SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 14, 1997
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674 94-2793941
(Commission File Number) (IRS Employer Identification No.)
47071 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(510) 226-4000
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5 Other Events
Filing of Registration Statement on Form S-3
On November 14, 1997, SyQuest Technology,
Inc. ("Registrant") filed a
Registration Statement on Form S-3
(the "Registration Statement"), relating to the
to the registration of Registrant's Common
Stock for resale by certain Selling
Stockholders (as described in the Registration
Statement attached hereto as exhibit
99.1 and incorporated herein by this reference).
As part of the Registration Statement
Registrant updated the risk factors relevant
to a decision as to whether to invest
in Registrant's Common Stock.
Item 7 Financial Statements and Exhibits
c) Exhibits
99.1 Registrant's Registration Statement
on Form S-3, as filed with the
Securities and Exchange Commission on November 14, 1997.
SYQUEST TECHNOLOGY,INC.
(Registrant)
Dated: November 14, 1997 By /s/ Bob L. Corey
Bob L. Corey
Executive Vice President, Finance
and Chief Financial Officer
<PAGE>
Exhibit 99.1
As filed with the Securities and Exchange
Commission on November 14, 1997
Registration No. __________
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 Identification Number)
organization)
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, CA 94538
(510) 226-4000
(Name, address, including zip code and telephone number,
including area code of agent for service)
____________________________________
COPIES TO:
STEVEN O. GASSER
GREGORY D. DEUTSCH
SHARTSIS, FRIESE & GINSBURG LLP
ONE MARITIME PLAZA, EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111
(415) 4214500
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. [ ]
CALCULATION OF REGISTRATION FEE
Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be Offering Price Aggregate Offering Registration
to be registered Per Share Price2 Fee
registered
Common Stock 40,021,557 $3.72 $148,880,192 $49,627
0.0001 par
value
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL 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.
// Includes (i) a presently indeterminate number of
shares issued or issuable upon conversion of or
otherwise in respect of Registrant's 5% Cumulative
Convertible Preferred Stock, Series 4, (ii) a presently
indeterminate number of shares issuable upon conversion
of or otherwise in respect of Registrant's Convertible
Preferred Stock, Series 5, and (iii) 25,628,848 shares
issuable upon exercise of certain outstanding stock
purchase warrants, as such numbers may be adjusted in
accordance with Rule 416, including without limitation,
adjustments as a result of floating rate conversion
prices.
// Estimated solely for the purpose of calculating
the amount of the registration fee pursuant to Rule
457(c), based on the average of the high and low prices
of Common Stock reported in the Nasdaq National Market
for the five consecutive days preceding November 13,
1997.
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 1997
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 AND 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 SECURITIES LAWS OF
ANY SUCH STATE.
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
40,021,557 SHARES
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
All of the shares of Common Stock, par value
$.0001 per share ("Common Stock") of SyQuest
Technology, Inc., a Delaware corporation ("SyQuest" or
the "Company"), offered hereby are being offered for
resale by certain stockholders of the Company (the
"Selling Stockholders") as described more fully herein.
The Company will not receive any proceeds from the
sale of the shares offered hereby. 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 October 27, 1997 was $3.375 per share.
The shares of Common Stock offered hereby by the
Selling Stockholders consist of (i) in accordance with
Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act") a presently indeterminate number of
shares issued or issuable upon conversion or otherwise
in respect of 3,600 shares of the Company's 5%
Cumulative Convertible Preferred Stock, Series 4, par
value $.0001 (the "Series 4 Preferred Stock"), (ii) a
presently indeterminate number of shares issuable upon
conversion or otherwise in respect of 30,000 shares of
the Company's Convertible Preferred Stock, Series 5,
par value .0001 (the "Series 5 Preferred Stock") and,
(iii) up to 25,628,848 shares issuable upon exercise of
certain outstanding stock purchase warrants (the "Stock
Purchase Warrants"). For the purposes of calculating
the number of shares of Common Stock beneficially owned
by the Selling Stockholders holding Series 4 Preferred
Stock, the number of shares of Common Stock calculated
to be issuable in connection with the conversion of the
Series 4 Preferred Stock is based on a conversion price
that is derived from the closing market price of the
Common Stock on the first day that Series 4 Preferred
Stock was issued, which price is $2.343. For the
purposes of calculating the number of shares of Common
Stock beneficially owned by the Selling Stockholders
holding Series 5 Preferred Stock, the number of shares
of Common Stock calculated to be issuable in connection
with the conversion of the Series 5 Preferred Stock is
based on a conversion price that is derived from the
closing market price of the Common Stock on the day
that Series 5 Preferred Stock was issued to the holder
thereof, which price ranged from $2.438 to $3.375. The
number of shares available for resale is subject to
adjustment and could be materially less or more than
such estimated amount depending on factors which cannot
be predicted by SyQuest at this time, including, among
others, the future market price of the Common Stock.
This presentation is not intended, and should in no way
be construed, to constitute a prediction as to the
future market price of the Common Stock. See "Risk
Factors - Convertible Securities, Warrants and Options;
Potential Dilution and Adverse Impact on Additional
Financing" and "Selling Stockholders."
_____________________________
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 5 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.
The date of this Prospectus is _______________, 1997
All expenses of this offering will be paid by
the Company except for commissions, fees and discounts
of any underwriters, brokers, dealers or agents
retained by the Selling Stockholders. Estimated
expenses payable by the Company in connection with this
offering are approximately $79,627. 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 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, in privately negotiated
transactions or otherwise. 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 "Use of Proceeds" and "Plan of
Distribution."
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. The
Commission also maintains a World Wide Web site
(http:/www.sec.gov) that contains reports, proxy and
information statements and other information regarding
registrants, including the Company, that file
electronically with the Commission.
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:
1) The Company's Annual Report on Form 10-K,
as amended, for the fiscal year ended
September 30, 1996;
2) The Company's Current Reports on Form 8-K
dated October 31, 1996, as amended,
November 11, 1996, November 25, 1996,
December 2, 1996, December 30, 1996;
January 23, 1997, February 3, 1997,
February 28, 1997, May 30, 1997, July 2,
1997, August 4, 1997, August 11, 1997 and
October 4, 1997;
3) The Company's Registration Statement on
Form 8-A registering the Common Stock
under Section 12(9) of the Exchange Act;
and
4) The Company's Current Reports on Form
10-Q, as amended, for the Quarters ended
December 31, 1996, March 31, 1997 and June
30, 1997.
5) The Company's Proxy Statement for its
annual meeting of stockholders held May 6,
1997; and
6) The Company's Proxy Statement for its
special meeting of stockholders held
November 5, 1997.
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: Bob L. Corey, Executive Vice President,
Finance and Chief Financial Officer.
"SyQuest" and "SyJet" are registered trademarks
of the Company. "EZ135," "EZ Flyer," "SparQ" and
"Quest" are trademarks of the Company. This Prospectus
also includes trademarks of companies other than
SyQuest Technology, Inc.
THE COMPANY
The Company designs, develops, manufactures, and
markets removable hard disk cartridges, 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.
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. THE DISCUSSION
IN THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, CERTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF
THE COMPANY'S PLANS, BELIEFS, EXPECTATIONS AND
INTENTIONS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THE FOLLOWING
RISK FACTORS, AS WELL AS FACTORS DISCUSSED ELSEWHERE IN
THIS PROSPECTUS. 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.
SUSTAINED LOSSES; NEED FOR ADDITIONAL FINANCING; FUTURE
CAPITAL NEEDS.
The Company has accumulated losses during fiscal
years ended September 30, 1995, 1996, and 1997 totaling
approximately $220 million. There can be no assurances
that the Company will cease incurring losses despite
new product introductions, as there can be no
assurances that the Company's products will be accepted
in the marketplace. Continued losses would result in
liquidity and cash flow issues and could affect product
delivery efforts. Further sustained losses will
necessitate future additional financings that if raised
through the issuance of equity securities, will reduce
the percentage ownership of the stockholders of the
Company. Existing stockholders may experience
additional dilution, and securities issued in
conjunction with new financings may have rights,
preferences and privileges senior to those of holders
of the Company's Common Stock. See "Risk Factors -
Convertible Securities, Warrants and Options; Potential
Dilution and Adverse Impact on Additional Financing."
dilutive effect on current shareholders. There can be
no assurance, however, that additional financing will
be available when needed, if at all, or on favorable
terms.
The inability to raise additional financings when
needed and continued losses could impact the Company's
ability to maintain its listing on the Nasdaq National
Market in the future. Should the Company fail to meet
such listing standards, it may be delisted from the
Nasdaq Stock Market. Trading, if any, in the listed
securities would thereafter be conducted on the
Electronic Bulletin Board or the National Quotation
Bureau's "pink sheets." As a result, should delisting
occur, an investor may find it difficult to dispose of,
or to obtain accurate quotations of the price of, the
Company's securities. This would likely have a
material and adverse effect on the market price of the
Company's Common Stock and on the Company's ability to
raise additional capital. There can be no assurances
that the Company would be successful in securing
additional financings which could place the Company at
risk of losing its Nasdaq listing.
To meet its working capital needs, the Company has
engaged in a series of financing transactions during
calendar 1996 and 1997.
The following table sets forth in summary form the
Company's cumulative financing activities from June
1996 through October 1997. The terms of these
financings are described in seven of the Company's
Current Reports on Form 8-K dated, respectively, June
14, 1996, October 31, 1996, November 11, 1996, April
14, 1997, May 30, 1997, August 4, 1997, and October 4,
1997.
Date Series/Transaction Preferred Gross Resulting
Shares Proceeds Common
share
6/96 7% Cumulative Convertible
Preferred Stock, Series 1 20,000 $20,000,000 10,301,708
7/97 6% Convertible
Subordinated Debenture (1) - $7,700,000 -
9/96-10/96 Various Debt to Equity - $24,440,000 -
2/97-4/97 Exchanges
10/96 Cumulative Convertible
Preferred Stock, Series 1 5,500(2) $5,500,000 3,289,981
10/96 5% Cumulative Convertible
Preferred Stock, Series 2 24,500(2) $24,500,000 12,440,447
11/96 Common Stock Sale - $8,500,000 1,500,000
3/97 5% Cumulative Convertible
Preferred Stock, Series 3 50,000(2) $5,000,000 2,485,070
5/97 5% Cumulative Convertible
Preferred Stock, Series 4 280,000(3) $28,000,000 10,069,645
08/97 Common Stock Sale - $3,500,000 1,382,716
9/97-10/97 5% Cumulative Convertible
Preferred Stock, Series 5 30,000(4) $30,000,000 -
Total 410,000 $157,140,000 49,516,836
(1) The 6% Convertible Subordinated Debenture, issued as
part of a debt to equity transaction, is
convertible into up to 400,000 shares of the
Company's Common Stock at a conversion price of
$6.9375 per share.
(2) All preferred shares have been converted into the
resulting common stock noted.
(3) 53,580 shares of the Series 4 Preferred Stock remain
unconverted.
(4) There have been no conversions of the Series 5
Preferred Stock.
Assuming the conversion of the all remaining Series 4
and Series 5 Preferred Stock, the Company would be
obligated to issue an additional 13.2 million shares of
Common Stock. Accordingly, as of October 27, 1997, a
total of approximately 75.2 million shares of Common
Stock would be issuable to holders of all outstanding
preferred stock, warrants and option. As such, current
shareholders will experience a dilutive effect on their
ownership interest in the Company upon the issuance of
such Common Stock.
As of September 30, 1997, the Company had
approximately $7.1 million in cash and cash
equivalents. For the nine months ended June 30, 1997,
the Company used approximately $53.4 million of cash in
operating activities and an additional $2.4 million in
capital equipment purchases. The Company believes
that, based on a number of events occurring, the
current sources of financing available to the Company
will be sufficient to fund the Company's operations
into the near future. However, the precise amount and
timing of the Company's funding needs cannot be
determined accurately at this time, and will depend
upon a number of factors, including the market demand
and pricing of the Company's products, the progress of
the Company's product development efforts, marketing
expenditures, the availability of critical components,
the Company's strategic alliances, if any, for the
manufacture of its products, the Company's inventory
and accounts receivable management and whether key
suppliers will continue to grant payment terms for the
purchase of materials and services.
CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS; POTENTIAL
DILUTION AND ADVERSE IMPACT ON ADDITIONAL FINANCING.
As of October 27, 1997, the Company had
outstanding options and warrants to purchase an
aggregate of 62,000,000 shares of Common Stock, at a
weighted average exercise price of $2.755 per share.
The exact number of shares of Common Stock issuable
upon conversion of the Series 4 Preferred Stock and the
Series 5 Preferred Stock (collectively, the "Preferred
Stock") cannot be estimated with certainty because,
generally, such issuances of Common Stock will vary
inversely with the market price of the Common Stock at
the time of such conversion, and there is no cap on the
number of shares of Common Stock that may be issuable.
The number of shares of Common Stock issuable upon
conversion of the Preferred Stock is also subject to
various adjustments to prevent dilution resulting from
stock splits, stock dividends or similar transactions.
Further, the Company may, at its election, choose to
issue additional shares of Series 4 Preferred Stock in
lieu of cash dividends due to the holders of the Series
4 Preferred Stock.
In addition, on November 13, 1996, SyQuest sold
to an investor 1,500,000 shares of Common Stock that
became freely tradeable, subject to compliance with
applicable securities laws, on approximately February
12, 1997. As part of this same transaction, the
Company issued a warrant that will become exercisable
for between 375,000 shares and 1,875,000 shares of
Common Stock, depending on a number of factors. The
actual shares available to be purchased calculated to
be 1,875,000 shares as of July 12, 1997.
To the extent that such options and warrants are
exercised, shares of Common Stock or Series 4 Preferred
Stock are issued in lieu of cash dividends or
convertible securities are converted, substantial
dilution of the interests of the Company's stockholders
is likely to result and the market price of the Common
Stock may be materially adversely affected. Such
dilution will be greater if the future market price of
the Common Stock decreases as the number of conversion
shares to be issued will increase. For the life of
such warrants, options and convertible securities the
holders will have the opportunity to profit from a rise
in the price of the underlying securities. The
existence of such warrants, options and convertible
securities is likely to affect materially and adversely
the terms on which the Company can obtain additional
financing, and the holders of such warrants, options
and convertible securities can be expected to exercise
them at a time when the Company would otherwise, in all
likelihood, be able to obtain additional capital by an
offering of its unissued capital stock on terms more
favorable to the Company than those provided by such
warrants, options and convertible securities.
The Company has filed Registration Statements on
Form S-8 under the Act to register shares of Common
Stock subject to stock options and to the Company's
employee stock purchase plan that will permit the
resale of such shares, subject to Rule 144 volume
limitations applicable to affiliates of the Company and
vesting restrictions. The Company has also registered
the Common Stock issuable upon exercise of the warrants
and conversion of the convertible securities pursuant
to a prospectus included in Registration Statement Nos.
333-7369 and 333-17119 and 333-28225. Such registered
shares can be sold without any holding period or sales
volume limitations. The registration of the shares set
forth in the Selling Stockholders table set forth below
is in addition to the shares previously registered.
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. In December 1996, the Company
began shipping its SyJet 1.5 Gigabyte Removable
Cartridge Hard Drive (SyJet) product line. While the
Company believes that the SyJet product line has been
favorably received by the marketplace, there can be no
assurance that the level of acceptance will continue or
grow. Through March 31, 1997, SyJet production was
constrained by industry-wide shortages of critical
components and other production shortfalls. On
November 3, 1997, the Company announced its SparQ 1.0
Gigabyte Removable Cartridge Hard Drive (SparQ) product
line. The Company anticipates first customer shipments
to occur in November, 1997. The initial acceptance of
the market place for SparQ has been favorable, however,
there can be no assurance that the level of acceptance
will continue to grow. On November 10, 1997, the
Company announced its Quest 4.7 Gigabyte Removable
Cartridge Hard Drive (Quest) product line. The Company
anticipates first customer shipments to occur in
December, 1997. The initial acceptance of the
marketplace for Quest has been favorable, however,
there can be no assurance that the level of acceptance
will continue to grow.
While the Company continues its sales and
marketing campaigns to successfully launch these new
products there can be no assurance that they will
continue to be accepted in the marketplace. Further,
the Company continues its efforts to increase its
manufacturing output for these new products to meet the
sales and projected sales demand and there can be no
assurances that the Company will be successful in
manufacturing the required unit volumes.
SyQuest removable-cartridge hard drive
technology is different from the most widely used data
storage devices today (hard disk drives, floppy disk
drives and CD-ROM drives). Other types 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 the same market acceptance. Whether the
Company's new products will achieve significant market
acceptance will depend upon a number of factors,
including the price, performance and other
characteristics of competing solutions introduced by
other vendors, the timing of the introduction of such
products, and the success of the Company in
establishing OEM arrangements for the Company's new
products. See "Risk Factors - Competition" and "-
Shortages of Critical Components; Absence of Supply
Contracts; Supplier Workouts." There can be no
assurance that the Company will be successful in
achieving market acceptance. 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.
While the Company's products are also used for some
software distribution, there can be no assurances that
software distribution on the Company's will continue.
The failure of the Company's new products to achieve
widespread commercial acceptance would have a material
adverse effect on the Company's financial results and
business.
CONTINUED SALES OF THE EZ FLYER 230 AND LEGACY
PRODUCTS.
While the Company believes that the EZ Flyer 230
will continue to be a contributor to the Company's
revenue in the near future, there can be no assurances,
in the face of increased competition and higher
capacity solutions, that the demand for the EZ Flyer
230 will continue at current levels.
The Company has a group of "legacy" products
that represent earlier generations of removable
cartridge hard drive products. These legacy products
have generally been replaced by new generation products
with greater performance and capacity. The Company
continues to sell its legacy products to support
installed systems still in use in the marketplace.
There can be no assurances that sales of legacy
products will continue.
SHORTAGES OF CRITICAL COMPONENTS; ABSENCE OF SUPPLY
CONTRACTS; SUPPLIER WORKOUTS.
Many components incorporated in, or used in the
manufacture of, the Company's products are currently
only available from sole source suppliers. During the
1996 fiscal year and fiscal 1997, the Company
experienced disruption in its supply of certain
components for a number of reasons including, industry
wide shortages and the shortage of cash to pay
suppliers. During fiscal 1996, component shortages due
to limited cash availability affected the Company's
ability to produce EZ Flyer 230 and SyJet products and
limited the Company's ability to implement certain
improvement plans. Moreover, the Company may continue
from time to time 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. A disruption in the supply of key
components would have had a material adverse affect on
the Company's ability to generate sales and the ability
to successfully produce product in volumes necessary to
meet demand. If such disruptions are repeated, the
Company's ability to generate sales and increase
revenues will be materially adversely effected.
On July 15, 1996, the Company issued a Debenture
to one of its suppliers pursuant to which up to 400,000
shares of Common Stock could be issued to such supplier
at a conversion price of $6.9375 per share.
Subsequently, the Company negotiated with other
suppliers to extend the payment dates on amounts owed.
The Company conducted similar negotiations with other
suppliers, converting a total of approximately $43.1
million of accounts payable and other obligations to
those suppliers, to notes payable to reflect extended
repayment terms. In September and October 1996,
February, March and April 1997, the Company received
certain of those notes payable in exchange for an
aggregate of 8,047,269 shares of Common Stock. As a
result of the Company's completion of recent financing
transactions and other efforts by management to improve
SyQuest's balance sheet, most of the Company suppliers
have transitioned from doing business with the Company
on a C.O.D. basis and are selling to the Company under
more standard commercial terms. However, if the
Company were to experience a shortage of cash as noted
above, many of its key suppliers may again require
C.O.D. payments which would place a significant demand
on the Company's available cash resources that may
limit its financial flexibility and ability to meet
market demand for its products.
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
increased costs and 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 affect the Company's business and financial
results.
COMPETITION.
The data storage industry is highly competitive.
The Company believes that its products compete most
directly with other removable-media data storage
devices, such as disk drives offered by Iomega
Corporation and magneto optical disk drives. Although
the Company believes that its products offer
performance and certain other advantages over most
other removable-media storage devices available today,
the Company believes that the price/performance levels
of existing removable-media products will improve and
that other companies will introduce new removable-media
storage devices. Accordingly, the Company believes its
products will face increasingly intense competition.
In particular, a consortium comprising Compaq Computer,
3M, OR Technology and Matsushita-Kotobuki Electronics
Industries Ltd. has announced and is selling the LS120,
a high capacity floptical drive that is compatible with
conventional floppy disks. Each of Mitsubishi Electric
Corp. and Mitsumi has also announced that it plans to
manufacture a high capacity, floppy drive that is
downward compatible with existing floppy diskettes.
Additionally, Avastor, Nomai and Caleb have products
that complete with SyQuest products. Sony Corporation
and Fuji Photo Film Co. have also recently announced a
jointly developed "HiFD" 3.5 floppy disk system with a
200 Megabyte storage capacity. If successfully
marketed, these drives would compete with the Company's
EZ Flyer 230 products. The Iomega Zip drive, a high
capacity floppy disk drive, is also a competitor to EZ
Flyer 230. The JAZ and JAZ II drives are removable
hard drives and compete 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. In addition, 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 relative
to its competitors.
TECHNOLOGICAL CHANGE AND NEW PRODUCTS.
The Company operates in an industry that is
subject both to 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 3 gigabytes (GB) or
more, while the market price per megabyte of a hard
disk drive has dramatically decreased. The Company's
future success will depend in significant part on its
ability continually to develop and introduce, in a
timely manner, new removable cartridge hard drive
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 depends on technological
developments from other vendors for the components in
its products (such as heads, semiconductor devices and
media). The Company's products are targeted for sale
into the Company's traditional customer base in the
desktop publishing, pre-press and service bureau
segments, computer, audio and video OEMs, retail, as
well as to a broad array of users in the SOHO (Small
Office/Home Office) market segment. There can be no
assurance that the Company will be successful in
developing, manufacturing and marketing cost effective
products that meet both the performance and price
demands of the data storage market.
DEPENDENCE ON STRATEGIC MARKETING ALLIANCES.
The Company's business strategy will be enhanced
in significant part by 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 product manufacturers that
will include SyQuest products as a standard feature or
factory-installed option in their personal computers;
reseller arrangements (including private and
co-branding arrangements) with major vendors of
computer products covering the resale of the Company's
products by such companies; and licensing arrangements
under which the Company grants certain computer
manufacturers on a royalty-bearing basis the right to
manufacture and sell its drives or media. Moreover,
the Company believes that establishing strategic
alliances (especially OEM arrangements) is important 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 may also require the Company to
share control over its manufacturing and marketing
programs and technologies.
RELIANCE ON MANUFACTURING RELATIONSHIPS; NOMAI
LAWSUITS.
The Company plans to continue to use independent
parties to manufacture for the Company a portion of the
Company's components. The Company currently has
manufacturing relationships for cartridges and others
for manufacture and subassembly of components.
In January of 1997, the Company filed a suit
against Nomai, S.A. and certain other defendants in the
United States District Court for the Northern District
of California alleging, among other things, patent
infringement and violation of trademark and unfair
competition laws. On May 23, 1997, Nomai filed a
counterclaim against the Company alleging, among other
things, breach of contract and violations of the unfair
competition laws. The parties have entered into a
settlement agreement (the "Settlement Agreement") and
filed a dismissal in this action.
In September 1996, the Company and Legend Group
("Legend"), the largest computer systems manufacturer
and distributor in the People's Republic of China,
announced an intention to form a joint venture company
for the manufacture and distribution of the Company's
removable cartridge hard drives and products in China
and to make Legend the exclusive distributor of the
Company's products in the developing Chinese market.
The Company will provide the proposed joint venture
company with training and manufacturing know-how to
insure that the joint venture has the requisite skills
to manufacture the Company's removable cartridge hard
drives and products. Legend and the Company will
contribute the capital required for the joint venture.
The Company and Legend are in the process of
negotiating a more definitive term sheet in preparation
for negotiation of definitive agreements. In December
1996, the Company and Legend announced a distribution
agreement whereby Legend has become the exclusive
distributor of the Company's products in the developing
Chinese market.
There can be no assurance that the Company will
be successful in establishing the joint venture, that
the financing agreement with Legend will be consummated
or be successful, or that the Company will successfully
establish additional relationships in the future or
successfully manage 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
partners. Moreover, there can be no assurance that
third-party manufacturers will be willing or 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 have had an impact on the
Company's products and have contributed 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.
The revenue, operating loss and loss per share for the
four quarters of the fiscal year ended September 30,
1997 are presented below to illustrate the quarterly
fluctuations during the most recent fiscal year. The
loss per share in Q1 has been recalculated in order to
be presented on a consistent basis with the other
periods to reflect a charge (for earnings per share
computation purposes only) resulting from value
assigned to warrants issued during the first quarter.
The accounting presentation had no impact on the
reported operating loss.
(1) Q1 Q2 Q3 Q4
Revenue $48.3 $16.8 $31.7 $25.9
Operating Losses $(6.8) $(33.7) $(10.6) $(17.4)
Loss Per Share $(1.19) $(1.31) $(.80) $(.54)
(1) table is presented in millions, except per share
amounts.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; INTELLECTUAL
PROPERTY LITIGATION.
The Company's success depends heavily on 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. The Company
holds numerous U.S. and foreign patent applications
relating to its drives and hard disk cartridges. Many
of these patents, however, do not pertain to the
Company's recent product generations, 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 independently to develop similar technology. In
particular, the Company's sales would be materially
adversely affected if any unlicensed parties develop
removable cartridges compatible with the Company's disk
drives.
The Company filed suit against Nomai, S.A.
(Nomai) and Maxell in France for copyright and patent
infringement. The Company initiated an arbitration
proceeding against Nomai seeking payment of outstanding
royalties of approximately $1 million. These actions
will be settled as part of the Settlement Agreement -
See Reliance on Manufacturing Relationships; Nomai
lawsuits.
On January 27, 1997, the Company filed a suit
against Nomai, S.A., Electronique d2 and La Cie Ltd. in
Federal district court in San Francisco for patent,
trademark and copyright infringement, unfair
competition and breach of contract. The suit alleges
that Nomai and others have illegally used the Company's
proprietary technology in certain of Nomai's competing
products. The suit seeks to block further sales of
such products along with damages deriving from harm
done to the Company by this conduct. Nomai filed a
counter claim including claims for breach of contract,
misrepresentation, interference with contract and
unfair competition. This suit has been terminated
pursuant to the Settlement Agreement - See Reliance on
Manufacturing Relationships; Nomai lawsuits.
On July 23, 1997, Iomega Corporation ("Iomega")
filed civil action No. 97-466 in the United States
District Court in and for the District of Delaware
against SyQuest Technology Inc. The law suit alleges
that SyQuest has infringed Iomega's Design Patent No.
D378,518 and U.S. Patent No. 5,644,444 by making and
selling computer disk cartridges and drives which
embody alleged inventions of those patents and that
SyQuest has willfully infringed Iomega's alleged
trademark "JET". The complaint requests money damages
and a preliminary and permanent injunction enjoining
SyQuest from further infringement. The Company
believes that it does not infringe any valid patent
claims or trademarks of Iomega and intends to
vigorously defend against this action.
The Company has filed suit against Castlewood
Systems, Inc. and certain of its employees and
consultants for misappropriation of trade secrets,
unfair competition and other specified claims.
Castlewood Systems, Inc. has filed a cross-complaint
against the Company alleging interference with
prospective economic advantage, unfair competition and
trade libel. The Company believes that these cross-
claims are without merit and intends to vigorously
defend against them.
Periodically, the Company is made aware that
technology used by the Company in the manufacture of
some or all of its products may infringe on product or
process technology rights held by others. Resolution
of whether the Company's manufacture of products has
infringed on valid rights held by others could have a
material adverse effect on the Company's financial
position or results of operations, and may require
material changes in production processes and products.
Several companies have individually contacted the
Company concerning its alleged use of intellectual
property belonging to them. Companies that have
contacted the Company include one company that has
alleged that the Company's products infringe six U.S.
patents. It is the Company's belief that the claims
are without merit or that the infringement claims
relate to component parts purchased from vendors. The
Company also believes that in the event this company
prevailed on its claims, the Company would be
indemnified by its vendors for any liability arising
from the alleged infringements and that this matter
will not have a material adverse effect upon its
financial condition or results of operations. Another
company has notified the Company that it believes a
number of the Company's removable cartridge hard drives
products infringe several of its patents relating to
the use of spin motors in disc drives. The Company
believes that its removable cartridge hard drive
products do not infringe the claims of these patents
and that some or all of the asserted patents are
invalid.
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 have been or 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 years 1995,
1996 and 1997, and the Company expects international
sales to continue to constitute 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 regulatory, economic or political changes.
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 materially and
adversely affect the Company's international sales and
its overall business and financial performance.
The Company's international sales are
predominantly denominated in U.S. dollars.
Accordingly, a significant decrease 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 material adverse effect on the Company's sales.
MANAGEMENT CHANGES; DEPENDENCE ON KEY PERSONNEL.
The Company's success will depend in large part
upon the capabilities of the members of the new
management team, most of whom have been with the
Company for less than 18 months. The inability of such
individuals to become familiar with the widespread
operations of the Company and its subsidiaries and turn
around the financial situation of the Company could
have a material adverse effect on the Company. The
Company's success will also depend in significant part
upon its ability to attract and retain highly-skilled
management and other personnel. Competition for such
personnel in the computer industry is intense, and the
Company has from time to time experienced difficulty in
finding sufficient numbers of qualified professional
and production personnel. There can be no assurance
that the Company will be successful in attracting and
retaining the quantity and quality of personnel that it
needs.
VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS.
The market prices for shares of high technology
companies including the securities of SyQuest have been
volatile. The Company's Common Stock has in the past
experienced substantial levels of short selling, which
has depressed the market price, and increased the
volatility of the market price, of the Company's Common
Stock. Factors such as announcements of technological
innovations or 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 material adverse effects
on the market price of the Common Stock. In the past,
following periods of volatility in the market price of
a company's securities, securities class action
litigation has often been instituted against such a
company. Such litigation, can result and has resulted
in substantial costs and a diversion of management
attention and resources. See "Risk Factors - Class
Action and Shareholder Derivative Lawsuits."
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 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.
The Company has not paid any cash dividends
since its inception, and it does not anticipate paying
cash dividends in the foreseeable future.
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 it estimates
will 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 material adverse effects on the Company's
results of operations, particularly because future
results will depend heavily on recently introduced
products for which the Company has little or no
operating history. In addition, customers generally
have stock rotation rights permitting them to return
slower-moving products in inventory within specified
time periods in return for compensating orders of other
products. Any buildup of inventory at the Company or
in its distribution channels that does not sell through
to end users could have material adverse effects 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 especially during periods of transition to new
products. There can be no assurance that the Company
will not experience quality or reliability problems in
the future that have material adverse effects on the
Company's business and financial results.
The Company markets its products primarily
through computer product distributors and retailers.
Distribution channels for personal computers and
accessories have been characterized by rapid change,
including consolidation and financial difficulties of
distributors. The loss or ineffectiveness of any of
the Company's major distributors could have a material
adverse effect on the Company's results of operations.
In addition, since the Company grants credit to its
customers, a substantial portion of outstanding
accounts receivable are due from computer product
distributors and certain large retailers. At June 30,
1997, the customers with the ten highest accounts
receivable balances totaled $17.6 million, or 73%, of
gross accounts receivable at that date. The Company
has no reason to believe these receivable balances are
uncollectible, but 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.
EFFECT OF ANTI-TAKEOVER PROVISIONS.
The Company's Board of Directors has the
authority to issue up to 4,000,000 shares of preferred
stock and to determine the price, rights, preferences
and privileges of those shares, which, under certain
circumstances, could be issued without any further vote
or action by the Company's stockholders. To date, an
aggregate of 410,000 shares of preferred stock have
been issued: 20,000 shares of 7% Cumulative Preferred
Stock; 5,500 shares of Convertible Preferred Stock,
24,500 shares of Series 2 Preferred Stock; 50,000
shares of Series 3 Preferred Stock, 280,000 shares of
Series 4 Preferred Stock and 30,000 shares of the
Series 5 Preferred Stock, all of which, except for the
Series 4 Preferred Stock and Series 5 Preferred Stock,
have been converted. The rights of the holders of
Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of these
preferred shares and any preferred stock that may be
issued in the future. Such issuance, while providing
desirable flexibility in connection with possible
financings and acquisitions and other corporate
purposes, could make it more difficult for a third
party to acquire a majority of the outstanding voting
stock of the Company. In addition, preferred stock may
have other rights, including economic rights, senior to
the Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the
market value of the Common Stock. The Company is also
subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law, which prohibit
the Company from engaging in a "business combination"
with an "interested stockholder" for a period of three
years after the date of the transaction in which the
person first becomes an "interested stockholder,"
unless the business combination is approved in a
prescribed manner. The application of Section 203
could also have the effect of delaying or preventing a
change of control of the Company.
CLASS ACTION AND SHAREHOLDER DERIVATIVE LAWSUITS.
The Company has been named as a defendant in
four putative class action lawsuits. Two of the
actions, Ravens, et al. v. Iftikar, et al. (filed April
2, 1996) and Belleza, et al. v. Iftikar, et al. (filed
May 24, 1996) have been brought in the United States
District Court for the Northern District of California
and have been assigned to the Honorable Vaughn Walker
(collectively, the "Federal Lawsuit"). Certain current
and former officers and directors also have been named
as defendants in the Federal Lawsuit. Plaintiffs have
petitioned the Court to consolidate the foregoing
complaints into one consolidated action. That request
was denied and other procedural matters which arose
during a July 18, 1996, case management conference, are
under consideration. The plaintiffs in the Federal
Lawsuit purport to represent a class of all persons who
purchased the Company's Common Stock between October
21,1994 and February 1, 1996. The Federal Lawsuit
alleges that the defendants violated the federal
securities laws through material misrepresentations and
omissions. The third suit is a purported class action
entitled Gary S. Kaufman v. SyQuest Technology Inc., et
al. was filed on March 25, 1996, in the Superior Court
of the State of California for the County of Alameda
(the "Kaufman Lawsuit"). Certain current and former
executive officers and directors of the Company are
also named as defendants in the Kaufman Lawsuit. The
plaintiffs in the Kaufman Lawsuit purport to represent
a class of all persons who purchased the Company's
Common Stock between May 2, 1995, and February 2, 1996.
The Kaufman Lawsuit, which alleges that defendants
violated various California laws through material
misrepresentations and omissions, seeks unspecified
damages. The fourth purported class action, entitled
Ravens, et al. v. Iftikar, et al., was filed on October
11, 1996, in the Superior Court of the State of
California for the County of Alameda (the "Ravens
Lawsuit"). The Ravens Lawsuit, which alleges that the
Company and certain of its former officers and
directors violated various California laws through
material representations and omissions between October
21, 1994, and February 2, 1996, and is purportedly
brought on behalf of persons who purchased stock during
that period, seeks unspecified damages. The Ravens
Lawsuit has been consolidated with the Kaufman Lawsuit
discussed above. Plaintiffs are preparing a
consolidated complaint. The Company intends to defend
the cases vigorously.
On May 14, 1996, the Company was served with a
shareholder's derivative action filed in Alameda
County, California, Superior Court entitled John Nitti,
et al. v. Syed Iftikar, et al. On July 22, 1996,
plaintiffs filed an amended complaint. The action
seeks to recover unspecified damages and punitive
damages on behalf of the Company from current and
former officers and directors of the Company for
alleged breach of fiduciary duty, unjust enrichment and
waste of corporate assets. The Company is a nominal
defendant in the action. The complaint alleges that
the officers and directors issued false and misleading
information and sold shares of the Company's stock at
artificially inflated prices. The allegations are
essentially the same as those in the putative class
actions. The Company intends to defend this case
vigorously.
While the Company intends to vigorously defend
the lawsuits, there can be no assurance as to what
financial effect the pending litigation may have on the
Company. From time to time, the Company is involved in
litigation that it considers to be in the normal course
of its business. Other than set forth in this
prospectus, the Company is not engaged in any legal
proceedings as of the date hereof which the Company
expects individually or in the aggregate to have a
material adverse effect on the Company's financial
condition or results of operations.
USE OF PROCEEDS
The proceeds from the sale of the shares of
Common Stock offered hereby are solely for the account
of the Selling Stockholders. Accordingly, the Company
will receive none of the proceeds from the sale
thereof. However, certain of the shares of Common
Stock offered hereby are issuable in the future upon
the exercise of the outstanding warrants, and the
Company will receive the exercise prices payable upon
any exercise of the warrants. There can be no
assurance that all or any part of the warrants will be
exercised.
SELLING STOCKHOLDERS
The Selling Stockholders are (i) certain persons
who provided (or helped facilitate) equity financing to
the Company or designees of such persons, and (ii)
certain persons who provided (or are providing) certain
services to the Company. The shares of Common Stock
covered by this Prospectus are being registered so that
the Selling Stockholders may offer the shares for
resale from time to time. See "Plan of Distribution."
Except as described below, none of the Selling
Stockholders has had a material relationship with the
Company within the past three years other than as a
result of the ownership of the Common Stock and other
securities of the Company.
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 October 27, 1997, and the number of
shares which may be offered for resale pursuant to this
Prospectus. For the purposes of calculating the number
of shares of Common Stock beneficially owned by the
Selling Stockholders holding Series 4 Preferred Stock,
the number of shares of Common Stock calculated to be
issuable in connection with the conversion of the
Series 4 Preferred Stock is based on a conversion price
that is derived from the closing market price of the
Common Stock on the day that Series 4 Preferred Stock
was issued, which price is $2.343. For the purposes of
calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders holding
Series 5 Preferred Stock, the number of shares of
Common Stock calculated to be issuable in connection
with the conversion of the Series 5 Preferred Stock is
based on a conversion price that is derived from the
closing market price of the Common Stock on the first
day that Series 5 Preferred Stock was issued to each
holder of Series 5 Preferred Stock, which price ranged
from $2.438 to $3.375, depending on the holder. The
calculation of the total number of shares of Common
Stock to be offered by the holders of such convertible
securities, however, is an estimate based on a
hypothetical conversion at the prices stated above with
respect to the Series 4 Preferred Stock and the Series
5 Preferred Stock, which prices are below or equal to
the closing market price of the Common Stock as of
October 27, 1997, which price is $3.375. The
registration statement of which this Prospectus is a
part includes in accordance with Rule 416 of the
Securities Act, an indeterminate number of shares
issuable upon conversion of the Series 4 Preferred
Stock and the Series 5 Preferred Stock as a result of
the floating rate conversion features thereof. If the
price per share of the Common Stock falls below the cap
amount for either Series 4 Preferred Stock or Series 5
Preferred Stock, respectively (e.g., $2.343 for
Series 4 Preferred Stock), the number of shares of
Common Stock issuable on conversion of such preferred
stock will increase from the amounts listed in the
following table. The use of such hypothetical
conversions prices is not intended, and should in no
way be construed, to constitute a prediction as to the
future market price of the Common Stock.
The information included below 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.
Name Shares of Common Shares of Shares of Common
Beneficially owned Common Stock Beneficially
Prior to Offering being owned After
(1)(2) offered Offering (2)
Bain & Company 513,649 513,649 0
, Inc/(4)
CC Investments 8,550,861 5,550,861 0
LDC/(5)
Capital Ventures
International/(5) 3,775,431 2,775,431 0
RGC International
Investors, LDC 7,329,936 5,550,861 0
(5)(6)
Nelson Partners 4,369,881 5,988,498 0
(5)(7)
Olympus Securities 6,927,512 7,319,276 0
, Ltd.(5)(7)
Multiple Import 1,481,481 4,981,481 0
Export, Ltd.(5)
Jayhawk Investments 0 3,736,429 0
L.P. (8)
Jayhawk Institutional 0 1,046,296 0
Partners(8)
The Silikahn Route 0 254,428 0
(9)(10)
Silicon Valley Bank 0 166,667 0
(10)
Greyrock Business Credit 0 333,333 0
(10)
Wharton Capital Partners 14,420 1,804,347 0
(10)(11)
Total 33,296,504 40,021,557 0
(1) Unless otherwise indicated in the footnotes to
this table, the persons and entities named in the table
have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community
property laws where applicable.
(2) As required by regulations of the Securities and
Exchange Commission, the number of shares shown as
beneficially owned includes shares which can be
purchased within 60 days after October 27, 1997. The
actual number of shares of Common Stock beneficially
owned is subject to adjustment and could be materially
less or more than the estimated amount indicated
depending upon factors which cannot be predicted by the
Company at this time, including, among others, the
market price of the Common Stock prevailing at the
actual date of conversion of Preferred Stock, and
whether or to what extent dividends to the holders of
certain Preferred Stock are paid in Common Stock.
(3) Assumes the sale of all shares offered hereby,
and in the case of Bain & Company, Inc, CC Investments,
LDC, Capital Ventures International, RGC International
Investors, LDC, Nelson Partners, Olympus Securities,
Ltd., and Wharton Capital Partners, the sale of all
such selling Stockholder's shares of Common Stock
registered for resale by Registration Statement
Nos. 333-17119 or 333-28225, as applicable.
(4) The Selling Stockholder holds shares of Series 4
Preferred Stock of the Company, which are convertible
into shares of Common Stock. Each share of Series 4
Preferred Stock may be converted into a number of
shares of Common Stock at a conversion price which is
the greater of the arithmetical average of the closing
sale prices of the Common Stock for the five
consecutive trading days preceding the conversion or
90% of the closing sale price the day before the
conversion, but in any event not greater than $2.343.
The holder of Series 4 Preferred Stock also holds a
warrant to purchase shares of the Company's Common
Stock at an exercise price equal to the greater of 130%
of the arithmetical average of the closing sales price
per share of common stock on the five consecutive
trading days preceding the delivery of the exercise
notice and 130% of such closing sale price on the day
immediately prior to the delivery of the exercise
notice, but in any event not greater than $3.0469. The
number of shares of Common Stock underlying the
warrants issued to the holder of Series 4 Preferred
Stock equals the purchase price for the Series 4
Preferred Stock. For example, if a holder purchased $1
million of Series 4 Preferred Stock, it would receive a
warrant to acquire 1 million shares of Common Stock.
The warrants issued to the Selling Stockholder are not
exercisable until the lapse of a period ending on the
sixty-fifth day after such Selling Stockholder delivers
a notice to the Company designating an aggregate number
of warrant shares to be purchased. Once such notice is
given and the 65-day period has passed, the Selling
Stockholder may exercise its warrant up to the number
of shares designated in the 65-day notice by providing
further notice to the Company that such Selling
Stockholder is exercising the warrant. The number of
shares shown as being offered in the table is based on
(i) shares issuable upon conversion, at a conversion
price of $2.343 (which is the conversion price based on
the price per share of the Common stock on the date of
the Series 4 Preferred Shares were first issued) and
(ii) the number of warrant shares the Selling
Stockholder acquired as part of the purchase of Series
4 Preferred Shares. The Selling Stockholder can
convert Series 4 Preferred Stock into Common Stock only
to the extent that the number of shares issued thereby,
combined with the number of shares of Common Stock
already held by such Selling Stockholder and its
affiliates, would not exceed 4.9% of the then
outstanding Common Stock, as determined in accordance
with Section 13(d) of the Exchange Act. For a further
description of the rights of the holder of Series 4
Preferred Stock, see the Certificate of Designations,
Preferences and Rights of 5% Cumulative Convertible
Preferred Stock, Series 4 and form of warrant attached
as Exhibit 4.27 to this Registration Statement.
(5) Each of the listed Selling Stockholders holds
shares of Series 5 Preferred Stock of the Company,
which are convertible into shares of Common Stock.
Each share of Series 5 Preferred Stock may be converted
into a number of shares of Common Stock at a conversion
price which is the greater of the arithmetical average
of the closing sale prices of the Common Stock for the
five consecutive trading days preceding the conversion
or 90% of the closing sale price the day before the
conversion, but in any event not greater than the price
of the Common Stock on the date the Series 5 Preferred
Shares were issued to the holder thereof. Except for
certain of the warrants held by Olympus Securities Ltd.
and Nelson Partners, the holders of Series 5 Preferred
Stock also hold a warrant to purchase shares of the
Company's Common Stock at an exercise price equal to
the greater of 130% of the arithmetical average of the
closing sales price per share of common stock on the
five consecutive trading days preceding the delivery of
the exercise notice and 130% of such closing sale price
on the day immediately prior to the delivery of the
exercise notice, but in any event not greater than
$3.0469. With regard to Olympus Securities Ltd. and
Nelson Partners, they each acquired additional Series 5
Preferred Shares and a corresponding warrant, which
warrant exercise price is capped at $3.4375 per share.
Olympus Securities Ltd. holds a warrant to acquire
1,925,000 such shares and Nelson Partners holds a
warrant to acquire 1,575,000 such shares. The number
of shares of Common Stock underlying the warrants
issued to the holders of Series 5 Preferred Stock
equals 70% of the purchase price for the Series 5
Preferred Stock. For example, if a holder purchased $1
million of Series 5 Preferred Stock, it would receive a
warrant to acquire 700,000 shares of Common Stock. The
warrants issued to the Selling Stockholder are not
exercisable until the lapse of a period ending on the
sixty-fifth day after such Selling Stockholder delivers
a notice to the Company designating an aggregate number
of warrant shares to be purchased. Once such notice is
given and the 65-day period has passed, the Selling
Stockholder may exercise its warrant up to the number
of shares designated In the 65-day notice by providing
further notice to the Company that such Selling
Stockholder is exercising the warrant. The number of
shares shown as being offered in the table is based on
(i) shares issuable upon conversion, at a conversion
price ranging from $2.438 to $3.375 depending on the
price of the Common Stock on the date the Series 5
Preferred Shares were issued to the holder thereof and
(ii) the number of warrant shares each Selling
Stockholder (or its designee) acquired as part of the
purchase of Series 5 Preferred Shares. Notwithstanding
the foregoing, each listed Selling Stockholder can
convert Series 5 Preferred Stock into Common Stock only
to the extent that the number of shares issued thereby,
combined with the number of shares of Common Stock
already held by such Selling Stockholder and its
affiliates, would not exceed 4.9% of the then
outstanding Common Stock, as determined in accordance
with Section 13(d) of the Exchange Act. For a further
description of the rights of holders of Series 5
Preferred Stock, see the Certificate of Designations,
Preferences and Rights of Convertible Preferred Stock,
Series 5, and the related Securities Purchase Agreement
(with exhibits) filed as an exhibit to the Company's
Current Report on Form 8-K dated August 4, 1997 and
dated October 4, 1997.
(6) The number of shares of Common Stock
beneficially owned by RGC International Investors, LDC
("RGC") includes 27,248 shares of Common Stock
underlying warrants issued to Rose Glen Funding, Inc.
("Rose Glen"), an affiliate of Rose Glen Capital
Management, L.P. (the investment manager of RGC), from
October 1996 through February 1997 as part of a
financing separate from the Company's sale of Series 4
Preferred Stock, which shares of Common Stock have been
previously registered by the Company pursuant to
Registration Statement No. 333-17119.
(7) The number of shares of Common Stock beneficially
owned by Nelson Partners ("Nelson") and Olympus
Securities, Ltd. ("Olympus") includes 2,318,883 shares
of Common Stock and 2,217,030 shares of Common Stock,
respectively, underlying Series 4 Preferred Stock
converted into Common Stock, related warrants and
additional warrants issued to Nelson and Olympus, which
securities were issued from October 1996 through
May 1997, which shares of Common Stock have been
previously registered by the Company pursuant to
Registration Statement Nos. 333-17119 and 333-28225.
Citadel Limited Partnership is the managing general
partner of Nelson and the trading Manager of Olympus,
and consequently, has voting control and investment
discretion over securities held by both Nelson and
Olympus. The ownership information for Nelson does not
include the shares owned by Olympus and the ownership
information for Olympus does not include the shares
owned by Nelson.
(8) Jayhawk Investments, L.P. and Jayhawk
Institutional Partners, L.P. purchased 1,086,420 and
296,296 shares of the Company's Common Stock,
respectively. Both Selling Stockholders each also hold
a warrant to purchase shares of the Company's Common
Stock at an exercise price equal to the greater of the
arithmetical average of the closing sales price per
share of common stock on the five consecutive trading
days preceding the delivery of the exercise notice and
90% of such closing sale price on the day immediately
prior to the delivery of the exercise notice, but in
any event not greater than $3.0469. The number of
shares of Common Stock underlying the warrants issued
to the Selling Stockholders equals the purchase price
for the Common Stock acquired. For example, if a
holder purchased $1 million of Common Stock, it would
receive a warrant to acquire 1 million shares of Common
Stock. The warrants issued to the Selling Stockholders
are not exercisable until the lapse of a period ending
on the sixty-fifth day after such Selling Stockholder
delivers a notice to the Company designating an
aggregate number of warrant shares to be purchased.
Once such notice is given and the 65-day period has
passed, the Selling Stockholder may exercise its
warrant up to the number of shares designated in the
65-day notice by providing further notice to the
Company that such Selling Stockholder is exercising the
warrant. For a further description of the rights of
such Selling Stockholders, see the Securities Purchase
Agreement (with exhibits) filed as an exhibit to the
Company's Current Report on Form 8-K dated August 4,
1997.
(9) The Listed Selling Stockholder has the right to
acquire Common Stock pursuant to certain warrants to
purchase shares of Common Stock. The Company granted
such Stock Purchase Warrants as part of the Selling
Stockholders' compensation for their providing certain
consulting services for the Company. One of the
warrants is exercisable into 132,923 shares of common
stock at an exercise price of the greater of 130% of
the arithmetical average of the closing sales price per
share of common stock on the five consecutive trading
days preceding the delivery of the exercise notice and
130% of such closing sale price on the day immediately
prior to the delivery of the exercise notice, but in
any event not greater than $3.0469. The exercise price
of the other warrants is the greater of 130% of the
arithmetical average of the closing sales price per
share of common stock on the five consecutive trading
days preceding the delivery of the exercise notice and
130% of such closing sale price on the day immediately
prior to the delivery of the exercise notice, but in
any event not greater than 130% of the closing sale
price on the date the warrant is issued. A warrant to
acquire 48,797 shares of Common Stock was issued as of
August 15, 1997, a warrant to acquire 35,854 shares of
Common Stock was issued as of September, 1997, and a
warrant to acquire 35,854 shares of Common Stock was
issued as of October 15, 1997. The warrants issued to
the Selling Stockholder are not exercisable until the
lapse of a period ending on the sixty-fifth day after
such Selling Stockholder delivers a notice to the
Company designating an aggregate number of warrant
shares to be purchased. Once such notice is given and
the 65-day period has passed, the Selling Stockholder
may exercise its warrants up to the number of shares
designated in the 65-day notice by providing further
notice to the Company that such Selling Stockholder is
exercising the warrant. A copy of each warrant is
filed with this Registration Statement as Exhibit 4.30.
(10) Each Listed Selling Stockholder has the right to
acquire Common Stock pursuant to certain warrants to
purchase shares of Common Stock. The Company granted
such Stock Purchase Warrants as part of the Selling
Stockholders' compensation for either their providing
certain consulting services or their facilitation of
certain financings for the Company. The exercise price
for warrants is the greater of 130% of the arithmetical
average of the closing sales price per share of common
stock on the five consecutive trading days preceding
the delivery of the exercise notice and 130% of such
closing sale price on the day immediately prior to the
delivery of the exercise notice, but in any event not
greater than $3.0469. The warrants issued to the
Selling Stockholder are not exercisable until the lapse
of a period ending on the sixty-fifth day after such
Selling Stockholder delivers a notice to the Company
designating an aggregate number of warrant shares to be
purchased. Once such notice is given and the 65-day
period has passed, the Selling Stockholder may exercise
its warrants up to the number of shares designated in
the 65-day notice by providing further notice to the
Company that such Selling Stockholder is exercising the
warrant.
(11) In connection with facilitating prior financings,
the Company previously committed to issue a warrant to
such Selling Stockholder to acquire 500,000 shares of
Common Stock at an exercise price of $7.15 per share.
In addition, the Company also issued warrants to
acquire a total of 250,000 shares of Common Stock to
such Selling Stockholder and to State Capital market
Group Ltd. at either $7.15 or $10.875 per share, which
warrants were registered pursuant to Registration
Statement No. 333-28225. The warrants to acquire said
750,000 shares of Common Stock have been cancelled, and
in exchange the Selling Stockholder has received a
warrant to acquire 500,000 shares of Common Stock on
the terms and conditions described in footnote (10),
above.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common
Stock offered by the Selling Stockholders hereunder
pursuant to contractual registration rights.
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 on any exchange which the common
stock is listed for trading 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
underwritten offerings, block trades, agency
placements, exchange distributions, brokerage
transactions or otherwise, or in any combination of
transactions. The shares of Common Stock offered
hereunder may be used to settle sales of Common Stock
effected on or after the date Preferred Stock is
converted into Common Stock.
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.
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
each other and 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
Certain legal matters will be passed upon for
the Company by Shartsis, Friese & Ginsburg LLP, San
Francisco, California.
EXPERTS
The consolidated financial statements of SyQuest
Technology, Inc. appearing in the SyQuest Technology,
Inc. Annual Report on Form 10-K for the fiscal year
ended September 30, 1996, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein
by reference. Such consolidated financial statements
are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as
experts in accounting and auditing.
NO DEALER, SALESPERSON OR
OTHER INDIVIDUAL HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST 40,021,557 SHARES
NOT BE RELIED UPON AS HAVING BEEN SYQUEST TECHNOLOGY, INC.
AUTHORIZED BY THE COMPANY. THIS COMMON STOCK
PROSPECTUS DOES NOT CONSTITUTE AN PROSPECTUS
OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY
SALE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
TABLE OF CONTENTS
AVAILABLE INFORMATION................3
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...............3
THE COMPANY..........................4
RISK FACTORS.........................5
USE OF PROCEEDS.....................20
SELLING STOCKHOLDERS................21
PLAN OF DISTRIBUTION................26
LEGAL MATTERS.......................27
EXPERTS.............................27
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 commission, payable by the
Company in connection with the sale of the Common Stock being
registered. All the amounts shown are estimates except for the
registration fee.
Registration fee $49,627.00
Blue sky qualification fees and expenses -
Printing 1,000.00
Legal fees and expenses 25,000.00
Accounting fees and expenses 3,000.00
Miscellaneous 1,000.00
-----------
Total 79,627.00
===========
ITEM 15. INDEMNIFICATION OF OFFICERS AND
DIRECTORS.
The Company has the power, pursuant to Section
102(7) of the Delaware General Corporation Law, to
limit the liability of directors of the Company for
certain breaches of fiduciary duty and, pursuant to
Section 145 of the Delaware General Corporation Law, to
indemnify its officers and directors and other persons
for certain acts.
The Company's Restated Certificate of
Incorporation includes the following provisions:
The personal liability of the directors of the
corporation for monetary damages for breach of
fiduciary duty as a director shall be eliminated to the
fullest extent permissible under Delaware law as the
same exists or as may hereafter be amended. Neither
any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of
Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in
respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article would
accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
The corporation is authorized to provide
indemnification of officers, directors, employees or
agents of the corporation for breach of duty to the
corporation and its stockholders through By-law
provisions or through agreements with such officers,
directors, employees or agents, or both, in excess of
the indemnification otherwise permitted by Section 145
of the Delaware General Corporation Law, subject to the
limits on such excess indemnification set forth in
Section 102(b)(7) of the Delaware General Corporation
Law.
Pursuant to Section 145 of the Delaware General
Corporation Law, a corporation generally has the power
to indemnify its present and former directors,
officers, employees and agents against expenses
incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by
reason of their serving in such positions so long as
they acted in good faith and in a manner they
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 terms of their
registration rights agreements, certain of 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
3.1 Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 of
the Company's Annual Report on Form 10-K/A for the
fiscal period ended September 30, 1996.
3.2 Amendment to Restated Certificate of
Incorporation of the Company. Incorporated by
reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-3 filed December 2, 1996 (File No.
333-17119), as amended.
4.1 Corrected Certificate of Designations,
Preferences and Rights of 7% Cumulative Convertible
Preferred Stock, Series 1. Incorporated by reference
to Exhibit 3.1 to the Company's Current Report on Form
8-K dated June 14, 1996 (the "June 14, 1996, Form
8-K").
4.2 Securities Purchase Agreement, dated as of May
31, 1996, by and among the Company and holders of 7%
Cumulative Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 10.1 to the June
14, 1996, Form 8-K.
4.3 Registration Rights Agreement dated as of May
31, 1996, by and among the Company and holders of 7%
Cumulative Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 10.2 to the June
14, 1996, Form 8-K.
4.4 6% Convertible Subordinated Debenture dated July
15, 1996. Incorporated by reference to Exhibit 10.3 to
the Company's Form S-3 Registration Statement No.
333-7369 ("Registration 333-7369").
4.5 Registration Agreement dated July 15, 1996,
among the Company and WISRS (Malaysia) SDN.BHD.
Incorporated by reference to Exhibit 10.4 to
Registration 333-7369
4.6 Certificate of Designations, Preferences and
Rights of Convertible Preferred Stock, Series 1, as
amended and agreed to be amended. Incorporated by
Reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K/A dated October 31, 1996 (the
"October 31, 1996, Form 8-K/A").
4.7 Certificate of Designations, Preferences and
Rights of 5% Cumulative Preferred Stock, Series 2.
Incorporated by reference to Exhibit 3.2 to the October
31, 1996, Form 8-K/A.
4.8 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.
Incorporated by reference to Exhibit 10.1 to the
October 31, 1996, Form 8-K/A.
4.9 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. Incorporated
by reference to Exhibit 10.2 to the October 31, 1996,
Form 8-K/A.
4.10 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. Incorporated
by reference to Exhibit 10.3 to the October 31, 1996,
Form 8-K/A.
4.11 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. Incorporated
by reference to Exhibit 10.4 to the October 31, 1996,
Form 8-K/A.
4.12 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. Incorporated
by reference to Exhibit 10.5 to the October 31, 1996,
Form 8-K/A.
4.13 Securities Purchase Agreement dated as of
September 27, 1996, between the Company and Atmel
Corporation, including the exhibit Form of Registration
Rights Agreement. Incorporated by reference to Exhibit
10.6 to the October 31, 1996, Form 8-K/A.
4.14 Securities Purchase Agreement dated as of
October 18, 1996, between the Company and Petronic
International, Inc., including the exhibit Form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.7 to the October 31, 1996, Form
8-K/A.
4.15 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. Incorporated by reference to Exhibit
10.8 to the October 31, 1996, Form 8-K/A.
4.16 Securities Purchase Agreement dated as of
October 25, 1996, between the Company and Freight
Solutions International, including the exhibit Form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.9 to the October 31, 1996, Form
8-K/A.
4.17 Subscription Agreement dated March 31, 1997,
between the Company and Fletcher International Limited,
including as Annex B thereto the form of Warrant
Certificate issued pursuant thereto. Incorporated by
reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated February 28, 1997 (the
"February 28, 1997, Form 8-K").
4.18 Securities Purchase Agreement dated as of
February 28, 1997, between the Company and A-Com
Enterprises Company, Ltd., including the exhibit form
of Registration Rights Agreement. Incorporated by
reference to Exhibit 10.2 to the February 28, 1997,
Form 8-K.
4.19 Securities Purchase Agreement dated as of March
19, 1997, between the Company and Seksun Precision
Engineering Limited, including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.3 to the February 28, 1997,
Form 8-K.
4.20 Securities Purchase Agreement dated as of March
26, 1997, between the Company and Tongkah SDN.BHD.,
including the exhibit form of Registration Rights
Agreement. Incorporated by reference to Exhibit 10.4
to the February 28, 1997, Form 8-K.
4.21 Securities Purchase Agreement dated as of March
26, 1997, between the Company and Silicon Systems,
Inc., including the exhibit form of Registration Rights
Agreement. Incorporated by reference to Exhibit 10.5
to the February 28, 1997, Form 8-K.
4.22 Securities Purchase Agreement dated as of April
15, 1997, between the Company and Jardine Matheson &
Company, Ltd., including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated April 15, 1997 (the "April 15,
1997, Form 8-K").
4.23 Securities Purchase Agreement dated May 1, 1997,
between the Company and New Enterprises Associates VII
L.P., including as Annex A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, as Annex B
thereto the form of Warrant Certificate issued pursuant
thereto, as Annex C thereto the form of Delivery
Letter, and as Annex D thereto the corrections to be
made to the Certificate of Designations. Incorporated
by reference to the April 15, 1997, Form 8-K.
4.24 Securities Purchase Agreement dated August 4,
1997, between the Company and Jayhawk Investments,
L.P., including as Exhibit A thereto the form of
Warrant Certificate issued pursuant thereto.
Incorporated by reference to the August 4, 1997, Form
8-K.
4.25 Securities Purchase Agreement dated September 3,
1997, between the Company and Olympus Securities, Inc.,
including as Exhibit A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 5, as Exhibit B
thereto the form of Warrant Certificate issued pursuant
thereto, as Exhibit C thereto the form of Delivery
Letter, and as Exhibit D thereto the form of conversion
notice. Incorporated by reference to the August 4,
1997, Form 8-K.
4.26 Securities Purchase Agreement dated October 3,
1997, between the Company and Olympus Securities, Inc.,
including as Exhibit A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 5, as Exhibit B
thereto the form of Warrant Certificate issued pursuant
thereto, as Exhibit C thereto the form of Delivery
Letter, and as Exhibit D thereto the form of conversion
notice. Incorporated by reference to the August 4,
1997, Form 8-K.
4.27 Securities Purchase Agreement dated October 13,
1997, between the Company and Bain & Company, Inc.,
including as Annex A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, and as Annex B
thereto the form of Warrant Certificate issued pursuant
thereto. Reference is made to Exhibit 4.27.
4.28 Warrant Certificates dated as of June 27, 1997,
issued to Slicon Valley Bank. Incorporated by
reference to the June 27, 1997, Form 8-K.
4.29 Warrant Certificates dated as of June 27, 1997,
issued to Greyrock Business Credit. Incorporated by
reference to the June 27, 1997, Form 8-K.
4.30 Warrant Certificates dated as of July 23, 1997,
August 15, 1997, September 15, 1997, and October 15,
1997, issued to The Silakhan Route. Incorporated by
reference to the June 27, 1997, Form 8-K.
4.31 Warrant Certificate dated as of November 10,
1997, issued to Wharton Capital Partners. Incorporated
by reference to the June 27, 1997, Form 8-K.
5.1 Opinion of Shartsis, Friese & Ginsburg LLP (to
be filed in a subsequent amendment).
23.1 Consent of Ernst & Young LLP, independent
auditors (to be filed in a subsequent amendment).
23.2 Consent of Shartsis, Friese & Ginsburg LLP.
Reference is made to Exhibit 5.1.
24.1 Power of Attorney of certain officers and
directors (included in Part II of the Registration
Statement - previously filed).
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:
To include any prospectus required
by Section 10(a)(3) of the Act;
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;
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)(i) and (1)(ii) do not apply if the information
required 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
1 5(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining
any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means
of a post-effective amendment any of the securities
being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining
any liability under the Act, each filing of the
Company's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement
shall be deemed to be the 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.
SIGNATURES
Pursuant to the requirements of the
Securities Act, the Company certifies that it has
reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused
this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of
California, on the 2nd day of October, 1997.
SYQUEST TECHNOLOGY, INC.
By: /s/ Bob L. Corey
Bob L. Corey,
Executive Vice President, Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities
Act, this Registration Statement has been signed below
by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/s/ Edwin L. Harper President, Chief Executive November 13, 1997
Edwin L. Harper Officer and Director
(Principal Executive Officer)
/s/ Bob L. Corey Executive Vice President, November 13, 1997
Bob L. Corey Finance and Chief Financial
Officer
(Principal Financial and
Accounting Officer)
/s/ Edward L. Marinaro Chairman of the Board and November 13, 1997
Edward L. Marinaro Director
/s/ C. Richard Kramlich Director November 13, 1997
C. Richard Kramlich
/s/ S. Joseph Baia Director November 13, 1997
S. Joseph Baia
INDEX TO EXHIBITS
Exhibit
Sequential
Number Description of Document
Page No.
3.1 Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit
3.1 to the Company's Annual Report on Form 10-K
for the fiscal period ended September 30, 1995.
3.2 Amendment to Restated Certificate of
Incorporation of the Company. Incorporated by
reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-3 filed
December 2, 1996 (File No. 333-17119), as
amended.
4.1 Corrected Certificate of Designations,
Preferences and right of 7% Cumulative
Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated June
14, 1996 (the "June 14, 1996, Form 8-K").
4.2 Securities Purchase Agreement, dated as of May
31, 1996, by and among the Company and holders
of 7% Cumulative Convertible Preferred Stock,
Series 1. Incorporated by reference to Exhibit
10.1 to the June 14, 1996, Form 8-K.
4.3 Registration Rights Agreement dated as of May
31, 1996, by and among the Company and holders
of 7% Cumulative Convertible Preferred Stock,
Series 1. Incorporated by reference to Exhibit
10.2 to the June 14, 1996, Form 8-K.
4.4 6% Convertible Subordinated Debenture dated July
15, 1996. Incorporated by reference to Exhibit
10.3 to the Company's Form S-3 Registration
Statement No. 333-7369 ("Registration
333-7369").
4.5 Registration Agreement dated July 15, 1996,
among the Company and WISRS (Malaysia) SDN.BHD.
Incorporated by reference to Exhibit 10.4 to
Registration 333-7369.
4.6 Certificate of Designations, Preferences and
Rights of Convertible Preferred Stock, Series 1,
as amended and agreed to be amended.
Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K/A dated
October 31, 1996 (the October 31, 1996, Form
8-K/A").
4.7 Certificate of Designations, Preferences and
Rights of 5% Cumulative Preferred Stock, Series
2. Incorporated by reference to Exhibit 3.2 to
the October 31, 1996, Form 8-K/A.
4.8 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. Incorporated
by reference to Exhibit 10.1 to the October 31,
1996, Form 8-K/A.
4.9 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. Incorporated by reference to
Exhibit 10.2 to the October 31, 1996, Form
8-K/A.
4.10 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. Incorporated by reference to
Exhibit 10.3 to the October 31, 1996, Form
8-K/A.
4.11 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. Incorporated by reference to
Exhibit 10.4 to the October 31, 1996, Form
8-K/A.
4.12 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. Incorporated by reference to
Exhibit 10.5 to the October 31,1996, Form 8-K/A.
4.13 Securities Purchase Agreement dated as of
September 27, 1996, between the Company and
Atmel Corporation, including the exhibit Form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.6 to the October 31,
1996, Form 8-K/A.
4.14 Securities Purchase Agreement dated as of
October 18, 1996, between the Company and
Petronic International, Inc., including the
exhibit Form of Registration Rights Agreement.
Incorporated by reference to Exhibit 10.7 to the
October 31, 1996, Form 8-K/A.
4.15 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. Incorporated
by reference to Exhibit 10.8 to the October 31,
1996, Form 8-K/A.
4.16 Securities Purchase Agreement dated as of
October 25, 1996, between the Company and
Freight Solutions International, including the
exhibit Form of Registration Rights Agreement.
Incorporated by reference to Exhibit 10.9 to the
October 31, 1996, Form 8-K/A.
4.17 Subscription Agreement dated March 31, 1997,
between the Company and Fletcher International
Limited, including as Annex B thereto the form
of Warrant Certificate issued pursuant thereto.
Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K dated
February 28, 1997 (the "February 28, 1997, Form
8-K").
4.18 Securities Purchase Agreement dated as of
February 28, 1997, between the Company and
A-Corn Enterprises Company, Ltd., including the
exhibit form of Registration Rights Agreement.
Incorporated by reference to Exhibit 10.2 to the
February 28, 1997, Form 8-K.
4.19 Securities Purchase Agreement dated as of March
19, 1997, between the Company and Seksun
Precision Engineering Limited, including the
exhibit form of Registration Rights Agreement.
Incorporated by reference to Exhibit 10.3 to the
February 28, 1997, Form 8-K.
4.20 Securities Purchase Agreement dated as of March
26, 1997, between the Company and Tongkah
SDN.BHD., including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.4 to the February 28,
1997, Form 8-K.
4.21 Securities Purchase Agreement dated as of March
26, 1997, between the Company and Silicon
Systems, Inc., including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.5 to the February 28,
1997, Form 8-K.
4.22 Securities Purchase Agreement dated as of April
15, 1997, between the Company and Jardine
Matheson & Company, Ltd., including the exhibit
form of Registration Rights Agreement.
Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated April
15, 1997 (the "April 15, 1997, Form 8-K").
4.23 Securities Purchase Agreement dated May 1, 1997,
between the Company and New Enterprises
Associates VII L.P., including as Annex A
thereto the Certificate of Designations,
Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, as Annex
B thereto the form of Warrant Certificate issued
pursuant thereto, as Annex C thereto the form of
Delivery Letter, and as Annex D thereto the
corrections to be made to the Certificate of
Designations. Incorporated by reference to the
April 15, 1997, Form 8-K.
4.24 Securities Purchase Agreement dated August 4,
1997, between the Company and Jayhawk
Investments, L.P., including as Exhibit A
thereto the form of Warrant Certificate issued
pursuant thereto. Incorporated by reference to
the August 4, 1997, Form 8-K.
4.25 Securities Purchase Agreement dated September 3,
1997, between the Company and Olympus
Securities, Inc., including as Exhibit A thereto
the Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred
Stock, Series 5, as Exhibit B thereto the form
of Warrant Certificate issued pursuant thereto,
as Exhibit C thereto the form of Delivery
Letter, and as Exhibit D thereto the form of
conversion notice. Incorporated by reference to
the August 4, 1997, Form 8-K.
4.26 Securities Purchase Agreement dated October 3,
1997, between the Company and Olympus
Securities, Inc., including as Exhibit A thereto
the Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred
Stock, Series 5, as Exhibit B thereto the form
of Warrant Certificate issued pursuant thereto,
as Exhibit C thereto the form of Delivery
Letter, and as Exhibit D thereto the form of
conversion notice. Incorporated by reference to
the August 4, 1997, Form 8-K.
4.27 Securities Purchase Agreement dated October 13,
1997, between the Company and Bain & Company,
Inc., including as Annex A thereto the
Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred
Stock, Series 4, and as Annex B thereto the form
of Warrant Certificate issued pursuant thereto.
4.28 Warrant Certificates dated as of June 27, 1997,
issued to Slicon Valley Bank. Incorporated by
reference to the June 27, 1997, Form 8-K.
4.29 Warrant Certificates dated as of June 27, 1997,
issued to Greyrock Business Credit. Incorporated by
reference to the June 27, 1997, Form 8-K.
4.30 Warrant Certificates dated as of July 23, 1997,
August 15, 1997, September 15, 1997, and October
15, 1997, issued to The Silakhan Route. Incorporated
by reference to the June 27, 1997, Form 8-K.
4.31 Warrant Certificate dated as of November 10,
1997, issued to Wharton Capital Partners. Incorporated
reference to the June 27, 1997, Form 8-K.
5.1 Opinion of Shartsis, Friese & Ginsburg LLP (to
be filed in a subsequent amendment).
23.1 Consent of Ernst & Young LLP, independent
auditors (to be filed in a subsequent
amendment).
23.2 Consent of Shartsis, Friese & Ginsburg LLP.
Reference is made to Exhibit 5.1.
24.1 Power of Attorney of certain officers and
directors (included in Part II of the
Registration Statement).
Exhibit 4.27
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the
"Agreement") dated October 13, 1997, is entered into by
and between SyQuest Technology, Inc., a Delaware
corporation (together with its successors, "SyQuest"),
and Bain & Company, Inc., a Massachusetts corporation
("Bain").
Unless otherwise defined herein, capitalized
terms used herein and not defined herein shall have the
meanings given to them in Regulation D (as now if
effect or as hereafter amended, "Regulation D") under
the Securities Act of 1933, as amended (the "Securities
Act").
The parties hereto agree as follows:
1. Purchase and Sale. In consideration
of and upon the basis of the representations,
warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
a. 5% Convertible Preferred
Stock. SyQuest agrees to issue and sell to
Bain, and Bain agrees to purchase from SyQuest,
on the Closing Date specified in Section 2
hereof, 3,600 shares of SyQuest's 5% Cumulative
Convertible Preferred Stock, Series 4, stated
value $100 per share (the "Preferred Shares"),
having the terms and conditions set forth in the
Certificate of Designation which is attached
hereto as Annex A at a purchase price per share
equal to one hundred dollars ($100), for an
aggregate purchase price of $360,000. Payment
for the Preferred Shares shall be made by
offsetting fees Bain would otherwise be due for
consulting services provided to SyQuest for the
period April 16, 1997, through October 15, 1997,
as follows:
Amount Of Fees
Date Services To Offset Against
To Be Provided Purchase Price
April 16, 1997 - May 15, 1997 $80,000
May 16, 1997 - June 15, 1997 $80,000
June 16, 1997 - July 15, 1997 $80,000
July 16, 1997 - August 15, 1997 $40,000
August 16, 1997 - September 15, 1997 $40,000
September 16, 1997 - October 15, 1997 $40,000
If the consulting arrangement between SyQuest
and Bain is terminated prior to October 15,
1997, then the amount of Preferred Shares
purchased shall be prorated (on a daily basis)
based on the amount of the offset accrued as of
the date the consulting arrangement is
terminated.
b. Warrant. In consideration of
the purchase of the Preferred Shares by Bain,
SyQuest will issue to Bain on the Closing Date
specified in Section 2 hereof, a warrant or
warrants having the terms set forth in the
warrant certificate attached hereto as Annex B
(the "Warrant") to purchase one share (subject
to adjustment) of SyQuest's Common Stock, par
value $.0001 per share (the "Common Stock") for
every dollar of offset applied to the purchase
of the Preferred Shares. The shares of Common
Stock issuable pursuant to the Warrant are
referred to herein as the "Warrant Shares."
c. Converted Stock. The term
"Converted Stock" shall apply to any Common
Stock issued or to be issued to Bain upon
conversion of the Preferred Shares pursuant to
the terms of this Agreement and the Certificate
of Designation or upon the exercises of the
Warrant.
2. Closing Date. Upon satisfaction
or, if applicable, waiver of the conditions set forth
in Sections 7 and 8 hereof, the delivery of the
Preferred Shares referred to in Section 1(a) and the
Warrant referred to in Section 1(b) (the "Closing")
shall take place on October 16, 1997, or at such other
date and time as Bain and SyQuest may agree (such date
and time being referred to herein as the "Closing
Date").
At the Closing, the following deliveries
shall be made:
a. Preferred Shares. SyQuest
shall deliver the certificate representing the
Preferred Shares, duly registered on the books
of SyQuest in the name of Bain, against payment
by Bain of the purchase price through offset as
specified in Section 1(a) hereof.
b. Warrant. SyQuest shall
deliver the certificate representing the Warrant
to Bain. Such certificate shall be
substantially in the form attached hereto as
Annex B.
c. Closing Documents. The
closing documents required by Sections 7 and 8
shall be delivered to Bain and SyQuest,
respectively.
The foregoing deliveries shall be deemed
to occur simultaneously as part of a single
transaction, and no delivery shall be deemed to have
been made until all such deliveries have been made.
3. Representations and Warranties of
SyQuest. Except as disclosed in any report, form,
schedule, statement or other document (collectively,
"SEC Filings") filed by the Company prior to the date
of this Agreement with the SEC under the 1933 Act or
the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or as disclosed in the Schedule of
Exceptions attached hereto SyQuest hereby represents
and warrants to Bain on the date hereof and on the
Closing Date, on the date any Preferred Share is
converted (each a "Conversion Date") and on each
Exercise Date (as defined in the Warrant Certificate)
as follows:
a. SyQuest has been duly
incorporated and is validly existing in good
standing under the laws of Delaware, or, after
the Closing Date if another entity has succeeded
SyQuest in accordance with the terms hereof,
under the laws of one of the United States.
b. The execution, delivery and
performance of this Agreement (including the
issuance of the Preferred Shares and Converted
Stock) and the Warrant Certificate by SyQuest
have been duly authorized by all requisite
corporate action and no further consent or
authorization of SyQuest, its Board of Directors
or its stockholders is required. This Agreement
and the Warrant Certificate have been duly
executed and delivered by SyQuest and, when duly
authorized, executed and delivered by Bain, will
be valid and binding agreements enforceable
against SyQuest in accordance with their terms,
subject to bankruptcy, insolvency, reorgani-
zation, moratorium and similar laws of general
applicability relating to or affecting
creditors' rights generally and to general
principles of equity.
c. SyQuest has full corporate
power and authority necessary to execute and
deliver this Agreement and the Warrant
Certificate and to perform its obligations
hereunder (including the issuance of the
Preferred Shares and Converted Stock) and
thereunder.
d. No consent, approval,
authorization or order of any court, governmen-
tal agency or other body is required for execu-
tion and delivery by SyQuest of this Agreement
and the Warrant Certificate or the performance
by SyQuest of any of its obligations hereunder
(including the issuance of the Preferred Shares
and Converted Stock) or thereunder, other than,
with respect to any Exercise Date, any consent,
approval, authorization or order which is
received on or prior to such date.
e. Neither the execution and
delivery by SyQuest of this Agreement and the
Warrant Certificate nor the performance by
SyQuest of any of its obligations hereunder or
thereunder:
(1) violates, conflicts with,
results in a breach of, or constitutes a
default (or an event which with the giving
of notice or the lapse of time or both
would be reasonably likely to constitute a
default) under (A) the Certificate of
Incorporation or by-laws of SyQuest or any
of its subsidiaries or any Certificate of
Designation relating to any securities of
SyQuest or any of its subsidiaries, (B)
any decree, judgment, order, law, treaty,
rule, regulation or determination of which
SyQuest is aware (after due inquiry) of
any court, governmental agency or body, or
arbitrator having jurisdiction over
SyQuest or any of its subsidiaries or any
of their respective properties or assets,
(C) the terms of any bond, debenture, note
or any other evidence of indebtedness, or
any agreement, stock option or other
similar plan, indenture, lease, mortgage,
deed of trust or other instrument to which
SyQuest or any of its subsidiaries is a
party, by which SyQuest or any of its
subsidiaries is bound, or to which any of
the properties or assets of SyQuest or any
of its subsidiaries is subject, (D) the
terms of any "lock-up" or similar pro-
vision of any underwriting or similar
agreement to which SyQuest or any of its
subsidiaries is a party or (E) any rules
of the National Association of Securities
Dealers, Inc. applicable to SyQuest or the
transactions contemplated hereby; or
(2) results in the creation
or imposition of any lien, charge or
encumbrance upon (A) any Preferred Share,
the Warrant or any Converted Stock or (B)
any of the properties or assets of SyQuest
or any of its subsidiaries.
f. SyQuest has validly reserved
400,000 Preferred Shares for issuance pursuant
to the terms hereof. SyQuest has recommended at
its 1997 Annual Meeting of stockholders an
amendment to SyQuest's Certificate of
Incorporation (the "Amendment") that would
increase the number of shares of Common Stock
authorized for issuance to 120,000,000, and if
the Amendment is approved SyQuest intends to
reserve for issuance to Bain the maximum number
of shares of Common Stock that may be issuable
from time to time upon conversion of the
Preferred Shares and exercise of the Warrant.
When issued to Bain against payment therefor in
accordance with the terms of this Agreement, the
Certificate of Designation or the Warrant, each
share of Preferred Stock and Converted Stock:
(1) will have been duly and
validly authorized, duly and validly
issued, fully paid and non-assessable;
(2) will be free and clear of
any security interests, liens, claims or
other encumbrances (other than those
resulting solely from actions by Bain);
and
(3) will not have been issued
or sold in violation of any preemptive or
other similar rights of the holders of any
securities of SyQuest.
g. Reserved.
h. On the Closing Date, there is
no pending or, to the best knowledge of SyQuest,
threatened action, suit, proceeding or
investigation before any court, governmental
agency or body, or arbitrator having
jurisdiction over SyQuest or any of its
affiliates that would materially affect the
execution by SyQuest of, or the performance by
SyQuest of its obligations under, this Agreement
or the Warrant Certificate, provided, however,
that the representations and warranties con-
tained in this Section 3(h) shall not apply to
any action, threatened action, suit, proceeding
or investigation initiated by Bain.
i. SyQuest has timely filed all
filings with the United States Securities and
Exchange Commission (the "SEC") under the
Securities Act or under Section 13(a) or 15(d)
of the Exchange Act (each, an "SEC Filing")
required to be filed by SyQuest pursuant to such
acts and no SEC Filing, or press release
containing information material to the business
of SyQuest as a whole, contained any untrue
statement of a material fact or omitted to state
any material fact necessary in order to make the
statements, in the light of the circumstances
under which they were made, not misleading.
j. Since the date of SyQuest's
most recent SEC Filing, there has not been, and
SyQuest is not aware of any development that
would require an amendment to SyQuest's
Registration Statement on Form S-3 (registration
number 333-17119), as supplemented, in order to
permit public offers and sales of shares of
Common Stock thereunder.
k. The offer and sale of the
Preferred Shares, the Warrant and the Converted
Stock to Bain pursuant to this Agreement and the
Warrant Certificate will, subject to compliance
by Bain with the applicable representations and
warranties contained in Section 4 hereof and
with the applicable covenants and agreements
contained in Section 6 hereof, be made in
accordance with the provisions and requirements
of Regulation D and any applicable state law,
provided, however, that the representations and
warranties contained in this Section 3(k) shall
not be required to be given in respect of any
Exercise Date if the provisions of Section 3A
are applicable and SyQuest is in full compliance
therewith and Bain is permitted to resell the
Common Stock thereunder.
l. Capitalization. As of
September 26, 1997, the authorized capital stock
of the Company consisted of (i) 120,000,000
shares of Common Stock of which approximately
59.2 million shares were issued and outstanding,
and (ii) 4,000,000 shares of Preferred Stock of
which there are more than 300,000 shares issued
and outstanding. All such shares of Common
Stock are, and all shares which may be issued
pursuant to stock options, warrants or other
convertible rights will be, when issued and paid
for in accordance with the respective terms
thereof, duly authorized, validly issued, fully
paid and nonassessable and free of any
preemptive rights in respect thereof. There are
no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any
character whatsoever granted or issued by the
Company and relating to, or securities or rights
granted or issued by the Company and 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. There are no outstanding debt
securities issued by the Company. 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 this
Agreement). The Company has furnished to
Investor true and correct copies of the
Certificate of Incorporation and the Company's
By-laws, as in effect on the date hereof (the
"Bylaws").
3.A Registration Provisions.
a. SyQuest shall, as promptly as
practicable hereafter and at its own expense,
file a registration statement (the "Registration
Statement") under the 1933 Act covering the sale
or resale of the maximum number of shares of
Common Stock then issuable upon conversion of
the Preferred Shares and exercise of the Warrant
(each a "Covered Security"), shall use its best
efforts to cause such Registration Statement to
be declared effective not later than 90 days
from the Closing Date (or 120 days from the
Closing Date if the SEC reviews such
Registration Statement) and shall amend such
Registration Statement from time to time upon
the request of Investor if the maximum number of
shares of Common Stock issuable upon conversion
of the Preferred Shares and exercise of the
Warrant is greater than the number of shares of
Common Stock registered pursuant to such
Registration Statement, unless an amendment is
not required for the registration and sale of
such securities under such Registration
Statement pursuant to Rule 416 or any other rule
under the 1933 Act; provided that Investor shall
have provided such information and cooperation
in connection therewith as SyQuest may reason-
ably request.
b. SyQuest will use its best ef-
forts to: (i) keep such registration effective
until the earlier of (A) the second anniversary
of the issuance of each Covered Security, (B)
such date as all of the Covered Securities shall
have been sold by Bain or (C) such time as all
of the Covered Securities held by Bain can be
sold by Bain or any of its affiliates within a
three-month period without compliance with the
registration requirements of the Securities Act
pursuant to Rule 144 under the Securities Act
("Rule 144"); (ii) prepare and file with the SEC
such amendments and supplements to the Registra-
tion Statement and the prospectus used in
connection with the Registration Statement (as
so amended and supplemented from time to time,
the "Prospectus") as may be necessary to comply
with the provisions of the Securities Act with
respect to the disposition of all Covered
Securities by Bain or any of its affiliates;
(iii) furnish such number of Prospectuses and
other documents incident thereto, including any
amendment of or supplement to the Prospectus, as
Bain from time to time may reasonably request;
(iv) cause all Covered Securities that are
Common Stock to be listed on each securities
exchange and quoted on each quotation service on
which similar securities issued by SyQuest are
then listed or quoted; (v) provide a transfer
agent and registrar for all Covered Securities
and a CUSIP number for all Covered Securities;
(vi) otherwise use its best efforts to comply
with all applicable rules and regulations of the
SEC; and (vii) file the documents required of
SyQuest and otherwise use its best efforts to
obtain and maintain requisite blue sky clearance
in (A) all jurisdictions in which any of the
Covered Securities are originally sold and (B)
all other states specified in writing by Bain,
provided, however, that as to this clause (B),
SyQuest shall not be required to qualify to do
business or consent to service of process in any
state in which it is not now so qualified or has
not so consented.
c. SyQuest shall furnish to Bain
upon request a reasonable number of copies of a
supplement to or an amendment of such Prospectus
as may be necessary in order to facilitate the
public sale or other disposition of all or any
of the Covered Securities by Bain or any of its
affiliates pursuant to the Registration
Statement.
d. With a view to making
available to Bain and its affiliates the
benefits of Rule 144 and Form S-3 under the
Securities Act, SyQuest covenants and agrees to:
(i) make and keep available adequate current
public information (within the meaning of Rule
144(c)) concerning SyQuest, until the earlier of
(A) the third anniversary of the issuance of
each Covered Security or (B) such date as all of
the Covered Securities shall have been resold by
Bain or any of its affiliates; (ii) maintain its
status as a Reporting Issuer and file with the
SEC in a timely manner all reports and other
documents required of SyQuest for use of Form S-
3; and (iii) furnish to Bain upon request, as
long as Bain owns any Covered Securities, (A) a
written statement by SyQuest that it has
complied with the reporting requirements of the
Securities Act and the Exchange Act, (B) a copy
of the most recent annual or quarterly report of
SyQuest, and (C) such other information as may
be reasonably requested in order to avail Bain
and its affiliates of Rule 144 or Form S-3 with
respect to such Covered Securities.
e. Notwithstanding anything else
in this Section 3A, if, at any time during which
a Prospectus is required to be delivered in con-
nection with the sale of any Covered Securities,
SyQuest determines in good faith that a
development has occurred or a condition exists
as a result of which the Registration Statement
or the Prospectus contains a material misstate-
ment or omission, SyQuest will immediately
notify Bain thereof by telephone and in writing.
Upon receipt of such notification, Bain and its
affiliates will immediately suspend all offers
and sales of any Covered Securities pursuant to
the Registration Statement. In such event,
SyQuest will amend or supplement the Regis-
tration Statement as promptly as practicable and
will take such other steps as may be required to
permit sales of the Covered Securities thereun-
der by Bain and its affiliates in accordance
with applicable federal and state securities
laws. SyQuest will promptly notify Bain after
it has determined in good faith that such sales
have become permissible in such manner and will
promptly deliver copies of the Registration
Statement and the Prospectus (as so amended or
supplemented) to Bain in accordance with
paragraph (b) of this Section 3A.
Notwithstanding the foregoing, (A) under no
circumstances shall SyQuest be entitled to
exercise its right to suspend sales of any
Covered Securities pursuant to the Registration
Statement more than two times in any twelve-
month period, (B) the period during which such
sales may be suspended (each a "Blackout
Period") shall not exceed thirty days and (C) no
Blackout Period may commence less than 30 days
after the end of the preceding Blackout Period.
Upon the commencement of a Blackout Period
pursuant to this Section 3A, Bain will immedi-
ately notify SyQuest of any contracts to sell
any Covered Securities (each a "Sales Contract")
that Bain or any of its affiliates has entered
into prior to the commencement of such Blackout
Period and that would require delivery of such
Covered Securities during such Blackout Period,
which notice will contain the aggregate sale
price and volume of Covered Securities pursuant
to such Sales Contract. Upon receipt of such
notice, SyQuest will immediately notify Bain of
its election either (i) to terminate the
Blackout Period and, as promptly as practicable,
amend or supplement the Registration Statement
or the Prospectus in order to correct the
material misstatement or omission and deliver to
Bain copies of such amended or supplemented
Registration Statement and Prospectus in
accordance with paragraph (b) of this Section 3A
or (ii) to continue the Blackout Period in
accordance with this paragraph. If SyQuest
elects to continue the Blackout Period, and Bain
or any of its affiliates is therefore unable to
consummate the sale of Covered Securities
pursuant to the Sales Contract (such unsold
Covered Securities being hereinafter referred to
herein as the "Unsold Securities"), SyQuest will
promptly indemnify each Bain Indemnified Party
(as such term is defined in Section 11(a) below)
against any Proceeding (as such term is defined
in Section 11(a) below) that each Bain Indemni-
fied Party may incur arising out of or in
connection with Bain's breach or alleged breach
of any such Sales Contract, and SyQuest shall
reimburse each Bain Indemnified Party for any
reasonable costs or expenses (including
reasonable legal fees) incurred by such party in
investigating or defending any such Proceeding
(collectively, the "Indemnification Amount");
provided, however, that each Bain Indemnified
Party shall take all actions reasonably
necessary or appropriate to mitigate such
Indemnification Amount; and provided further,
however, that the Indemnification Amount shall
be reduced by an amount equal to the number of
Unsold Securities multiplied by the difference
between (x) the actual per share price received
by Bain or any of its affiliates upon the sale
of the Unsold Securities (if such sale occurs
within three Trading Days of the end of the
Blackout Period) or the closing sale price of
the Common Stock on the NASDAQ National Market
("NASDAQ") or other national securities exchange
on which the Common Stock is then listed on the
third Trading Day after the end of the Blackout
Period (if the Unsold Securities are not sold by
Bain or any of its affiliates within three
Trading Days of the end of the Blackout Period),
and (y) the per share sale price for the Unsold
Securities provided in the Sales Contract. As
used herein, the term "Trading Day" means any
day on which SyQuest's Common Stock is quoted on
NASDAQ or, if applicable, other national
securities exchange.
4. Representations and Warranties
of Bain. Bain hereby represents and warrants to
SyQuest on the date hereof and on the Closing
Date, and agrees with SyQuest, as follows:
a. The execution, delivery and
performance of this Agreement by Bain have been
duly authorized by all requisite corporate
action and no further consent or authorization
of Bain, its Board of Directors or its
stockholders is required. This Agreement has
been duly executed and delivered by Bain and,
when duly authorized, executed and delivered by
SyQuest, will be a valid and binding agreement
enforceable against Bain in accordance with its
terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of
general applicability relating to or affecting
creditors' rights generally and to general
principles of equity.
b. Bain understands that no
United States federal or state agency has passed
on, reviewed or made any recommendation or
endorsement of the Preferred Shares or the
Warrant.
c. In making the decision to
purchase the Preferred Shares or the Warrant in
accordance with this Agreement, Bain has relied
solely upon independent investigations made by
it and not upon any representations made by
SyQuest other than those made in this Agreement.
d. Subject to Section 3A, Bain
understands that the Preferred Shares, the
Warrant and the Converted Stock have not been
registered under the Securities Act and may not
be reoffered or resold other than pursuant to
such registration or an available exemption
therefrom.
e. Bain is purchasing the
Preferred Shares and the Warrant for its own
account for investment only and not with a view
to, or for resale in connection with, the public
sale or distribution thereof except pursuant to
sales registered under the 1933 Act. Bain is
not purchasing the Preferred Shares or Warrant
for the purpose of covering, and will not use
any Preferred Shares or Converted Stock
(collectively, "Derivative Shares") to cover,
any short sale position in the Common Stock.
Bain understands that it shall be a condition to
the issuance of any Derivative Shares that the
representations and warranties in this section 4
shall be true and complete with respect to the
Warrant and such Derivative Shares.
f. Bain is an "accredited
investor" as that term is defined in Regulation
D. Bain is able to bear the economic risk of
Bain's investment hereunder.
g. Bain understands that the
Preferred Shares, the Warrant and the Derivative
Shares are being or will be offered and sold to
it in reliance on specific exemptions from the
registration requirements of United States
federal and state securities laws and that
SyQuest is relying on the truth and accuracy of,
and Bain's compliance with, the representations,
warranties, agreements, acknowledgments and
understandings of Bain set forth herein in order
to determine the availability of such exemptions
and the eligibility of Bain to acquire Preferred
Shares, the Warrant and Derivative Shares.
h. A principal executive officer
or other representative of Bain who is acting on
behalf of Bain in connection with the
transactions contemplated hereby has such
knowledge and experience in financial and
business matters that such officer is capable of
evaluating the merits and risks of the
investment by Bain contemplated by this
Agreement and has the capacity to protect Bain's
interests.
i. Bain has been furnished with
all materials and information relating to the
business, management, properties, financial
condition, operations, affairs and prospects of
the SyQuest and all materials and information
relating to the offer and sale of the Preferred
Shares, the Warrant and the Derivative Shares,
as have been requested by Bain. Bain has been
afforded the opportunity to ask all questions of
the SyQuest that the Bain considered appropriate
or desirable to ask in connection with this
Agreement and has received answers to such
inquiries that Bain considers satisfactory.
Bain understands that its investment in the
Preferred Shares, the Warrant and Derivative
Shares involves and will involve a high degree
of risk. Bain has sought such investment,
accounting, legal and tax advice as it has
considered necessary to an informed investment
decision with respect to its acquisition of
Preferred Shares, the Warrant and the Derivative
Shares.
j. Bain understands that (i)
except as otherwise provided in section 3.A, the
Preferred Shares, the Warrant and the Derivative
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) Bain
shall have delivered to the SyQuest an opinion
of counsel, reasonably satisfactory in form,
scope and substance to the SyQuest, 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 ("Rule 144") may be made only in
accordance with the terms of Rule 144 and, if
Rule 144 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
SyQuest nor any other person is under any
obligation to register such securities (other
than pursuant to section 3.A) under the 1933 Act
or any state securities laws or to comply with
the terms and conditions of any exemption
thereunder.
5. Covenants of SyQuest. Except as set
forth in the Schedule of Exceptions attached
hereto, SyQuest covenants and agrees with Bain
as follows:
a. For so long as any of the
Preferred Shares or any portion of the Warrant
remains outstanding, SyQuest will use its best
efforts to (i) maintain the eligibility of the
Common Stock for quotation on NASDAQ or listing
on a national securities exchange (as defined in
the Exchange Act) and (ii) regain the
eligibility of the Common Stock for quotation on
NASDAQ in the event that the Common Stock is
delisted by NASDAQ.
b. SyQuest will (i) provide Bain
with an opportunity to review and comment on any
public disclosure by SyQuest of information
regarding this Agreement and the transactions
contemplated hereby, (ii) promptly notify Bain
if there is any public disclosure by SyQuest of
material information regarding SyQuest or its
financial condition, prospects or results of
operation and (iii) provide Bain with copies of
all SEC Filings.
c. Reserved.
d. SyQuest will comply with the
terms and conditions of the Preferred Shares and
of the Warrant as set forth in the Warrant
Certificate (as duly amended from time to time
by the parties hereto).
e. For so long as any of the
Preferred Shares or any portion of the Warrant
remains outstanding, SyQuest shall at all times
reserve and keep available, free from preemptive
rights, out of its authorized but unissued
Common Stock, for issuance upon conversion of
such Preferred Shares or exercise of such
Warrant, the maximum number of shares of
Converted Stock then so issuable. If at any
time the number of authorized but unissued
shares of Common Stock is not sufficient to
effect the conversion of all the outstanding
Preferred Shares and the exercise of the Warrant
for all the Warrant Shares issuable thereunder,
SyQuest shall use its best efforts to increase
its number of authorized shares of Common Stock
to such number of shares as shall be sufficient
to effect such conversion and exercise,
including causing the SyQuest Board of Directors
to call a meeting of stockholders and recommend
such increase, and after obtaining any such
approval SyQuest shall reserve for issuance to
Bain the number of shares of Common Stock
required to effect such conversion and exercise.
f. Reserved.
g. If the Amendment is approved
by SyQuest's stockholders, SyQuest will cause
the Common Stock issuable pursuant to conversion
of the Preferred Shares and exercise of the
Warrant to be duly listed and admitted for
trading on NASDAQ or, if NASDAQ is not then the
principal trading market for the Common Stock,
on a national securities exchange (as defined in
the Securities Exchange Act of 1934, as amended
(the "Exchange Act")).
6. Covenants of Bain. Bain hereby
covenants and agrees with SyQuest as follows:
a. Neither Bain nor any of its
affiliates nor any person acting on its or their
behalf will at any time offer or sell any
Preferred Shares, the Warrant or any Converted
Stock other than pursuant to registration under
the Securities Act or pursuant to an available
exemption therefrom.
b. Bain will agree not to convert
its Preferred Stock for a maximum period of 60
days following a successful public offering of
the Common Stock in excess of $25 million in a
single transaction, if all other convertible
security holders are bound by the same restric-
tion.
6A. Legend. Bain understands that the
certificates or other instruments representing the
Preferred Shares, the Warrant and, until such time as
the Derivative Shares shall have been sold pursuant to
a registration under the 1933 Act as contemplated by
this Agreement, the stock certificates representing the
Derivative Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer
order may be placed against transfer of such
certificates or other instruments):
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, AND 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.
The legend set forth above shall be removed and SyQuest
shall issue a certificate without such legend to any
holder of Preferred Shares, the Warrant or Derivative
Shares if, unless otherwise required by state
securities laws, (a) the same are sold pursuant to an
effective registration statement under the 1933 Act, or
(b) in connection with a sale transaction, such holder
provides the SyQuest with an opinion of counsel, in
form, substance and scope reasonably acceptable to the
SyQuest, to the effect that a public sale, assignment
or transfer thereof may be lawfully effected without
registration under the 1933 Act, or (c) such holder
provides the SyQuest with assurances reasonably
satisfactory to the SyQuest that the same may be
publicly sold pursuant to Rule 144 without restriction.
7. Conditions Precedent to Bain's Obliga-
tions. The obligations of Bain hereunder are subject
to the performance by SyQuest of its obligations
hereunder and to the satisfaction of the following
additional conditions precedent, unless expressly
waived in writing by Bain:
a. On the Closing Date, on each
Conversion Date and on each Exercise Date (as
defined in the Warrant Certificate), (i) to the
extent provided in Section 3 hereof, the
representations and warranties made by SyQuest
in this Agreement shall be true and correct, and
(ii) SyQuest shall have complied fully with all
the covenants and agreements in this Agreement
and the Warrant Certificate; and Bain shall have
received on each such date a certificate of the
Chief Executive Officer and the Chief Financial
Officer of SyQuest dated such date and to such
effect.
b. On the Closing Date, on each
Conversion Date and on each Exercise Date,
SyQuest shall have delivered to Bain an opinion
of counsel reasonably satisfactory to Bain,
dated the date of delivery, confirming in
substance the matters covered in paragraphs (a),
(b), (c), (d), (e), (f), and (h) of Section 3
hereof and paragraph (h) of Section 5 hereof
(provided that the opinion delivered on the
Closing Date need not confirm the matters
covered in paragraph (h) of Section 5 hereof);
provided, however, that no such opinion
delivered in respect of any Exercise Date or
Conversion Date shall be required to cover the
matters set forth in paragraph (h) of Section 3
hereof.
c. Prior to the Closing, the
Certificate of Designation will have been filed
with the Secretary of State of the State of
Delaware in accordance with the Delaware General
Corporation Law.
d. On the Closing Date, SyQuest
shall have delivered to Bain the opinion of
counsel reasonably satisfactory to Bain, dated
the Closing Date, to the effect that the offer
and sale of the Preferred Shares and the Warrant
hereunder do not require registration under the
Securities Act.
As used herein the term "Business Day"
means any day on which banks in the City of New York
are open for business.
8. Conditions Precedent to SyQuest's
Obligations. The obligations of SyQuest hereunder are
subject to the performance by Bain of its obligations
hereunder and to the satisfaction of the following
additional conditions precedent, unless expressly
waived in writing by SyQuest:
a. On the Closing Date and on
each Exercise Date (as defined in the Warrant
Certificate), (i) the representations and
warranties made by Bain in this Agreement shall
be true and correct, and (ii) Bain shall have
complied fully with all the covenants and
agreements in this Agreement and the Warrant
Certificate; and SyQuest shall have received on
each such date a certificate of an appropriate
officer of Bain dated such date and to such
effect.
9. Fees and Expenses. SyQuest agrees to
pay Bain's reasonable legal fees and costs actually
incurred incident to the preparation of this Agreement
and related documents up to $5,000.00 upon presentation
of evidence reasonably satisfactory to SyQuest that
such fees and costs were actually incurred.
10. Non-Performance.
If, on the date hereof, on the Closing
Date, on any Conversion Date or any Exercise Date,
SyQuest shall fail to deliver the Warrant, Preferred
Shares or Converted Stock to Bain required to be
delivered pursuant to this Agreement for any reason
other than the failure of any condition precedent to
SyQuest's obligations hereunder or the failure by Bain
to comply with its obligations hereunder, then SyQuest
shall:
(1) hold Bain harmless against any
loss, claim or damage (including without
limitation, incidental and consequential
damages) arising from or as a result of
such failure by SyQuest; and
(2) reimburse Bain for all of its
reasonable out-of-pocket expenses,
including fees and disbursements of its
counsel, incurred by Bain in connection
with this Agreement and the Warrant and
the transactions contemplated herein and
therein;
provided, however, that SyQuest shall then be under no
further liability to Bain except as provided in the
Warrant Certificate, this Section 10 and Section 11
hereof.
11. Indemnification.
a. Indemnification of Bain.
SyQuest hereby agrees to indemnify Bain and each
of its officers, directors, employees, agents
and affiliates and each person that controls
(within the meaning of Section 20 of the
Securities Exchange Act of 1934, as amended) any
of the foregoing persons (each a "Bain
Indemnified Party") against any claim, demand,
action, liability, damages, loss, cost or
expense (including, without limitation, reason-
able legal fees) (a "Proceeding"), that it may
incur in connection with any of the transactions
contemplated hereby arising out of or based
upon:
(1) any untrue or alleged
untrue statement of a material fact by
SyQuest or any of its affiliates or any
person acting on its or their behalf or
omission or alleged omission to state any
material fact necessary in order to make
the statements, in the light of the
circumstances under which they were made,
not misleading by SyQuest or any of its
affiliates or any person acting on its or
their behalf ;
(2) any of the
representations or warranties made by
SyQuest herein being untrue or incorrect;
and
(3) any breach or non-
performance by SyQuest of any of its
covenants, agreements or obligations under
this Agreement and the Warrant
Certificate;
and SyQuest hereby agrees to reimburse each Bain
Indemnified Party for any reasonable legal or other
expenses incurred by such Bain Indemnified Party in
investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall
not apply to any Proceeding to the extent that it
arises out of or is based upon the gross negligence or
wilful misconduct of Bain in connection therewith.
b. Indemnification of SyQuest.
Bain hereby agrees to indemnify SyQuest and each
of its officers, directors, employees, agents
and affiliates and each person that controls
(within the meaning of Section 20 of the Securi-
ties Exchange Act of 1934, as amended) any of
the foregoing persons (each a "SyQuest
Indemnified Party") against any Proceeding, that
it may incur in connection with any of the
transactions contemplated hereby arising out of
or based upon:
(1) any untrue or alleged
untrue statement of a material fact by
Bain or any of its affiliates or any
person acting on its or their behalf or
omission or alleged omission to state any
material fact necessary in order to make
the statements, in the light of the
circumstances under which they were made,
not misleading by Bain or any of its
affiliates or any person acting on its or
their behalf:
(2) any of the
representations or warranties made by Bain
herein being untrue or incorrect; and
(3) any breach or non-
performance by Bain of any of its
covenants, agreements or obligations under
this Agreement and the Warrant
Certificate;
and Bain hereby agrees to reimburse each SyQuest
Indemnified Party for any reasonable legal or
other expenses incurred by such SyQuest
Indemnified Party in investigating or defending
any such Proceeding; provided, however, that
the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of
or is based upon the gross negligence or wilful
misconduct of SyQuest in connection therewith.
c. Conduct of Claims.
(1) Whenever a claim for
indemnification shall arise under this
Section, the party seeking indemnification
(the "Indemnified Party"), shall notify
the party from whom such indemnification
is sought (the "Indemnifying Party") in
writing of the Proceeding and the facts
constituting the basis for such claim in
reasonable detail;
(2) Upon delivery of such
notice, such Indemnified Party shall have
a duty to take all reasonable steps to
mitigate any losses, liabilities, costs,
charges and expenses relating to any such
Proceeding;
(3) Such Indemnifying Party
shall have the right to retain the counsel
of its choice in connection with such
Proceeding and to participate at its own
expense in the defense of any such
Proceeding; provided, however, that
counsel to the Indemnifying Party shall
not (except with the consent of the rele-
vant Indemnified Party) also be counsel to
such Indemnified Party. In no event shall
the Indemnifying Party be liable for fees
and expenses of more than one counsel (in
addition to any local counsel) separate
from its own counsel for all Indemnified
Parties in connection with any one action
or separate but similar or related actions
in the same jurisdiction arising out of
the same general allegations or circum-
stances; and
(4) No Indemnifying Party
shall, without the prior written consent
of the Indemnified Parties (which consent
shall not be unreasonably withheld),
settle or compromise or consent to the
entry of any judgment with respect to any
litigation, or any investigation or
proceeding by any governmental agency or
body, commenced or threatened, or any
claim whatsoever in respect of which
indemnification could be sought under this
Section unless such settlement, compromise
or consent (A) includes an unconditional
release of each Indemnified Party from all
liability arising out of such litigation,
investigation, proceeding or claim and (B)
does not include a statement as to or an
admission of fault, culpability or a
failure to act by or on behalf of any
Indemnified Party.
12. Survival of the Representations,
Warranties, etc. The respective representations,
warranties, and agreements made herein by or on behalf
of the parties hereto shall remain in full force and
effect, regardless of any investigation made by or on
behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling
or under common control with, such party and will
survive delivery of and payment for the Preferred
Shares, the Warrant and any Converted Stock issuable
hereunder.
13. Notices. all communications
hereunder shall be in writing, and
a. if sent to Bain, shall be
delivered by hand, sent by registered mail or
transmitted and confirmed by facsimile to Bain at:
Bain & Company, Inc.
One Embarcadero Center
San Francisco, California 94111
Attention: George W. Cogan
Telephone: (415) 434-1022
Facsimile: (415) 627-1033
b. if sent to SyQuest, shall be
delivered by hand, sent by registered mail or
transmitted and confirmed by facsimile to SyQuest at:
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Attention: Chief Financial Officer
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
with a copy to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Steven O. Gasser, Esq.
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
14. Miscellaneous
a. This Agreement may be executed
in one or more counterparts and it is not necessary
that signatures of all parties appear on the same coun-
terpart, but such counterparts together shall consti-
tute but one and the same agreement.
b. This Agreement and the Warrant
shall inure to the benefit of and be binding upon the
parties hereto, their respective successors and assigns
and, with respect to Section 11 hereof, their
respective officers, directors, employees, agents,
affiliates and controlling persons, and no other person
shall have any right or obligation hereunder. SyQuest
may not assign this Agreement or the Warrant
Certificate.
c. This Agreement and the Warrant
Certificate shall be governed by, and construed in
accordance with, the internal laws of the State of
California, and each of the parties hereto hereby
submits to the non-exclusive jurisdiction of any State
or Federal court in the City of San Francisco and State
of California and any court hearing any appeal there-
from, over any suit, action or proceeding against it
arising out of or based upon this Agreement and the
Warrant (a "Related Proceeding"). Each of the parties
hereto hereby waives any objection to any Related
Proceeding in such courts whether on the grounds of
venue, residence or domicile or on the ground that the
Related Proceeding has been brought in an inconvenient
forum.
d. The provisions of this
Agreement and the Warrant Certificate are severable,
and if any clause or provision hereof shall be held
invalid, illegal or unenforceable in whole or in part,
such invalidity or unenforceability shall not in any
manner affect any other clause or provision of this
Agreement or the Warrant Certificate.
e. The headings of the sections
of this document have been inserted for convenience of
reference only and shall not be deemed to be a part of
this Agreement.
f. This Agreement (including the
Warrant and the terms and conditions of the Certificate
of Designations relating to the Preferred Shares)
constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and
oral, between the parties hereto with respect to the
subject matter of this Agreement and the Warrant and is
not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder or
under the terms of the warrant and term sheets between
such parties.
g. The term "affiliate" is used
herein as defined in Rule 144(a)(1) under the Securi-
ties Act.
h. Notwithstanding any provision
of the Certificate of Designations to the contrary, the
Company may hereafter authorize additional or other
capital stock for issuance to Beijing Legend Group Ltd.
and its affiliates that is senior, equal or junior to
the Series 4 Preferred Shares, in respect of the
preferences as to dividends and distributions and
payments on the liquidation, dissolution and winding up
of the Company, provided that any such preference shall
not exceed Beijing Legend Group Ltd.'s investment in
SyQuest, provided further that Company may not
otherwise hereafter, for so long as any Series 4
Preferred Shares are outstanding, authorize additional
or other capital stock that is of senior or equal rank
to the Series 4 Preferred Shares, in respect of the
preferences as to dividends and distributions and
payments on the liquidation, dissolution and winding up
of the Company.
i. Notwithstanding anything to
the contrary in the Certificate of Designations or the
Warrant, in no event shall any holder of Series 4
Preferred Shares or the Warrant hereunder be entitled
to convert its Series 4 Preferred Shares or exercise
its Warrant if, after giving effect to such conversion
or exercise, 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 4 Preferred
Shares or exercise of the Warrant shall not be deemed
to be beneficially owned by such holder or the Related
Persons for this purpose.
15. Time of Essence. Time shall be of
the essence in this Agreement and the Warrant.
IN WITNESS WHEREOF, the parties hereto
have duly executed and delivered this Agreement, all as
of the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:
Name:
Title:
BAIN & COMPANY, INC.
By:
Name:
Title:
SCHEDULE OF EXCEPTIONS
Regarding sections 3.b, 3.c, 3.d, 3.e and 3.f,
the Company will not have sufficient shares of Common
Stock available to issue upon conversion of the
Preferred Shares and exercise of the Warrant until such
time, if ever, as the Amendment is approved by the
Company's shareholders and becomes effective.
Regarding section 3.h, Iomega Corporation
recently filed a lawsuit against SyQuest alleging both
patent and trademark infringement.
Regarding section 3.l, the number of shares of
Common Stock issuable on conversion of SyQuest's
outstanding (a) 5% Cumulative Convertible Preferred
Stock, Series 3, (b) 5% Cumulative Convertible
Preferred Stock, Series 4, and (c) Convertible
Preferred Stock, Series 5, may vary based on the
average closing prices of the Common Stock for the five
days preceding conversion. In addition, as of
September 26, 1997, there are: (i) stock options and
other commitments to employees to issue approximately
4.5 million shares of SyQuest's Common Stock; (ii)
warrants for the issuance of approximately 35.9 million
shares of SyQuest's Common Stock; and (iii) other
commitments (principally for preferred stock dividends)
to issue approximately 100,000 shares of SyQuest's
Common Stock. In connection with the foregoing, SyQuest
has granted or committed to grant certain registration
rights to (1) Jayhawk Investments, L.P. and Jayhawk
Institutional Partners, L.P. to register a total of
4,882,716 shares of its Common Stock, (2) to The
Silikahn Route to register a total of 132,923 shares of
its Common Stock, (3) Silicon Valley Bank to register a
total of 166,667 shares of its Common Stock, (4)
Greyrock Business Credit to register a total of 333,333
shares of its Common Stock, (5) to CAM Advanced
Technologies, Inc. to register approximately 274,000
shares of its Common Stock, (6) to Nelson Partners to
register sufficient shares of Common Stock relating to
the conversion of its 3,375 shares of Convertible
Preferred Stock, Series 5 ("Series 5 Stock") and
exercise of its warrant for the purchase of 2,362,500
shares of Common Stock, (7) to Olympus Securities, Ltd.
to register sufficient shares of Common Stock relating
to the conversion of its 4,125 shares of Series 5 Stock
and exercise of its warrant for the purchase of
2,887,500 shares of Common Stock, (8) to CC Investments
LDC to register sufficient shares of Common Stock
relating to the conversion of its 5,000 shares of
Series 5 Stock and exercise of its warrant for the
purchase of 3,500,000 shares of Common Stock, (9) to
Capital Ventures International to register sufficient
shares of Common Stock relating to the conversion of
its 2,500 shares of Series 5 Stock and exercise of its
warrant for the purchase of 1,750,000 shares of Common
Stock, (11) RGC International Investors to register
sufficient shares of Common Stock relating to the
conversion of its 5,000 shares of Series 5 Stock and
exercise of its warrant for the purchase of 3,500,000
shares of Common Stock, and (12) Multiple Import
Export, Ltd. to register sufficient shares of Common
Stock relating to the conversion of its 5,000 shares of
Series 5 Stock and exercise of its warrant for the
purchase of 3,500,000 shares of Common Stock.
ANNEX A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES 4
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 on 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 four hundred thousand (400,000) shares of
5% Cumulative Convertible Preferred Stock, Series 4, of
the Company, as follows:
RESOLVED, that the Company is authorized
to issue 400,000 shares of 5% Cumulative
Convertible Preferred Stock, Series 4, $.001 par
value (the "Series 4 Preferred Shares"), which
shall have the following powers, designations,
preferences and other special rights:
1. Dividends. The holders of the
Series 4 Preferred Shares shall be entitled to a
cash dividend of five percent per annum of the
Stated Value (as defined below), on a cumulative
basis (prorated for any portion of the
applicable period during which the Series 4
Preferred Shares are outstanding). Dividends
shall accrue from the date of issuance of the
Series 4 Preferred Shares and shall be payable
on the last day of each calendar quarter,
commencing June 30, 1997, through and including
the date on which the Series 4 Preferred Shares
are converted. Dividends may be paid at the
Company's option in cash or, on not less than
ninety days' notice from the Company to each
holder of Series 4 Preferred Shares; in
additional Series 4 Preferred Shares, provided
that the Company may not elect to pay dividends
in additional Series 4 Preferred Shares to the
extent that the number of authorized and
unissued Series 4 Preferred Shares is
insufficient to make such payment or the ability
of the holders of the Series 4 Preferred Shares
to convert Series 4 Preferred Shares or to
exercise the Warrant (as hereinafter defined) is
restricted by Section 2(h) below. If the
Company elects to pay to any holder of Series 4
Preferred Shares any such dividend in additional
Series 4 Preferred Shares, the number of such
additional Series 4 Preferred Shares shall be
determined by dividing the aggregate amount of
such dividend payable to such holder by 100;
provided that no fraction of a Series 4
Preferred Share shall be issued, but in lieu
thereof, the Company shall pay in cash an amount
equal to such fraction multiplied by $100.
2. Conversion of Series 4 Preferred
Shares. The holders of the Series 4 Preferred
Shares shall have the right, at their option,
but subject to the terms of any purchase
agreement which the Company may enter into (the
"Purchase Agreement"), to convert the Series 4
Preferred Shares into shares of the common stock
of the Company, $.001 par value, as such stock
now exists or may be changed from time to time
hereafter ("Common Stock"), on the following
terms and conditions:
(a) Conversion Right. Any or all
of the Series 4 Preferred Shares shall be
convertible at any time into whole, fully paid
and nonassessable shares of Common Stock, at the
conversion price (the "Conversion Price") in
effect at the time of conversion determined as
hereinafter provided. Each Series 4 Preferred
Share shall have a stated value of $100 (the
"Stated Value") for the purpose of such
conversion and the number of shares of Common
Stock issuable on conversion of each Series 4
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
Series 4 Preferred Shares for which there are
accrued and unpaid dividends, the amount of the
accrued and unpaid dividends shall be paid at
the time and in the manner provided in section
1.
(b) Conversion Price. The
Conversion Price shall be the greater of (1) the
arithmetical average of the closing sale prices
per share of Common Stock on the five
consecutive trading days preceding the delivery
of any Conversion Notice (as that term is
hereinafter defined), as reported by the Nasdaq
National Market (the "NNM"), or, if the NNM is
not then the principal trading market for the
Common Stock, on the principal trading market
for the Common Stock at that time, or, if there
is then no such principal trading market, the
fair market value per share of Common Stock
during such period as determined in good faith
by the Board of Directors of the Company, and
(2) ninety percent of such closing sale price on
the day immediately preceding the delivery of
the Conversion Notice (as that term is
hereinafter defined); provided that the
Conversion Price shall not be greater than the
closing sale price per share of Common Stock as
reported by the NNM on the first day that any
Series 4 Preferred Shares are issued. If the
value of the Common Stock is so to be determined
by the Board of Directors of the Company and the
holders of the Series 4 Preferred Shares
disagree with said valuation, the value of the
Common Stock will be determined by binding
arbitration in accordance with the Commercial
Arbitration Rules then prevailing of the
American Arbitration Association, and such
arbitration shall proceed in San Francisco,
California, or at such other place as agreed to
in writing by the Company and the holders of the
Series 4 Preferred Shares.
(c) Adjustment to Conversion
Price. In the event that the Company shall
declare a dividend or make a distribution on or
with respect to the outstanding shares of its
Common Stock in shares of its Common Stock,
subdivide its outstanding shares of Common Stock
into a greater number of shares, or combine its
outstanding shares of Common Stock into a
smaller number of shares, then, in each such
event, 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 in good faith by the Board of
Directors of the Company, so that the holder of
any Series 4 Preferred Shares surrendered for
conversion after such time shall be entitled to
receive the aggregate number of shares of Common
Stock that the holder would have owned or been
entitled to receive had such Series 4 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.
(d) Conversion Notice. On
presentation and surrender to the Company (or at
any office or agency maintained for the transfer
of the Series 4 Preferred Shares) of the
certificate(s) ("Preferred Stock
Certificate(s)") for Series 4 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 Series 4 Preferred Shares
shall be entitled, subject to the limitations
herein contained, to receive in exchange
therefor a certificate or certificates for
whole, fully paid and nonassessable shares of
Common Stock, which certificates shall be
delivered by the fourth trading day after the
date of delivery of the Conversion Notice and
Preferred Stock Certificates for the Series 4
Preferred Shares being converted, and cash for
any fractional share of Common Stock on the
foregoing basis. If the Common Stock can be
issued without a restrictive legend pursuant to
the Purchase Agreement, on request made by the
holders of the Series 4 Preferred Shares in the
Conversion Notice, the Company will authorize
and instruct its transfer agent to issue the
Common Stock electronically. 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 and the Company receives the
Preferred Stock Certificate(s) by 10:00 a.m.
California time the following business day, or
on the next business day after it is deposited
for next day delivery with a nationally
recognized overnight delivery service. The
Series 4 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.
(e) Reservation of Shares. The
Company shall, as soon as practicable hereafter
and then for so long as any of the Series 4
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 4
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 4 Preferred Shares then outstanding.
(f) Fractional Shares. The
Company shall not issue any fraction of a share
of Common Stock on any conversion, but shall pay
in cash therefor at the Conversion Price then in
effect multiplied by such fraction.
(g) Taxes. The Company shall pay
any and all taxes that may be imposed on it with
respect to the issuance and delivery of Common
Stock on the conversion of Series 4 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 4 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 shall have paid
to the Company the amount of any such tax, or
shall have established to the satisfaction of
the Company and its transfer agent, if any, that
such tax has been paid.
(h) The 19.9% Limit. If at the
time that the Company receives a Conversion
Notice, the aggregate number of shares of Common
Stock issuable pursuant to such Conversion
Notice and all other Conversion Notices received
at that time (the "Subject Conversion Notices"),
when added to the aggregate number of shares of
Common Stock (1) previously issued on conversion
of Series 4 Preferred Shares and the exercise of
that certain Warrant to purchase Common Stock
(the "Warrant") issued by the Company to
Fletcher pursuant to the Subscription Agreement
on the date of initial issuance of the Series 4
Preferred Shares and (2) issuable on conversion
of all remaining outstanding Series 4 Preferred
Shares (determining such number as if such
Series 4 Preferred Shares were converted as of
the Conversion Date relating to such Conversion
Notice) and (3) issuable on exercise of the
Warrant (determined based on the Exercise Price
then in effect, as defined in the Warrant) would
exceed nineteen and nine-tenths percent of the
total number of shares of Common Stock
outstanding (adjusted to reflect any split,
subdivision, combination or consolidation of the
Common Stock, whether by reclassification,
distribution of a dividend with respect to the
outstanding Common Stock payable in shares of
Common Stock, or otherwise, or any
recapitalization of the Common Stock) on the
date of the first issuance of Series 4 Preferred
Shares (the "19.9% Limit") and such circumstance
would require the approval of the holders of the
Common Stock pursuant to the listing
requirements of the Nasdaq Stock Market or the
rules of the National Association of Securities
Dealers, Inc. (or such stock exchange or other
interdealer quotation system that is then the
Principal Market), the number of Series 4
Preferred Shares identified in the Subject
Conversion Notices that, if converted into
shares of Common Stock, would equal or exceed
the 19.9% Limit (the "Excess Preferred Shares"),
shall not be converted unless and until the
stockholder approval referred to in section
(2)(j) (the "Stockholder Consent") is obtained
or is no longer required. The Excess Preferred
Shares will be allocated among the holders
delivering Subject Conversion Notices on a pro
rata basis based on the relative number of
Series 4 Preferred Shares identified in each
such Subject Conversion Notice. Any Excess
Preferred shares shall not be converted into
shares of Common Stock until the later of the
date on which the Stockholder Consent is
obtained and the Company receives a subsequent
Conversion Notice with respect thereto. If the
Company is not otherwise notified by the Nasdaq
Stock Market or the National Association of
Securities Dealers, Inc. that Stockholder
Consent is necessary, the Company will issue
Common Stock to the holders of the Series 4
Preferred Shares in excess of the 19.9% Limit.
(i) Stockholder Approval. If
there are Excess Preferred Shares as described
in section (2)(i), the Company shall promptly
use its best efforts to obtain the Stockholder
Consent, including, without limitation, causing
its Board of Directors to call a special meeting
of stockholders and recommend such approval.
3. Voting Rights. Holders of Series 4
Preferred Shares shall have no voting rights,
except as required by law.
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 4
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 Series 4
Preferred Shares and holders of shares of other
classes or series of preferred stock of the
Company that are of equal rank with the Series 4
Preferred Shares as to payments of Preferred
Funds (the "Pari Passu Shares"), then each
holder of Series 4 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 4 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
4 Preferred Shares shall be entitled to receive
any amounts with respect thereto on any
liquidation, dissolution or winding up of the
Company other than the amounts provided for
herein.
5. Preferred Rank. With respect to
preferences as to dividends and distributions
and payments on the liquidation, dissolution or
winding up of the Company, the Series 4
Preferred Shares shall rank (1) senior to the
Common Stock, (2) with respect to all other
existing capital stock of the Company, senior to
such capital stock if permitted by the terms of
such capital stock or, if not so permitted, on a
parity with such capital stock if permitted by
the terms of such capital stock or, if not so
permitted, junior to such capital stock, and (3)
senior to all series of any class of the
Company's capital stock issued after the date of
the filing of this Certificate. So long as any
of the Series 4 Preferred Shares are
outstanding, no Common Stock and no other
capital stock of the Company ranking junior to
the Series 4 Preferred Shares will be redeemed,
purchased or otherwise acquired for any
consideration by the Company (except by
conversion into or exchange for stock of the
Company ranking junior to the Series 4 Preferred
Shares) unless in each case the Company offers
to redeem the Series 4 Preferred Shares on
substantially the same terms (provided that the
redemption price shall not be less than $100 per
share). Notwithstanding any provision hereof to
the contrary, the Company may hereafter
authorize additional or other capital stock for
issuance to Beijing Legend Group Ltd. and its
affiliates that is senior, equal or junior to
the Series 4 Preferred Shares, in respect of the
preferences as to dividends and distributions
and payments on the liquidation, dissolution and
winding up of the Company, but the Company may
not otherwise hereafter, for so long as any
Series 4 Preferred Shares are outstanding,
authorize additional or other capital stock that
is of senior or equal rank to the Series 4
Preferred Shares, in respect of the preferences
as to dividends and distributions and payments
on the liquidation, dissolution and winding up
of the Company. In the event of the merger or
consolidation of the Company with or into
another corporation, the Series 4 Preferred
Shares shall maintain their relative powers,
designations and preferences provided herein.
6. Lost or Stolen Certificates. On
receipt by the Company of evidence of the loss,
theft, destruction or mutilation of any
Preferred Stock Certificate, 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 on 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, stolen or
destroyed Preferred Stock Certificate if the
holder thereof contemporaneously requests the
Company to convert such Series 4 Preferred
Shares into Common Stock.
7. Amendment. So long as any Series 4
Preferred Shares are outstanding, the Company
shall not, without first obtaining the approval
by vote or written consent, in the manner
provided by law, of the holders of at least a
majority of the total number of Series 4
Preferred shares outstanding, voting separately
as a class, amend or repeal any provision of, or
add any provision to, the Company's Certificate
of Incorporation, if such action would alter or
change the preferences, rights, privileges or
powers of, or the restrictions provided for the
benefit of, the Series 4 Preferred Shares.
IN WITNESS WHEREOF, the Company has caused this
certificate to be signed by Henry Montgomery, its Chief
Financial Officer, as of April 28, 1997.
SYQUEST
TECHNOLOGY,
INC.
By:
Title: Chief Financial Officer
ANNEX B
THE SECURITIES REPRESENTED BY OR ISSUABLE ON
EXERCISE OF 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, AND 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.
Warrant No.
COMMON STOCK PURCHASE WARRANT
SYQUEST TECHNOLOGY, INC.
This Warrant certifies that Bain & Company, Inc.
("Holder"), or its registered assigns, is the
registered holder of one Warrant (the "Warrant")
expiring on _________ __, 2004, (the "Termination
Date") to purchase shares of common stock, par value
$.0001 per share (the "Common Stock"), of SYQUEST
TECHNOLOGY, INC., a Delaware corporation (the
"Issuer"). This Warrant entitles the holder to
purchase from the Issuer up to ____ Warrant Shares (as
defined below), subject to adjustment, at a per share
Exercise Price (as defined below). A "Warrant Share"
initially represents one fully paid and nonassessable
share of Common Stock, based upon an Exchange Rate (as
defined below) of one-for-one, subject to adjustment
pursuant to paragraph 10.
This Warrant was issued on ________, 1997 (the
"Closing Date"), pursuant to the Securities Purchase
Agreement dated ________, 1997 (the "Purchase
Agreement"), between the Issuer and Holder, and is
subject to the terms and conditions thereof. Unless
otherwise defined herein, capitalized terms used herein
have the meanings respectively ascribed to them in the
Purchase Agreement. A copy of the Purchase Agreement
may be obtained by the registered holder hereof upon
written request to the Issuer.
The exercise price per Warrant Share (plus
transfer taxes, if applicable, the "Exercise Price")
shall be the greater of (a) 130 percent of the
arithmetical average of the closing sale prices per
share of Common Stock on the five consecutive trading
days preceding the delivery of any Exercise Notice (as
defined below) as reported by the Nasdaq National
Market (the "NNM") or, if the NNM is not then the
principal trading market for the Common Stock, on the
principal trading market for the Common Stock at that
time or, if there is then no such principal trading
market, the fair market value per share of Common Stock
during such period as determined in good faith by the
Board of Directors of the Issuer and (b) 130 percent of
such closing sale price on the day immediately
preceding the delivery of the Exercise Notice; provided
that in no event shall the Exercise Price exceed
$3.0469. If the value of the Common Stock is to be
determined by the Board of Directors of the Issuer and
the holder of this Warrant disagrees with said
valuation, the value of the Common Stock will be
determined by binding arbitration in accordance with
the then prevailing commercial arbitration rules of the
American Arbitration Association, and such arbitration
shall proceed in San Francisco, California, or at such
other place as agreed to in writing by the Issuer and
the holder of this Warrant. The Exercise Price
multiplied by the Exercise Amount (as defined below) at
any Exercise Date (as defined below) is referred to as
a "Warrant Purchase Price".
This Warrant shall have the following additional
terms:
1. This Warrant is not exercisable until the lapse
of a period ending on the 65th day (the "Notice
Period") after the holder delivers a notice (a
"65 Day Notice") to the Issuer designating an
aggregate number of Warrant Shares (the "Exer-
cisable Number"). A 65 Day Notice may be given
at any time after the Closing Date. If the
initial 65 Day Notice does not designate all of
the Warrant Shares, this Warrant will become
exercisable for some or all of the remaining
Warrant Shares upon delivery of one or more 65
Day Notices increasing the Exercisable Number
after a further Notice Period. From time to time
following the Notice Period, this Warrant may be
exercised on any Business Day prior to the
Termination Date (an "Exercise Date") for any
quantity of Warrant Shares, such that the
aggregate number of Warrant Shares issued
hereunder is less than or equal to the Exercis-
able Number. To exercise this Warrant, the
registered holder must, prior to the Termination
Date, surrender this Warrant to the Issuer at
its principal office with the Exercise Notice
attached hereto (an "Exercise Notice") duly
completed and signed by the registered holder
hereof and stating the total number of Warrant
Shares in respect of which this Warrant is then
exercised (the "Exercise Amount") and tender the
applicable Warrant Purchase Price. This Warrant
shall be exercisable only in the minimum amount
of 10,000 Warrant Shares and integral multiples
of 10,000 Warrant Shares in excess thereof (or
such lesser amount as shall constitute the full
amount remaining of this Warrant). As used
herein the term "Business Day" means any day on
which banks in the State of California are open
for business.
2. On the Business Day following an Exercise Date
(an "Issue Date"), the Issuer shall issue and
cause to be delivered to the registered holder
hereof at such address as such holder shall
specify in the Exercise Notice a certificate or
certificates for the number of full Warrant
Shares issuable upon the exercise of this
Warrant, registered in such holder's name,
together with cash (if any) as provided in
paragraph 4. Such certificate or certificates
shall be deemed to have been issued and any
person so designated to be named therein shall
be deemed to have become a holder of record of
such Warrant Shares as of such Exercise Date.
3. If on such Issue Date the number of Warrant
Shares to be delivered shall be less than the
total number of Warrant Shares deliverable
hereunder, there shall be issued to the holder
hereof or his assignee on such Issue Date a new
warrant substantially identical to this Warrant,
except that such new warrant shall evidence the
right to purchase the number of Warrant Shares
equal to (x) the total number of Warrant Shares
deliverable hereunder less (y) the number of
Warrant Shares so delivered.
4. The Issuer shall not be required to issue
fractional Warrant Shares on the exercise of
this Warrant. The number of full Warrant Shares
which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of
the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share
would, except for the provisions of this
paragraph 4, be issuable on the exercise of this
Warrant, the Issuer shall pay an amount in cash
equal to the last per share sale price of the
Common Stock (on the NNM or the Principal
Market, as the case may be) on the day
immediately preceding the Exercise Date,
multiplied by such fraction (subject to
adjustment pursuant to paragraph 10); provided
that if at the time that the Exercise Price is
to be determined the NNM is not the principal
trading market for the Common Stock and there is
no Principal Market, then the amount of cash to
be paid per fractional Warrant Share shall be
determined in good faith by the Board of
Directors of the Issuer. If the holder of this
Warrant disagrees with such determination, the
amount of cash to be paid per fractional Warrant
Share will be determined by binding arbitration
in accordance with the then prevailing
commercial arbitration rules of the American
Arbitration Association, and such arbitration
shall proceed in San Francisco, California, or
at such other place as agreed to in writing by
the Issuer and the holder of this Warrant.
5. For so long as this Warrant has not been
exercised in full, the Issuer shall at all times
prior to the Termination Date reserve and keep
available, free from preemptive rights, out of
its authorized but unissued Common Stock, for
issuance upon exercise of this Warrant, the
maximum number of shares of Common Stock and any
other Capital Stock (as defined below) then so
issuable. In furtherance of the foregoing, but
subject to adjustment pursuant to paragraph 10
and to increase pursuant to the fourth paragraph
hereof, the Issuer shall reserve for issuance
hereunder, not less than 360,000 shares of
Common Stock. In the event the number of shares
of Common Stock or other securities issuable in
respect of the Warrant Shares exceeds the
authorized number of shares of Common Stock or
other securities, the Issuer shall promptly take
all actions necessary to increase the authorized
number, including causing its Board of Directors
to call a special meeting of stockholders within
thirty days of the date on which such excess
first existed and recommend such increase for
approval by the Issuer's stockholders. The
Issuer shall use its best efforts to obtain
stockholder approval of the increase to the
authorized number of shares of Common Stock.
6. By accepting delivery of this Warrant, the
registered holder hereof covenants and agrees
with the Issuer not to exercise or transfer this
Warrant or any Warrant Shares except in
compliance with the Purchase Agreement and this
Warrant.
7. By accepting this Warrant, the registered holder
hereof covenants and agrees with the Issuer that
this Warrant may not be sold, assigned,
conveyed, encumbered, pledged, hypothecated or
in any other manner disposed of or transferred,
as a whole or in part, unless and until such
holder shall deliver to the Issuer (i) written
notice of such transfer and of the name and
address of the transferee, (ii) a written
agreement, in form and substance reasonably
satisfactory to the Issuer, of the transferee to
comply with the applicable terms of the Purchase
Agreement and this Warrant and (iii) an opinion
of counsel for such holder, reasonably
satisfactory to the Issuer in form, scope and
substance, that such transaction will comply
with all applicable securities laws and
regulations. If a portion of this Warrant is
transferred, all rights of the registered holder
hereunder may be exercised by the transferee
(subject to the requirement that such transferee
shall provide a like opinion of counsel in
respect of the number of Warrant Shares
transferred with the portion of this Warrant),
provided that any registered holder of this
Warrant may deliver a 65 Day Notice, an Exercise
Notice or elect the form of consideration
pursuant to paragraph 10 only with respect to
the Warrant Shares subject to such holder's
portion of this Warrant, and, for purposes of
paragraph 10(c), the calculation of the Black-
Scholes Warrant Value shall be made by the
registered holder(s) of a majority in interest
of this Warrant.
8. The Issuer will pay all documentary stamp taxes
(if any) attributable to the issuance of Warrant
Shares upon the exercise of this Warrant by the
registered holder hereof; provided that the
Issuer shall not be required to pay any tax or
taxes which may be payable in respect of any
transfer involved in the registration of this
Warrant or any certificates for Warrant Shares
in a name other than that of the registered
holder of this Warrant surrendered upon the
exercise of this Warrant, and the Issuer shall
not be required to issue or deliver this Warrant
or certificates for Warrant Shares unless or
until the person or persons requesting the
issuance thereof shall have paid to the Issuer
the amount of such tax or shall have established
to the satisfaction of the Issuer that such tax
has been paid.
9. In case this Warrant shall be mutilated, lost,
stolen or destroyed, the Issuer may in its
discretion issue in exchange and substitution
for and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the
lost, stolen or destroyed Warrant, a new Warrant
of like tenor, but only upon receipt of evidence
reasonably satisfactory to the Issuer of such
loss, theft or destruction of such Warrant and
indemnity, if requested, reasonably satisfactory
to the Issuer. Applicants for a substitute
Warrant shall also comply with such other
reasonable regulations and pay such other
reasonable charges as the Issuer may prescribe.
10. The number of shares of Common Stock (and other
Capital Stock (as defined below) or property)
(as adjusted from time to time, the "Exchange
Rate") issuable upon the exercise of this
Warrant and the terms and conditions of this
Warrant are subject to adjustment by the Issuer,
in consultation with the holder hereof, from
time to time as follows:
(a) If the Issuer:
1. subdivides its outstanding shares of
Common Stock into a greater number
of shares;
2. combines its outstanding shares of
Common Stock into a smaller number
of shares; or
3. issues by reclassification of its
Common Stock any shares of its
Capital Stock;
then the Exchange Rate in effect
immediately prior to such action shall be
adjusted so that the registered holder
hereof shall thereafter be entitled to
receive upon exercise of this Warrant in
respect of each Warrant Share the number
of shares of Common Stock or other Capital
Stock of the Issuer that such holder would
have received immediately following such
action if such holder had so exercised
this Warrant immediately prior to such
action.
As used herein, the term "Capital Stock"
means, with respect to any corporation,
any and all shares, interests, rights to
purchase, warrants, options,
participations or other equivalents of or
interests (however designated) in stock
issued by that corporation.
Such adjustment shall become effective
simultaneously with the effective date of
any subdivision, combination or
reclassification.
If, after an adjustment, the registered
holder hereof would receive upon exercise
shares of two or more classes of Capital
Stock of the Issuer, the Exchange Rate
shall thereafter be subject to adjustment
upon the occurrence of an action taken
with respect to each such class of Capital
Stock as is contemplated hereby with
respect to the Common Stock, on terms
comparable to those applicable to Common
Stock hereunder.
(b) Whenever any of the actions described in
this paragraph 10 are to be taken, the
Issuer shall provide the notices required
by paragraph 11 hereof.
(c) (A) The Issuer covenants and agrees with
the registered holder hereof not to
consolidate or merge with or into, or
sell, transfer or lease all or
substantially all its assets to, or sell a
majority of its securities generally
entitled to vote for the election of
directors of the Issuer ("Voting
Securities") to, any person, unless, and
(B) if any person consummates a tender
offer for the purchase of at least a
majority of the Voting Securities (any of
which transactions described in clauses
(A) and (B), a "Transaction"), then, at
the election of the registered holder
hereof (or if such holder does not notify
the Issuer of such election within twenty
days after being notified of the
Transaction, at the election of the
Issuer), on the effective date of such
Transaction (the "Transaction Date") and
as a condition to the consummation of any
Transaction described in clause (A),
either:
1. the Issuer shall have redeemed this
Warrant by paying to such holder,
upon surrender of this Warrant, a
cash payment equal to the Black-
Scholes value of the unexercised
portion of this Warrant from the
effective date of the Transaction
until the Warrant Expiration Date
(the "Black-Scholes Warrant Value"),
computed as of such Transaction
Date; or
2. (a) such person shall expressly
assume in writing all of the
obligations of the Issuer
under the Purchase Agreement
and hereunder and deliver
notice thereof to the
registered holder hereof; and
(b) upon consummation of such
Transaction, this Warrant
shall automatically become
exercisable for the common
stock of the acquiror (without
regard to the form of
acquisition consideration)
with similar terms and at an
exercise price that would
result in a Black-Scholes
Warrant Value of this Warrant
computed immediately after
the Transaction equal to the
Black-Scholes Warrant Value of
this Warrant computed immedi-
ately before the Transaction.
For purposes of this paragraph 10(c), the
factors to be used in the calculation of
the Black-Scholes Warrant Value are as
follows:
Stock Price:
the last sales price
of the Common Stock
reported by Bloomberg
on the last Trading
Day prior to the
Transaction Date (the
"Last Trading Day")
Time To Expiration:
the number
of Trading Days
between the Last
Trading Day and the
Termination Date
Exercise Price: Exercise Price
Volatility:
volatility shown by
Bloomberg for the
past 260 days at
close on the Last
Trading Day, unless
the Time to Expira-
tion is less than 260
Trading Days, in
which case the
volatility shown by
Bloomberg at close on
the Last Trading Day
for the number of
Trading Days from the
Last Trading Day to
the Termination Date
Risk-Free Interest Rate:
closing yield as of the Last
Trading Day as quoted
in the Wall Street
Journal for U.S.
Treasury bond with a
maturity date closest
to the Termination
Date
Number of Shares
Outstanding:
the total number
of shares of Common
Stock outstanding as
of the Last Trading
Day
Exercisable
Common Stock:
the number of shares
of Common Stock
exercisable under
this Warrant as of
the Transaction Date
The Black-Scholes Warrant Value will be
calculated using the factors shown above.
A preliminary calculation of the Black-
Scholes Warrant Value, and, if applicable,
the exercise price contemplated by
paragraph 10(c)2(b) hereof, (using then-
current values for each factor) will be
delivered by Holder to the Issuer not
later than the tenth day after it receives
notice of a Transaction by the Issuer.
The Issuer, in turn, will respond within
five days with any comments or questions
and reach agreement with Holder on the
preliminary factors. On the Transaction
Date, Holder, in consultation with the
Issuer, will calculate the final Black-
Scholes Warrant Value using the then-
current values for each factor; such
calculation will be used to compute the
values called for in paragraph 10(c). It
shall be a condition to any Transaction
that the consideration provided for herein
shall be paid in full, in the case of
cash, or delivered, in the case of a
warrant, all in accordance with the terms
hereof, immediately prior to the
consummation of the Transaction. As used
herein, the term "Trading Day" means any
day on which the Issuer's Common Stock is
quoted on the NNM or, if applicable, other
national securities exchange. If the
factors shown above can not be determined
because the Issuer's Common Stock is not
listed on any national securities exchange
or because Bloomberg does not report the
factors shown above, then the Issuer and
the holder of this Warrant shall agree on
an alternative calculation to satisfy the
requirements of this paragraph 10(c).
(d) After an adjustment to the Exchange Rate
hereunder, any subsequent event requiring
an adjustment hereunder shall cause an
adjustment to the Exchange Rate as so
adjusted.
(e) Upon the issuance of any stock dividend or
distribution of Common Stock pro rata to
all holders of Common Stock, the Exchange
Rate shall be adjusted so that the
registered holder hereof on the record
date for such distribution shall be
entitled to receive such dividend or
distribution on the same terms as the
holders of Common Stock upon exercise
hereof.
11. Except as provided in the following paragraph,
upon any adjustment of the Exchange Rate
pursuant to paragraph 10, the Issuer shall
promptly thereafter but in any event within
fifteen days following such adjustment (i) cause
to be delivered to the registered holder hereof
a certificate of its Chief Financial Officer
setting forth the Exchange Rate after such
adjustment and setting forth in reasonable
detail the method of calculation and the facts
upon which such calculations are based, which
certificate shall be conclusive evidence of the
correctness of the matters set forth therein,
and (ii) cause to be delivered to the registered
holder hereof at its address appearing on the
Warrant Register written notice of such
adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be
given in advance and included as part of the
notice required to be mailed under the other
provisions of this paragraph 11.
In case:
(a) the Issuer shall authorize the issuance to
all holders of shares of Common Stock of
rights, options or warrants to subscribe
for or purchase shares of Common Stock or
of any other subscription rights or
warrants; or
(b) of any proposal for a consolidation or
merger to which the Issuer is a party, the
sale or transfer of all or substantially
all of the assets of the Issuer, or any
reclassification or change of Common Stock
issuable upon exercise of this Warrant
(other than a change in par value, or from
par value to no par value, or from no par
value to par value, or as a result of a
subdivision or combination), or of a
tender offer or exchange offer for shares
of Common Stock; or
(c) of the voluntary or involuntary
dissolution, liquidation or winding up of
the Issuer; or
(d) the Issuer proposes to take any action
that would require an adjustment of the
Exchange Rate pursuant to paragraph 10;
then the Issuer shall cause to be given to the
registered holder hereof at its address
appearing on the Warrant Register (as defined
below), at least twenty days (or ten days in any
case specified in clause (a) above) prior to the
applicable record date hereinafter specified, or
promptly in the case of events for which there
is no record date, by first class mail, postage
prepaid, a written notice stating (i) the date
as of which the holders of record of shares of
Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to
be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iii) the
date on which any such reclassification,
consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is
expected to become effective or consummated, and
the date as of which it is expected that holders
of record of shares of Common Stock shall be
entitled to exchange such shares for securities
or other property, if any, deliverable upon such
reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation
or winding up.
12. The Issuer shall serve as warrant agent (the
"Warrant Agent") under this Agreement. The
Warrant Agent hereunder shall at all times
maintain a register (the "Warrant Register") of
the holders of Warrants. Upon thirty days'
notice to the registered holder hereof, the
Issuer may appoint a new Warrant Agent. Such
new Warrant Agent shall be a corporation doing
business and in good standing under the laws of
the United States or any state thereof, and
having a combined capital and surplus of not
less than $50,000,000. The combined capital and
surplus of any such new Warrant Agent shall be
deemed to be the combined capital and surplus as
set forth in the most recent annual report of
its condition published by such Warrant Agent
prior to its appointment; provided that such
reports are published at least annually pursuant
to law or to the requirements of a federal or
state supervising or examining authority. After
acceptance in writing of such appointment by the
new Warrant Agent, it shall be vested with the
same powers, rights, duties and responsibilities
as if it had been originally named herein as the
Warrant Agent, without any further assurance,
conveyance, act or deed, but if for any reason
it shall be reasonably necessary or expedient to
execute and deliver any further assurance,
conveyance, act or deed, the same shall be done
at the expense of the Issuer and shall be
legally and validly executed and delivered by
the Issuer.
Any corporation into which the Issuer or any new
Warrant Agent may be merged or any corporation
resulting from any consolidation to which the
Issuer or any new Warrant Agent shall be a party
or any corporation to which the Issuer or any
new Warrant Agent transfers substantially all of
its corporate trust or shareholders services
business shall be a successor Warrant Agent
under this Agreement without any further act;
provided that such corporation (i) would be
eligible for appointment as successor to the
Warrant Agent under the provisions of this
paragraph 12 or (ii) is a wholly owned
subsidiary of the Warrant Agent. Any such
successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be
mailed (by first class mail, postage prepaid) to
the registered holder hereof at such holder's
last address as shown on the Warrant Register.
This Warrant shall not be valid unless signed by
the Issuer.
IN WITNESS WHEREOF, SyQuest Technology, Inc. has
caused this Warrant to be signed by its duly authorized
officer.
Dated: May 7, 1997
SYQUEST TECHNOLOGY, INC.
By:
Name:
Title:
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise of the Warrant)
[DATE]
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Attention: Chief Financial Officer
Re: Warrant No.
Ladies and Gentlemen:
The undersigned is the registered holder
of the above-referenced warrant (the "Warrant") issued
by SyQuest Technology, Inc., the original of which is
attached hereto, and hereby elects to exercise the
Warrant to purchase _________ Warrant Shares (as
defined in the Warrant) and herewith tenders
$_____________ by certified or official bank check to
the order of SyQuest Technology, Inc. as payment for
such Warrant Shares in accordance with the terms of the
Warrant and the Purchase Agreement (as defined in the
Warrant).
In accordance with the attached Warrant,
the undersigned requests that certificates for such
Warrant Shares be registered in the name of and
delivered to the undersigned at the following address:
________________________
________________________
________________________
[If the number of Warrant Shares to be
delivered is less than the total number of Warrant
Shares deliverable under the Warrant, insert the
following -- The undersigned requests that a new
warrant substantially identical to the attached Warrant
be issued to the undersigned evidencing the right to
purchase the number of Warrant Shares equal to (x) the
total number of Warrant Shares deliverable under the
Warrant less (y) the number of Warrant Shares to be
delivered in connection with this exercise.]
NAME OF REGISTERED HOLDER
[ADDRESS]
By:
Name:
Title:
