<PAGE>
Page 1 of 13 Pages
Exhibit Index is on page 11.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant of Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 1996
SYQUEST TECHNOLOGY, INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-19674 94-2793941
-------- ------- ----------
(State of Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
47071 Bayside Parkway, Fremont, California 94538
------------------------------------------------
(Address of Principal Executive Offices)
(510) 226-4000
--------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE>
ITEM 5. OTHER EVENTS
SPECIAL STOCKHOLDERS MEETING
- ----------------------------
On September 26, 1996, SyQuest Technology, Inc. (the "Company") held a
Special Meeting of Stockholders. All of the proposals submitted to the
stockholders at the meeting were approved.
The stockholders approved an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
20,000,000 to 60,000,000 by the following vote:
<TABLE>
<CAPTION>
<S> <C> <C>
For : 9,240,216
Against : 1,237,995
Abstain : 87,414
Broker Non-Vote : 0
</TABLE>
The amendment was filed with the Delaware Secretary of State on
September 27, 1996.
The stockholders approved the issuance by the Company of more than
2,291,891 shares of Common Stock to the holders of the Company's 7% Cumulative
Convertible Preferred Stock, Series 1, by the following vote:
<TABLE>
<CAPTION>
<S> <C> <C>
For : 4,100,593
Against : 832,417
Abstain : 113,801
Broker Non-Vote : 5,518,814
</TABLE>
The net proceeds from the sale of the 7% Cumulative Convertible
Preferred Stock, Series 1, will be treated as equity by the Registrant on its
balance sheet as a result of the vote of the stockholders to approve the sale
and to increase the number of available shares so that if the preferred
stockholders fully convert their preferred shares, there will be a sufficient
number of shares of common stock into which the preferred shares can be
converted.
The stockholders approved an increase in the number of shares issuable
under the Company's 1991 Stock Option Plan from 4,428,524 shares to 6,000,000
shares by the following vote:
<TABLE>
<CAPTION>
<S> <C> <C>
For : 2,854,778
Against : 2,123,841
Abstain : 121,442
Broker Non-Vote : 5,465,564
</TABLE>
The stockholders approved an increase in the number of shares issuable
under the Company's 1992 Non-Employee Director Stock Option Plan from 250,000
shares to 500,000 shares by the following vote:
2
<PAGE>
<TABLE>
<S> <C> <C>
For : 3,007,488
Against : 2,216,623
Abstain : 138,942
Broker Non-Vote : 5,202,572
</TABLE>
The stockholders approved other amendments to the Company's 1992 Non-
Employee Director Stock Option Plan to increase the annual grants of options to
the non-employee directors and to provide for a one-time option grant to
purchase 30,000 shares to new non-employee directors (which one-time grant will
also be made to each non-employee director as of the date of stockholder
approval of the amendments). The amendments were approved by the following
vote:
<TABLE>
<CAPTION>
<S> <C> <C>
For : 7,788,555
Against : 2,236,833
Abstain : 132,952
Broker Non-Vote : 407,285
</TABLE>
MAINTENANCE OF LISTING ON NASDAQ MARKET
- ---------------------------------------
The Company filed today with Nasdaq a pro forma balance sheet (the
"Pro Forma Balance Sheet") evidencing the Company's compliance with the net
tangible assets and capital and surplus listing requirements of the Nasdaq
National Market. Accordingly, the Company anticipates that its Common Stock
will continue to be listed on the Nasdaq National Market. A copy of the Pro
Forma Balance Sheet is attached as Exhibit 99.1 to this Form 8-K and is
incorporated herein by this reference.
On September 16, 1996, the Company was given a temporary exception
from the Nasdaq National Market listing requirements, conditioned on the
Company's ability to file a pro forma balance sheet as of September 30, 1996,
indicating net tangible assets of at least $2,000,000. The Pro Forma Balance
Sheet evidences approximately $7.454 million in net tangible assets. As
described in greater detail in the Pro Forma Balance Sheet, the Company's net
tangible assets increased primarily as a result of (i) the reclassification from
debt to equity, following the Special Meeting of Stockholders and the
elimination of certain redemption rights of the holders, of the Company's 7%
Cumulative Convertible Preferred Stock, Series 1 in the amount of $18.2 million;
(ii) exchange by certain vendors of the Company of approximately $2.3 million
of notes payable for common stock during the fourth quarter of fiscal year 1996,
and the exchange of an additional $9.2 million of accounts payable and notes
payable for common stock subsequent to September 30, 1996; and (iii) the
issuance by the Company, subsequent to September 30, 1996, of its Convertible
Preferred Stock, Series 1, and its 5% Cumulative Convertible Preferred Stock,
Series 2, as described below, from which the Company received net proceeds of
$28.5million.
The Pro Forma Balance Sheet is unaudited and includes a preliminary
estimate of retained earnings at September 30, 1996, as required by Nasdaq in
order for the Company to maintain its listing on the Nasdaq National Market.
There can be no assurance that the Company's audited consolidated balance sheet
as of September 30, 1996, and in particular its
3
<PAGE>
retained earnings, following an audit of the Company's consolidated statements
of operations, will not be materially different from the information presented
in the Pro Forma Balance Sheet.
EXCHANGE OF DEBT FOR EQUITY
- ---------------------------
From September 27, 1996, through October 30, 1996, the Company
exchanged approximately $11.57 million of its trade debt for shares of its
common stock, pursuant to Regulation D under the Securities Act of 1933, as
amended, as follows:
<TABLE>
<CAPTION>
Number
Name of Creditor Amount of Debt of Shares
- ---------------- -------------- ---------
<S> <C> <C>
Atmel Corporation $2,338,524.94 370,488
Petronic International, Inc. $1,392,440.30 218,422
Freight Solutions International $1,759,260.64 293,210
SAE Magnetics $6,080,397.22 992,717
</TABLE>
Each of the creditors has warranted to the Company that it is an
accredited investor. Each of the creditors was given a registration rights
agreement whereby the Company is required to register its shares for
resale.
SALES OF PREFERRED STOCK
- ------------------------
CONVERTIBLE PREFERRED STOCK, SERIES 1
On October 8, 1996, in reliance on the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D thereunder, the Company issued to certain
accredited investors 5,500 shares of its Convertible Preferred Stock, Series 1,
$0.001 par value per share (the "Convertible Preferred Stock"), at a price of
$1,000 per share. The net proceeds to the Company were approximately $5,225,000.
The proceeds were placed in escrow with AM Capital Management Group.
The terms of the Escrow Agreement provide generally that the monies in the
escrow account may be used by the Company solely for the Company's business
operations and product development, introduction and marketing after October 8,
1996, and to repay certain indebtedness. In order to withdraw monies from the
escrow account, the Company's Chief Executive Officer or Chief Financial Officer
must request the withdrawal and certify as to the use of the proceeds. The
escrow account shall terminate upon the earlier of the withdrawal of all of the
monies in the account or upon agreement between the Company and the holders of
the Convertible Preferred Stock.
The rights, preferences and privileges of the Convertible Preferred
Stock, as summarized below, are set forth in a Certificate of Designations,
Preferences and Rights of Convertible Preferred Stock, Series 1, filed with the
Delaware Secretary of State, a copy of which is attached as Exhibit 3.1 to this
Form 8-K and incorporated herein by this reference.
4
<PAGE>
Dividends. The holders of Convertible Preferred Stock are not
---------
entitled to dividends.
Conversion; Registration. The Convertible Preferred Stock is
------------------------
convertible into Common Stock (the "Conversion Shares"), at the option of the
holders, at any time after December 15, 1996. Each share of Convertible
Preferred Stock will be convertible into a number of shares of Common Stock
equal to: (x) $1,000 (the "Stated Value") plus an additional $50 for each year
(prorated on a daily basis for partial years) between October 15, 1996, and the
conversion date, (y) divided by a conversion price (the "Conversion Price")
which is the lesser of $6.50 per share (the "Fixed Conversion Price") or 85%
(the "Conversion Percentage") of the average market price of the Common Stock on
the five trading days prior to the conversion. The Convertible Preferred Stock
cannot be converted if the converting holder and its affiliates would
beneficially own more than 4.9% of the Company's Common Stock at the time of
conversion (excluding from the calculation shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock).
The Company has agreed to file a registration statement on Form S-3
(the "Registration Statement") covering the resale of the Conversion Shares and
shares issuable upon exercise of the warrants described below, to make its best
efforts to have such statement declared effective before January 14, 1997, and
to keep such statement effective until the earlier of (a) the date on which the
holders of the Convertible Preferred Stock may sell the Conversion Shares and
shares issuable upon exercise of the warrants without restriction or (b) the
date on which such holders have sold all of their shares of Common Stock and
there are no outstanding shares of Convertible Preferred Stock or related
warrants to purchase Common Stock.
If a Registration Statement registering the resale of the Common Stock
is not effective by January 14, 1997, or if after such Registration Statement is
declared effective by the SEC sales can not be made pursuant to the Registration
Statement, the Conversion Percentage shall be reduced 3% per month and the Fixed
Conversion Price shall be reduced by $0.195 per month for each month or partial
month of such delayed effectiveness or inability to sell.
Any Convertible Preferred Stock outstanding on October 31, 1998, will
automatically convert to Common Stock on that date.
Redemption -- By Company Upon Receipt of Conversion Notice. If the
----------------------------------------------------------
Company receives a notice of conversion and the Conversion Price is less than
three dollars and fifty cents ($3.50) per share, the Company will have the
option to redeem all or any portion (pro rated if less than all is redeemed) of
the Convertible Preferred Shares submitted for conversion, in lieu of
conversion. The redemption price ("Redemption Rate") to be paid per share of
Convertible Preferred Stock is an amount equal to (x) the number of shares of
Common Stock that would otherwise be issuable on the date of conversion,
multiplied by (y) the closing bid price of the Common Stock on the conversion
date. Each holder of Convertible Preferred Stock shall have the right to
5
<PAGE>
require the Company to provide advance notice stating whether the Company will
elect to redeem such holder's Convertible Preferred Stock in cash should such
holder submit such shares for conversion.
Redemption--By Company at its Election. Commencing April 1, 1997, the
--------------------------------------
Company shall have the option to redeem, from time to time, any or all of the
Convertible Preferred Shares upon delivery of 30 days' advance written notice,
provided that the Company shall only be entitled to redeem Convertible Preferred
Stock which together with Series 2 Preferred Stock being redeemed at the same
time has an aggregate Stated Value of at least $5,000,000. Stated Value shall
equal $1,000 per share of Convertible Preferred Stock or Series 2 Preferred
Stock (together, the "New Preferred Stock"). The redemption price shall equal
the greater of (x) the Redemption Rate calculated on the date the Company
delivers notice of redemption, and (y) a percentage of Stated Value of the
Convertible Preferred Stock, which percentage will vary depending upon the date
of redemption as follows:
<TABLE>
<CAPTION>
Date of Redemption at the Company's % of Stated
Election Value
----------------------------------- -----------
<S> <C>
April 1, 1997 to March 31, 1998 125%
April 1, 1998 to October 31, 1998 120%
</TABLE>
Notwithstanding the above, any holder of Convertible Preferred Stock may convert
such Convertible Preferred Stock into Common Stock, as described above, prior to
the close of business on the day prior to the date of redemption at the
Company's election, including Convertible Preferred Stock selected for
redemption at the Company's election; provided, however, that the Company shall
still be entitled, as described above, to exercise its right to redeem
Convertible Preferred Stock upon its receipt of a notice of conversion.
Redemption at Option of Holders. If Edward L. Marinaro and Edwin L.
-------------------------------
Harper shall both cease to be directors and officers of the Company (a "Change
of Control") other than as a result of the Company's consolidation with or
merger into any other corporation or the reclassification of the Company's
outstanding shares, holders of Convertible Preferred Stock shall have the option
to require the Company to redeem all or a portion of such Convertible Preferred
Stock for Common Stock with a value equal to the greater of: 125% of Stated
Value and the Redemption Rate calculated as of the date such Change of Control
occurs.
Merger. If the Company consolidates, merges or reclassifies its
------
outstanding Common Stock, the holders of Convertible Preferred Stock are
entitled to receive the greater of (a) their share of any consideration on an
as-converted basis, or (b) $1,250.00 per share of Convertible Preferred Stock,
payable (at the Company's election) in Common Stock. The Company must give at
least 5 and not more than 10 days notice of a merger or reclassification, but
such notice is not required prior to public announcement of any such
transaction.
6
<PAGE>
Nonvoting. The Convertible Preferred Stock is nonvoting, except as
---------
required by law.
Warrants. Upon conversion of Convertible Preferred Stock, the holders
--------
of the Convertible Preferred Stock will receive, for each 3 shares of Common
Stock acquired through conversion of Convertible Preferred Stock, a warrant to
purchase 1 share of Common Stock at a price which is the lesser of $7.15 per
share or 110% of the average market price of the Common Stock on the 5 trading
days prior to the date of the related conversion of the Convertible Preferred
Stock. Such warrants will expire 3 years after the date of the related
conversion of the Convertible Preferred Stock.
Liquidation Preference. In liquidation, the holders of the
----------------------
Convertible Preferred Stock receive their Stated Value before the holders of
Common Stock receive any cash or assets on liquidation.
Other Preferred. The Company may issue or authorize preferred stock
---------------
that is junior to the Convertible Preferred Stock in respect of preferences as
to payments upon liquidation, dissolution and winding up, provided that the
Company may issue preferred stock of equal rank to Beijing Legend Group, Ltd. or
any of its affiliates or successors if such parties have entered into or agreed
to enter into a joint venture or other business relationship with the Company.
Vote to Amend Preferred. Holders of two-thirds of the outstanding
-----------------------
shares of Convertible Preferred Stock must approve any amendment to its terms.
If any material changes are made to the terms of the Series 2 Preferred Stock,
holders of Convertible Preferred Stock shall be entitled, upon approval of two-
thirds of the outstanding shares of Convertible Preferred Stock, to comparable
changes.
Amendment of Convertible Preferred Stock; Additional Warrants. On
-------------------------------------------------------------
October 31, 1996, the Company and the majority of Convertible Preferred
Stockholders agreed to amend the terms of the Convertible Preferred Stock to (i)
remove restrictions on certain common equity sales and (ii) provide that any
redemption upon a Change in Control or business combination may be paid by
the Company in shares of Common Stock instead of cash. As part of this
amendment, the Company granted the holders of Convertible Preferred Stock
warrants to acquire 550,000 shares of Common Stock at a price of $5.50 per
share, which warrants have a 3-year term.
SERIES 2 PREFERRED STOCK
On October 8, 1996, in reliance on the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
and related Rule 506 of Regulation D thereunder, the Company issued to various
accredited investors 24,500 shares of its 5% Cumulative Convertible Preferred
Stock, Series 2, $0.001 par value per share (the "Series 2 Preferred Stock"), at
a price of $1,000 per share. The net proceeds to the Company were approximately
$23,275,000. The proceeds were placed in escrow with AM Capital Management Group
pursuant to escrow agreements with generally the same terms described above with
respect to the escrow of the funds from the Convertible Preferred Stock sale.
The rights, preferences and privileges of the Series 2 Preferred
Stock, as summarized below, are set forth in a Certificate of Designations,
Preferences and Rights of 5% Cumulative Convertible Preferred Stock filed with
the Delaware Secretary of State, a copy of which is attached as Exhibit 3.2 to
this Form 8-K and incorporated herein by this reference.
7
<PAGE>
Dividends. Cumulative dividends accrue on the Series 2 Preferred
---------
Stock at an annual rate of 5%. Such dividends are payable quarterly in cash (or,
at the Company's option, Common Stock valued at the average market price of the
Common Stock on the five trading days prior to the dividend payment date
("Dividend Shares"), except when the number of shares to be issued would cause
the holders of the Series 2 Preferred Stock to beneficially own a number of
shares of Common Stock in excess of certain numeric limits described below).
Conversion; Registration. The Series 2 Preferred Stock is convertible
------------------------
into Common Stock (the "Conversion Shares") at the option of the holders after
December 15, 1996, at a conversion price which is the lesser of $6.50 per share
(the "Fixed Conversion Price") or 85% (the "Conversion Percentage") of the
average market price of the Common Stock on the five trading days prior to the
conversion. The Series 2 Preferred Stock cannot be converted if the converting
holder and its respective affiliates would beneficially own more than 4.9% of
the Company's Common Stock at the time of conversion (excluding from the
calculation shares of Common Stock issuable upon conversion of the Series 2
Preferred Stock).
The Company has agreed to file a registration statement on Form S-3
(the "Registration Statement") covering the resale of the Conversion Shares, the
Dividend Shares and shares issued upon exercise of the warrants described below,
to use its best efforts to have such statement declared effective within 90
days, and to keep such statement effective until the earlier of (a) the date on
which the holders of the Series 2 Preferred Stock may sell the Conversion
Shares, the Dividend Shares and shares issuable upon exercise of the warrants
without restriction or (b) the date on which such holders have sold all of their
shares of Common Stock and there are no outstanding shares of Series 2 Preferred
Stock or related warrants to purchase Common Stock.
If a Registration Statement registering the resale of the Common Stock
is not effective within 90 days, then the Conversion Percentage and the Fixed
Conversion Rate are reduced at the rate of 3 percentage points per month of
delay.
At any time within the 120-day period after the Registration Statement
is declared effective (the "First Redemption Period"), the Company may redeem
any or all of the Series 2 Preferred Stock if the average market price for the
Common Stock for any period of 5 consecutive trading days is less than $3.00 per
share, or at any time after the First Redemption Period so long as the average
market price per share of the Common Stock is $3.00 or more. The redemption
price will be the greater of (a) the product of the average market price per
share of the Common Stock for the 5 trading days preceding a redemption notice
multiplied by the number of shares of Common Stock into which a Series 2
Preferred Share is convertible on the trading day preceding the redemption
notice, and (b) $1,176.47. Notwithstanding the above, any holder may convert its
Series 2 Preferred Stock into Common Stock prior to the close of business on the
fifth trading day prior to the date of redemption.
Merger. A holder of Series 2 Preferred Stock is entitled to receive
------
its share of consideration on an as-converted basis if the Company merges or
reclassifies its outstanding Common Stock. The Company must give 75 days' notice
of merger or reclassification.
8
<PAGE>
Nonvoting. The Series 2 Preferred Stock is nonvoting, except as
---------
required by law.
Warrants. Upon conversion of Series 2 Preferred Stock, the holders of
--------
the Series 2 Preferred Stock will receive, for each 3 shares of Common Stock
acquired through conversion of Series 2 Preferred Stock, a warrant to purchase
1 share of Common Stock at a price which is the lesser of (a) $7.15 per share
or (b) 110% of the average market price of the Common Stock on the 5 trading
days prior to the date of the related conversion of the Series 2 Preferred
Stock. Such warrants will expire 3 years after the date of the related
conversion of the Series 2 Preferred Stock.
Liquidation Preference. In liquidation, the holders of the Series 2
----------------------
Preferred Stock receive their original purchase price plus any accrued but
unpaid dividends before the holders of Common Stock receive any cash or assets
on liquidation.
Other Preferred. The Company may issue or authorize preferred stock
---------------
that is junior to the Series 2 Preferred Stock in respect of preferences as to
payments upon liquidation, dissolution and winding up, provided that the Company
may issue preferred stock of equal rank to Beijing Legend Group, Ltd. or any of
its affiliates or successors if such parties have entered into or agreed to
enter into a joint venture or other business relationship with the Company.
THE FOREGOING DESCRIPTION OF THE DEBT TO EQUITY CONVERSIONS AND THE
RIGHTS OF CONVERTIBLE PREFERRED STOCK AND SERIES 2 PREFERRED STOCK DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN IT ENTIRETY BY REFERENCE TO THE
EXHIBITS TO THIS FORM 8-K, EACH OF WHICH IS INCORPORATED HEREIN BY REFERENCE.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
--------
3.1 Certificate of Designations, Preferences and Rights of Convertible
Preferred Stock, Series 1, as amended and agreed to be amended.
3.2 Certificate of Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 2.
10.1 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and the buyers of the Convertible Preferred Stock, Series 1
including the following exhibits: Form of Warrant, Form of
Registration Rights Agreement, Form of Escrow Agreement and certain
Schedules to the representations.
10.2 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations.
9
<PAGE>
10.3 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations.
10.4 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations.
10.5 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations.
10.6 Securities Purchase Agreement dated as of September 27, 1996, between
the Company and Atmel Corporation, including the exhibit Form of
Registration Rights Agreement.
10.7 Securities Purchase Agreement dated as of October 18, 1996, between
the Company and Petronic International, Inc., including the exhibit
Form of Registration Rights Agreement.
10.8 Securities Purchase Agreement dated as of October 24, 1996, between
the Company and SAE Magnetics (HK) Ltd., including the exhibit Form of
Registration Rights Agreement.
10.9 Securities Purchase Agreement dated as of October 25, 1996, between
the Company and Freight Solutions International, including the exhibit
Form of Registration Rights Agreement.
99.1 Pro Forma Balance Sheet of the Company as of September 30, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: October 31, 1996 SYQUEST TECHNOLOGY, INC.
(Registrant)
By: /s/ Edwin L. Harper
----------------------------------
Edwin L. Harper, President and
Chief Executive Officer
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
- ------- ------
<C> <S> <C>
3.1 Certificate of Designations, Preferences and Rights of Convertible
Preferred Stock, Series 1, as amended and agreed to be amended
3.2 Certificate of Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 2.
10.1 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and the buyers of the Convertible Preferred Stock, Series 1
including the following exhibits: Form of Warrant, Form of Registration
Rights Agreement, Form of Escrow Agreement and certain Schedules to the
representations.
10.2 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant, Form
of Registration Rights Agreement and certain Schedules to the
representations.
10.3 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant, Form
of Registration Rights Agreement and certain Schedules to the
representations.
10.4 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant, Form
of Registration Rights Agreement and certain Schedules to the
representations.
10.5 Securities Purchase Agreement dated as of October 8, 1996 among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant, Form
of Registration Rights Agreement and certain Schedules to the
representations.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
- ------- ------
<C> <S> <C>
10.6 Securities Purchase Agreement dated as of September 27, 1996, between the
Company and Atmel Corporation, including the exhibit Form of Registration
Rights Agreement.
10.7 Securities Purchase Agreement dated as of October 18, 1996, between the
Company and Petronic International, Inc., including the exhibit Form of
Registration Rights Agreement.
10.8 Securities Purchase Agreement dated as of October 24, 1996, between the
Company and SAE Magnetics (HK) Ltd., including the exhibit Form of
Registration Rights Agreement.
10.9 Securities Purchase Agreement dated as of October 25, 1996, between the
Company and Freight Solutions International, including the exhibit Form of
Registration Rights Agreement.
99.1 Pro Forma Balance Sheet of the Company as of September 30, 1996.
</TABLE>
12
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF CONVERTIBLE PREFERRED STOCK, SERIES 1
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Five Thousand (5,000) shares of Convertible Preferred
Stock, Series 1, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 5,000 shares of
Convertible Preferred Stock, Series 1, $.001 par value (the "Series 1
Preferred Shares"), which shall have the following powers, designations,
preferences and other special rights:
(1) No Dividends. The Series 1 Preferred Shares shall not bear any
------------
dividends.
(2) Conversion of Series 1 Preferred Shares. The holders of the
---------------------------------------
Series 1 Preferred Shares shall have the right, at their option, to convert
the Series 1 Preferred Shares into shares of the Company's common stock,
$.001 par value (the "Common Stock"), on the following terms and
conditions:
(a) Conversion Right. Each Series 1 Preferred Share shall be
----------------
convertible, at any time after December 15, 1996 (or, if such Series 1
Preferred Share is called for conversion or for redemption as hereinafter
provided, at any time up to and including, but not after, the close of
business on the trading day preceding the date fixed for the conversion or
redemption, as the case may be), into fully paid and nonassessable shares
(calculated to the nearest whole share) of Common Stock, at the Conversion
Price on the Date of Conversion (as defined in Section (2)(e)(iii));
provided, however, that in no event shall any holder be entitled to convert
Series 1 Preferred Shares if, after giving
<PAGE>
effect to such conversion, the number of shares of Common Stock
beneficially owned by such holder and all other persons whose holdings
would be aggregated with such holder for purposes of calculating beneficial
ownership in accordance with Sections 13(d) and 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the regulations
thereunder, including, without limitation, any person serving as an adviser
to such holder (collectively, the "Related Persons"), would exceed four and
nine-tenths percent (4.9%) of the outstanding shares of Common Stock.
Common Stock issuable upon conversion of the Series 1 Preferred Shares
shall not be deemed to be beneficially owned by such holder or the Related
Persons for this purpose.
(b) Conversion Rate. The number of shares of Common Stock
---------------
issuable upon conversion of each of the Series 1 Preferred Shares pursuant
to Section (2)(a) shall be determined as follows:
(.05)(N/365)(1,000) + 1,000
---------------------------
Conversion Price
where
(i) "N" means the number of days between (A) the date
that, in connection with the consummation of the initial purchase by the
holder of Series 1 Preferred Shares from the Company, the Company or the
escrow agent (as the case may be) first had in its possession funds
representing full payment for the Series 1 Preferred Shares for which
conversion is being elected, and (B) the Date of Conversion for the Series
1 Preferred Shares for which conversion is being elected;
(ii) "Conversion Price" means, as of the Date of
Conversion, the lower of the Fixed Conversion Price and the Floating
Conversion Price, each in effect as of such date and subject to adjustment
as provided herein;
(iii) "Fixed Conversion Price" means $6.50, subject to
adjustment as provided herein;
(iv) "Floating Conversion Price" means the amount obtained
by multiplying the Conversion Percentage by the Average Market Price for
the Common Stock for the five (5) consecutive trading days ending one
trading day prior to the Date of Conversion for the Series 1 Preferred
Shares for which conversion is being elected;
(v) "Conversion Percentage" means eighty-five percent
(85%), subject to adjustment as provided herein; and
(vi) "Average Market Price" means, with respect to any
security for any period, that price which shall be computed as the
arithmetic average of the closing bid prices for such security for each
trading day in such period on the Nasdaq
2
<PAGE>
National Market (the "Nasdaq-NM"), or, if the Nasdaq-NM is not the
principal trading market for such security, on the principal trading market
or exchange for such security, or, if market value cannot be calculated for
such period on any of the foregoing bases, the Average Market Price shall
be the average fair market value during such period as reasonably
determined in good faith by the Board of Directors of the Company (all as
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
(c) Adjustment to Conversion Price - Registration Statement. If
-------------------------------------------------------
the registration statement (the "Registration Statement") covering the
shares of Common Stock issuable hereunder and required to be filed by the
Company pursuant to the Registration Rights Agreement between the Company
and the initial holders of the Series 1 Preferred Shares (the "Registration
Rights Agreement") is not declared effective by the U.S. Securities and
Exchange Commission ("SEC") within ninety (90) days after the date of
issuance of the Series 1 Preferred Shares, or, if after the relevant
Registration Statement has been declared effective by the SEC, sales cannot
be made pursuant to the Registration Statement, then, as partial relief for
the damages to any holder by reason of any such delay in or reduction of
its ability to sell the underlying shares of Common Stock (which remedy
shall not be exclusive of any other remedies available at law or in
equity), the Conversion Percentage and the Fixed Conversion Price shall be
adjusted as follows:
(i) Conversion Percentage. The Conversion Percentage in
---------------------
effect at such time shall be reduced by a number of percentage points equal
to the product of (A) three (3) multiplied by (B) the sum of (I) the number
of months (prorated for partial months) after the end of such ninety (90)
day period and prior to the date that the relevant Registration Statement
is declared effective by the SEC and (II) the number of months (prorated
for partial months) that sales cannot be made pursuant to the Registration
Statement after the Registration Statement has been declared effective.
(For example, if the Registration Statement becomes effective one and one-
half (1 1/2) months after the end of such ninety (90) day period, the
Conversion Percentage would be eighty and one-half percent (80.5%) until
any subsequent adjustment; if thereafter sales could not be made pursuant
to the Registration Statement for a period of two (2) additional months,
the Conversion Percentage would then be seventy-four and one-half percent
(74.5%)); and
(ii) Fixed Conversion Price. The Fixed Conversion Price in
----------------------
effect at such time shall be reduced by an amount equal to the product of
(A) one hundred ninety-five thousandths (.195) multiplied by (B) the sum of
(I) the number of months (prorated for partial months) after the end of
such ninety (90) day period and prior to the date that the relevant
Registration Statement is declared effective by the SEC and (II) the number
of months (prorated for partial months) that sales cannot be made pursuant
to the Registration Statement after the Registration Statement has been
declared effective. (For example, if the Registration Statement becomes
effective one and one-half
3
<PAGE>
(1 1/2) months after the end of such ninety (90) day period, the Fixed
Conversion Price would be six dollars and twenty-one cents ($6.21) until
any subsequent adjustment; if thereafter sales could not be made pursuant
to the Registration Statement for a period of two (2) additional months,
the Fixed Conversion Price would then be five dollars and eighty-two cents
($5.82).)
(d) Adjustment to Conversion Price - Stock Split, etc. In case
--------------------------------------------------
the Company shall (i) declare a dividend or make a distribution on the
outstanding shares of its Common Stock in shares of its Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, or (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision or combination shall be proportionately adjusted if necessary,
as reasonably determined in good faith by the Board of Directors of the
Company, so that the holder of any Series 1 Preferred Shares surrendered
for conversion after such time shall be entitled to receive the aggregate
number of shares of Common Stock which the holder would have owned or been
entitled to receive had such Series 1 Preferred Shares been converted
immediately prior to such record date or effective date and the resulting
Common Stock had been subject to such dividend, distribution, subdivision
or combination. Such adjustment shall be made successively whenever any
event specified above shall occur.
(e) Mechanics of Conversion.
-----------------------
(i) Holders' Delivery Requirements. To convert Series 1
------------------------------
Preferred Shares into full shares of Common Stock, the holder thereof shall
(A) deliver or transmit by facsimile, for receipt on or prior to 11:59
p.m., New York City time (the "Conversion Notice Deadline") on the date of
conversion, a copy of the fully executed notice of conversion ("Notice of
Conversion") to the Company at the office of the Company or its designated
transfer agent (the "Transfer Agent"), in the form attached as Exhibit I,
and (B) surrender to a common carrier for delivery to the office of the
Company or the Transfer Agent, the original certificates representing the
Series 1 Preferred Shares being converted (the "Preferred Stock
Certificates"), duly endorsed for cancellation.
(ii) Company's Response. Upon receipt by the Company of a
------------------
facsimile copy of such Notice of Conversion, the Company shall immediately
send, via facsimile, a confirmation of receipt of such Notice of Conversion
to such holder, which shall specify that the Notice of Conversion has been
received and the name and telephone number of a contact person at the
Company whom the holder should contact regarding information related to
such conversion. Upon receipt by the Company or the Transfer Agent of the
Preferred Stock Certificates to be converted pursuant to a Notice of
Conversion (or an indemnification undertaking with respect to such shares
in the case of their loss, theft or destruction) together with the
originally executed Notice of
4
<PAGE>
Conversion, the Company or the Transfer Agent (as applicable) shall, on
such date of receipt (or the next business day if received after 11:00 a.m.
local time of the Company or Transfer Agent, as applicable) (the
"Deadline"), issue and surrender to a common carrier for either overnight
or (if delivery is outside the United States) two (2) day delivery to the
address as specified in the Notice of Conversion, a certificate for the
number of shares of Common Stock to which the holder shall be entitled as
aforesaid. In the case of a dispute as to the calculation of the Conversion
Price, the Company shall promptly issue to the holder the number of shares
of Common Stock that is not disputed and shall submit the disputed
calculations to its outside accountant via facsimile within two (2) days of
receipt of such holder's Notice of Conversion. The Company shall cause the
accountant to perform the calculations and notify the Company and the
holder of the results no later than forty-eight (48) hours from the time it
receives the disputed calculations. Such accountant's calculation shall be
deemed conclusive absent manifest error.
(iii) Date of Conversion. The date on which conversion
------------------
occurs (the "Date of Conversion") shall be deemed to be the date set forth
in such Notice of Conversion, provided (A) that the advance copy of the
Notice of Conversion is faxed to the Company before 11:59 p.m., New York
City time, on the Date of Conversion, and (B) that the original Preferred
Stock Certificates representing the Series 1 Preferred Shares to be
converted, together with the originally executed Notice of Conversion, are
surrendered by depositing such certificates and Notice with a common
carrier, as provided above, and received by the Transfer Agent or the
Company on or prior to the second (2nd) business day following the Date of
Conversion. In the event the Preferred Stock Certificates and the
originally executed Notice of Conversion are not received within two (2)
business days after the date of the Notice of Conversion, the Notice of
Conversion shall be deemed null and void and no conversion of Series 1
Preferred Shares shall be effected thereby. 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 the Date of Conversion.
(f) Mandatory Conversion. If any Series 1 Preferred Shares
--------------------
remain outstanding on October 31, 1998, then all such Series 1 Preferred
Shares shall be converted as of such date in accordance with this Section
(2) as if the holders of such Series 1 Preferred Shares had given the
Notice of Conversion on October 31, 1998, and the Date of Conversion had
been fixed as of October 31, 1998, for all purposes of this Section (2),
and all holders of Preferred Stock Certificates shall thereupon and within
two (2) business days thereafter surrender all Preferred Stock
Certificates, duly endorsed for cancellation, to the Company or the
Transfer Agent, as the Company may direct. No person shall thereafter have
any rights in respect of Series 1 Preferred Shares, except the right to
receive shares of Common Stock on conversion thereof as provided in this
Section (2).
5
<PAGE>
(g) Redemption by Company upon Receipt of Notice of Conversion.
----------------------------------------------------------
(i) Company's Right to Redeem in Lieu of Conversion.
-----------------------------------------------
Notwithstanding anything herein to the contrary, if, on the Company's
receipt of a Notice of Conversion, the Conversion Price of the Common Stock
is less than three dollars and fifty cents ($3.50), the Company shall have
the right, in its sole discretion, to redeem as a whole or in part any
Series 1 Preferred Shares or shares of the Company's 5% Convertible
Preferred Stock, Series 2, par value $0.001 (the "Series 2 Preferred
Shares") (the Series 1 Preferred Shares and the Series 2 Preferred Shares
being collectively called herein the "5% Preferred Shares") submitted for
conversion, immediately prior to and in lieu of conversion ("Redemption on
Receipt of Notice of Conversion"). If the Company elects to redeem some,
but not all, of the 5% Preferred Shares submitted for conversion, the
Company shall redeem from among the 5% Preferred Shares submitted by the
holders for conversion on the applicable date, a pro-rata amount (based on
the number of shares submitted for conversion by each such holder) from
each such holder so submitting 5% Preferred Shares for conversion.
(ii) Redemption Price on Receipt of a Notice of
------------------------------------------
Conversion. The redemption price per Series 1 Preferred Share under this
-----------
Section (2)(g) shall be calculated in accordance with the following formula
("Redemption Rate"):
[[(.05)(N/365)(1,000)]+1,000] x Closing Bid Price on Date of Conversion
---------------------------------------
Conversion Price
where "N", "Date of Conversion" and "Conversion Price" have the same
meanings as defined above. For purposes hereof, the term "Closing Bid
Price" means the closing bid price of the Common Stock on the Nasdaq-NM, or
if the Nasdaq-NM is not the principal trading market for such security, on
the principal trading market or exchange for such security, or, if market
value cannot be determined by virtue of any of the foregoing, the fair
market value of such security on such date as reasonably determined in good
faith by the Board of Directors of the Company.
(iii) Mechanics of Redemption on Receipt of Notice of
-----------------------------------------------
Conversion. The Company shall effect each such redemption by giving notice
----------
of its election to redeem, by facsimile, by 5:00 p.m. New York City time,
the next business day following receipt of a Notice of Conversion from a
holder, and the Company shall provide a copy of such redemption notice by
overnight or (if delivery is outside the United States) two (2) day
delivery, to the address specified in the Notice of Conversion. Such
redemption notice shall indicate whether the Company will redeem all or
part of the 5% Preferred Shares submitted for conversion and the applicable
Redemption Rate.
(iv) Advance Notice of Redemption. A holder of Series 1
----------------------------
Preferred Shares shall have the right to require the Company to provide
advance notice stating whether the Company will elect to redeem such
holder's Series 1 Preferred Shares
6
<PAGE>
in cash, pursuant to the Company's redemption rights provided in
subparagraph (i) above, by sending notice (an "Election Notice") to the
Company and such other person(s) as the Company may designate (provided
that such holder shall have received notice of such designation), via
facsimile, of such holder's intention to require the Company to disclose
that, if such holder were to exercise such holder's right of conversion
(pursuant to Section (2)(a)), whether the Company would elect to redeem any
of such holder's Series 1 Preferred Shares for cash in lieu of issuing
Common Stock. Upon receipt by the Company of a facsimile copy of an
Election Notice, the Company shall immediately send, via facsimile, a
confirmation of receipt of the Election Notice to the holder that shall
have sent such Election Notice to the Company, which shall specify that
such Election Notice has been received and the name and telephone number of
a contact person at the Company whom such holder should contact regarding
information related to the requested advance notice. Thereafter, the
Company must respond by the close of business on the next business day
following receipt of such holder's Election Notice (A) via facsimile and
(B) by depositing such response with an overnight or (if delivery is
outside the United States) two (2) day courier. The Company's response must
state the number of shares it would redeem, if any, and such response shall
be binding on the Company for a period of twenty (20) business days from
and including the date of such Election Notice. If the Company does not
respond to such holder within one (1) business day after receipt of the
Election Notice via facsimile, the Company shall be required to issue to
such holder Common Stock upon such holder's conversion within the
subsequent twenty (20) business day period of such holder's Election
Notice.
(v) Payment of Redemption Price. In the event the
---------------------------
Company elects to exercise its right of Redemption on Receipt of Notice of
Conversion pursuant to this Section (2)(g), the Company shall pay the
applicable redemption price to each holder of Series 1 Preferred Shares
within five (5) business days after such holder's Preferred Stock
Certificates (or an indemnification undertaking with respect to such shares
in the case of their loss, theft or destruction) are delivered to the
Company or its Transfer Agent.
(h) Company's Right to Redeem at Its Election. At any time,
-----------------------------------------
commencing April 1, 1997, the Company shall have the right, in its sole
discretion, to redeem ("Redemption at the Company's Election"), from time
to time, any or all of the Series 1 Preferred Shares; provided that (A) the
Company shall first provide thirty (30) days' advance written notice as
provided in subparagraph (ii) below (which can be given beginning March 1,
1997), and (B) the Company shall only be entitled to redeem under this
section (2)(h) Series 1 Preferred Shares, which, together with any Series 2
Preferred Shares being redeemed at the same time, have an aggregate Stated
Value (as defined below) of at least five million dollars ($5,000,000). If
the Company elects to redeem some, but not all, of the 5% Preferred Shares,
the Company shall redeem an amount from each holder of Series 1 Preferred
Shares equal to such holder's pro-rata amount (based on the number of 5%
Preferred Shares held by such holder relative to the number of 5% Preferred
Shares outstanding) of all 5% Preferred Shares being redeemed.
7
<PAGE>
(i) Redemption Price at the Company's Election. The
------------------------------------------
"Redemption Price at the Company's Election" shall be an amount per Series
1 Preferred Share equal to the greater of (A) the price calculated in
accordance with the Redemption Rate as of the date of the Notice of
Redemption at the Company's Election (as defined below) and (B) a
percentage of the Stated Value (as defined below) of such Series 1
Preferred Share, which percentage shall vary depending on the Date of
Redemption at the Company's Election (as defined below), and shall be
determined as follows:
<TABLE>
<CAPTION>
Date of Redemption at the Company's % of Stated
Election Value
--------------------------------------------- ------------
<S> <C>
April 1, 1997 to March 31, 1998 125%
April 1, 1998 to October 31, 1998 120%
</TABLE>
For purposes hereof, "Stated Value" shall mean One thousand dollars
($1,000) per 5% Preferred Share.
(ii) Mechanics of Redemption at the Company's Election.
-------------------------------------------------
The Company shall effect each such redemption by giving at least thirty
(30) days' prior written notice ("Notice of Redemption at the Company's
Election") to (A) each holder of the Series 1 Preferred Shares, at the
address and facsimile number of such holder appearing in the Company's
Series 1 Preferred Share register and (B) the Transfer Agent. Such Notice
of Redemption at the Company's Election shall be deemed to have been
delivered and received one (1) business day, if delivery is within the
United States, after the Company's sending (by overnight courier) of such
Notice of Redemption at the Company's Election or two (2) business days, if
delivery is outside the United States, after the Company's sending (by two
(2) day courier) of such Notice of Redemption at the Company's Election.
Such Notice of Redemption at the Company's Election shall indicate (x) the
number of shares of Series 1 Preferred Shares that have been selected for
redemption, (y) the date that such redemption is to become effective (the
"Date of Redemption at the Company's Election") and (z) the applicable
Redemption Price at the Company's Election. Notwithstanding the above, any
holder may convert into Common Stock pursuant to Section (2)(a), prior to
the close of business on the day prior to the Date of Redemption at the
Company's Election, any Series 1 Preferred Shares that such holder is
otherwise entitled to convert, including Series 1 Preferred Shares that
have been selected for redemption at the Company's election pursuant to
this Section (2)(h); provided, however, that the Company shall still be
entitled, subject to Section (2)(g)(iv), to exercise its right to redeem
upon receipt of a Notice of Conversion pursuant to Section (2)(g).
(iii) Payment of Redemption Price. Each holder submitting
---------------------------
Series 1 Preferred Shares being redeemed under this Section (2)(h) shall
send such holder's Preferred Stock Certificates so redeemed to the Company
or its Transfer Agent
8
<PAGE>
(as set forth in the Notice of Redemption), and the Company shall pay the
applicable redemption price to that holder within five (5) business days
after such holder's Preferred Stock Certificates (or an indemnification
undertaking with respect to such shares in the case of their loss, theft or
destruction) are delivered to the Company or its Transfer Agent.
(i) Company Must Have Immediately Available Funds or Credit
-------------------------------------------------------
Facilities. The Company shall not be entitled to send any Redemption
---------
Notice pursuant to Section (2)(g) or (2)(h) and begin the redemption
procedure under such section, unless it has:
(A) the full amount of the redemption price in cash,
available in a demand or other immediately available account in a bank or
similar financial institution; or
(B) credit facilities that are immediately available
and unrestricted for use in redeeming the Series 1 Preferred Shares, in the
full amount of the redemption price with a bank or similar financial
institution; or
(C) a written agreement with a standby underwriter or
qualified buyer ready, willing and able to purchase from the Company a
sufficient number of shares of stock to provide proceeds necessary to
redeem any stock that is not converted prior to redemption; or
(D) a combination of the items set forth in the
preceding clauses (A), (B) and (C), aggregating the full amount of the
redemption price.
(j) Redemption at Option of Buyer.
-----------------------------
(i) Redemption Option. After a Change in Control (as
-----------------
defined below) other than a Major Transaction (as defined in Section 2(k)
below), each holder of Series 1 Preferred Shares shall have the right, at
such holder's option, to require the Company to redeem all or a portion of
such holder's Series 1 Preferred Shares at a price per Series 1 Preferred
Share equal to the greater of:
(A) 125% of the Stated Value of such Series 1
Preferred Share; or
(B) the price calculated in accordance with the
Redemption Rate calculated as of the date of the Change of Control.
(ii) "Change in Control". "Change in Control" shall be
-------------------
deemed to have occurred at such time as Edward L. Marinaro and Edwin L.
Harper shall both cease to be directors and officers of the Company.
9
<PAGE>
(iii) Mechanics of Redemption at Option of Buyer. Each
------------------------------------------
holder may require the Company to redeem such holder's Series 1 Preferred
Shares by delivering written notice ("Notice of Redemption at Option of
Buyer") to the Company, which Notice of Redemption at Option of Buyer shall
be deemed to have been delivered one (1) business day, if delivery is
within the United States, after such holder's sending (by overnight
courier) of such Notice of Redemption at Option of Buyer or two (2)
business days, if delivery is outside the United States, after such
holder's sending (by two (2) day courier) of such Notice of Redemption at
Option of Buyer. Such Notice of Redemption at Option of Buyer shall
indicate (A) the number of Series 1 Preferred Shares that have been
selected for redemption and (B) the applicable redemption price, as
calculated pursuant to Section (2)(j)(i) above.
(iv) Payment of Redemption Price. Each holder submitting
---------------------------
Series 1 Preferred Shares for redemption under this Section (2)(j) shall
send such holder's Preferred Stock Certificates to be redeemed to the
Company or its Transfer Agent, and the Company shall pay the applicable
redemption price to that holder within thirty (30) business days after the
Company's receipt of such holder's Notice of Redemption at Option of Buyer;
provided that such holder's Preferred Stock Certificates (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction) shall have been so delivered to the
Company or its Transfer Agent.
(k) Major Transactions. If the Company shall consolidate with
------------------
or merge into any corporation or reclassify its outstanding shares of
Common Stock (other than by way of subdivision or reduction of such shares)
(each a "Major Transaction"), then each Series 1 Preferred Share shall
thereafter be entitled to receive consideration, in exchange for such
Series 1 Preferred Share, equal to the greater of: (i) the number of shares
of stock or securities or property of the Company, or of the entity
resulting from such consolidation or merger (the "Major Transaction
Consideration"), to which a holder of the number of shares of Common Stock
delivered upon conversion of such Series 1 Preferred Share would have been
entitled upon such Major Transaction had the holder of such Series 1
Preferred Share exercised its right of conversion on the trading date
preceding the public announcement of the transaction resulting in such
Major Transaction and had such Common Stock been issued and outstanding and
had such holder been the holder of record of such Common Stock at the time
of such Major Transaction, and the Company shall make lawful provision
therefor as a part of such consolidation, merger or reclassification; and
(ii) 125% of the Stated Value of such Series 1 Preferred Share in cash. No
sooner than ten (10) days nor later than five (5) days prior to the
consummation of the Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written
notice ("Notice of Major Transaction") to each holder of Series 1 Preferred
Shares, which Notice of Major Transaction shall be deemed to have been
delivered one (1) business day, if delivery is within the United States,
after the Company's sending (by overnight courier) of such Notice of Major
Transaction or two (2) business days, if deliver is outside the United
States, after the Company's sending (by two (2) day courier) of such Notice
of Major
10
<PAGE>
Transaction. Such Notice of Major Transaction shall indicate the amount and
type of the Major Transaction Consideration which such holder would receive
under clause (i) of this Section (2)(k). If the Major Transaction
Consideration does not consist entirely of United States currency, such
holder may elect to receive United States currency in an amount equal to
the value of the Major Transaction Consideration in lieu of the Major
Transaction Consideration by delivering notice of such election to the
Company within five (5) days of the holder's receipt of the Notice of Major
Transaction.
(l) Reservation of Shares. The Company shall, so long as any of
---------------------
the Series 1 Preferred Shares are outstanding, reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series 1 Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all of the Series 1 Preferred Shares then outstanding.
(m) Fractional Shares. The Company shall not issue any fraction
-----------------
of a share of Common Stock upon any conversion, but shall pay in cash
therefor at the Conversion Price then in effect multiplied by such
fraction.
(n) Taxes. The Company shall pay any and all taxes which may be
-----
imposed upon it with respect to the issuance and delivery of Common Stock
upon the conversion of the Series 1 Preferred Shares as herein provided.
The Company shall not be required in any event to pay any transfer or other
taxes by reason of the issuance of such Common Stock in names other than
those in which the Series 1 Preferred Shares surrendered for conversion are
registered on the Company's records, and no such conversion or issuance of
Common Stock shall be made unless and until the person requesting such
issuance has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company and its transfer agent, if
any, that such tax has been paid.
(3) Voting Rights. Holders of Series 1 Preferred Shares shall have
-------------
no voting rights, except as required by law and by Section (7) hereof.
(4) Liquidation, Dissolution, Winding Up. In the event of any
------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Series 1 Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"Preferred Funds"), before any amount shall be paid to the holders of any
of the capital stock of the Company of any class junior in rank to the
Series 1 Preferred Shares in respect of the preferences as to the
distributions and payments on the liquidation, dissolution and winding up
of the Company, an amount equal to the Stated Value per Series 1 Preferred
Share provided that, if the Preferred Funds are insufficient to pay the
full amount due to the holders of Series 1 Preferred Shares and holders of
shares of other classes or series of preferred stock of the Company that
are of equal rank
11
<PAGE>
with the Series 1 Preferred Shares as to payments of Preferred Funds (the
"Pari Passu Shares"), then each holder of Series 1 Preferred Shares and
Pari Passu Shares shall receive a percentage of the Preferred Funds equal
to the full amount of Preferred Funds payable to such holder as a
percentage of the full amount of Preferred Funds payable to all holders of
Series 1 Preferred Shares and Pari Passu Shares. The purchase or
redemption by the Company of stock of any class, in any manner permitted by
law, shall not, for the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the consolidation or
merger of the Company with or into any other corporation or corporations,
nor the sale or transfer by the Company of less than substantially all of
its assets, shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company. No holder of Series 1 Preferred
Shares shall be entitled to receive any amounts with respect thereto upon
any liquidation, dissolution or winding up of the Company other than the
amounts provided for herein.
(5) Preferred Rank. All shares of Common Stock shall be of junior
--------------
rank to all Series 1 Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up
of the Company. The rights of the shares of Common Stock shall be subject
to the preferences and relative rights of the Series 1 Preferred Shares.
The Company may hereafter only authorize and issue additional or other
capital stock that is of junior rank to the Series 1 Preferred Shares in
respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company; provided that the
Company may hereafter authorize additional or other capital stock that is
of equal rank to the Series 1 Preferred Shares in respect of such
preferences, if shares thereof are issued only to Beijing Legend Group Ltd.
or any of its affiliates (as that term is defined under the Exchange Act)
or successors (collectively, the "Legend Parties") and one or more of the
Legend Parties shall have entered into or agreed to enter into a joint
venture or other business relationship with the Company. In the event of
the merger or consolidation of the Company with or into another
corporation, the Series 1 Preferred Shares shall maintain their relative
powers, designations and preferences provided for herein.
(6) Restriction on Below Market Issuance of Securities. For a period
--------------------------------------------------
of ninety (90) days following the issuance of the Series 1 Preferred
Shares, the Company shall not issue or agree to issue, except to one or
more of the Legend Parties, any equity securities of the Company (or any
security convertible into or exercisable or exchangeable, directly or
indirectly, for equity securities of the Company) if such securities are
issued at a price (or in the case of securities convertible into or
exercisable or exchangeable, directly or indirectly, for Common Stock such
securities provide for a conversion price) less than the lesser of the
Fixed Conversion Price and the Average Market Price for Common Stock for
the five (5) consecutive trading days ending one day prior to the date of
issuance (in the case of Common Stock) or the conversion date (in the case
of securities convertible into or exercisable or exchangeable, directly or
indirectly, for Common Stock).
12
<PAGE>
(7) Vote to Change the Terms of Series 1 Preferred Shares. The
-----------------------------------------------------
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the holders of not less than two-thirds (2/3)
of the then outstanding Series 1 Preferred Shares shall be required to
amend, alter, change or repeal any of the powers, designations, preferences
and rights of the Series 1 Preferred Shares. In addition, the Company
shall not agree to amend or otherwise change a material term of the Series
2 Preferred Shares unless the holders of the Series 1 Preferred Shares
shall be entitled to comparable amendments or changes upon the affirmative
vote at a meeting duly called for such purpose or the written consent
without a meeting of the holders of not less than two-thirds (2/3) of the
then outstanding Series 1 Preferred Shares. The Company shall negotiate in
good faith with the holders of the Series 1 Preferred Shares to determine
the availability and terms of such a comparable amendment or change. In
the event the Company and the holders of the Series 1 Preferred Shares do
not reach agreement on an amendment or change, the availability and terms
of such an amendment or change shall be determined in good faith by the
Board of Directors of the Company.
(8) Lost or Stolen Certificates. Upon receipt by the Company of
---------------------------
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Series 1
Preferred Shares, and (in the case of loss, theft or destruction) of any
indemnification undertaking by the holder to the Company that is reasonably
satisfactory to the Company, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Company shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
However, the Company shall not be obligated to re-issue such lost or stolen
Preferred Stock Certificates if holder contemporaneously requests the
Company to convert such Series 1 Preferred Shares into Common Stock. Each
reference herein to an indemnification undertaking shall be deemed to refer
to an indemnification undertaking that is accompanied by such evidence and
complies with this Section (8).
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Edward L. Marinaro, its Chairman as of the 7th day of October 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
____________________________________
Title: Chairman
_________________________________
13
<PAGE>
EXHIBIT I
SYQUEST TECHNOLOGY, INC.
NOTICE OF CONVERSION
Reference is made to the Certificate of Designations, Preferences and Rights of
Convertible Preferred Stock, Series 1, of SyQuest Technology, Inc. (the
"Designation"). In accordance with and pursuant to the Designation, the
undersigned hereby elects to convert the number of shares of Convertible
Preferred Stock, Series 1, par value $.001 (the "Series 1 Preferred"), of
SyQuest Technology, Inc., a Delaware corporation (the "Company"), indicated
below into shares of Common Stock, par value $.001 (the "Common Stock"), of the
Company, and warrants to acquire Common Stock of the Company by tendering the
stock certificate(s) representing the share(s) of Series 1 Preferred specified
below as of the date specified below:
Date of Conversion _________________________________
Number of shares of Series 1
Preferred to be converted: _________________________________
Stock certificates no(s). of Series 1
Preferred to be converted: _________________________________
Please confirm the following
information:
Conversion Price: _________________________________
Number of shares of Common Stock
to be issued: _________________________________
Number of warrants to be issued: _________________________________
Please issue the Common Stock into which the Series 1 Preferred shares are being
converted and such warrants in the following name and to the following address:
Issue to:
_________________________________
_________________________________
_________________________________
_________________________________
Name of converting holder: _________________________________
Duly executed: By ______________________________
Name & Title: ______________________________
Dated: _________________________________
14
<PAGE>
EXHIBIT A-1
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF CONVERTIBLE PREFERRED STOCK, SERIES 1
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and pursuant to section 151 of the General Corporation
Law of the State of Delaware, by action taken by Unanimous Written Consent of
the Board of Directors of the Company dated as of October 11, 1996, in
accordance with and pursuant to section 242 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Company adopted the
following resolution:
BE IT RESOLVED, that the first three lines of the Certificate of
Designations, Preferences and Rights of Convertible Preferred Stock, Series 1,
of the Company, filed with the Delaware Secretary of State on October 9, 1996
(which three lines now read, "RESOLVED, that the Company is authorized to issue
5,000 shares of Convertible Preferred Stock, Series 1, $.001 par value (the
"Series 1 Preferred Shares"), which shall have the following powers,
designations, preferences and other special rights:"), be and they hereby are
amended to read as follows:
RESOLVED, that the Company is authorized to issue 5,500 shares of
Convertible Preferred Stock, Series 1, $.001 par value (the "Series 1
Preferred Shares"), which shall have the following powers, designations,
preferences and other special rights:
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by Edward L. Marinaro, its Chairman of the Board, as of the 11th day of
October 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
----------------------
Chairman of the Board
<PAGE>
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF CONVERTIBLE PREFERRED STOCK, SERIES 1
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and by action taken by Unanimous Written Consent of the
Board of Directors of the Company dated as of October 30, 1996, in accordance
with and pursuant to section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Company adopted the following
resolution:
BE IT RESOLVED, that paragraph (6) of the Certificate of Designations,
Preferences and Rights of Convertible Preferred Stock, Series 1, of the Company,
filed with the Delaware Secretary of State on October 9, 1996, and amended on
October 15, 1996, be and it hereby is amended to read as follows:
(6) Reserved.
--------
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Edward L. Marinaro, its Chairman of the Board, as of the 30th day of October
1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
_______________________________
Chairman of the Board
Edward L. Marinaro
<PAGE>
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF CONVERTIBLE PREFERRED STOCK, SERIES 1
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and by action taken by Unanimous Written Consent of the
Board of Directors of the Company dated as of October 31, 1996, in accordance
with and pursuant to section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Company adopted the following
resolutions:
BE IT RESOLVED, that paragraph (2) (j) (i) of the Certificate of
Designations, Preferences and Rights of Convertible Preferred Stock, Series 1,
of the Company, filed with the Delaware Secretary of State on October 9, 1996,
amended on October 15, 1996, and on October 31, 1996, be and it hereby is
amended to include the following sentence at the end thereof:
Such price shall be payable by the Company by issuing and delivering a
number of shares of Common Stock equal to such price per Series 1 Preferred
Share divided by the Closing Bid Price on the date of the Change in
Control, if the public announcement of such Change in Control is made
before 12:00 p.m. Eastern Time on such date; otherwise on the trading date
immediately following such public announcement.
RESOLVED FURTHER, that paragraph (2) (k) of the Certificate of
Designations, Preferences and Rights of Convertible Preferred Stock, Series 1,
of the Company, filed with the Delaware Secretary of State on October 9, 1996,
amended on October 15, 1996, and on October 31, 1996, be and it hereby is
amended to read as follows:
(k) Major Transactions. If the Company shall consolidate with or
------------------
merge into any corporation or reclassify its outstanding shares of Common
Stock (other than by way of subdivision or reduction of such shares) (each
a "Major Transaction"), then each Series 1 Preferred Share shall thereafter
be entitled to receive consideration, in exchange for such Series 1
Preferred Share, equal to the greater of: (i) the number of shares of stock
or securities or property of the Company, or of the entity resulting from
such consolidation or merger (the "Major Transaction Consideration"), to
which a holder of the number of shares of Common Stock delivered upon
conversion of such Series 1 Preferred Share would have been entitled upon
such Major Transaction had the holder of such Series 1 Preferred Share
exercised its right of conversion on the trading date preceding the public
announcement of the transaction resulting in such Major Transaction and had
such Common Stock been issued and outstanding and had such holder been the
<PAGE>
holder of record of such Common Stock at the time of such Major
Transaction, and the Company shall make lawful provision therefor as a part
of such consolidation, merger or reclassification; and (ii) 125% of the
Stated Value of such Series 1 Preferred Share, payable in cash, or at the
exclusive election of the Company, by issuing and delivering a number of
shares of Common Stock equal to 125% of such Stated Value divided by the
Average Market Price for the five trading days preceding the date of the
public announcement of the transaction resulting in such Major Transaction.
No sooner than ten (10) days nor later than five (5) days prior to the
consummation of the Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written
notice ("Notice of Major Transaction") to each holder of Series 1 Preferred
Shares, which Notice of Major Transaction shall be deemed to have been
delivered one (1) business day, if delivery is within the United States,
after the Company's sending (by overnight courier) of such Notice of Major
Transaction or two (2) business days, if delivery is outside the United
States, after the Company's sending (by two (2) day courier) of such Notice
of Major Transaction. Such Notice of Major Transaction shall indicate the
amount and type of the Major Transaction Consideration which such holder
would receive under clause (i) of this Section (2)(k).
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by Edward L. Marinaro, its Chairman of the Board, as of the 31st day of
October 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
__________________________________
Chairman of the Board
Edward L. Marinaro
2
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES 2
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of Twenty-Five Thousand (25,000) shares of 5% Cumulative
Convertible Preferred Stock, Series 2, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 25,000 shares of 5%
Cumulative Convertible Preferred Stock, Series 2, $.001 par value (the "5%
Preferred Shares"), which shall have the following powers, designations,
preferences and other special rights:
(1) Dividends. The holders of the 5% Preferred Shares shall be
---------
entitled to a cash dividend of five percent (5%) per annum of the Stated
Value (as defined below), on a cumulative basis with quarterly compounding
(prorated for any portion of the applicable period during which the 5%
Preferred Shares are outstanding). Dividends shall accrue from the date of
issuance of the 5% Preferred Shares and shall be payable quarterly
commencing December 31, 1996, through and including the date on which the
5% Preferred Shares are converted or redeemed. Dividends may be paid at
the Company's option in cash or, except in the case of a redemption
pursuant to Section (4), Common Stock valued based on the Average Market
Price (as defined below) of the Common Stock for the period of five (5)
consecutive trading days ending on the trading day before the dividend
payment dates or the date of conversion, as the case may be; provided,
however, that in no event shall accrued dividends be paid in shares of
Common Stock if, after giving effect to such distribution, the number of
shares of Common Stock beneficially owned by such holder and all other
holders whose holdings would be
<PAGE>
aggregated with such holder for purposes of calculating beneficial
ownership in accordance with Sections 13(d) and 16 of the Securities
Exchange Act of 1934, as amended, and the regulations thereunder ("Sections
13(d) and 16"), including, without limitation, any person serving as an
adviser to any holder (collectively, the "Related Persons"), would exceed
four and nine-tenths percent (4.9%) of the outstanding shares of Common
Stock (calculated in accordance with Sections 13(d) and 16) (Common Stock
issuable upon conversion of the 5% Preferred Shares shall not be deemed
beneficially owned by such holder or the Related Persons for this purpose),
and cash shall be paid in lieu of any shares which cannot be issued
pursuant to this proviso. The Company shall not issue any fraction of a
share of Common Stock in payment of a dividend, but shall pay cash
therefor. The Company shall, so long as any of the 5% Preferred Shares are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, such number of shares of Common Stock as shall from time to
time be sufficient to pay dividends hereunder. Every reference herein to
the Common Stock of the Company (unless a different intention is expressed)
shall be to the shares of the Common Stock of the Company, $.001 par value,
as such stock exists immediately after the issuance of the 5% Preferred
Shares provided for hereunder, or to stock into which such Common Stock may
be changed from time to time thereafter.
"Average Market Price" of any security for any period shall be
computed as the arithmetic average of the closing bid prices for such
security for each trading day in such period on the Nasdaq National Market
(the "Nasdaq-NM"), or, if the Nasdaq-NM is not the principal trading market
for such security, on the principal trading market for such security, or,
if market value cannot be calculated for such period on any of the
foregoing bases, the Average Market Price shall be the average fair market
value during such period as reasonably determined in good faith by the
Board of Directors of the Company (all as appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period
or between the end of such period and the date of conversion or dividend
payment, as applicable).
(2) Conversion of 5% Preferred Shares. The holders of the 5%
---------------------------------
Preferred Shares shall have the right, at their option, to convert the 5%
Preferred Shares into shares of Common Stock on the following terms and
conditions:
(a) Conversion Right. The 5% Preferred Shares shall be
----------------
convertible, at any time after December 15, 1996, and, if the 5% Preferred
Shares are called for redemption pursuant to Section (4) hereof, at any
time up to and including, but not after, the close of business on the fifth
(5th) trading day prior to the date fixed for the redemption, into fully
paid and nonassessable shares (calculated to the nearest whole share) of
Common Stock, at the conversion price (the "Conversion Price") in effect at
the time of conversion determined as hereinafter provided; provided,
however, that in no event shall any holder be entitled to convert 5%
Preferred Shares if, after giving effect to such conversion, the number of
shares of Common Stock beneficially owned by such holder and all Related
Persons, would exceed four and nine-tenths percent (4.9%)
2
<PAGE>
of the outstanding shares of Common Stock (calculated in accordance with
Sections 13(d) and 16). Common Stock issuable upon conversion of the 5%
Preferred Shares shall not be deemed to be beneficially owned by such
holder or the Related Persons for this purpose. Each 5% Preferred Share
shall have a stated value of One Thousand Dollars ($1,000) (the "Stated
Value") for the purpose of such conversion and the number of shares of
Common Stock issuable upon conversion of each 5% Preferred Share shall be
determined by dividing the Stated Value thereof by the Conversion Price
then in effect. In the event of a conversion of 5% Preferred Shares for
which there are accrued and unpaid dividends, the amount of the accrued and
unpaid dividends may be converted into Common Stock at the option of the
holder of such Preferred Shares (to the extent permissible under the
Delaware General Corporation Law). The number of shares of Common Stock
issuable upon conversion of the 5% Preferred Shares resulting from the
accrued and unpaid dividends shall be determined by dividing the amount of
accrued and unpaid dividends by the Conversion Price then in effect.
(b) Conversion Price. The Conversion Price shall be the lower
----------------
of (i) $6.50 (the "Fixed Conversion Price") or (ii) the amount obtained by
multiplying eighty-five percent (85%) (the "Conversion Percentage") by the
Average Market Price for the Common Stock for the five (5) consecutive
trading days ending one trading day prior to the date of the Conversion
Notice (as defined below), subject to adjustment as provided herein.
(c) Adjustment to Conversion Price. If the registration
------------------------------
statement (the "Registration Statement") covering the shares of Common
Stock issuable hereunder and required to be filed by the Company pursuant
to the Registration Rights Agreement between the Company and the initial
holders of the 5% Preferred Shares (the "Registration Rights Agreement") is
not declared effective by the U.S. Securities and Exchange Commission
("SEC") within ninety (90) days after the date of issuance of the 5%
Preferred Shares which are convertible into the shares of Common Stock
covered by such Registration Statement (provided, however, that such ninety
(90) day period shall be extended, with the holders' prior written
consent), then, as partial relief for the damages to the holder by reason
of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity):
(i) The Conversion Percentage shall be reduced by a
number of percentage points equal to three (3) multiplied by the sum of:
(i) the number of months (prorated for partial months) after the end of
such ninety (90) day period (or of such extension of such period as to
which the holders shall have consented) and prior to the date that the
relevant Registration Statement is declared effective by the SEC; and (ii)
the number of months (prorated for partial months) that sales cannot be
made pursuant to the Registration Statement (by reason of stop order, the
Company's failure to update the Registration or otherwise) after the
Registration Statement has been declared effective. (For example, if the
Registration Statement becomes effective one and one-half
3
<PAGE>
(1 1/2) months after the end of such ninety (90) day period (or of such
extension of such period as to which the holders shall have consented), the
Conversion Percentage would be eighty and one-half percent (80.5%) until
any subsequent adjustment; if thereafter sales could not be made pursuant
to the Registration Statement for a period of two (2) additional months,
the Conversion Percentage would then be seventy-four and one-half percent
(74.5%).)
(ii) The Fixed Conversion Price shall be reduced by a
number of percentage points equal to three (3) multiplied by the sum of:
(i) the number of months (prorated for partial months) after the end of
such ninety (90) day period (or of such extension of such period as to
which the holders shall have consented) and prior to the date the relevant
Registration Statement is declared effective by the SEC; and (ii) the
number of months (prorated for partial months) that sales cannot be made
pursuant to the Registration Statement (by reason of stop order, the
Company's failure to update the Registration or otherwise) after the
Registration Statement has been declared effective. (For example, if the
Registration Statement becomes effective one and one-half (1 1/2) months
after the end of such ninety (90) day period (or of such extension of such
period as to which the holders shall have consented), the Fixed Conversion
Price would be six dollars and twenty-one cents ($6.21) until any
subsequent adjustment; if thereafter sales could not be made pursuant to
the Registration Statement for a period of two (2) additional months, the
Fixed Conversion Price would then be five dollars and eighty-two cents
($5.82).)
(d) Other Adjustment to Conversion Price. In case the Company
------------------------------------
shall (i) declare a dividend or make a distribution on the outstanding
shares of its Common Stock in shares of its Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares, or
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect at the time of the record date
for such dividend or distribution or the effective date of such subdivision
or combination shall be proportionately adjusted if necessary, as
determined by the Board of Directors of the Company, so that the holder of
any 5% Preferred Shares surrendered for conversion after such time shall be
entitled to receive the aggregate number of shares of Common Stock which
the holder would have owned or been entitled to receive had such 5%
Preferred Shares been converted immediately prior to such record date or
effective date and the resulting Common Stock had been subject to such
dividend, distribution, subdivision or combination. Such adjustment shall
be made successively whenever any event specified above shall occur.
(e) Conversion Notice. On presentation and surrender to the
-----------------
Company (or at any office or agency maintained for the transfer of the 5%
Preferred Shares) of the certificates ("Preferred Stock Certificates") for
5% Preferred Shares so to be converted, duly endorsed in blank for transfer
or accompanied by proper instruments of assignment or transfer in blank and
written notice of conversion (a "Conversion Notice"), the holder of such 5%
Preferred Shares shall be entitled, subject to the limitations herein
contained,
4
<PAGE>
to receive in exchange therefor a certificate or certificates for fully
paid and nonassessable shares, which certificates shall be delivered by the
second trading day after the date of delivery of the Conversion Notice and
Preferred Stock Certificates for the 5% Preferred Shares being converted,
and cash for fractional shares, of Common Stock on the foregoing basis.
The Conversion Notice shall be deemed delivered and received on the
business day when it is transmitted by facsimile if so transmitted by 5:00
p.m., California time, or on the next business day after it is deposited
for next-day delivery with a nationally recognized overnight delivery
service. The 5% Preferred Shares shall be deemed to have been converted,
and the person converting the same to have become the holder of record of
Common Stock, for all purposes as of the date of delivery of the Conversion
Notice.
(f) Major Transactions. If the Company shall consolidate with
------------------
or merge into any corporation or reclassify its outstanding shares of
Common Stock (other than by way of subdivision or reduction of such shares)
(each a "Major Transaction"), then each 5% Preferred Share shall thereafter
be convertible into the number of shares of stock or securities (the
"Resulting Securities") or property of the Company, or of the entity
resulting from such consolidation or merger, to which a holder of the
number of shares of Common Stock delivered upon conversion of such 5%
Preferred Share would have been entitled upon such Major Transaction had
the holder of such 5% Preferred Share exercised its right of conversion and
had such Common Stock been issued and outstanding and had such holder been
the holder of record of such Common Stock at the time of such Major
Transaction, and the Company shall make lawful provision therefor as a part
of such consolidation, merger or reclassification; provided, however, that
the Company shall give the holders of the 5% Preferred Shares written
notice of any Major Transaction promptly upon the execution of any
agreement whether or not binding in connection therewith (including,
without limitation, a letter of intent or agreement in principle) and in no
event shall a Major Transaction be consummated prior to seventy-five (75)
days after such notice or prior to the date that the Registration Statement
is declared effective by the SEC.
(g) Reservation of Shares. The Company shall, so long as any of
---------------------
the 5% Preferred Shares are outstanding, reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the 5% Preferred Shares, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the 5% Preferred Shares then outstanding.
(h) Fractional Shares. The Company shall not issue any fraction
-----------------
of a share of Common Stock upon any conversion, but shall pay in cash
therefor at the Conversion Price then in effect multiplied by such
fraction.
(i) Taxes. The Company shall pay any and all taxes which may be
-----
imposed upon it with respect to the issuance and delivery of Common Stock
upon the conversion of the 5% Preferred Shares as herein provided. The
Company shall not be
5
<PAGE>
required in any event to pay any transfer or other taxes by reason of the
issuance of such Common Stock in names other than those in which the 5%
Preferred Shares surrendered for conversion are registered on the Company's
records, and no such conversion or issuance of Common Stock shall be made
unless and until the person requesting such issuance has paid to the
Company the amount of any such tax, or has established to the satisfaction
of the Company and its transfer agent, if any, that such tax has been paid.
(3) Voting Rights. Holders of 5% Preferred Shares shall have no
-------------
voting rights, except as required by law.
(4) Company's Right to Redeem at Its Election. At any time within
-----------------------------------------
the one hundred twenty (120) day period (the "First Redemption Period")
after the Registration Statement is declared effective, if the Average
Market Price of the Common Stock for any period of five (5) consecutive
trading days is less than three dollars ($3.00) per share, or at any time
after the First Redemption Period so long as the Average Market Price per
share of the Common Stock is three dollars ($3.00) or more, the Company
shall have the right, in its sole discretion, to redeem ("Redemption at the
Company's Election"), from time to time, any or all of the 5% Preferred
Shares; provided that if such right arises because such Average Market
Price is less than three dollars ($3.00) per share for a period of five (5)
consecutive trading days during the First Redemption Period, the Company
may exercise such right only by giving notice as provided in Section (4)(b)
below within three (3) business days after such period of five (5)
consecutive trading days. If the Company elects to redeem some, but not
all, of the 5% Preferred Shares, the Company shall redeem a pro-rata amount
(based on the number of 5% Preferred Shares held by such holder) from each
holder of the 5% Preferred Shares.
(a) Redemption Price at the Company's Election. The "Redemption
------------------------------------------
Price at the Company's Election" shall be an amount per 5% Preferred Share
equal to the greater of (A) the product of the Average Market Price per
share of Common Stock for the period of five (5) consecutive trading days
preceding the Notice of Redemption at the Company's Election (as defined
below) multiplied by the number of shares of Common Stock into which one 5%
Preferred Share is convertible on the trading day preceding the Notice of
Redemption at the Company's Election, and (B) one thousand one hundred
seventy-six dollars and forty-seven cents ($1,176.47).
(b) Mechanics of Redemption at the Company's Election. The
-------------------------------------------------
Company shall effect each the Redemption at the Company's Election by
giving at least twenty (20) days' prior written notice ("Notice of
Redemption at the Company's Election") to (A) each holder of the 5%
Preferred Shares selected for redemption, at the address and facsimile
number of such holder appearing in the Company's 5% Preferred Share
register and (B) the Company's Transfer Agent for the 5% Preferred Shares.
Such Notice of Redemption at the Company's Election shall be deemed to have
been delivered and received one (1) business day, if delivery is within the
United States, after the Company's sending (by overnight courier) of such
Notice of Redemption at the
6
<PAGE>
Company's Election or two (2) business days, if delivery is outside the
United States, after the Company's sending (by two (2) day courier) of such
Notice of Redemption at the Company's Election. Such Notice of Redemption
at the Company's Election shall indicate (x) the number of 5% Preferred
Shares that have been selected for redemption, (y) the date that such
redemption is to become effective (the "Date of Redemption at the Company's
Election") and (z) the applicable Redemption Price at the Company's
Election. Notwithstanding the above, any holder may convert into Common
Stock pursuant to Section (2)(a), prior to the close of business on the
fifth trading day prior to the Date of Redemption at the Company's
Election, any 5% Preferred Shares that such holder is otherwise entitled to
convert, including 5% Preferred Shares that have been selected for
Redemption at the Company's Election pursuant to this Section (4).
(c) Payment of Redemption Price. Each holder submitting 5%
---------------------------
Preferred Shares being redeemed under this Section (4) shall send such
holder's Preferred Stock Certificates so redeemed to the Company or its
Transfer Agent (as set forth in the Notice of Redemption at the Company's
Election), and the Company shall pay the applicable Redemption Price at the
Company's Election to that holder within five (5) business days after such
holder's Preferred Stock Certificates (or an indemnification undertaking
satisfactory to the Company with respect to such shares in the case of
their loss, theft or destruction) are delivered to the Company or its
Transfer Agent.
(d) Company Must Have Immediately Available Funds or Credit
-------------------------------------------------------
Facilities. The Company shall not be entitled to send any Notice of
----------
Redemption at the Company's Election pursuant to this Section (4) and begin
the redemption procedure hereunder, unless it has, and unless the Company
shall have furnished to such holder whose 5% Preferred Shares are being
redeemed a certificate signed by the treasurer or chief financial officer
of the Company stating that the Company has:
(i) the full amount of the redemption price in cash,
available in a demand or other immediately available account in a bank or
similar financial institution; or
(ii) immediately available credit facilities, in the full
amount of the redemption price with a bank or similar financial
institution; or
(iii) an agreement with a standby underwriter or qualified
buyer ready, willing and able to purchase from the Company a sufficient
number of shares of stock to provide proceeds necessary to redeem any stock
that is not converted prior to redemption; or
(iv) a combination of the items set forth in the preceding
clauses (A), (B) and (C), aggregating the full amount of the redemption
price.
7
<PAGE>
(5) Liquidation, Dissolution, Winding Up. In the event of any
------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the 5% Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"Preferred Funds"), before any amount shall be paid to the holders of the
Common Stock, an amount equal to the Stated Value per Preferred Share plus
any accrued and unpaid dividends, provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of 5% Preferred
Shares and holders of shares of other classes or series of preferred stock
of the Company that are of equal rank with the 5% Preferred Shares as to
payments of Preferred Funds (the "Pari Passu Shares"), then each holder of
5% Preferred Shares and Pari Passu Shares shall receive a percentage of the
Preferred Funds equal to the full amount of Preferred Funds payable to such
holder as a percentage of the full amount of Preferred Funds payable to all
holders of 5% Preferred Shares and Pari Passu Shares. The purchase or
redemption by the Company of stock of any class, in any manner permitted by
law, shall not, for the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the consolidation or
merger of the Company with or into any other corporation or corporations,
nor the sale or transfer by the Company of less than substantially all of
its assets, shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company. No holder of 5% Preferred Shares
shall be entitled to receive any amounts with respect thereto upon any
liquidation, dissolution or winding up of the Company other than the
amounts provided for herein.
(6) Preferred Rank. All shares of Common Stock shall be of junior
--------------
rank to all 5% Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution and winding up
of the Company. The rights of the shares of Common Stock shall be subject
to the preferences and relative rights of the 5% Preferred Shares. The
Company may hereafter only authorize additional or other capital stock that
is of junior rank to the 5% Preferred Shares in respect of the preferences
as to payments upon the liquidation, dissolution and winding up of the
Company; provided that the Company may hereafter authorize additional or
other capital stock that is of equal rank to the 5% Preferred Shares in
respect of such preferences, if shares thereof are issued only to Beijing
Legend Group Ltd. or any of its affiliates (as that term is defined under
the Securities Exchange Act of 1934, as amended) or successors
(collectively, the "Legend Parties") and one or more of the Legend Parties
shall have entered into or agreed to enter into a joint venture or other
business relationship with the Company. In the event of the merger or
consolidation of the Company with or into another corporation, the 5%
Preferred Shares shall maintain their relative powers, designations and
preferences provided herein.
(7) Lost or Stolen Certificates. Upon receipt by the Company of
---------------------------
evidence of the loss, theft, destruction or mutilation of any Preferred
Stock Certificate representing 5% Preferred Shares, and (in the case of
loss, theft or destruction) of any indemnification undertaking by the
holder to the Company that is reasonably satisfactory to the Company,
8
<PAGE>
and upon surrender and cancellation of such Preferred Stock Certificate, if
mutilated, the Company shall execute and deliver a new Preferred Stock
Certificate of like tenor and date; provided that the Company shall not be
obligated to re-issue any lost or stolen Preferred Stock Certificate if the
holder thereof contemporaneously requests the Company to convert such 5%
Preferred Shares into Common Stock.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Edward L. Marinaro, its Chairman as of the 7th day of October, 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
----------------------
Title: Chairman
9
<PAGE>
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the investors listed on the Schedule of Investors attached
hereto as Exhibit B (individually, a "Buyer" and, collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyers wish to purchase, in the amounts set forth in the Schedule
of Investors and upon the terms and conditions stated in this Agreement, shares
(the "Preferred Shares") of the Company's Convertible Preferred Stock, Series 1,
$.001 par value per share (the "Preferred Stock"), which shall be convertible
into shares of the Company's Common Stock (the "Common Stock"), $.001 par value
(as converted, the "Conversion Shares");
C. Each Buyer shall receive upon each conversion and in certain
circumstances redemption of such Buyer's Preferred Shares a warrant to acquire
one share of Common Stock for each three shares of Common Stock issued upon
conversion of such Preferred Shares (the "Warrants"), which Warrants shall
expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit F
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
a. Purchase of Preferred Shares. The Company shall issue and sell
----------------------------
to the Buyers and the Buyers shall purchase an aggregate of 5,500 Preferred
Shares, in the respective amounts set forth opposite the Buyers' names on the
Schedule of Investors, which shall be convertible into Conversion Shares in
accordance with the terms of the Certificate of Designations, Preferences and
Rights of Convertible Preferred Stock, Series 1, in the form attached hereto as
Exhibits A and A-1 (together, the "Certificate of Designations"). The per share
purchase price (the "Purchase Price") of the Preferred Shares shall be $1,000.
The Preferred Shares shall be sold at the closing as hereinafter provided.
<PAGE>
b. Closing. The date and time of the closing (the "Closing") of the
-------
issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on October 8, 1996 (or such later date as is mutually agreed to by
the Company and the Buyers).
c. Form of Payment. Each Buyer shall pay the Purchase Price for the
---------------
number of Preferred Shares set forth opposite such Buyer's name in the Schedule
of Investors, by wire transfer of immediately available United States Dollars on
the Closing date, to be deposited into an escrow account (the "Escrow Account")
as contemplated by an Escrow Agreement in substantially the form of Exhibit G
attached hereto (the "Escrow Agreement"). At the closing, the Company shall
deliver stock certificates, duly executed on behalf of the Company, representing
the Preferred Shares (the "Stock Certificates") to the respective Buyers.
d. Warrant Issuances. The Company will issue to each Buyer,
-----------------
within five (5) days after any conversion of Preferred Shares by that Buyer, a
Warrant in substantially the form of Exhibit C attached hereto, to acquire one
share of Common Stock for each three Conversion Shares that are issued on such
conversion of Preferred Shares, with an exercise price equal to the lower of
$7.15 per share and 110 percent of the Average Market Price (as that term is
defined in the Certificate of Designations) per share of Common Stock for the
five trading days preceding such conversion. In addition, the Company will issue
to each Buyer the Warrants described in the preceding sentence upon any
redemption of Preferred Shares upon the same terms as if such Preferred Shares
were converted on the date of redemption; provided that the Company is not
required to issue Warrants to Buyer in the event the Company redeems Preferred
Shares pursuant to Section 2(h) of the Certificate of Designations in connection
with a public offering by the Company of Common Stock. Each Warrant shall be
immediately exercisable and shall expire (to the extent not exercised) on the
third anniversary of the date of the relevant conversion or redemption of
Preferred Shares, as the case may be.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants to the Company as to itself, severally,
and not jointly, that:
a. Investment Purpose. Such Buyer is purchasing the Preferred
------------------
Shares and the Warrants for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the 1933 Act. Such Buyer is
not purchasing the Preferred Shares for the purpose of covering short sale
positions in the Common Stock established on or prior to the date of the
Closing. Such Buyer understands that it shall be a condition to the issuance of
the Conversion Shares and the shares of Common Stock issuable upon exercise of
the Warrants (the "Warrant Shares") that the Warrants, Conversion Shares and
Warrant Shares are subject to the representations set forth in the first
sentence of this Section 2(a).
b. Accredited Investor Status. Such Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
2
<PAGE>
c. Reliance on Exemptions. Such Buyer understands that the
----------------------
Preferred Shares, Warrants, Conversion Shares and Warrant Shares are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and such Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
Preferred Shares, Warrants, Conversion Shares and Warrant Shares.
d. Information. Such Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares and Warrant Shares which have been requested
by such Buyer. Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received answers to such
inquiries. Such Buyer understands that its investment in Preferred Shares,
Warrants, Conversion Shares and Warrant Shares involves a high degree of risk,
including, without limitation, the risks arising from the facts that the
Company's stockholders' equity is negative in an amount in excess of
$30,000,000, that the Company incurred a loss for the quarter ended September
30, 1996, and that no assurance can be given that the Company will not incur
continuing losses or will be profitable. Such Buyer has sought such accounting,
legal and tax advice as it has considered necessary to an informed investment
decision with respect to its acquisition of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares.
e. No Governmental Review. Such Buyer understands that no United
----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares or Warrant Shares or the fairness or suitability of
the investment in the Preferred Shares, Warrants, Conversion Shares or Warrant
Shares nor have such authorities passed upon or endorsed the merits of the
offering of the Preferred Shares, Warrants, Conversion Shares and Warrant
Shares.
f. Transfer or Resale. Such Buyer understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) such Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration; (ii) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to
3
<PAGE>
register such securities (other than pursuant to the Registration Rights
Agreement) under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or other
-------
instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares and the Warrant Shares (collectively, the
"Registrable Securities") have been sold pursuant to a registration under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Registrable Securities shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the sale of the Registrable
Securities is registered under the 1933 Act, or (b) in connection with a sale
transaction, such holder provides the Company with an opinion of counsel, in
form, substance and scope reasonably acceptable to the Company, to the effect
that a public sale, assignment or transfer of the Preferred Shares, the Warrants
or such Registrable Securities may be made without registration under the 1933
Act, or (c) such holder provides the Company with reasonable assurances that the
Preferred Shares, the Warrants or such Registrable Securities can be sold
pursuant to Rule 144 under the 1933 Act (or a successor rule thereto) without
any restriction as to the number of securities acquired as of a particular date
that can then be immediately sold. Such Buyer agrees to sell the Registrable
Securities, including those represented by certificate(s) from which the legend
has been removed, in compliance with all applicable securities laws.
4
<PAGE>
h. Authorization; Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered by such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
i. Residency. Such Buyer is a resident of that country
---------
specified in its address on the Schedule of Investors.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Buyers that:
a. Organization and Qualification. The Company and its
------------------------------
subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated,
except, in the case of any such subsidiaries, as would not have a Material
Adverse Effect (as defined below), and have the requisite corporate power to own
their properties and to carry on their business as now being conducted. Each of
the Company and its subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary and where the
failure so to qualify would have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
b. Authorization; Enforcement; Compliance with Other Instruments.
-------------------------------------------------------------
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Escrow Agreement and the Registration Rights
Agreement, and to issue the Preferred Shares, the Warrants and the Registrable
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Escrow Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Preferred Shares,
the Warrants and the Registrable Securities, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required, (iii) this Agreement, the Escrow Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company, and (iv) this
Agreement, the Escrow Agreement and the Registration Rights Agreement constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
c. Capitalization. As of the date hereof, the authorized
--------------
capital stock of the Company consists of (i) 60,000,000 shares of Common Stock
of which, as of October 3, 1996, 12,219,415 shares were issued and outstanding,
and (ii) 4,000,000 shares of Preferred
5
<PAGE>
Stock of which, as of October 3, 1996, 20,000 shares were issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Schedule 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt securities, and
(iii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement). The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended, as in effect on the date hereof
("Certificate of Incorporation"), and the Company's By-laws, as in effect on the
date hereof (the "Bylaws").
d. Issuance of Securities. The Registrable Securities, the
----------------------
Preferred Shares and the Warrants are duly authorized and, upon issuance in
accordance with the terms hereof and thereof, shall be validly issued, fully
paid and non-assessable, and free from all taxes, liens and charges with respect
to the issue thereof.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Except as disclosed in Schedule 3(e), neither the Company nor
its subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or Bylaws or, in any material respect, any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted through the Registration Period (as
defined herein), in violation of any law, ordinance, regulation of any
governmental entity, except for possible violations which either singly or in
the aggregate do not have a Material Adverse Effect. Except as required under
the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof.
6
<PAGE>
f. SEC Documents, Financial Statements. Since September 30,
-----------------------------------
1995, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein (other than exhibits to incorporated
documents), being hereinafter referred to as the "SEC Documents"). The Company
has delivered to each Buyer or its representative true and complete copies of
the SEC Documents, except for such exhibits, schedules and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
any Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
--------------------------
3(g), since June 30, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as expressly set forth in its
---------------------
Form 10-Q for the quarter ended June 30, 1996, or in Schedule 3(h), there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein.
7
<PAGE>
i. Purpose of Investment. The Company recognizes that the
---------------------
Buyer's investment in the Company is being made in order to provide financing
for the Company's ongoing operations and especially for the development and
introduction of new products, including the marketing of such products, and
payment of accrued interest on and repayment of any loan heretofore made to the
Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000.
j. Acknowledgement Regarding Buyers' Purchase of Preferred
-------------------------------------------------------
Shares. The Company acknowledges and agrees that each of the Buyers is acting
- ------
solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Buyer or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Preferred Shares. The Company further represents to each Buyer
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
k. No Undisclosed Events or Circumstances. No event or
--------------------------------------
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective business, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation, was
required to be publicly disclosed or announced by the Company but which has not
been so publicly announced or disclosed.
l. No General Solicitation. Neither the Company, nor any of
-----------------------
its affiliates, or, to its knowledge, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the 1933 Act) in connection with the offer or
sale of the Preferred Shares.
m. No Registration Required. Except as provided herein and in
------------------------
the Registration Rights Agreement, neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Preferred Shares, Registrable Securities or Warrants under the 1933 Act.
n. Employee Relations. Neither the Company nor any of its
------------------
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company believes that its
relations with its employees for the most part are good.
o. Intellectual Property Rights. The Company and its
----------------------------
subsidiaries own or possess adequate rights to use sufficient trademarks, trade
names, service marks, service mark registrations, patent rights, copyrights,
licenses, approvals, governmental authorizations, trade secrets and rights to
conduct their respective businesses as now conducted; except as set forth
8
<PAGE>
on Schedule 3(o), the expiration or termination of any trademarks, trade names,
service marks, service mark registrations, patent rights, copyrights, licenses,
approvals, government authorizations, trade secrets or rights would not have a
Material Adverse Effect; and the Company does not have any knowledge of any
material infringement by the Company or its subsidiaries of trademark, trade
name rights, patent rights, copyrights, licenses, service marks, service mark
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(o), there is no claim being made
against the Company or its subsidiaries regarding trademark, trade name, patent,
copyright, license, service marks, service mark registrations, trade secret or
other infringement which could have a Material Adverse Effect. The Company and
its subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
p. Restructuring of Trade Payables. The vendor payables set
-------------------------------
forth on Schedule 3(p) (which schedule includes the name of the vendor creditor
and the amount of the vendor payable) have been restructured as indicated on
Schedule 3(p).
q. Closing of Future Financings. The Company is currently
----------------------------
negotiating additional financing transactions, which include a possible
investment by Beijing Legend Group Ltd. of approximately $20,000,000, a possible
investment by Fletcher Asset Management, Inc. or its clients of $7,000,000 to
$16,000,000 and a possible investment by a group led by New Enterprise
Associates of $5,000,000 to $27,000,000, and the Company hopes that one or both
of the latter two transactions will be completed by October 31, 1996, but the
Company does not hereby represent or warrant that any of such financing
transactions will be consummated by October 31, 1996, or at all. The Company
intends that any of these transactions, if consummated, will involve the sale of
securities at a price approximately equivalent to fair market value, except that
securities sold to Beijing Legend Group Ltd. will be sold, if at all, at a price
substantially below fair market value.
r. Dilutive Effect. The Company understands and acknowledges
---------------
the potentially dilutive effect to the Common Stock of the issuance of the
Preferred Shares, the Warrants and the Registrable Securities.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
------
the Preferred Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933
9
<PAGE>
Act (or successor thereto), or (ii) the date on which (A) the Investors shall
have sold all the Registrable Securities and (B) none of the Preferred Shares or
Warrants is outstanding (the "Registration Period"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Preferred Shares for the Company's internal working capital
purposes, including costs and expenses of the Company's business operations and
product development, production and marketing, and for payment of accrued
interest on and repayment of a loan by Silicon Valley Bank to the Company in an
aggregate amount of not more than $5,000,000.
e. Financial Information. The Company agrees to send the
---------------------
following to each Buyer during the Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-
K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii)
within one day after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries; and (iii) notice of any requested
disbursement under the Escrow Agreement.
f. Reservation of Shares. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares and
the Warrant Shares.
g. Listing. The Company shall promptly secure the listing of
-------
the Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement. The Company shall use its best
efforts to maintain the Common Stock's authorization for quotation on the Nasdaq
National Market or such other national securities exchange. The Company shall
promptly provide to the Buyers copies of any notices it receives from Nasdaq
regarding the continued eligibility of the Common Stock for listing on the
Nasdaq National Market.
h. Legal Expenses. The Company shall pay all expenses incurred
--------------
in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the respective Buyers or their respective nominees,
for the Conversion Shares and Warrant Shares in such amounts as specified from
time to time by the respective
10
<PAGE>
Buyers to the Company. All such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company shall provide
instructions and opinions of counsel to its transfer agent in accordance with
Section 3(m) of the Registration Rights Agreement. The Company warrants that no
instruction other than such instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof, in the case of the
Registrable Securities, will be given by the Company to its transfer agent and
that the Preferred Shares, the Warrants and the Registrable Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Registration Rights Agreement and
the Warrants. Nothing in this Section shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If a Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by such Buyer of any of the Preferred
Shares, the Warrants or the Registrable Securities is not required under the
1933 Act, the Company shall permit the transfer, and promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to sell the Preferred Shares
is subject to the satisfaction, at or before the date of the Closing, of each of
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. Each Buyer shall have delivered to the Company the Purchase
Price for all Preferred Shares being purchased by such Buyer by wire transfer of
immediately available funds pursuant to the wiring instructions provided by the
Company.
d. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and each Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
11
<PAGE>
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of each Buyer to purchase the Preferred Shares at the
Closing is subject to the satisfaction, at or before the date of the Closing, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with the
Secretary of State of Delaware, and a copy thereof certified by such Secretary
of State shall have been delivered to each Buyer.
c. Until the date of the Closing, the Common Stock shall be
authorized for quotation on the Nasdaq National Market or the Nasdaq SmallCap
Market and trading in the Common Stock on Nasdaq National Market or the Nasdaq
SmallCap Market shall not have been suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3, in which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the date of
the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. Each
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer.
e. Each Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to each Buyer
the Stock Certificates for the Preferred Shares being purchased by such Buyer.
g. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall have closed the sale of 24,500 shares of
the Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par
value per share, for an aggregate gross purchase price of $24,500,000 on the
terms and conditions and with the rights and obligations set forth in the forms
of the securities purchase agreement, registration rights agreement, escrow
agreement and certificate of designations, preferences and rights previously
delivered to Robert J. Brantman, counsel for the Buyers.
12
<PAGE>
i. The Escrow Agreement shall have been duly executed and
delivered to the Buyers.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by mail or delivered personally
or by courier and shall be effective five days after being placed in the mail,
if mailed, certified or registered, return receipt requested, or upon receipt,
if delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
13
<PAGE>
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to a Buyer, at its address on the Schedule of Investors, with a
copy to such Buyer's counsel as set forth thereon.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each of the Buyers
(which consent shall not be unreasonably withheld). A Buyer may assign its
rights hereunder without the consent of the Company, provided, however, that any
such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h), 8(j) and 8(k), and this subsection shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably
14
<PAGE>
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date without
liability of any party to any other party.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
- ------ -------
SYQUEST TECHNOLOGY, INC. NELSON PARTNERS
By:/s/ Edward L. Marinaro By:/s/ Anne Dupuy
------------------------ -------------------
Name: Name:Anne Dupy
Its: Its: Officer
OLYMPUS SECURITIES, LTD.
By:/s/ Anne Dupuy
-------------------
Name: Anne Dupuy
Its: Alternate Director
ROSE GLEN FUNDING, INC.
By: /s/ Steve Katznelson
------------------------
Name: Steve Katznelson
Its: PRESIDENT
15
<PAGE>
EXHIBIT B
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Investor Address and Investor's Legal Counsel Number of
Investor Name Facsimile Number and Counsel's Address Preferred Shares
------------- ---------------- --------------------- ----------------
<S> <C> <C> <C>
Nelson Partners c/o Leeds Management Services Citadel Limited Partnership 3,000
129 Front Street, 5th Floor 225 West Washington
Hamilton HM12 Street
Bermuda 9th Floor
Attn: Anne Dupuy Chicago, Illinois 60606
Facsimile: (441) 292-2239 Attn: John D. Ziegelman
Kenneth A. Simpler
Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
Attn: Robert J. Brantman
Facsimile: (312) 902-1061
Olympus Securities, Ltd. c/o Leeds Management Services Citadel Limited Partnership 2,000
129 Front Street, 5th Floor 225 West Washington
Hamilton HM12 Street
Bermuda 9th Floor
Attn: Anne Dupuy Chicago, Illinois 60606
Facsimile: (441) 292-2239 Attn: John D. Ziegelman
Kenneth A. Simpler
Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
Attn: Robert J. Brantman
Facsimile: (312) 902-1061
Rose Glen Funding, Inc. 440 East Swedesford Road 500
Suite 2025
Wayne, PA 19087
Attn: Gary Kaminsky
Facsimile: 610-971-2212
</TABLE>
17
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION OR REDEMPTION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OR REDEMPTION OF SERIES
1 PREFERRED SHARES] _________________ (_________) fully paid nonassessable
shares of Common Stock (as defined herein) of the Company (the "Warrant Shares")
at a purchase price of [THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE
MARKET PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE
TRADING DAYS PRECEDING THE CONVERSION OR REDEMPTION DATE] U.S. $_______ per
share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any
------------
capital stock into which such Common Stock shall have been changed or any
capital stock resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
<PAGE>
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. Pacific
Time on the Expiration Date. The rights represented by this Warrant may be
exercised by the holder hereof then registered on the books of the Company, as a
whole or from time to time in part (except that this Warrant shall not be
exercisable as to a fractional share) by (i) delivery of a written notice, in
the form of the Subscription Notice attached as Exhibit A hereto, of such
holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which the Warrant is being exercised (plus any applicable issue or
transfer
2
<PAGE>
taxes) in cash or by check, for the number of Warrant Shares as to which this
Warrant shall have been exercised, and (iii) the surrender of this Warrant,
properly endorsed, at the principal office of the Company (or at such other
agency or office of the Company as the Company may designate by notice to the
holder hereof); provided, that if such Warrant Shares are to be issued in any
name other than that of the registered holder of this Warrant, such issuance
shall be deemed a transfer and the provisions of Section 8 shall be applicable.
In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2(a), a certificate or certificates for the Warrant
Shares so purchased, registered in the name of, or as directed by, the holder,
shall be delivered to, or as directed by, such holder within a reasonable time
after such rights shall have been so exercised.
(b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall issue a new Warrant
identical in all respects to the Warrant exercised except (i) it shall represent
rights to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under the Warrant exercised, less the number of Warrant Shares
with respect to which such Warrant is exercised, and (ii) the holder thereof
shall be deemed to have become the holder of record of such Warrant Shares
immediately prior to the close of business on the date on which the Warrant is
surrendered and payment of the amount due in respect of such exercise and any
applicable taxes is made, irrespective of the date of delivery of such share
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are properly closed, such person
shall be deemed to have become the holder of such Warrant Shares at the opening
of business on the next succeeding date on which the stock transfer books are
open.
Section 3. Covenants as to Common Stock. The Company covenants and
----------------------------
agrees that all Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved a sufficient number
of shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax
-----
or taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as
---------------------------------------
such, of this Warrant shall be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive
3
<PAGE>
notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the holder of this Warrant of the Warrant Shares which
he or she is then entitled to receive upon the due exercise of this Warrant.
Notwithstanding the foregoing, the Company will provide the holder of this
Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by
-------------------------
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment and not with a view to, or for
sale in connection with, any distribution hereof or of any of the shares of
Common Stock or other securities issuable upon the exercise thereof, and not
with any present intention of distributing any of the same. The holder of this
Warrant further represents, by acceptance hereof, that, as of this date, such
holder is an "accredited investor" as such term is defined in Rule 501(a)(1) of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act (an "Accredited Investor") and an "excluded purchaser" for
purposes of Section 25102(f) of the California Corporate Securities Law of 1968
(an "Excluded Purchaser"). Upon exercise of this Warrant, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor and an Excluded Purchaser. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) The holder of this Warrant understands that (i) except as
provided in the Registration Rights Agreement, this Warrant and the Warrant
Shares have not been and are not being registered under the Securities Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) such holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the
4
<PAGE>
Securities Act may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than pursuant to the Registration
Rights Agreement) under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
(b) Any Warrant Shares issued upon exercise of this Warrant may bear
one or more of the legends in similar form to the legend set forth on this
Warrant.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall
--------------------------
effect a stock dividend, a stock split, a stock combination, or a reverse stock
split of the Common Stock, the number of Warrant Shares purchasable hereunder
and the Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking
5
<PAGE>
reasonably satisfactory to the Company, issue a new Warrant of like denomination
and tenor as the Warrant so lost, stolen or destroyed.
Section 11. Notice. Any notices required or permitted to be given
------
under the terms of this Warrant shall be sent by mail or delivered personally or
by courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to Holder, to it at the address set forth below Holder's signature
on the signature page hereof.
Each party shall provide notice to the other party of any change in address.
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
Section 13. Date. The date of this Warrant is _____________, 199__.
----
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of
6
<PAGE>
Section 8 shall continue in full force and effect after such date as to any
Warrant Shares or other securities issued upon the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By: _____________________________
Name: ___________________________
Title:___________________________
ACCEPTED:
- --------
[HOLDER]
By: ________________________
Name: ______________________
Title: _____________________
Address: ___________________
____________________________
____________________________
____________________________
7
<PAGE>
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment of U.S. $_______________, the
aggregate Warrant Exercise Price of such Warrant Shares in full.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(1) of Regulation D as promulgated by the Securities and
Exchange Commission under the Securities Act and an "excluded purchaser" for
purposes of Section 25102(f) of the California Corporate Securities Law of 1968.
[HOLDER]
Dated:____________________, 199_.
By: ____________________________________
Name: __________________________________
Title:__________________________________
Address: _______________________________
________________________________________
________________________________________
________________________________________
Number of Warrant Shares
Being Purchased: ______________________
8
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (each, a "Buyer" and, collectively, the
"Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement to (i) issue and sell to the Buyers shares of the Company's
Convertible Preferred Stock, Series 1, $.001 par value per share (the "Preferred
Shares"), which will be convertible into shares of the Company's common stock
(the "Common Stock"), par value $.001 per share (as converted, the "Conversion
Shares"), and (ii) issue Warrants (the "Warrants") which will be exercisable to
purchase shares of Common Stock (the "Warrant Shares"); and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer and any transferee or assignee thereof
to whom the Buyer assigns this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 hereof.
b. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
<PAGE>
c. "Registrable Securities" means the Conversion Shares and the
Warrant Shares and any shares of Common Stock issued in respect of the
Conversion Shares or Warrant Shares as a result of any stock split, stock
dividend, recapitalization or similar event.
d. "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare, and, on or before thirty (30) days after the date of the issuance of
the relevant Preferred Shares, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable Securities
issuable upon conversion of or in connection with the relevant Preferred Shares,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares or exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within ninety (90) days after the date of issuance
of the relevant Preferred Shares. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by each Buyer and one
legal counsel selected by the Buyers prior to the Company's filing or other
submission, such approval not to be unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration
2
<PAGE>
rights under this Section 2(c) written notice of such determination and, if
within twenty (20) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' reasonable good
faith judgment, marketing or other factors dictate such limitation is necessary
to facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder; provided that no portion of the equity securities which the
Company is offering for its own account shall be excluded; provided, further
that the Company shall be entitled to exclude Registrable Securities to the
extent necessary to avoid breaching obligations existing prior to the date
hereof to other stockholders of the Company. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not entitled to
inclusion of such securities in such Registration Statement or are not entitled
to pro rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the Registration
Statement other than holders of securities entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights or whose registration rights existed prior to the date hereof. No right
to registration of Registrable Securities under this Section 2(c) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(c) may be waived by Investors
holding a majority of the Registrable Securities. If an offering in connection
with which an Investor is entitled to registration under this Section 2(c) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyers and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
3
<PAGE>
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares or Warrants is outstanding (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s) as may be necessary to keep the Registration Statement(s) effective
at all times during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement(s)
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement(s).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority of the Registrable Securities
being offered reasonably request (but in no event in more than five states of
the United States), (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a
4
<PAGE>
condition thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause more than nominal expense or burden to the Company, or
(e) make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders. The Company shall promptly notify each Investor
who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. The Company shall permit a single firm of counsel, designated as
selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable
5
<PAGE>
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
6
<PAGE>
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
o. The Company shall otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OTHER OBLIGATIONS.
-----------------
a. At least five (5) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent
7
<PAGE>
to the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
8
<PAGE>
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company and fees and disbursements of one counsel for the
Investors, shall be borne by the Company, subject, with respect to expenses for
such counsel incurred by the Investors, to the limit stated in Section 4(h) of
the Securities Purchase Agreement.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities, attorneys' fees, amounts paid in settlement or expenses (joint or
several) (collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or in any filing made
in connection with the qualification of the offering under the securities or
other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact therein required to be stated or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to
9
<PAGE>
the number of legal counsel, the Company shall reimburse the Investors and each
such underwriter or controlling person, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) with respect to any preliminary
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (iii) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or to cause to be delivered the prospectus
made available by the Company; and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force
10
<PAGE>
and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that legal
fees of such firm shall be reasonable. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such Indemnified Damages are incurred or bills therefor are received
and are due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect
11
<PAGE>
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that (i) no contribution
shall be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (ii) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and
12
<PAGE>
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act, and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
13
<PAGE>
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to a Buyer, at its address on Schedule A attached hereto, with a copy to
such Buyer's counsel at the address thereon.
Each party shall provide notice to the other party of any change in
address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
14
<PAGE>
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
SYQUEST TECHNOLOGY, INC. NELSON PARTNERS
By:_______________________________ By:________________________________
Name: Name:
Its: Its:
OLYMPUS SECURITIES, LTD.
By:________________________________
Name:
Its:
ROSE GLEN FUNDING, INC.
By:________________________________
Name:
Its:
15
<PAGE>
SCHEDULE A
Buyer Name and Address Name and Address of Buyer's Counsel
- ------------------------------- -----------------------------------
Nelson Partners Citadel Limited Partnership
c/o Leeds Management Services 225 West Washington Street
129 Front Street, 5th Floor 9th Floor
Hamilton HM12 Chicago, Illinois 60606
Bermuda Attn: John D. Ziegelman
Attn: Anne Dupuy Kenneth A. Simpler
Facsimile: (441) 292-2239 Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
Attn: Robert J. Brantman
Facsimile: (312) 902-1061
Olympus Securities, Ltd. Citadel Limited Partnership
c/o Leeds Management Services 225 West Washington Street
129 Front Street, 5th Floor 9th Floor
Hamilton HM12 Chicago, Illinois 60606
Bermuda Attn: John D. Ziegelman
Attn: Anne Dupuy Kenneth A. Simpler
Facsimile: (441) 292-2239 Facsimile: (312) 368-1348
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
Attn: Robert J. Brantman
Facsimile: (312) 902-1061
Rose Glen Funding, Inc.
440 East Swedesford Road
Suite 2025
Wayne, PA 19087
Attn: Gary Kaminsky
Facsimile: 610-971-2212
16
<PAGE>
EXHIBIT G
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996 among Nelson
Partners, Olympus Securities, Ltd. and Rose Glen Funding, Inc. (each, a "Buyer"
and, collectively, the "Buyers"), SyQuest Technology, Inc., a Delaware
corporation (the "Company"), and AM Capital Management Group, a New York
corporation, as Escrow Agent (the "Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of October 8, 1996 (the "Purchase Agreement"), pursuant to
which the Company has agreed to sell, and the Buyers have agreed to purchase, an
aggregate of 5,500 shares of the Company's Convertible Preferred Stock, Series
1, $.001 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyers and the Company have agreed to place into escrow the
$5,500,000 purchase price (the "Purchase Price") for the Preferred Shares to be
available for disbursements to the Company for its business operations and
product development, introduction and marketing after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyers' obligations to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. At such time as the Purchase Price is released to the
-------
Company by Shartsis, Friese & Ginsburg, LLP, counsel for the Company, pursuant
to a letter of instructions dated as of October 8, 1996, a copy of which is
attached hereto as Exhibit B, the Purchase Price and any earnings thereon (the
"Escrow") shall be transferred to the Escrow Agent, to be held by the Escrow
Agent in a separate interest-bearing money market account established at Silicon
Valley Bank or any other banking institution that the Company may designate (the
"Bank"), Account No. 3300039539 or another account subject to this Agreement to
which the Company may direct that the Escrow be transferred (the "Escrow
Account"), subject to the terms and provisions contained herein. Interest shall
accrue on the Escrow Account at the highest rate paid by the Bank on accounts
which permit multiple withdrawals from an
<PAGE>
account within any particular monthly period. The Escrow Agent shall provide the
Company with all Bank statements, notices and other writings which it receives
from the Bank in connection with the Escrow Account. The Escrow, together with
all interest thereon, shall at all times remain (until disbursed in accordance
with this Agreement) the property of the Company, subject only to the
restrictions as to the use thereof expressly provided in this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time
--------------------------
hereafter request by notice to the Escrow Agent that the Escrow Account be
transferred to another banking institution. In such event, the Escrow Agent
shall, within two business days after receiving such notice, transfer the
remaining Escrow as the Company may instruct, whereupon the transferee banking
institution shall become the "Bank" for purposes of this Agreement and the
account into which the remaining Escrow is deposited shall become the "Escrow
Account", in all cases subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during the
-------------
term of this Agreement, the Company shall deliver to the Escrow Agent, with a
copy to each Buyer, a request in writing signed by the Company for a
disbursement from the Escrow accompanied by a certification, in substantially
the form attached hereto as Exhibit A, executed by the Company's Chief Executive
Officer or Chief Financial Officer, stating that the amount of the Escrow to be
disbursed shall be used by the Company solely for costs and expenses of the
Company's business operations and product development, introduction and
marketing after the date hereof, or for payment of accrued interest on and
repayment of any loan heretofore made to the Company by Silicon Valley Bank in
an aggregate amount not in excess of $5,000,000, the Escrow Agent shall pay such
amount of the Escrow as specified in such request within forty-eight hours of
receipt of such request by the Escrow Agent by wire transfer as directed in such
request.
2.2 Controversies. If any controversy arises between one or more of
-------------
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyers or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2
<PAGE>
2.3 No Other Disbursements. No portion of the Escrow monies shall be
----------------------
disbursed or otherwise transferred except in accordance with this section 2,
section 4 or section 5.1(b). Without limiting the foregoing, neither Escrow
Agent nor any Buyer shall be entitled to any right of offset against the Escrow
or otherwise entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its gross negligence, willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a) the
-----------
date on which the Escrow shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, and (b) any other date agreed to by the
Buyers and the Company, in which event the Escrow shall be disbursed in full to
the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or
3
<PAGE>
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall not apply to any direct claim
against the Escrow Agent by the Company alleging a breach of this Agreement.
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyers, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction in
Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyers. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreement. The parties acknowledge that the
----------------------
Company, the Escrow Agent and the purchasers of the Company's 5% Cumulative
Convertible Preferred Stock, Series 2, are concurrently herewith entering into
another Escrow Agreement in substantially the same form as this Agreement (the
"Other Agreement"). The parties contemplate that deposits into the Escrow
Account shall be made under this Agreement and the Other Agreement, which shall
together govern the rights and obligations of the parties hereto and thereto
with respect to the Escrow Account, the Escrow and other funds deposited into
the Escrow Account and the rights and duties of the parties with respect
thereto, as if this Agreement and the Other Agreement were a single agreement
among all of the parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at Three Edward Lane, Syosset, NY 11791.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:_____________________________________
Name:
Its:
BUYER:
------
NELSON PARTNERS
By:_____________________________________
Name:
Its:
OLYMPUS SECURITIES, LTD.
By:_____________________________________
Name:
Its:
ROSE GLEN FUNDING, INC.
By:____________________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:_____________________________________
Name: Michael Arnouse
Its: President
5
<PAGE>
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996, by
and among Nelson Partners, Olympus Securities, Ltd., Rose Glen Funding, Inc.,
SyQuest Technology, Inc. and AM Capital Management Group (the "Escrow
Agreement"). Capitalized terms used and not otherwise defined herein have the
meanings respectively ascribed to them in the Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for (a) costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement, or (b) payment of accrued interest on
and repayment of any loan made, prior to October 9, 1996, to the Company by
Silicon Valley Bank in an aggregate amount not in excess of $5,000,000.
IN WITNESS WHEREOF, the undersigned has executed this Certification as this
____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:_____________________________________
Name:
Title:
6
<PAGE>
EXHIBIT B
SYQUEST TECHNOLOGY, INC.
47071 BAYSIDE PARKWAY
FREMONT, CA 94538
October 8, 1996
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Douglas L. Hammer, Esq.
Re: Securities Purchase Agreement dated as of
October 8, 1996 (the "Agreement"), between
SyQuest Technology, Inc. (the "Company") and
Nelson Partners, Olympus Securities, Ltd. and
Rose Glen Funding, Inc. (the "Buyers")
---------------------------------------------
Ladies and Gentlemen:
Please refer to the Agreement. Capitalized terms used and not otherwise
defined in this letter have the meanings respectively ascribed to them in the
Agreement or the Escrow Agreement.
The Company and the Buyers have agreed that, notwithstanding anything to
the contrary in the Agreement or the Escrow Agreement, the Purchase Price of the
Preferred Shares, which is expected to aggregate $5,500,000, will be wire
transferred to your trust account, according to such wire transfer instructions
as you may furnish to the Buyers, and you will hold, subject to this letter, the
Agreement, the Registration Rights Agreement, the Escrow Agreement and other
documents to be delivered at the Closing (the "Closing Documents"), together
with all certificates representing the Preferred Shares (the "Stock
Certificates"). You are instructed to cause the Purchase Price, when received in
such trust account, to be invested in a money market account or instrument or
repurchase agreements or instruments relating to United States Treasury debt
instruments and to cause the earnings thereon to be credited to the account of
the Company, subject to these instructions. You are further instructed to
deliver the Stock Certificates and to disburse the funds held by you in such
trust account only as set forth below in this letter. All documents and funds
delivered to you pursuant to this letter shall be held in escrow and delivered
by you as set forth herein.
7
<PAGE>
Shartis, Friese & Ginburg, LLP
October 8, 1996
Page 8
If, at any time on or prior to October 31, 1996, either you receive from
the Buyers written instructions (which may be original instructions or
instructions transmitted to you by facsimile), which you believe to be genuine,
signed by each of the Buyers and instructing you to release this escrow, or you
receive from the Company a certificate (which may be an original certificate or
a certificate transmitted to you by facsimile), which you believe to be genuine,
signed by the Chief Financial Officer of the Company and stating that, after
October 8, 1996, the stockholders' equity of the Company determined in
accordance with generally accepted accounting principles was increased by
$5,000,000 or more on account of the Company's receipt of consideration for the
issuance or sale of capital stock (other than Preferred Shares and shares of 5%
Cumulative Convertible Preferred Stock, Series 2) in exchange for cash or
cancellation or forgiveness of indebtedness after that date (the "CFO
Certificate"), you shall thereupon transmit by facsimile a copy of the CFO
Certificate to Katten Muchin & Zavis, attention Robert J. Brantman, counsel for
the Buyers, and transmit all funds held by you in such trust account to the
Escrow Account pursuant to the Escrow Agreement. At the same time, you shall
send to the Buyers the Stock Certificates and deliver to the Company, counsel
for the Buyers and the Escrow Agent counterparts of the Agreement and the other
Closing Documents, whereupon the Closing shall be deemed to have occurred as of
the date that you shall have received the Purchase Price.
If you do not receive the CFO Certificate on or prior to October 31, 1996,
you shall transmit to the respective Buyers, according to such wire transfer
instructions as they may provide to you, all funds in such trust account
(including earnings, if any, on the Purchase Price) in amounts that are
proportional to the amounts the respective Buyers would otherwise have been
obligated to pay (at $1,000 per Preferred Share) under the Agreement. At the
same time, you shall return to the Company for cancellation all of the Stock
Certificates. The Company and the Buyers have agreed that, in such event, the
Agreement and all of the other Closing Documents will be null and void for all
purposes.
The Company and the Buyers have agreed that the Agreement shall not
terminate pursuant to section 8.l of the Agreement prior to November 1, 1996.
If you are notified of any controversy or dispute between the Company and
any or all of the Buyers, you shall have the same rights as the Escrow Agent
under the Escrow Agreement in the case of a controversy or dispute. The
provisions of section 3 of the Escrow Agreement shall apply to you in the same
manner as they apply to the Escrow Agent under the Escrow Agreement.
These instructions are irrevocable, may be amended only with the consent of
the Company and the Buyers, and have been approved by the Buyers as set forth
below. Please
8
<PAGE>
Sharsis, Friese & Ginsburg, LLP
October 8, 1996
Page 9
indicate your acceptance of these instructions by causing a copy of this letter
to be signed on your behalf in the space provided below.
Yours very truly,
SYQUEST TECHNOLOGY, INC.
By _____________________________________
Chairman of the Board
AGREED AND CONFIRMED: ACCEPTED:
SHARTSIS, FRIESE & GINSBURG, LLP
By _________________________________ By _____________________________________
Its _____________________________ Partner
NELSON PARTNERS
OLYMPUS SECURITIES, LTD.
By _________________________________
Its ___________________________
ROSE GLEN FUNDING, INC.
By __________________________________
Its ____________________________
9
<PAGE>
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a total
of 3,252,244 shares of its Common Stock. As of October 3, 1996, the Company had
options outstanding to purchase a total of 2,790,345 shares of its Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and convertible
debentures, as well as the possible issuance of Common Stock in exchange for
forgiveness of indebtedness. Certain of the arrangements may provide that the
debt will not be cancelled until such time as the supplier obtains proceeds from
the sale of the shares issued in the arrangement. Equity securities issued for
cancellation of debt, as well as for the Common Stock issuable upon conversion
of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to Wharton Capital Corporation, and has a commitment to issue a warrant to (a)
Needham & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. Harper
Group to purchase 500,000 shares of Common Stock.
<PAGE>
Schedule 3(e)
-------------
There are no dislosures to be made pursuant to this Schedule 3(e).
<PAGE>
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following:
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of 1995.
As a result of these and other factors, past-due accounts payable continued
to be high during the period, amounts borrowable under the Company's line
of credit decreased and the Company's overall liquidity has been materially
and adversely affected. Suppliers were placed on a payment plans for
repayment of amounts owed. Reference is made to (i) the Company's press
release dated May 7, 1996, (ii) the Company's report on Form 10-Q for the
quarter ended March 31, 1996, (iii) various news-wire stories of June 5,
1996, containing Nasdaq's statements in connection with the Company's lack
of compliance with Nasdaq listing requirements, (iv) the Company's report
on Form 10-Q for the quarter ended June 30, 1996, (v) the Company's press
release dated September 16, 1996, (vi) the Company's Current Report on Form
8-K dated June 14, 1996, (vii) the events and developments described in the
Company's Amendment Number 1 to Form S-3 Registration Statement filed
August 29, 1996, (viii) Nasdaq's granting of an exception through October
31, 1996, to the net tangible assets and capital and surplus requirements
for listing on the Nasdaq Stock Market, and (ix) the granting of an
exception to the rules of the National Association of Securities Dealers,
Inc., which would otherwise require stockholder approval of the
transactions contemplated by this Agreement, such exception having been
granted because the Company's audit committee was of the opinion that a
failure to complete immediately the transactions contemplated by this
Agreement would seriously jeopardize the financial viability of the
Company. Such documents and information are incorporated herein by this
reference. See Schedule 3(h) for information regarding litigation, which
is also incorporated by reference.
<PAGE>
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not expressly set forth in Form 10-Q for
the quarter ended June 30, 1996 that would have a Materially Adverse Effect or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, the Agreement or any
of the documents contemplated therein.
<PAGE>
Schedule 3(o)
-------------
There are no dislosures to be made pursuant to this Schedule 3(o).
<PAGE>
Schedule 3(p)
-------------
<TABLE>
<CAPTION>
Contract Payment Interest
Supplier Date Start Date Term Amount Rate
- -------- -------- ---------- ---- ------ --------
<S> <C> <C> <C> <C> <C>
Adaptec 5/22/96 5/22/96 25 mo 100,763.21 --
Akashic Memories 8/8/96 9/1/96 15 mo 2,163,186.25 --
Allegro MicroSystems 7/30/96 10/15/96 24 mo 243,050.00 10%
Cherry Semiconductor 8/22/96 10/15/96 24 mo 1,110,127.37 10%
Freight Solutions 7/31/96 10/15/96 24 mo 1,844,368.91 10%
Intel 9/10/96 10/15/96 12 mo 1,163,000.00 10%
Jardine Freight Services 8/21/96 10/15/96 24 mo 1,500,038.68 10%
RMS 8/6/96 8/6/96 35 mo 2,643,466.51 --
Seagate 9/6/96 9/16/96 24 mo 1,484,684.00 10%
Shuttle Technology 9/25/96 8/15/96 24 mo 139,000.00 8%
Silicon Systems 7/29/96 10/15/96 24 mo 2,354,963.00 10%
Splaine & Assoc. 8/27/96 9/15/96 13 mo 467,339.00 --
Teletech 9/20/96 10/15/96 6 mo 500,000.00 10%
TongKah Electronics 8/21/96 9/30/96 25 mo 11,474,127.76 10%
UFE Incorporated 9/5/96 10/15/96 13 mo 209,612.49 10%
WISRS 7/15/96 8/15/96 36 mo 7,678,578.65 6%
Juno, Inc. 9/30/96 10/15/96 24 mo 656,764.10 10%
Skynet Electronic Co. Ltd. 8/26/96 10/15/96 24 mo 590,735.52 10%
A-Corn Enterprises 10/15/96 10/15/96 24 mo 1,795,353.46 10%
Brandon International 4/29/96 10/15/96 1 mo 120,205.50 10%
</TABLE>
<PAGE>
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms and
conditions stated in this Agreement, shares (the "Preferred Shares") of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock (the "Common Stock"), $.001 par value (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in payment of dividends (the "Dividend Shares");
C. The Buyer shall receive upon each conversion of Preferred Shares a
warrant to acquire one share of Common Stock for each three shares of Common
Stock issued upon conversion of such Preferred Shares (the "Warrants"), which
Warrants shall expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit F
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
a. Purchase of Preferred Shares. The Company shall issue and sell
----------------------------
to the Buyer and the Buyer shall purchase an aggregate of 25,000 Preferred
Shares, which shall be convertible into Conversion Shares in accordance with the
terms of the Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series 2 in the form attached hereto as
Exhibit A (the "Certificate of Designation"). The per share purchase price (the
"Purchase Price") of the Preferred Shares shall be $1,000. The Preferred Shares
shall be allocated among the entities constituting the Buyer as specified on
their respective counterpart signature pages and shall be sold at a closing as
hereinafter provided and as set forth in the signature pages.
<PAGE>
b. Closing. The date and time of the closing (the "Closing") of the
-------
issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on _________ ___, 1996 (or such later date as is mutually agreed to
by the Company and the entities constituting the Buyer).
c. Form of Payment. The Buyer shall pay the Purchase Price for the
---------------
Preferred Shares by wire transfer of immediately available United States Dollars
on the Closing date, to be deposited into an escrow account (the "Escrow
Account") established at Silicon Valley Bank, Santa Clara, California, pursuant
to an Escrow Agreement in substantially the form of Exhibit B attached hereto
(the "Escrow Agreement"). At the Closing, the Company shall deliver stock
certificates, duly executed on behalf of the Company, representing the Preferred
Shares (the "Stock Certificates") to the Buyer.
d. Warrant Issuances. The Company will issue to Buyer or its
-----------------
designee within five (5) days after any conversion of Preferred Shares a Warrant
in substantially the form of Exhibit C attached hereto, to acquire one share of
Common Stock for each three Conversion Shares that are issued on such conversion
of Preferred Shares, with an exercise price equal to the lower $7.15 per share
and 110 percent of the Average Market Price (as that term is defined in Exhibit
A hereto) per share of Common Stock for the five trading days preceding such
conversion. Each Warrant shall expire to the extent not exercised on the third
anniversary of the date of the relevant conversion.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants to the Company as to itself,
severally, and not jointly, that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares
------------------
and the Warrants for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the 1933 Act. The Buyer is not
purchasing the Preferred Shares for the purpose of covering short sale positions
in the Common Stock established on or prior to the date of the Closing. The
Buyer understands that it shall be a condition to the issuance of the Conversion
Shares, the Dividend Shares and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") that the Warrants, Conversion
Shares, Dividend Shares and Warrant Shares are subject to the representations
set forth in this Section 2(a).
b. Accredited Investor Status. The Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Preferred
----------------------
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
2
<PAGE>
availability of such exemptions and the eligibility of the Buyer to acquire
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
d. Information. The Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer acknowledges
that the Buyer has requested only publicly available information and has
specifically declined to receive nonpublic information that may be material,
notwithstanding that the Company has offered to make all such information
available to the Buyer. Such nonpublic material information may include, for
example, information regarding other financings, potential strategic alliances,
distributor and customer arrangements, potential acquisitions and joint
ventures, new product developments, technological developments, supplier
arrangements, developments in manufacturing techniques, personnel changes and
other matters that could have material effects on the Company, and the Buyer
acknowledges that it is expressly assuming the risk that material nonpublic
information, which it has not received and does not desire to receive, might
have caused the Buyer not to make the investments contemplated hereby had the
Buyer received such information. The Buyer understands that its investment in
the Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares involves a high degree of risk, including, without limitation, the risks
arising from the facts that the Company's stockholders' equity is negative in an
amount in excess of $30,000,000, that the Company expects to incur a loss for
the quarter ended September 30, 1996, and that no assurance can be given that
the Company will not incur continuing losses or will be profitable. The Buyer
has sought such accounting, legal and tax advice as it has considered necessary
to an informed investment decision with respect to its acquisition of the
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
e. No Governmental Review. The Buyer understands that no United
----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares, Dividend Shares and Warrant Shares or the fairness
or suitability of the investment in the Preferred Shares, Warrants, Conversion
Shares, Dividend Shares or Warrant Shares nor have such authorities passed upon
or endorsed the merits of the offering of the Preferred Shares, Warrants,
Conversion Shares, Dividend Shares and Warrant Shares.
f. Transfer or Resale. The Buyer understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares, the Dividend Shares and the Warrant Shares have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (a)
subsequently registered thereunder, or (b) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities to be sold, assigned
or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration; (ii) any sale of such securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable,
3
<PAGE>
any resale of such securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register such securities (other than pursuant to the Registration Rights
Agreement) under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
g. Legends. The Buyer understands that the certificates or other
-------
instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares, the Dividend Shares and the Warrant Shares
(collectively, the "Registrable Securities") have been sold pursuant to a
registration under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Registrable Securities shall
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY
SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the Registrable Securities are
sold pursuant to a sale that is registered under the 1933 Act, or (b) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale, assignment or transfer of the
Preferred Shares, the Warrants or such Registrable Securities may be made
without registration under the 1933 Act, or (c) such holder provides the Company
with reasonable assurances that the Preferred Shares, the Warrants or such
Registrable Securities can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
h. Authorization; Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered by the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general
4
<PAGE>
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its subsidiaries
------------------------------
are corporations duly organized and existing in good standing under the laws of
the jurisdiction in which they are incorporated, except, in the case of any such
subsidiaries, as would not have a Material Adverse Effect (as defined below),
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary and where the failure so to qualify would
have a Material Adverse Effect. "Material Adverse Effect" means any material
adverse effect on the operations, properties or financial condition of the
Company and its subsidiaries taken as a whole.
b. Authorization; Enforcement. (i) The Company has the requisite
--------------------------
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, and to issue the Preferred Shares, the Warrants
and the Registrable Securities in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company, and (iv) this Agreement and the
Registration Rights Agreement constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
c. Capitalization. As of October 3, 1996, the authorized capital
--------------
stock of the Company consists of (i) 60,000,000 shares of Common Stock of which
12,219,415 shares were issued and outstanding, and (ii) 4,000,000 shares of
Preferred Stock of which 20,000 shares were issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the
5
<PAGE>
Registration Rights Agreement). The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended, as in
effect on the date hereof ("Certificate of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "Bylaws").
d. Issuance of Securities. The Registrable Securities and Preferred
----------------------
Shares are duly authorized and, upon issuance in accordance with the terms
hereof and thereof, shall be validly issued, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issue thereof.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws (other than
as results from the limit on the number of authorized shares of Common Stock) or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
f. SEC Documents, Financial Statements. Since September 30, 1995,
-----------------------------------
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyer true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form
6
<PAGE>
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer and referred to in Section 2(d) of this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
--------------------------
3(g), since June 30, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in its Form 10-Q for
---------------------
the quarter ended June 30, 1996, or in Schedule 3(h), there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
i. Purpose of Investment. The Company recognizes that the Buyer's
---------------------
investment in the Company is being made in order to provide financing for the
Company's ongoing operations and especially for the development and introduction
of new products, including the marketing of such products.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely to
------------
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to the
------
Preferred Shares as required under Regulation D and to provide a copy thereof to
the Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of which
----------------
the Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
on which (A) the Investors shall have sold all the Registrable Securities and
(B) none of the Preferred Shares is outstanding (the "Registration
7
<PAGE>
Period"), the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Preferred Shares for the Company's internal working capital purposes,
including costs and expenses of the Company's business operations and product
development, production and marketing, and for repayment of the existing debt
obligation to Silicon Valley Bank in an amount up to $5,000,000.
e. Financial Information. The Company agrees to send the following
---------------------
reports to the Buyer during the Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-
K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and
(ii) within one day after release thereof, copies of all press releases issued
by the Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares, the
Dividend Shares and the Warrant Shares.
g. Listing. The Company shall promptly secure the listing of the
-------
Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
h. Other Offerings. The Company shall not, within sixty days from
---------------
the date hereof, sell or enter into a contract to sell any shares of Common
Stock, or any options, warrants, rights or securities entitling the holder
thereof to acquire any shares of Common Stock, at a price that is not
substantially equivalent to or greater than the fair market value of such Common
Stock, options, warrants, rights or securities at the time of the sale, except
for sales of not more than 5,000 shares of the Company's Convertible Preferred
Stock, Series 1.
i. Legal Expenses. The Company shall pay all expenses incurred in
--------------
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the Conversion Shares,
Dividend Shares and Warrant Shares in such amounts as specified from time to
time by the Buyer to the Company. All such certificates shall bear the
restrictive legend specified in Section 2(g) of this
8
<PAGE>
Agreement. The Company shall provide instructions and opinions of counsel to
its transfer agent in accordance with Section 3(m) of the Registration Rights
Agreement. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof, in the case of the Registrable Securities,
will be given by the Company to its transfer agent and that the Preferred Shares
and the Registrable Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section shall affect in
any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Registrable Securities. If the Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, that registration of a resale by the
Buyer of any of the Preferred Shares or the Registrable Securities is not
required under the 1933 Act, the Company shall permit the transfer, and promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to sell the Preferred Shares
is subject to the satisfaction, at or before the date of the Closing, of each of
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. The Buyer shall have delivered to the Company the Purchase Price
for all Preferred Shares being purchased by wire transfer of immediately
available funds pursuant to the wiring instructions provided by the Company.
d. The representations and warranties of each Buyer shall be true
and correct in all material respects as of the date when made and as of the date
of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer to purchase the Preferred Shares at the
Closing is subject to the satisfaction, at or before the date of the Closing, of
each of the following
9
<PAGE>
conditions, provided that these conditions are for the sole benefit of each of
the entities constituting the Buyer and may be waived by any such entity at any
time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with the
Secretary of State of Delaware, and a copy thereof certified by such Secretary
of State shall have been delivered to the Buyer.
c. The Common Stock shall be authorized for quotation on the Nasdaq
National Market or the Nasdaq SmallCap Market and trading in the Common Stock on
Nasdaq National Market or the Nasdaq SmallCap Market shall not have been
suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the date
of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. The
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to the Buyer the
Stock Certificates for the Preferred Shares.
g. The Board of Directors of the Company shall have adopted
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall not have received from Nasdaq or the National
Association of Securities Dealers, Inc. any written or oral communication as to
its actual or potential ineligibility for continued listing of the Common Stock
on the Nasdaq National Market, the substance of which shall not have been
publicly disclosed.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. In the event of any litigation regarding
the interpretation or application of this Agreement, the parties consent to the
nonexclusive jurisdiction in any of the federal courts
10
<PAGE>
located in the State of New York and waive their rights to object to venue in
any such court, regardless of the convenience or inconvenience thereof to any
party.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
----------------------------
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
-------
terms of this Agreement shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
11
<PAGE>
If to the Buyer, at the addresses on the signature pages.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, any of the entities constituting the Buyer may assign its rights
hereunder to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company, provided, however, that any such
assignment shall not release such entity from its obligations hereunder unless
such obligations are assumed by such affiliate and the Company has consented to
such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyer contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h) and 8(k), and this subsection shall survive the closing. Each party
which constitutes the Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of the Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date.
12
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. _______________________________________
/s/ Edward L. Marinaro
By:--------------------------- By:____________________________________
Name:Edward L. Marinaro Name:
Its: Chairman of the Board Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
13-A
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. RUTGERS CASUALTY INSURANCE CO.
---------------------------------------
By: By: /s/ Nachum Stein
-------------------------------- ------------------------------------
Name: Name: Nachum Stein
Its: Its: Chairman
2250 CHAPEL AVE WEST
Address: ------------------------
CHERRY HILL, NJ 08002
------------------------
________________________
Number of Preferred Shares 250
to be purchased at Closing:-----------
($250,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
13-B
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. AMERICAN EUROPEAN GROUP, Nominee
_______________________________________
By: By: /s/ Nachum Stein
--------------------------------- -----------------------------------
Name: Name: Nachum Stein
Its: Its: Chairman
Address: 444 MADISON AVENUE, SUITE 501
----------------------------
NEW YORK, NY 10022-6903
----------------------------
____________________________
Number of Preferred Shares 100
to be purchased at Closing:-----------
($100,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
13-C
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. UNITED INTERNATIONAL INSURANCE CO.
---------------------------------------
By: By: /s/ Nachum Stein
------------------------------- -----------------------------------
Name: Name: Nachum Stein
Its: Its: President
444 MADISON AVENUE, SUITE 501
Address: ----------------------------
NEW YORK, NY 10022-6902
----------------------------
___________________________
Number of Preferred Shares 150
to be purchased at Closing:-----------
($150,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-D
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
Combination, Inc.
SYQUEST TECHNOLOGY, INC. ---------------------------------------
By: By: /s/ David Freuf
------------------------------ -----------------------------------
Name: Name: David Freuf
Its: Its: Secretary
111 Broadway
Address: ------------------------
N.Y., NY
------------------------
10006
------------------------
Number of Preferred Shares
to be purchased at Closing: 5,485
($5,485,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-E
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. BURNSTIEN & LINDSAY SECURITIES CORP.
---------------------------------------
By: By: /s/ Mosi Kraus
------------------------------- -----------------------------------
Name: Name: Mosi Kraus
Its: Its: Attorney in Fact
c/o Eilembers & Zivian
Address: ---------------------------
666 Third Avenue, 30th floor
---------------------------
New York, NY 10017
---------------------------
Number of Preferred Shares 700
to be purchased at Closing:-----------
($700,000)
--------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-F
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. FUTURES BROKERAGE INC.
---------------------------------------
By: By: /s/ S. Hecht
------------------------------- -----------------------------------
Name: Name: Simche Hecht
Its: Its: Attorney in Fact
c/o Eilenberg & Zivian
Address: ---------------------------
666 Third Avenue, 30th Floor
---------------------------
New York, NY 10017
---------------------------
Number of Preferred Shares 750
to be purchased at Closing:-----------
($750.000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-G
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
Biscount Investment Corp.
SYQUEST TECHNOLOGY, INC. _______________________________________
By: By: /s/ Joseph Owadeyah
-------------------------------- -----------------------------------
Name: Name: Joseph Owadeyah
Its: Its:
Address:
________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing: 1,550
($1,550,000)
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-H
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. TULA BUSINESS, INC.
---------------------------------------
By: By: /s/ Josef Goldenberg
-------------------------------- ------------------------------------
Name: Name: Josef Goldenberg
Its: Its: Director
c/o Eilenberg & Zivian
Address: ---------------------------
666 Third Avenue 30th Floor
---------------------------
New York, NY 10017
---------------------------
Number of Preferred Shares 750
to be purchased at Closing:-----------
($750,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-I
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. GROSS FOUNDATION INC.
---------------------------------------
By: By: /s/ C. Gross
-------------------------------- -----------------------------------
Name: Name: C. Gross
Its: Its: President
Address: C Gross
1660 49th St
Brooklyn NY 11204-1133
Number of Preferred Shares
to be purchased at Closing: 500
-----------
($500,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-J
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER: MASLO FUND LTD.
- ------- -----
Minna Ledereich
SYQUEST TECHNOLOGY, INC. By:------------------------------------
By:___________________________ By:____________________________________
Name: Name:Minna Ledereich
Its: Its: Director
c/o Eilenberg & Zivian
Address: ---------------------------
666 Third Avenus, 30th Floor
---------------------------
New York, NY 10017
---------------------------
Number of Preferred Shares 265
to be purchased at Closing:-----------
($265,000)
---------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-K
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. BLACK INC.
---------------------------------------
/S/ S.Hecht
By:___________________________ By:------------------------------------
Name: Name:Simche Hecht
Its: Its: Attorney in Fact
c/o Eilenberg & Zivian
Address: ---------------------------
666 Third Avenue, 30th Floor
---------------------------
New York, NY 10017
---------------------------
Number of Preferred Shares 150
to be purchased at Closing:-----------
($150,000)
--------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-L
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. IBNS Manufacturing Co.
---------------------------------------
By: By: /s/ Natam Brach
-------------------------------- -----------------------------------
Name: Name: Natam Brach
Its: Its: President
c/o Eilenberg & Zivian
Address: ---------------------------
666 Third Avenue, 30th Floor
---------------------------
New York, NY 10017
---------------------------
Number of Preferred Shares 250
to be purchased at Closing:-----------
($250,000)
--------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-M
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. MILLENCE, L.P.
---------------------------------------
By: By: /s/ Terry Feeney
------------------------------- -----------------------------------
Name: Name: Terry Feeney
Its: Its: Chief Adm. Officer
111 Broadway,
Address: ---------------------------
NY NY 10006
---------------------------
---------------------------
Number of Preferred Shares 500
to be purchased at Closing:-----------
($500,000)
--------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-N
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. WHARTON CAPITAL CORPORATION
---------------------------------------
By: By: /s/ Simche Hecht
-------------------------------- -----------------------------------
Name: Name: Simche Hecht
Its: Its: Attorney in Fact
Address: ___________________________
___________________________
___________________________
Number of Preferred Shares 100
to be purchased at Closing:-----------
($100,000)
--------------------------------------
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:___________
_______________________________________
By:____________________________________
Name:
Its:
Address: ________________________
________________________
________________________
Number of Preferred Shares
to be purchased at Closing:__________
13-O
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996 among
_________________, ____________________, and _________________ (collectively,
the "Buyer"), SyQuest Technology, Inc., a Delaware corporation (the "Company"),
and AM Capital Management Group, a New York corporation, as Escrow Agent (the
"Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of __________, 1996 (the "Purchase Agreement"), pursuant to
which the Company has agreed to sell, and the Buyer has agreed to purchase, an
aggregate of 25,000 shares of the Company's 5% Cumulative Convertible Preferred
Stock, Series 2, $.001 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyer and the Company have agreed to place into escrow the
$25,000,000 purchase price for the Preferred Shares to be available for
disbursements to the Company for its business operations and product
development, introduction and marketing on and after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyer's obligation to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. On the date of the Closing under, and to the extent
-------
required by, the Purchase Agreement, the Buyer shall cause to be wire
transferred to the Escrow Agent $25,000,000 (the "Escrow"), to be held by the
Escrow Agent in a separate interest-bearing money market account established at
Silicon Valley Bank or any other banking institution that the Company may
designate (the "Bank"), Account No. 3300039539 or another account subject to
this Agreement to which the Company may direct that the Escrow be transferred
(the "Escrow Account"), subject to the terms and provisions contained herein.
Interest shall accrue on the Escrow Account at the highest rate paid by the Bank
on accounts which permit multiple withdrawals from an account within any
particular monthly period. The Escrow Agent shall provide the Company with all
Bank statements, notices and other writings which it receives from the Bank in
connection with the Escrow Account. The Escrow, together
<PAGE>
with all interest thereon, shall at all times remain (until disbursed in
accordance with this Agreement) the property of the Company, subject only to the
restrictions as to the use thereof expressly provided in this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time
--------------------------
hereafter request by notice to the Escrow Agent that the Escrow Account be
transferred to another banking institution. In such event, the Escrow Agent
shall, within two business days after receiving such notice, transfer the
remaining Escrow as the Company may instruct, whereupon the transferee banking
institution shall become the "Bank" for purposes of this Agreement and the
account into which the remaining Escrow is deposited shall become the "Escrow
Account", in all cases subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during the
-------------
term of this Agreement, the Company shall deliver to the Escrow Agent a request
in writing signed by the Company for a disbursement from the Escrow accompanied
by a certification, in substantially the form attached hereto as Exhibit A,
executed by the Company's Chief Executive Officer or Chief Financial Officer,
stating that the amount of the Escrow to be disbursed shall be used by the
Company solely for costs and expenses of the Company's business operations and
product development, introduction and marketing after the date hereof, or for
payment of accrued interest on and repayment of any loan heretofore made to the
Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000, the Escrow Agent shall pay such amount of the Escrow as specified in
such request within forty-eight hours of receipt of such request by the Escrow
Agent by wire transfer as directed in such request.
2.2 Controversies. If any controversy arises between one or more of
-------------
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyer or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Escrow monies shall be
----------------------
disbursed or otherwise transferred except in accordance with this section 2,
section 4 or section 5.1(b). Without limiting the foregoing, neither Escrow
Agent nor Buyer shall be entitled
2
<PAGE>
to any right of offset against the Escrow or otherwise entitled to receive any
portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its gross negligence, willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except
those which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a) the
-----------
date on which the Escrow shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, and (b) any other date agreed to by the
Buyer and the Company, in which event the Escrow shall be disbursed in full to
the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. This
indemnification shall not apply to any direct claim against the Escrow Agent by
the Company alleging a breach of this Agreement.
3
<PAGE>
(b) In the event of any dispute as to the nature of the rights
or obligations of the Buyer, the Company or the Escrow Agent hereunder, the
Escrow Agent may at any time or from time to time interplead, deposit and/or pay
all or any part of the Escrow Funds with or to a court of competent jurisdiction
in Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreement. The parties acknowledge that the
----------------------
Company, the Escrow Agent and the purchasers of the Company's Convertible
Preferred Stock, Series 1, are concurrently herewith entering into another
Escrow Agreement in substantially the same form as this Agreement (the "Other
Agreement"). The parties contemplate that deposits into the Escrow Account shall
be made under this Agreement and the Other Agreement, which together shall
govern the rights and obligations of the parties hereto and thereto with respect
to the Escrow Account, the Escrow and other funds deposited into the Escrow
Account and the rights and duties of the parties with respect thereto, as if
this Agreement and the Other Agreement were a single agreement among all of the
parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at Three Edward Lane, Syosset, NY 11791.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:________________________________
Name:
Its:
BUYER:
------
___________________________________
By:________________________________
Name:
Its:
___________________________________
By:________________________________
Name:
Its:
___________________________________
By:________________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:________________________________
Name: Michael Arnouse
Its: President
5
<PAGE>
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996,
by and among ______________________________________________, SyQuest Technology,
Inc. and AM Capital Management Group (the "Escrow Agreement"). Capitalized
terms used and not otherwise defined herein have the meanings respectively
ascribed to them in the Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certification as
this ____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:________________________________
Name:
Its:
6
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF 5% PREFERRED SHARES]
_________________ (_________) fully paid nonassessable shares of Common Stock
(as defined herein) of the Company (the "Warrant Shares") at a purchase price of
[THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE MARKET PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE TRADING DAYS PRECEDING THE
CONVERSION DATE] U.S. $_______ per share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant have the following meanings:
"Common Stock" means (a) the Company's common stock, par value
------------
$.001 per share, and (b) any capital stock into which such common stock shall
have been changed or any capital stock resulting from a reclassification of such
common stock.
<PAGE>
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $_____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. Pacific
Time on the Expiration Date. The rights represented by this Warrant may be
exercised by the holder hereof then registered on the books of the Company, as a
whole or from time to time in part (except that this Warrant shall not be
exercisable as to a fractional share) by (i) delivery of a written notice, in
the form of the Subscription Notice attached as Exhibit A hereto, of such
holder's election to exercise this
2
<PAGE>
Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in cash
or by check, for the number of Warrant Shares as to which this Warrant shall
have been exercised, and (iii) the surrender of this Warrant, properly endorsed,
at the principal office of the Company (or at such other agency or office of the
Company as the Company may designate by notice to the holder hereof); provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 8 shall be applicable. In the event of any exercise
of the rights represented by this Warrant in compliance with this Section 2(a),
a certificate or certificates for the Warrant Shares so purchased, registered in
the name of, or as directed by, the holder, shall be delivered to, or as
directed by, such holder within a reasonable time after such rights shall have
been so exercised.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall issue a new
Warrant identical in all respects to the Warrant exercised except (i) it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under the Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised, and (ii) the
holder thereof shall be deemed to have become the holder of record of such
Warrant Shares immediately prior to the close of business on the date on which
the Warrant is surrendered and payment of the amount due in respect of such
exercise and any applicable taxes is made, irrespective of the date of delivery
of such share certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the stock
transfer books are open.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
----------------------------
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
-----
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
---------------------------------------
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer
3
<PAGE>
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor") and an "excluded purchaser" for purposes of Section
25102(f) of the California Corporate Securities Law of 1968 (an "Excluded
Purchaser"). Upon exercise of this Warrant, the holder shall, if requested by
the Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the holder's own
account and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale and that such holder is an Accredited
Investor and an Excluded Purchaser. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) Prior to any sale, transfer or other disposition of this
Warrant or the Warrant Shares not pursuant to an effective registration
statement, the holder thereof will give ten (10) days' notice to the Company of
such holder's intention to effect such transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer and, if such transfer is
not registered under the Securities Act, shall be accompanied by an opinion,
addressed to the Company and reasonably satisfactory in form and substance to
it, of counsel (reasonably satisfactory to the Company) for such holder, stating
that, in the opinion of such counsel, such transfer will be a transaction exempt
from registration under the Securities Act.
4
<PAGE>
(b) If such sale, transfer or other disposition may in the opinion
of such counsel be effected without registration under the Securities Act, such
holder shall thereupon be entitled to the terms of the notice delivered by such
holder to the Company. If in the opinion of such counsel such transfer may not
be effected without registration under the Securities Act, such holder shall not
be entitled to so transfer this Warrant or the Warrant Shares unless the Company
shall have filed a registration statement relating to such proposed transfer and
such registration statement shall have become effective under the Securities
Act.
(c) Any Warrant Shares issued upon exercise of this Warrant may
bear one or more of the legends in similar form to the legend set forth on this
Warrant.
(d) The Company acknowledges that it has entered into a
Registration Rights Agreement entitling certain holders of Warrant Shares to
require the Company to cause such Warrant Shares to be registered under the
Securities Act.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect
a stock dividend, a stock split, a stock combination, or a reverse stock split
of the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
5
<PAGE>
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
terms as to indemnity or otherwise as it may in its discretion impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed.
Section 11. Notice. All notices and other communications under this
------
Warrant shall (a) be in writing (which shall include communications by
facsimile), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, or by facsimile, or (ii) delivered by hand, and (c) be
given at the following respective addresses and facsimile numbers and to the
attention of the following persons:
(a) if to the Company, to it at:
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, California 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
(b) if to Holder, to it at the address set forth below Holder's
signature on the signature page hereof.
or at such other address or facsimile number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the fifth Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by facsimile, when such
communication is transmitted to the appropriate number determined as above
provided in this Section and the appropriate answer back is received or receipt
is otherwise acknowledged, and (iii) if given by hand delivery, when left at the
address of the addressee addressed as above provided, except that notices of a
change of address, facsimile or telephone number, shall not be deemed furnished,
until actually received.
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
6
<PAGE>
Section 13. Date. The date of this Warrant is _____________, 199__. This
----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
ACCEPTED:
- --------
[HOLDER]
By:_________________________________
Name:_______________________________
Title:______________________________
Address:____________________________
____________________________________
____________________________________
____________________________________
7
<PAGE>
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment of U.S. $_______________, the
aggregate Warrant Exercise Price of such Warrant Shares in full.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(1) of Regulation D as promulgated by the Securities and
Exchange Commission under the Securities Act and an "excluded purchaser" for
purposes of Section 25102(f) of the California Corporate Securities Law of 1968.
Dated: ______________, _____ [HOLDER]
By:___________________________________
Name:_________________________________
Title:________________________________
Address:
______________________________________
______________________________________
______________________________________
Number of Warrant Shares Being
Purchased:
8
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement to (i) issue and sell to the Buyer shares of the Company's 5%
Cumulative Convertible Preferred Stock, Series 2, $.001 par value per share (the
"Preferred Shares"), which will be convertible into shares of the Company's
common stock (the "Common Stock"), par value $.001 per share (as converted, the
"Conversion Shares"), pursuant to which certain shares of Common Stock may be
issued to the Buyer in payment of dividends (the "Dividend Shares"), and (ii)
issue Warrants (the "Warrants") which will be exercisable to purchase shares of
Common Stock (the "Warrant Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
i. "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9 hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
<PAGE>
effectiveness of such Registration Statement by the United States Securities and
Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Dividend Shares.
iv. "Registration Statement" or "Registration Statements" means
a registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare, and, on or before thirty (30) days after the date of the issuance of
the relevant Preferred Shares, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable Securities
issuable upon conversion of or in connection with the relevant Preferred Shares,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares or exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Registration Statement(s) (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be provided to and
approved by the Buyer and its counsel prior to its filing or other submission,
such approval not to be unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration rights under this Section 2(c) written notice of such
determination and, if within twenty (20) days
2
<PAGE>
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder; provided
that no portion of the equity securities which the Company is offering for its
own account shall be excluded; provided, further that the Company shall be
entitled to exclude Registrable Securities to the extent necessary to avoid
breaching obligations existing prior to the date hereof to other stockholders of
the Company. Any exclusion of Registrable Securities shall be made pro rata
among the Investors seeking to include Registrable Securities, in proportion to
the number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this Section 2(c) may
be waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
3
<PAGE>
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s) as may be necessary to keep the Registration Statement(s) effective
at all times during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement(s)
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement(s).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold forty percent or more of the Registrable
Securities being offered reasonably request (but in no event in more than five
states of the United States), (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith
4
<PAGE>
or as a condition thereto to (a) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(d),
(b) subject itself to general taxation in any such jurisdiction, (c) file a
general consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause more than nominal expense or burden to the Company, or
(e) make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
h. The Company shall permit a single firm of counsel, designated as
selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing
5
<PAGE>
the Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
6
<PAGE>
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
4. OTHER OBLIGATIONS.
-----------------
a. At least five (5) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
7
<PAGE>
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, subject, with respect to expenses incurred by the
Investors, to the limit stated in Section 4(h) of the Securities Purchase
Agreements.
8
<PAGE>
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and the officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of the material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented, if such prospectus
was timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or
9
<PAGE>
to cause to be delivered the prospectus made available by the Company; and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify, hold harmless and defend,
to the same extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement or to the
extent such Claim is based upon any violation or alleged violation by the
Investor of the 1933 Act, 1934 Act or any other law; and such Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
10
<PAGE>
governmental action), such Indemnified Person or Indemnified Party shall, 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 indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that legal
fees of such firm shall be reasonable. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
11
<PAGE>
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority
12
<PAGE>
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, L.L.P.
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature pages of the Securities
Purchase Agreement.
Each party shall provide notice to the other party of any change in
address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
13
<PAGE>
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid of unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request
14
<PAGE>
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
- -------
SYQUEST TECHNOLOGY INC.
By:
--------------------------------
Name:
Its:
BUYER:
- -----
- -----------------------------------
By:
--------------------------------
Name:
Its:
- -----------------------------------
By:
--------------------------------
Name:
Its:
- -----------------------------------
By:
--------------------------------
Name:
Its:
15
<PAGE>
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a total
of 3,252,244 shares of its Common Stock. As of October 3, 1996, the Company had
options outstanding to purchase a total of 2,790,345 shares of its Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and convertible
debentures, as well as the possible issuance of Common Stock in exchange for
forgiveness of indebtedness. Certain of the arrangements may provide that the
debt will not be cancelled until such time as the supplier obtains proceeds from
the sale of the shares issued in the arrangement. Equity securities issued for
cancellation of debt, as well as for the Common Stock issuable upon conversion
of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to Wharton Capital Corporation, and has a commitment to issue a warrant to (a)
Needham & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. Harper
Group to purchase 500,000 shares of Common Stock.
<PAGE>
Schedule 3(e)
-------------
There are no disclosures to be made pursuant to this Schedule 3(e).
<PAGE>
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following:
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of
1995. As a result of these and other factors, past-due accounts payable
continued to be high during the period, amounts borrowable under the
Company's line of credit decreased and the Company's overall liquidity
has been materially and adversely affected. Suppliers were placed on a
payment plans for repayment of amounts owed. Reference is made to (i) the
Company's press released dated May 7, 1996, (ii) the Company's report on
Form 10-Q for the quarter ended March 31, 1996, (iii) various news-wire
stores of June 5, 1996, containing Nasdaq's statements in connection with
the Company's lack of compliance with Nasdaq listing requirements, (iv)
the Company's report on Form 10-Q for the quarter ended June 30, 1996,
(v) the Company's press release dated September 16, 1996, (vi) the
Company's Current Report on Form 8-K dated June 14, 1996, (vii) the
events and developments described in the Company's Amendment Number 1 to
Form S-3 Registration Statement filed August 29, 1996, (viii) Nasdaq's
granting of an exception through October 31, 1996, to the net tangible
assets and capital and surplus requirements for listing on the Nasdaq
Stock Market, and (ix) the granting of an exception to the rules of the
National Association of Securities Dealers, Inc., which would otherwise
require stockholder approval of the transactions contemplated by this
Agreement, such exception having been granted because the Company's audit
committee was of the opinion that a failure to complete immediately the
transactions contemplated by this Agreement would seriously jeopardize
the financial viability of the Company. Such documents and information
are incorporated herein by this reference. See Schedule 3(h) for
information regarding litigation, which is also incorporated by
reference.
<PAGE>
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not set forth in Form 10-Q for the
quarter ended June 20, 1996 that would have a Materially Adverse Effect or which
would adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the Agreement or any of
the documents contemplated therein.
<PAGE>
Exhibit 10.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October
8, 1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms
and conditions stated in this Agreement, shares (the "Preferred Shares") of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock (the "Common Stock"), $.001 par value (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in payment of dividends (the "Dividend Shares");
C. The Buyer shall receive upon each conversion of Preferred Shares
a warrant to acquire one share of Common Stock for each three shares of Common
Stock issued upon conversion of such Preferred Shares (the "Warrants"), which
Warrants shall expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement (the "Registration Rights Agreement") substantially in the form of
Exhibit F pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
a. Purchase of Preferred Shares. The Company shall issue and
----------------------------
sell to the Buyer and the Buyer shall purchase an aggregate of 25,000 Preferred
Shares, which shall be convertible into Conversion Shares in accordance with the
terms of the Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series 2 in the form attached hereto as
Exhibit A (the "Certificate of Designation"). The per share purchase price (the
"Purchase Price") of the Preferred Shares shall be $1,000. The Preferred Shares
shall be allocated among the entities constituting the Buyer as specified on
their respective counterpart signature pages and shall be sold at a closing as
hereinafter provided and as set forth in the signature pages.
<PAGE>
b. Closing. The date and time of the closing (the "Closing") of the
-------
issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on _________ ___, 1996 (or such later date as is mutually agreed to
by the Company and the entities constituting the Buyer).
c. Form of Payment. The Buyer shall pay the Purchase Price for the
---------------
Preferred Shares by wire transfer of immediately available United States Dollars
on the Closing date, to be deposited into an escrow account (the "Escrow
Account") established at Silicon Valley Bank, Santa Clara, California, pursuant
to an Escrow Agreement in substantially the form of Exhibit B attached hereto
(the "Escrow Agreement"). At the Closing, the Company shall deliver stock
certificates, duly executed on behalf of the Company, representing the Preferred
Shares (the "Stock Certificates") to the Buyer.
d. Warrant Issuances. The Company will issue to Buyer or its
-----------------
designee within five (5) days after any conversion of Preferred Shares a Warrant
in substantially the form of Exhibit C attached hereto, to acquire one share of
Common Stock for each three Conversion Shares that are issued on such conversion
of Preferred Shares, with an exercise price equal to the lower $7.15 per share
and 110 percent of the Average Market Price (as that term is defined in Exhibit
A hereto) per share of Common Stock for the five trading days preceding such
conversion. Each Warrant shall expire to the extent not exercised on the third
anniversary of the date of the relevant conversion.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants to the Company as to itself,
severally, and not jointly, that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares
------------------
and the Warrants for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the 1933 Act. The Buyer is not
purchasing the Preferred Shares for the purpose of covering short sale positions
in the Common Stock established on or prior to the date of the Closing. The
Buyer understands that it shall be a condition to the issuance of the Conversion
Shares, the Dividend Shares and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") that the Warrants, Conversion
Shares, Dividend Shares and Warrant Shares are subject to the representations
set forth in this Section 2(a).
b. Accredited Investor Status. The Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Preferred
----------------------
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
2
<PAGE>
availability of such exemptions and the eligibility of the Buyer to acquire
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
d. Information. The Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer acknowledges
that the Buyer has requested only publicly available information and has
specifically declined to receive nonpublic information that may be material,
notwithstanding that the Company has offered to make all such information
available to the Buyer. Such nonpublic material information may include, for
example, information regarding other financings, potential strategic alliances,
distributor and customer arrangements, potential acquisitions and joint
ventures, new product developments, technological developments, supplier
arrangements, developments in manufacturing techniques, personnel changes and
other matters that could have material effects on the Company, and the Buyer
acknowledges that it is expressly assuming the risk that material nonpublic
information, which it has not received and does not desire to receive, might
have caused the Buyer not to make the investments contemplated hereby had the
Buyer received such information. The Buyer understands that its investment in
the Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares involves a high degree of risk, including, without limitation, the risks
arising from the facts that the Company's stockholders' equity is negative in an
amount in excess of $30,000,000, that the Company expects to incur a loss for
the quarter ended September 30, 1996, and that no assurance can be given that
the Company will not incur continuing losses or will be profitable. The Buyer
has sought such accounting, legal and tax advice as it has considered necessary
to an informed investment decision with respect to its acquisition of the
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
e. No Governmental Review. The Buyer understands that no United
----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares, Dividend Shares and Warrant Shares or the fairness
or suitability of the investment in the Preferred Shares, Warrants, Conversion
Shares, Dividend Shares or Warrant Shares nor have such authorities passed upon
or endorsed the merits of the offering of the Preferred Shares, Warrants,
Conversion Shares, Dividend Shares and Warrant Shares.
f. Transfer or Resale. The Buyer understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares, the Dividend Shares and the Warrant Shares have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (a)
subsequently registered thereunder, or (b) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities to be sold, assigned
or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration; (ii) any sale of such securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable,
3
<PAGE>
any resale of such securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register such securities (other than pursuant to the Registration Rights
Agreement) under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
g. Legends. The Buyer understands that the certificates or other
-------
instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares, the Dividend Shares and the Warrant Shares
(collectively, the "Registrable Securities") have been sold pursuant to a
registration under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Registrable Securities shall
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the Registrable Securities are
sold pursuant to a sale that is registered under the 1933 Act, or (b) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale, assignment or transfer of the
Preferred Shares, the Warrants or such Registrable Securities may be made
without registration under the 1933 Act, or (c) such holder provides the Company
with reasonable assurances that the Preferred Shares, the Warrants or such
Registrable Securities can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
h. Authorization; Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered by the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general
4
<PAGE>
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its
------------------------------
subsidiaries are corporations duly organized and existing in good standing
under the laws of the jurisdiction in which they are incorporated, except,
in the case of any such subsidiaries, as would not have a Material Adverse
Effect (as defined below), and have the requisite corporate power to own
their properties and to carry on their business as now being conducted.
Each of the Company and its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on the
operations, properties or financial condition of the Company and its
subsidiaries taken as a whole.
b. Authorization; Enforcement. (i) The Company has the
--------------------------
requisite corporate power and authority to enter into and perform this
Agreement and the Registration Rights Agreement, and to issue the Preferred
Shares, the Warrants and the Registrable Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or
its stockholders is required, (iii) this Agreement and the Registration
Rights Agreement have been duly executed and delivered by the Company, and
(iv) this Agreement and the Registration Rights Agreement constitute the
valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies or by other
equitable principles of general application.
c. Capitalization. As of October 3, 1996, the authorized
--------------
capital stock of the Company consists of (i) 60,000,000 shares of Common Stock
of which 12,219,415 shares were issued and outstanding, and (ii) 4,000,000
shares of Preferred Stock of which 20,000 shares were issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the
5
<PAGE>
Registration Rights Agreement). The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended, as in
effect on the date hereof ("Certificate of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "Bylaws").
d. Issuance of Securities. The Registrable Securities and
----------------------
Preferred Shares are duly authorized and, upon issuance in accordance with the
terms hereof and thereof, shall be validly issued, fully paid and non-
assessable, and free from all taxes, liens and charges with respect to the issue
thereof.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws (other than
as results from the limit on the number of authorized shares of Common Stock) or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
f. SEC Documents, Financial Statements. Since September
-----------------------------------
30, 1995, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits) incorporated by
reference therein, being hereinafter referred to as the "SEC Documents").
The Company has delivered to the Buyer true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated documents.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form
6
<PAGE>
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer and referred to in Section 2(d) of this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
--------------------------
3(g), since June 30, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in its Form 10-Q
---------------------
for the quarter ended June 30, 1996, or in Schedule 3(h), there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
i. Purpose of Investment. The Company recognizes that the
---------------------
Buyer's investment in the Company is being made in order to provide financing
for the Company's ongoing operations and especially for the development and
introduction of new products, including the marketing of such products.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
------
the Preferred Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration
7
<PAGE>
Period"), the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Preferred Shares for the Company's internal working capital
purposes, including costs and expenses of the Company's business operations and
product development, production and marketing, and for repayment of the existing
debt obligation to Silicon Valley Bank in an amount up to $5,000,000.
e. Financial Information. The Company agrees to send the
---------------------
following reports to the Buyer during the Registration Period: (i) within five
(5) days after the filing thereof with the SEC, a copy of its Annual Reports on
Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-
K; and (ii) within one day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares, the
Dividend Shares and the Warrant Shares.
g. Listing. The Company shall promptly secure the listing of
-------
the Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
h. Other Offerings. The Company shall not, within sixty days
---------------
from the date hereof, sell or enter into a contract to sell any shares of Common
Stock, or any options, warrants, rights or securities entitling the holder
thereof to acquire any shares of Common Stock, at a price that is not
substantially equivalent to or greater than the fair market value of such Common
Stock, options, warrants, rights or securities at the time of the sale, except
for sales of not more than 5,000 shares of the Company's Convertible Preferred
Stock, Series 1.
i. Legal Expenses. The Company shall pay all expenses incurred
--------------
in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall instruct its transfer agent to issue
certificates, registered in the name of the Buyer or its nominee, for the
Conversion Shares, Dividend Shares and Warrant Shares in such amounts as
specified from time to time by the Buyer to the Company. All such
certificates shall bear the restrictive legend specified in Section 2(g) of
this
8
<PAGE>
Agreement. The Company shall provide instructions and opinions of counsel to
its transfer agent in accordance with Section 3(m) of the Registration Rights
Agreement. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof, in the case of the Registrable Securities,
will be given by the Company to its transfer agent and that the Preferred Shares
and the Registrable Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section shall affect in
any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Registrable Securities. If the Buyer
provides the Company with an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, that registration of a resale by the
Buyer of any of the Preferred Shares or the Registrable Securities is not
required under the 1933 Act, the Company shall permit the transfer, and promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to sell the
Preferred Shares is subject to the satisfaction, at or before the date of
the Closing, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. The Buyer shall have delivered to the Company the Purchase
Price for all Preferred Shares being purchased by wire transfer of immediately
available funds pursuant to the wiring instructions provided by the Company.
d. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer to purchase the Preferred Shares
at the Closing is subject to the satisfaction, at or before the date of the
Closing, of each of the following
9
<PAGE>
conditions, provided that these conditions are for the sole benefit of each of
the entities constituting the Buyer and may be waived by any such entity at any
time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.
c. The Common Stock shall be authorized for quotation on the
Nasdaq National Market or the Nasdaq SmallCap Market and trading in the Common
Stock on Nasdaq National Market or the Nasdaq SmallCap Market shall not have
been suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. The
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to the Buyer
the Stock Certificates for the Preferred Shares.
g. The Board of Directors of the Company shall have adopted
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall not have received from Nasdaq or the
National Association of Securities Dealers, Inc. any written or oral
communication as to its actual or potential ineligibility for continued listing
of the Common Stock on the Nasdaq National Market, the substance of which shall
not have been publicly disclosed.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. In the event of any litigation regarding
the interpretation or application of this Agreement, the parties consent to the
nonexclusive jurisdiction in any of the federal courts
10
<PAGE>
located in the State of New York and waive their rights to object to venue in
any such court, regardless of the convenience or inconvenience thereof to any
party.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for
--------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by mail or delivered personally
or by courier and shall be effective five days after being placed in the mail,
if mailed, certified or registered, return receipt requested, or upon receipt,
if delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
11
<PAGE>
If to the Buyer, at the addresses on the signature pages.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, any of the entities constituting the Buyer may assign its rights
hereunder to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company, provided, however, that any such
assignment shall not release such entity from its obligations hereunder unless
such obligations are assumed by such affiliate and the Company has consented to
such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyer contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h) and 8(k), and this subsection shall survive the closing. Each party
which constitutes the Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date.
12
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. _____________________________________
By: /s/ Edward L. Marinaro
-------------------------------- By:__________________________________
Name: Edward L. Marinaro Name:
Its: Chairman of the Board Its:
Address: ____________________________
____________________________
____________________________
Number of Preferred Shares
to be purchased at Closing: ________
_____________________________________
By: _________________________________
Name:
Its:
Address: __________________________
__________________________
__________________________
Number of Preferred Shares
to be purchased at Closing: ________
_____________________________________
By: _________________________________
Name:
Its:
Address: ___________________________
___________________________
___________________________
Number of Preferred Shares
to be purchases at Closing: ________
13-A
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. MUSEUM ASSETS LTD.
By: BY: /s/ Chaim Farro
-------------------------------- ------------------------------
Name: Name: Chaim Farro
Its: Its: SECRETARY
Address: 83 Dana Crescent
--------------------------
Thornhill, Ontario
--------------------------
CANADA L4J3 B9
--------------------------
Number of Preferred Shares
to be purchased at Closing: 3,900
------
ASHLINE LTD.
------------------------------------
By: /s/ Deborah Gutnick
--------------------------------
Name: Deborah Gutnick
Its: SECRETARY
Address: 18 Trover Ct.
---------------------------
Thornhill, Ontario
---------------------------
CANADA L4J 2M7
--------------------------
Number of Preferred Shares
to be purchased at Closing: 3,900
--------
KARLIN INVESTMENTS, INC. Tim Boom Ltd.
- ---------------------------------- ----------------------------------
By:_______________________________ By: ______________________________
Name: Menachem Eitan Name: Menachem Eitan
Its: Its:
Address: 21 Hagvura Street Address: 21 Hagvura Street
------------------------- -------------------------
Karmei-Schromron Karmei-Schromron
------------------------- -------------------------
ISRAEL ISRAEL
------------------------- -------------------------
Number of Preferred Shares Number of Preferred Shares
to be purchases at Closing: 1,700 to be purchased at Closing: 500
------ ------
13-B
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996 among
_________________, ____________________, and _________________ (collectively,
the "Buyer"), SyQuest Technology, Inc., a Delaware corporation (the "Company"),
and AM Capital Management Group, a New York corporation, as Escrow Agent (the
"Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities
Purchase Agreement dated as of __________, 1996 (the "Purchase Agreement"),
pursuant to which the Company has agreed to sell, and the Buyer has agreed to
purchase, an aggregate of 25,000 shares of the Company's 5% Cumulative
Convertible Preferred Stock, Series 2, $.001 par value per share (the "Preferred
Shares"); and
WHEREAS, the Buyer and the Company have agreed to place into escrow
the $25,000,000 purchase price for the Preferred Shares to be available for
disbursements to the Company for its business operations and product
development, introduction and marketing on and after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyer's obligation to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. On the date of the Closing under, and to the
-------
extent required by, the Purchase Agreement, the Buyer shall cause to be wire
transferred to the Escrow Agent $25,000,000 (the "Escrow"), to be held by the
Escrow Agent in a separate interest-bearing money market account established at
Silicon Valley Bank or any other banking institution that the Company may
designate (the "Bank"), Account No. 3300039539 or another account subject to
this Agreement to which the Company may direct that the Escrow be transferred
(the "Escrow Account"), subject to the terms and provisions contained herein.
Interest shall accrue on the Escrow Account at the highest rate paid by the Bank
on accounts which permit multiple withdrawals from an account within any
particular monthly period. The Escrow Agent shall provide the Company with all
Bank statements, notices and other writings which it receives from the Bank in
connection with the Escrow Account. The Escrow, together
<PAGE>
with all interest thereon, shall at all times remain (until disbursed in
accordance with this Agreement) the property of the Company, subject only to the
restrictions as to the use thereof expressly provided in this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time
--------------------------
hereafter request by notice to the Escrow Agent that the Escrow Account be
transferred to another banking institution. In such event, the Escrow Agent
shall, within two business days after receiving such notice, transfer the
remaining Escrow as the Company may instruct, whereupon the transferee banking
institution shall become the "Bank" for purposes of this Agreement and the
account into which the remaining Escrow is deposited shall become the "Escrow
Account", in all cases subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during
-------------
the term of this Agreement, the Company shall deliver to the Escrow Agent a
request in writing signed by the Company for a disbursement from the Escrow
accompanied by a certification, in substantially the form attached hereto as
Exhibit A, executed by the Company's Chief Executive Officer or Chief Financial
Officer, stating that the amount of the Escrow to be disbursed shall be used by
the Company solely for costs and expenses of the Company's business operations
and product development, introduction and marketing after the date hereof, or
for payment of accrued interest on and repayment of any loan heretofore made to
the Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000, the Escrow Agent shall pay such amount of the Escrow as specified in
such request within forty-eight hours of receipt of such request by the Escrow
Agent by wire transfer as directed in such request.
2.2 Controversies. If any controversy arises between one or
-------------
more of the parties hereto, or between any of the parties hereto and any person
not a party hereto, as to whether or not or to whom the Escrow Agent shall
deliver the Escrow or any portion thereof or as to any other matter arising out
of or relating to this Escrow Agreement, the Escrow Agent shall not be required
to determine the same and need not make any delivery of the Escrow concerned or
any portion thereof but may retain the same until the rights of the parties to
the dispute shall have been finally determined by agreement or by final judgment
of a court of competent jurisdiction after all appeals have been finally
determined (or the time for further appeals has expired without an appeal having
been made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyer or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Escrow monies
----------------------
shall be disbursed or otherwise transferred except in accordance with this
section 2, section 4 or section 5.1(b). Without limiting the foregoing, neither
Escrow Agent nor Buyer shall be entitled
2
<PAGE>
to any right of offset against the Escrow or otherwise entitled to receive any
portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any
manner whatever for the sufficiency, correctness, genuineness or validity of any
cash, investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any
written notice, certificate, instruction, request or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
3.3 The Escrow Agent shall not be liable for any act done
hereunder except in the case of its gross negligence, willful misconduct or bad
faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except
those which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a)
-----------
the date on which the Escrow shall have been fully disbursed in accordance with
the terms and conditions of this Agreement, and (b) any other date agreed to by
the Buyer and the Company, in which event the Escrow shall be disbursed in full
to the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. This
indemnification shall not apply to any direct claim against the Escrow Agent by
the Company alleging a breach of this Agreement.
3
<PAGE>
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyer, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction in
Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreement. The parties acknowledge that the
----------------------
Company, the Escrow Agent and the purchasers of the Company's Convertible
Preferred Stock, Series 1, are concurrently herewith entering into another
Escrow Agreement in substantially the same form as this Agreement (the "Other
Agreement"). The parties contemplate that deposits into the Escrow Account shall
be made under this Agreement and the Other Agreement, which together shall
govern the rights and obligations of the parties hereto and thereto with respect
to the Escrow Account, the Escrow and other funds deposited into the Escrow
Account and the rights and duties of the parties with respect thereto, as if
this Agreement and the Other Agreement were a single agreement among all of the
parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at Three Edward Lane, Syosset, NY 11791.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:___________________________________
Name:
Its:
BUYER:
-----
______________________________________
By:___________________________________
Name:
Its:
______________________________________
By:___________________________________
Name:
Its:
______________________________________
By:___________________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:___________________________________
Name: Michael Arnouse
Its: President
5
<PAGE>
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996,
by and among ______________________________________________, SyQuest Technology,
Inc. and AM Capital Management Group (the "Escrow Agreement"). Capitalized
terms used and not otherwise defined herein have the meanings respectively
ascribed to them in the Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certification as
this ____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:___________________________________
Name:
Title:
6
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF 5% PREFERRED SHARES]
_________________ (_________) fully paid nonassessable shares of Common Stock
(as defined herein) of the Company (the "Warrant Shares") at a purchase price of
[THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE MARKET PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE TRADING DAYS PRECEDING THE
CONVERSION DATE] U.S. $_______ per share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant have the following meanings:
"Common Stock" means (a) the Company's common stock, par value
------------
$.001 per share, and (b) any capital stock into which such common stock shall
have been changed or any capital stock resulting from a reclassification of such
common stock.
<PAGE>
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $_____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. Pacific
Time on the Expiration Date. The rights represented by this Warrant may be
exercised by the holder hereof then registered on the books of the Company, as a
whole or from time to time in part (except that this Warrant shall not be
exercisable as to a fractional share) by (i) delivery of a written notice, in
the form of the Subscription Notice attached as Exhibit A hereto, of such
holder's election to exercise this
2
<PAGE>
Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in cash
or by check, for the number of Warrant Shares as to which this Warrant shall
have been exercised, and (iii) the surrender of this Warrant, properly endorsed,
at the principal office of the Company (or at such other agency or office of the
Company as the Company may designate by notice to the holder hereof); provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 8 shall be applicable. In the event of any exercise of
the rights represented by this Warrant in compliance with this Section 2(a), a
certificate or certificates for the Warrant Shares so purchased, registered in
the name of, or as directed by, the holder, shall be delivered to, or as
directed by, such holder within a reasonable time after such rights shall have
been so exercised.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall issue a new
Warrant identical in all respects to the Warrant exercised except (i) it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under the Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised, and (ii) the
holder thereof shall be deemed to have become the holder of record of such
Warrant Shares immediately prior to the close of business on the date on which
the Warrant is surrendered and payment of the amount due in respect of such
exercise and any applicable taxes is made, irrespective of the date of delivery
of such share certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the stock
transfer books are open.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
----------------------------
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
-----
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
---------------------------------------
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer
3
<PAGE>
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of stock,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the holder of this Warrant of the Warrant Shares which he or she is then
entitled to receive upon the due exercise of this Warrant.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor") and an "excluded purchaser" for purposes of Section
25102(f) of the California Corporate Securities Law of 1968 (an "Excluded
Purchaser"). Upon exercise of this Warrant, the holder shall, if requested by
the Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the holder's own
account and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale and that such holder is an Accredited
Investor and an Excluded Purchaser. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) Prior to any sale, transfer or other disposition of this
Warrant or the Warrant Shares not pursuant to an effective registration
statement, the holder thereof will give ten (10) days' notice to the Company of
such holder's intention to effect such transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer and, if such transfer is
not registered under the Securities Act, shall be accompanied by an opinion,
addressed to the Company and reasonably satisfactory in form and substance to
it, of counsel (reasonably satisfactory to the Company) for such holder, stating
that, in the opinion of such counsel, such transfer will be a transaction exempt
from registration under the Securities Act.
4
<PAGE>
(b) If such sale, transfer or other disposition may in the opinion
of such counsel be effected without registration under the Securities Act, such
holder shall thereupon be entitled to the terms of the notice delivered by such
holder to the Company. If in the opinion of such counsel such transfer may not
be effected without registration under the Securities Act, such holder shall not
be entitled to so transfer this Warrant or the Warrant Shares unless the Company
shall have filed a registration statement relating to such proposed transfer and
such registration statement shall have become effective under the Securities
Act.
(c) Any Warrant Shares issued upon exercise of this Warrant may
bear one or more of the legends in similar form to the legend set forth on this
Warrant.
(d) The Company acknowledges that it has entered into a
Registration Rights Agreement entitling certain holders of Warrant Shares to
require the Company to cause such Warrant Shares to be registered under the
Securities Act.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect a
--------------------------
stock dividend, a stock split, a stock combination, or a reverse stock split of
the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
5
<PAGE>
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
terms as to indemnity or otherwise as it may in its discretion impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed.
Section 11. Notice. All notices and other communications under this
------
Warrant shall (a) be in writing (which shall include communications by
facsimile), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, or by facsimile, or (ii) delivered by hand, and (c) be
given at the following respective addresses and facsimile numbers and to the
attention of the following persons:
(a) if to the Company, to it at:
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, California 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
(b) if to Holder, to it at the address set forth below Holder's
signature on the signature page hereof.
or at such other address or facsimile number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the fifth Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by facsimile, when such
communication is transmitted to the appropriate number determined as above
provided in this Section and the appropriate answer back is received or receipt
is otherwise acknowledged, and (iii) if given by hand delivery, when left at the
address of the addressee addressed as above provided, except that notices of a
change of address, facsimile or telephone number, shall not be deemed furnished,
until actually received.
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
6
<PAGE>
Section 13. Date. The date of this Warrant is _____________, 199__. This
----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
ACCEPTED:
- --------
[HOLDER]
By:_______________________________
Name:_____________________________
Title:____________________________
Address:__________________________
__________________________________
__________________________________
__________________________________
7
<PAGE>
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment of U.S. $_______________, the
aggregate Warrant Exercise Price of such Warrant Shares in full.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(1) of Regulation D as promulgated by the Securities and
Exchange Commission under the Securities Act and an "excluded purchaser" for
purposes of Section 25102(f) of the California Corporate Securities Law of 1968.
Dated: ______________, _____ [HOLDER]
By:___________________________________
Name:_________________________________
Title:________________________________
Address:
______________________________________
______________________________________
______________________________________
Number of Warrant Shares Being
Purchased:
8
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement to (i) issue and sell to the Buyer shares of the Company's 5%
Cumulative Convertible Preferred Stock, Series 2, $.001 par value per share (the
"Preferred Shares"), which will be convertible into shares of the Company's
common stock (the "Common Stock"), par value $.001 per share (as converted, the
"Conversion Shares"), pursuant to which certain shares of Common Stock may be
issued to the Buyer in payment of dividends (the "Dividend Shares"), and (ii)
issue Warrants (the "Warrants") which will be exercisable to purchase shares of
Common Stock (the "Warrant Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
i. "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9 hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
<PAGE>
effectiveness of such Registration Statement by the United States Securities and
Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Dividend Shares.
iv. "Registration Statement" or "Registration Statements" means
a registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall use its best efforts to
----------------------
prepare, and, on or before thirty (30) days after the date of the issuance of
the relevant Preferred Shares, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable Securities
issuable upon conversion of or in connection with the relevant Preferred Shares,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares or exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Registration Statement(s) (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be provided to and
approved by the Buyer and its counsel prior to its filing or other submission,
such approval not to be unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration rights under this Section 2(c) written notice of such
determination and, if within twenty (20) days
2
<PAGE>
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder; provided
that no portion of the equity securities which the Company is offering for its
own account shall be excluded; provided, further that the Company shall be
entitled to exclude Registrable Securities to the extent necessary to avoid
breaching obligations existing prior to the date hereof to other stockholders of
the Company. Any exclusion of Registrable Securities shall be made pro rata
among the Investors seeking to include Registrable Securities, in proportion to
the number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this Section 2(c) may
be waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
3
<PAGE>
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s) as may be necessary to keep the Registration Statement(s) effective
at all times during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement(s)
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement(s).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold forty percent or more of the Registrable
Securities being offered reasonably request (but in no event in more than five
states of the United States), (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith
4
<PAGE>
or as a condition thereto to (a) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(d),
(b) subject itself to general taxation in any such jurisdiction, (c) file a
general consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause more than nominal expense or burden to the Company, or
(e) make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
h. The Company shall permit a single firm of counsel, designated as
selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing
5
<PAGE>
the Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
6
<PAGE>
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
4. OTHER OBLIGATIONS.
-----------------
a. At least five (5) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
7
<PAGE>
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company and fees and disbursements of one counsel for the
Investors, shall be borne by the Company, subject, with respect to expenses
incurred by the Investors, to the limit stated in Section 4(h) of the Securities
Purchase Agreement.
8
<PAGE>
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or
9
<PAGE>
to cause to be delivered the prospectus made available by the Company; and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based upon any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any
10
<PAGE>
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that legal
fees of such firm shall be reasonable. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
11
<PAGE>
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority
12
<PAGE>
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, L.L.P.
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature pages of the
Securities Purchase Agreement.
Each party shall provide notice to the other party of any change in
address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
13
<PAGE>
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request
14
<PAGE>
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
- -------
SYQUEST TECHNOLOGY, INC.
By:____________________________
Name:
Its:
BUYER:
- -----
_______________________________
By:____________________________
Name:
Its:
_______________________________
By:____________________________
Name:
Its:
_______________________________
By:____________________________
Name:
Its:
15
<PAGE>
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a
total of 3,252,244 shares of its Common Stock. As of October 3, 1996, the
Company had options outstanding to purchase a total of 2,790,345 shares of its
Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and convertible
debentures, as well as the possible issuance of Common Stock in exchange for
forgiveness of indebtedness. Certain of the arrangements may provide that the
debt will not be cancelled until such time as the supplier obtains proceeds from
the sale of the shares issued in the arrangement. Equity securities issued for
cancellation of debt, as well as for the Common Stock issuable upon conversion
of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to Wharton Capital Corporation, and has a commitment to issue a warrant to (a)
Needham & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. Harper
Group to purchase 500,000 shares of Common Stock.
<PAGE>
Schedule 3(e)
-------------
There are no dislosures to be made pursuant to this Schedule 3(e).
<PAGE>
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following:
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of
1995. As a result of these and other factors, past-due accounts
payable continued to be high during the period, amounts borrowable
under the Company's line of credit decreased and the Company's overall
liquidity has been materially and adversely affected. Suppliers were
placed on a payment plans for repayment of amounts owed. Reference is
made to (i) the Company's press release dated May 7, 1996, (ii) the
Company's report on Form 10-Q for the quarter ended March 31, 1996,
(iii) various news-wire stories of June 5, 1996, containing Nasdaq's
statements in connection with the Company's lack of compliance with
Nasdaq listing requirements, (iv) the Company's report on Form 10-Q
for the quarter ended June 30, 1996, (v) the Company's press release
dated September 16, 1996, (vi) the Company's Current Report on Form 8-
K dated June 14, 1996, (vii) the events and developments described in
the Company's Amendment Number 1 to Form S-3 Registration Statement
filed August 29, 1996, (viii) Nasdaq's granting of an exception
through October 31, 1996, to the net tangible assets and capital and
surplus requirements for listing on the Nasdaq Stock Market, and (ix)
the granting of an exception to the rules of the National Association
of Securities Dealers, Inc., which would otherwise require stockholder
approval of the transactions contemplated by this Agreement, such
exception having been granted because the Company's audit committee
was of the opinion that a failure to complete immediately the
transactions contemplated by this Agreement would seriously jeopardize
the financial viability of the Company. Such documents and information
are incorporated herein by this reference. See Schedule 3(h) for
information regarding litigation, which is also incorporated by
reference.
<PAGE>
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not expressly set forth in Form 10-Q for
the quarter ended June 30, 1996 that would have a Materially Adverse Effect or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, the Agreement or any
of the documents contemplated therein.
<PAGE>
EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
[Pangaea]
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms and
conditions stated in this Agreement, shares (the "Preferred Shares") of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock (the "Common Stock"), $.001 par value (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in payment of dividends (the "Dividend Shares");
C. The Buyer shall receive upon each conversion of Preferred Shares a
warrant to acquire one share of Common Stock for each three shares of Common
Stock issued upon conversion of such Preferred Shares (the "Warrants"), which
Warrants shall expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit F
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
a. PURCHASE OF PREFERRED SHARES. The Company shall issue and sell to
----------------------------
the Buyer and the Buyer shall purchase the number of Preferred Shares set forth
below the Buyer's signature, which shall be convertible into Conversion Shares
in accordance with the terms of the Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred Stock, Series 2 in the form
attached hereto as Exhibit A (the "Certificate of Designation"). The per share
purchase price (the "Purchase Price") of the Preferred Shares shall be $1,000.
The Preferred Shares shall be allocated among the entities constituting the
Buyer as specified on their respective counterpart signature pages and shall be
sold at a closing as hereinafter provided and as set forth in the signature
pages.
<PAGE>
b. CLOSING. The date and time of the closing (the "Closing") of the
-------
issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on October 15, 1996 (or such later date as is mutually agreed to by
the Company and the entities constituting the Buyer).
c. FORM OF PAYMENT. The Buyer shall pay the Purchase Price for the
---------------
Preferred Shares by wire transfer of immediately available United States Dollars
on the Closing date, to be deposited into an escrow account (the "Escrow
Account") established at Silicon Valley Bank, Santa Clara, California, pursuant
to an Escrow Agreement in substantially the form of Exhibit B attached hereto
(the "Escrow Agreement"). At the Closing, the Company shall deliver stock
certificates, duly executed on behalf of the Company, representing the Preferred
Shares (the "Stock Certificates") to the Buyer.
d. WARRANT ISSUANCES. The Company will issue to Buyer or its
-----------------
designee within five (5) days after any conversion of Preferred Shares a Warrant
in substantially the form of Exhibit C attached hereto, to acquire one share of
Common Stock for each three Conversion Shares that are issued on such conversion
of Preferred Shares, with an exercise price equal to the lower $7.15 per share
and 110 percent of the Average Market Price (as that term is defined in Exhibit
A hereto) per share of Common Stock for the five trading days preceding such
conversion. Each Warrant shall expire to the extent not exercised on the third
anniversary of the date of the relevant conversion.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants to the Company as to itself,
severally, and not jointly, that:
a. INVESTMENT PURPOSE. The Buyer is purchasing the Preferred Shares
------------------
and the Warrants for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the 1933 Act. The Buyer is not
purchasing the Preferred Shares for the purpose of covering short sale positions
in the Common Stock established on or prior to the date of the Closing. The
Buyer understands that it shall be a condition to the issuance of the Conversion
Shares, the Dividend Shares and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") that the Warrants, Conversion
Shares, Dividend Shares and Warrant Shares are subject to the representations
set forth in this Section 2(a).
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor"
--------------------------
as that term is defined in Rule 501(a)(3) or Rule 501(a)(8) of Regulation D.
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the Preferred
----------------------
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
2
<PAGE>
d. INFORMATION. The Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer acknowledges
that the Buyer has requested only publicly available information and has
specifically declined to receive nonpublic information that may be material,
notwithstanding that the Company has offered to make all such information
available to the Buyer. Such nonpublic material information may include, for
example, information regarding other financings, potential strategic alliances,
distributor and customer arrangements, potential acquisitions and joint
ventures, new product developments, technological developments, supplier
arrangements, developments in manufacturing techniques, personnel changes and
other matters that could have material effects on the Company, and the Buyer
acknowledges that it is expressly assuming the risk that material nonpublic
information, which it has not received and does not desire to receive, might
have caused the Buyer not to make the investments contemplated hereby had the
Buyer received such information. The Buyer understands that its investment in
the Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares involves a high degree of risk, including, without limitation, the risks
arising from the facts that the Company's stockholders' equity is negative in an
amount in excess of $30,000,000, that the Company expects to incur a loss for
the quarter ended September 30, 1996, and that no assurance can be given that
the Company will not incur continuing losses or will be profitable. The Buyer
has sought such accounting, legal and tax advice as it has considered necessary
to an informed investment decision with respect to its acquisition of the
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
e. NO GOVERNMENTAL REVIEW. The Buyer understands that no United
----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares, Dividend Shares and Warrant Shares or the fairness
or suitability of the investment in the Preferred Shares, Warrants, Conversion
Shares, Dividend Shares or Warrant Shares nor have such authorities passed upon
or endorsed the merits of the offering of the Preferred Shares, Warrants,
Conversion Shares, Dividend Shares and Warrant Shares.
f. TRANSFER OR RESALE. The Buyer understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares, the Dividend Shares and the Warrant Shares have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (a)
subsequently registered thereunder, or (b) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities to be sold, assigned
or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration; (ii) any sale of such securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under
3
<PAGE>
any obligation to register such securities (other than pursuant to the
Registration Rights Agreement) under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
g. LEGENDS. The Buyer understands that the certificates or other
-------
instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares, the Dividend Shares and the Warrant Shares
(collectively, the "Registrable Securities") have been sold pursuant to a
registration under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Registrable Securities shall
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY
SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the Registrable Securities are
sold pursuant to a sale that is registered under the 1933 Act, or (b) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale, assignment or transfer of the
Preferred Shares, the Warrants or such Registrable Securities may be made
without registration under the 1933 Act, or (c) such holder provides the Company
with reasonable assurances that the Preferred Shares, the Warrants or such
Registrable Securities can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
h. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered by the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
------------------------------
subsidiaries are corporations duly organized and existing in good standing under
the laws of the jurisdiction in which they are incorporated, except, in the case
of any such subsidiaries, as would not have a Material Adverse Effect (as
defined below), and have the requisite corporate power to own their properties
and to carry on their business as now being conducted. Each of the Company and
its subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the operations, properties or financial condition
of the Company and its subsidiaries taken as a whole.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the
--------------------------
requisite corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, and to issue the Preferred Shares, the
Warrants and the Registrable Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company, and (iv) this Agreement and the
Registration Rights Agreement constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
c. CAPITALIZATION. As of October 3, 1996, the authorized
--------------
capital stock of the Company consists of (i) 60,000,000 shares of Common Stock
of which 12,219,415 shares were issued and outstanding, and (ii) 4,000,000
shares of Preferred Stock of which 20,000 shares were issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement). The Company has furnished to the Buyer true and correct copies of
the Company's Certificate of Incorporation, as amended, as in effect on the date
hereof ("Certificate of Incorporation"), and the Company's By-laws, as in effect
on the date hereof (the "Bylaws").
5
<PAGE>
d. ISSUANCE OF SECURITIES. The Registrable Securities and
----------------------
Preferred Shares are duly authorized and, upon issuance in accordance with the
terms hereof and thereof, shall be validly issued, fully paid and non-
assessable, and free from all taxes, liens and charges with respect to the issue
thereof.
e. NO CONFLICTS. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws (other than
as results from the limit on the number of authorized shares of Common Stock) or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
f. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since September 30,
-----------------------------------
1995, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"1934 Act") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to as the "SEC Documents"). The Company has delivered to
the Buyer true and complete copies of the SEC Documents, except for such
exhibits, schedules and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects
6
<PAGE>
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer and referred to
in Section 2(d) of this Agreement contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule
--------------------------
3(g), since June 30, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. ABSENCE OF LITIGATION. Except as set forth in its Form 10-Q
---------------------
for the quarter ended June 30, 1996, or in Schedule 3(h), there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
i. PURPOSE OF INVESTMENT. The Company recognizes that the
---------------------
Buyer's investment in the Company is being made in order to provide financing
for the Company's ongoing operations and especially for the development and
introduction of new products, including the marketing of such products.
4. COVENANTS.
---------
a. BEST EFFORTS. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. FORM D. The Company agrees to file a Form D with respect to
------
the Preferred Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing.
c. REPORTING STATUS. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the
---------------
sale of the Preferred Shares for the Company's internal working capital
purposes, including costs and
7
<PAGE>
expenses of the Company's business operations and product development,
production and marketing, and for repayment of the existing debt obligation to
Silicon Valley Bank in an amount up to $5,000,000.
e. FINANCIAL INFORMATION. The Company agrees to send the
---------------------
following reports to the Buyer during the Registration Period: (i) within five
(5) days after the filing thereof with the SEC, a copy of its Annual Reports on
Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-
K; and (ii) within one day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries.
f. RESERVATION OF SHARES. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares, the
Dividend Shares and the Warrant Shares.
g. LISTING. The Company shall promptly secure the listing of
-------
the Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
h. OTHER OFFERINGS. The Company shall not, within sixty days
---------------
from the date hereof, sell or enter into a contract to sell any shares of Common
Stock, or any options, warrants, rights or securities entitling the holder
thereof to acquire any shares of Common Stock, at a price that is not
substantially equivalent to or greater than the fair market value of such Common
Stock, options, warrants, rights or securities at the time of the sale, except
for sales of not more than 5,000 shares of the Company's Convertible Preferred
Stock, Series 1.
i. LEGAL EXPENSES. The Company shall pay all expenses incurred
--------------
in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
j. If a Buyer shall have given a notice of conversion as
provided in the Certificate of Designation, the Company's obligation to issue
and deliver the certificates for Common Stock upon such conversion shall be
absolute and unconditional, irrespective of the absence of any action by such
Buyer to enforce the same, any waiver or consent with respect to such
conversion, the recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to such Buyer, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
Buyer of any obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to such
Buyer in connection with such conversion. If the Company fails to issue and
deliver the certificates for the Common Stock to such Buyer converting shares of
Preferred Stock pursuant to the Certificate of Designation as and when required
to do so, in addition to any other liabilities the Company may have under the
Certificate of Designation and under applicable law, the Company shall pay or
reimburse such Buyer on demand for all out-of pocket costs, liabilities, damages
8
<PAGE>
and expenses, including, without limitation, fees and expenses of legal counsel,
incurred by such Buyer as a result of such failure.
k. As used in Section 2(c) of the Certificate of Designation,
the term "month" shall mean a period of 30 consecutive calendar days.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall instruct its transfer agent to issue
certificates, registered in the name of each of the entities constituting the
Buyer that holds the related Preferred Shares or Warrants or its nominee, for
the Conversion Shares, Dividend Shares and Warrant Shares in such amounts as
specified from time to time by such entity to the Company. All such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company shall provide instructions and opinions of counsel to its transfer
agent in accordance with Section 3(m) of the Registration Rights Agreement. The
Company warrants that no instruction other than such instructions referred to in
this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof, in the case of the Registrable Securities, will be given by the Company
to its transfer agent and that the Preferred Shares and the Registrable
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If the Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by the Buyer of any of the Preferred
Shares or the Registrable Securities is not required under the 1933 Act, the
Company shall permit the transfer, and promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to sell the Preferred
Shares is subject to the satisfaction, at or before the date of the Closing, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. The Buyer shall have delivered to the Escrow Account, in
accordance with the Escrow Agreement, the Purchase Price for all Preferred
Shares being purchased by wire transfer of immediately available funds pursuant
to the wiring instructions provided by the Company.
d. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific
9
<PAGE>
date), and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Buyer at or prior
to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer to purchase the Preferred Shares at
the Closing is subject to the satisfaction, at or before the date of the
Closing, of each of the following conditions, provided that these conditions are
for the sole benefit of each of the entities constituting the Buyer and may be
waived by any such entity for itself only at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.
c. The Common Stock shall be authorized for quotation on the
Nasdaq National Market or the Nasdaq SmallCap Market and trading in the Common
Stock on Nasdaq National Market or the Nasdaq SmallCap Market shall not have
been suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. The
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to the Buyer
the Stock Certificates for the Preferred Shares.
g. The Board of Directors of the Company shall have adopted
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall not have received from Nasdaq or the
National Association of Securities Dealers, Inc. any written or oral
communication as to its actual or
10
<PAGE>
potential ineligibility for continued listing of the Common Stock on the Nasdaq
National Market, the substance of which shall not have been publicly disclosed.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. GOVERNING LAW. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws.
b. COUNTERPARTS. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. HEADINGS. The headings of this Agreement are for
--------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by mail or delivered personally
or by courier or by facsimile and shall be effective five days after being
placed in the mail, if mailed, certified or registered, return receipt
requested, or upon receipt, if delivered personally or by courier or by
facsimile, in each case properly addressed to the party to receive the same.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
11
<PAGE>
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature pages.
Each party shall provide notice to the other party of any change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, any of the entities constituting the Buyer may assign its rights
hereunder to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company, provided, however, that any such
assignment shall not release such entity from its obligations hereunder unless
such obligations are assumed by such affiliate and the Company has consented to
such assignment and assumption.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyer contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h) and 8(k), and this subsection shall survive the closing. Each party
which constitutes the Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. PUBLICITY. The Company and the Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. FURTHER ASSURANCES. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date.
12
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. PANGAEA FUND LIMITED
--------------------------------------
By: /s/ Edward L. Marinaro By:
-------------------------------- ___________________________________
Name: Edward L. Marinaro Name:
Its: Chairman of the Board Its:
c/o Pangaea Asset Manage-
Address: ment, Inc.
----------------------------
250 Kitchawan Road
----------------------------
South Salem, NY 10590
----------------------------
Number of Preferred Shares
to be purchased at Closing: 1,200
---------
13-A
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. PANGAEA FUND LIMITED
--------------------------------------
By: /s/ Edward L. Marinaro By:
-------------------------------- ___________________________________
Name: Edward L. Marinaro Name:
Its: Chairman of the Board Its:
c/o Pangaea Asset Manage-
Address: ment, Inc.
----------------------------
250 Kitchawan Road
----------------------------
South Salem, NY 10590
----------------------------
Number of Preferred Shares
to be purchased at Closing: 200
---------
13-B
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. PANGAEA FUND LIMITED
--------------------------------------
By: By: /s/ Rhonda D. Mcdeigan-Eldridge
________________________________ -----------------------------------
Name: Name: Rhonda D. Mcdeigan-Eldridge
Its: Its: President
c/o Pangaea Asset Manage-
Address: ment, Inc.
----------------------------
250 Kitchawan Road
----------------------------
South Salem, NY 10590
----------------------------
Number of Preferred Shares
to be purchased at Closing: 1,200
---------
_______________________________________
By: /s/ Cedric L. Carroll
-----------------------------------
Name: Cedric L. Carroll
Its: Vice President
Address:
_____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing:
___________
______________________________________
By:
____________________________________
Name:
Its:
Address:
_____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing:
___________
13-C
Securities Purchase Agreement
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. PANGAEA FUND LIMITED
--------------------------------------
By: By: /s/ Rhonda D. Mcdeigan-Eldridge
________________________________ -----------------------------------
Name: Name: Rhonda D. Mcdeigan-Eldridge
Its: Its: President
c/o Pangaea Asset Manage-
Address: ment, Inc.
----------------------------
250 Kitchawan Road
----------------------------
South Salem, NY 10590
----------------------------
Number of Preferred Shares
to be purchased at Closing: 200
---------
_______________________________________
By: /s/ Cedric L. Carroll
-----------------------------------
Name: Cedric L. Carroll
Its: Vice President
Address:
_____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing:
_________
______________________________________
By:____________________________________
Name:
Its:
Address:
_____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing:
___________
13-D
Securities Purchase Agreement
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
[Pangaea]
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996 among
Pangaea Fund Limited (the "Buyer"), SyQuest Technology, Inc., a Delaware
corporation (the "Company"), and AM Capital Management Group, a New York
corporation, as Escrow Agent (the "Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of October 8, 1996 (the "Purchase Agreement"), pursuant to
which the Company has agreed to sell, and the Buyer has agreed to purchase, an
aggregate of 25,000 shares of the Company's 5% Cumulative Convertible Preferred
Stock, Series 2, $.001 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyer and the Company have agreed to place into escrow the
$25,000,000 purchase price for the Preferred Shares to be available for
disbursements to the Company for its business operations and product
development, introduction and marketing on and after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyer's obligation to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. On the date of the Closing under, and to the extent
-------
required by, the Purchase Agreement, the Buyer shall cause to be wire
transferred to the Escrow Agent $25,000,000 (the "Escrow"), to be held by the
Escrow Agent in a separate interest-bearing money market account established at
Silicon Valley Bank or any other banking institution that the Company may
designate (the "Bank"), Account No. 3300039539 or another account subject to
this Agreement to which the Company may direct that the Escrow be transferred
(the "Escrow Account"), subject to the terms and provisions contained herein.
Interest shall accrue on the Escrow Account at the highest rate paid by the Bank
on accounts which permit multiple withdrawals from an account within any
particular monthly period. The Escrow Agent shall provide the Company with all
Bank statements, notices and other writings
<PAGE>
which it receives from the Bank in connection with the Escrow Account. The
Escrow, together with all interest thereon, shall at all times remain (until
disbursed in accordance with this Agreement) the property of the Company,
subject only to the restrictions as to the use thereof expressly provided in
this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time
--------------------------
hereafter request by notice to the Escrow Agent that the Escrow Account be
transferred to another banking institution. In such event, the Escrow Agent
shall, within two business days after receiving such notice, transfer the
remaining Escrow as the Company may instruct, whereupon the transferee banking
institution shall become the "Bank" for purposes of this Agreement and the
account into which the remaining Escrow is deposited shall become the "Escrow
Account", in all cases subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during the
-------------
term of this Agreement, the Company shall deliver to the Escrow Agent a request
in writing signed by the Company for a disbursement from the Escrow accompanied
by a certification, in substantially the form attached hereto as Exhibit A,
executed by the Company's Chief Executive Officer or Chief Financial Officer,
stating that the amount of the Escrow to be disbursed shall be used by the
Company solely for costs and expenses of the Company's business operations and
product development, introduction and marketing after the date hereof, or for
payment of accrued interest on and repayment of any loan heretofore made to the
Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000, the Escrow Agent shall pay such amount of the Escrow as specified in
such request within forty-eight hours of receipt of such request by the Escrow
Agent by wire transfer as directed in such request.
2.2 Controversies. If any controversy arises between one or more of
-------------
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyer or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Escrow monies shall be
----------------------
disbursed or otherwise transferred except in accordance with this section 2,
section 4 or
2
<PAGE>
section 5.1(b). Without limiting the foregoing, neither Escrow Agent nor Buyer
shall be entitled to any right of offset against the Escrow or otherwise
entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its gross negligence, willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except
those which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a) the
-----------
date on which the Escrow shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, and (b) any other date agreed to by the
Buyer and the Company, in which event the Escrow shall be disbursed in full to
the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
3
<PAGE>
This indemnification shall not apply to any direct claim against the Escrow
Agent by the Company alleging a breach of this Agreement.
(b) In the event of any dispute as to the nature of the rights
or obligations of the Buyer, the Company or the Escrow Agent hereunder, the
Escrow Agent may at any time or from time to time interplead, deposit and/or pay
all or any part of the Escrow Funds with or to a court of competent jurisdiction
in Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreements. The parties acknowledge that the
-----------------------
Company, the Escrow Agent, other purchasers of Preferred Shares and the
purchasers of the Company's Convertible Preferred Stock, Series 1, are
concurrently herewith entering into other Escrow Agreements in substantially the
same form as this Agreement (the "Other Agreements"). The parties contemplate
that deposits into the Escrow Account shall be made under this Agreement and the
Other Agreements, which together shall govern the rights and obligations of the
parties hereto and thereto with respect to the Escrow Account, the Escrow and
other funds deposited into the Escrow Account and the rights and duties of the
parties with respect thereto, as if this Agreement and the Other Agreements were
a single agreement among all of the parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at Three Edward Lane, Syosset, NY 11791.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:_____________________________
Name:
Its:
BUYER:
-----
PANGAEA ASSET MANAGEMENT, INC.
---------------------------------
By:______________________________
Name:
Its:
_________________________________
By:______________________________
Name:
Its:
_________________________________
By:______________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:______________________________
Name: Michael Arnouse
Its: President
5
<PAGE>
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996, by
and among the investors named therein, SyQuest Technology, Inc. and AM Capital
Management Group (the "Escrow Agreement"). Capitalized terms used and not
otherwise defined herein have the meanings respectively ascribed to them in the
Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for (a) costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement or (b) payment of accrued interest on and
repayment of any loan made, prior to October 9, 1996, to the Company by Silicon
Valley Bank in an aggregate amount not in excess of $5,000,000.
IN WITNESS WHEREOF, the undersigned has executed this Certification as
this ____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:______________________________
Name:
Title:
C:\DMS\4795\001\0183247.01B
6
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
[PANGAEA]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF 5% PREFERRED SHARES]
_________________ (_________) fully paid nonassessable shares of Common Stock
(as defined herein) of the Company (the "Warrant Shares") at a purchase price of
[THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE MARKET PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE TRADING DAYS PRECEDING THE
CONVERSION DATE] U.S. $_______ per share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant have the following meanings:
<PAGE>
"Common Stock" means (a) the Company's common stock, par value
------------
$.001 per share, and (b) any capital stock into which such common stock shall
have been changed or any capital stock resulting from a reclassification of such
common stock.
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $_____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references herein
(A) to the Company shall be deemed to include the Company's successors and (B)
to any applicable law defined or referred to herein, shall be deemed references
to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender includes
the masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. Pacific
Time on the Expiration Date.
2
<PAGE>
The rights represented by this Warrant may be exercised by the holder hereof
then registered on the books of the Company, as a whole or from time to time in
part (except that this Warrant shall not be exercisable as to a fractional
share) by (i) delivery of a written notice, in the form of the Subscription
Notice attached as Exhibit A hereto, of such holder's election to exercise this
Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in cash
or by check, for the number of Warrant Shares as to which this Warrant shall
have been exercised, and (iii) the surrender of this Warrant, properly endorsed,
at the principal office of the Company (or at such other agency or office of the
Company as the Company may designate by notice to the holder hereof); provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 8 shall be applicable. In the event of any exercise of
the rights represented by this Warrant in compliance with this Section 2(a), a
certificate or certificates for the Warrant Shares so purchased, registered in
the name of, or as directed by, the holder, shall be delivered to, or as
directed by, such holder within a reasonable time after such rights shall have
been so exercised.
(b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall issue a new Warrant
identical in all respects to the Warrant exercised except (i) it shall represent
rights to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under the Warrant exercised, less the number of Warrant Shares
with respect to which such Warrant is exercised, and (ii) the holder thereof
shall be deemed to have become the holder of record of such Warrant Shares
immediately prior to the close of business on the date on which the Warrant is
surrendered and payment of the amount due in respect of such exercise and any
applicable taxes is made, irrespective of the date of delivery of such share
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are properly closed, such person
shall be deemed to have become the holder of such Warrant Shares at the opening
of business on the next succeeding date on which the stock transfer books are
open.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
----------------------------
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
-----
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
3
<PAGE>
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
---------------------------------------
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an "Accredited Investor") and an "excluded purchaser" for purposes of Section
25102(f) of the California Corporate Securities Law of 1968 (an "Excluded
Purchaser"). Upon exercise of this Warrant, the holder shall, if requested by
the Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the holder's own
account and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale and that such holder is an Accredited
Investor and an Excluded Purchaser. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) Prior to any sale, transfer or other disposition of this Warrant
or the Warrant Shares not pursuant to an effective registration statement, the
holder thereof will give ten (10) days' notice to the Company of such holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer and, if such transfer is not
registered under the Securities Act, shall be accompanied by an opinion,
4
<PAGE>
addressed to the Company and reasonably satisfactory in form and substance to
it, of counsel (reasonably satisfactory to the Company) for such holder, stating
that, in the opinion of such counsel, such transfer will be a transaction exempt
from registration under the Securities Act.
(b) If such sale, transfer or other disposition may in the opinion of
such counsel be effected without registration under the Securities Act, such
holder shall thereupon be entitled to the terms of the notice delivered by such
holder to the Company. If in the opinion of such counsel such transfer may not
be effected without registration under the Securities Act, such holder shall not
be entitled to so transfer this Warrant or the Warrant Shares unless the Company
shall have filed a registration statement relating to such proposed transfer and
such registration statement shall have become effective under the Securities
Act.
(c) Any Warrant Shares issued upon exercise of this Warrant may bear
one or more of the legends in similar form to the legend set forth on this
Warrant.
(d) The Company acknowledges that it has entered into a Registration
Rights Agreement entitling certain holders of Warrant Shares to require the
Company to cause such Warrant Shares to be registered under the Securities Act.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
5
<PAGE>
(b) Dividends and Stock Splits. If and whenever the Company shall effect
--------------------------
a stock dividend, a stock split, a stock combination, or a reverse stock split
of the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
--------------------------------------------
is lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new Warrant
of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed.
Section 11. Notice. All notices and other communications under this
------
Warrant shall (a) be in writing (which shall include communications by
facsimile), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, or by facsimile, or (ii) delivered by hand, and (c) be
given at the following respective addresses and facsimile numbers and to the
attention of the following persons:
(a) if to the Company, to it at:
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, California 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
(b) if to Holder, to it at the address set forth below Holder's
signature on the signature page hereof.
or at such other address or facsimile number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the fifth Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by facsimile, when such
communication is transmitted to the appropriate number determined as above
provided in this Section and the appropriate answer back is received or receipt
is otherwise acknowledged, and (iii) if given by hand delivery, when left at the
address of the addressee addressed as above provided, except that notices of a
change of address, facsimile or telephone number, shall not be deemed furnished,
until actually received.
6
<PAGE>
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
Section 13. Date. The date of this Warrant is _____________, 199__. This
----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
ACCEPTED:
- --------
[HOLDER]
By: __________________________________
Name: ________________________________
Title: _______________________________
Address: _____________________________
______________________________________
______________________________________
______________________________________
7
<PAGE>
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares by this Warrant specified below according to the conditions
thereof and herewith makes payment of U.S. $ ___________________, the aggregate
Warrant Exercise Price of such Warrant Shares in full. Capitalized terms used
herein have the meanings respectively ascribed to them in the Warrant.
THE UNDERSIGNED FURTHER CERTIFIES THAT:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same except in compliance with all applicable securities
laws; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(3) or Rule 501(a)(8) of Regulation D as promulgated by
the Securities and Exchange Commission under the Securities Act and an "excluded
purchaser" for purposes of Section 25102(f) of the California Corporate
Securities Law of 1968.
Dates: ______________________, _________ [HOLDER]
By:___________________________
Name: ________________________
Title: _______________________
Address:
______________________________
______________________________
______________________________
Number of Warrant Shares Being
Purchased:
8
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
[PANGAEA]
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement to (i) issue and sell to the Buyer shares of the Company's 5%
Cumulative Convertible Preferred Stock, Series 2, $.001 par value per share (the
"Preferred Shares"), which will be convertible into shares of the Company's
common stock (the "Common Stock"), par value $.001 per share (as converted, the
"Conversion Shares"), pursuant to which certain shares of Common Stock may be
issued to the Buyer in payment of dividends (the "Dividend Shares"), and (ii)
issue Warrants (the "Warrants") which will be exercisable to purchase shares of
Common Stock (the "Warrant Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
i. "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9 hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
<PAGE>
effectiveness of such Registration Statement by the United States Securities and
Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Dividend Shares.
iv. "Registration Statement" or "Registration Statements" means
a registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare, and, on or before thirty (30) days after the date of the issuance of
the relevant Preferred Shares, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable Securities
issuable upon conversion of or in connection with the relevant Preferred Shares,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares or exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Registration Statement(s) (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be provided to and
approved by the Buyer and its counsel prior to its filing or other submission,
such approval not to be unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a Registration
---------------------
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority of the Registrable Securities subject to such
underwritten offering shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer their
interest in the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration of
------------------------
the Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall send to each Investor who is entitled to
registration rights under this Section 2(c) written notice of such determination
and, if within twenty (20) days
2
<PAGE>
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder; provided
that no portion of the equity securities which the Company is offering for its
own account shall be excluded; provided, further that the Company shall be
entitled to exclude Registrable Securities to the extent necessary to avoid
breaching obligations existing prior to the date hereof to other stockholders of
the Company. Any exclusion of Registrable Securities shall be made pro rata
among the Investors seeking to include Registrable Securities, in proportion to
the number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this Section 2(c) may
be waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
3
<PAGE>
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the period
ending on the earlier of such dates being hereinafter called the "Registration
Period"), which Registration Statement(s) (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s) as may be necessary to keep the Registration Statement(s) effective
at all times during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement(s)
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement(s).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold forty percent or more of the Registrable
Securities being offered reasonably request (but in no event in more than five
states of the United States), (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such
4
<PAGE>
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (a) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company, or (e) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
h. The Company shall permit a single firm of counsel, designated as
selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
5
<PAGE>
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
6
<PAGE>
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
securities in a timely fashion that complies with then mandated securities
settlement procedures for regular way market transactions and delivery of
unlegended securities in settlement of such sales.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
4. OTHER OBLIGATIONS.
-----------------
a. At least five (5) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to
7
<PAGE>
the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees,
8
<PAGE>
and fees and disbursements of counsel for the Company and fees and disbursements
of one counsel for the Investors, shall be borne by the Company, subject, with
respect to expenses incurred by the Investors, to the limit stated in Section
4(h) of the Securities Purchase Agreement.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
9
<PAGE>
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered to each broker or dealer
executing a sale of Registrable Securities the prospectus made available by the
Company; and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to
10
<PAGE>
information such persons so furnished in writing by such persons expressly for
inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that legal
fees of such firm shall be reasonable. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of 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.
11
<PAGE>
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
12
<PAGE>
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier or by facsimile and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier or facsimile, in each case properly
addressed to the party to receive such notice. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, L.L.P.
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature pages of the
Securities Purchase Agreement.
Each party shall provide notice to the other party of any change in
address.
13
<PAGE>
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. This Agreement, the Securities Purchase Agreement and the Escrow
Agreement constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request
14
<PAGE>
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
- -------
SYQUEST TECHNOLOGY, INC.
By:______________________________
Name:
Its:
BUYER:
- -----
PANGAEA FUND LIMITED
- ---------------------------------
By:______________________________
Name:
Its:
_________________________________
By:______________________________
Name:
Its:
_________________________________
By:______________________________
Name:
Its:
15
<PAGE>
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a
total of 3,252,244 shares of its Common Stock. As of October 3, 1996, the
Company had options outstanding to purchase a total of 2,790,345 shares of its
Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and
convertible debentures, as well as the possible issuance of Common Stock in
exchange for forgiveness of indebtedness. Certain of the arrangements may
provide that the debt will not be cancelled until such time as the supplier
obtains proceeds from sale of the shares issued in the arrangement. Equity
securities issued for cancellation of debt, as well as for the Common Stock
issuable upon conversion of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to Wharton Capital Corporation, and has a commitment to issue a warrant to (a)
Needham & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. Harper
Group to purchase 500,000 shares of Common Stock.
<PAGE>
Schedule 3(e)
-------------
There are no disclosures to be made pursuant to this Schedule 3(e).
<PAGE>
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following;
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of 1995.
As a result of these and other factors, past-due accounts payable continued
to be high during the period, amounts borrowable under the Company's line
of credit decreased and the Company's overall liquidity has been materially
and adversely affected. Suppliers were placed on a payment plans for
repayment of amounts owed. Reference is made to (i) the Company's press
release dated May 7, 1996, (ii) the Company's report on Form 10-Q for the
quarter ended March 31, 1996, (iii) various news-wire stories of June 5,
1996, containing Nasdaq's statements in connection with the Company's lack
of compliance with Nasdaq listing requirements, (iv) the Company's report
on Form 10-Q for the quarter ended June 30, 1996, (v) the Company's press
release dated September 16, 1996, (vi) the Company's Current Report on Form
8-K dated June 14, 1996, (vii) the events and developments described in the
Company's Amendment Number 1 to Form S-3 Registration Statement filed
August 29, 1996, (viii) Nasdaq's granting of an exception through October
31, 1996, to the net tangible assets and capital and surplus requirements
for listing on the Nasdaq Stock Market, and (ix) the granting of an
exception to the rules of the National Association of Securities Dealers,
Inc., which would otherwise require stockholder approval of the
transactions contemplated by this Agreement, such exception having been
granted because the Company's audit committee was of the opinion that a
failure to complete immediately the transactions contemplated by this
Agreement would seriously jeopardize the financial viability of the
Company. Such documents and information are incorporated herein by this
reference. See Schedule 3(h) for information regarding litigation, which is
also incorporated by reference.
<PAGE>
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not set forth in Form 10-Q for the
quarter ended June 30, 1996 that would have a Materially Adverse Effect or which
would adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the Agreement or any of
the documents contemplated therein.
<PAGE>
Exhibit 10.5
SECURITIES PURCHASE AGREEMENT
[Cygni]
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyer (the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms and
conditions stated in this Agreement, shares (the "Preferred Shares") of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock (the "Common Stock"), $.001 par value (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in payment of dividends (the "Dividend Shares");
C. The Buyer shall receive upon each conversion of Preferred Shares a
warrant to acquire one share of Common Stock for each three shares of Common
Stock issued upon conversion of such Preferred Shares (the "Warrants"), which
Warrants shall expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit F
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
a. Purchase of Preferred Shares. The Company shall issue and sell to
----------------------------
the Buyer and the Buyer shall purchase the number of Preferred Shares set forth
below the Buyer's signature, which shall be convertible into Conversion Shares
in accordance with the terms of the Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred Stock, Series 2 in the form
attached hereto as Exhibit A (the "Certificate of Designation"). The per share
purchase price (the "Purchase Price") of the Preferred Shares shall be $1,000.
The Preferred Shares shall be allocated among the entities constituting the
Buyer as specified on their respective counterpart signature pages and shall be
sold at a closing as hereinafter provided and as set forth in the signature
pages.
<PAGE>
b. Closing. The date and time of the closing (the "Closing") of the
-------
issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on October 15, 1996 (or such later date as is mutually agreed to by
the Company and the entities constituting the Buyer).
c. Form of Payment. The Buyer shall pay the Purchase Price for the
---------------
Preferred Shares by wire transfer of immediately available United States Dollars
on the Closing date, to be deposited into an escrow account (the "Escrow
Account") established at Silicon Valley Bank, Santa Clara, California, pursuant
to an Escrow Agreement in substantially the form of Exhibit B attached hereto
(the "Escrow Agreement"). At the Closing, the Company shall deliver stock
certificates, duly executed on behalf of the Company, representing the Preferred
Shares (the "Stock Certificates") to the Buyer.
d. Warrant Issuances. The Company will issue to Buyer or its
-----------------
designee within five (5) days after any conversion of Preferred Shares a Warrant
in substantially the form of Exhibit C attached hereto, to acquire one share of
Common Stock for each three Conversion Shares that are issued on such conversion
of Preferred Shares, with an exercise price equal to the lower $7.15 per share
and 110 percent of the Average Market Price (as that term is defined in Exhibit
A hereto) per share of Common Stock for the five trading days preceding such
conversion. Each Warrant shall expire to the extent not exercised on the third
anniversary of the date of the relevant conversion.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants to the Company as to itself,
severally, and not jointly, that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares
------------------
and the Warrants for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the 1933 Act. The Buyer is not
purchasing the Preferred Shares for the purpose of covering short sale positions
in the Common Stock established on or prior to the date of the Closing. The
Buyer understands that it shall be a condition to the issuance of the Conversion
Shares, the Dividend Shares and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") that the Warrants, Conversion
Shares, Dividend Shares and Warrant Shares are subject to the representations
set forth in this Section 2(a).
b. Accredited Investor Status. The Buyer is an "accredited investor"
--------------------------
as that term is defined in Rule 501(a)(3) or Rule 501(a)(8) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Preferred
----------------------
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
2
<PAGE>
d. Information. The Buyer and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer acknowledges
that the Buyer has requested only publicly available information and has
specifically declined to receive nonpublic information that may be material,
notwithstanding that the Company has offered to make all such information
available to the Buyer. Such nonpublic material information may include, for
example, information regarding other financings, potential strategic alliances,
distributor and customer arrangements, potential acquisitions and joint
ventures, new product developments, technological developments, supplier
arrangements, developments in manufacturing techniques, personnel changes and
other matters that could have material effects on the Company, and the Buyer
acknowledges that it is expressly assuming the risk that material nonpublic
information, which it has not received and does not desire to receive, might
have caused the Buyer not to make the investments contemplated hereby had the
Buyer received such information. The Buyer understands that its investment in
the Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares involves a high degree of risk, including, without limitation, the risks
arising from the facts that the Company's stockholders' equity is negative in an
amount in excess of $30,000,000, that the Company expects to incur a loss for
the quarter ended September 30, 1996, and that no assurance can be given that
the Company will not incur continuing losses or will be profitable. The Buyer
has sought such accounting, legal and tax advice as it has considered necessary
to an informed investment decision with respect to its acquisition of the
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
e. No Governmental Review. The Buyer understands that no United
----------------------
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares, Dividend Shares and Warrant Shares or the fairness
or suitability of the investment in the Preferred Shares, Warrants, Conversion
Shares, Dividend Shares or Warrant Shares nor have such authorities passed upon
or endorsed the merits of the offering of the Preferred Shares, Warrants,
Conversion Shares, Dividend Shares and Warrant Shares.
f. Transfer or Resale. The Buyer understands that (i) except as
------------------
provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares, the Dividend Shares and the Warrant Shares have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (a)
subsequently registered thereunder, or (b) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities to be sold, assigned
or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration; (ii) any sale of such securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under
3
<PAGE>
any obligation to register such securities (other than pursuant to the
Registration Rights Agreement) under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
g. Legends. The Buyer understands that the certificates or other
-------
instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares, the Dividend Shares and the Warrant Shares
(collectively, the "Registrable Securities") have been sold pursuant to a
registration under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Registrable Securities shall
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST
ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the Registrable Securities are
sold pursuant to a sale that is registered under the 1933 Act, or (b) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale, assignment or transfer of the
Preferred Shares, the Warrants or such Registrable Securities may be made
without registration under the 1933 Act, or (c) such holder provides the Company
with reasonable assurances that the Preferred Shares, the Warrants or such
Registrable Securities can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
h. Authorization; Enforcement. This Agreement has been duly and
--------------------------
validly authorized, executed and delivered by the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
4
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its
------------------------------
subsidiaries are corporations duly organized and existing in good standing under
the laws of the jurisdiction in which they are incorporated, except, in the case
of any such subsidiaries, as would not have a Material Adverse Effect (as
defined below), and have the requisite corporate power to own their properties
and to carry on their business as now being conducted. Each of the Company and
its subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the operations, properties or financial condition
of the Company and its subsidiaries taken as a whole.
b. Authorization; Enforcement. (i) The Company has the
--------------------------
requisite corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, and to issue the Preferred Shares, the
Warrants and the Registrable Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company, and (iv) this Agreement and the
Registration Rights Agreement constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
c. Capitalization. As of October 3, 1996, the authorized
--------------
capital stock of the Company consists of (i) 60,000,000 shares of Common Stock
of which 12,219,415 shares were issued and outstanding, and (ii) 4,000,000
shares of Preferred Stock of which 20,000 shares were issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement). The Company has furnished to the Buyer true and correct copies of
the Company's Certificate of Incorporation, as amended, as in effect on the date
hereof ("Certificate of Incorporation"), and the Company's By-laws, as in effect
on the date hereof (the "Bylaws").
5
<PAGE>
d. Issuance of Securities. The Registrable Securities and Preferred
----------------------
Shares are duly authorized and, upon issuance in accordance with the terms
hereof and thereof, shall be validly issued, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issue thereof.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
------------
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws (other than
as results from the limit on the number of authorized shares of Common Stock) or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
f. SEC Documents, Financial Statements. Since September 30, 1995,
-----------------------------------
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyer true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects
6
<PAGE>
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer and referred to
in Section 2(d) of this Agreement contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
--------------------------
since June 30, 1996 there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in its Form 10-Q for
---------------------
the quarter ended June 30, 1996, or in Schedule 3(h), there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
i. Purpose of Investment. The Company recognizes that the Buyer's
---------------------
investment in the Company is being made in order to provide financing for the
Company's ongoing operations and especially for the development and introduction
of new products, including the marketing of such products.
4. COVENANTS.
---------
a. Best Efforts. Each party shall use its best efforts timely
------------
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
------
the Preferred Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of
----------------
which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
---------------
sale of the Preferred Shares for the Company's internal working capital
purposes, including costs and
7
<PAGE>
expenses of the Company's business operations and product development,
production and marketing, and for repayment of the existing debt obligation to
Silicon Valley Bank in an amount up to $5,000,000.
e. Financial Information. The Company agrees to send the
---------------------
following reports to the Buyer during the Registration Period: (i) within five
(5) days after the filing thereof with the SEC, a copy of its Annual Reports on
Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-
K; and (ii) within one day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have
---------------------
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares, the
Dividend Shares and the Warrant Shares.
g. Listing. The Company shall promptly secure the listing of
-------
the Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
h. Other Offerings. The Company shall not, within sixty days
---------------
from the date hereof, sell or enter into a contract to sell any shares of Common
Stock, or any options, warrants, rights or securities entitling the holder
thereof to acquire any shares of Common Stock, at a price that is not
substantially equivalent to or greater than the fair market value of such Common
Stock, options, warrants, rights or securities at the time of the sale, except
for sales of not more than 5,000 shares of the Company's Convertible Preferred
Stock, Series 1.
i. Legal Expenses. The Company shall pay all expenses incurred
--------------
in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
j. If a Buyer shall have given a notice of conversion as
provided in the Certificate of Designation, the Company's obligation to issue
and deliver the certificates for Common Stock upon such conversion shall be
absolute and unconditional, irrespective of the absence of any action by such
Buyer to enforce the same, any waiver or consent with respect to such
conversion, the recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to such Buyer, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
Buyer of any obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to such
Buyer in connection with such conversion. If the Company fails to issue and
deliver the certificates for the Common Stock to such Buyer converting shares of
Preferred Stock pursuant to the Certificate of Designation as and when required
to do so, in addition to any other liabilities the Company may have under the
Certificate of Designation and under applicable law, the Company shall pay or
reimburse such Buyer on demand for all out-of pocket costs, liabilities, damages
8
<PAGE>
and expenses, including, without limitation, fees and expenses of legal counsel,
incurred by such Buyer as a result of such failure.
k. As used in Section 2(c) of the Certificate of Designation,
the term "month" shall mean a period of 30 consecutive calendar days.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall instruct its transfer agent to issue
certificates, registered in the name of each of the entities constituting the
Buyer that holds the related Preferred Shares or Warrants or its nominee, for
the Conversion Shares, Dividend Shares and Warrant Shares in such amounts as
specified from time to time by such entity to the Company. All such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company shall provide instructions and opinions of counsel to its transfer
agent in accordance with Section 3(m) of the Registration Rights Agreement. The
Company warrants that no instruction other than such instructions referred to in
this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof, in the case of the Registrable Securities, will be given by the Company
to its transfer agent and that the Preferred Shares and the Registrable
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If the Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by the Buyer of any of the Preferred
Shares or the Registrable Securities is not required under the 1933 Act, the
Company shall permit the transfer, and promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to sell the Preferred
Shares is subject to the satisfaction, at or before the date of the Closing, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. The Buyer shall have delivered to the Escrow Account, in
accordance with the Escrow Agreement, the Purchase Price for all Preferred
Shares being purchased by wire transfer of immediately available funds pursuant
to the wiring instructions provided by the Company.
d. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific
9
<PAGE>
date), and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Buyer at or prior
to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer to purchase the Preferred Shares at
the Closing is subject to the satisfaction, at or before the date of the
Closing, of each of the following conditions, provided that these conditions are
for the sole benefit of each of the entities constituting the Buyer and may be
waived by any such entity for itself only at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.
c. The Common Stock shall be authorized for quotation on the
Nasdaq National Market or the Nasdaq SmallCap Market and trading in the Common
Stock on Nasdaq National Market or the Nasdaq SmallCap Market shall not have
been suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. The
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to the Buyer
the Stock Certificates for the Preferred Shares.
g. The Board of Directors of the Company shall have adopted
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall not have received from Nasdaq or the
National Association of Securities Dealers, Inc. any written or oral
communication as to its actual or
10
<PAGE>
potential ineligibility for continued listing of the Common Stock on the Nasdaq
National Market, the substance of which shall not have been publicly disclosed.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for
--------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by mail or delivered personally
or by courier or by facsimile and shall be effective five days after being
placed in the mail, if mailed, certified or registered, return receipt
requested, or upon receipt, if delivered personally or by courier or by
facsimile, in each case properly addressed to the party to receive the same.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
11
<PAGE>
With copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature pages.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, any of the entities constituting the Buyer may assign its rights
hereunder to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company, provided, however, that any such
assignment shall not release such entity from its obligations hereunder unless
such obligations are assumed by such affiliate and the Company has consented to
such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyer contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h) and 8(k), and this subsection shall survive the closing. Each party
which constitutes the Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date.
12
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. CYGNI S.A.
--------------------------------------
By:__________________________________
Name: By: /s/ S. Salcman
__________________________________
Its: Name: S. Salcman
Its: Authorized Signatory
c/o Betuvo AG
Bearerstrasse 73
CH-6302, Zurich,
Switzerland
Number of Preferred Shares
to be purchased at Closing: 1,000
-----------
________________________________________
By: ____________________________________
Name:
Its:
Address: _____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing: ___________
________________________________________
By: ____________________________________
Name:
Its:
Address: _____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing: ___________
13
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
[CYGNI S.A.]
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996, among CYGNI
S.A. (the "Buyer"), SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and AM Capital Management Group, a New York corporation, as Escrow
Agent (the "Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of October 8, 1996 (the "Purchase Agreement"), pursuant to
which the Company has agreed to sell, and the Buyer has agreed to purchase, an
aggregate of 25,000 shares of the Company's 5% Cumulative Convertible Preferred
Stock, Series 2, $.001 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyer and the Company have agreed to place into escrow the
$25,000,000 purchase price for the Preferred Shares to be available for
disbursements to the Company for its business operations and product
development, introduction and marketing on and after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyer's obligation to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. On the date of the Closing under, and to the extent
-------
required by, the Purchase Agreement, the Buyer shall cause to be wire
transferred to the Escrow Agent $25,000,000 (the "Escrow"), to be held by the
Escrow Agent in a separate interest-bearing money market account established at
Silicon Valley Bank or any other banking institution that the Company may
designate (the "Bank"), Account No. 3300039539 or another account subject to
this Agreement to which the Company may direct that the Escrow be transferred
(the "Escrow Account"), subject to the terms and provisions contained herein.
Interest shall accrue on the Escrow Account at the highest rate paid by the Bank
on accounts which permit multiple withdrawals from an account within any
particular monthly period. The Escrow Agent shall provide the Company with all
Bank statements, notices and other writings
<PAGE>
which it receives from the Bank in connection with the Escrow Account. The
Escrow, together with all interest thereon, shall at all times remain (until
disbursed in accordance with this Agreement) the property of the Company,
subject only to the restrictions as to the use thereof expressly provided in
this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time hereafter
--------------------------
request by notice to the Escrow Agent that the Escrow Account be transferred to
another banking institution. In such event, the Escrow Agent shall, within two
business days after receiving such notice, transfer the remaining Escrow as the
Company may instruct, whereupon the transferee banking institution shall become
the "Bank" for purposes of this Agreement and the account into which the
remaining Escrow is deposited shall become the "Escrow Account", in all cases
subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during the
-------------
term of this Agreement, the Company shall deliver to the Escrow Agent a request
in writing signed by the Company for a disbursement from the Escrow accompanied
by a certification, in substantially the form attached hereto as Exhibit A,
executed by the Company's Chief Executive Officer or Chief Financial Officer,
stating that the amount of the Escrow to be disbursed shall be used by the
Company solely for costs and expenses of the Company's business operations and
product development, introduction and marketing after the date hereof, or for
payment of accrued interest on and repayment of any loan heretofore made to the
Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000, the Escrow Agent shall pay such amount of the Escrow as specified in
such request within forty-eight hours of receipt of such request by the Escrow
Agent by wire transfer as directed in such request.
2.2 Controversies. If any controversy arises between one or more of
-------------
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyer or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Escrow monies shall be
----------------------
disbursed or otherwise transferred except in accordance with this section 2,
section 4 or
2
<PAGE>
section 5.1(b). Without limiting the foregoing, neither Escrow Agent nor Buyer
shall be entitled to any right of offset against the Escrow or otherwise
entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its gross negligence, willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a) the
-----------
date on which the Escrow shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, and (b) any other date agreed to by the
Buyer and the Company, in which event the Escrow shall be disbursed in full to
the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
3
<PAGE>
This indemnification shall not apply to any direct claim against the Escrow
Agent by the Company alleging a breach of this Agreement.
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyer, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction in
Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreements. The parties acknowledge that the
-----------------------
Company, the Escrow Agent, other purchasers of Preferred Shares and the
purchasers of the Company's Convertible Preferred Stock, Series 1, are
concurrently herewith entering into other Escrow Agreements in substantially the
same form as this Agreement (the "Other Agreements"). The parties contemplate
that deposits into the Escrow Account shall be made under this Agreement and the
Other Agreements, which together shall govern the rights and obligations of the
parties hereto and thereto with respect to the Escrow Account, the Escrow and
other funds deposited into the Escrow Account and the rights and duties of the
parties with respect thereto, as if this Agreement and the Other Agreements were
a single agreement among all of the parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at Three Edward Lane, Syosset, NY 11791.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:___________________________________
Name:
Its:
BUYER:
-----
______________________________________
By:___________________________________
Name:
Its:
______________________________________
By:___________________________________
Name:
Its:
______________________________________
By:___________________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:___________________________________
Name: Michael Arnouse
Its: President
5
<PAGE>
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996,
by and among the investors named therein, SyQuest Technology, Inc. and AM
Capital Management Group (the "Escrow Agreement"). Capitalized terms used and
not otherwise defined herein have the meanings respectively ascribed to them in
the Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for (a) costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement or (b) payment of accrued interest on and
repayment of any loan made, prior to October 9, 1996, to the Company by Silicon
Valley Bank in an aggregate amount not in excess of $5,000,000.
IN WITNESS WHEREOF, the undersigned has executed this Certification as
this ____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:_____________________________
Name:
Title:
6
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
[Cygni]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF 5% PREFERRED SHARES]
_________________ (_________) fully paid nonassessable shares of Common Stock
(as defined herein) of the Company (the "Warrant Shares") at a purchase price of
[THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE MARKET PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE TRADING DAYS PRECEDING THE
CONVERSION DATE] U.S. $_______ per share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant have the following meanings:
<PAGE>
"Common Stock" means (a) the Company's common stock, par value
------------
$.001 per share, and (b) any capital stock into which such common stock shall
have been changed or any capital stock resulting from a reclassification of such
common stock.
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $_____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. San
Francisco Time on the Expiration Date.
2
<PAGE>
The rights represented by this Warrant may be exercised by the holder hereof
then registered on the books of the Company, as a whole or from time to time in
part (except that this Warrant shall not be exercisable as to a fractional
share) by (i) delivery of a written notice, in the form of the Subscription
Notice attached as Exhibit A hereto, of such holder's election to exercise this
Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in cash
or by check, for the number of Warrant Shares as to which this Warrant shall
have been exercised, and (iii) the surrender of this Warrant, properly endorsed,
at the principal office of the Company (or at such other agency or office of the
Company as the Company may designate by notice to the holder hereof); provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 8 shall be applicable. In the event of any exercise
of the rights represented by this Warrant in compliance with this Section 2(a),
a certificate or certificates for the Warrant Shares so purchased, registered in
the name of, or as directed by, the holder, shall be delivered to, or as
directed by, such holder within a reasonable time after such rights shall have
been so exercised.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall issue a new
Warrant identical in all respects to the Warrant exercised except (i) it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under the Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised, and (ii) the
holder thereof shall be deemed to have become the holder of record of such
Warrant Shares immediately prior to the close of business on the date on which
the Warrant is surrendered and payment of the amount due in respect of such
exercise and any applicable taxes is made, irrespective of the date of delivery
of such share certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the stock
transfer books are open.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
----------------------------
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
-----
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
3
<PAGE>
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
---------------------------------------
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(3) or Rule
501(a)(8) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor") and an "excluded purchaser"
for purposes of Section 25102(f) of the California Corporate Securities Law of
1968 (an "Excluded Purchaser"). Upon exercise of this Warrant, the holder
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the Warrant Shares so purchased are being acquired solely
for the holder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale and that such
holder is an Accredited Investor and an Excluded Purchaser. If such holder
cannot make such representations because they would be factually incorrect, it
shall be a condition to such holder's exercise of the Warrant that the Company
receive such other representations as the Company considers reasonably necessary
to assure the Company that the issuance of its securities upon exercise of the
Warrant shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) Prior to any sale, transfer or other disposition of this
Warrant or the Warrant Shares not pursuant to an effective registration
statement, the holder thereof will give ten (10) days' notice to the Company of
such holder's intention to effect such transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer and, if such transfer is
not registered under the Securities Act, shall be accompanied by an opinion,
4
<PAGE>
addressed to the Company and reasonably satisfactory in form and substance to
it, of counsel (reasonably satisfactory to the Company) for such holder, stating
that, in the opinion of such counsel, such transfer will be a transaction exempt
from registration under the Securities Act.
(b) If such sale, transfer or other disposition may in the opinion
of such counsel be effected without registration under the Securities Act, such
holder shall thereupon be entitled to the terms of the notice delivered by such
holder to the Company. If in the opinion of such counsel such transfer may not
be effected without registration under the Securities Act, such holder shall not
be entitled to so transfer this Warrant or the Warrant Shares unless the Company
shall have filed a registration statement relating to such proposed transfer and
such registration statement shall have become effective under the Securities
Act.
(c) Any Warrant Shares issued upon exercise of this Warrant may
bear one or more of the legends in similar form to the legend set forth on this
Warrant, except as otherwise provided in the Securities Purchase Agreement dated
as of October 8, 1996, between the Company and the other investors named
therein, or in the Registration Rights Agreement dated as of October 8, 1996,
between the Company and the investors named therein.
(d) The Company acknowledges that it has entered into a
Registration Rights Agreement entitling certain holders of Warrant Shares to
require the Company to cause such Warrant Shares to be registered under the
Securities Act.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
5
<PAGE>
(b) Dividends and Stock Splits. If and whenever the Company shall effect a
--------------------------
stock dividend, a stock split, a stock combination, or a reverse stock split of
the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
terms as to indemnity or otherwise as it may in its discretion impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed.
Section 11. Notice. All notices and other communications under this
------
Warrant shall (a) be in writing (which shall include communications by
facsimile), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, or by facsimile, or (ii) delivered by hand, and (c) be
given at the following respective addresses and facsimile numbers and to the
attention of the following persons:
(a) if to the Company, to it at:
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, California 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
(b) if to Holder, to it at the address set forth below Holder's
signature on the signature page hereof.
or at such other address or facsimile number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the fifth Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by facsimile, when such
communication is transmitted to the appropriate number determined as above
provided in this Section and the appropriate answer back is received or receipt
is otherwise acknowledged, and (iii) if given by hand delivery, when left at the
address of the addressee addressed as above provided, except that notices of a
change of address, facsimile or telephone number, shall not be deemed furnished,
until actually received.
6
<PAGE>
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
Section 13. Date. The date of this Warrant is _____________, 199__. This
----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By:______________________________
Name:____________________________
Title:___________________________
ACCEPTED:
- --------
[HOLDER]
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
__________________________
__________________________
__________________________
7
<PAGE>
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment of U.S. $_______________, the
aggregate Warrant Exercise Price of such Warrant Shares in full. Capitalized
terms used herein have the meanings respectively ascribed to them in the
Warrant.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same except in compliance with all applicable securities
laws; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(3) or Rule 501(a)(8) of Regulation D as promulgated by
the Securities and Exchange Commission under the Securities Act and an "excluded
purchaser" for purposes of Section 25102(f) of the California Corporate
Securities Law of 1968.
Dated: ______________, _____ [HOLDER]
By:___________________________________
Name:_________________________________
Title:________________________________
Address:
______________________________________
______________________________________
______________________________________
Number of Warrant Shares Being
Purchased:
8
<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
[PANGAEA]
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October
8, 1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 47071 Bayside Parkway, Fremont, CA 94538 (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement to (i) issue and sell to the Buyer shares of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Shares"), which will be convertible into shares of the
Company's common stock (the "Common Stock"), par value $.001 per share (as
converted, the "Conversion Shares"), pursuant to which certain shares of Common
Stock may be issued to the Buyer in payment of dividends (the "Dividend
Shares"), and (ii) issue Warrants (the "Warrants") which will be exercisable to
purchase shares of Common Stock (the "Warrant Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have
the following meanings:
i. "Investor" means the Buyer and any transferee or
assignee thereof to whom the Buyer assigns this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9
hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
<PAGE>
effectiveness of such Registration Statement by the United States Securities and
Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Dividend Shares.
iv. "Registration Statement" or "Registration Statements" means
a registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall use its best
----------------------
efforts to prepare, and, on or before thirty (30) days after the date of the
issuance of the relevant Preferred Shares, file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration) (any of which may contain a combined prospectus with
other registrations by the Company), covering the resale of the Registrable
Securities issuable upon conversion of or in connection with the relevant
Preferred Shares, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement(s) also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Preferred Shares or
exercise of the Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by the Buyer and its
counsel prior to its filing or other submission, such approval not to be
unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
send to each Investor who is entitled to registration rights under this Section
2(c) written notice of such determination and, if within twenty (20) days
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<PAGE>
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder; provided
that no portion of the equity securities which the Company is offering for its
own account shall be excluded; provided, further that the Company shall be
entitled to exclude Registrable Securities to the extent necessary to avoid
breaching obligations existing prior to the date hereof to other stockholders of
the Company. Any exclusion of Registrable Securities shall be made pro rata
among the Investors seeking to include Registrable Securities, in proportion to
the number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this Section 2(c) may
be waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
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<PAGE>
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall use its best efforts to cause such
Registration Statement(s) relating to Registrable Securities to become effective
as soon as possible after such filing, and keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earlier of (i) the date as
of which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Registrable Securities and (B) none of the Preferred Shares is outstanding (the
period ending on the earlier of such dates being hereinafter called the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s) as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold forty percent or more of the Registrable
Securities being offered reasonably request (but in no event in more than five
states of the United States), (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such
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<PAGE>
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (a) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company, or (e) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
a Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel, designated
as selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the Registrable
Securities being sold, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
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<PAGE>
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
6
<PAGE>
l. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
securities in a timely fashion that complies with then mandated securities
settlement procedures for regular way market transactions and delivery of
unlegended securities in settlement of such sales.
n. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
4. OTHER OBLIGATIONS.
-----------------
a. At least five (5) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to
7
<PAGE>
the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees,
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<PAGE>
and fees and disbursements of counsel for the Company and fees and disbursements
of one counsel for the Investors, shall be borne by the Company, subject, with
respect to expenses incurred by the Investors, to the limit stated in Section
4(h) of the Securities Purchase Agreement.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend each Investor who holds such Registrable Securities,
the directors, officers and each person who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), if any, and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
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<PAGE>
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered to each broker or dealer
executing a sale of Registrable Securities the prospectus made available by the
Company; and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to
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<PAGE>
information such persons so furnished in writing by such persons expressly for
inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates;
provided, that legal fees of such firm shall be reasonable. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of 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.
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<PAGE>
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
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10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier or by facsimile and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier or facsimile, in each case properly
addressed to the party to receive such notice. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: President
With copy to:
Shartsis, Friese & Ginsburg, L.L.P.
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature pages of the
Securities Purchase Agreement.
Each party shall provide notice to the other party of any change
in address.
13
<PAGE>
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement, the Securities Purchase Agreement and the
Escrow Agreement constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement and the Securities Purchase Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request
14
<PAGE>
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
- -------
SYQUEST TECHNOLOGY, INC.
By:_____________________________
Name:
Its:
BUYER:
- -----
________________________________
By:_____________________________
Name:
Its:
________________________________
By:_____________________________
Name:
Its:
________________________________
By:_____________________________
Name:
Its:
15
<PAGE>
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a
total of 3,252,244 shares of its Common Stock. As of October 3, 1996, the
Company had options outstanding to purchase a total of 2,790,345 shares of its
Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and convertible
debentures, as well as the possible issuance of Common Stock in exchange for
forgiveness of indebtedness. Certain of the arrangements may provide that the
debt will not be cancelled until such time as the supplier obtains proceeds from
the sale of the shares issued in the arrangement. Equity securities issued for
cancellation of debt, as well as for the Common Stock issuable upon conversion
of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to Wharton Capital Corporation, and has a commitment to issue a warrant to (a)
Needham & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. Harper
Group to purchase 500,000 shares of Common Stock.
<PAGE>
Schedule 3(e)
-------------
There are no dislosures to be made pursuant to this Schedule 3(e).
<PAGE>
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following;
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of 1995.
As a result of these and other factors, past-due accounts payable continued
to be high during the period, amounts borrowable under the Company's line
of credit decreased and the Company's overall liquidity has been materially
and adversely affected. Suppliers were placed on a payment plans for
repayment of amounts owed. Reference is made to (i) the Company's press
release dated May 7, 1996, (ii) the Company's report on Form 10-Q for the
quarter ended March 31, 1996, (iii) various news-wire stories of June 5,
1996, containing Nasdaq's statements in connection with the Company's lack
of compliance with Nasdaq listing requirements, (iv) the Company's report
on Form 10-Q for the quarter ended June 30, 1996, (v) the Company's press
release dated September 16, 1996, (vi) the Company's Current Report on Form
8-K dated June 14, 1996, (vii) the events and developments described in the
Company's Amendment Number 1 to Form S-3 Registration Statement filed
August 29, 1996, (viii) Nasdaq's granting of an exception through October
31, 1996, to the net tangible assets and capital and surplus requirements
for listing on the Nasdaq Stock Market, and (ix) the granting of an
exception to the rules of the National Association of Securities Dealers,
Inc., which would otherwise require stockholder approval of the
transactions contemplated by this Agreement, such exception having been
granted because the Company's audit committee was of the opinion that a
failure to complete immediately the transactions contemplated by this
Agreement would seriously jeopardize the financial viability of the
Company. Such documents and information are incorporated herein by this
reference. See Schedule 3(h) for information regarding litigation, which is
also incorporated by reference.
<PAGE>
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not set forth in Form 10-Q for the
quarter ended June 30, 1996 that would have a Materially Adverse Effect or which
would adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the Agreement or any of
the documents contemplated therein.
<PAGE>
Exhibit 10.6
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
the 27th day of September, 1996, by and between SYQUEST TECHNOLOGY
INTERNATIONAL, a Grand Cayman corporation ("Sub"), SYQUEST TECHNOLOGY, INC., a
Delaware corporation which owns 100% of the issued and outstanding capital stock
of Sub ("Parent"), and ATMEL CORPORATION, a California corporation
("PURCHASER").
A. Sub has failed to make payments to PURCHASER when due for products
manufactured and delivered by PURCHASER pursuant to the purchase orders and
related invoices (the "Purchase Orders") listed on Schedule A to this
Agreement in the aggregate amount of $2,338,524.94 (the "Purchaser Order
Amount"); and
B. Parent, in consideration of cancellation of the amounts owed to PURCHASER
equal to the sum of the Purchase Order Amount, will issue to PURCHASER
shares of the Common Stock of Parent (the "Shares"), to repay the amounts
due to PURCHASER with the Shares to be valued at the last sale price (the
"Closing Price") as reported in the NASDAQ NAtional Market on the last
trading day prior to the closing date, but in no event shall Parent be
obligated to issue in excess of 500,000 shares of its Common Stock.
C. Parent will execute and deliver to PURCHASER that certain Registration
Rights Agreement, dated as of the date hereof (the "Registration Rights
Agreement") in consideration of the promises of PURCHASER herein.
In consideration of the mutual promises described hereinafter, the parties
agree as follows:
1. Amount Owed to PURCHASER for Products Shipped Pursuant to the Purchase
----------------------------------------------------------------------
Orders. Sub acknowledges that PURCHASER is owed the sum of the
------
amounts set forth opposite each Purchase Order, for products
manufactured and delivered by PURCHASER to Sub in response to the
purchase orders issued by Sub to PURCHASER, and that notwithstanding
any payment or credit term contained in such purchase orders, said sum
is currently due and payable in full. If any such product shipped to
Sub is defective, Sub and Parent shall have the right to return such
product to and request delivery of substitute product from PURCHASER
and in the event such substitute product is not delivered, reduced by
the amount Parent or Sub owe PURCHASER on account of any indebtedness,
now existing or hereafter arising, not otherwise the subject of this
Agreement.
2. Issuance of Shares
------------------
(a) Issuance of Shares. Parent shall issue to PURCHASER at closing
------------------
the number of shares of Parent's Common Stock equal to the
Purchaser Order Amount divided by the Closing Price, rounded down
to the nearest lower whole number of shares, but in no event
shall Parent be required to issue
<PAGE>
in excess of 500,000 shares of its Common Stock. Such shares are
hereinafter called the "Shares".
(b) Repayment of Balance. In the event Parent is unable to issue the
--------------------
full number of Shares necessary to repay the Purchase Order
Amount due to the limit on the number of shares issued as
provided in Section 2(a), above, Parent shall repay the balance
due (the "Balance"), to PURCHASER as follows:
i) If the Balance is less than or equal to $50,000, the full
amount of the Balance shall be payable to PURCHASER at
Closing, by check or wire transfer;
ii) If the Balance is greater than $50,000 but less than or
equal to $100,000, the Balance shall be payable by check or
wire transfer to PURCHASER in three equal payments of
principal and interest payable on (i) the Closing Date, (ii)
the 90th day after the Closing Date, and (iii) the 150th day
after the Closing Date; and
iii) If the Balance is greater than $100,000, the Balance shall
be payable to PURCHASER over a period for not less than
twelve months, with the precise payment schedule to be
mutually agreed to by Parent and PURCHASER.
(c) Extinguishment of Indebtedness. At the Closing, Parent and Sub
------------------------------
shall be deemed to have repaid the amount equal to the number of
Shares issued to PURCHASER multiplied by the Closing Price as of
the time of issuance of the stock certificates evidencing the
Shares. PURCHASER agrees that, except to the extent additional
amounts are still due pursuant to Section 2(b) above, Parent and
Sub shall be deemed to have repaid the Purchase Order Amount in
full upon delivery of the stock certificates. If at the Closing
additional amounts are still due pursuant to Section 2(b) above,
Parent and Sub shall be deemed to have repaid the whole Purchase
Order Amount in full upon payment of the final installment
payment of the Balance.
3. Representations and Warranties of Parent and Sub. Each of Parent and
------------------------------------------------
Sub hereby represents and warrants to PURCHASER as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and to otherwise
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
2
<PAGE>
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Grand Cayman and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and to otherwise carry out and
perform its obligations under the terms of this Agreement.
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance of this Agreement and
the Registration Rights Agreement and the issuance of Shares
pursuant hereto has been taken, and this Agreement and the
Registration Rights Agreement constitute valid and binding
obligations of Sub enforceable against Sub in accordance with
their respective terms.
(c) Valid Issuance. The Shares, when issued in compliance with the
--------------
provisions of this Agreement will be validly issued, fully paid,
nonassessable and free of any restrictions on transfer other than
pursuant to applicable state and federal securities law.
(d) SEC Documents. Parent has furnished to PURCHASER true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, as amended by Form 10-K/A, its
Quarterly Report on Form 10-Q for the quarters ended December 31,
1995, March 31, 1996, and June 30, 1996 and its Current Report on
Form 8-K dated June 14, 1996, in each case as filed with the
Securities and Exchange Commission (the "SEC"). (Such documents
are hereinafter collectively referred to as the "Parent SEC
Documents"). To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, as of their respective filing dates
(except as thereafter amended), the Parent SEC Documents complied
in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(e) No Contravention. To the best knowledge of the current executive
----------------
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or
3
<PAGE>
violation of, any provision of the certificate of incorporation
or by-laws of Parent or Sub; (ii) constitute, with or without
notice or the passage of time or both, a material breach,
violation or default under any order, writ, injunction, decree,
law, statute, rule or regulation, governmental permit or license
of Parent or Sub or to which either of their properties is
subject; or (iii) except as provided for in the Resignation
Rights Agreement, require any consent, approval or authorization
of, notification to, or filing with, any court, governmental
agency or regulatory or administrative authority on the part of
Parent or Sub, except for filings under the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act and the
Nasdaq National Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in Section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
4. Representations and Warranties of PURCHASER. PURCHASER represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. PURCHASER has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of PURCHASER
enforceable against PURCHASER in accordance with their respective
terms.
(c) Securities Laws Representations. PURCHASER is acquiring the
-------------------------------
Shares for PURCHASER's own account and not with a view to or for
sale in connection with any distribution. PURCHASER has such
knowledge and experience in financial and business matters that
PURCHASER is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of
such investment and is able to protect the PURCHASER's own
interests in connection with this transaction. PURCHASER has had
access to such information concerning Parent as PURCHASER deems
necessary to enable PURCHASER to make an informed decision
concerning an investment in the Shares. PURCHASER is aware that
the Shares have not been registered under the Securities Act and
the Shares cannot be transferred by PURCHASER unless they are
subsequently registered under the Securities Act or an exemption
from such registration is available. The Shares will not be
transferred without registration under the Securities Act, or
pursuant to an applicable exemption therefrom. PURCHASER is an
"accredited investor" as such term is defined in Rule 501(a) of
Regulation D as promulgated by the SEC under the Securities Act.
PURCHASER acknowledges that until the
4
<PAGE>
Shares are registered under the Securities Act, the certificates
representing the Shares shall bear the following legend.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT, AND UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
5. Additional Representation. Each of the parties jointly and severally
-------------------------
warrants and represents to the other that it is the sole and lawful
owner of all right, title and interest in and to all of the claims
related to the Purchase Orders and that it has not heretofore
voluntarily, by operation of law or otherwise, assigned or transferred
or purported to assign or transfer to any person whomsoever any such
claim.
6. Closing.
-------
(a) The issuance of the Shares (the "Closing") shall take place on
the date hereof, or on such later date as all of the conditions
to Closing set forth in subsection (b) below have been satisfied
(the "Closing Date"), and shall be consummated by mail or
otherwise in accordance with arrangements reasonably acceptable
to Parent and PURCHASER. On the Closing Date, Parent shall
deliver to the PURCHASER the certificate or certificates
representing the Shares, and any Balance to be paid at Closing
pursuant to Section 2(b) above, in cancellation of indebtedness
equal to the Purchase Order Amount as provided in Section 2(c)
above.
(b) The obligations of Parent to issue and sell the Shares and to
perform its other obligations hereunder, shall be subject to the
satisfaction as determined by, or waiver by, Parent of the
following conditions on or before the Closing Date:
i) The representations and warranties of PURCHASER contained in
Sections 4 and 5 hereof shall be true and correct on the
Closing Date as if made on such date; and
5
<PAGE>
ii) A Notification Form of Listing of Additional Shares shall
have been filed with Nasdaq with respect to the Shares at
least fifteen days prior to the Closing Date.
7. General Provisions.
------------------
(a) Successors. The rights and obligations hereunder shall inure to
----------
the benefit of and shall be binding upon the parties hereto and
their respective successors and assigns.
(b) Governing Law. Each of Parent, Sub and PURCHASER agrees that any
-------------
action brought to enforce the terms of this Agreement may be
instituted and prosecuted in the Superior Court of the City and
County of San Francisco, California, or if requisite jurisdiction
exists, in the United States District Court for the Northern
District of California. This Agreement shall be construed in
accordance with the laws of the State of California and the
United States of America.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement and all schedules and other documents referred to
therein constitute the entire agreement of the parties respecting
the subject matter hereof and thereof and shall supersede all
previous communications and understandings, whether written or
oral between the parties regarding the subject matter hereof.
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorney Fees. In the event of litigation or other proceedings
-------------
in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings 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
proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All communications between Parent
--------------------------
and PURCHASER will be carried out through the designated
representatives for the respective parties, who are:
6
<PAGE>
For Parent: SyQuest Technology, Inc.
4701 Basad Parkway
Fragment, California 94538
Attention: Michael J. Field, Esq.
Facsimile: (510) 226-4100
For PURCHASER: ATMEL Corporation
2325 Orchard Parkway
San Jose, California 95131
Attention: George Perlegos
Facsimile: (408) 436-4377
Any notices to be given to either party pertaining to the
performance of this Agreement shall be written in the English
language and shall be effective when delivered to the other party
(which may be facsimile transmission or telegram). Any party may
change any address or facsimile number set forth above by giving
written notice thereof to the other party in the manner
prescribed herein.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as the day and the year first set forth
above.
SYQUEST TECHNOLOGY, INC.
By:__________________________________________
Name:
Title:
SYQUEST TECHNOLOGY, INTERNATIONAL
By:__________________________________________
Name:
Title:
ATMEL CORPORATION
By:__________________________________________
Name:
Title:
8
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
September 27, 1996, by and among SyQuest Technology, Inc., a Delaware
corporation (the "Company"), and Atmel Corporation, a California corporation
(the "Buyer"), with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the Buyer
the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns this Agreement and who agrees to become a
party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare and, on or before forty-five days after the date of the issuance of
the Shares, file with
<PAGE>
the SEC a Registration Statement or Registration Statements (as is necessary) on
Form S-3 (or, if such form is unavailable for such a registration, on such other
form as is available for such a registration) (any of which may contain a
combined prospectus with other registrations by the Company), covering the
resale of the Registrable Securities. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by the Buyer and its
counsel prior to its filing or other submission, which approval shall not to be
unreasonably withheld.
2.2 Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to section 2.1 involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
2.3 Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration rights under this section 2.3 written notice of such
determination and, if within twenty days after receipt of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock that may be included in the Registration Statement because, in such
underwriter(s)' good faith judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder; provided that no portion of the equity securities
that the Company is offering for its own account shall be excluded; and provided
further that the Company shall be entitled to exclude Registrable Securities to
the extent necessary to avoid breaching obligations existing prior to the date
hereof to other stockholders of the Company. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided that the Company shall not
exclude any Registrable Securities unless the Company has first excluded all
outstanding securities held by persons that are not entitled to inclusion of
such securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided further that, after
giving effect to the preceding provision, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights or whose
registration rights existed prior to the date hereof. No right to registration
of Registrable Securities under this
2
<PAGE>
section 2.3 shall be construed to limit any registration required under section
2.1. The obligations of the Company under this section 2.3 may be waived by
Investors holding a majority of the Registrable Securities. If an offering in
connection with which an Investor is entitled to registration under this Section
2.3 is an underwritten offering, each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to all provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
2.4 Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities, and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner to maintain such eligibility for the use of Form S-3. If Form
S-3 is not available for sale by the Investors of the Registrable Securities,
the Company shall register the sale on another appropriate form.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best efforts
-----------------------
to prepare promptly, and file with the SEC not later than forty-five days after
the date of the issuance of the Shares, a Registration Statement with respect to
the Shares. Thereafter, the Company shall use its best efforts to cause such
Registration Statement(s) relating to Registrable Securities to become effective
as soon as possible after such filing, and keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earlier of (a) the second
anniversary of the date hereof, or (b) the date on which the Investors shall
have sold all the Registrable Securities (the "Registration Period"), which
Registration Statement(s) (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file
--------------------------
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s) as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each Investor
-------------------
whose Registrable Securities are included in the Registration Statement(s) and
its legal counsel (a) promptly after the same is prepared and publicly
distributed, filed with the SEC or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and (b) such
3
<PAGE>
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request to facilitate the disposition of the Registrable Securities
owned by such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Underwriting Agreement. If Investors who hold a majority of the
----------------------
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
3.6 Corrections. As promptly as practicable after becoming aware of
-----------
such event, the Company shall notify each Investor of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
3.7 Stop Orders. The Company shall use its best efforts to prevent
-----------
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, use its best efforts to
obtain the withdrawal of such order at the earliest possible moment and to
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof.
4
<PAGE>
3.8 Selling Stockholders' Counsel. The Company shall permit a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold, to
review and comment on the Registration Statement(s) and all amendments and
supplements thereto a reasonable period prior to their filing with the SEC, and
shall not file any document in a form to which such counsel reasonably objects.
3.9 Comfort Letter and Opinion. At the request of Investors who
--------------------------
hold a majority of the Registrable Securities being sold, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (a)
if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (b) an opinion,
dated as of such date, of counsel representing the Company for purposes of such
Registration Statement, in such form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors.
3.10 Due Diligence. The Company shall make available for inspection
-------------
by any Investor, any underwriter participating in any disposition pursuant to a
Registration Statement, one firm of attorneys and one firm of accountants or
other agents retained by the Investors, and one firm of attorneys retained by
all such underwriters (collectively, the "Inspectors"), all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed necessary
by such Inspector to enable such Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information that any Inspector may reasonably request for purposes of
such due diligence; provided that each Inspector shall hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.11 Listing. The Company shall use its best efforts either to (a)
-------
cause all the Registrable Securities covered by a Registration Statement to be
listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such
5
<PAGE>
Registrable Securities is then permitted under the rules of such exchange, or
(b) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (a) or (b), the Company
is unsuccessful in satisfying the preceding clause (a) or (b), to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
3.12 Certificates. The Company shall cooperate with the Investors
------------
who hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
3.13 Other Action. The Company shall take all other reasonable
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Underwriting Agreement. If Investors holding a majority of the
----------------------
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and
6
<PAGE>
take such other actions as are reasonably required to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement(s).
4.4 Corrections. Each Investor agrees that, on receipt of any
notice from the Company of the happening of any event of the kind described in
section 3.6 or 3.7, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.6 or 3.7 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.5 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder, unless such Investor (a) agrees to sell
such Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
------------------------
underwriting discounts, incurred in connection with registrations, filings or
qualifications pursuant to sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors, shall be borne by the Company, subject, with
respect to expenses incurred by the Investors.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company
--------------
will indemnify, hold harmless and defend each Investor, each director and
officer of and person, if any, who controls such Investor within the meaning of
the 1933 Act or the 1934 Act, and each underwriter (as defined in the 1933 Act)
for the Investors, and each director and officer of, and each person, if any,
who controls, such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or
7
<PAGE>
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (c) any violation or alleged
violation caused by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the preceding
clauses (a), (b) and (c) being, collectively, "Violations"). Subject to the
restrictions in section 6.4 with respect to the number of legal counsel, the
Company shall reimburse each Indemnified Person promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by such Indemnified Person in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary herein, the
indemnification agreement in this section 6.1: (1) shall not apply to a Claim
arising out of or based on a Violation that occurs in reliance on and in
conformity with information furnished in writing to the Company by, or caused
by, any Indemnified Person or underwriter for such Indemnified Person in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to section 3.3; (2) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to section 3.3; (3) shall not be available to the extent that such
Claim is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company; and (4) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to section 9.
6.2 By the Investors. In connection with any Registration Statement
----------------
in which an Investor is participating, each such Investor agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in section 6.1, the Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act, any underwriter and
any other stockholder selling securities pursuant to the Registration Statement
or any of its directors or officers or any person who controls such stockholder
or underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and together with an Indemnified Person, an "Indemnified Party"), against any
Claim to which any of them may become subject, under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claim arises out of or is based on any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance on and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based on any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other
8
<PAGE>
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided that the indemnity agreement in this section
6.2 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; and provided further that the
Investor shall be liable under this section 6.2 for only such amount of a Claim
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to section 9. Notwithstanding
anything to the contrary herein, the indemnification agreement in this section
6.2 with respect to any preliminary prospectus shall not inure to the benefit of
any Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities
---------
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to 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
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time after the
threat or commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
9
<PAGE>
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as
-----------
those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and
-------
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements, and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor
owns Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
---------------------------------
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of Registrable
Securities if: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, 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 transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to become a party
to and be bound by this Agreement, (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (f) such transferee shall be an "accredited investor" as that term
10
<PAGE>
defined in Rule 501 of Regulation D under the 1933 Act, and (g) if the
assignment occurs after the date of effectiveness of the Registration Statement
required to be filed pursuant to section 2.1, the transferee agrees to pay all
reasonable expenses of amending or supplementing such Registration Statement to
reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or
-------
permitted to be given under this Agreement shall be sent by registered or
certified mail, return receipt requested, or delivered personally or by
facsimile or courier and shall be effective five days after being placed in the
mail, if mailed, or on receipt, if delivered personally or by courier or
facsimile, in each case properly addressed to the party to receive such notice.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature page of this Agreement.
11
<PAGE>
Each party shall provide notice to the other party of any change in
address.
11.3 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
11.6 Successors and Assigns. Subject to section 9, this Agreement
----------------------
shall inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause
------------------
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
- --------
ATMEL CORPORATION
SYQUEST TECHNOLOGY, INC. -----------------
By: /s/ Edward L. Marinaro By: /s/ George Perleges
------------------------ -------------------------
Name: EDWARD L. MARINARO Name: George Perleges
Its: CHAIRMAN Its: President and CEO
Address:
2325 Orchard Plwy
--------------------
San Jose, CA 95131
--------------------
____________________
Telephone: (408) 441-0311
-----------------
Facsimile: (408) 436-4377
-----------------
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<PAGE>
Exhibit 10.7
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 18, 1996, by and between SyQuest Technology (M) SDN. BHD. ("Sub"),
SYQUEST TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and Petronics International, Inc.,
a California corporation ("Purchaser"), with reference to the following facts:
A. Sub has failed to make payments to Purchaser when due for products
manufactured and delivered by Purchaser pursuant to the purchase orders and
related invoices (the "Purchase Orders") listed on Schedule A to this
Agreement in the aggregate amount of $1,392,440.30 (the "Purchaser Order
Amount").
B. In consideration of cancellation of the amounts owed to Purchaser equal to
the sum of the Purchase Order Amount, Parent will issue to Purchaser shares
of the Common Stock of Parent, to repay the amounts due to Purchaser with
such shares, valued at the last sale price (the "Closing Price") as
reported in the Nasdaq National Market on the last trading day preceding
the Closing Date (as that term is defined below), but in no event shall
Parent be obligated to issue hereunder in excess of 280,000 of its Common
Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser the
---------------------
Purchase Order Amount shown on Schedule A attached hereto and
incorporated herein by reference, for products manufactured and
delivered by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. If any such product
shipped to Sub is defective, Sub and Parent shall have the right to
return such product to and request delivery of substitute product from
Purchaser and if such substitute product is not delivered, the
Purchase Order Amount, to the extent not then paid or discharged
hereunder or otherwise, shall be reduced accordingly, or if the
Purchase Order Amount shall then have been paid or otherwise
discharged in full, the cost thereof shall forthwith be refunded by
Purchaser to Sub in cash.
<PAGE>
2. Payment.
-------
(a) Issuance of Shares. Parent shall issue to Purchaser on the
------------------
Closing Date the number of shares of Parent's Common Stock equal
to the quotient of the Purchase Order Amount (as it shall then
have been reduced under section 1) divided by the Closing Price,
rounded down to the nearest lower whole number of shares, but in
no event shall Parent be required to issue hereunder in excess of
280,000 shares of its Common Stock. Such shares are hereinafter
called the "Shares".
(b) Payment of Balance. If Parent is unable to issue the full number
------------------
of Shares necessary to repay the Purchase Order Amount due to the
limit on the number of Shares provided in section 2(a), Parent
shall pay the balance due (the "Balance"), to Purchaser as
follows:
(i) If the Balance is not more than $50,000, the full amount of
the Balance shall be paid by Sub to Purchaser on the Closing
Date, by check or wire transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or wire
transfer to Purchaser in three equal installments of
principal and interest (at the annual rate of ten percent),
one such installment to be paid on each of the Closing Date,
the 90th day after the Closing Date, and the 150th day after
the Closing Date; and
(iii) If the Balance is more than $100,000, the Balance shall be
paid by Sub to Purchaser (with interest at the annual rate
of ten percent) over a period of not less than twelve
months, with the payment schedule to be determined by mutual
agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date, Parent and
------------------------------
Sub shall be deemed to have paid and discharged all or a portion
of the Purchase Order Amount equal to the product of the number
of Shares multiplied by the Closing Price. Purchaser agrees
that, except to the extent of the unpaid Balance, if any, Parent
and Sub shall be deemed to have paid and discharged the Purchase
Order Amount in full on the Closing Date. If, after the Closing
Date, any Balance remains unpaid, Parent and Sub shall be deemed
to have paid and discharged the Purchase Order Amount in full on
payment of the final installment of the Balance.
3. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
2
<PAGE>
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Grand Cayman and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with this
--------------
Agreement, will be validly issued, fully paid, nonassessable and
free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1995, March 31, 1996, and June 30, 1996, its Current Report
on Form 8-K dated June 14, 1996, and its Amendment to Form S-3
filed on August 29, 1996 and Supplement thereto, in each case as
filed with the Securities and Exchange Commission (the "SEC").
Such Reports are hereinafter collectively called the "Reports".
To the best knowledge of the current executive officers of
Parent, without having conducted an investigation of the records
of Parent or Sub, as of their respective filing dates (except as
thereafter amended), the Reports complied in all material
respects with the applicable
3
<PAGE>
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(e) No Contravention. To the best knowledge of the current executive
----------------
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or violation of, any provision of the
certificate of incorporation or by-laws of Parent or Sub; (ii)
constitute, with or without notice or the passage of time or
both, a material breach, violation or default under any order,
writ, injunction, decree, law, statute, rule or regulation,
governmental permit or license of Parent or Sub or to which
either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
4. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in financial and business matters that
Purchaser is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of
such investment and is able to protect the Purchaser's own
interests in connection with this transaction. Purchaser
acknowledges having had access to such information concerning
Parent, Sub and their
4
<PAGE>
affiliates as Purchaser deems necessary to enable Purchaser to
make an informed decision concerning an investment in the Shares.
In entering into this Agreement and consummating the transactions
contemplated hereby, Purchaser is relying solely on its own
investigation of Parent, Sub and their affiliates and their
businesses, management, financial condition, properties and
prospects and the merits and risks of such transactions.
Purchaser is aware that the Shares have not been registered under
the Securities Act and the Shares may not be transferred by
Purchaser unless they are subsequently registered under the
Securities Act or an exemption from such registration is
available. The Shares shall not be transferred without
registration under the Securities Act or an applicable exemption
therefrom. Purchaser is an accredited investor as that term is
defined in Rule 501(a) of Regulation D promulgated by the SEC
under the Securities Act. Purchaser acknowledges that until the
Shares are sold pursuant to registration under the Securities Act
or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
5. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represnts
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to
assign or transfer to any person whomsoever any such claim.
6. Closing.
-------
(a) The issuance of the Shares shall take place on the date hereof or
on such later date as the conditions in section 6(b) shall have
been satisfied or waived (the "Closing Date"), and shall be
consummated by mail or otherwise in accordance with arrangements
reasonably acceptable to Parent and Purchaser. On the Closing
Date, Parent shall deliver to Purchaser a certificate
representing the Shares and a check for all or part
5
<PAGE>
of the Balance, if any, to be paid on the Closing Date pursuant
to section 2(b) above, in payment, discharge and cancellation of
indebtedness equal to part or all of the Purchase Order Amount as
provided in section 2(c).
(b) The obligations of Parent to issue and sell the Shares and to
perform its other obligations hereunder shall be subject to the
satisfaction as determined by, or waiver by, Parent of the
following conditions on or before the Closing Date:
(i) The representations and warranties of Purchaser in sections
4 and 5 shall be true and correct on the Closing Date as if
made on such date; and
(ii) A Notification Form of Listing of Additional Shares shall
have been filed with Nasdaq with respect to the Shares at
least fifteen days prior to the Closing Date.
7. General Provisions.
------------------
(a) Successors. This Agreement shall bind and inure to the benefit
----------
of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret, construe
-------------
or enforce this Agreement may be instituted and prosecuted only
in a state court located in Alameda County, State of California,
or, if requisite jurisdiction exists, in the United States
District Court for the Northern District of California. This
Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
6
<PAGE>
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorneys' Fees. In the event of litigation or other proceedings
---------------
in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings shall be entitled to
reimbursement from the opposing party of all reasonable expenses,
including, without limitation, reasonable attorneys' fees and
expenses and expenses of investigation in connection with such
litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All notices and other communications
--------------------------
required or permitted hereunder shall be in writing in the
English language and shall be deemed duly delivered and received
when delivered personally, when transmitted by facsimile if
receipt is acknowledged by the addressee, two days after being
deposited for next-day or second-day delivery with an
internationally recognized overnight or two-day delivery service,
or four days after being deposited as first class mail with the
United States Postal Service, properly addressed as follows:
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4114
If to Purchaser: Petronics International, Inc.
2300 C Zanker Road
San Jose, California 95131
Attn: Chuck Ley
Facsimile: (408) 943-0430
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
_______________________________________________
Name: EDWARD L. MARINARO
Title: Chairman
By: /s/ Edward L. Marinaro
_______________________________________________
Name: EDWARD L. MARINARO
Title: Director/ Chairman
PETRONICS INTERNATIONAL, INC.
By: /s/ Charles P. Ley
_______________________________________________
Name: CHARLES P. LEY
Title: V.P.
9
<PAGE>
[LETTERHEAD OF PETRONIC INTERNATIONAL, INC. APPEARS HERE]
TO: Mike Clemens, SyQuest Technology
CC: John Luhtala, SyQuest Technology
Ed Gatchalian, SyQuest Technology
Mr. Kim, Petronics
Roger Maino, Attorney
FROM: Chuck Ley
syq1016.1
DATE: Oct. 16, 1996
RE: "Notes Payable"
On Sept. 25, 1996, SyQuest and Petronics had agreed that the amount of
$2,128,017.17 was the amount that SyQuest was terming "Notes Payable"
for old debt owed to Petronics.
Notes Payable per SyQuest $2,128,107.17
Payment of Invoice 807-1
including in aging but not
deducted in reconciliation
(8/96) (233,805.00)
Payment Received from
SyQuest on old debt (8/96) (314,000.00)
Apply listing of Invoices
on SyQuest A/R for Material
(new debt, see A/R list) (741,358.35)
Void Invoice #16700; received
RMA from Jay Khan on 2 EZ bds. (163.50)
Cents discrepancy .01
--------------
BALANCE ON NOTES PAYABLE $ 838,690.33
==============
This should be the balance of the Notes Payable for Petronics.
Schedule A
<PAGE>
[LOGO OF SYQUEST APPEARS HERE]
- --------------------------------------------------------------------------------
March 14, 1996
Mr Jong Y. Kim
Petronic International, Inc.
2300 Sanker Road, Suite C
San Jose, CA 95131
Dear Mr. Kim:
This is to confirm our agreements in the meeting on February 13, 1996.
1. SyQuest will pay Petronic $250,000 per week.
2. Petronic will convert $4,000,000 of existing debt to a notes receivable due
October 15, 1996.
3. Petronic will defer payment of $5 value added on the new products to be due
October 15, 1996.
4. Petronic has opportunity to build a minimum of 100 units for the VL230.
Since other suppliers have agreed to take 18-month note at 10% interest that
SyQuest will pay 1/15th of the principal plus interest from the 4th month on, we
would like you to consider taking the same proposal from us for number 2 above.
Thank you for your continued support to SyQuest.
If you have any question, please contact me at 510-226-4317.
Sincerely,
SYQUEST TECHNOLOGY, INC.
/s/ Hang T. Nguyen
Hang T. Nguyen
Vice President & Treasurer
cc: Chuck Ley
<PAGE>
[SYQUEST TECHNOLOGY (M) SDN, BHD. LETTERHEAD APPEARS HERE]
-------------------------------
PURCHASE VL96030013 CHARGE NO.
ORDER NO. DUPLICATE 01
-------------------------------
SHIP TO
SYQUEST TECHNOLOGY (M) SDN BHD
PLOT 55 LORONG PERUSAHAAN 4
PRAI FREE TRADE ZONE
PHASE 1, 13600 PRAI
PENANG
04-3986560
VENDOR BILL TO
PETRONICS INT'L INC/MMS
23OOC ZANKER ROAD
SAN JOSE, CA 95131
USA
TX:
PHONE (408) 943-1717 FAX: EXEMPT NO:
- --------------------------------------------------------------------------------
REQUESTOR DELIVERY TO PURCHASE ORDER
TERRY STORE
- --------------------------------------------------------------------------------
ORDER DATE VENDOR CODE BUYER TERMS SHIP VIA
06/03/96 PETINT NG 7 DAYS AIR
- --------------------------------------------------------------------------------
SHIPMENT TERMS TAXABLE P.O. TYPE CONFIRM TO
DEST COLLECT NO REG CHUCK LEY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM PART NUMBER/DESCRIPTION ??? INSP DELIVER DATE QTY UOM UNIT PRICE EXTENSION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.00 109620-004 0 CLOSED 33.800 EA 173.159 58527.74N
ASSY, PCB, EZ230SL - 9
2.00 109620-004 0 06/03/96 10412.00 EA 201.105 2093905.26N
ASSY, PCB, EZ230SL - 9
3.00 109620-004 0 06/10/96 5000.00 EA 201.105 1005525.OON
ASSY, PCB, EZ230SL - 9
4.00 109620-004 0 06/17/96 5000.00 EA 201.105 1005525.OON
ASSY, PCB, EZ230SL - 9
5.00 109620-004 0 06/24/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
6.00 109620-004 0 07/01/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
7.00 109620-004 0 07/08/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
8.00 109620-004 0 07/15/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
9.00 109620-004 0 07/22/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
10.00 109620-004 0 07/29/96 8000.00 EA 201.105 1608840.00N
- ---------------------------------------------------------------------------------------------------------------
TOTAL ORDER CONTINUE NEXT PAGE
-------------------------------
</TABLE>
BUYER [SIGNATURE ILLEGIBLE] DATE 13/06/96
------------------------- ---------
APPROVAL [SIGNATURE ILLEGIBLE]
----------------------
SPECIAL INSTRUCTIONS
1. SyQuest Technology Part Number, if referenced, and P.O. NO. must appear on
the outside of the package, also the Packing Slip - or the shipment will
be refused.
2. All invoice, Packing Lists and Communications must contain P.O. Number and
Part Number.
3. All shipments are to be F.O.B. Destination and insured by vendor unless
otherwise noted.
4. Acceptance of this Purchase Order implies the acceptance of all terms and
conditions contained herein.
5. Render separate invoice billing for each Purchase Order and/or partial
shipment.
6. Mail one copy of invoice to Accounts Payable Department.
VENDOR
<PAGE>
[SYQUEST TECHNOLOGY LETTERHEAD APPEARS HERE]
-------------------------------
PURCHASE VL96030013 CHARGE NO.
ORDER NO. DUPLICATE 01
-------------------------------
SHIP TO
SYQUEST TECHNOLOGY (M) SDN BHD
PLOT 557 LORONG PERUSAHAAN 4
PRAI FREE TRADE ZONE
PHASE 1, 13600 PRAI
PENANG
04-3986560
VENDOR BILL TO
PETRONICS INT'L INC/MMS
23OOC ZANKER ROAD
SAN JOSE, CA 95131
USA
TX:
PHONE (408) 943-1717 FAX: EXEMPT NO:
- --------------------------------------------------------------------------------
REQUESTOR DELIVERY TO PURCHASE ORDER
TERRY STORE
- --------------------------------------------------------------------------------
ORDER DATE VENDOR CODE BUYER TERMS SHIP VIA
06/03/96 PETINT NG 7 DAYS AIR
- --------------------------------------------------------------------------------
SHIPMENT TERMS TAXABLE P.O. TYPE CONFIRM TO
DEST COLLECT NO REG CHUCK LEY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM PART NUMBER/DESCRIPTION ??? INSP DELIVERY DATE QTY UOM UNIT PRICE EXTENSION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSY, PCB, EZ230SL - 9
11.00 109620-004 0 08/05/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
12.00 109620-004 0 08/12/96 8000.00 EA 201.105 1608840.00N
ASSY, PCB, EZ230SL - 9
13.00 109620-004 0 08/19/96 5600.00 EA 201.105 1126188.00N
ASSY, PCB, EZ230SL - 9
14.00 109620-004 0 08/28/96 5100.00 EA 201.105 1025635.50N
ASSY, PCB, EZ230SL - 9
15.00 109620-004 0 09/02/96 5100.00 EA 201.105 1025635.50N
ASSY, PCB, EZ230SL - 9
16.00 109620-004 0 09/09/96 5100.00 EA 201.105 1025635.50N
ASSY, PCB, EZ230SL - 9
17.00 109620-004 0 09/19/96 5100.00 EA 201.105 1025635.50N
ASSY, PCB, EZ230SL - 9
QTY ORDERED: 110750.00 QTY RECIEVED 338.00 QTY DUE 110412.00
REMARKS
1. ALL CURRENCY IN RM
- ---------------------------------------------------------------------------------------------------------------
TOTAL ORDER CONTINUE NEXT PAGE
-------------------------------
</TABLE>
BUYER [SIGNATURE ILLEGIBLE] DATE 13/06/96
---------------------- --------
APPROVAL [SIGNATURE ILLEGIBLE]
------------------------------------
SPECIAL INSTRUCTIONS
1. SyQuest Technology Part Number, if referenced, and P.O. NO. must appear on
the outside of the package, also the Packing Slip - or the shipment will
be refused.
2. All invoice, Packing Lists and Communications must contain P.O. Number and
Part Number.
3. All shipments are to be F.O.B. Destination and insured by vendor unless
otherwise noted.
4. Acceptance of this Purchase Order implies the acceptance of all terms and
conditions contained herein.
5. Render separate invoice billing for each Purchase Order and/or partial
shipment.
6. Mail one copy of invoice to Accounts Payable Department.
VENDOR
<PAGE>
--------------------
PURCHASE VL96030013
ORDER NO. DUPLICATE
--------------------
SHIP TO
SYQUEST TECHNOLOGY (M) SDN BHD
PLOT 557 LORONG PERUSAHAAN 4
PRAI FREE TRADE ZONE
PHASE 1, 13600 PRAI
PENANG
04-3986560
VENDOR BILL TO
PETRONICS INT'L INC/MMS
2300C ZANKER ROAD
SAN JOSE, CA 95131
USA
<TABLE>
<CAPTION>
TX:
PHONE (408) 943-1717 FAX: EXEMPT NO:
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REQUESTOR DELIVERY TO PURCHASE ORDER
TERRY STORE
- ----------------------------------------------------------------------------------------------------------------
ORDER DATE VENDOR CODE BUYER TERMS SHIP VIA
06/03/96 PETINT NG 7 DAYS AIR
- ----------------------------------------------------------------------------------------------------------------
SHIPMENT TERMS TAXABLE P.O. TYPE CONFIRM TO
DEST COLLECT NO REG CHUCK LEY
- ----------------------------------------------------------------------------------------------------------------
ITEM PART NUMBER/DESCRIPTION REV INSP DELIVER DATE QTY UOM UNIT PRICE EXTENSION
- ----------------------------------------------------------------------------------------------------------------
2. CONVERSION RATE IS U$1.00 = RM2.46
3. UNIT PRICE IS U$81.75
4. P/O# IS SUBJECT TO CHANGE.
- ----------------------------------------------------------------------------------------------------------------
TOTAL ORDER RN 22262933.00
------------------------------------
</TABLE>
BUYER [SIGNATURE ILLEGIBLE] DATE 13/06/96
----------------------- ---------
APPROVAL [SIGNATURE ILLEGIBLE]
------------------------------------
SPECIAL INSTRUCTIONS
1. SyQuest Technology Part Number, if referenced, and P.O. NO. must appear on
the outside of the package, also the Packing Slip - or the shipment will be
refused.
2. All Invoice, Packing Lists and Communications must contain P.O. Number and
Part Numbers.
3. All shipments are to be F.O.B. Destination and insured by vendor unless
otherwise noted.
4. Acceptance of this Purchase Order implies the acceptance of all terms and
conditions contained herein.
5. Render separate invoice billing for each Purchase Order and/or partial
shipment.
6. Mail one copy of invoice to Accounts Payable Department.
VENDOR
<PAGE>
[LETTERHEAD OF SYQUEST APPEARS HERE] 1
--------------------------------
PURCHASE VL96030013
ORDER NO. DUPLICATE REVISED
--------------------------------
SHIP TO
SYQUEST TECHNOLOGY (M) SDN BHD
SYQUEST TECHNOLOGY (M) SDN BHD
PLOT 55 LORONG PERUSAHAAN 4
PRAI FREE TRADE ZONE
PHASE 1, 13600 PRAI
PENANG
04-3986560
VENDOR BILL TO
PETRONICS INT'L INC/MMS
23OOC ZANKER ROAD
SAN JOSE, CA 95131
USA
TX:
PHONE (408) 943-1717 FAX: EXEMPT NO:
- --------------------------------------------------------------------------------
REQUESTOR DELIVERY TO PURCHASE ORDER
TERRY STORE
- --------------------------------------------------------------------------------
ORDER DATE VENDOR CODE BUYER TERMS SHIP VIA
06/03/96 PETINT NG 7 DAYS AIR
- --------------------------------------------------------------------------------
SHIPMENT TERMS TAXABLE P.O. TYPE CONFIRM TO
DEST COLLECT NO REG CHUCK LEY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ITEM PART NUMBER/DESCRIPTION REV INSP DELIVER DATE QTY UOM UNIT PRICE EXTENSION
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.00 109620-004 0 CLOSED 338.00 EA 173.159 58527.741
ASSY, PCB, EZ230SL - 9
QTY ORDERED 338.00 QTY RECEIVED: 338.00 QTY DUE: .00?
2.00 109620-001 P1 0 CLOSED 3272.00 EA .000 .00?
ASSY, PCB, EZ230SL - P
3.00 109620-001 P1 0 CLOSED 2184.00 EA .000 .OO?
ASSY, PCB, EZ230SL - P
4.00 109620-001 P1 0 CLOSED 7280.00 EA .000 .00?
ASSY, PCB, EZ230SL - P
5.00 109620-001 P1 0 CLOSED 3328.00 EA $ 82.010 .00?
ASSY, PCB, EZ230SL - P
6.00 109620-001 P1 0 CLOSED 2392.00 EA 201.105 481043.16?
ASSY, PCB, EZ230SL - P
7.00 109620-001 P1 0 CLOSED 4980.00 EA 201.105 1001502.9O?
ASSY, PCB, EZ230SL - P
8.00 109620-001 P1 0 08/05/96 2600.00 EA 201.105 522873.00?
ASSY, PCB, EZ230SL - P
9.00 109620-001 P1 0 08/12/96 3000.00 EA 201.105 603315.0O?
ASSY, PCB, EZ230SL - P
- ---------------------------------------------------------------------------------------------------------------
TOTAL ORDER CONTINUE NEXT PAGE
-------------------------------
</TABLE>
BUYER [SIGNATURE ILLEGIBLE] DATE 2/8/96
------------------------- ---------
APPROVAL [SIGNATURE ILLEGIBLE]
-----------------------------------
SPECIAL INSTRUCTIONS
1. SyQuest Technology Part Number, if referenced, and P.O. NO. must appear on
the outside of the package, also the Packing Slip - or the shipment will
be refused.
2. All invoice, Packing Lists and Communications must contain P.O. Number and
Part Number.
3. All shipments are to be F.O.B. Destination and insured by vendor unless
otherwise noted.
4. Acceptance of this Purchase Order implies the acceptance of all terms and
conditions contained herein.
5. Render separate invoice billing for each Purchase Order and/or partial
shipment.
6. Mail one copy of invoice to Accounts Payable Department.
VENDOR
<PAGE>
[SYQUEST TECHNOLOGY (M) SDN. BHD. LETTERHEAD APPEARS HERE]
SHIP TO SYQUEST TECHNOLOGY (M) SDN BHD
SYQUEST TECHNOLOGY (M) SDN BHD
PLOT 557 LORONG PERUSAHAAN 4
PRAI FREE TRADE ZONE
PHASE 1, 13600 PRAI
PENANG
04-3986560
VENDOR BILL TO
PETRONICS INT'L INC/MMS
2300C ZANKER ROAD
SAN JOSE, CA 95131
USA
TX:
PHONE (408) 943-1717 FAX: EXEMPT NO:
- --------------------------------------------------------------------------------
REQUESTOR DELIVERY TO
TERRY STORE PURCHASE ORDER
- --------------------------------------------------------------------------------
ORDER DATE VENDOR CODE BUYER TERMS SHIP VIA
06/03/96 PETINT NG 7 DAYS AIR
- --------------------------------------------------------------------------------
SHIPMENT TERMS TAXABLE P.O. TYPE CONFIRM TO
DEST COLLECT NO REG CHUCK LEY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ITEM PART NUMBER/DESCRIPTION ????? INSP DELIVERY DATE QTY ????? UNIT PRICE EXTENTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10.00 109620-001 P1 0 08/19/96 5000.00 EA 201.105 1005525.001
ASSY,PCB,EZ230SL-P
11.00 109620-001 P1 0 08/26/96 5500.00 EA 201.105 1106077.501
ASSY,PCB,EZ230SL-P
12.00 109620-001 P1 0 09/02/96 5500.00 EA 201.105 1106077.501
ASSY,PCB,EZ230SL-P
13.00 109620-001 P1 0 09/09/96 5000.00 EA 201.105 1005525.001
ASSY,PCB,EZ230SL-P
14.00 109620-001 P1 0 09/16/96 5000.00 EA 201.105 1005525.001
ASSY,PCB,EZ230SL-P
15.00 109620-001 P1 0 09/23/96 4000.00 EA 201.105 804420.001
ASSY,PCB,EZ230SL-P
16.00 109620-001 P1 0 09/30/96 4000.00 EA 201.105 804420.001
ASSY,PCB,EZ230SL-P
17.00 109620-001 P1 0 10/07/96 4000.00 EA 201.105 804420.001
ASSY,PCB,EZ230SL-P
18.00 109620-001 P1 0 10/14/96 4000.00 EA 201.105 804420.001
ASSY,PCB,EZ230SL-P
- ------------------------------------------------------------------------------------------------------------------------
CONTINUE
TOTAL ORDER NEXT PAGE
-----------------------------------
</TABLE>
BUYER [SIGNATURE ILLEGIBLE] DATE 13/06/96
------------------------- ---------
APPROVAL [SIGNATURE ILLEGIBLE]
----------------------
SPECIAL INSTRUCTIONS
1. SyQuest Technology Part Number, if referenced, and P.O. NO. must appear on
the outside of the package, also the Packing Slip - or the shipment will
be refused.
2. All invoice, Packing Lists and Communications must contain P.O. Number and
Part Numbers.
3. All shipments are to F.O.B. Destination and insured by vendor unless
otherwise noted.
4. Acceptance of this Purchase Order implies the acceptance of all terms and
conditions contained herein.
5. Render separate invoice billing for each Purchase Order and/or partial
shipment.
6. Mail one copy of invoice to Accounts Payable Department.
VENDOR
<PAGE>
[LETTER HEAD OF SYQUEST APPEARS HERE]
---------------------
PURCHASE VL96030013
ORDER NO. DUPLICATE
---------------------
SHIP TO
SYQUEST TECHNOLOGY (M) SDN BHD
SYQUEST TECHNOLOGY (M) SDN BHD
PLOT 557 LORONG PERUSAHAAN 4
PRAI FREE TRADE ZONE
PHASE 1, 13600 PRAI
PENANG
04-3986560
VENDOR BILL TO
PETRONICS INT'L INC/MMS
2300C ZANKER ROAD
SAN JOSE, CA 95131
USA
<TABLE>
<CAPTION>
TAX:
PHONE (408) 943-1717 FAX: EXEMPT NO:
- -------------------------------------------------------------------------------------------------------
REQUESTER DELIVERY TO PURCHASE ORDER
TERRY STORE
- -------------------------------------------------------------------------------------------------------
ORDER DATE VENDOR CODE BUYER TERMS SHIP VIA
06/03/96 PETINT NG 7 DAYS AIR
- -------------------------------------------------------------------------------------------------------
SHIPMENT TERMS TAXABLE P.O.TYPE CONFIRM TO
DEST COLLECT NO REG CHUCK LEY
- -------------------------------------------------------------------------------------------------------
ITEM PART NUMBER/DESCRIPTION REV INSP DELIVERY DATE QTY UOM UNIT PRICE EXTENSION
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
19.00 109620-001 P1 0 99/99/99 39376.00 EA 201.105 7918710.48N
ASSY, PCB, EZ230SL-P
QTY ORDERED: 110412.00 QTY RECEIVED: 25892.00 QTY DUE: 84520.00
REMARKS
1. ALL CURRENCY IN RM
2. CONVERSION RATE IS U$1.00 = RM2.46
3. UNIT PRICE IS U$81.75
4. P/O # IS SUBJECT TO CHANGE.
5. ADDITIONAL 90 DAYS FORECAST AS FOLLOW :--
NOV' 96 --- 15,000 PCS
DEC' 96 --- 15,000 PCS
JAN' 97 --- 15,000 PCS
6. P.O'S WILL BE GENERATED EACH MONTH TO PROVIDE A
CONTINUOUS 90 DAYS REQUIREMENT.
- -------------------------------------------------------------------------------------------------------
TOTAL ORDER 19032382.28
-------------------------
</TABLE>
BUYER [SIGNATURE ILLEGIBLE] DATE 7/8/96
--------------------- -----------
APPROVAL [SIGNATURE ILLEGIBLE]
-------------------------------
SPECIAL INSTRUCTIONS
1. SyQuest Technology Part Number, if referenced, and P.O. NO. must appear on
the outside of the package, also the Packing Slip - or the shipment will be
refused.
2. All Invoice, Packing Lists and Communications must contain P.O. Number and
Part Numbers.
3. All shipments are to be F.O.B. Destination and Insured by vendor unless
otherwise noted.
4. Acceptance of this Purchase Order implies the acceptance of all terms and
conditions contained herein.
5. Render separate invoice billing for each Purchase Order and/or partial
shipment.
6. Mail one copy of invoice to Accounts Payable Department.
VENDOR
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of October
18, 1996, by and among SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and Petronics International, Inc. Corporation, a California
corporation (the "Buyer"), with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the Buyer
the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns this Agreement and who agrees to become a
party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare and, on or before forty-five days after the date of the issuance of
the Shares, file with
<PAGE>
the SEC a Registration Statement or Registration Statements (as is necessary) on
Form S-3 (or, if such form is unavailable for such a registration, on such other
form as is available for such a registration) (any of which may contain a
combined prospectus with other registrations by the Company), covering the
resale of the Registrable Securities. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by the Buyer and its
counsel prior to its filing or other submission, which approval shall not to be
unreasonably withheld.
2.2 Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to section 2.1 involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
2.3 Piggy-Back Registrations. If at any time prior to the
------------------------
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
send to each Investor who is entitled to registration rights under this section
2.3 written notice of such determination and, if within twenty days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock that may be included in the Registration Statement
because, in such underwriter(s)' good faith judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder; provided that no portion of the
equity securities that the Company is offering for its own account shall be
excluded; and provided further that the Company shall be entitled to exclude
Registrable Securities to the extent necessary to avoid breaching obligations
existing prior to the date hereof to other stockholders of the Company. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided that
the Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities held by persons that are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided
further that, after giving effect to the preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights or whose
registration rights existed prior to the date hereof. No right to registration
of Registrable Securities under this
2
<PAGE>
section 2.3 shall be construed to limit any registration required under section
2.1. The obligations of the Company under this section 2.3 may be waived by
Investors holding a majority of the Registrable Securities. If an offering in
connection with which an Investor is entitled to registration under this Section
2.3 is an underwritten offering, each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to all provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
2.4 Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities, and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner to maintain such eligibility for the use of Form S-3. If Form
S-3 is not available for sale by the Investors of the Registrable Securities,
the Company shall register the sale on another appropriate form.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best efforts
-----------------------
to cause such Registration Statement(s) relating to Registrable Securities to
become effective as soon as possible after the filing thereof, and keep the
Registration Statement(s) effective pursuant to Rule 415 at all times until the
earliest of (a) the date as of which the Investors may sell all of the
Registrable Securities without registration pursuant to Rule 144 promulgated
under the 1933 Act, (b) the second anniversary of the date hereof, and (c) the
date on which the Investors shall have sold all the Registrable Securities (the
"Registration Period"). Such Registration Statement(s) (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file
--------------------------
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s) as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each Investor
-------------------
whose Registrable Securities are included in the Registration Statement(s) and
its legal counsel (a) promptly after the same is prepared and publicly
distributed, filed with the SEC or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and (b) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and
3
<PAGE>
supplements thereto and such other documents as such Investor may reasonably
request to facilitate the disposition of the Registrable Securities owned by
such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Underwriting Agreement. If Investors who hold a majority of the
----------------------
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
3.6 Corrections. As promptly as practicable after becoming aware of
-----------
such event, the Company shall notify each Investor of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
3.7 Stop Orders. The Company shall use its best efforts to prevent
-----------
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, use its best efforts to
obtain the withdrawal of such order at the earliest possible moment and to
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof.
4
<PAGE>
3.8 Selling Stockholders' Counsel. The Company shall permit a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold, to
review and comment on the Registration Statement(s) and all amendments and
supplements thereto a reasonable period prior to their filing with the SEC, and
shall not file any document in a form to which such counsel reasonably objects.
3.9 Comfort Letter and Opinion. At the request of Investors who
--------------------------
hold a majority of the Registrable Securities being sold, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (a)
if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (b) an opinion,
dated as of such date, of counsel representing the Company for purposes of such
Registration Statement, in such form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors.
3.10 Due Diligence. The Company shall make available for inspection
-------------
by any Investor, any underwriter participating in any disposition pursuant to a
Registration Statement, one firm of attorneys and one firm of accountants or
other agents retained by the Investors, and one firm of attorneys retained by
all such underwriters (collectively, the "Inspectors"), all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed necessary
by such Inspector to enable such Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information that any Inspector may reasonably request for purposes of
such due diligence; provided that each Inspector shall hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.11 Listing. The Company shall use its best efforts either to (a)
-------
cause all the Registrable Securities covered by a Registration Statement to be
listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such
5
<PAGE>
Registrable Securities is then permitted under the rules of such exchange, or
(b) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (a) or (b), the Company
is unsuccessful in satisfying the preceding clause (a) or (b), to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
3.12 Certificates. The Company shall cooperate with the Investors
------------
who hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
3.13 Other Action. The Company shall take all other reasonable
------------
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of an Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Underwriting Agreement. If Investors holding a majority of the
----------------------
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and
6
<PAGE>
take such other actions as are reasonably required to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement(s).
4.4 Corrections. Each Investor agrees that, on receipt of any
-----------
notice from the Company of the happening of any event of the kind described in
section 3.6 or 3.7, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.6 or 3.7 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.5 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder, unless such Investor (a) agrees to sell
such Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
------------------------
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company
--------------
will indemnify, hold harmless and defend each Investor, each director and
officer of and person, if any, who controls such Investor within the meaning of
the 1933 Act or the 1934 Act, and each underwriter (as defined in the 1933 Act)
for the Investors, and each director and officer of, and each person, if any,
who controls, such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any
7
<PAGE>
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading, or (c) any violation or alleged violation caused by
the Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by, or caused by, any Indemnified Person or
underwriter for such Indemnified Person in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to section
3.3; (2) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to section 3.3; (3) shall not be
available to the extent that such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (4) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to section 9.
6.2 By the Investors. In connection with any Registration Statement
----------------
in which an Investor is participating, each such Investor agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in section 6.1, the Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act, any underwriter and
any other stockholder selling securities pursuant to the Registration Statement
or any of its directors or officers or any person who controls such stockholder
or underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and together with an Indemnified Person, an "Indemnified Party"), against any
Claim to which any of them may become subject, under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claim arises out of or is based on any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance on and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based on any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such
8
<PAGE>
Claim; provided that the indemnity agreement in this section 6.2 shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; and provided further that the Investor shall be liable
under this section 6.2 for only such amount of a Claim as does not exceed the
net proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to section 9. Notwithstanding anything to the contrary
herein, the indemnification agreement in this section 6.2 with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities
---------
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to 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
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time after the
threat or commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the
9
<PAGE>
maximum contribution with respect to any amounts for which it would otherwise be
liable under section 6 to the fullest extent permitted by law; provided that (a)
no contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in section
6, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as
-----------
those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and
-------
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements, and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor
------------
owns Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
---------------------------------
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of twenty-five
percent or more of the Registrable Securities if: (a) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, 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 transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, (d) at or before the time the Company receives the written
notice contemplated by clause (b) of this sentence the transferee or assignee
agrees in writing with the Company to become a party to and be bound by this
Agreement, (e) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement, (f) such
transferee shall be an "accredited investor" as that term defined in Rule 501 of
Regulation D under the 1933 Act, and (g) if the assignment occurs after the date
of effectiveness of the Registration Statement
10
<PAGE>
required to be filed pursuant to section 2.1, the transferee agrees to pay all
reasonable expenses of amending or supplementing such Registration Statement to
reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or
-------
permitted to be given under this Agreement shall be sent by registered or
certified mail, return receipt requested, or delivered personally or by
facsimile or courier and shall be effective five days after being placed in the
mail, if mailed, or on receipt, if delivered personally or by courier or
facsimile, in each case properly addressed to the party to receive such notice.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature page of this Agreement.
Each party shall provide notice to the other party of any change in
address.
11
<PAGE>
11.3 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
11.6 Successors and Assigns. Subject to section 9, this Agreement
----------------------
shall inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause
------------------
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
- --------
PETRONICS INTERNATIONAL, INC.
SYQUEST TECHNOLOGY, INC.
By:/s/ Charles P. Ley
By:/s/ Edward L. Marinaro --------------------------
------------------------- Name: Charles P.Ley
Name: Edward L. Marinaro Its: V.P
Its: Chairman
Address:
Petronics International, Inc.
2300 C Zanker Road
San Jose, California 95131
Attn: Chuck Ley
Telephone: 408-945-1717
------------------
Facsimile: (408) 943-0430
13
<PAGE>
Exhibit 10.8
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 24, 1996, by and between SYQUEST TECHNOLOGY INTERNATIONAL, Grand Cayman
corporation ("Sub"), SYQUEST TECHNOLOGY, INC., a Delaware corporation that owns
all of the issued and outstanding capital stock of Sub ("Parent"), and SAE
Magnetics (HK) LTD. corporation ("Purchaser"), with reference to the following
facts:
A. Sub has failed to make payments to Purchaser when due for products
manufactured and delivered by Purchaser pursuant to the purchase orders and
related invoices (the "Purchase Orders") listed on Schedule A to this
Agreement in the aggregate amount of $6,080,397.22 (the "Purchaser Order
Amount").
B. In consideration of cancellation of the amounts owed to Purchaser equal to
the sum of the Purchase Order Amount, Parent will issue to Purchaser shares
of the Common Stock of Parent, to repay the amounts due to Purchaser with
such shares, valued at the last sale price (the "Closing Price") as
reported in the Nasdaq National Market on the last trading day preceding
the Closing Date (as that term is defined below), but in no event shall
Parent be obligated to issue hereunder in excess of 1,020,000 of its Common
Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser the
---------------------
Purchase Order Amount shown on Schedule A attached hereto and
incorporated herein by reference, for products manufactured and
delivered by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. If any such product
shipped to Sub is defective, Sub and Parent shall have the right to
return such product to and request delivery of substitute product from
Purchaser and if such substitute product is not delivered, the
Purchase Order Amount, to the extent not then paid or discharged
hereunder or otherwise, shall be reduced accordingly, or if the
Purchase Order Amount shall then have been paid or otherwise
discharged in full, the cost thereof shall forthwith be credited by
Purchaser to Sub and/or Parent against future purchases as disgnated
by Sub and/or Parent.
<PAGE>
2. Payment.
-------
(a) Issuance of Shares. Parent shall issue to Purchaser on the
------------------
Closing Date the number of shares of Parent's Common Stock equal
to the quotient of the Purchase Order Amount (as it shall then
have been reduced under section 1) divided by the Closing Price,
rounded down to the nearest lower whole number of shares, but in
no event shall Parent be required to issue hereunder in excess of
1,020,000 shares of its Common Stock. Such shares are hereinafter
called the "Shares".
(b) Payment of Balance. If Parent is unable to issue the full number
------------------
of Shares necessary to repay the Purchase Order Amount due to the
limit on the number of Shares provided in section 2(a), Parent
shall pay the balance due (the "Balance"), to Purchaser as
follows:
(i) If the Balance is not more than $50,000, the full
amount of the Balance shall be paid by Sub to Purchaser
on the Closing Date, by check or wire transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or
wire transfer to Purchaser in three equal installments
of principal and interest (at the annual rate of ten
percent), one such installment to be paid on each of
the Closing Date, the 90th day after the Closing Date,
and the 150th day after the Closing Date; and
(iii) If the Balance is more than $100,000, the Balance shall
be paid by Sub to Purchaser (with interest at the
annual rate of ten percent) over a period of not less
than twelve months, with the payment schedule to be
determined by mutual agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date, Parent and
------------------------------
Sub shall be deemed to have paid and discharged all or a portion
of the Purchase Order Amount equal to the product of the number
of Shares multiplied by the Closing Price. Purchaser agrees that,
except to the extent of the unpaid Balance, if any, Parent and
Sub shall be deemed to have paid and discharged the Purchase
Order Amount in full on the Closing Date. If, after the Closing
Date, any Balance remains unpaid, Parent and Sub shall be deemed
to have paid and discharged the Purchase Order Amount in full on
payment of the final installment of the Balance.
2
<PAGE>
3. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Grand Cayman and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with this
--------------
Agreement, will be validly issued, fully paid, nonassessable and
free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1995, March 31, 1996, and June 30, 1996, its Current Report
on Form 8-K dated June 14, 1996, and its Amendment to Form S-3
filed on August 29, 1996, in each case as filed with the
Securities and Exchange Commission (the "SEC"). Such Reports are
hereinafter collectively called the "Reports". To the best
knowledge of the current executive officers of Parent, without
having conducted an investigation of the records of Parent or
Sub, as of their respective filing dates (except as thereafter
amended), the
3
<PAGE>
Reports complied in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(e) No Contravention. To the best knowledge of the current executive
----------------
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or violation of, any provision of the
certificate of incorporation or by-laws of Parent or Sub; (ii)
constitute, with or without notice or the passage of time or
both, a material breach, violation or default under any order,
writ, injunction, decree, law, statute, rule or regulation,
governmental permit or license of Parent or Sub or to which
either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
4. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in financial and business matters that
Purchaser is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of
such investment and is able to protect the Purchaser's own
interests in connection with this transaction. Purchaser
acknowledges having had access to such information concerning
Parent. Sub and their affiliates as Purchaser deems
4
<PAGE>
necessary to enable Purchaser to an informed decision concerning
an investment in the Shares.In entering into this Agreement and
consummating the transactions contemplated hereby, Purchaser is
relying solely on its own investigation of Parent, Sub and their
affiliates and their businesses, management, financial condition,
properties and prospects and the merits and risks of such
transactions. Purchaser is aware that the Shares have not been
registered under the Securities Act and the Shares may not be
transferred by Purchaser unless they are subsequently registered
under the Securities Act or an exemption from such registration
is available. The Shares shall not be transferred without
registration under the Securities Act or an applicable exemption
therefrom. Purchaser is an accredited investor as that term is
defined in Rule 501(a) of Regulation D promulgated by the SEC
under the Securities Act. Purchaser acknowledges that until the
Shares are sold pursuant to registration under the Securities Act
or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
5. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represnts
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to
assign or transfer to any person whomsoever any such claim.
5
<PAGE>
6. Closing.
-------
(a) The issuance of the Shares shall take place on the date hereof or
on such later date as the conditions in section 6(b) shall have
been satisfied or waived (the "Closing Date"), and shall be
consummated by mail or otherwise in accordance with arrangements
reasonably acceptable to Parent and Purchaser. On the Closing
Date, Parent shall deliver to Purchaser a certificate
representing the Shares and a check for all or part of the
Balance, if any, to be paid on the Closing Date pursuant to
section 2(b) above, in payment, discharge and cancellation of
indebtedness equal to part or all of the Purchase Order Amount as
provided in section 2(c).
(b) The obligations of Parent to issue and sell the Shares and to
perform its other obligations hereunder shall be subject to the
satisfaction as determined by, or waiver by, Parent of the
following conditions on or before the Closing Date:
(i) The representations and warranties of Purchaser in
sections 4 and 5 shall be true and correct on the
Closing Date as if made on such date; and
(ii) A Notification Form of Listing of Additional Shares
shall have been filed with Nasdaq with respect to the
Shares at least fifteen days prior to the Closing Date.
7. General Provisions.
------------------
(a) Successors. This Agreement shall bind and inure to the benefit
----------
of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret, construe
-------------
or enforce this Agreement may be instituted and prosecuted only
in a state court located in Alameda County, State of California,
or, if requisite jurisdiction exists, in the United States
District Court for the Northern District of California. This
Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
6
<PAGE>
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorneys' Fees. In the event of litigation or other proceedings
---------------
in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings shall be entitled to
reimbursement from the opposing party of all reasonable expenses,
including, without limitation, reasonable attorneys' fees and
expenses and expenses of investigation in connection with such
litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All notices and other communications
--------------------------
required or permitted hereunder shall be in writing in the
English language and shall be deemed duly delivered and received
when delivered personally, when transmitted by facsimile if
receipt is acknowledged by the addressee, two days after being
deposited for next-day or second-day delivery with an
internationally recognized overnight or two-day delivery service,
or four days after being deposited as first class mail with the
United States Postal Service, properly addressed as follows:
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4114
If to Purchaser: SAE Magnetics (HK) LTD.
185 Martinvale Lane
San Jose, California 95119
Attention: Mr. Paul Ting
Facsimile: (408) 972-5996
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
--------------------------------------
Name: Edward L. Marinaro
Title: Chairman
SYQUEST TECHNOLOGY INTERNATIONAL
By: /s/ Edward L. Marinaro
--------------------------------------
Name: Edward L. Marinaro
Title: Chairman
SAE MAGNETICS (HK) LTD.
By: /s/ Paul Ting
--------------------------------------
Name: Paul Ting
Title: Vice President
8
<PAGE>
AGREEMENT
This agreement ("Agreement" is entered into this 15 day of October, 1996,
by and between SyQuest Technology, Inc. ("Vendee") and SAE Magnetics (H.K.) Ltd.
("Vendor").
WHEREAS, Vendee is indebted to Vendor in the amount of $6,080,397.22 (the
"Claim") of which $1,506,788.96 is for payment of the promise shown on Exhibit A
hereto to be delivered to the Vendor within thirty (30) days of the effective
date of the Agreement.
WHEREAS, neither Vendor or Vendee desire to engage in costly and time
consuming litigation to determine their respective rights against each other;
and,
WHEREAS, Vendor desires to enter into this Agreement so that payments on
the account of the Claim can begin without delay.
NOW THEREFORE, in consideration of the above (which is hereby incorporated
into and shall be deemed a part of this Agreement), and of the covenants and
agreements hereinafter set forth, and of other goods and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties, it
is agreed by and between the parties as follows:
1. In accordance with the terms of the Promissory Note to be executed by
Vendee, substantially for the form of Exhibit B hereto, Vendee shall pay to the
order of Vendor the Claim amount in equal monthly installments of $304,019.86 on
account of principle and interest over a period of twenty-four (24) months.
Monthly payments will commence on October 15, 1996. Interest shall accrue at the
rate of ten percent (10%) per annum commencing on October 15, 1996. Each monthly
payment will be applied first to payment of interest.
2. Until such time, if ever, as an Event of Default (as defined below)
exists, Vendor agrees to forebear from enforcing its rights, if any, to collect
or enforce the Claim, or to create, perfect or enforce any lien against the
property of Vendee, or its affiliates with respect to the Claim, or otherwise
take any action against Vendee or its affiliates. Not withstanding, the
foregoing sentence, Vendor shall not be limited with regard to enforcing its
rights relating to any claim, course of action, or rights after the execution of
this Agreement unrelated to the Claim.
3. Only upon the occurrence of the following shall there exist an Event
of Default under this Agreement: Vendee's failure to make a payment hereunder,
provided such payment is not cured within ten (10) working days following
written notice given by Vendor to Vendee that its payment has not been received.
4. (a) Upon the occurrence of an Event of Default, the entire unpaid
principle balance of the Claim, together with interest thereon at the rate
specified herein, shall, as the option of the holder hereof, become immediately
due and payable. Vendee agrees to pay the holder hereof all costs and expenses
incurred in connection with the collection hereof, including reasonable
attorneys' fees.
(b) Vendee waives any rights of set-off against the Claim and agrees
that it shall not assent any counterclaim in any action or proceeding to enforce
the Claim, hereby acknowledges that the obligations hereunder are fixed and
unconditional.
5. Any notice to be given to either party under this Agreement shall be
written in the English language and shall be effective when delivered to the
other party (which may be made by facsimile transmission or telegram) as
follows:
<TABLE>
<S> <C> <C> <C>
If to Vendor: SyQuest Technology, Inc. If to Vendor: SAE Magnetics (H.K.) Ltd.
47071 Bayside Parkway SAE Tower, 38-42 Kwai Fung
Fremont, California 94538 Kwai Chang, New Territories, Hong Kong
Attn: John W. Luhtola
Fax (510) 226-4100 Fax (852) 2480-4757
Copy to:
TOR U.S.A. Corporation
12 Harbor Park Drive
Port Washington, NY 11050
Attn: Director of Finance
Fax (516) 625-2972
</TABLE>
<PAGE>
6. This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
7. Vendor and Vendee warrant that they are authorized to enter into this
Agreement.
8. This Agreement embodies the entire agreement and understanding between
the parties pertaining thereon, and supercedes all previous agreements,
understandings, negotiations, representatives and discussions, whether verbal or
written of the parties, pertaining thereto.
9. This Agreement may be amended, modified or supplemented only by a
writing executed by each of the parties. No waiver by any party of a breach of
any provision of this Agreement shall be construed as a waiver of any subsequent
or differing breach.
SyQuest Technology, Inc. SAE Magnetics (H.K.) Ltd.
By:_______________________ By: /s/ Paul Ting
-------------
Its:______________________ Its: Vice President
--------------
Date:_____________________ Date: October 15, 1996
----------------
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of October
24, 1996, by and among SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and SAE Magnetics (HK) LTD. (the "Buyer"), with reference to the
following facts:
In connection with the Securities Purchase Agreement by and among the Buyer
the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee thereof
to whom the Buyer assigns this Agreement and who agrees to become a party to and
be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its best efforts to
----------------------
prepare and, on or before forty-five days after the date of the issuance of the
Shares, file with
<PAGE>
the SEC a Registration Statement or Registration Statements (as is necessary) on
Form S-3 (or, if such form is unavailable for such a registration, on such other
form as is available for such a registration) (any of which may contain a
combined prospectus with other registrations by the Company), covering the
resale of the Registrable Securities. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by the Buyer and its
counsel prior to its filing or other submission, which approval shall not to be
unreasonably withheld.
2.2 Underwritten Offering. If any offering pursuant to a Registration
---------------------
Statement pursuant to section 2.1 involves an underwritten offering, the
Investors who hold a majority of the Registrable Securities subject to such
underwritten offering shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer their
interest in the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
2.3 Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration rights under this section 2.3 written notice of such
determination and, if within twenty days after receipt of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock that may be included in the Registration Statement because, in such
underwriter(s)' good faith judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder; provided that no portion of the equity securities
that the Company is offering for its own account shall be excluded; and provided
further that the Company shall be entitled to exclude Registrable Securities to
the extent necessary to avoid breaching obligations existing prior to the date
hereof to other stockholders of the Company. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided that the Company shall not
exclude any Registrable Securities unless the Company has first excluded all
outstanding securities held by persons that are not entitled to inclusion of
such securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided further that, after
giving effect to the preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in the Registration Statement other than holders of
securities entitled to inclusion of their securities in such Registration
Statement by reason of demand registration rights or whose registration rights
existed prior to the date hereof. No right to registration of Registrable
Securities under this
2
<PAGE>
section 2.3 shall be construed to limit any registration required under section
2.1. The obligations of the Company under this section 2.3 may be waived by
Investors holding a majority of the Registrable Securities. If an offering in
connection with which an Investor is entitled to registration under this Section
2.3 is an underwritten offering, each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to all provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
2.4 Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities, and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner to maintain such eligibility for the use of Form S-3. If Form
S-3 is not available for sale by the Investors of the Registrable Securities,
the Company shall register the sale on another appropriate form.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best efforts
-----------------------
to cause such Registration Statement(s) relating to Registrable Securities to
become effective as soon as possible after the filing thereof, and keep the
Registration Statement(s) effective pursuant to Rule 415 at all times until the
earliest of (a) the date as of which the Investors may sell all of the
Registrable Securities without registration pursuant to Rule 144 promulgated
under the 1933 Act, (b) the second anniversary of the date hereof, and (c) the
date on which the Investors shall have sold all the Registrable Securities (the
"Registration Period"). Such Registration Statement(s) (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file
--------------------------
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s) as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each Investor
-------------------
whose Registrable Securities are included in the Registration Statement(s) and
its legal counsel (a) promptly after the same is prepared and publicly
distributed, filed with the SEC or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and (b) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and
3
<PAGE>
supplements thereto and such other documents as such Investor may reasonably
request to facilitate the disposition of the Registrable Securities owned by
such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Underwriting Agreement. If Investors who hold a majority of the
----------------------
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
3.6 Corrections. As promptly as practicable after becoming aware of
-----------
such event, the Company shall notify each Investor of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
3.7 Stop Orders. The Company shall use its best efforts to prevent
-----------
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, use its best efforts to
obtain the withdrawal of such order at the earliest possible moment and to
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof.
4
<PAGE>
3.8 Selling Stockholders' Counsel. The Company shall permit a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold, to
review and comment on the Registration Statement(s) and all amendments and
supplements thereto a reasonable period prior to their filing with the SEC, and
shall not file any document in a form to which such counsel reasonably objects.
3.9 Comfort Letter and Opinion. At the request of Investors who
--------------------------
hold a majority of the Registrable Securities being sold, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (a)
if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (b) an opinion,
dated as of such date, of counsel representing the Company for purposes of such
Registration Statement, in such form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors.
3.10 Due Diligence. The Company shall make available for
-------------
inspection by any Investor, any underwriter participating in any disposition
pursuant to a Registration Statement, one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors"), all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by such Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information that any Inspector may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.11 Listing. The Company shall use its best efforts either to (a)
-------
cause all the Registrable Securities covered by a Registration Statement to be
listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such
5
<PAGE>
Registrable Securities is then permitted under the rules of such exchange, or
(b) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (a) or (b), the Company
is unsuccessful in satisfying the preceding clause (a) or (b), to secure the
inclusion for quotation on the Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
3.12 Certificates. The Company shall cooperate with the Investors
------------
who hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
3.13 Other Action. The Company shall take all other reasonable
------------
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Underwriting Agreement. If Investors holding a majority of the
----------------------
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and
6
<PAGE>
take such other actions as are reasonably required to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement(s).
4.4 Corrections. Each Investor agrees that, on receipt of any
-----------
notice from the Company of the happening of any event of the kind described in
section 3.6 or 3.7, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.6 or 3.7 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.5 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder, unless such Investor (a) agrees to sell
such Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
------------------------
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify, hold harmless and defend each Investor, each director and officer of
and person, if any, who controls such Investor within the meaning of the 1933
Act or the 1934 Act, and each underwriter (as defined in the 1933 Act) for the
Investors, and each director and officer of, and each person, if any, who
controls, such underwriter within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any
7
<PAGE>
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading, or (c) any violation or alleged violation caused by
the Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by, or caused by, any Indemnified Person or
underwriter for such Indemnified Person in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to section
3.3; (2) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to section 3.3; (3) shall not be
available to the extent that such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (4) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to section 9.
6.2 By the Investors. In connection with any Registration
----------------
Statement in which an Investor is participating, each such Investor agrees to
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in section 6.1, the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based on
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance on and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement or to the extent such Claim is based on any
violation or alleged violation by the Investor of the 1933 Act, 1934 Act or any
other law; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such
8
<PAGE>
Claim; provided that the indemnity agreement in this section 6.2 shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; and provided further that the Investor shall be liable
under this section 6.2 for only such amount of a Claim as does not exceed the
net proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to section 9. Notwithstanding anything to the contrary
herein, the indemnification agreement in this section 6.2 with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities
---------
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to 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
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time after the
threat or commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the
9
<PAGE>
maximum contribution with respect to any amounts for which it would otherwise be
liable under section 6 to the fullest extent permitted by law; provided that (a)
no contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in section
6, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as
-----------
those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and
-------
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements, and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor
------------
owns Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
---------------------------------
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of twenty-five
percent or more of the Registrable Securities if: (a) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, 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 transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, (d) at or before the time the Company receives the written
notice contemplated by clause (b) of this sentence the transferee or assignee
agrees in writing with the Company to become a party to and be bound by this
Agreement, (e) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement, (f) such
transferee shall be an "accredited investor" as that term defined in Rule 501 of
Regulation D under the 1933 Act, and (g) if the assignment occurs after the date
of effectiveness of the Registration Statement
10
<PAGE>
required to be filed pursuant to section 2.1, the transferee agrees to pay all
reasonable expenses of amending or supplementing such Registration Statement to
reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or
-------
permitted to be given under this Agreement shall be sent by registered or
certified mail, return receipt requested, or delivered personally or by
facsimile or courier and shall be effective five days after being placed in the
mail, if mailed, or on receipt, if delivered personally or by courier or
facsimile, in each case properly addressed to the party to receive such notice.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature page of this
Agreement.
Each party shall provide notice to the other party of any change
in address.
11
<PAGE>
11.3 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
11.6 Successors and Assigns. Subject to section 9, this Agreement
----------------------
hall inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause
------------------
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
- --------
SYQUEST TECHNOLOGY, INC. SAE MAGNETICS (HK) LTD.
By: /s/ Edward L. Marinaro By: /s/ Paul Ting
---------------------- ------------------------
Name: Name: PAUL TING
Its: Chairman Its: Vice President
Address:
185 Martindale Lane
---------------------
San Jose, CA 95119
---------------------
_____________________
Telephone: 408-972-5888
-------------------
Facsimile: 408-972-5996
-------------------
13
<PAGE>
Exhibit 10.9
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 25, 1996, by and between SyQuest Technology International ("Sub"),
SYQUEST TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and FREIGHT SOLUTIONS INTERNATIONAL
("Purchaser"), with reference to the following facts:
A. Sub and Parent has failed to make payments to Purchaser when due for
services provided by Purchaser as evidenced by that certain promissory note
in the aggregate amount of $1,759,260.64 (the "Promissory Note Amount").
B. In consideration of cancellation of the amounts owed to Purchaser equal to
the sum of the Promissory Note Amount, Parent will issue to Purchaser
shares of the Common Stock of Parent, to repay the amounts due to Purchaser
with such shares, valued at the last sale price (the "Closing Price") as
reported in the Nasdaq National Market on the last trading day preceding
the Closing Date (as that term is defined below), but in no event shall
Parent be obligated to issue hereunder in excess of 380,000 of its Common
Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Promissory Note Amount. Sub acknowledges that Sub owes Purchaser the
----------------------
Promissory Note Amount for services provided by Purchaser to Sub in
response to the services requested by Sub to Purchaser.
2. Payment.
-------
(a) Issuance of Shares. Parent shall issue to Purchaser on the
------------------
Closing Date the number of shares of Parent's Common Stock equal
to the quotient of the Promissory Note Amount (as it shall then
have been reduced under section 1) divided by the Closing Price,
rounded down to the nearest lower whole number of shares, but in
no event shall Parent be required to issue hereunder in excess of
380,000 shares of its Common Stock. Such shares are hereinafter
called the "Shares".
(b) Payment of Balance. If Parent is unable to issue the full number
------------------
of Shares necessary to repay the Promissory Note Amount due to
the limit on the
<PAGE>
number of Shares provided in section 2(a), Parent shall pay the
balance due (the "Balance"), to Purchaser as follows:
(i) If the Balance is not more than $50,000, the full amount
of the Balance shall be paid by Sub to Purchaser on the
Closing Date, by check or wire transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or
wire transfer to Purchaser in three equal installments of
principal and interest (at the annual rate of ten
percent), one such installment to be paid on each of the
Closing Date, the 90th day after the Closing Date, and the
150th day after the Closing Date; and
(iii) If the Balance is more than $100,000, the Balance shall be
paid by Sub to Purchaser (with interest at the annual rate
of ten percent) over a period of not less than twelve
months, with the payment schedule to be determined by
mutual agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date, Parent and
------------------------------
Sub shall be deemed to have paid and discharged all or a portion
of the Promissory Note Amount equal to the product of the number
of Shares multiplied by the Closing Price. Purchaser agrees
that, except to the extent of the unpaid Balance, if any, Parent
and Sub shall be deemed to have paid and discharged the
Promissory Note Amount in full on the Closing Date. If, after
the Closing Date, any Balance remains unpaid, Parent and Sub
shall be deemed to have paid and discharged the Promissory Note
Amount in full on payment of the final installment of the
Balance.
3. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Grand Cayman and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
2
<PAGE>
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with this
--------------
Agreement, will be validly issued, fully paid, nonassessable and
free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1995, March 31, 1996, and June 30, 1996, its Current Report
on Form 8-K dated June 14, 1996, its Amendment to Form S-3 filed
on August 29, 1996 and supplement thereto, in each case as filed
with the Securities and Exchange Commission (the "SEC"). Such
Reports are hereinafter collectively called the "Reports". To
the best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, as of their respective filing dates (except as
thereafter amended), the Reports complied in all material
respects with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(e) No Contravention. To the best knowledge of the current executive
----------------
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or violation of, any provision of the
certificate of incorporation or by-laws of Parent or Sub; (ii)
constitute, with or without notice or the passage of time or
both, a material breach, violation or default under any order,
writ, injunction, decree, law, statute, rule or regulation,
governmental permit or license of Parent or Sub or to which
either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to,
3
<PAGE>
or filing with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
4. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in financial and business matters that
Purchaser is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of
such investment and is able to protect the Purchaser's own
interests in connection with this transaction. Purchaser
acknowledges having had access to such information concerning
Parent, Sub and their affiliates as Purchaser deems necessary to
enable Purchaser to make an informed decision concerning an
investment in the Shares. In entering into this Agreement and
consummating the transactions contemplated hereby, Purchaser is
relying solely on its own investigation of Parent, Sub and their
affiliates and their businesses, management, financial condition,
properties and prospects and the merits and risks of such
transactions. Purchaser is aware that the Shares have not been
registered under the Securities Act and the Shares may not be
transferred by Purchaser unless they are subsequently registered
under the Securities Act or an exemption from such registration
is available. The Shares shall not be transferred without
registration under the Securities Act or an applicable exemption
therefrom. Purchaser is an accredited investor as that term is
defined in Rule 501(a) of Regulation D promulgated by the SEC
under the Securities Act. Purchaser acknowledges that until the
Shares are sold pursuant
4
<PAGE>
to registration under the Securities Act or an available
exemption therefrom, all certificates representing Shares shall
bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
5. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represents
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Promissory Note Amount and that it has not heretofore voluntarily,
by operation of law or otherwise, assigned or transferred or purported
to assign or transfer to any person whomsoever any such claim.
6. Closing.
-------
(a) The issuance of the Shares shall take place on the date hereof or
on such later date as the conditions in section 6(b) shall have
been satisfied or waived (the "Closing Date"), and shall be
consummated by mail or otherwise in accordance with arrangements
reasonably acceptable to Parent and Purchaser. On the Closing
Date, Parent shall deliver to Purchaser a certificate
representing the Shares and a check for all or part of the
Balance, if any, to be paid on the Closing Date pursuant to
section 2(b) above, in payment, discharge and cancellation of
indebtedness equal to part or all of the Promissory Note Amount
as provided in section 2(c).
(b) The obligations of Parent to issue and sell the Shares and to
perform its other obligations hereunder shall be subject to the
satisfaction as determined by, or waiver by, Parent of the
following conditions on or before the Closing Date:
(i) The representations and warranties of Purchaser in
sections 4 and 5 shall be true and correct on the Closing
Date as if made on such date; and
5
<PAGE>
(ii) A Notification Form of Listing of Additional Shares shall
have been filed with Nasdaq with respect to the Shares at
least fifteen days prior to the Closing Date.
7. General Provisions.
------------------
(a) Successors. This Agreement shall bind and inure to the benefit
----------
of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret, construe
-------------
or enforce this Agreement may be instituted and prosecuted only
in a state court located in Alameda County, State of California,
or, if requisite jurisdiction exists, in the United States
District Court for the Northern District of California. This
Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorneys' Fees. In the event of litigation or other proceedings
---------------
in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings shall be entitled to
reimbursement from the opposing party of all reasonable expenses,
including, without limitation, reasonable attorneys' fees and
expenses and expenses of investigation in connection with such
litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All notices and other communications
--------------------------
required or permitted hereunder shall be in writing in the
English language and shall be deemed duly delivered and received
when delivered personally, when transmitted by facsimile if
receipt is acknowledged by the addressee, two days
6
<PAGE>
after being deposited for next-day or second-day delivery with an
internationally recognized overnight or two-day delivery service,
or four days after being deposited as first class mail with the
United States Postal Service, properly addressed as follows :
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4114
If to Purchaser: Freight Solutions International
989 East Hillsdale Blvd.
Suite 350
Foster City, CA 94404
Attention: Patrick Crenshaw
Facsimile: (415) 573-6991
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
[remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ Michael K. Clemens
-----------------------------------------
Name: MICHAEL K. CLEMENS
Title: VICE PRESIDENT, FINANCIAL SERV.
CORP. SEC.
SYQUEST TECHNOLOGY INTERNATIONAL
By: /s/ Michael K. Clemens
-----------------------------------------
Name: MICHAEL K. CLEMENS
Title: V.P. FINANCIAL SERV. CORP. SEC.
FREIGHT SOLUTIONS INTERNATIONAL
By: /s/ Patrick H. Crenshaw PRESIDENT
-----------------------------------------
Name: PATRICK H. CRENSHAW
Title: PRESIDENT
8
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of October
25, 1996, by and among SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and Freight Solutions International, (the "Buyer"), with reference
to the following facts:
In connection with the Securities Purchase Agreement by and among the Buyer
the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer assigns this Agreement and who agrees to become a
party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare and, on or before forty-five days after the date of the issuance of
the Shares, file with the SEC a Registration Statement or Registration
Statements (as is necessary) on Form S-3 (or, if such form is
<PAGE>
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable
Securities. The Registration Statement(s) (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to and approved by the Buyer and its counsel prior to its filing or
other submission, which approval shall not to be unreasonably withheld.
2.2 Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to section 2.1 involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
2.3 Piggy-Back Registrations. If at any time prior to the
------------------------
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
send to each Investor who is entitled to registration rights under this section
2.3 written notice of such determination and, if within twenty days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company
the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock that may be included in the Registration Statement
because, in such underwriter(s)' good faith judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder; provided that no portion of the
equity securities that the Company is offering for its own account shall be
excluded; and provided further that the Company shall be entitled to exclude
Registrable Securities to the extent necessary to avoid breaching obligations
existing prior to the date hereof to other stockholders of the Company. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities, in proportion to the number of
Registrable Securities sought to be included by such Investors; provided that
the Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities held by persons that are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided
further that, after giving effect to the preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights or whose
registration rights existed prior to the date hereof. No right to registration
of Registrable Securities under this section 2.3 shall be construed to limit any
registration required under section 2.1. The
2
<PAGE>
obligations of the Company under this section 2.3 may be waived by Investors
holding a majority of the Registrable Securities. If an offering in connection
with which an Investor is entitled to registration under this Section 2.3 is an
underwritten offering, each Investor whose Registrable Securities are included
in such Registration Statement shall, unless otherwise agreed by the Company,
offer and sell such Registrable Securities in an underwritten offering using the
same underwriter or underwriters and, subject to all provisions of this
Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
2.4 Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities, and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner to maintain such eligibility for the use of Form S-3. If Form
S-3 is not available for sale by the Investors of the Registrable Securities,
the Company shall register the sale on another appropriate form.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best
-----------------------
efforts to cause such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after the filing thereof, and
keep the Registration Statement(s) effective pursuant to Rule 415 at all times
until the earliest of (a) the date as of which the Investors may sell all of the
Registrable Securities without registration pursuant to Rule 144 promulgated
under the 1933 Act, (b) the second anniversary of the date hereof, and (c) the
date on which the Investors shall have sold all the Registrable Securities (the
"Registration Period"). Such Registration Statement(s) (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file
--------------------------
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s) as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each
-------------------
Investor whose Registrable Securities are included in the Registration
Statement(s) and its legal counsel (a) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one copy of
the Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and (b) such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and
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such other documents as such Investor may reasonably request to facilitate the
disposition of the Registrable Securities owned by such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Underwriting Agreement. If Investors who hold a majority of the
----------------------
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
3.6 Corrections. As promptly as practicable after becoming aware
-----------
of such event, the Company shall notify each Investor of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
3.7 Stop Orders. The Company shall use its best efforts to prevent
-----------
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, use its best efforts to
obtain the withdrawal of such order at the earliest possible moment and to
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof.
3.8 Selling Stockholders' Counsel. The Company shall permit a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the
4
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Registrable Securities being sold, to review and comment on the Registration
Statement(s) and all amendments and supplements thereto a reasonable period
prior to their filing with the SEC, and shall not file any document in a form to
which such counsel reasonably objects.
3.9 Comfort Letter and Opinion. At the request of Investors who
--------------------------
hold a majority of the Registrable Securities being sold, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement (a)
if required by an underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (b) an opinion,
dated as of such date, of counsel representing the Company for purposes of such
Registration Statement, in such form and substance as is customarily given in an
underwritten public offering, addressed to the underwriters and the Investors.
3.10 Due Diligence. The Company shall make available for inspection
-------------
by any Investor, any underwriter participating in any disposition pursuant to a
Registration Statement, one firm of attorneys and one firm of accountants or
other agents retained by the Investors, and one firm of attorneys retained by
all such underwriters (collectively, the "Inspectors"), all pertinent financial
and other records, and pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably deemed necessary
by such Inspector to enable such Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information that any Inspector may reasonably request for purposes of
such due diligence; provided that each Inspector shall hold in strict confidence
and shall not make any disclosure (except to an Investor) or use of any Record
or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not
be required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.11 Listing. The Company shall use its best efforts either to (a)
-------
cause all the Registrable Securities covered by a Registration Statement to be
listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (b) secure designation and quotation of all
the Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or, if, despite the Company's best efforts to satisfy the
preceding clause (a) or (b), the Company is unsuccessful in satisfying the
preceding clause (a) or (b), to secure the inclusion for quotation on the
5
<PAGE>
Nasdaq SmallCap Market for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities.
3.12 Certificates. The Company shall cooperate with the Investors
------------
who hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
3.13 Other Action. The Company shall take all other reasonable
------------
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Underwriting Agreement. If Investors holding a majority of the
----------------------
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required to expedite or facilitate the disposition of
the Registrable Securities, unless such Investor notifies the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
6
<PAGE>
4.4 Corrections. Each Investor agrees that, on receipt of any
-----------
notice from the Company of the happening of any event of the kind described in
section 3.6 or 3.7, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.6 or 3.7 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.5 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder, unless such Investor (a) agrees to sell
such Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
------------------------
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company
--------------
will indemnify, hold harmless and defend each Investor, each director and
officer of and person, if any, who controls such Investor within the meaning of
the 1933 Act or the 1934 Act, and each underwriter (as defined in the 1933 Act)
for the Investors, and each director and officer of, and each person, if any,
who controls, such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (c) any violation or alleged violation caused by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding
7
<PAGE>
clauses (a), (b) and (c) being, collectively, "Violations"). Subject to the
restrictions in section 6.4 with respect to the number of legal counsel, the
Company shall reimburse each Indemnified Person promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by such Indemnified Person in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary herein, the
indemnification agreement in this section 6.1: (1) shall not apply to a Claim
arising out of or based on a Violation that occurs in reliance on and in
conformity with information furnished in writing to the Company by, or caused
by, any Indemnified Person or underwriter for such Indemnified Person in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to section 3.3; (2) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to section 3.3; (3) shall not be available to the extent that such
Claim is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company; and (4) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to section 9.
6.2 By the Investors. In connection with any Registration
----------------
Statement in which an Investor is participating, each such Investor agrees to
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in section 6.1, the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based on
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance on and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement or to the extent such Claim is based on any
violation or alleged violation by the Investor of the 1933 Act, 1934 Act or any
other law; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided that the indemnity agreement in this section 6.2 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; and provided further that the Investor shall be liable
under this section 6.2 for only such amount of a Claim as does not exceed the
net proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to section 9. Notwithstanding anything to the contrary
herein, the indemnification agreement in this
8
<PAGE>
section 6.2 with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive
---------
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so furnished
in writing expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to 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
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time after the
threat or commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) 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.
9
<PAGE>
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as
-----------
those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and
-------
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements, and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
8.3 Confirmation. Furnish to each Investor so long as such
------------
Investor owns Registrable Securities, promptly on request, (a) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (b) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (c) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
---------------------------------
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of twenty-five
percent or more of the Registrable Securities if: (a) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, 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 transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, (d) at or before the time the Company receives the written
notice contemplated by clause (b) of this sentence the transferee or assignee
agrees in writing with the Company to become a party to and be bound by this
Agreement, (e) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement, (f) such
transferee shall be an "accredited investor" as that term defined in Rule 501 of
Regulation D under the 1933 Act, and (g) if the assignment occurs after the date
of effectiveness of the Registration Statement required to be filed pursuant to
section 2.1, the transferee agrees to pay all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
10
<PAGE>
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or
-------
permitted to be given under this Agreement shall be sent by registered or
certified mail, return receipt requested, or delivered personally or by
facsimile or courier and shall be effective five days after being placed in the
mail, if mailed, or on receipt, if delivered personally or by courier or
facsimile, in each case properly addressed to the party to receive such notice.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Douglas L. Hammer, Esq.
If to the Buyer, at the addresses on the signature page of this Agreement.
Each party shall provide notice to the other party of any change in
address.
11.3 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
11
<PAGE>
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
11.6 Successors and Assigns. Subject to section 9, this Agreement
----------------------
shall inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause
------------------
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
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SYQUEST TECHNOLOGY, INC. FREIGHT SOLUTIONS INTERNATIONAL
By: /s/ Michael K. Clemens By: /s/ Patrick H. Crenshaw
----------------------- ------------------------
Name: Michael K. Clemens Name: Patrick H. Crenshaw
Its: VICE PRESIDENT, FINANCIAL Its:
SERVICES, CORP. SECURITY Address:
989 East Hillsdale Blvd.
Suite 350
Foster City, CA94404
Telephone: (415) 573-6990
Facsimile: (415) 573-6991
12
<PAGE>
EXHIBIT 99.1
SyQuest Technology, Inc.
Pro Forma Balance Sheet
-----------------------
(in thousands)
<TABLE>
<CAPTION>
Estimated Pro Forma Pro Forma
9/30/96 Adjustments 9/30/96
--------- ----------- ---------
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash equivalents $ 3,329 (6) $28,500 $ 31,829
Short Term Investments 200 200
Account Receivable 32,669 32,669
Inventories 12,508 12,508
Other Current Assets 2,741 2,741
--------- ------- ---------
Total Current Assets 51,447 28,500 79,947
Property, Equipment and Leasehold Improvements 58,004 58,004
Less: Accumulated Depreciation (30,176) (30,176)
--------- ------- ---------
Net Property and Equipment 27,828 27,828
Other Assets 1,938 1,938
--------- ------- ---------
Total Assets $ 81,213 $28,500 $ 109,713
========= ======= =========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable (1) $ 27,424 (5) $(4,224) $ 23,200
Accrued Liabilities 17,355 17,355
Notes Payable to Bank 19,881 19,881
Short Term Notes Payable (1) 20,173 (5) (4,125) 16,048
Convertible Subordinated Debenture, Current Portion 2,559 2,559
--------- ------- ---------
Total Current Liabilities 87,392 (8,349) 79,043
Short Term Notes Payable (1) 17,648 (5) (883) 16,765
Deferred Rent 192 192
Deferred Income Taxes 1,139 1,139
Convertible Subordinated Debenture 5,120 5,120
Stockholders' Equity
Preferred Stock (2) 18,233 (6) 28,500 46,733
Common Stock and Additional Paid in Capital (3) 84,454 (5) 9,232 93,686
Treasury Stock (12,855) (12,855)
Retained Earnings (4) (120,110) (120,110)
--------- ------- ---------
Total Stockholders' Equity (30,278) 37,732 7,454
Total Liabilities and Stockholders' Equity $ 81,213 $28,500 $ 109,713
========= ======= =========
</TABLE>
<PAGE>
Confidential
SyQuest Technology, Inc.
Unaudited Pro Forma Balance Sheet
The unaudited pro forma consolidated balance sheet for SyQuest Technology, Inc.
(the Company) presents the consolidated financial position for the Company after
giving effect to issuance of preferred stock, and conversion of notes payable
and convertible subordinated debentures to common stock subsequent to September
30, 1996. The financial position for the Company at September 30, 1996 is
unaudited, and the Company's management expects to file audited results in its
Form 10-K on or before December 29, 1996.
(1) As of September 30, $38.9 million of accounts payable had been converted
into notes payable, part of which is classified as short term notes payable and
part of which is classified as long term notes payable. These notes are not
convertible into stock of the Company, and may only be so converted upon
execution of additional agreements.
(2) As of September 30, $18.2 million of redeemable convertible preferred stock
was reclassified into preferred stock because it can no longer be redeemed by
the holder.
(3) As of September 30, a vendor of the Company exchanged $2.3 million of notes
payable into shares of common stock at a price of $6.30 per share.
(4) Includes an estimated loss of $10.4 million for fourth quarter Fiscal 1996.
(5) Subsequent to September 30, certain vendors exchanged an additional $9.2
million of notes payable to common stock. The number of shares, and the average
price per share, are as follows:
<TABLE>
<CAPTION>
Date of Note Shares Average
Exchange Exchange Received Price per Share
<S> <C> <C> <C>
10/23/96 $ 6,080,397 992,717 $ 6.13
10/25/96 1,759,261 293,210 6.00
10/18/96 1,392,440 218,422 6.37
----------- --------- ------
Total $ 9,232,098 1,504,349 $ 6.14
</TABLE>
(6) Subsequent to September 30, the Company issued an additional $30 million of
preferred stock. Net proceeds from the sale of preferred stock was $28.5
million. Preferred stock is convertible after December 15, 1996, into shares of
common stock at a price based on the market value at the time of
conversion.
As of September 30, 1996, and as adjusted to reflect the exchange of debt to
equity occuring thereafter (See Note 5, above) the total issued and outstanding
shares of common stock are 13,867,370.
