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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) February 28, 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.)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5 Other Events
Exchange of Debt for Equity
From February 28, 1997, through March 26, 1997, Registrant
exchanged approximately $12,880,000 of its trade debt owed to various creditors
(the "Creditors") for shares (the "Shares") of Registrant's common stock
("Common Stock") pursuant to Rule 506 of Regulation D under the Securities Act
of 1933, as amended (the "Securities Act"), as follows:
Name of Creditor Amount of Debt Number of Shares
- ---------------- -------------- ----------------
A-Corn Enterprises $1,712,509.19 548,002
Company, Ltd.
Seksun Precision
Engineering, Limited $ 363,764.93 141,957
Tongkah Electronics $8,767,184.95 3,506,874
SDN.BHD.
Silicon Systems, Inc. $2,027,544.33 811,017
Each of the Creditors has warranted to Registrant that it is
an accredited investor under Regulation D. Registrant entered into a
registration rights agreement with each Creditor, whereby Registrant is required
to register such Shares for resale.
THE FOREGOING DESCRIPTION OF THE DEBT TO EQUITY CONVERSIONS IS ONLY A BRIEF
SUMMARY, DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO EXHIBITS 10.2, 10.3, 10.4 AND 10.5 TO THIS REPORT ON FORM 8-K,
WHICH ARE INCORPORATED HEREIN BY THIS REFERENCE.
Registrant Announces New Bank Lines of Credit
On March 27, 1997, Registrant announced new bank lines of
credit that maintain Registrant's credit line at a maximum of $30,000,000. The
new bank lines of credit are also described in the press release attached hereto
as Exhibit 99.1 and incorporated herein by this reference.
Item 7 Financial Statements, Pro Forma Financial Information
and Exhibits
(c) Exhibits
10.1 Subscription Agreement dated March 31, 1997, between
Registrant and Fletcher International Limited, including as
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Annex B thereto the form of Warrant Certificate issued pursuant
thereto.
10.2 Securities Purchase Agreement dated as of February 28, 1997, between
Registrant and A-Corn Enterprises Company, Ltd., including the exhibit
form of Registration Rights Agreement.
10.3 Securities Purchase Agreement dated as of March 19, 1997, between
Registrant and Seksun Precision Engineering Limited, including the
exhibit form of Registration Rights Agreement.
10.4 Securities Purchase Agreement dated as of March 26, 1997, between
Registrant and Tongkah SDN.BHD., including the exhibit form of
Registration Rights Agreement.
10.5 Securities Purchase Agreement dated as of March 26, 1997, between
Registrant and Silicon Systems, Inc., including the exhibit form of
Registration Rights Agreement.
99.1 Registrant's Press Release released March 27, 1997.
99.2 Registrant's Press Release released April 9, 1997.
Item 9 Sale of Equity Securities Pursuant to Regulation S
On April 2, 1997, pursuant to a Subscription Agreement dated
March 31, 1997 (the "Agreement"), Registrant issued and sold to Fletcher
International Limited, a company organized under the laws of the Cayman Islands
("Purchaser"), 50,000 newly issued shares (the "Shares") of Registrant's 5%
Cumulative Convertible Preferred Stock, Series 3, par value $.001 per share (the
"Preferred Shares"), at a price of $100 per share, for an aggregate price of
$5,000,000. The rights, preferences and privileges of the Preferred Shares, as
summarized below, are set forth in the Certificate of Designations, Preferences
and Rights of 5% Cumulative Convertible Preferred Stock, Series 3 (the
"Certificate"), filed with the Delaware Secretary of State on April 1, 1997. A
copy of the Agreement (which includes, as Annex A and Annex B, respectively,
copies of the Certificate and the Warrant Certificate, as defined below) is
attached as Exhibit 10.1 to this Form 8-K and incorporated herein by this
reference. Under the Agreement, Purchaser also acquired a warrant (the
"Warrant") to purchase 5,000,000 shares (the "Warrant Shares") of Common Stock,
pursuant to a Warrant Certificate (the "Warrant Certificate").
Conversion; Registration. Subject to certain conditions, the
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Preferred Shares are convertible into shares (the "Conversion Shares") of
Registrant's Common Stock at any time at the option of the holder of the
Preferred Shares. The conversion price is the greater of the arithmetical
average of the closing sale prices of the Common Stock for the 5-day period
preceding the conversion or 90% of the closing sale price the day before
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the conversion, but not greater than the closing sale price on
April 2, 1997 ($2.25).
Conversion Shares cannot all be issued until Registrant's
stockholders approve an increase in the authorized number of shares of
Registrant's common stock, because Registrant currently has insufficient
authorized Common Stock to issue all of the Conversion Shares and Warrant
Shares. If an increase in Registrant's authorized shares of Common Stock is not
approved prior to June 1, 1997, and Purchaser seeks to convert any Preferred
Shares or exercise the Warrant and Registrant is unable to deliver the
Conversion Shares or Warrant Shares, then Registrant will be required, in lieu
of delivering the Conversion Shares or Warrant Shares, to make cash payment
within three months thereafter equal to the market value of the Common Stock
that would be issuable on conversion or exercise using the closing price of the
Common Stock at the date the conversion or exercise is requested. Any balance
owed will accrue interest at an annual rate of 15%.
Notwithstanding the foregoing, the Preferred Shares cannot be
converted and the Warrant may not be exercised if such conversion or exercise
would require stockholder approval under applicable Nasdaq National Market
rules, if such action would result in the Purchaser acquiring more than 19.9% of
the outstanding Common Stock on April 2, 1997, and if the price at which such
Common Stock is acquired is considered to be below market. In such case,
Registrant is required to use its best efforts to seek stockholder approval of
the transaction so that Purchaser can acquire greater than 19.9% of the
outstanding Common Stock.
Dividends. Cumulative dividends accrue on the Preferred Shares
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at an annual rate of 5%. Such dividends are payable quarterly in cash, or, at
Registrant's option, in additional Preferred Shares. Dividends may not be paid
in Preferred Shares if the conversion price of the Preferred Shares would
constitute a below market issuance of Common Stock and to do so would violate
the 19.9% limitation described above.
Liquidation Preference. The Preferred Shares have a
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liquidation preference as to dividends, distributions and payments on
liquidation, dissolution or winding up of Registrant senior to Common Stock,
senior to other capital stock if permitted by the terms of such other capital
stock, in 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 senior
to all series of any class of Registrant's capital stock issued after April 2,
1997, except for capital stock which may be issued in the future to Beijing
Legend Group, Ltd.
Non-Voting. The Preferred Stock is non-voting, except as
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required by law.
Warrant. The exercise price (the "Exercise Price") of the
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Warrant will be the greater of the arithmetical average of the closing sales
price per share of common stock on the 5
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consecutive trading days preceding the delivery of the Exercise Notice (as
defined below) and 90% of such closing sale price on the day immediately prior
to the delivery of the Exercise Notice, but not greater than the closing sale
price per share of the Common Stock on April 2, 1997. The Warrant is not
exercisable until the lapse of a period ending on the sixty-fifth day after
Purchaser delivers a notice to Registrant designating an aggregate number of
Warrant Shares to be purchased. Once such notice is given and the 65-day period
has passed, the Purchaser may exercise the Warrant up to the number of shares
designated in the 65-day notice by providing further notice to Registrant that
the Purchaser is exercising the Warrant (the "Exercise Notice"). The Warrant
expires on April 2, 2004. The number of Warrant Shares available will increase
by 500,000 for each month (prorated daily for partial months), that either of
the following conditions is not satisfied: (a) the Registration Statement is not
declared effective by June 1, 1997 (provided that such condition need not be
satisfied until July 1, 1997, if the Commission reviews the Registration
Statement), or (b) on the day after Registrant's 1997 annual meeting of
stockholders, but in any event not later than June 1, 1997, the issuer shall
have the number of duly authorized shares of Common Stock reserved for issuance
to Purchaser equal to the total number then issuable on full exercise of the
Warrant and full conversion of the Preferred Shares and otherwise is able to
deliver shares of Common Stock on such exercise or conversion.
Registration Rights. The Agreement provides that Registrant
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file a registration statement on Form S-3 (the "Registration Statement")
covering resales of the Conversion Shares and the Warrant Shares (collectively,
the "Converted Securities") and use its best efforts to have the Registration
Statement declared effective not later than June 1, 1997 (or July 1, 1997, if
the Commission reviews the Registration Statement), and to keep the Registration
Statement effective until the earlier of (a) the second anniversary of the
issuance of the Converted Securities, (b) such date as all of the Converted
Securities shall have been sold by Purchaser or (c) such time as all of the
Converted Securities held by Purchaser can be sold by Purchaser or any of its
affiliates within a three month period without compliance with the registration
requirements of the Securities Act pursuant to Rule 144 thereunder.
If the Registration Statement is not effective by June 1,
1997, or July 1, 1997, as the case may be, then the number of Warrant Shares
issuable pursuant to the Warrant will increase by 500,000 for each month after
the appropriate date (prorated on a daily basis) that the Registration Statement
is not declared effective.
The Agreement, the Warrant and related matters are also
described in the press release attached hereto as Exhibit 99.2 and incorporated
herein by this reference.
THE FOREGOING DESCRIPTION OF THE AGREEMENT, THE CERTIFICATE AND THE WARRANT
CERTIFICATE IS ONLY A BRIEF SUMMARY, DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
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EXHIBIT 10.1 TO THIS REPORT ON FORM 8-K, WHICH IS INCORPORATED HEREIN BY THIS
REFERENCE.
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SYQUEST TECHNOLOGY, INC.
(Registrant)
Dated: April 9, 1997 By /s/ Edwin L. Harper
Edwin L. Harper,
President and
Chief Executive Officer
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EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
----------------------
This Subscription Agreement (the "Agreement") dated March 31, 1997 is
entered into by and between SyQuest Technology, Inc., a Delaware corporation
(together with its successors, "SyQuest"), and Fletcher International Limited, a
company organized under the laws of the Cayman Islands (together with its
successors, "Fletcher").
Unless otherwise defined herein, capitalized terms used herein and not
defined herein shall have the meanings given to them in Regulation S (as now if
effect or as hereafter amended, "Regulation S") 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
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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
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sell to Fletcher, and Fletcher agrees to purchase from SyQuest, on the
Closing Date specified in Section 2 hereof, 50,000 shares of SyQuest's 5%
Cumulative Convertible Preferred Stock, Series 3, 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 $5,000,000.
b. Warrant. In consideration of the purchase of the Preferred
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Shares by Fletcher, SyQuest will issue to Fletcher on the Closing Date
specified in Section 2 hereof, a warrant having the terms set forth in the
warrant certificate attached hereto as Annex B (the "Warrant") to purchase
up to 5,000,000 shares (subject to adjustment) of SyQuest's Common Stock,
par value $.001 per share (the "Common Stock"), which, subject to the terms
and conditions of this Agreement and the Warrant, will be freely tradable.
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
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any Common Stock issued or to be issued to Fletcher 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
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the conditions set forth in Sections 8 and 9 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 initially via facsimile at 1:00
p.m. (New York time) on April 1, 1997, or at such other date and time as
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Fletcher and SyQuest may agree (such date and time being referred to herein as
the "Closing Date"), provided that the original certificates shall be delivered
via Federal Express to Fletcher at the address set forth in Section 13 hereof.
At the Closing, the following deliveries shall be made:
a. Preferred Shares. SyQuest shall deliver the certificate
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representing the Preferred Shares, duly registered on the books of SyQuest
in the name of Fletcher, against payment by Fletcher of the purchase price
specified in Section 1(a) hereof in immediately available funds to the
following account: Account Name: Bank of America, 1850 Gateway Blvd., 4th
Floor, Concord, California 94520, Account No. 1233456287, ABA No.
121000358.
b. Warrant. SyQuest shall deliver the certificate representing
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the Warrant to Fletcher. Such certificate shall be substantially in the
form attached hereto as Annex B.
c. Closing Documents. The closing documents required by
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Sections 7 and 8 shall be delivered to Fletcher and SyQuest, respectively.
d. Delivery Notice. An executed copy of the delivery notice in
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the form attached hereto as Annex C shall be delivered to Fletcher.
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 set forth
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in the Schedule of Exceptions attached hereto, SyQuest hereby represents and
warrants to Fletcher 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 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 Fletcher, will be valid
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and binding agreements enforceable against SyQuest in accordance with their
terms, sub ject to bankruptcy, insolvency, reorganization, 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 thereunder.
d. No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution 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) 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 provision 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 100,000 Preferred Shares for
issuance pursuant to the terms hereof. SyQuest intends to recommend at its
1997 Annual
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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 Fletcher 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 Fletcher 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 Fletcher); 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. SyQuest is a Reporting Issuer within the meaning of
Regulation S, provided, however, that the representations and warranties
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contained in this Section 3(h) shall not be required to be given in respect
of any Exercise Date or Conversion Date if the provisions of Section 3A are
applicable and SyQuest is in full compliance therewith and Fletcher is
permitted to resell the Common Stock thereunder.
i. 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,
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however, that the representations and warranties contained in this Section
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3(i) shall not apply to any action, threatened action, suit, proceeding or
investigation initiated by Fletcher.
j. 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.
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k. 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.
l. The offer and sale of the Preferred Shares, the Warrant and
the Warrant Shares to Fletcher pursuant to this Agreement and the Warrant
Certificate will, subject to compliance by Fletcher 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 S and any
applicable state law, provided, however, that the representations and
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warranties contained in this Section 3(l) 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 Fletcher is
permitted to resell the Common Stock thereunder.
m. Neither SyQuest nor any of its affiliates nor any person
acting on its or their behalf has engaged or will engage in any Directed
Selling Efforts with respect to the Preferred Shares, the Warrant or the
Converted Stock, and all such persons understand and have complied and will
otherwise comply with the requirements of Regulation S.
n. The transactions contemplated by this Agreement and the
Warrant are not part of a plan or scheme on the part of SyQuest, any of its
subsidiaries or any person acting on its or their behalf to evade the
registration provisions of the Securities Act.
o. SyQuest has not issued, and after the date hereof, will not
issue, any stop transfer order or other order impeding the sale and
delivery of the Preferred Shares, the Converted Stock or the Warrant
issuable hereunder except for a stop order restricting the sale of any of
the foregoing securities to any person in the United States or to or for
the account or benefit of any U.S. person during an applicable Restricted
Period or otherwise not in compliance with any applicable securities law or
regulation.
p. Except for securities sold to Fletcher or proposed to be sold
to Beijing Legend Group Ltd. and its affiliates (the "BLC Transaction"), on
the Closing Date, neither SyQuest nor any of its affiliates has offered to
sell or sold any Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock in reliance upon Regulation S
at any time during the past 12 months and there are no outstanding
convertible or exchangeable securities that have been offered or sold in
reliance upon Regulation S, except, in each case the Warrant, the Converted
Stock and the Preferred Shares sold pursuant hereto.
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q. Capitalization. As of the date hereof, the authorized
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capital stock of SyQuest consists of 60,000,000 shares of Common Stock, and
4,000,000 shares of Preferred Stock, par value $.001 per share, of SyQuest
("Preferred Stock"). As of March 3, 1997, (i) 37,654,494 shares of Common
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Stock (including the treasury shares described in clause (iii) below) and
7,823 shares of Preferred Stock were issued and outstanding, (ii)
16,075,370 shares of Common Stock were reserved for issuance upon exercise
of outstanding stock options, convertible Preferred Stock, warrants or
other rights (based, with respect to 4,053,578 shares of Common Stock, on a
conversion price of $1.92 per share of Common Stock) and (iii) 1,225,000
shares of Common Stock were held in the treasury of SyQuest. As of March
3, 1997, all the outstanding 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. As of
the date hereof, except as set forth above or in SyQuest's Registration
Statement on Form S-3 (registration number 333-17119), as supplemented, and
except for shares of Common Stock or other securities issued upon
conversion, exchange, exercise or purchase associated with the securities,
options, warrants, rights and other instruments referenced above from March
3, 1997 to the date hereof, (i) no shares of capital stock or other voting
securities of SyQuest were outstanding, (ii) no equity equivalents,
interests in the ownership or earnings of SyQuest or other similar rights
were outstanding and (iii) there were no existing options, warrants, calls,
subscriptions or other rights or agreements or commitments relating to the
capital stock of SyQuest or any of its subsidiaries or obligating SyQuest
or any of its subsidiaries to issue, transfer, sell or redeem any shares of
capital stock, or other equity interest in, SyQuest or any of its
subsidiaries or obligating SyQuest or any of its subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement or commitment.
r. The parties hereto acknowledge that Fletcher has neither
requested of nor received from SyQuest any non-public information relating
to SyQuest or the business affairs or business prospects of SyQuest and
without limiting Fletcher's reliance on any of the representations,
warranties, covenants and agreements of SyQuest contained herein, Fletcher
assumes the risk that the knowledge of any of the non-public information
described in this Section 3(r) might have materially influenced Fletcher's
decision to enter into and perform this Agreement.
3.A Registration Provisions.
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a. SyQuest shall, as promptly as practicable hereafter and at
its own expense, file a registration statement (the "Registration
Statement") under the Securities 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
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declared effective not later than June 1, 1997 (or July 1, 1997, if the SEC
reviews such Registration Statement) and shall amend such Registration
Statement from time to time upon the request of Fletcher 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 Securities Act; provided that Fletcher shall have provided such
information and coop eration in connection therewith as SyQuest may
reasonably request. Upon the effective ness of such Registration Statement
and at Fletcher's request (A) SyQuest shall issue such securities to
Fletcher in accordance with the terms hereof and (B) the provisions of
Sections 3(l), (m) and (o), 4(f), (g), (h), (i) and (j), 5(a), (b), (c) and
(d), 6(a), (c) and (d) (collectively, the "Specified Provisions"), 7(a) and
(b) (to the extent applicable to the Specified Provisions), and 8(b), (c)
and (d) (to the extent applicable to the Specified Provisions) shall
thereafter be of no force and effect with respect to the issuance of such
Covered Securities.
b. SyQuest will use its best efforts 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 Fletcher or (C) such time as all of the
Covered Securities held by Fletcher can be sold by Fletcher or any of its
affiliates within a three-month period without compliance with the registra
tion 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 Registration 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 Fletcher 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
Fletcher 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 Fletcher, 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 Fletcher upon request a reasonable
number of copies of a supplement to or an amendment of such Prospectus as
may be necessary
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in order to facilitate the public sale or other disposition of all or any
of the Covered Securities by Fletcher or any of its affiliates pursuant to
the Registration Statement.
d. With a view to making available to Fletcher 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 Fletcher 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 Fletcher upon request, as long as Fletcher 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
Fletcher 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 connection
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
misstatement or omission, SyQuest will immediately notify Fletcher thereof
by telephone and in writing. Upon receipt of such notification, Fletcher
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 Registration Statement as promptly as
practicable and will take such other steps as may be required to permit
sales of the Covered Securities thereunder by Fletcher and its affiliates
in accordance with applicable federal and state securities laws. SyQuest
will promptly notify Fletcher after it has determined in good faith that
such sales have become permissible in such manner and will promptly deliver
copies of the Registration State ment and the Prospectus (as so amended or
supplemented) to Fletcher in accordance with paragraph (b) of this Section
3A. Notwithstanding the foregoing, (A) under no circum stances 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 com mence less than 30 days after the end of the
preceding Blackout Period.
Upon the commencement of a Blackout Period pursuant to this Section
3A, Fletcher will immediately notify SyQuest of any contracts to sell any
Covered Securities (each a "Sales Contract") that Fletcher 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
8
<PAGE>
notice, SyQuest will immediately notify Fletcher 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 Fletcher 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 Fletcher 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 Fletcher 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 Fletcher Indemnified Party may incur arising
out of or in connection with Fletcher's breach or alleged breach of any
such Sales Contract, and SyQuest shall reimburse each Fletcher 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 Fletcher 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 multi plied by the
difference between (x) the actual per share price received by Fletcher 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 ex change 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 Fletcher 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 Fletcher. Fletcher hereby
------------------------------------------
represents and warrants to SyQuest on the date hereof and on the Closing Date,
and agrees with SyQuest, as follows:
a. Fletcher has been duly incorporated and is validly existing
in good standing under the laws of the Cayman Islands.
b. The execution, delivery and performance of this Agreement by
Fletcher have been duly authorized by all requisite corporate action and no
further consent or authorization of Fletcher, its Board of Directors or its
stockholders is re quired. This Agreement has been duly executed and
delivered by Fletcher and, when duly authorized, executed and delivered by
SyQuest, will be a valid and binding agreement enforceable against Fletcher
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
9
<PAGE>
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
c. Fletcher 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.
d. In making the decision to purchase the Preferred Shares or
the Warrant in accordance with this Agreement, Fletcher has relied solely
upon independent investigations made by it and not upon any representations
made by SyQuest other than those made in this Agreement.
e. Subject to Section 3A, Fletcher 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.
f. Fletcher is not a U.S. Person and is not acquiring the
Preferred Shares, the Warrant or any Converted Stock for the account or
benefit of any U.S. Person, and Fletcher is not an affiliate of SyQuest.
g. At the time the buy orders for the Preferred Shares and the
Warrant (and any Converted Stock to be issued during the Restricted Period)
were originated, Fletcher was located outside the United States.
h. Neither Fletcher nor any of its affiliates nor anyone acting
on its or their behalf has engaged or will engage in any Directed Selling
Efforts with respect to the Preferred Shares, the Warrant or any Converted
Stock, and all such persons understand and have complied and will otherwise
comply with the requirements of Regulation S.
i. Fletcher:
(1) will not, during the Restricted Period applicable to the
Preferred Shares, the Warrant and the Converted Stock, offer or sell
any of the foregoing securities (or create or maintain any derivative
position equivalent thereto) in the United States, to or for the
account or benefit of a U.S. Person or other than in accordance with
Regulation S; and
(2) will, after the expiration of the applicable Restricted
Period, offer, sell, pledge or otherwise transfer the Preferred
Shares, the Warrant or any Converted Stock (or create or maintain any
derivative position equivalent thereto) only pursuant to registration
under the Securities Act or an available exemption therefrom and, in
any case, in accordance with applicable state securities laws.
10
<PAGE>
j. Fletcher is purchasing the Preferred Shares, the Warrant and
the Converted Stock for its own account, for the purpose of investment
and not with a view to a distribution thereof.
k. The transactions contemplated by this Agreement and the
Warrant Certificate are not part of a plan or scheme on the part of
Fletcher, any of its affiliates or any person acting on its or their behalf
to evade the registration requirements of the Securities Act.
5. Covenants of SyQuest. Except as set forth in the Schedule of
--------------------
Exceptions attached hereto, SyQuest covenants and agrees with Fletcher as
follows:
a. For so long as any of the Preferred shares or any portion of
the Warrant remains outstanding, and in any case for a period of 40 days
thereafter, SyQuest will continue to be a Reporting Issuer within the
meaning of Regulation S and 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. Except in the BLC Transaction or with the written consent of
Fletcher, for a period of six months following the date of this Agreement,
SyQuest will not offer or sell any Common Stock or any securities
convertible into or exchangeable into Common Stock in reliance upon
Regulation S and in any event will not take any action which would extend
the Restricted Period hereunder.
c. For so long as any of the Preferred shares or any portion of
the Warrant remains outstanding, and in any case for a period of 40 days
thereafter, neither SyQuest nor any of its affiliates nor any person acting
on its or their behalf will engage in any Directed Selling Efforts with
respect to the Warrant or any Converted Stock.
d. For so long as any of the Preferred Shares or any portion of
the Warrant remains outstanding, and in any case for a period of 40 days
thereafter, SyQuest will ensure that all applicable Offering Restrictions
with respect to the Warrant and the Converted Stock are thoroughly complied
with and satisfied.
e. Beginning on the date hereof and for so long as any of the
Preferred Shares or any portion of the Warrant remains outstanding, and in
any case for a period of 40 days thereafter, SyQuest will (i) provide
Fletcher 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 Fletcher 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
Fletcher with copies of all SEC Filings.
11
<PAGE>
f. If the Amendment is not approved on or prior to June 1, 1997
and Fletcher seeks to convert any Preferred Shares or exercise the Warrant
and SyQuest is unable to deliver the Converted Stock, then within three
months of delivery of the applicable Conversion Notice (as defined in the
Certificate of Designation) or Exercise Notice (as defined in the Warrant
Certificate), as the case may be, SyQuest must make a cash payment in lieu
of delivering the Converted Stock equal to the market value of the Common
Stock issuable pursuant to such Conversion Notice or Exercise Notice
calculated by using (i) the closing price on NASDAQ as reported by
Bloomberg, L.P. on the date of delivery of the Conversion Notice or
Exercise Notice, or (ii) if NASDAQ is not then the principal trading market
for the Common Stock, the closing price on the principal trading market for
the Common Stock at that time (the "Principal Market"), as reported by
Bloomberg L.P. on the date of delivery of the Conversion Notice or Exercise
Notice, or (iii) if NASDAQ is not then the principal trading market for the
Common Stock and there is no Principal Market, the market value as
determined in good faith by the Board of Directors of SyQuest, in each such
case plus 15% per annum interest for the period from the date of delivery
of the Conversion Notice or Exercise Notice to the date the amount is paid
in full. If SyQuest is required to make payments to Fletcher pursuant to
this Section 5(f) because of a failure to deliver Converted Stock, the
provisions of Section 10 shall not apply to such failure to deliver
Converted Stock. If the value of the Common Stock is to be determined by
the Board of Directors of SyQuest and Fletcher 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 Chicago, Illinois or at such other place as agreed to in writing
by SyQuest and Fletcher.
g. 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).
h. 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 Fletcher
the number of shares of Common Stock required to effect such conversion and
exercise. At the 1997 Annual Meeting of SyQuest's stockholders, SyQuest
will recommend to its stockholders
12
<PAGE>
the Amendment, and SyQuest shall use its best efforts to obtain stockholder
approval of the Amendment.
i. As soon as such information is available (but in no event
later than the date of filing of SyQuest's quarterly report on Form 10-Q
for the period ended March 31, 1997), SyQuest shall deliver to Fletcher a
written notice stating the number of outstanding shares of Common Stock as
of March 31, 1997.
j. SyQuest shall not issue any Preferred Shares to any person
other than Fletcher.
k. In accordance with the terms of Regulation S, SyQuest will
file with the SEC, within 15 calendar days after the date hereof, a report
on form 8-K with respect to the transactions contemplated hereby and by the
Warrant Certificate. In addition, SyQuest shall file copies of this
Agreement, the Warrant Certificate, the Certificate of Designation and the
Schedule of Exceptions as exhibits to the Form 8-K.
l. 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 Fletcher. Fletcher hereby covenants and agrees with
---------------------
SyQuest as follows:
a. During any Restricted Period applicable to the Preferred
Shares, the Warrant or the Converted Stock, neither Fletcher nor any of its
affiliates nor any person acting on its or their behalf will:
(1) offer or sell such Preferred Shares, Warrant or Converted
Stock other than in an Offshore Transaction;
(2) engage in any Directed Selling Efforts with respect to
such Preferred Shares, Warrant or Converted Stock;
(3) offer or sell such Preferred Shares, Warrant or Converted
Stock other than: (A) in accordance with Rule 903 or Rule 904 of
Regulation S; (B) pursuant to registration under the Securities Act or
(C) pursuant to an available exemption therefrom; or
(4) offer or sell such Preferred Shares, the Warrant or
Converted Stock, to any U.S. Person or for the account or benefit of
any U.S. Person.
13
<PAGE>
b. Neither Fletcher 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.
c. Fletcher 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 restriction.
d. At the 1997 Annual Meeting of SyQuest's stockholders,
Fletcher will vote all shares of Common Stock owned by Fletcher as of the
applicable record date in favor of an increase in the authorized number of
shares of Common Stock to 120,000,000.
6A. Legend. The term "Restricted Period," with respect to any
------
security, shall mean the Restricted Period then applicable to such security
pursuant to Regulation S (or any applicable successor thereto), provided that,
the parties agree that absent an intervening change in the applicable law, the
Restricted Period with respect to the Preferred Shares, the Warrant and the
Converted Stock will expire on the 40th day after the Closing Date. SyQuest
shall place the following legend on the certificate representing the Preferred
Shares:
The securities represented by this certificate were issued on April
2, 1997 (the "Closing Date") pursuant to the Subscription Agree ment
dated March 31, 1997 between SyQuest Technology, Inc. ("SyQuest") and
Fletcher International Limited. The securities represented by this
certificate have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and have been sold in reliance on
the exemption from registration provided by Regulation S under the
Securities Act ("Regulation S"). Prior to the expiration of a 40-day
restricted period beginning on the Closing Date (the "Restricted
Period"), the securities rep resented by this certificate may not be
offered or sold, directly or indirectly, within the United States (as
defined in Regulation S under the Securities Act), to a U.S. Person
(as defined in Regula tion S under the Securities Act) or for the
account or benefit of a U.S. Person. After the Restricted Period,
such securities may be resold in the United States or to a U.S. Person
only if they are registered under the Securities Act or an exemption
from regis tration is available.
At any time after the expiration of the Restricted Period with respect
to the Preferred Shares or the Warrant, certificates for any Converted Stock
issued or in respect of transferred shares of Common Stock will not be legended
unless required by Regulation S or
14
<PAGE>
other applicable law, upon satisfaction of the conditions set forth in Section 8
and, if applicable, in the Warrant Certificate.
7. Conditions Precedent to Fletcher's Obligations. The obligations
----------------------------------------------
of Fletcher 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 Fletcher:
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 Fletcher 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 Exe
rcise Date, SyQuest shall have delivered to Fletcher an opinion of counsel
reasonably satisfactory to Fletcher, dated the date of delivery, confirming
in substance the matters covered in paragraphs (a), (b), (c), (d), (e),
(f), (h) and (i) of Section 3 hereof and paragraph (l) of Section 5 hereof
(provided that the opinion delivered on the Closing Date need not confirm
the matters covered in paragraph (l) 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 (i) 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 Fletcher
the opinion of counsel reasonably satisfactory to Fletcher, 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 Fletcher 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
Fletcher in this
15
<PAGE>
Agreement shall be true and correct, and (ii) Fletcher 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 Fletcher dated such date and to
such effect.
b. On the Closing Date, Fletcher shall have delivered to SyQuest
a written certification of an appropriate officer of Fletcher dated
such date stating that Fletcher is not a U.S. Person.
c. On each Conversion Date and each Exercise Date, Fletcher
shall have delivered to SyQuest either (i) a written certification of an
appropriate officer of Fletcher dated such date stating that Fletcher is
not a U.S. Person or (ii) an opinion of counsel to the effect that the
Warrant or Preferred Shares, as applicable, and the shares of Common Stock
delivered upon exercise or conversion thereof have been registered under
the Securities Act or an exemption from such registration is available.
d. On the date of any transfer by Fletcher of the Warrant, any
Preferred Shares or any Converted Stock during the applicable Restricted
Period, Fletcher shall have delivered to SyQuest a written certification of
an appropriate officer of Fletcher dated such date stating that Fletcher is
not a U.S. Person and that the Preferred Shares or the Warrant are not
being converted or exercised on behalf of a U.S. Person.
e. On the Closing Date, Fletcher shall have delivered to SyQuest
the opinion of counsel substantially in the form attached hereto, 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.
9. Fees and Expenses. Each of Fletcher and SyQuest agrees to pay
-----------------
its own expenses incident to the performance of its obligations hereunder,
including, but not limited to the fees, expenses and disbursements of such
party's counsel, except as is otherwise expressly provided in this Agreement and
the Warrant Certificate.
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 Fletcher 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 Fletcher to comply with its
obligations hereunder, then SyQuest shall:
(1) hold Fletcher 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
16
<PAGE>
(2) reimburse Fletcher for all of its reasonable out-of-pocket
expenses, including fees and disbursements of its counsel, incurred by
Fletcher in connection with this Agreement and the Warrant and the
transactions contemplat ed herein and therein;
provided, however, that SyQuest shall then be under no further liability to
- -------- -------
Fletcher except as provided in the Warrant Certificate, this Section 10 and
Section 11 hereof.
11. Indemnification.
---------------
a. Indemnification of Fletcher. SyQuest hereby agrees to
---------------------------
indemnify Fletcher 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 "Fletcher Indemnified Party") against any claim, demand,
action, liability, damages, loss, cost or expense (including, without
limitation, reasonable 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 Fletcher Indemnified Party for any
reasonable legal or other expenses incurred by such Fletcher 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 Fletcher in connection therewith.
b. Indemnification of SyQuest. Fletcher 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 Securities Exchange Act of 1934, as amended) any of the foregoing
persons (each a "SyQuest Indemnified Party")
17
<PAGE>
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 Fletcher 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 Fletcher
or any of its affiliates or any person acting on its or their behalf:
(2) any of the representations or warranties made by
Fletcher herein being untrue or incorrect; and
(3) any breach or non-performance by Fletcher of any of its
covenants, agreements or obligations under this Agreement and the
Warrant Certificate;
and Fletcher hereby agrees to reimburse each SyQuest Indemnified Party for
any reason able 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
18
<PAGE>
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 circumstances; 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 Fletcher, shall be delivered by hand, sent by
registered mail or transmitted and confirmed by facsimile to Fletcher at:
Fletcher International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
P.O. Box 1109, Mary Street
Grand Cayman, Cayman Islands
British West Indies
Telephone: (809) 949-7755
Facsimile: (809) 949-7634
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Stephen W. Hamilton
Telephone: (202) 371-7010
Facsimile: (212) 393-5760
19
<PAGE>
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: Douglas L. Hammer
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
counterpart, but such counterparts together shall constitute 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 New
York, and each of the parties hereto hereby submits to the non-exclusive
jurisdiction of any State or Federal court in the Borough of Manhattan in the
City and State of New York and any court hearing any appeal therefrom, 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
20
<PAGE>
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 Securities Act.
15. Time of Essence. Time shall be of the essence in this Agreement
---------------
and the Warrant.
21
<PAGE>
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: /s/ Henry Montgomery
-------------------------------------
Name: Henry Montgomery
Title: Chief Financial Officer
FLETCHER INTERNATIONAL LIMITED
By: /s/ Todd Fletcher
-------------------------------------
Name: Todd Fletcher
Title: Director/Vice Chairman
<PAGE>
SCHEDULE OF EXCEPTIONS
Regarding section 3.i, disclosure of the actions, suits, proceedings and
investigations in SyQuest's SEC Filings is incorporated herein by reference.
Regarding section 3.q, the number of shares of Common Stock issuable on
conversion of SyQuest's outstanding 7% Cumulative Convertible Preferred Stock,
Series 1, may vary based on the average closing prices of the Common Stock for
the five days preceding conversion. In addition to the issued and outstanding
Common Stock listed in section 3.q., as of the following dates, the Company is
deemed to have issued shares of its Common Stock to the following entities in
connection with their agreeement to exchange certain trade debt for such Common
Stock:
<TABLE>
<CAPTION>
NO. OF
NAME DATE OF EXCHANGE SHARES
- ---- ---------------- --------
<S> <C> <C>
Seksun Precision March 19, 1997 141,957
Engineering Limited
Tongkah Electronics March 26, 1997 3,506,874
SDN.BHD.
Silicon Systems, Inc. March 26, 1997 811,017
</TABLE>
<PAGE>
ANNEX A
-------
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES 3
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 one hundred thousand (100,000) shares of 5% Cumulative
Convertible Preferred Stock, Series 3, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 100,000 shares of 5%
Cumulative Convertible Preferred Stock, Series 3, $.001 par value (the
"Series 3 Preferred Shares"), which shall have the following powers,
designations, preferences and other special rights:
(1) Dividends. The holders of the Series 3 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 3 Preferred Shares are
outstanding). Dividends shall accrue from the date of issuance of the
Series 3 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 3 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 3 Preferred Shares, in
additional Series 3 Preferred Shares; provided that the Company may not
elect to pay dividends in additional Series 3 Preferred Shares to the
extent that (a) the number of authorized and unissued Series 3 Preferred
Shares is insufficient to make such payment, or (b) the ability of the
holders of Series 3 Preferred Shares to convert Series 3 Preferred Shares
or to exercise the Warrant (as hereinafter
<PAGE>
defined) is restricted by section 2(h), below. If the Company elects to
pay to any holder of Series 3 Preferred Shares any such dividend in
additional Series 3 Preferred Shares, the number of such additional Series
3 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 3 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 3 Preferred Shares. The holders of the
---------------------------------------
Series 3 Preferred Shares shall have the right, at their option, but
subject to the Subscription Agreement dated March 31, 1997 (the
"Subscription Agreement"), between the Company and Fletcher International
Limited ("Fletcher"), to convert the Series 3 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 3 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 3 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
3 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 3 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 "NMS"), or, if the NMS 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 NMS on the first day that any Series 3 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 3 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 Chicago, Illinois, or at such other
place as agreed to in writing by the Company and the holders of the Series
3 Preferred Stock.
2
<PAGE>
(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 3 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 3 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 3 Preferred Shares) of the certificate(s) ("Preferred Stock
Certificate(s)") for Series 3 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 3 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 3 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 such
restrictive legend pursuant to the Subscription Agreement, upon request
made by the holders of the Series 3 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 3 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 3 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 3 Preferred Shares, such number
3
<PAGE>
of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series 3 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 3 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 3 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 3 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 3 Preferred Shares and (2) issuable on conversion of
all remaining outstanding Series 3 Preferred Shares (determining such
number as if such Series 3 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 3 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 3 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
4
<PAGE>
Subject Conversion Notices on a pro rata basis based on the relative
number of Series 3 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 3 Preferred Shares in excess of the 19.9%
Limit.
(i) Maximum Number. Series 3 Preferred Shares shall be
--------------
convertible only into the Maximum Number of shares of Common Stock. The
"Maximum Number" is equal to the sum of the 9% Number and the Convertible
Number. The "9% Number" is nine percent of the outstanding shares of
Common Stock as of the date of filing of this Certificate with the Delaware
Secretary of State, minus 1,500,000. The "Convertible Number" is initially
zero and thereafter may be increased on expiration of a sixty-five day
period (the "Notice Period") after the holder of Series 3 Preferred Shares
delivers a notice (a"65-Day Notice") to the Company designating an
aggregate number of shares of Common Stock in excess of the 9% Number that
will become convertible. A 65-Day Notice may be given at any time. If the
initial 65-Day Notice does not designate all of the shares of Common Stock
then issuable on conversion of such holder's Series 3 Preferred Shares,
additional Series 3 Preferred Shares will become convertible into some or
all of the remaining shares of Common Stock on delivery of one or more 65-
Day Notices increasing the Convertible Number after a further Notice
Period. From time to time following the Notice Period, the Series 3
Preferred Shares may be converted on any business day for any number of
shares of Common Stock, such that the aggregate number of shares of Common
Stock issued hereunder is less than or equal to the Maximum Number.
(j) Stockholder Approval. If there are Excess Preferred Shares
--------------------
as described in section (2)(h), 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 3 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 3 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 3
Preferred Shares and holders of shares
5
<PAGE>
of other classes or series of preferred stock of the Company that are of
equal rank with the Series 3 Preferred Shares as to payments of Preferred
Funds (the "Pari Passu Shares"), then each holder of Series 3 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 3 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 3 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 3 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 3 Preferred Shares are
outstanding, no Common Stock nor any other capital stock of the Company
ranking junior to the Series 3 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 3 Preferred Shares) unless in each case the Company offers to redeem
the Series 3 Preferred Shares on substantially the same terms (provided
that the redemption price shall not be less than $100 per share). The
Company may hereafter authorize additional or other capital stock for
issuance in the BLC Transaction (as that term is defined in the
Subscription Agreement) that is senior, equal or junior to the Series 3
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 3 Preferred Shares are outstanding, authorize additional or
other capital stock that is of senior or equal rank to the Series 3
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 3 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 representing Series 3 Preferred Shares, and (in the case
of loss, theft or destruction) of any
6
<PAGE>
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 or stolen
Preferred Stock Certificate if the holder thereof contemporaneously
requests the Company to convert such Series 3 Preferred Shares into Common
Stock.
(7) Amendment. So long as any Series 3 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 3 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 3
Preferred Shares.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
_______________________________, its ________________________________, as of
___________________, 1997.
SYQUEST TECHNOLOGY, INC.
By:_________________________________
Title:
7
<PAGE>
ANNEX B
(Form of Warrant Certificate)
The Warrant represented by this certificate was issued on April 2,
1997 (the "Closing Date") pursuant to the Subscription Agreement dated
March 31, 1997 between SyQuest Technology, Inc. and Fletcher
International Limited. Neither the Warrant represented by this
certificate nor the securities issuable upon exercise hereof have been
registered under the Securities Act of 1933, as amended (the "Act").
The Warrant represented by this certificate may not be exercised by or
on behalf of any U.S. Person (as defined in Regulation S under the Act
("Regulation S")) unless the securities issuable upon exercise hereof
are registered under the Act or an exemption from such registration is
available. The Warrant represented hereby has been issued and sold in
reliance on the exemption from registration provided by Regulation S.
Warrant No. 59
Warrant Certificate
SYQUEST TECHNOLOGY, INC.
This Warrant Certificate certifies that FLETCHER INTERNATIONAL LIMITED
("Fletcher"), or its registered assigns, is the registered holder of one Warrant
(the "Warrant") expiring on April 2, 2004 (the "Termination Date") to purchase
shares of common stock, par value $.001 per share (the "Common Stock"), of
SYQUEST TECHNOLOGY, INC., a Delaware corporation (the "Issuer"). The Warrant
entitles the holder to purchase from the Issuer up to Five Million 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 hereof.
The Warrant represented hereby was issued on April 2, 1997 (the "Closing
Date") pursuant to the Subscription Agreement dated March 31, 1997 (the
"Subscription Agreement"), between the Issuer and Fletcher, and is subject to
the terms and conditions thereof. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings set forth in the Subscription
Agreement. A copy of the Subscription Agreement may be obtained by the
registered holder hereof upon written request to the Issuer.
<PAGE>
The exercise price per Warrant Share (plus transfer taxes, if applicable,
the "Exercise Price") shall be the greater of (a) 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 Stock Market (the "NMS") or (ii) if the NMS 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) 90% 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 the closing sale price per share of Common Stock as reported by the NMS
on the date of initial issuance of this Warrant Certificate. 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 Certificate 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 Chicago, Illinois or at such
other place as agreed to in writing by the Issuer and the holder of this Warrant
Certificate. 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".
The number of Warrant Shares for which this Warrant may be exercised will
increase by 500,000 for each month (prorated daily for partial months) that
either of the following conditions is not satisfied: (i) the Registration
Statement (as defined in the Subscription Agreement) shall be effective not
later than June 1, 1997 (provided that such condition need not be satisfied
until July 1, 1997 if the Securities and Exchange Commission reviews the
Registration Statement), and (ii) on the day after the Issuer's 1997 Annual
Meeting of stockholders, but in any event not later than June 1, 1997, the
Issuer shall have the number of duly authorized shares of Common Stock reserved
for issuance to Fletcher equal to the total number then issuable upon full
exercise of this Warrant and full conversion of the Preferred Shares (as defined
in the Subscription Agreement) and otherwise is able to deliver shares of Common
Stock upon such exercise or conversion.
The Warrant represented hereby shall have the following additional terms:
1. The 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 "Exercisable 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, the 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, the Warrant represented hereby 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 Exercisable
Number. To exercise the Warrant, the registered
2
<PAGE>
holder must, prior to the Termination Date, surrender this Warrant
Certificate 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 the Warrant is then exercised (the "Exercise Amount") and
tender the applicable Warrant Purchase Price. In order to exercise the
Warrant, the registered holder hereof is required to give either (a) a
written certification that it is not a U.S. Person (as defined in
Regulation S) and the Warrant is not being exercised on behalf of a U.S.
Person or (b) a written opinion of counsel to the effect that the Warrant
and the securities deliverable upon exercise hereof have been registered
under the Act or are exempt from registration thereunder. The 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 City of New York and 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 such 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 certificate substantially identical to this Warrant
Certificate, except that such new warrant certificate 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 the Warrant represented hereby. The number of full Warrant
Shares which shall be issuable upon the exercise of the Warrant shall be
computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the 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 the Warrant, the Issuer shall pay an amount in cash equal
to the last per share sale price of the Common Stock (on the NMS 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 NMS 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
3
<PAGE>
the Issuer. If the holder of this Warrant Certificate 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 Chicago, Illinois or at
such other place as agreed to in writing by the Issuer and the holder of
this Warrant Certificate.
5. For so long as the Warrant represented hereby has not been exercised in
full, the Issuer shall at all times prior to the Termination Date reserve
and keep available, free from pre-emptive rights, out of its authorized but
unissued Common Stock, for issuance upon exercise of the Warrant
represented hereby, the maximum number of shares of Common Stock and any
other Capital Stock (as defined below) then so issuable. In furtherance of
the foregoing, 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 5,000,000 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 30 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 Certificate, the registered holder
hereof covenants and agrees with the Issuer not to exercise or transfer the
Warrant or any Warrant Shares except in compliance with the terms of the
Subscription Agreement and this Warrant Certificate.
7. By accepting delivery of this Warrant Certificate, the registered holder
hereof covenants and agrees with the Issuer that the Warrant may not be
sold, assigned, conveyed, encumbered, pledged, hypothecated or in any
other manner disposed of or transferred, in 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 Subscription
Agreement and this Warrant Certificate and (iii) a written certification of
appropriate officers of the transferee that such transferee is not a "U.S.
Person" (as defined in Regulation S) or any person holding on behalf of any
U.S. Person or that such transfer is otherwise exempt from any registration
requirements. If a portion of the 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 written certification
of appropriate officers of the transferee that such transferee is not a
U.S. Person or exercising on behalf of a U.S. Person or that such transfer
is otherwise exempt from any registration requirements in respect of the
number of Warrant Shares transferred with the portion of the Warrant),
provided that any registered holder
4
<PAGE>
of the 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 the Warrant, and, for
purposes of paragraph 10(d), the calculation of the Black-Scholes Warrant
Value shall be made by the registered holder(s) of a majority in interest
of the Warrant.
8. The Issuer will pay all documentary stamp taxes (if any) attributable to
the issuance of Warrant Shares upon the exercise of the Warrant by the
registered holder hereof; provided, however, 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 the Warrant Certificate or any
certificates for Warrant Shares in a name other than that of the registered
holder of the Warrant Certificate surrendered upon the exercise of a
Warrant, and the Issuer shall not be required to issue or deliver the
Warrant Certificate 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 Certificate 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
Certificate, or in lieu of and substitution for the lost, stolen or
destroyed Warrant Certificate, a new Warrant Certificate of like tenor, but
only upon receipt of evidence reasonably satisfactory to the Issuer of such
loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, reasonably satisfactory to the Issuer. Applicants for a
substitute Warrant Certificate 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 in respect of each Warrant Share upon the exercise of the Warrant
and the terms and conditions of the 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;
5
<PAGE>
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 the 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 the
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 12
hereof.
(c) Reserved.
(d) (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 20 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 the Warrant represented hereby by
paying to such holder, upon surrender of this Warrant
Certificate, a cash payment equal to the Black-Scholes value of
the unexercised portion of the Warrant from the effective date of
the Transaction until the Warrant Expiration
6
<PAGE>
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 Subscription Agreement
and hereunder and deliver notice thereof to the registered
holder hereof; and
(b) upon consummation of such Transaction, the 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 the
Warrant computed immediately after the Transaction equal
to the Black-Scholes Warrant Value of the Warrant computed
immediately before the Transaction.
For purposes of this paragraph 10(d), 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 Expiration 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: 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 the 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(d)2.(b) hereof,
7
<PAGE>
(utilizing then-current values for each factor) will be delivered by
Fletcher 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 Fletcher on the preliminary factors. On the Transaction
Date, Fletcher, in consultation with the Issuer, will calculate the
final Black-Scholes Warrant Value utilizing the then-current values
for each factor; such calculation will be utilized to compute the
values called for in paragraph 10(d). 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
NASDAQ 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 the Warrant shall agree on an alternative calculation so
as to satisfy the requirements of this paragraph 10(d).
(e) 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.
(f) 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. Reserved.
12. 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 15 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 12.
In case:
8
<PAGE>
(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 the 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 which 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
his or her address appearing on the Warrant Register (as defined below), at
least 20 days (or 10 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.
13. 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 30 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
9
<PAGE>
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 13 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 Certificate shall not be valid unless signed by the Issuer.
10
<PAGE>
IN WITNESS WHEREOF, SyQuest Technology, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officer.
Dated: April 2, 1997
SYQUEST TECHNOLOGY, INC.
By: _______________________
Name:
Title:
<PAGE>
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., evidenced by the
Warrant Certificate attached hereto, and hereby elects to exercise the Warrant
to purchase _________ Warrant Shares (as defined in such Warrant Certificate)
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 such Warrant Certificate and the Subscription
Agreement (as defined in the Warrant Certificate). The undersigned either (i)
hereby certifies that it is not a "U.S. Person" (as defined in Regulation S
under the Securities Act of 1933, as amended (the "Act")), it is not exercising
this Warrant on behalf of any U.S. Person and the Warrant is not being exercised
within the United States, or (ii) delivers herewith an opinion of counsel to the
effect that the Warrant and the Warrant Shares have been registered under the
Act or are exempt from registration thereunder. This exercise notice is
accompanied by the certificates required to be delivered pursuant to Section 8
of the Subscription Agreement.
In accordance with the terms of the attached Warrant Certificate, the
undersigned requests that certificates for such Warrant Shares be registered in
the name of and delivered to the undersigned at the following address:
________________________
________________________
________________________
By providing the above address, the undersigned confirms that, upon
exercise of the Warrant, the Warrant Shares will not be delivered within the
United States (as defined in Regulation S under the Act) unless (i) in an
offering deemed to meet the definition of "offshore transaction" pursuant to
paragraph (i)(3) of Rule 902 under the Act or (ii) an opinion of counsel has
been provided to the effect that the Warrant and the Warrant Shares have been
registered under the Act or an exemption from such registration is available.
<PAGE>
[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 certificate
substantially identical to the attached Warrant Certificate 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:
<PAGE>
EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
February 28, 1997, by and between SyQuest International Singapore ("Sub"),
SYQUEST TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and A-Corn Enterprises Company,
Ltd, a Tawain corporation ("Purchaser"), with reference to the following facts:
A. Sub has failed to make payments to Purchaser when due for products
manufactured and delivered by Purchaser pursuant to the purchase orders and
related invoices (the "Purchase Orders") listed on Schedule A to this
Agreement in the aggregate amount of $1,712,509.19 (the "Purchaser Order
Amount").
B. In consideration of cancellation of the amounts owed to Purchaser equal to
the sum of the Purchase Order Amount, Parent will issue to Purchaser shares
of the Common Stock of Parent, to repay the amounts due to Purchaser with
such shares, valued at the last sale price (the "Closing Price") as
reported in the Nasdaq National Market on the last trading day preceding
the date of this Agreement (the "Closing Date"), but in no event shall
Parent be obligated to issue hereunder in excess of 550,000 of its Common
Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser the
---------------------
Purchase Order Amount shown on Schedule A attached hereto and
incorporated herein by reference, for products manufactured and
delivered by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. If any such product
shipped to Sub is defective, Sub and Parent shall have the right to
return such product to and request delivery of substitute product from
Purchaser and if such substitute product is not delivered, the
Purchase Order Amount, to the extent not then paid or discharged
hereunder or otherwise, shall be reduced accordingly, or if the
Purchase Order Amount shall then have been paid or otherwise
discharged in full, the cost thereof shall forthwith be refunded by
Purchaser to Sub in cash.
<PAGE>
2. Payment.
-------
(a) Issuance of Shares. Parent shall instruct its transfer agent to
------------------
issue to Purchaser on the Closing Date the number of shares of
Parent's Common Stock equal to the quotient of the Purchase Order
Amount (as it shall then have been reduced under section 1)
divided by the Closing Price, rounded down to the nearest lower
whole number of shares, but in no event shall Parent be required
to issue hereunder in excess of 550,000 shares of its Common
Stock. Such shares are hereinafter called the "Shares".
(b) Payment of Balance. If Parent is unable to issue the full number
------------------
of Shares necessary to repay the Purchase Order Amount due to the
limit on the number of Shares provided in section 2(a), Parent
shall pay the balance due (the "Balance"), to Purchaser as
follows:
(i) If the Balance is not more than $50,000, the full amount
of the Balance shall be paid by Sub to Purchaser within
ten (10) days of the Closing Date, by check or wire
transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or
wire transfer to Purchaser in three equal installments of
principal and interest (at the annual rate of ten
percent), one such installment to be paid on each of ten
(10) days after the Closing Date, the 90th day after the
Closing Date, and the 150th day after the Closing Date;
and
(iii) If the Balance is more than $100,000, the Balance shall be
paid by Sub to Purchaser (with interest at the annual rate
of ten percent) over a period of not less than twelve
months, with the payment schedule to be determined by
mutual agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date, Parent and
------------------------------
Sub shall be deemed to have paid and discharged all or a portion
of the Purchase Order Amount equal to the product of the number
of Shares multiplied by the Closing Price. Purchaser agrees
that, except to the extent of the unpaid Balance, if any, Parent
and Sub shall be deemed to have paid and discharged the Purchase
Order Amount in full on the Closing Date. If, after the Closing
Date, any Balance remains unpaid, Parent and Sub shall be deemed
to have paid and discharged the Purchase Order Amount in full on
payment of the final installment of the Balance.
3. Limitation on Disposition. Purchaser shall not sell, assign or
-------------------------
otherwise transfer any Shares received hereunder until such time as the Shares
become registered pursuant to an
2
<PAGE>
effective registration statement. Once the Shares received hereunder are
registered pursuant to an effective registration statement, Purchaser shall not
sell, assign or otherwise transfer more than fifteen percent (15%) per month of
such Shares originally recieved hereunder.
4. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Singapore and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with this
--------------
Agreement, will be validly issued, fully paid, nonassessable and
free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1996, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1996, its Current Reports on Form 8-K, and its Form S-3 filed
on January 6, 1997, in each case as filed with the Securities and
Exchange Commission (the "SEC").
3
<PAGE>
Such Reports are hereinafter collectively called the "Reports".
To the best knowledge of the current executive officers of
Parent, without having conducted an investigation of the records
of Parent or Sub, as of their respective filing dates (except as
thereafter amended), the Reports complied in all material
respects with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(e) No Contravention. To the best knowledge of the current executive
----------------
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or violation of, any provision of the
certificate of incorporation or by-laws of Parent or Sub; (ii)
constitute, with or without notice or the passage of time or
both, a material breach, violation or default under any order,
writ, injunction, decree, law, statute, rule or regulation,
governmental permit or license of Parent or Sub or to which
either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
5. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in financial and business matters that
Purchaser is capable of evaluating the
4
<PAGE>
merits and risks of its investment in the Shares, is able to bear
the economic risk of such investment and is able to protect the
Purchaser's own interests in connection with this transaction.
Purchaser acknowledges having had access to such information
concerning Parent, Sub and their affiliates as Purchaser deems
necessary to enable Purchaser to make an informed decision
concerning an investment in the Shares. In entering into this
Agreement and consummating the transactions contemplated hereby,
Purchaser is relying solely on its own investigation of Parent,
Sub and their affiliates and their businesses, management,
financial condition, properties and prospects and the merits and
risks of such transactions. Purchaser is aware that the Shares
have not been registered under the Securities Act and the Shares
may not be transferred by Purchaser unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. The Shares shall not be transferred
without registration under the Securities Act or an applicable
exemption therefrom. Purchaser is an accredited investor as that
term is defined in Rule 501(a) of Regulation D promulgated by the
SEC under the Securities Act. Purchaser acknowledges that until
the Shares are sold pursuant to registration under the Securities
Act or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
6. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represents
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to
assign or transfer to any person whomsoever any such claim.
7. Closing.
-------
(a) The issuance of the Shares shall take place as of the date
hereof, and shall be consummated by mail or otherwise in
accordance with arrangements
5
<PAGE>
reasonably acceptable to Parent and Purchaser. Within ten (10)
days of the Closing Date, Parent shall deliver to Purchaser a
certificate representing the Shares and a check for all or part
of the Balance, if any, to be paid on the Closing Date pursuant
to section 2(b) above, in payment, discharge and cancellation of
indebtedness equal to part or all of the Purchase Order Amount as
provided in section 2(c).
8. General Provisions.
------------------
(a) Successors. This Agreement shall bind and inure to the benefit
----------
of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret, construe
-------------
or enforce this Agreement may be instituted and prosecuted only
in a state court located in Alameda County, State of California,
or, if requisite jurisdiction exists, in the United States
District Court for the Northern District of California. This
Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorneys' Fees. In the event of litigation or other proceedings
---------------
in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings shall be entitled to
reimbursement from the opposing party of all reasonable expenses,
including, without limitation, reasonable attorneys' fees and
expenses and expenses of investigation in connection with such
litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
6
<PAGE>
(h) Communications and Notices. All notices and other communications
--------------------------
required or permitted hereunder shall be in writing in the
English language and shall be deemed duly delivered and received
when delivered personally, when transmitted by facsimile if
receipt is acknowledged by the addressee, two days after being
deposited for next-day or second-day delivery with an
internationally recognized overnight or two-day delivery service,
or four days after being deposited as first class mail with the
United States Postal Service, properly addressed as follows:
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4091
With a copy to: Steven O. Gasser, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Facsimile: (415) 421-2922
If to Purchaser: A-Corn Enterprises Company, Ltd.
4 Fl, 429 Kuang Fu S. Road
Taipei, Tawain
R.O.C.
Attention: K C Wang
Facsimile: 886-2-758-7695
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: MICHAEL CLEMENS
------------------------------------
Name: Michael Clemens
Title: Vice-President, Financial
Services and Treasurer
SYQUEST INTERNATIONAL SINGAPORE
By: MICHAEL CLEMENS
------------------------------------
Name: Michael Clemens
Title: Director
A-CORN ENTERPRISES COMPANY, LTD.
By: CARL LEE
------------------------------------
Name: Carl Lee
Title: Authorized Representive and
Signatory
8
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
February 28, 1997, by and among SyQuest Technology, Inc., a Delaware corporation
(the "Company"), and A-Corn Enterprises Company, Ltd, a Tawain corporation (the
"Buyer"), with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the
Buyer, the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee thereof to
whom the Buyer transfers or assigns this Agreement and who agrees to become a
party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its best reasonable
----------------------
efforts to prepare and, on or before one hundred-twenty (120) days after the
date of the issuance
<PAGE>
of the Shares, file with the SEC a Registration Statement or Registration
Statements (as is necessary) on Form S-3 (or, if such form is unavailable for
such a registration, on such other form as is available for such a registration)
(any of which may contain a combined prospectus with other registrations by the
Company), covering the resale of the Registrable Securities.
2.2 Suspension or Termination of S-3 Registration Statement. The Company
-------------------------------------------------------
may suspend or terminate any Registration Statement filed pursuant to the
provisions of section 2.1 if the Company determines in good faith that the
continued effectiveness of such Registration Statement might (a) interfere with
or affect the negotiation or completion of any transaction that is being
contemplated by the Company, (b) involve continuing disclosure obligations that
might not be in the best interest of the Company's shareholders or (c) be
seriously detrimental to the Company; provided that (1) any such suspension or
termination extends for no more than ninety (90) days, (2) the Company
undertakes no more than two (2) such suspensions or terminations in any one
calendar year, (3) the Company re-establishes the effectiveness of such
Registration Statement promptly following the cessation of the cause for such
suspension or termination, but in no event later than the expiration of such 90-
day period and (4) the Registration Period (as hereinafter defined) set forth in
section 3.1(b) shall, if applicable, be extended by the period of each such
suspension or termination.
2.3 Piggy-Back Registrations.
------------------------
(a) If at any time prior to the expiration of the Registration Period the
Company shall file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans or on any form that
does not permit secondary sales), the Company shall send to each Investor who is
entitled to registration rights under this section 2.3 written notice of such
determination and the Company shall use its best reasonable efforts to include
in such Registration Statement (and any qualification under "blue sky" laws or
other compliance), except as set forth in section 2.3(c) and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request or requests made by such Investor and received by the Company within
(10) days after the written notice from the Company is mailed or delivered by
the Company. Such written request may specify all or part of an Investor's
Registrable Securities.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Investors as a part of the written notice given pursuant to section
2.3(a). In such event, the right of any Investor to registration pursuant to
this section 2.3 shall be conditioned upon such Investor's participation in such
underwriting and the inclusion of such Investor's Registrable Securities in the
underwriting to the extent provided herein. All Investors proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein (the "Other Stockholders") distributing their
securities through such underwriting) enter into any
2
<PAGE>
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Notwithstanding any other provisions of this section 2.3, if the
representative of the underwriters advises the Company in writing that marketing
or other factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders requesting registration, and the number of
shares that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter allocated among the Investors and Other Stockholders
requesting inclusion of securities of the Company having registration rights
(the "Other Shares") pro rata on the basis of the number of shares of
Registrable Securities and Other Shares held by such Investors and Other
Stockholders; provided that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to permit the inclusion of Other Shares of
Other Stockholders having registration rights pursuant to any agreement with the
Company entered into prior to the date hereof; and provided further that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, and if any
Investor or Other Stockholder does not request inclusion of the maximum number
of Registrable Securities and Other Shares allocated to him, her or it pursuant
to the foregoing procedure, the remaining portion of his, her or its allocation
shall be reallocated among those requesting Investors and Other Stockholders
whose allocations do not satisfy their requests pro rata on the basis of the
number of Registrable Securities and Other Shares held by such Investors and
Other Stockholders, and this procedure shall be repeated until all of the
Registrable Securities and Other Shares that may be included in the registration
on behalf of the Investors and Other Stockholders shall have been so allocated.
The Company shall not limit the number of Registrable Securities to be included
in a registration pursuant to this Agreement in order to include securities held
by stockholders with no registration rights. If any person does not agree to the
terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or Other Shares excluded or withdrawn from such underwriting shall be withdrawn
from such registration. Nothing in this section 2.3 shall give Investors the
right to require the Company to commence such registration or complete it once
the process has commenced.
(d) No right to registration of Registrable Securities under this section
2.3 shall be construed to limit any registration required under section 2.1.
The obligations of the Company under this section 2.3 may be waived by Investors
holding a majority of the Registrable Securities.
2.4 Eligibility for Form S-3. The Company represents and warrants that it
------------------------
meets the requirements for the use of Form S-3 for registration of the sale by
the Buyer and any other Investor of the Registrable Securities, and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner to maintain such eligibility for the use of Form S-3. If Form S-3
is not available for sale by the Investors of the Registrable
3
<PAGE>
Securities, upon request of the Investors the Company shall register the sale on
another appropriate form. The Company shall have a reasonable period of time to
complete such registration.
2.5 Market Stand-Off Agreement. The Investors agree, without consent of
--------------------------
managing underwriter(s), not to effect any sale or distribution of Registrable
Securities (other than in connection with the Investors' own registration
pursuant to section 2.3), including a disposition pursuant to Rule 144 of the
1933 Act, during the period beginning ten (10) days prior to the Company's good
faith estimate of the filing of, and ending on the date ninety (90) days after
the effective date of, a Company - initiated registration; provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best reasonable
-----------------------
efforts to cause such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after the filing thereof and,
subject to the provisions of section 2.2, keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earliest of (a) the date
as of which the Investors may sell all of the Registrable Securities without
registration pursuant to Rule 144 promulgated under the 1933 Act, (b) the second
anniversary of the date hereof (subject to extension in accordance with the
provisions of section 2.2), and (c) the date on which the Investors shall have
sold all the Registrable Securities (the "Registration Period"). Such
Registration Statement(s) (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file with
--------------------------
the SEC such amendments (including post-effective amendments) and supplements to
the Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s) as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each Investor whose
-------------------
Registrable Securities are included in the Registration Statement(s) and its
legal counsel (a) promptly after the same is prepared and publicly distributed,
filed with the SEC or received by the Company, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and (b) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
4
<PAGE>
supplements thereto and such other documents as such Investor may reasonably
request to facilitate the disposition of the Registrable Securities owned by
such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Corrections. As promptly as practicable after becoming aware of such
-----------
event, the Company shall notify each Investor selling Registrable Securities of
the happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
incomplete, and use its best reasonable efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.
3.6 Stop Orders. Except as otherwise permitted by this Agreement, the
-----------
Company shall use its best reasonable efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, use its best reasonable efforts to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
3.7 Selling Stockholders' Counsel. The Company shall permit a single firm
-----------------------------
of counsel, designated as selling stockholders' counsel by the Investors who
hold a majority of the Registrable Securities being sold and compensated by such
Investors, to review and comment on the Registration Statement(s) (and all
amendments and supplements thereto but only
5
<PAGE>
if they directly relate to such Investors) a reasonable period prior to their
filing with the SEC, and shall not file any document in a form to which such
counsel reasonably objects. Failure to object in writing within three days shall
be deemed to be an approval of the Registration Statement (s).
3.8 Due Diligence. The Company shall make available for inspection by one
-------------
firm of attorneys and one firm of accountants or other agents retained by the
Investors at their expense (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by such Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information that any Inspector may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.9 Listing. The Company shall use its best reasonable efforts either to
-------
(a) cause all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (b) secure designation and quotation of all
the Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or, if, despite the Company's best efforts to satisfy the
preceding clause (a) or (b), the Company is unsuccessful in satisfying the
preceding clause (a) or (b), to secure the inclusion for quotation on the Nasdaq
SmallCap Market or, on the Nasdaq Electronic Bulletin Board.
3.10 Certificates. The Company shall cooperate with the Investors who
------------
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter
6
<PAGE>
or underwriters, the Investors may reasonably request and registered in such
names as the managing underwriter or underwriters, if any, or the Investors may
request.
3.11 Other Action. The Company shall take all other reasonable actions
------------
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of an Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Corrections. Each Investor agrees that, on receipt of any notice from
-----------
the Company of the happening of any event of the kind described in section 2.2,
3.5 or 3.6, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.5 or 3.6 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.4 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder unless such Investor (a) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel and other advisers for any Investor (collectively,
"Selling Expenses").
7
<PAGE>
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than Selling
------------------------
Expenses, incurred in connection with registrations, filings or qualifications
pursuant to sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify, hold harmless and defend each Investor, each director and officer of
and person, if any, who controls such Investor within the meaning of the 1933
Act or the 1934 Act, and each underwriter (as defined in the 1933 Act) for the
Investors, and each director and officer of, and each person, if any, who
controls, such underwriter within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (c) any violation or alleged violation caused by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by, or caused by, any Indemnified Person or
underwriter for such Indemnified Person in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to section
3.3; (2) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to section 3.3; (3) shall
8
<PAGE>
not be available to the extent that such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company; and (4) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to section 9.
6.2 By the Investors. In connection with any Registration Statement in
----------------
which an Investor is participating, each such Investor agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in section 6.1, the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act, any underwriter and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based on any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance on and in conformity with written information furnished to the Company
by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based on any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided that the
indemnity agreement in this section 6.2 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld; and
provided further that the Investor shall be liable under this section 6.2 for
only such amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
section 9. Notwithstanding anything to the contrary herein, the indemnification
agreement in this section 6.2 with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities from
---------
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including
9
<PAGE>
any governmental action), such Indemnified Person or Indemnified Party shall, if
a Claim in respect thereof is to be made against any indemnifying party under
this section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided
that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority of the
Registrable Securities included in the Registration Statement to which the Claim
relates. The failure to deliver written notice to the indemnifying party within
a reasonable time after the threat or commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as those
-----------
terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and other
-------
documents required of the Company under the 1933 Act and the 1934 Act so long as
the
10
<PAGE>
Company remains subject to such requirements, and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor owns
------------
Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
---------------------------------
register securities granted to an Investor by the Company pursuant to section 2
may not be transferred or assigned by an Investor except in a private sale to a
transferee or assignee of not less than 100,000 shares of the Registrable
Securities and: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to become a party
to and be bound by this Agreement, (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (f) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D under the 1933 Act, and (g) if the
assignment occurs after the date of effectiveness of the Registration Statement
required to be filed pursuant to section 2.1, the transferee or assignee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment. Any such transferee or assignee shall be
deemed to be an Investor hereunder, in the place and stead of the transferring
or assigning Investor with respect to the Registrable Securities so transferred
and assigned, from and after the effective date of such permitted transfer,
assignment and assumption.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of Registrable
------
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act on the basis of
11
<PAGE>
instructions, notices or elections received from the registered owner of such
Registrable Securities.
11.2 Notices. Any notices or other communications required or permitted
-------
to be given under this Agreement shall be sent by registered or certified mail,
return receipt requested, or delivered personally or by facsimile or courier and
shall be effective five days after being placed in the mail, if mailed, or on
receipt, if delivered personally or by courier or facsimile, in each case
properly addressed to the party to receive such notice. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4091
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Steven O. Gasser, Esq.
If to the Buyer, at the addresses on the signature page of this Agreement.
Each party shall provide notice to the other party of any change in
address.
11.3 Governing Law. This Agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
12
<PAGE>
11.6 Successors and Assigns. Subject to section 9, this Agreement shall
----------------------
inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
SYQUEST TECHNOLOGY, INC. A-CORN ENTERPRISES COMPANY, LTD.
By: /s/ MICHAEL CLEMENS By: /s/ CARL LEE
--------------------------- -----------------------------
Name: Michael Clemens Name: Carl Lee
Its: Vice-President, Financial Its: Authorized Representive and
Services and Treasurer Signatory
Address:
A-Corn Enterprises Company, Ltd.
4 Fl, 429 Kuang Fu S. Road
Taipei, Tawain
R.O.C.
Attention: K C Wang
Facsimile: 886-2-758-7695
13
<PAGE>
EXHIBIT 10.3
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
19 March 1997, by and between SyQuest Technology International ("Sub"), SYQUEST
TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and Seksun Precision Engineering
Limited, a Singapore corporation ("Purchaser"), with reference to the following
facts:
A. Sub has failed to make payments to Purchaser when due for products
manufactured and delivered by Purchaser pursuant to the purchase
orders and related invoices (the "Purchase Orders") listed on Schedule
A to this Agreement in the aggregate amount of $363,764.93 (the
"Purchaser Order Amount").
B. In consideration of cancellation of the amounts owed to Purchaser
equal to the sum of the Purchase Order Amount, Parent will issue to
Purchaser shares of the Common Stock of Parent, to repay the amounts
due to Purchaser with such shares, valued at the last sale price (the
"Closing Price") as reported in the Nasdaq National Market on the last
trading day preceding the date of this Agreement (the "Closing Date"),
but in no event shall Parent be obligated to issue hereunder in excess
of 150,000 of its Common Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser
herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser
---------------------
the Purchase Order Amount shown on Schedule A attached hereto and
incorporated herein by reference, for products manufactured and
delivered by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. If any such product
shipped to Sub is defective, Sub and Parent shall have the right to
return such product to and request delivery of substitute product from
Purchaser and if such substitute product is not delivered, the
Purchase Order Amount, to the extent not then paid or discharged
hereunder or otherwise, shall be reduced accordingly, or if the
Purchase Order Amount shall then have been paid or otherwise
discharged in full, the cost thereof shall forthwith be refunded by
Purchaser to Sub in cash.
<PAGE>
2. Payment.
-------
(a) Issuance of Shares. Parent shall instruct its transfer
------------------
agent to issue to Purchaser on the Closing Date the number of
shares of Parent's Common Stock equal to the quotient of the
Purchase Order Amount (as it shall then have been reduced under
section 1) divided by the Closing Price, rounded down to the
nearest lower whole number of shares, but in no event shall
Parent be required to issue hereunder in excess of 150,000 shares
of its Common Stock. Such shares are hereinafter called the
"Shares".
(b) Payment of Balance. If Parent is unable to issue the full
------------------
number of Shares necessary to repay the Purchase Order Amount due
to the limit on the number of Shares provided in section 2(a),
Parent shall pay the balance due (the "Balance"), to Purchaser as
follows:
(i) If the Balance is not more than $50,000, the full
amount of the Balance shall be paid by Sub to Purchaser
within ten (10) days of the Closing Date, by check or wire
transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or
wire transfer to Purchaser in three equal installments of
principal and interest (at the annual rate of ten
percent), one such installment to be paid on each of ten
(10) days after the Closing Date, the 90th day after the
Closing Date, and the 150th day after the Closing Date;
and
(iii) If the Balance is more than $100,000, the Balance
shall be paid by Sub to Purchaser (with interest at the
annual rate of ten percent) over a period of not less than
twelve months, with the payment schedule to be determined
by mutual agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date,
------------------------------
Parent and Sub shall be deemed to have paid and discharged all or
a portion of the Purchase Order Amount equal to the product of
the number of Shares multiplied by the Closing Price. Purchaser
agrees that, except to the extent of the unpaid Balance, if any,
Parent and Sub shall be deemed to have paid and discharged the
Purchase Order Amount in full on the Closing Date. If, after the
Closing Date, any Balance remains unpaid, Parent and Sub shall be
deemed to have paid and discharged the Purchase Order Amount in
full on payment of the final installment of the Balance.
2
<PAGE>
3. Limitation on Disposition. Purchaser shall not sell, assign or
-------------------------
otherwise transfer any Shares received hereunder until such time as the Shares
become registered pursuant to an effective registration statement. Once the
Shares received hereunder are registered pursuant to an effective registration
statement, Purchaser shall not sell, assign or otherwise transfer more than
fifteen percent (15%) per month of such Shares originally recieved hereunder.
4. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Singapore and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on
--------------------------------
the part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with
--------------
this Agreement, will be validly issued, fully paid, nonassessable
and free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year
3
<PAGE>
ended September 30, 1996, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1996, its Current Reports on Form 8-K, and its Form S-3 filed
on January 6, 1997, in each case as filed with the Securities and
Exchange Commission (the "SEC"). Such Reports are hereinafter
collectively called the "Reports". To the best knowledge of the
current executive officers of Parent, without having conducted an
investigation of the records of Parent or Sub, as of their
respective filing dates (except as thereafter amended), the
Reports complied in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(e) No Contravention. To the best knowledge of the current
----------------
executive officers of Parent, without having conducted an
investigation of the records of Parent or Sub, neither the
execution and delivery of this Agreement by Parent or Sub nor the
consummation of the transactions contemplated hereby will (i)
conflict with, or result in any breach or violation of, any
provision of the certificate of incorporation or by-laws of
Parent or Sub; (ii) constitute, with or without notice or the
passage of time or both, a material breach, violation or default
under any order, writ, injunction, decree, law, statute, rule or
regulation, governmental permit or license of Parent or Sub or to
which either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
5. Representations and Warranties of Purchaser. Purchaser
-------------------------------------------
represents and warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to
---------
execute and deliver this Agreement and the Registration Rights
Agreement and to perform its obligations hereunder and
thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
4
<PAGE>
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in financial and business matters that
Purchaser is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of
such investment and is able to protect the Purchaser's own
interests in connection with this transaction. Purchaser
acknowledges having had access to such information concerning
Parent, Sub and their affiliates as Purchaser deems necessary to
enable Purchaser to make an informed decision concerning an
investment in the Shares. In entering into this Agreement and
consummating the transactions contemplated hereby, Purchaser is
relying solely on its own investigation of Parent, Sub and their
affiliates and their businesses, management, financial condition,
properties and prospects and the merits and risks of such
transactions. Purchaser is aware that the Shares have not been
registered under the Securities Act and the Shares may not be
transferred by Purchaser unless they are subsequently registered
under the Securities Act or an exemption from such registration
is available. The Shares shall not be transferred without
registration under the Securities Act or an applicable exemption
therefrom. Purchaser is an accredited investor as that term is
defined in Rule 501(a) of Regulation D promulgated by the SEC
under the Securities Act. Purchaser acknowledges that until the
Shares are sold pursuant to registration under the Securities Act
or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
6. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represents
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore
5
<PAGE>
voluntarily, by operation of law or otherwise, assigned or transferred
or purported to assign or transfer to any person whomsoever any such
claim.
7. Closing.
-------
(a) The issuance of the Shares shall take place as of the date
hereof, and shall be consummated by mail or otherwise in
accordance with arrangements reasonably acceptable to Parent and
Purchaser. Within ten (10) days of the Closing Date, Parent shall
deliver to Purchaser a certificate representing the Shares and a
check for all or part of the Balance, if any, to be paid on the
Closing Date pursuant to section 2(b) above, in payment,
discharge and cancellation of indebtedness equal to part or all
of the Purchase Order Amount as provided in section 2(c).
8. General Provisions.
------------------
(a) Successors. This Agreement shall bind and inure to the
----------
benefit of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret,
-------------
construe or enforce this Agreement may be instituted and
prosecuted only in a state court located in Alameda County, State
of California, or, if requisite jurisdiction exists, in the
United States District Court for the Northern District of
California. This Agreement shall be governed by and interpreted
and construed in accordance with the laws of the State of
California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver,
----------------------------------
modification or amendment of this Agreement shall be enforceable
unless in writing and executed by the party against whom such
waiver, modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held
------------
to be illegal, invalid or unenforceable, the legality, validity
and enforceability of the remaining provisions shall not be
affected or impaired.
6
<PAGE>
(f) Attorneys' Fees. In the event of litigation or other
---------------
proceedings in connection with or related to this Agreement, the
prevailing party in such litigation or proceedings shall be
entitled to reimbursement from the opposing party of all
reasonable expenses, including, without limitation, reasonable
attorneys' fees and expenses and expenses of investigation in
connection with such litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All notices and other
--------------------------
communications required or permitted hereunder shall be in
writing in the English language and shall be deemed duly
delivered and received when delivered personally, when
transmitted by facsimile if receipt is acknowledged by the
addressee, two days after being deposited for next-day or second-
day delivery with an internationally recognized overnight or two-
day delivery service, or four days after being deposited as first
class mail with the United States Postal Service, properly
addressed as follows:
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4091
With a copy to: Steven O. Gasser, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Facsimile: (415) 421-2922
If to Purchaser: _________________________________
_________________________________
_________________________________
_________________________________
Attention: ______________________
Facsimile: ______________________
Telephone: ______________________
7
<PAGE>
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ MICHAEL CLEMENS
--------------------------------------
Name: Michael Clemens
Title: Vice-President, Financial
Services and Treasurer
SYQUEST TECHNOLOGY INTERNATIONAL
By: /s/ MICHAEL CLEMENS
--------------------------------------
Name: Michael Clemens
Title: Director
_________________________________________
By: /s/ JOSEPH LAM
--------------------------------------
Name: Joseph Lam
Title: Finance Director
9
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of 19
March 1997, by and among SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and Seksun Precision Engineering Limited, a Singapore corporation
(the "Buyer"), with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the
Buyer, the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
-----------
herein have the respective meanings respectively ascribed to them in the
Securities Purchase Agreement. As used in this Agreement, the following terms
have the following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer transfers or assigns this Agreement and who agrees to
become a party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means
a registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
<PAGE>
2.1 Mandatory Registration. The Company shall use its best
----------------------
reasonable efforts to prepare and, on or before one hundred-twenty (120) days
after the date of the issuance of the Shares, file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration) (any of which may contain a combined prospectus with
other registrations by the Company), covering the resale of the Registrable
Securities.
2.2 Suspension or Termination of S-3 Registration Statement.
-------------------------------------------------------
The Company may suspend or terminate any Registration Statement filed pursuant
to the provisions of section 2.1 if the Company determines in good faith that
the continued effectiveness of such Registration Statement might (a) interfere
with or affect the negotiation or completion of any transaction that is being
contemplated by the Company, (b) involve continuing disclosure obligations that
might not be in the best interest of the Company's shareholders or (c) be
seriously detrimental to the Company; provided that (1) any such suspension or
termination extends for no more than ninety (90) days, (2) the Company
undertakes no more than two (2) such suspensions or terminations in any one
calendar year, (3) the Company re-establishes the effectiveness of such
Registration Statement promptly following the cessation of the cause for such
suspension or termination, but in no event later than the expiration of such 90-
day period and (4) the Registration Period (as hereinafter defined) set forth in
section 3.1(b) shall, if applicable, be extended by the period of each such
suspension or termination.
2.3 Piggy-Back Registrations.
------------------------
(a) If at any time prior to the expiration of the
Registration Period the Company shall file with the SEC a Registration Statement
relating to an offering for its own account or the account of others under the
1933 Act of any of its equity securities (other than on Form S-4 or Form S-8 or
their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans or on
any form that does not permit secondary sales), the Company shall send to each
Investor who is entitled to registration rights under this section 2.3 written
notice of such determination and the Company shall use its best reasonable
efforts to include in such Registration Statement (and any qualification under
"blue sky" laws or other compliance), except as set forth in section 2.3(c) and
in any underwriting involved therein, all of the Registrable Securities
specified in a written request or requests made by such Investor and received by
the Company within (10) days after the written notice from the Company is mailed
or delivered by the Company. Such written request may specify all or part of an
Investor's Registrable Securities.
2
<PAGE>
(b) If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Investors as a part of the written notice given pursuant to
section 2.3(a). In such event, the right of any Investor to registration
pursuant to this section 2.3 shall be conditioned upon such Investor's
participation in such underwriting and the inclusion of such Investor's
Registrable Securities in the underwriting to the extent provided herein. All
Investors proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein (the "Other
Stockholders") distributing their securities through such underwriting) enter
into any underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Notwithstanding any other provisions of this section
2.3, if the representative of the underwriters advises the Company in writing
that marketing or other factors require a limitation on the number of shares to
be underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting.
The Company shall so advise all holders requesting registration, and the number
of shares that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter allocated among the Investors and Other Stockholders
requesting inclusion of securities of the Company having registration rights
(the "Other Shares") pro rata on the basis of the number of shares of
Registrable Securities and Other Shares held by such Investors and Other
Stockholders; provided that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to permit the inclusion of Other Shares of
Other Stockholders having registration rights pursuant to any agreement with the
Company entered into prior to the date hereof; and provided further that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, and if any
Investor or Other Stockholder does not request inclusion of the maximum number
of Registrable Securities and Other Shares allocated to him, her or it pursuant
to the foregoing procedure, the remaining portion of his, her or its allocation
shall be reallocated among those requesting Investors and Other Stockholders
whose allocations do not satisfy their requests pro rata on the basis of the
number of Registrable Securities and Other Shares held by such Investors and
Other Stockholders, and this procedure shall be repeated until all of the
Registrable Securities and Other Shares that may be included in the registration
on behalf of the Investors and Other Stockholders shall have been so allocated.
The Company shall not limit the number of Registrable Securities to be included
in a registration pursuant to this Agreement in order to include securities held
by stockholders with no registration rights. If any person does not agree to
the terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or Other Shares excluded or withdrawn from such underwriting shall be withdrawn
from such
3
<PAGE>
registration. Nothing in this section 2.3 shall give Investors the right to
require the Company to commence such registration or complete it once the
process has commenced.
(d) No right to registration of Registrable Securities
under this section 2.3 shall be construed to limit any registration required
under section 2.1. The obligations of the Company under this section 2.3 may be
waived by Investors holding a majority of the Registrable Securities.
2.4 Eligibility for Form S-3. The Company represents and
------------------------
warrants that it meets the requirements for the use of Form S-3 for registration
of the sale by the Buyer and any other Investor of the Registrable Securities,
and the Company shall file all reports required to be filed by the Company with
the SEC in a timely manner to maintain such eligibility for the use of Form S-3.
If Form S-3 is not available for sale by the Investors of the Registrable
Securities, upon request of the Investors the Company shall register the sale on
another appropriate form. The Company shall have a reasonable period of time to
complete such registration.
2.5 Market Stand-Off Agreement. The Investors agree, without
--------------------------
consent of managing underwriter(s), not to effect any sale or distribution of
Registrable Securities (other than in connection with the Investors' own
registration pursuant to section 2.3), including a disposition pursuant to Rule
144 of the 1933 Act, during the period beginning ten (10) days prior to the
Company's good faith estimate of the filing of, and ending on the date ninety
(90) days after the effective date of, a Company-initiated registration;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best
-----------------------
reasonable efforts to cause such Registration Statement(s) relating to
Registrable Securities to become effective as soon as possible after the filing
thereof and, subject to the provisions of section 2.2, keep the Registration
Statement(s) effective pursuant to Rule 415 at all times until the earliest of
(a) the date as of which the Investors may sell all of the Registrable
Securities without registration pursuant to Rule 144 promulgated under the 1933
Act, (b) the second anniversary of the date hereof (subject to extension in
accordance with the provisions of section 2.2), and (c) the date on which the
Investors shall have sold all the Registrable Securities (the "Registration
Period"). Such Registration Statement(s) (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
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<PAGE>
3.2 Amendments and Supplements. The Company shall prepare and
--------------------------
file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s) as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each
-------------------
Investor whose Registrable Securities are included in the Registration
Statement(s) and its legal counsel (a) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one copy of
the Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto, and (b) such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request to facilitate the disposition of the Registrable Securities
owned by such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to
-------------
(a) register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Corrections. As promptly as practicable after becoming
-----------
aware of such event, the Company shall notify each Investor selling Registrable
Securities of the happening of any event, of which the Company has knowledge, as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue
5
<PAGE>
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or incomplete, and use
its best reasonable efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
3.6 Stop Orders. Except as otherwise permitted by this
-----------
Agreement, the Company shall use its best reasonable efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, use its best reasonable
efforts to obtain the withdrawal of such order at the earliest possible moment
and to notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance of such order and the resolution thereof.
3.7 Selling Stockholders' Counsel. The Company shall permit a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold and
compensated by such Investors, to review and comment on the Registration
Statement(s) (and all amendments and supplements thereto but only if they
directly relate to such Investors) a reasonable period prior to their filing
with the SEC, and shall not file any document in a form to which such counsel
reasonably objects. Failure to object in writing within three days shall be
deemed to be an approval of the Registration Statement (s).
3.8 Due Diligence. The Company shall make available for
-------------
inspection by one firm of attorneys and one firm of accountants or other agents
retained by the Investors at their expense (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by such Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information that any Inspector may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and
6
<PAGE>
implementing the confidentiality obligations of this section 3.10. Each
Investor agrees that it shall, on learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow and cooperate
with the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
3.9 Listing. The Company shall use its best reasonable
-------
efforts either to (a) cause all the Registrable Securities covered by a
Registration Statement to be listed on each national securities exchange on
which the Common Stock is then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(b) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (a) or (b), the Company
is unsuccessful in satisfying the preceding clause (a) or (b), to secure the
inclusion for quotation on the Nasdaq SmallCap Market or, on the Nasdaq
Electronic Bulletin Board.
3.10 Certificates. The Company shall cooperate with the
------------
Investors who hold Registrable Securities being offered and, to the extent
applicable, any managing underwriter or underwriters, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the managing underwriter or underwriters, if any, or, if
there is no managing underwriter or underwriters, the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request.
3.11 Other Action. The Company shall take all other reasonable
------------
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such
7
<PAGE>
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance
-----------
of the Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Corrections. Each Investor agrees that, on receipt of any
-----------
notice from the Company of the happening of any event of the kind described in
section 2.2, 3.5 or 3.6, such Investor will immediately discontinue disposition
of Registrable Securities pursuant to the Registration Statement(s) covering
such Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.5 or 3.6 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.4 Underwriting Arrangements. No Investor may participate in
-------------------------
any underwritten registration hereunder unless such Investor (a) agrees to sell
such Investor's Registrable Securities on the basis provided in any underwriting
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel and other advisers for any Investor (collectively,
"Selling Expenses").
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
------------------------
Selling Expenses, incurred in connection with registrations, filings or
qualifications pursuant to sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the
--------------
Company will indemnify, hold harmless and defend each Investor, each director
and officer of and person, if any, who controls such Investor within the meaning
of the 1933 Act or the 1934 Act, and each underwriter (as defined in the 1933
Act) for the Investors, and
8
<PAGE>
each director and officer of, and each person, if any, who controls, such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) (collectively, "Claims") to which any of them may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based on: (a)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (c) any violation or alleged violation caused by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by, or caused by, any Indemnified Person or
underwriter for such Indemnified Person in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to section
3.3; (2) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to section 3.3; (3) shall not be
available to the extent that such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (4) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to section 9.
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<PAGE>
6.2 By the Investors. In connection with any Registration
----------------
Statement in which an Investor is participating, each such Investor agrees to
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in section 6.1, the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based on
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance on and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement or to the extent such Claim is based on any
violation or alleged violation by the Investor of the 1933 Act, 1934 Act or any
other law; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided that the indemnity agreement in this section 6.2 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; and provided further that the Investor shall be liable
under this section 6.2 for only such amount of a Claim as does not exceed the
net proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to section 9. Notwithstanding anything to the
contrary herein, the indemnification agreement in this section 6.2 with respect
to any preliminary prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive
---------
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so furnished
in writing expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified
----------
Person or Indemnified Party under this section 6 of notice of the commencement
of any action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the
10
<PAGE>
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided that an Indemnified Person
or Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Company shall pay
reasonable fees for only one separate legal counsel for the Investors, and such
legal counsel shall be selected by the Investors holding a majority of the
Registrable Securities included in the Registration Statement to which the Claim
relates. The failure to deliver written notice to the indemnifying party within
a reasonable time after the threat or commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to
--------------------------
the Investors the benefits of Rule 144 under the 1933 Act or any other similar
rule or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available,
-----------
as those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports
-------
and other documents required of the Company under the 1933 Act and the 1934 Act
so long as
11
<PAGE>
the Company remains subject to such requirements, and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
8.3 Confirmation. Furnish to each Investor so long as such
------------
Investor owns Registrable Securities, promptly on request, (a) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (b) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (c) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
---------------------------------
Company to register securities granted to an Investor by the Company pursuant to
section 2 may not be transferred or assigned by an Investor except in a private
sale to a transferee or assignee of not less than 100,000 shares of the
Registrable Securities and: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(d) at or before the time the Company receives the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to become a party to and be bound by this Agreement, (e) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement, (f) such transferee shall be an "accredited
investor" as that term defined in Rule 501 of Regulation D under the 1933 Act,
and (g) if the assignment occurs after the date of effectiveness of the
Registration Statement required to be filed pursuant to section 2.1, the
transferee or assignee agrees to pay all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment. Any such
transferee or assignee shall be deemed to be an Investor hereunder, in the place
and stead of the transferring or assigning Investor with respect to the
Registrable Securities so transferred and assigned, from and after the effective
date of such permitted transfer, assignment and assumption.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended
--------------------------------
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
12
<PAGE>
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or
-------
permitted to be given under this Agreement shall be sent by registered or
certified mail, return receipt requested, or delivered personally or by
facsimile or courier and shall be effective five days after being placed in the
mail, if mailed, or on receipt, if delivered personally or by courier or
facsimile, in each case properly addressed to the party to receive such notice.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4091
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Steven O. Gasser, Esq.
If to the Buyer, at the addresses on the signature page of this
Agreement.
Each party shall provide notice to the other party of any change in
address.
11.3 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not
13
<PAGE>
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities
----------------
Purchase Agreement together constitute the entire agreement of the parties and
supersede all prior or contemporaneous negotiations, correspondence,
understandings and agreements, written or oral, regarding the subject matter
hereof.
11.6 Successors and Assigns. Subject to section 9, this
----------------------
Agreement shall inure to the benefit of and bind the parties hereto and their
respective permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are
--------------------
for convenience of reference only and are not part of this Agreement.
References to sections herein refer to sections of this Agreement, except as
otherwise indicated. The singular includes the plural and vice versa, as the
context may require.
11.8 Counterparts. This Agreement may be executed in two or
------------
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
SYQUEST TECHNOLOGY, INC.
By: /s/ MICHAEL CLEMENS
-------------------------------
Name: Michael Clemens
Its: Vice-President, Financial
Services and Treasurer
14
<PAGE>
BUYER:
- ---------------------------------------
By: /s/ JOSEPH LAM
------------------------------------
Name: Joseph Lam
Its: Finance Director
Address:
- ---------------------------------------
SEKSUN PRECISION ENGINEERING LIMITED
- ---------------------------------------
5 ANG MO KIO STREET 64
- ---------------------------------------
ANG MO KIO INDUSTRIAL PARK 3
- ---------------------------------------
SINGAPORE 569085
- ---------------------------------------
Attention: JOSEPH LAM
-----------------------------
Facsimile: 65-4816065
----------------------------
15
<PAGE>
EXHIBIT 10.4
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
26 March 1997, by and between SyQuest Technology International ("Sub"), SYQUEST
TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and Tongkah Electronics Sdn.Bhd., a
Malaysia corporation ("Purchaser"), with reference to the following facts:
A. Sub has failed to make payments to Purchaser when due for products
manufactured and delivered by Purchaser pursuant to the purchase
orders and related invoices (the "Purchase Orders") listed on Schedule
A to this Agreement in the aggregate amount of $8,767,184.95 (the
"Purchaser Order Amount").
B. In consideration of cancellation of the amounts owed to Purchaser
equal to the sum of the Purchase Order Amount, Parent will issue to
Purchaser shares of the Common Stock of Parent, to repay the amounts
due to Purchaser with such shares, valued at the last sale price (the
"Closing Price") as reported in the Nasdaq National Market on the last
trading day preceding the date of this Agreement (the "Closing Date"),
but in no event shall Parent be obligated to issue hereunder in excess
of 3,506,874 of its Common Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser
herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser
---------------------
the Purchase Order Amount shown on Schedule A attached hereto and
incorporated herein by reference, for products manufactured and
delivered by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. If any such product
shipped to Sub is defective, Sub and Parent shall have the right to
return such product to and request delivery of substitute product from
Purchaser and if such substitute product is not delivered, the
Purchase Order Amount, to the extent not then paid or discharged
hereunder or otherwise, shall be reduced accordingly, or if the
Purchase Order Amount shall then have been paid or otherwise
discharged in full, the cost thereof shall forthwith be refunded by
Purchaser to Sub in cash.
<PAGE>
2. Payment.
-------
(a) Issuance of Shares. Parent shall instruct its transfer
------------------
agent to issue to Purchaser on the Closing Date the number of
shares of Parent's Common Stock equal to the quotient of the
Purchase Order Amount (as it shall then have been reduced under
section 1) divided by the Closing Price, rounded down to the
nearest lower whole number of shares, but in no event shall
Parent be required to issue hereunder in excess of 3,506,874
shares of its Common Stock. Such shares are hereinafter called
the "Shares".
(b) Payment of Balance. If Parent is unable to issue the full
------------------
number of Shares necessary to repay the Purchase Order Amount due
to the limit on the number of Shares provided in section 2(a),
Parent shall pay the balance due (the "Balance"), to Purchaser as
follows:
(i) If the Balance is not more than $50,000, the full
amount of the Balance shall be paid by Sub to Purchaser
within ten (10) days of the Closing Date, by check or wire
transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or
wire transfer to Purchaser in three equal installments of
principal and interest (at the annual rate of ten
percent), one such installment to be paid on each of ten
(10) days after the Closing Date, the 90th day after the
Closing Date, and the 150th day after the Closing Date;
and
(iii) If the Balance is more than $100,000, the Balance
shall be paid by Sub to Purchaser (with interest at the
annual rate of ten percent) over a period of not less than
twelve months, with the payment schedule to be determined
by mutual agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date,
------------------------------
Parent and Sub shall be deemed to have paid and discharged all or
a portion of the Purchase Order Amount equal to the product of
the number of Shares multiplied by the Closing Price. Purchaser
agrees that, except to the extent of the unpaid Balance, if any,
Parent and Sub shall be deemed to have paid and discharged the
Purchase Order Amount in full on the Closing Date. If, after the
Closing Date, any Balance remains unpaid, Parent and Sub shall be
deemed to have paid and discharged the Purchase Order Amount in
full on payment of the final installment of the Balance.
2
<PAGE>
3. Limitation on Disposition. Purchaser shall not sell, assign or
-------------------------
otherwise transfer any Shares received hereunder until such time as the Shares
become registered pursuant to an effective registration statement. Once the
Shares received hereunder are registered pursuant to an effective registration
statement, Purchaser shall not sell, assign or otherwise transfer more than
fifteen percent (15%) per month of such Shares originally received hereunder.
4. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Singapore and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on
--------------------------------
the part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with
--------------
this Agreement, will be validly issued, fully paid, nonassessable
and free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year
3
<PAGE>
ended September 30, 1996, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1996, its Current Reports on Form 8-K, and its Form S-3 filed
on January 6, 1997, in each case as filed with the Securities and
Exchange Commission (the "SEC"). Such Reports are hereinafter
collectively called the "Reports". To the best knowledge of the
current executive officers of Parent, without having conducted an
investigation of the records of Parent or Sub, as of their
respective filing dates (except as thereafter amended), the
Reports complied in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(e) No Contravention. To the best knowledge of the current
----------------
executive officers of Parent, without having conducted an
investigation of the records of Parent or Sub, neither the
execution and delivery of this Agreement by Parent or Sub nor the
consummation of the transactions contemplated hereby will (i)
conflict with, or result in any breach or violation of, any
provision of the certificate of incorporation or by-laws of
Parent or Sub; (ii) constitute, with or without notice or the
passage of time or both, a material breach, violation or default
under any order, writ, injunction, decree, law, statute, rule or
regulation, governmental permit or license of Parent or Sub or to
which either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
5. Representations and Warranties of Purchaser. Purchaser
-------------------------------------------
represents and warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to
---------
execute and deliver this Agreement and the Registration Rights
Agreement and to perform its obligations hereunder and
thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
4
<PAGE>
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in financial and business matters that
Purchaser is capable of evaluating the merits and risks of its
investment in the Shares, is able to bear the economic risk of
such investment and is able to protect the Purchaser's own
interests in connection with this transaction. Purchaser
acknowledges having had access to such information concerning
Parent, Sub and their affiliates as Purchaser deems necessary to
enable Purchaser to make an informed decision concerning an
investment in the Shares. In entering into this Agreement and
consummating the transactions contemplated hereby, Purchaser is
relying solely on its own investigation of Parent, Sub and their
affiliates and their businesses, management, financial condition,
properties and prospects and the merits and risks of such
transactions. Purchaser is aware that the Shares have not been
registered under the Securities Act and the Shares may not be
transferred by Purchaser unless they are subsequently registered
under the Securities Act or an exemption from such registration
is available. The Shares shall not be transferred without
registration under the Securities Act or an applicable exemption
therefrom. Purchaser is an accredited investor as that term is
defined in Rule 501(a) of Regulation D promulgated by the SEC
under the Securities Act. Purchaser acknowledges that until the
Shares are sold pursuant to registration under the Securities Act
or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
6. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represents
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore
5
<PAGE>
voluntarily, by operation of law or otherwise, assigned or transferred
or purported to assign or transfer to any person whomsoever any such
claim.
7. Closing.
-------
(a) The issuance of the Shares shall take place as of the date
hereof, and shall be consummated by mail or otherwise in
accordance with arrangements reasonably acceptable to Parent and
Purchaser. Within ten (10) days of the Closing Date, Parent shall
deliver to Purchaser a certificate representing the Shares and a
check for all or part of the Balance, if any, to be paid on the
Closing Date pursuant to section 2(b) above, in payment,
discharge and cancellation of indebtedness equal to part or all
of the Purchase Order Amount as provided in section 2(c).
8. General Provisions.
------------------
(a) Successors. This Agreement shall bind and inure to the
----------
benefit of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret,
-------------
construe or enforce this Agreement may be instituted and
prosecuted only in a state court located in Alameda County, State
of California, or, if requisite jurisdiction exists, in the
United States District Court for the Northern District of
California. This Agreement shall be governed by and interpreted
and construed in accordance with the laws of the State of
California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver,
----------------------------------
modification or amendment of this Agreement shall be enforceable
unless in writing and executed by the party against whom such
waiver, modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held
------------
to be illegal, invalid or unenforceable, the legality, validity
and enforceability of the remaining provisions shall not be
affected or impaired.
6
<PAGE>
(f) Attorneys' Fees. In the event of litigation or other
---------------
proceedings in connection with or related to this Agreement, the
prevailing party in such litigation or proceedings shall be
entitled to reimbursement from the opposing party of all
reasonable expenses, including, without limitation, reasonable
attorneys' fees and expenses and expenses of investigation in
connection with such litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All notices and other
--------------------------
communications required or permitted hereunder shall be in
writing in the English language and shall be deemed duly
delivered and received when delivered personally, when
transmitted by facsimile if receipt is acknowledged by the
addressee, two days after being deposited for next-day or second-
day delivery with an internationally recognized overnight or two-
day delivery service, or four days after being deposited as first
class mail with the United States Postal Service, properly
addressed as follows:
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4091
With a copy to: Steven O. Gasser, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Facsimile: (415) 421-2922
If to Purchaser: _________________________________
_________________________________
_________________________________
_________________________________
Attention: ______________________
Facsimile: ______________________
Telephone: ______________________
7
<PAGE>
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ MICHAEL CLEMENS
--------------------------------------
Name: Michael Clemens
Title: Vice-President, Financial
Services and Treasurer
SYQUEST TECHNOLOGY INTERNATIONAL
By: /s/ MICHAEL CLEMENS
--------------------------------------
Name: Michael Clemens
Title: Director
TONGKAH ELECTRONICS SDN.BHD
By: /s/ BERNARD TAY
--------------------------------------
Name: Bernard Tay
Title: Managing Director
9
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of 26
March 1997, by and among SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and Tongkah Electronics Sdn.Bhd., a Malaysia corporation (the
"Buyer"), with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the
Buyer, the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee thereof
to whom the Buyer transfers or assigns this Agreement and who agrees to become a
party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
<PAGE>
2.1 Mandatory Registration. The Company shall use its best reasonable
----------------------
efforts to prepare and, on or before one hundred-twenty (120) days after the
date of the issuance of the Shares, file with the SEC a Registration Statement
or Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable
Securities.
2.2 Suspension or Termination of S-3 Registration Statement. The
-------------------------------------------------------
Company may suspend or terminate any Registration Statement filed pursuant to
the provisions of section 2.1 if the Company determines in good faith that the
continued effectiveness of such Registration Statement might (a) interfere with
or affect the negotiation or completion of any transaction that is being
contemplated by the Company, (b) involve continuing disclosure obligations that
might not be in the best interest of the Company's shareholders or (c) be
seriously detrimental to the Company; provided that (1) any such suspension or
termination extends for no more than ninety (90) days, (2) the Company
undertakes no more than two (2) such suspensions or terminations in any one
calendar year, (3) the Company re-establishes the effectiveness of such
Registration Statement promptly following the cessation of the cause for such
suspension or termination, but in no event later than the expiration of such 90-
day period and (4) the Registration Period (as hereinafter defined) set forth in
section 3.1(b) shall, if applicable, be extended by the period of each such
suspension or termination.
2.3 Piggy-Back Registrations.
------------------------
(a) If at any time prior to the expiration of the Registration
Period the Company shall file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans or on any form that
does not permit secondary sales), the Company shall send to each Investor who is
entitled to registration rights under this section 2.3 written notice of such
determination and the Company shall use its best reasonable efforts to include
in such Registration Statement (and any qualification under "blue sky" laws or
other compliance), except as set forth in section 2.3(c) and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request or requests made by such Investor and received by the Company within
(10) days after the written notice from the Company is mailed or delivered by
the Company. Such written request may specify all or part of an Investor's
Registrable Securities.
2
<PAGE>
(b) If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise the Investors as a part of the written notice given pursuant to section
2.3(a). In such event, the right of any Investor to registration pursuant to
this section 2.3 shall be conditioned upon such Investor's participation in such
underwriting and the inclusion of such Investor's Registrable Securities in the
underwriting to the extent provided herein. All Investors proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein (the "Other Stockholders") distributing their
securities through such underwriting) enter into any underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
(c) Notwithstanding any other provisions of this section 2.3, if
the representative of the underwriters advises the Company in writing that
marketing or other factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders requesting registration, and the number of
shares that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter allocated among the Investors and Other Stockholders
requesting inclusion of securities of the Company having registration rights
(the "Other Shares") pro rata on the basis of the number of shares of
Registrable Securities and Other Shares held by such Investors and Other
Stockholders; provided that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to permit the inclusion of Other Shares of
Other Stockholders having registration rights pursuant to any agreement with the
Company entered into prior to the date hereof; and provided further that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, and if any
Investor or Other Stockholder does not request inclusion of the maximum number
of Registrable Securities and Other Shares allocated to him, her or it pursuant
to the foregoing procedure, the remaining portion of his, her or its allocation
shall be reallocated among those requesting Investors and Other Stockholders
whose allocations do not satisfy their requests pro rata on the basis of the
number of Registrable Securities and Other Shares held by such Investors and
Other Stockholders, and this procedure shall be repeated until all of the
Registrable Securities and Other Shares that may be included in the registration
on behalf of the Investors and Other Stockholders shall have been so allocated.
The Company shall not limit the number of Registrable Securities to be included
in a registration pursuant to this Agreement in order to include securities held
by stockholders with no registration rights. If any person does not agree to the
terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or Other Shares excluded or withdrawn from such underwriting shall be withdrawn
from such
3
<PAGE>
registration. Nothing in this section 2.3 shall give Investors the right to
require the Company to commence such registration or complete it once the
process has commenced.
(d) No right to registration of Registrable Securities under
this section 2.3 shall be construed to limit any registration required under
section 2.1. The obligations of the Company under this section 2.3 may be waived
by Investors holding a majority of the Registrable Securities.
2.4 Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities, and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner to maintain such eligibility for the use of Form S-3. If Form
S-3 is not available for sale by the Investors of the Registrable Securities,
upon request of the Investors the Company shall register the sale on another
appropriate form. The Company shall have a reasonable period of time to complete
such registration.
2.5 Market Stand-Off Agreement. The Investors agree, without
--------------------------
consent of managing underwriter(s), not to effect any sale or distribution of
Registrable Securities (other than in connection with the Investors' own
registration pursuant to section 2.3), including a disposition pursuant to Rule
144 of the 1933 Act, during the period beginning ten (10) days prior to the
Company's good faith estimate of the filing of, and ending on the date ninety
(90) days after the effective date of, a Company-initiated registration;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best
-----------------------
reasonable efforts to cause such Registration Statement(s) relating to
Registrable Securities to become effective as soon as possible after the filing
thereof and, subject to the provisions of section 2.2, keep the Registration
Statement(s) effective pursuant to Rule 415 at all times until the earliest of
(a) the date as of which the Investors may sell all of the Registrable
Securities without registration pursuant to Rule 144 promulgated under the 1933
Act, (b) the second anniversary of the date hereof (subject to extension in
accordance with the provisions of section 2.2), and (c) the date on which the
Investors shall have sold all the Registrable Securities (the "Registration
Period"). Such Registration Statement(s) (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
4
<PAGE>
3.2 Amendments and Supplements. The Company shall prepare and file
--------------------------
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement(s) and the prospectus(es) used in
connection with the Registration Statement(s) as may be necessary to keep the
Registration Statement(s) effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each Investor
-------------------
whose Registrable Securities are included in the Registration Statement(s) and
its legal counsel (a) promptly after the same is prepared and publicly
distributed, filed with the SEC or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and (b) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request to facilitate the disposition of the Registrable Securities owned by
such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Corrections. As promptly as practicable after becoming aware of
-----------
such event, the Company shall notify each Investor selling Registrable
Securities of the happening of any event, of which the Company has knowledge, as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue
5
<PAGE>
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or incomplete, and use
its best reasonable efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
3.6 Stop Orders. Except as otherwise permitted by this Agreement,
-----------
the Company shall use its best reasonable efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, use its best reasonable efforts to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
3.7 Selling Stockholders' Counsel. The Company shall permit a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold and
compensated by such Investors, to review and comment on the Registration
Statement(s) (and all amendments and supplements thereto but only if they
directly relate to such Investors) a reasonable period prior to their filing
with the SEC, and shall not file any document in a form to which such counsel
reasonably objects. Failure to object in writing within three days shall be
deemed to be an approval of the Registration Statement (s).
3.8 Due Diligence. The Company shall make available for inspection
-------------
by one firm of attorneys and one firm of accountants or other agents retained by
the Investors at their expense (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by such Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information that any Inspector may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and
6
<PAGE>
implementing the confidentiality obligations of this section 3.10. Each Investor
agrees that it shall, on learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow and cooperate with the
Company, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed confidential.
3.9 Listing. The Company shall use its best reasonable efforts
-------
either to (a) cause all the Registrable Securities covered by a Registration
Statement to be listed on each national securities exchange on which the Common
Stock is then listed, if any, if the listing of such Registrable Securities is
then permitted under the rules of such exchange, or (b) secure designation and
quotation of all the Registrable Securities covered by the Registration
Statement on the Nasdaq National Market or, if, despite the Company's best
efforts to satisfy the preceding clause (a) or (b), the Company is unsuccessful
in satisfying the preceding clause (a) or (b), to secure the inclusion for
quotation on the Nasdaq SmallCap Market or, on the Nasdaq Electronic Bulletin
Board.
3.10 Certificates. The Company shall cooperate with the Investors
------------
who hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
3.11 Other Action. The Company shall take all other reasonable
------------
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such
7
<PAGE>
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Corrections. Each Investor agrees that, on receipt of any
-----------
notice from the Company of the happening of any event of the kind described in
section 2.2, 3.5 or 3.6, such Investor will immediately discontinue disposition
of Registrable Securities pursuant to the Registration Statement(s) covering
such Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.5 or 3.6 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.4 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder unless such Investor (a) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel and other advisers for any Investor (collectively,
"Selling Expenses").
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than Selling
------------------------
Expenses, incurred in connection with registrations, filings or qualifications
pursuant to sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify, hold harmless and defend each Investor, each director and officer of
and person, if any, who controls such Investor within the meaning of the 1933
Act or the 1934 Act, and each underwriter (as defined in the 1933 Act) for the
Investors, and
8
<PAGE>
each director and officer of, and each person, if any, who controls, such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) (collectively, "Claims") to which any of them may
become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based on: (a)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (c) any violation or alleged violation caused by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by, or caused by, any Indemnified Person or
underwriter for such Indemnified Person in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to section
3.3; (2) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to section 3.3; (3) shall not be
available to the extent that such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (4) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to section 9.
9
<PAGE>
6.2 By the Investors. In connection with any Registration Statement
----------------
in which an Investor is participating, each such Investor agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in section 6.1, the Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act, any underwriter and
any other stockholder selling securities pursuant to the Registration Statement
or any of its directors or officers or any person who controls such stockholder
or underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and together with an Indemnified Person, an "Indemnified Party"), against any
Claim to which any of them may become subject, under the 1933 Act, the 1934 Act
or otherwise, insofar as such Claim arises out of or is based on any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance on and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based on any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided that the
indemnity agreement in this section 6.2 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld; and
provided further that the Investor shall be liable under this section 6.2 for
only such amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
section 9. Notwithstanding anything to the contrary herein, the indemnification
agreement in this section 6.2 with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities
---------
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the
10
<PAGE>
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided that an Indemnified Person
or Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Company shall pay reasonable
fees for only one separate legal counsel for the Investors, and such legal
counsel shall be selected by the Investors holding a majority of the Registrable
Securities included in the Registration Statement to which the Claim relates.
The failure to deliver written notice to the indemnifying party within a
reasonable time after the threat or commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as
-----------
those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and
-------
other documents required of the Company under the 1933 Act and the 1934 Act so
long as
11
<PAGE>
the Company remains subject to such requirements, and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor
------------
owns Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
---------------------------------
register securities granted to an Investor by the Company pursuant to section 2
may not be transferred or assigned by an Investor except in a private sale to a
transferee or assignee of not less than 100,000 shares of the Registrable
Securities and: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to become a party
to and be bound by this Agreement, (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (f) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D under the 1933 Act, and (g) if the
assignment occurs after the date of effectiveness of the Registration Statement
required to be filed pursuant to section 2.1, the transferee or assignee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment. Any such transferee or assignee shall be
deemed to be an Investor hereunder, in the place and stead of the transferring
or assigning Investor with respect to the Registrable Securities so transferred
and assigned, from and after the effective date of such permitted transfer,
assignment and assumption.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
12
<PAGE>
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or
-------
permitted to be given under this Agreement shall be sent by registered or
certified mail, return receipt requested, or delivered personally or by
facsimile or courier and shall be effective five days after being placed in the
mail, if mailed, or on receipt, if delivered personally or by courier or
facsimile, in each case properly addressed to the party to receive such notice.
The addresses for such communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4091
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Steven O. Gasser, Esq.
If to the Buyer, at the addresses on the signature page of this Agreement.
Each party shall provide notice to the other party of any change in
address.
11.3 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not
13
<PAGE>
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
11.6 Successors and Assigns. Subject to section 9, this Agreement
----------------------
shall inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause
------------------
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
SYQUEST TECHNOLOGY, INC.
By: /s/ MICHAEL CLEMENS
----------------------------
Name: Michael Clemens
Its: Vice-President, Financial
Services and Treasurer
14
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BUYER:
- ---------------------------------
By: /s/ BERNARD TAY
----------------------------
Name: BERNARD TAY
Its: MANAGING DIRECTOR
Address:
TONGKAH ELECTRONICS SDN.BHD
- ---------------------------------------------
PLOT 105, MK 11, BUKIT TENGAH INDUSTRIAL PARK
- ---------------------------------------------
14000 SEBERANG PERAI TENGAH
- ---------------------------------------------
PENANG, MALAYSIA
- ---------------------------------------------
Attention: BERNARD TAY
---------------------
Facsimile: 60-4-5072266
---------------------
15
<PAGE>
EXHIBIT 10.5
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
March 26, 1997, by and between SyQuest Technology International ("Sub"), SYQUEST
TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and Silicon Systems, Inc., a
Delaware corporation ("Purchaser"), with reference to the following facts:
A. Sub has failed to make payments to Purchaser when due for products
manufactured and delivered (or to be delivered) by Purchaser as described
in that certain Promissory Note between Purchaser and Parent dated July 29,
1996, in the amount of $2,027,544.43 (the "Purchase Order Amount").
B. In consideration of cancellation of the amounts owed to Purchaser equal to
the sum of the Purchase Order Amount, Parent will issue to Purchaser
811,017 shares of the Common Stock of Parent (calculated by dividing the
Purchase Order Amount by the last sale price (the "Closing Price") as
reported in the Nasdaq National Market on the last trading day preceding
the date of this Agreement (the "Closing Date").
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser the
---------------------
Purchase Order Amount for products manufactured and delivered (or to
be delivered) by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. Sub and Parent's rights
with regard to defective product received from Purchaser shall be
determined in accordance with the Purchase Order(s) relating to such
defective product.
2. Payment.
-------
(a) Issuance of Shares. Parent shall instruct its transfer agent to
------------------
issue to Purchaser as of the Closing Date the 811,017 shares of
Parent's Common Stock. Such shares are hereinafter called the
"Shares".
<PAGE>
(b) Extinguishment of Indebtedness. On the Closing Date, Parent and
------------------------------
Sub shall be deemed to have paid and discharged all of the
Purchase Order Amount.
3. Representations and Warranties of Parent and Sub. Parent and Sub
------------------------------------------------
hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
-----------------------------
organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. Sub is a corporation duly organized and existing
under the laws of Grand Cayman and in good standing under such
laws, and Sub has all requisite corporate power to execute and
deliver this Agreement and otherwise to carry out and perform its
obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. All
corporate action on the part of Sub necessary for the execution,
delivery and performance by Sub of this Agreement has been taken,
and this Agreement constitutes valid and binding obligations of
Sub enforceable against Sub in accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with this
--------------
Agreement, will be validly issued, fully paid, nonassessable and
free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
-------------
complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1996, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarter ended December 31,
1996, its Current Reports on Form 8-K, and its Form S-3 filed on
January 6, 1997, in each case as filed with the Securities and
Exchange Commission (the "SEC"). Such Reports are hereinafter
collectively called the "Reports". As of their respective filing
dates (except as thereafter amended), the Reports complied in all
material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
2
<PAGE>
(e) No Contravention. Neither the execution and delivery of this
----------------
Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or violation of, any provision of the
certificate of incorporation or by-laws of Parent or Sub; (ii)
constitute, with or without notice or the passage of time or
both, a material breach, violation or default under any
agreement, order, writ, injunction, decree, law, statute, rule or
regulation, governmental permit or license of Parent or Sub or to
which either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act and applicable state securities laws.
4. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution other than in compliance
with the Securities Act. Purchaser has such knowledge and
experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of its investment in
the Shares, is able to bear the economic risk of such investment
and is able to protect the Purchaser's own interests in
connection with this transaction. Purchaser acknowledges having
had access to such information concerning Parent, Sub and their
affiliates as Purchaser deems necessary to enable Purchaser to
make an informed decision concerning an investment in the Shares.
In entering into this Agreement and consummating the transactions
contemplated hereby,
3
<PAGE>
Purchaser is relying solely on its own investigation of Parent,
Sub and their affiliates and their businesses, management,
financial condition, properties and prospects and the merits and
risks of such transactions. Purchaser is aware that the Shares
have not been registered under the Securities Act and the Shares
may not be transferred by Purchaser unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. The Shares shall not be transferred
without registration under the Securities Act or an applicable
exemption therefrom. Purchaser is an accredited investor as that
term is defined in Rule 501(a) of Regulation D promulgated by the
SEC under the Securities Act. Purchaser acknowledges that until
the Shares are sold pursuant to registration under the Securities
Act or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
5. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represents
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to
assign or transfer to any person whomsoever any such claim.
6. Closing.
-------
(a) The issuance of the Shares shall take place as of the date
hereof, and shall be consummated by mail or otherwise in
accordance with arrangements reasonably acceptable to Parent and
Purchaser. Within ten (10) days of the Closing Date, Parent
shall deliver to Purchaser a certificate representing the Shares
in payment, discharge and cancellation of the Purchase Order
Amount.
7. General Provisions.
------------------
4
<PAGE>
(a) Successors. This Agreement shall bind and inure to the benefit
----------
of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret, construe
-------------
or enforce this Agreement may be instituted and prosecuted only
in a state court located in Alameda County, State of California,
or, if requisite jurisdiction exists, in the United States
District Court for the Northern District of California. This
Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California.
(c) Entire Agreement. This Agreement and Registration Rights
----------------
Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorneys' Fees. In the event of litigation or other proceedings
---------------
in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings shall be entitled to
reimbursement from the opposing party of all reasonable expenses,
including, without limitation, reasonable attorneys' fees and
expenses and expenses of investigation in connection with such
litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
--------
(h) Communications and Notices. All notices and other communications
--------------------------
required or permitted hereunder shall be in writing in the
English language and shall be deemed duly delivered and received
when delivered personally, when transmitted by facsimile if
receipt is acknowledged by the addressee, two days after being
deposited for next-day or second-day delivery with an
internationally recognized overnight or two-day delivery service,
or four days after being deposited as first class mail with the
United States Postal Service, properly addressed as follows:
5
<PAGE>
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4091
With a copy to: Steven O. Gasser, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Facsimile: (415) 421-2922
If to Purchaser: Texas Instruments Incorporated
P.O. Box 650311, MS 3995
Dallas, Texas 75265
Attention: Corporate Development
Facsimile: 972-917-3804
Any party may change its address or facsimile number set forth
above by giving written notice thereof to the other party in the
manner prescribed herein.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ MICHAEL CLEMENS
--------------------------------------
Name: Michael Clemens
Title: Vice-President, Financial
Services and Treasurer
SYQUEST TECHNOLOGY INTERNATIONAL
By: /s/ MICHAEL CLEMENS
--------------------------------------
Name: Michael Clemens
Title: Director
SILICON SYSTEMS, INC.
By: /s/ WILLIAM E. BENDUSH
--------------------------------------
Name: Willliam E. Bendush
Title: Sr. V.P., CFO and Secretary
7
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of March
26, 1997, by and among SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and Silicon Systems, Inc., a Delaware corporation (the "Buyer"),
with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the
Buyer, the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the respective meanings respectively ascribed to them in the Securities
Purchase Agreement. As used in this Agreement, the following terms have the
following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee thereof to
whom the Buyer transfers or assigns this Agreement and who agrees to become a
party to and be bound by this Agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its best reasonable
----------------------
efforts to prepare and, on or before July 1, 1997, file with the SEC a
Registration Statement or
<PAGE>
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable
Securities.
2.2 Suspension or Termination of S-3 Registration Statement. The Company
-------------------------------------------------------
may suspend or terminate any Registration Statement filed pursuant to the
provisions of section 2.1 if the Company determines in good faith that the
continued effectiveness of such Registration Statement might (a) interfere with
or affect the negotiation or completion of any transaction that is being
contemplated by the Company, (b) involve continuing disclosure obligations that
might not be in the best interest of the Company's shareholders or (c) be
seriously detrimental to the Company; provided that (1) any such suspension or
termination extends for no more than ninety (90) days, (2) the Company
undertakes no more than two (2) such suspensions or terminations in any one
calendar year, (3) the Company re-establishes the effectiveness of such
Registration Statement promptly following the cessation of the cause for such
suspension or termination, but in no event later than the expiration of such 90-
day period and (4) the Registration Period (as hereinafter defined) set forth in
section 3.1(b) shall, if applicable, be extended by the period of each such
suspension or termination.
2.3 Piggy-Back Registrations.
------------------------
(a) If at any time prior to the expiration of the Registration Period the
Company shall file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans or on any form that
does not permit secondary sales), the Company shall send to each Investor who is
entitled to registration rights under this section 2.3 written notice of such
determination and the Company shall use its best reasonable efforts to include
in such Registration Statement (and any qualification under "blue sky" laws or
other compliance), except as set forth in section 2.3(c) and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request or requests made by such Investor and received by the Company within
(10) days after the written notice from the Company is mailed or delivered by
the Company. Such written request may specify all or part of an Investor's
Registrable Securities.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Investors as a part of the written notice given pursuant to section
2.3(a). In such event, the right of any Investor to registration pursuant to
this section 2.3 shall be conditioned upon such Investor's participation in such
underwriting and the inclusion of such Investor's Registrable Securities in the
underwriting to the extent provided herein. All Investors proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein (the "Other Stockholders") distributing their
securities through such underwriting) enter into any
2
<PAGE>
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Notwithstanding any other provisions of this section 2.3, if the
representative of the underwriters advises the Company in writing that marketing
or other factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders requesting registration, and the number of
shares that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter allocated among the Investors and Other Stockholders
requesting inclusion of securities of the Company having registration rights
(the "Other Shares") pro rata on the basis of the number of shares of
Registrable Securities and Other Shares held by such Investors and Other
Stockholders; provided that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to permit the inclusion of Other Shares of
Other Stockholders having registration rights pursuant to any agreement with the
Company entered into prior to the date hereof; and provided further that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, and if any
Investor or Other Stockholder does not request inclusion of the maximum number
of Registrable Securities and Other Shares allocated to him, her or it pursuant
to the foregoing procedure, the remaining portion of his, her or its allocation
shall be reallocated among those requesting Investors and Other Stockholders
whose allocations do not satisfy their requests pro rata on the basis of the
number of Registrable Securities and Other Shares held by such Investors and
Other Stockholders, and this procedure shall be repeated until all of the
Registrable Securities and Other Shares that may be included in the registration
on behalf of the Investors and Other Stockholders shall have been so allocated.
The Company shall not limit the number of Registrable Securities to be included
in a registration pursuant to this Agreement in order to include securities held
by stockholders with no registration rights. If any person does not agree to the
terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or Other Shares excluded or withdrawn from such underwriting shall be withdrawn
from such registration. Nothing in this section 2.3 shall give Investors the
right to require the Company to commence such registration or complete it once
the process has commenced.
(d) No right to registration of Registrable Securities under this section
2.3 shall be construed to limit any registration required under section 2.1.
The obligations of the Company under this section 2.3 may be waived by Investors
holding a majority of the Registrable Securities.
2.4 Eligibility for Form S-3. The Company represents and warrants that it
------------------------
meets the requirements for the use of Form S-3 for registration of the sale by
the Buyer and any other Investor of the Registrable Securities, and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner to maintain such eligibility for the use of Form S-3. If Form S-3
is not hereafter available for sale by the Investors of the
3
<PAGE>
Registrable Securities, upon request of the Investors the Company shall register
the sale on another appropriate form. The Company shall have a reasonable
period of time to complete such registration.
2.5 Market Stand-Off Agreement. The Investors agree, without consent of
--------------------------
managing underwriter(s), not to effect any sale or distribution of Registrable
Securities (other than in connection with the Investors' own registration
pursuant to section 2.3), including a disposition pursuant to Rule 144 of the
1933 Act, during the period beginning ten (10) days prior to the Company's good
faith estimate of the filing of, and ending on the date ninety (90) days after
the effective date of, a Company - initiated registration; provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best reasonable
-----------------------
efforts to cause such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after the filing thereof and,
subject to the provisions of section 2.2, keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earliest of (a) the date
as of which the Investors may sell all of the Registrable Securities without
registration pursuant to Rule 144 promulgated under the 1933 Act, (b) the second
anniversary of the date hereof (subject to extension in accordance with the
provisions of section 2.2), and (c) the date on which the Investors shall have
sold all the Registrable Securities (the "Registration Period"). Such
Registration Statement(s) (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file with
--------------------------
the SEC such amendments (including post-effective amendments) and supplements to
the Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s) as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
3.3 Prospectus Delivery. The Company shall furnish to each Investor whose
-------------------
Registrable Securities are included in the Registration Statement(s) and its
legal counsel (a) promptly after the same is prepared and publicly distributed,
filed with the SEC or received by the Company, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and (b) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
4
<PAGE>
supplements thereto and such other documents as such Investor may reasonably
request to facilitate the disposition of the Registrable Securities owned by
such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Corrections. As promptly as practicable after becoming aware of such
-----------
event, the Company shall notify each Investor selling Registrable Securities of
the happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
incomplete, and use its best reasonable efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.
3.6 Stop Orders. Except as otherwise permitted by this Agreement, the
-----------
Company shall use its best reasonable efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, use its best reasonable efforts to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
3.7 Selling Stockholders' Counsel. The Company shall permit a single firm
-----------------------------
of counsel, designated as selling stockholders' counsel by the Investors who
hold a majority of the Registrable Securities being sold and compensated by such
Investors, to review and comment on the Registration Statement(s) (and all
amendments and supplements thereto but only
5
<PAGE>
if they directly relate to such Investors) a reasonable period prior to their
filing with the SEC, and shall not file any document in a form to which such
counsel reasonably objects. Failure to object in writing within three days
shall be deemed to be an approval of the Registration Statement (s).
3.8 Due Diligence. The Company shall make available for inspection by one
-------------
firm of attorneys and one firm of accountants or other agents retained by the
Investors at their expense (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by such Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information that any Inspector may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.9 Listing. The Company shall use its best reasonable efforts either to
-------
(a) cause all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (b) secure designation and quotation of all
the Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or, if, despite the Company's best efforts to satisfy the
preceding clause (a) or (b), the Company is unsuccessful in satisfying the
preceding clause (a) or (b), to secure the inclusion for quotation on the Nasdaq
SmallCap Market or, on the Nasdaq Electronic Bulletin Board.
3.10 Certificates. The Company shall cooperate with the Investors who
------------
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter
6
<PAGE>
or underwriters, the Investors may reasonably request and registered in such
names as the managing underwriter or underwriters, if any, or the Investors may
request.
3.11 Other Action. The Company shall take all other reasonable actions
------------
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least ten days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Corrections. Each Investor agrees that, on receipt of any notice from
-----------
the Company of the happening of any event of the kind described in section 2.2,
3.5 or 3.6, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.5 or 3.6 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.4 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder unless such Investor (a) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel and other advisers for any Investor (collectively,
"Selling Expenses").
7
<PAGE>
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than Selling
------------------------
Expenses, incurred in connection with registrations, filings or qualifications
pursuant to sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify, hold harmless and defend each Investor, each director and officer of
and person, if any, who controls such Investor within the meaning of the 1933
Act or the 1934 Act, and each underwriter (as defined in the 1933 Act) for the
Investors, and each director and officer of, and each person, if any, who
controls, such underwriter within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (c) any violation or alleged violation caused by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter for
such Indemnified Person in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to section 3.3; (2)
with respect to any preliminary prospectus, shall not inure to the benefit of
any such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to section 3.3; (3) shall
8
<PAGE>
not be available to the extent that such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company; and (4) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to section 9.
6.2 By the Investors. In connection with any Registration Statement in
----------------
which an Investor is participating, each such Investor agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in section 6.1, the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act, any underwriter and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based on any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance on and in conformity with written information furnished to the Company
by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based on any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided that the
indemnity agreement in this section 6.2 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld; and
provided further that the Investor shall be liable under this section 6.2 for
only such amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
section 9. Notwithstanding anything to the contrary herein, the indemnification
agreement in this section 6.2 with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities from
---------
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including
9
<PAGE>
any governmental action), such Indemnified Person or Indemnified Party shall, if
a Claim in respect thereof is to be made against any indemnifying party under
this section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided
that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority of the
Registrable Securities included in the Registration Statement to which the Claim
relates. The failure to deliver written notice to the indemnifying party within
a reasonable time after the threat or commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as those
-----------
terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and other
-------
documents required of the Company under the 1933 Act and the 1934 Act so long as
the
10
<PAGE>
Company remains subject to such requirements, and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor owns
------------
Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
---------------------------------
register securities granted to an Investor by the Company pursuant to section 2
may not be transferred or assigned by an Investor except in a private sale to a
transferee or assignee of not less than 100,000 shares of the Registrable
Securities and: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to become a party
to and be bound by this Agreement, (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (f) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D under the 1933 Act, and (g) if the
assignment occurs after the date of effectiveness of the Registration Statement
required to be filed pursuant to section 2.1, the transferee or assignee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment. Any such transferee or assignee shall be
deemed to be an Investor hereunder, in the place and stead of the transferring
or assigning Investor with respect to the Registrable Securities so transferred
and assigned, from and after the effective date of such permitted transfer,
assignment and assumption.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this section 10
shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of Registrable
------
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act on the basis of
11
<PAGE>
instructions, notices or elections received from the registered owner of such
Registrable Securities.
11.2 Notices. Any notices or other communications required or permitted
-------
to be given under this Agreement shall be sent by registered or certified mail,
return receipt requested, or delivered personally or by facsimile or courier and
shall be effective five days after being placed in the mail, if mailed, or on
receipt, if delivered personally or by courier or facsimile, in each case
properly addressed to the party to receive such notice. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4091
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Steven O. Gasser, Esq.
If to the Buyer, at the addresses on the signature page of this Agreement.
Each party shall provide notice to the other party of any change in
address.
11.3 Governing Law. This Agreement shall be governed by and construed and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be invalid or
------------
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
12
<PAGE>
11.6 Successors and Assigns. Subject to section 9, this Agreement shall
----------------------
inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
- --------
SYQUEST TECHNOLOGY, INC. SILICON SYSTEMS, INC.
By: /s/ Michael Clemens By: /s/ William E. Bendush
----------------------- -------------------------
Name: Michael Clemens Name: William E. Bendush
Its: Vice President, Financial Its: Sr. VP., CFO and Secretary
Services and Treasurer
Address:
Texas Instruments Incorporated
P.O. Box 650311, MS 3995
Dallas, Texas 75265
Attention: Corporate Development
Facsimile: (972)-917-3804
Telephone: (972)-917-3806
13
<PAGE>
Exhibit 99.1
SyQuest Expands Cash Availability Through New Lending Arrangements
CONTACTS:
Richard Cline Henry Montgomery
Miller/Shandwick Technologies Chief Financial Officer
415/962-9550 SyQuest Technology, Inc.
510/226-4000
FOR IMMEDIATE RELEASE:
SyQuest expands cash availability through new bank lending
arrangements
FREMONT, Calif., March 27, 1997 -- SyQuest Technology Inc., (NASDAQ:SYQT), a
world leader in removable cartridge hard drive technology, today reported the
completion of expanded lines of credit from its domestic banks, Greyrock
Business Credit and Silicon Valley Bank, and from its bank in Malaysia that
supports SyQuest's manufacturing facility in Penang.
The new domestic banking arrangement maintains SyQuest's credit line at
a maximum of $30 million. The borrowing base was significantly expanded to
include 40 percent of finished goods inventories up to a maximum of $5 million
and 80 percent of eligible accounts receivable, up from 70 percent in the
previous agreement. In addition, the banks have provided SyQuest through June 30
with an incremental maximum of $10 million of borrowing availability over and
above the borrowing base. The company's bank in Malaysia provided the Penang
subsidiary with an additional $3 million of credit availability.
The new lending arrangements are intended to provide SyQuest with
additional capital to expand its production efforts in order to meet a strong
backlog for the company's newest product, the award-winning SyJet 1.5GB
removable cartridge hard drive.
As previously announced, SyQuest expects to report significantly
reduced revenues in the fiscal quarter ending March 30, 1997. Decreased sales,
additional costs of reducing and simplifying business structures, and other
expenses are expected to increase the current quarterly loss by a significant
amount over the previous quarter.
About SyQuest
SyQuest Technology, Inc., is a world leader in removable cartridge hard
drives. Founded in 1982, the company has an installed base of more than three
million drives and 15 million
1
<PAGE>
cartridges worldwide. SyQuest is headquartered in Fremont, California, and
maintains manufacturing facilities in Fremont, California, and Penang (Malaysia)
with additional facilities in Colorado, California, Europe and Asia. The company
offers removable cartridge hard drives for Apple, Windows, MS-DOS, PC-DOS, UNIX,
SGI and Sun OS platforms. SyQuest (SYQT) is publicly traded on NASDAQ's National
Market System. See SyQuest on the World Wide Web at http://www.syquest.com.
This news release contains forward-looking statements that involve
risks and uncertainties, including competition in the marketplace for the
company's products, and other risks detailed from time to time in the SEC
reports recently filed by SyQuest on Forms 10K and 10Q.
###
SyQuest and the SyQuest logo are registered trademarks, and SyJet
is a trademark of SyQuest Technology, Inc. All other brands or
tradenames are the property of their respective companies. Contact:
Amy Reardon
2
<PAGE>
Exhibit 99.2
SyQuest Adds $5 Million Investment
CONTACTS:
Henry Montgomery
Chief Financial Officer
SyQuest Technology, Inc.
510/226-4000
FOR IMMEDIATE RELEASE:
Syquest Adds $5 Million in latest investment
FREMONT, Calif., April 9, 1997 -- SyQuest Technology Inc., (NASDAQ:SYQT), a
world leader in removable cartridge hard drive technology, today announced a $5
million investment transaction by Fletcher International Limited, an
international investment firm. This follows an $8.5 million investment by
Fletcher last November.
Under the terms of the transaction, Fletcher purchased 50,000 shares of
SyQuest's five percent cumulative convertible preferred stock, Series 3, at $100
per share. The shares are convertible into SyQuest common stock at a price equal
to the 5-day average NASDAQ closing price prior to the conversion, subject to a
designated cap and floor price.
The company said it also issued to Fletcher a seven-year warrant to
purchase additional shares of SyQuest common stock at a price computed using a
formula similar to the formula used in converting the convertible preferred
stock into common stock.
SyQuest is seeking shareholder approval to increase the number of
authorized shares of common stock to provide sufficient shares to meet the
conversion and warrant requirements of this transaction, as well as for
financing and other corporate purposes. The company requested this approval in
its preliminary proxy filed last week with the Securities and Exchange
Commission.
The $5 million investment is subject to shareholder approval of the
increase in authorized shares.
The announcement of the Fletcher investment follows last week's report
detailing SyQuest's second round of debt-to-equity conversions, which since last
fall have aggregated $25.5 million. In the last 10 months, outside parties have
invested a total of $63.5 million in SyQuest.
About SyQuest
SyQuest Technology, Inc., is a world leader in removable
cartridge hard drives. Founded in 1982, the company has an
1
<PAGE>
installed base of more than three million drives and 16 million cartridges
worldwide. SyQuest is headquartered in Fremont, California, and maintains
manufacturing facilities in Fremont, California, and Penang (Malaysia) with
additional facilities in Colorado, California, Europe and Asia. The company
offers removable cartridge hard drives for Windows, MS-DOS, PC-DOS, UNIX, SGI,
Sun OS and Apple Macintosh platforms. SyQuest (SYQT) is publicly traded on
NASDAQ's National Market System. See SyQuest on the World Wide Web at
http://www.syquest.com.
This news release contains forward-looking statements that involve
risks and uncertainties, including competition in the marketplace for the
company's products, and other risks detailed from time to time in the SEC
reports filed by SyQuest including its most recent reports on Forms 8K, 10K and
10Q.
###
SyQuest and the SyQuest logo are registered trademarks of SyQuest
Technology, Inc. All other brands or tradenames are the property
of their respective companies. Contact: Thomas C. Tokos
2
