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As filed with the Securities and Exchange Commission on July 1, 1996.
Registration No. _________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------------
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2793941
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
47071 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(510) 226-4000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------------
EDWIN L. HARPER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SYQUEST TECHNOLOGY, INC.
47071 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(510) 226-4000
(Name, address, including zip code and telephone number,
including area code of agent for service)
------------------------------
COPIES TO:
TWILA L. FOSTER
JACKSON TUFTS COLE & BLACK, LLP
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans please check the following
box.|_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box . |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- --------------------------- -------------------------- -------------------------- -------------------------- ----------------------
Title of Securities Amount to be Registered Proposed Maximum Proposed Maximum Amount of
to be Registered Offering Price Aggregate Registration Fee
Per Share (1) Offering Price (1)
- --------------------------- -------------------------- -------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock $.001 par 2,291,891 (2) $7.375 $16,902,696.125 $5,828.52
value . . . . . . . . . .
- --------------------------- -------------------------- -------------------------- -------------------------- ----------------------
<FN>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 based on the average of the high and
low prices for the Common Stock, as reported on the Nasdaq National Market
on June 26, 1996.
(2) Constitutes shares issuable upon the conversion of the Registrant's 7%
Cumulative Convertible Preferred Stock, Series 1, as such number may be
adjusted in accordance with Rule 416.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED ___________, 1996
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
2,291,891 SHARES
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
----------------
This Prospectus relates to 2,291,891 shares of Common Stock, par value
$.001 (the "Common Stock"), of SyQuest Technology, Inc. ("SyQuest" or the
"Company") which are being offered and sold by certain stockholders of the
Company (the "Selling Stockholders"), consisting up to 2,291,891 shares (as such
number may be adjusted in the event of stock splits or stock dividends) issuable
upon conversion of the 20,000 shares of the Company's 7% Cumulative Convertible
Preferred Stock, Series 1, par value $.001 (the "Preferred Stock"), which are
presently outstanding. The Preferred Stock has a conversion price which is the
lesser of (i) seventy-seven percent (77%) of the average market price for the
Common Stock for the five trading days prior to conversion or (ii) $11.00,
subject to adjustment. (See "Material Changes - Preferred Stock" for a further
description of the conversion price for the Preferred Stock.) The Selling
Stockholders, directly or through agents, broker-dealers or underwriters, may
sell the Common Stock offered hereby from time to time on terms to be determined
at the time of sale, in transactions on the Nasdaq National Market or in
privately negotiated transactions. The Selling Stockholders and any agents,
broker-dealers or underwriters that participate in the distribution of the
Common Stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"), and any commission received by
them and any profit on the resale of the Common Stock purchased by them may be
deemed to be underwriting discounts or commissions under the Act. See "Selling
Stockholders" and "Plan of Distribution." The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders. See "Plan of
Distribution."
The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "SYQT." The last reported sales price of the Company's Common
Stock on the Nasdaq National Market on June 27, 1996 was $8 3/8 per share.
-----------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE 6 OF THIS PROSPECTUS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are approximately $60,000. See "Plan of
Distribution." The aggregate proceeds to the Selling Stockholders from the
Common Stock will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any.
The Company has agreed to indemnify the Selling Stockholders and
certain other persons against certain liabilities, including liabilities under
the Act.
The date of this Prospectus is __________, 1996
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
STATE OR OTHER JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH STATE OR JURISDICTION.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information may be inspected and copied at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to the date hereof.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Common Stock
offered hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information contained
in such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement, including exhibits thereto, may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, Washington, D.C., 20549, upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under
the Exchange Act are hereby incorporated by reference into this Prospectus:
(i) The Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995, as amended by Form 10-K/A, including
all material incorporated by reference therein.
(ii) The Company's Current Report on Form 8-K dated October 27,
1995.
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<PAGE>
(iii) The Company's Current Report on Form 8-K dated November 21,
1995.
(iv) The Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995.
(v) The Company's Current Report on Form 8-K dated January 23,
1996.
(vi) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
(vii) The Company's Current Report on Form 8-K dated June 14, 1996.
(viii) The Company's Registration Statement on Form 8-A registering
the Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to SyQuest Technology, Inc., 47071
Bayside Parkway, Fremont, California 94538, telephone (510) 226-4000, Attn: John
W. Luhtala, Senior Vice President, Finance and Chief Financial Officer,.
-------------------
"SyQuest," "EZ135," and "EZ230" are trademarks of the Company. This
Prospectus also includes trademarks of companies other than SyQuest Technology,
Inc.
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<PAGE>
THE COMPANY
The Company designs, develops, manufactures, and markets removable hard
disk cartridges, the associated disk drives and free-standing storage systems.
The Company's products combine the advantages of fixed hard disk drives with the
benefits of removability, which include unlimited incremental expansion of data
storage capacity, transfer and sharing of data and software among personal
computers, and backup, archival storage and physical security of data. The
Company's principal products have been 5.25 inch and 3.5 inch cartridges, drives
and storage systems used with personal computers and work stations manufactured
and sold by manufacturers of such products. These products are typically
purchased by distributors, mail order firms, national retail chains, value added
resellers, original equipment manufacturers ("OEMs") for integration into their
equipment, government contractors and others for resale to the end users.
The Company's principal executive offices are located at 47071 Bayside
Parkway, Fremont, California 94538, telephone (510) 226-4000.
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<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE FOLLOWING
RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS
PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS
SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS
WHEREVER THEY APPEAR IN THIS PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED HERE. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW, AS WELL AS THOSE
DISCUSSED ELSEWHERE HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS.
NEED FOR ADDITIONAL FINANCING; FUTURE CAPITAL NEEDS.
The Company has incurred losses in its most recent fiscal year ended
September 30, 1995 and its fiscal quarters ended December 31, 1995 and March 31,
1996. The Company announced in its Form 10-Q for the quarter ended March 31,
1996 that it did not expect to be profitable for the quarter ended June 30,
1996.
The Company is presently in need of additional cash to meet its working
capital needs. On June 14, 1996 the Company closed the sale of 20,000 shares of
its Preferred Stock for $20 million in gross proceeds. The Company also is
presently working with its suppliers to negotiate satisfactory repayment
arrangements but there can be no assurance that such negotiations will be
successful.
As of March 31, 1996, the Company had $7.2 million in cash. During the
nine months ended March 31, 1996, the Company used $28.3 million in operating
activities and an additional $11.5 million in the purchase of equipment and
leasehold improvements. The Company expects the current sources of financing
available to the Company will be sufficient to fund the Company's operations
through the end of its fiscal year; however, unless suppliers cooperate the
Company may need additional funds for new product introduction and to pay down
suppliers through the end of the Company's current fiscal year. The Company will
require additional funds during its first quarter in the next fiscal year or
thereafter to finance its operations. The precise amount and timing of the
Company's funding needs cannot be determined at this time, and will depend upon
a number of factors, including the market demand for the Company's products, the
progress of the Company's product development efforts, the availability of
critical components, the Company's strategic alliances for the manufacture of
its products, and the Company's inventory management. There can be no assurance
that funds required by the Company in the future will be available on terms
satisfactory to the Company. The inability to obtain needed funding on
satisfactory terms would have a material adverse effect on the Company's
business and financial results.
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<PAGE>
RESTRUCTURING.
In the second quarter of fiscal 1996 the Company announced a
restructuring plan to relocate its manufacturing capabilities from Singapore to
Penang, Malaysia. The Company accrued $1.6 million for write-off of capital
assets as well as $2.0 million for severance compensation and other benefits for
the affected employees and for the closure of the Singapore facilities. The
Company began implementation of the restructuring plan in April 1996 and
anticipates the completion of the restructuring by June 30, 1996. The estimated
total cost of the restructuring is approximately $4.0 million. There can be no
assurance that the restructuring will be completed as anticipated at the
anticipated costs or that the goals of the restructuring will be accomplished.
UNCERTAINTY OF MARKET ACCEPTANCE OF PRODUCTS.
The Company's future success will depend upon market acceptance of its
new products and upon the Company's ability to establish its new products as
industry standards. The Company introduced its EZ Flyer 230 in June 1996. The EZ
Flyer 230 is a newly designed product for the Company with 230 megabyte capacity
which has not yet been sold or manufactured in commercial quantities and the
Company can not yet accurately assess the market acceptance the EZ230 will
achieve due to uncertainties regarding the market for the EZ230 and the
competition it will face. The Company is still continuing to refine the EZ230
and there can be no assurance that the Company will not experience problems or
delays as it begins to manufacture and ship the EZ230 in higher volumes.
The SyQuest technology is different from the most widely used data
storage devices today (hard disk drives, floppy disk drives and CD-ROM drives).
No new type of read/writable data storage device has achieved widespread market
acceptance in recent years and there can be no assurance that the Company's new
products will achieve widespread market acceptance. The extent to which the
Company's new products achieve a significant market presence will depend upon a
number of factors, including the price, performance and other characteristics of
competing solutions introduced by other vendors, the timing of the introduction
of such products, and the success of the Company in establishing OEM
arrangements for the Company's new products. "See Risk-Factor - Competition" and
"Shortage of Critical Components; Absence of Supply Contracts; Dependence on
Suppliers." There can be no assurance that the Company will be successful in
satisfying any of these factors. In addition, the two formats of removable-media
storage which have gained widespread market acceptance to date--floppy disk
drives and CD-ROM drives--are both used by software manufacturers as a means of
software distribution. The Company's products are not currently used for
software distribution. The failure of the Company's new products to achieve
widespread commercial acceptance would have a material adverse effect on the
Company's business.
INTRODUCTION OF EZ135 AND EZ230.
The Company's EZ135 products accounted for 16% of the Company's sales
in the last quarter of fiscal 1995, 42% in the first quarter of fiscal 1996 and
46% in the second quarter of fiscal 1996. The Company expects that sales of the
EZ135 products will account for a less significant percentage of its sales for
the balance of the 1996 fiscal year. The Company's EZ135 products commenced
commercial shipment in September 1995. Although sales of EZ135 products
contributed significantly to the Company's revenue during the last quarter of
the 1995 fiscal year and the first half of fiscal year 1996, the Company lost
money on the EZ135 due to
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<PAGE>
design-related issues impacting the cost of manufacturing the product (which
could not be corrected as the Company originally anticipated), and due to
competitive pressures requiring the price to be lower than cost. The Company
presently expects to cease selling the EZ 135 by October 1996.
The Company introduced its EZ Flyer 230 on June 3, 1996. Commercial
shipments of the EZ230 commenced on June 1, 1996. There can be no assurance that
the EZ230 will be accepted in the marketplace or achieve significant sales (see
"Risk Factors-Uncertainty of Market Acceptance of Products") or that the Company
will be able to sell the EZ230 at a price in excess of the cost of manufacturing
the EZ230.
SHORTAGES OF CRITICAL COMPONENTS; ABSENCE OF SUPPLY CONTRACTS; DEPENDENCE ON
SUPPLIERS.
Many components incorporated in, or used in the manufacture of, the
Company's products are currently only available from sole source suppliers.
Moreover, the Company has experienced difficulty in the past, and expects to
continue to experience difficulty in the future, in obtaining a sufficient
supply of many key components (due to the shortage of cash to pay suppliers and
other reasons). During the fourth quarter of the 1995 fiscal year and the first
quarter of the 1996 fiscal year the Company experienced vendor-related component
supply and quality problems which limited the Company's ability to fill its open
customer backlog on the EZ135. During the 1996 fiscal year, the Company has
experienced disruption in its supply of certain of components (due to the
shortage of cash to pay suppliers). In addition, the Company has been advised by
certain sole source suppliers, including the manufacturers of critical
components, that they will not supply any additional components which in most
circumstances will be resolved once SyQuest reduces its payables to such
suppliers to below 90 days or negotiates appropriate terms to defer past due
payments to such suppliers. Component shortages due to limited cash availability
affected the Company's ability to produce EZ230 products and limited the
Company's ability to implement certain cost reduction and productivity
improvement plans, and the Company expects that the shortage of components may
limit production of its products for the foreseeable future.
The Company purchases all of its sole and limited source components and
equipment pursuant to purchase orders placed from time to time and has no
guaranteed supply arrangements. The inability to obtain sufficient components
and equipment, to obtain or develop alternative sources of supply at competitive
prices and quality, or to avoid manufacturing delays could prevent the Company
from producing sufficient quantities of its products to satisfy market demand,
result in delays in product shipments, increase the Company's material or
manufacturing costs or cause an imbalance in the inventory level of certain
components. Moreover, difficulties in obtaining sufficient components may cause
the Company to modify the design of its products to use a more readily available
component, and such design modifications may result in product performance
problems. Any or all of these problems could in turn result in the loss of
customers, provide an opportunity for competing products to achieve market
acceptance and otherwise adversely effect the Company's business and financial
results.
COMPETITION.
The data storage industry is highly competitive. The Company believes
that its products compete most directly with other removable-media data storage
devices, such as disk drives offered by Iomega Corporation and magneto optical
disk drives. Although the Company believes that its products offer performance
and certain other advantages over most other
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<PAGE>
removable-media storage devices available today, the Company believes that the
price/performance levels of existing removable-media products will improve and
that other companies will introduce new removable-media storage devices.
Accordingly, the Company believes its products will face increasingly intense
competition. In particular, a consortium comprised of Compaq Computer, 3M,
Insite and Matsushita-Kotobuki Electronics Industries Ltd. has announced and is
selling the LS120, a high-capacity floptical drive that is compatible with
conventional floppy disks. Mitsubishi Electric Corp. and Mitsumi have also
announced that they plan to manufacture a high capacity, floppy drive that is
downward compatible with existing floppy diskettes. If successfully marketed,
these drives would compete with the EZ135 and any successor to the EZ135. The
Iomega Zip drive, a high capacity floppy disk drive, is a competitor to the
SyQuest EZ 135 and EZ 230. The JAZ drive is Iomega's first removable hard drive
and competes directly with SyQuest's products. In addition, to the extent that
SyQuest drives are used for incremental primary storage capacity, they also
compete with conventional hard disk drives. Also, the leading suppliers of
conventional hard disk drives could at any time determine to enter the
removable-media storage market.
As new and competing removable-media storage solutions are introduced,
it is possible that the first such solution to achieve a significant market
presence will emerge as an industry standard and achieve a dominant market
position. If such is the case, there can be no assurance that the Company's
products would achieve significant market acceptance, particularly given the
Company's size and market position vis-a-vis other competitors.
TECHNOLOGICAL CHANGE AND NEW PRODUCTS.
The Company operates in an industry that is subject to both rapid
technological change and rapid change in consumer demands. For example, over the
last 10 years the typical hard disk drive included in a new personal computer
has increased in capacity from approximately 40 megabytes (MBs) to 1 gigabyte
(GB) or more, while the price of a hard disk drive has remained constant or even
decreased. The Company's future success will depend in significant part on its
ability to continually develop and introduce, in a timely manner, new removable
disk drives products with improved features, and to develop and manufacture
those new products within a cost structure that enables the Company to sell such
products at lower prices than those of comparable products today. In addition
the Company is dependent upon technological developments from other vendors for
the components in its products (i.e., heads, semiconductor devices and media).
The Company has recently introduced its EZ Flyer 230 which is targeted for sale
to the Company's traditional customer base in the desktop publishing, prepress
and service bureau segments. The recently announced SyJet 1.3 GB removable
cartridge hard drive is targeted towards computer, audio and video OEMS as well
as power users. The Company believes that this product will compete with the
Iomega Jaz. There can be no assurance that the Company will be successful in
developing, manufacturing and marketing new and enhanced products (including the
EZ Flyer 230 and the SyJet 1.3 GB) that meet both the performance and price
demands of the data storage market.
DEPENDENCE ON STRATEGIC MARKETING ALLIANCE.
The Company's business strategy depends in significant part on
establishing successful strategic alliances with a variety of key companies
within the computer, audio and video industries. Among the types of alliances
contemplated by the Company's business strategy are: OEM arrangements with
personal computer, audio and video manufacturers that will include SyQuest
products as a standard feature or factory-installed option in their personal
computers;
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<PAGE>
reseller arrangements (including private and co-branding arrangements) with
major vendors of computer products covering the resale of the Company's products
by such companies; and licensing arrangements under which the Company grants
certain computer manufacturers on a royalty-bearing basis the right to
manufacture and sell its drives or media. Moreover, the Company believes that
establishing strategic alliances (especially OEM arrangements) is critical to
the success of its business, and there can be no assurance that the Company will
be successful in doing so. In addition, the Company's strategic alliances are
generally not covered by binding contracts and may be subject to unilateral
termination by the Company's strategic partners, and also may require the
Company to share control over its manufacturing and marketing programs and
technologies.
RELIANCE ON MANUFACTURING RELATIONSHIPS.
The Company plans to use independent parties to manufacture for the
Company, a majority of the Company's components. The Company currently has
manufacturing relationships with Nomai for cartridges and others for manufacture
and subassembly of components. There can be no assurance that the Company will
be successful in maintaining such relationships or in establishing additional
relationships in the future, or in managing such manufacturing relationships.
The Company's manufacturing relationships are generally not covered by binding
contracts and may be subject to unilateral termination by the Company's
manufacturing partner. Moreover, there can be no assurance that third-party
manufacturers will be able to meet the Company's quantity or quality
requirements for manufactured products.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS.
The Company has experienced and in the future may continue to
experience significant fluctuations in its quarterly operating results. Factors
such as price reductions, the introduction and market acceptance of new
products, product returns, the availability of critical components and the lower
gross margins associated with the Company's newly introduced products could
contribute to this quarterly variability. Moreover, the Company's expense levels
are based in part on expectations of future sales levels, and a shortfall in
expected sales could therefore result in a disproportionate decrease in the
Company's results of operations. As a result of these and other factors, it is
likely that the Company's operating results in some future period will be below
the expectations of investors, which would be likely to result in a significant
reduction in the market price of the Common Stock.
DEPENDENCE ON PROPRIETARY TECHNOLOGY.
The Company's success is heavily dependent upon the establishment and
maintenance of proprietary technologies. The Company relies on a combination of
patent, copyright and trade secret law to protect the technology in its drives
and cartridges. Although the Company has filed over 136 U.S. and foreign patent
applications relating to its drives and hard disk cartridges, only 64 patents
have as yet been issued and there can be no assurance that additional patents
will issue in the future. There can be no assurance that the steps taken by the
Company to protect its technology will be adequate to prevent misappropriation
of its technology by third parties, or that third parties will not be able to
independently develop similar technology. In particular, the Company's sales
have been and will continue to be materially adversely affected when parties
develop cartridges compatible with the Company's disk drives. Moreover, because
the Company's cartridges have significantly higher gross margins than the
relevant drives, the
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<PAGE>
Company's results of operations have been and will continue to be
disproportionately affected by any such sales shortfall.
From time to time the Company receives notices alleging that the
Company's products infringe third party proprietary rights. Patent and similar
litigation frequently is complex and expensive and its outcome can be difficult
to predict. There can be no assurance that the Company will prevail in any
proceedings that may be commenced against the Company. In addition, certain
technology used in the Company's products is licensed from third parties. The
termination of any such license arrangements could have a material adverse
effect on the Company's business and financial results.
INTERNATIONAL OPERATIONS.
International sales generated a significant portion of the Company's
revenues in fiscal year 1995 and to date in fiscal year 1996 and the Company
expects international sales to continue to comprise a significant percentage of
its total sales in the future. The international portion of the Company's
business is subject to a number of inherent risks, including difficulties in
building and managing foreign operations and foreign reseller networks, the
differing product needs of foreign customers, fluctuations in the value of
foreign currencies, import-export duties and quotas, and unexpected regulatory,
economic or political changes in foreign markets. Moreover, the Company relies
on foreign companies for the supply of certain critical components and is
increasingly relying on foreign companies for the manufacture of certain of its
products and these relationships may be subject to some of the same risks
affecting its international sales. There can be no assurance that these factors
will not adversely affect the Company's international sales or its overall
financial performance.
The Company's international sales are predominantly denominated in U.S.
dollars. Accordingly, a significant increase in the valuation of the U.S. dollar
and the resultant increase in the price of the Company's foreign currency priced
products could have a negative effect on the Company's sales.
MANAGEMENT CHANGES; DEPENDENCE ON KEY PERSONNEL.
The Chairman of the Board, the President and Chief Executive Officer,
the Chief Financial Officer, the Executive Vice President-Sales, the Chief
Technical Officer, the General Counsel and the Vice President-Operations, have
all just recently joined the Company. Syed Iftikar, the Company's former
Chairman of the Board, President and Chief Executive Officer, ceased to be an
officer of the Company on June 13, 1996.
The Company's success will depend in large part upon the capabilities
of the new management team. The inability of such individuals to turn around the
financial situation of the Company could have a material adverse effect on the
Company. The Company's success will also depend in significant part upon its
ability to attract and retain highly-skilled management and other personnel.
Competition for such personnel in the computer industry is intense, and the
Company has from time to time experienced difficulty in finding sufficient
numbers of qualified professional and production personnel. The Company has had
a number of other executive officers leave the Company over the last six months.
There can be no assurance that the Company will be successful in attracting and
retaining the quantity and quality of personnel that it needs.
-11-
<PAGE>
SUPPLIER WORKOUTS.
As a result of the Company's current cash position, the Company is in
the process of working out certain repayment terms with certain of its
suppliers. The Company and its subsidiary are negotiating agreements with
suppliers pursuant to which shares of Common Stock could be issued to the
suppliers (which shares will be required to be registered for resale).
SyQuest has also been negotiating with other suppliers to extend the
payment dates on the amounts owing to the suppliers. If a supplier does not
agree to extend the date of payment the supplier may bring legal action to
collect on the receivable. Certain suppliers may also choose to not continue to
do business with SyQuest due to the delays in receiving payment in the amounts
due.
PREFERRED STOCK FINANCING.
On June 14, 1996, the Company issued 20,000 shares of its Preferred
Stock for aggregate net proceeds (after payment of finders' fees but before
payment of legal expenses and other costs incurred in the placement) to the
Company of approximately $19,000,000. The Preferred Stock bears cumulative
dividends at the rate of 7% per year and is convertible into SyQuest Common
Stock at a conversion price equal to the lesser of (i) seventy-seven percent
(77%) of the average market price of SyQuest Common Stock for the five
consecutive trading days ending one day prior to the date of the Conversion
Notice or $11.00. The conversion prices will be adjusted if the Registration
Statement registering the underlying Common Stock is not declared effective by
the Commission by September 3, 1996 based on a three percentage point reduction
in the adjusting conversion price and a three percent reduction in the fixed
conversion price for each month thereafter for which the Registration Statement
is not declared effective. The conversion price as of June 27, 1996 was
$6.477625 per share. The conversion price for the Preferred Stock is also
similarly adjusted for each month that the Registration Statement is not current
or during which a stop order has been issued.
The Company must redeem the Preferred Stock by May 31, 1999 with cash
(or at the Company's option with stock subject to limits on the number of shares
issuable in lieu of cash)). The Company must redeem the Preferred at 130% of its
original sales price if the Company's Common Stock ceases to be listed on the
Nasdaq National Market, Nasdaq Small Cap or the Nasdaq Electronic Bulletin
Board. The Company has optional redemption rights under certain circumstances
with payment of certain premiums.
The Company may not issue more than 2,291,891 shares of Common Stock
upon conversion of the Preferred unless the Company's stockholders approve the
issuance of additional shares. In the event the Preferred stockholders desire to
convert the Preferred Stock into Common Stock and the share limit precludes a
full conversion, the Company is required to redeem the remaining Preferred at
130% of the original Preferred sales price unless more than $10,000,000 in
Preferred Stock is to be redeemed as a result of this limit in which event the
redemption price is 110% of the sales price.
There can be no assurances that the Company will not be required to
issue significant amounts of its Common Stock upon conversion of the Preferred
Stock or be required to redeem shares of stock for which it has limited cash to
accomplish. The conversion price as of June 27, 1996 would, but for the
limitation, require the issuance of 3,087,549 shares of Common Stock.
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<PAGE>
See "Material Changes - Preferred Stock" for further information
concerning the Company's Preferred Stock.
VOLATILITY OF STOCK PRICE; SHARES AVAILABLE FOR FUTURE SALE; ABSENCE OF
DIVIDENDS.
The market prices for high technology companies including the
securities of SyQuest, have been volatile. Announcements of technological
innovations or new products by SyQuest or its competitors, as well as
period-to-period fluctuations in revenues and financial results, may have a
significant impact on the market price of the Company's Common Stock. The
Company has not paid any cash dividends since its inception, and it does not
anticipate paying cash dividends in the foreseeable future.
The Company's Common Stock has recently experienced substantial levels
of short selling, which has also affected the volatility of the market price of
the Company's Common Stock. Factors such as announcements of new products by the
Company or its competitors, variations in the Company's quarterly operating
results, continued high levels of short selling of the Common Stock or general
economic or stock market conditions unrelated to the Company's operating
performance may have a significant impact on the market price of the Common
Stock. In addition, the Company believes that electronic bulletin board postings
regarding the Company on America Online and other similar services, certain of
which have in the past contained false information about Company developments
have in the past and may in the future contribute to volatility in the market
price of the Common Stock. Any information concerning the Company, including
without limitation projections of future operating results, appearing in such
on-line bulletin boards or otherwise emanating from a source other than the
Company should not be relied upon as having been supplied or endorsed by the
Company.
As of March 31, 1996, the Company had approximately 11,402,664 shares
of Common Stock outstanding. As of June 27, 1996, the Preferred Stock was
convertible into 3,087,549 shares of Common Stock, subject to adjustment based
upon adjustments in the conversion price (and limited to 2,291,891 shares as a
result of the terms of the Preferred Stock currently in effect). (See "Risk
Factors Preferred Stock Financing" above.) As of March 31, 1996 the Company also
has options outstanding to purchase approximately 2,113,198 shares of Common
Stock. Pursuant to this Registration Statement, the Company is registering for
resale 2,291,891 shares issuable upon conversion of the Preferred Stock. These
shares may be sold into the public securities markets after this Registration
Statement becomes effective. Future sales of Common Stock in the public
securities markets may cause substantial fluctuations (including substantial
price reductions) in the price of the Company's Common Stock over short time
periods. Additionally, the price of the Company's Common Stock will be sensitive
to the performance and prospects of the Company and other factors.
RISK OF LOSING NASDAQ LISTING.
As of March 31, 1996 the Company did not meet the continued listing
requirements for Nasdaq National Market Securities. The Company did not meet the
net tangible asset requirement or the capital and surplus requirement. If the
Company continues to experience losses it will be unable to maintain the
standards for continued listing and the Common Stock could be subject to
delisting from the Nasdaq System. Trading, if any, in the listed securities
would thereafter be conducted on the NASD Electronic Bulletin Board or in what
is commonly referred to as the "pink sheets." As a result, an investor may find
it difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's securities.
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<PAGE>
CERTAIN MARKETING AND SALES RISKS.
As is common practice in its industry, the Company's arrangements with
its customers generally allow customers, in the event of a price decrease,
credit equal to the difference between the price originally paid and the new
decreased price on units in the customers' inventories on the date of the price
decrease. When a price decrease is anticipated, the Company establishes reserves
for amounts estimated to be reimbursed to qualifying customers. There can be no
assurance that these reserves will be sufficient or that any future returns or
price protection charges will not have a material adverse effect on the
Company's results of operations, particularly because future results will be
heavily dependent on recently introduced products for which the Company has
little or no operating history. In addition, customers generally have the right
to return excess inventory within specified time periods. Any build up of
inventory at the Company or in its distribution channels that does not sell
through to end users could have a material adverse effect on the Company's
operating results and financial condition.
As is typical in the industry, from time to time the Company
experiences product defects and product returns. There can be no assurance that
the Company will not experience quality or reliability problems in the future
which have an adverse effect on the Company's business or financial results.
The Company markets its products primarily through computer product
distributors and retailers. Distribution channels for personal computers and
accessories have been characterized by rapid change, including consolidation and
financial difficulties of distributors. The loss or ineffectiveness of any of
the Company's major distributors could have a material adverse effect on the
Company's results of operations. In addition, since the Company grants credit to
its customers, a substantial portion of outstanding accounts receivable are due
from computer product distributors and certain large retailers. At March 31,
1996, the customers with the three highest outstanding accounts receivable
balances totaled $19 million, or 39%, of gross accounts receivable. If any one
or a group of these customers' receivable balances should be deemed
uncollectible, it would have a material adverse effect on the Company's results
of operations and financial condition.
CLASS ACTION AND SHAREHOLDER DERIVATIVE LAWSUITS.
The Company and certain of its officers and directors are presently
defendants in three putative class action lawsuits and one shareholder
derivative action. The action entitled Irving Ravens, et al. v. Syed H. Iftikar,
et al. was filed on April 2, 1996 in the United States District Court for the
Northern District of California. On May 24, 1996, another purported securities
class action Bellezza, et al. v. Iftikar, et al., No. 96-1926-VRW was filed in
the United States District Court for the Northern District of California (Ravens
and Bellezza are referred to collectively as the "Federal Lawsuits"). The action
entitled Gary S. Kaufman v. SyQuest Technology Inc., et al. was filed on March
25, 1996 in the Superior Court of the State of California for the County of
Alameda (the "State Lawsuit"). Certain current and former executive officers and
directors of the Company are also named as defendants in the lawsuits. The
plaintiffs in the Federal Lawsuits purport to represent a class of all persons
who purchased the Company's Common Stock between October 21, 1994 and February
1, 1996. The complaints in the Federal Lawsuits allege that the defendants
violated the federal securities laws through material misrepresentations and
omissions. The plaintiffs in the State Lawsuit purport to represent a class of
all persons who purchased Common Stock between May 2, 1995 and February 2, 1996.
The complaint in the State Lawsuit alleges that defendants violated various
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<PAGE>
California laws and statutes through material misrepresentations and omissions.
On May 14, 1996, the Company was served with a shareholder's derivative action
filed in Alameda County, California, Superior Court entitled John Nitti, et al.
v. Syed Iftikar, et al. The action seeks to recover unspecified damages and
punitive damages on behalf of the Company from current and former officers and
directors of the Company for alleged breach of fiduciary duty, unjust enrichment
and waste of corporate assets. The Company is a nominal defendant in the action.
The Complaint alleges that the officers and directors issued false and
misleading information and sold shares of the Company's stock at artificially
inflated prices. The allegations are essentially the same as those in the
putative class actions.
While the Company intends to defend the lawsuits, there can be no
assurance as to what financial impact the pending litigation may have on the
Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders in the offering. However, certain of the Selling
Stockholders are required by the terms of their stock agreements with the
Company to cancel indebtedness owing from the Company or its subsidiary to them
as they receive proceeds from the sale of the shares of Common Stock which were
issued to them as part of the work-out arrangements. See "Selling Stockholders."
MATERIAL CHANGES
PREFERRED STOCK.
On June 14, 1996 the Company issued 20,000 shares of its Preferred
Stock at a price of $1,000 per share. The rights, preferences and privileges of
the Preferred Stock are set forth in a Certificate of Designations, Preferences
and Rights as filed with the Delaware Secretary of State and are summarized
below:
DIVIDENDS. 7% cumulative payable quarterly in cash (or, at Company's
option, stock, except when the number of shares to be issued would cause the
holders of the Preferred stock to beneficially own a number of shares of Common
Stock in excess of certain numeric limits).
CONVERSION. Convertible into Common Stock commencing August 28, 1996 or
the date the registration statement registering the shares for resale is
declared effective (whichever is earlier) at a conversion price which is the
lesser of $11 or 77% of the average market price of the Common Stock on the five
trading days prior to the conversion, as such amount may be adjusted. The
Preferred cannot be converted if the converting holder and its respective
affiliates would beneficially own more than 4.9% of the Common Stock at the time
of conversion (excluding from the calculation shares of Common Stock issuable
upon conversion of the Preferred Stock). If a registration statement registering
the resale of the Common Stock is not effective by September 3, 1996, the $11.00
per share amount decreases and the 23% discount increases (and therefore the 77%
factor decreases) at the rate of three percentage points (or three percent with
respect to the fixed conversion price) per month of delay.
If the Common Stock is trading below $5 when the Preferred Stock
converts, the Company can redeem that Preferred at 130% of the original purchase
price, except that the redemption price is reduced to 110% of the original
purchase price to the extent that the original
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<PAGE>
purchase price of the amount of Preferred Stock being redeemed (plus one half
the amount previously converted by the holders) exceeds $10 million.
The Company can force conversion after one year after the registration
statement becomes effective, so long as the Common Stock is still listed on the
Nasdaq Electronic Bulletin Board, Small Cap or National Market, and subject to
the 4.9% limit on the Preferred holders beneficially owning shares of the
Common.
MERGER. Preferred Stock is entitled to receive its share of the merger
price if the Company merges, on an as converted basis. The Company must give 75
days notice of merger or reclassification.
NONVOTING. The Preferred Stock is nonvoting, except as required by
operation of law.
REDEMPTION. The Company must redeem (at 100% of original purchase price
plus all accrued but unpaid dividends) all Preferred remaining outstanding on
May 31, 1999 with cash or (at Company's option) Common Stock. If Common Stock is
to be issued the redemption would be based on the market price of the Common
Stock for the five trading days before May 31, 1999. The Company must redeem the
Preferred at 130 % of original price if common is not listed on Nasdaq National
Market, Small Cap or Electronic Bulletin Board (or NYSE or AMEX). The Company
may redeem any or all Preferred at 130% of the original purchase price with 20
days prior notice if the average market price of the Common Stock for five
trading days is less than $14. The Company may redeem any or all of the
Preferred Stock under certain limited circumstances if the market price for last
five trading days is above $14 for that market price multiplied by the number of
the Common shares into which the Preferred Stock being redeemed is then
convertible. Example: To redeem $1,000,000 worth of Preferred when market price
is at $20, the Company would have to pay $1,818,181.80 plus unpaid dividends
($1,000,000 divided by the maximum conversion price of $11 times $20).
Under no circumstances may more than 2,291,891 shares of Common Stock
be issued on conversion of the Preferred or for dividends, unless the Company's
stockholders vote to increase that number and that vote does not violate the
Nasdaq National Market rule concerning below market value financings. If the
Preferred holders attempt a conversion which would exceed the limit, the Company
must redeem all Preferred remaining at 130% of original purchase price, except
it is 110% to the extent more than half of all of the Preferred ($10 million
worth) is redeemed under this provision.
LIQUIDATION PREFERENCE. In liquidation, the Preferred receives original
purchase price, plus dividends, before Common Stock receives any cash or assets
on liquidation.
OTHER PREFERRED. Company can issue preferred to others with equal or
inferior liquidation preference.
VOTE TO AMEND PREFERRED. Two-thirds of the outstanding shares of
Preferred must approve any amendment.
EZ135 PRICE REDUCTION. On June 13, 1996 the Company reduced the
suggested retail price on its EZ135 drive to $119.95 from a suggested retail
price of $199 for the SCSI configuration and $229 for the Parallel Port
configuration. The Company has incurred certain costs as a result of this
pricing action.
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<PAGE>
SELLING STOCKHOLDERS
<TABLE>
The following table sets forth the names of the Selling Stockholders,
the number of shares of Common Stock owned beneficially by each of the Selling
Stockholders as of June 27, 1996, and the number of shares which may be offered
for resale pursuant to this Prospectus. This information is based upon
information provided by the Selling Stockholders. Because the Selling
Stockholders may offer all, some or none of their Common Stock, no definitive
estimate as to the number of shares thereof that will be held by the Selling
Stockholders after such offering can be provided and the following table has
been prepared on the assumption that all shares of Common Stock offered under
this Prospectus will be sold.
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) OFFERING(3)
------------------- --------------------
Shares
Name Number Being Offered Number
---- ------ ------------- ------
<S> <C> <C> <C>
GFL Performance Fund Ltd.(4) 1,145,945 1,145,945 0
GFL Advantage Fund Ltd.(4) 572,973 572,973 0
GFL Portfolio B(4) 572,973 572,973 0
<FN>
- ---------------------
(1) Unless otherwise indicated in the footnotes to this table, the persons
and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) As required by regulations of the Securities and Exchange Commission,
the number of shares in the table includes shares which can be
purchased within 60 days after the date of this table.
(3) Assumes the sale of all shares offered hereby.
(4) The stockholder holds shares of Preferred Stock of the Company which
are convertible into shares of Common Stock. The number of shares
included within the table is based on a conversion price of $6.477625
per share (which was the conversion price on June 27, 1996) and has
been reduced on a pro rata basis to reflect the limit on the number of
shares into which the Preferred Stock may be converted. The conversion
price is adjustable and the number of shares beneficially owned by the
stockholder will vary based upon the changes in the conversion price.
See "Risk Factors -- Preferred Stock Financing" and "Material Changes -
Preferred Stock."
</FN>
</TABLE>
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<PAGE>
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the
Selling Stockholders hereunder pursuant to contractual registration rights
contained in registration rights agreements entered into as of May 31, 1996 with
the holders of the Preferred Stock.
The shares of Common Stock offered hereunder may be sold from time to
time by the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market or
in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then current market price, or in negotiated
transactions. The shares of Common Stock may be sold to or through one or more
broker-dealers, acting as agent or principal in underwriting offerings, block
trades, agency placements, exchange distributions, brokerage transactions or
otherwise, or in any combination of transactions.
In connection with any transaction involving the Common Stock,
broker-dealers or others may receive from the Selling Stockholders, and may in
turn pay to other broker-dealers or others, compensation in the form of
commissions, discounts or concessions in amounts to be negotiated at the time.
Broker-dealers and any other persons participating in a distribution of the
Common Stock may be deemed to be "underwriters' within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Act.
Any or all of the sales or other transactions involving the Common
Stock described above, whether effected by the Selling Stockholders, any broker
dealer or others, may be made pursuant to this Prospectus. In addition, any
shares of Common Stock that qualify for sale pursuant to Rule 144 under the Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, shares of Common Stock
may not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with under applicable state securities laws.
The Company and the Selling Stockholders have agreed, and hereafter may
further agree, to indemnify certain persons, including broker-dealers or others,
against certain liabilities in connection with any offering of the Common Stock,
including liabilities arising under the Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Jackson Tufts Cole & Black, LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of SyQuest Technology, Inc.
appearing in the SyQuest Technology, Inc. Annual Report (Form 10-K, as amended
by Form 10-K/A) for the fiscal year ended September 30, 1995, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by
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reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
Registration fee $5,828.52
Blue sky qualification fees and expenses 2,500.00
Printing and engraving expenses 1,000.00
Legal fees and expenses 20,000.00
Accounting fees and expenses 30,000.00
Miscellaneous 2,500.00
---------
Total $61,828.52
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company has the power, pursuant to Section 102(7) of the Delaware
General Corporation Law, to limit the liability of directors of the Company for
certain breaches of fiduciary duty and, pursuant to Section 145 of the Delaware
General Corporation Law, to indemnify its officers and directors and other
persons for certain acts.
The Company's Restated Certificate of Incorporation includes the
following provisions:
The personal liability of the directors of the
corporation for monetary damages for breach of fiduciary duty
as a director shall be eliminated to the fullest extent
permissible under Delaware law as the same exists or as may
hereafter be amended. Neither any amendment nor repeal of this
Article, nor the adoption of any provision of this Certificate
of Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of
any matter occurring, or any cause of action, suit or claim
that, but for this Article would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent
provision.
The corporation is authorized to provide
indemnification of officers, directors, employees or agents of
the corporation for breach of duty to the corporation and its
stockholders through By-law provisions or through agreements
with such officers, directors, employees or agents, or both,
in excess of the indemnification otherwise permitted by
Section 145 of the Delaware General Corporation Law, subject
to the
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limits on such excess indemnification set forth in Section
102(b)(7) of the Delaware General Corporation Law.
Pursuant to Section 145 of the Delaware General Corporation Law, a
corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred by them in
connection with any suit to which they are, or are threatened to be made, a
party by reason of their serving in such positions so long as they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of a corporation, and with respect to any criminal action, they
had no reasonable cause to believe their conduct was unlawful.
The Company believes that these provisions are necessary to attract and
retain qualified persons as directors and officers. These provisions do not
eliminate liability for breach of the director's duty of loyalty to the Company
or its stockholders, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for any transaction from
which the director derived an improper personal benefit or for any willful or
negligent payment of any unlawful dividend or any unlawful stock purchase
agreement or redemption.
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article VI of the Company's Bylaws provides that the Company, by action
of the Board of Directors, shall, to the fullest extent permitted by the General
Corporation Law of Delaware, indemnify any and all persons who it shall have
power to indemnify against any and all of the expenses, liabilities or other
matters.
The Company has entered into indemnification agreements with each of
its directors and executive officers which provide for mandatory indemnification
and advancement of legal expenses so long as the individual is entitled to
indemnification as determined in the manner provided in the agreement. The
burden is on the Company to establish the individual is not so entitled.
The Company has purchased and maintains an insurance policy covering
the officers and directors of the Company with respect to certain liabilities
arising under the Act or otherwise. Under the Registration Rights Agreements the
Selling Stockholders may be obligated to indemnify the Company and its directors
and officers under certain circumstances for liabilities under the Act.
ITEM 16. EXHIBITS.
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
5.1 Opinion of Jackson Tufts Cole & Black, LLP.
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<PAGE>
10.1 Securities Purchase Agreement dated as of May 31,
1996 by and among Registrant and holders of Preferred
Stock.1
10.2 Registration Rights Agreement dated as of May 31,
1996 among Registrant and holders of Preferred
Stock.1
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Jackson Tufts Cole & Black, LLP. Reference
is made to Exhibit 5.1.
24.1 Power of Attorney. See Page 25.
- ---------------------
1 Incorporated by reference from Form 8-K dated as of June 14, 1996.
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ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to provisions described in Item 15,
or otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided however, that paragraphs (1) and (1)(ii) do not apply if the
information required or to be included in a post effective amendment by these
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the Company's annual report pursuant to Section 13(a) or 15(d) of
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the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on the 28th day of
June, 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/Edwin L. Harper
-------------------------------------
Edwin L. Harper,
President and Chief Executive Officer
(Principal Executive Officer)
-24-
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Edwin Harper and John W. Luhtala and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them, for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-3 of SyQuest Technology, Inc., and to
file the same, with all exhibits thereto, and other documents in connection
therewith , with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Edwin L. Harper President, Chief Executive Officer June 28, 1996
- ------------------- and Director
Edwin L. Harper (Principal Executive Officer)
/s/ John W. Luhtala Senior Vice President, Finance June 28, 1996
- ------------------- and Chief Financial Officer
John W. Luhtala (Principal Financial and
Accounting Officer)
/s/ Edward L. Marinaro Chairman of the Board June 28, 1996
- ---------------------- and Director
Edward L. Marinaro
- ---------------------- Director __________, 1996
Syed H. Iftikar
- ---------------------- Director __________, 1996
C. Richard Kramlich
/s/ David I. Caplan Director June 28, 1996
- -------------------
David I. Caplan
</TABLE>
-25-
<PAGE>
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
<S> <C> <C>
5.1 Opinion of Jackson Tufts Cole & Black, LLP 27
10.1 Securities Purchase Agreement Incorporated by
Reference
10.2 Registration Rights Agreement Incorporated by
Reference
23.1 Consent of Ernst & Young LLP, independent auditors 28
23.2 Consent of Jackson Tufts Cole & Black, LLP. Reference is made 27
to Exhibit 5.1
24.1 Power of Attorney 25
- ------------------ ----------------------------------------------------------------- -----------------------
</TABLE>
-26-
EXHIBIT 5.1
OPINION OF JACKSON TUFTS COLE & BLACK, LLP
July 1, 1996
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Ladies and Gentlemen:
With reference to the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by SyQuest Technology, Inc., a Delaware
corporation (the "Company"), with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, relating to 2,291,891 shares of Common
Stock, par value $.001 per share, of the Company (the "Common Stock"), it is our
opinion that the shares of Common Stock to be offered and sold pursuant to the
Registration Statement, when issued upon conversion of the Preferred Stock in
accordance with the terms thereof, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.1 to the Registration Statement.
Very truly yours,
JACKSON TUFTS COLE & BLACK, LLP
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SyQuest Technology,
Inc. for the registration of 2,291,891 shares of its common stock and to the
incorporation by reference therein of our report dated October 26, 1995 (except
for Note 4, as to which the date is December 27, 1995 and Note 12, as to which
the date is June 26, 1996), with respect to the consolidated financial
statements and schedule of SyQuest Technology, Inc. included in its Annual
Report (Form 10-K , as amended by Form 10-K/A) for the year ended September 30,
1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
June 26, 1996
