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)
October 4, 1997
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674 94-2793941
(Commission File Number)(IRS Employer Identification No.)
47071 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(510) 226-4000
Not Applicable
(Former name or former address, if changed since last
report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5 Other Events
Sale of Equity Securities Pursuant to Regulation D
Additional Sales of Equity Securities Pursuant to
Regulation D
On or about October 3, 1997, pursuant to a
series of Securities Purchase Agreements
(collectively, the "Agreements" and individually, an
"Agreement"), Registrant issued and sold its certain
shares of its Convertible Preferred Stock, Series 5,
par value $.0001 per share (the "Preferred Shares"),
at a price of $1000 per share, to the following
entities (collectively, the "Purchasers" and
individually, a "Purchaser") in the amounts set forth
in the chart below:
Amount No. of
Date of of Common No. of
Name Agreement Investment Shares Warrants
Olympus Securities, Ltd 10-3-97 2,750,000 2,7505 1,925,000
Nelson Partners 10-3-97 2,250,000 2,250 1,575,000
Multiple Import
Export, Ltd. 9-30-97 5,000,000 5,000 3,500,500
All Agreements contain a provision limiting to 4.9%
the amount of the Company's Common Stock the Purchaser
may beneficially own.
The rights, preferences and privileges of
the Preferred Shares, as summarized below, are set
forth in the Certificate of Designations, Preferences
and Rights of Convertible Preferred Stock, Series 5
(the "Certificate"), filed with the Delaware Secretary
of State on September 3, 1997. A copy of the Olympus
Securities, Ltd. Agreement, which is representative of
all the other Agreements (except for the amount of
preferred shares purchased, the number of warrant
shares granted, other differences noted in the chart
above, and the maximum Exercise Price - See, Warrants,
below), is attached as Exhibit 10.2 to this Form 8-K
and incorporated herein by this reference.
Under each of the Agreements, the
purchaser also acquired a warrant (a "Warrant") to
purchase a number of shares (the "Warrant Shares") of
Common Stock, pursuant to a Warrant Certificate (a
"Warrant Certificate"), as set forth in chart, above.
Conversion; Registration. Subject to
certain conditions, the 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 each
of the five consecutive trading days preceding the
conversion or 90% of the closing sale price the day
before the conversion, but in any event not greater
than $3.0469 for Multiple Import Export, Ltd and
$3.34375 for Olympus Securities. Ltd and Nelson Partners
representing the closing sale price per share of Common Stock
as reported by the Nasdaq National Market on the first
business day prior to the first day that the Preferred
Shares are issued to the initial holder thereof
pursuant to such holder's Agreement.
The Preferred Shares cannot be converted
and the Warrants 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 as of the date of any Purchaser's respective
Agreement, 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 the Purchaser can acquire greater than 19.9% of
the outstanding Common Stock. Although the Company
believes it currently has sufficient shares of common
stock reserved or otherwise available for conversion
of the Preferred Shares into common stock, if the
Company is nevertheless unable to issue common stock
to the Purchasers on conversion of the Preferred
Shares, the Company would be required to pay any such
Share sought to be converted, plus twenty percent.
Dividends. There are no dividends on the
Preferred Shares.
Liquidation Preference. The Preferred
Shares have a liquidation preference as to
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 to be issued in the
future, 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 required by law.
Warrants. With regard to Multiple Import
Export, Ltd., the exercise price (the "Exercise
Price") of the Warrants will be the greater of the
arithmetical average of the closing sales price per
share of common stock on the five consecutive trading
days preceding the delivery of the Exercise Notice (as
defined below) and 90% of such closing sale price on
the day immediately prior to the delivery of the
Exercise Notice, but in any event not greater than
$3.0469. With regard to Olympus Securities and Nelson
Partners, the Exercise Price will be calculated the
same except that maximum Exercise Price will be
$3.4375 per share, not $3.0469. The Warrants issued
to the Purchasers are not exercisable until the lapse
of a period ending on the sixty-fifth day after such
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, a Purchaser may exercise its 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 Warrants expire on May 1, 2004. The
number of Warrant Shares available to each Purchaser
will increase by 6.67% of the total Warrant Shares
initially granted for each month (prorated daily for
partial months) upon the occurrence of certain events
specified in the Warrant Certificate. The Purchasers
are prohibited from exercising their warrants until
December 4, 1997 (or January 5, 1998 of the Commission
reviews certain filings). Although shares of common
stock have not been reserved for the exercise of the
Warrants, the Agreements require the Company to use
its best efforts to obtain shareholder approval of an
increase in the Company's authorized Common Stock so
that shares can be reserved. If shareholder
approval of such an increase is not obtained and the
Company otherwise has insufficient shares of Common
Stock to issue upon the exercise of the Warrants, the
Company is required to pay the difference between the
exercise price and the market value for any Warrants
any Purchaser attempted to exercise.
Registration Rights. With regard to
Multiple Import Export, the Agreement provides that
Registrant 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 December 4, 1997 (or January 5, 1998,
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.
A penalty of 1% per month (pro rated on a daily basis
for partial months) of each Purchasers' Amount of
Investment will be incurred for each month that the
Registration Statement is not declared effective
according to that time schedule.
With regard to Olympus Securities and
Nelson Partners, the registration rights are similar
except that Registrant is not obligated to have a
registration statement covering resales of its
Converted Securities declared effective until 91 days
after the Registration Statement covering the
Converted Securities of the other holders of Preferred
Shares is declared effective.
The Agreement, the Warrant Certificate and
related matters are also described in the press
release attached hereto as Exhibit 99.1 and
incorporated herein by this reference.
THE FOREGOING DESCRIPTION OF THE AGREEMENTS, THE
CERTIFICATE AND THE WARRANT CERTIFICATES IS ONLY A
BRIEF SUMMARY, DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXHIBIT 10.1
TO THIS REPORT ON FORM 8-K, WHICH IS INCORPORATED
HEREIN BY THIS REFERENCE.
EXERCISE OF CERTAIN WARRANTS
During the period beginning approximately
October 3, 1997, through October 9, 1997, holders of
warrants to acquire shares of the Registrant's Common
Stock exercised such warrants and received 2,191,214
shares of the Registrant's Common Stock. While the
exercise price per share varied depending on the
warrant exercised, Registrant received a total of
$4,757,143 upon the exercise of such warrants.
Item 7 Financial Statements, Pro Forma Financial
Information and Exhibits
10.1 Securities Purchase Agreement dated October 3,
1997, between Registrant and Olympus Securities, Ltd.,
including as Exhibit A thereto the Certification of
Designations, Preferences and Rights of Convertible
Preferred Stock, Series 5, and as Exhibit B thereto
the form of Warrant Certificate issued pursuant
thereto.
99.1 Registrant's Press Release released October 6, 1997.
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:October 10, 1997 By /s/ Edwin L. Harper
Edwin L. Harper,
President and
Chief Executive Officer
Exhibit 10.1:
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the
"Agreement") dated October 3, 1997, is entered into by
and between SyQuest Technology, Inc., a Delaware
corporation (together with its successors, "SyQuest"),
and Olympus Securities, Ltd., a Bermuda corporation
("Investor").
Unless otherwise defined herein,
capitalized terms used herein and not defined herein
shall have the meanings given to them in Regulation D
(as now if effect or as hereafter amended, "Regulation
D") under the Securities Act of 1933, as amended (the
"1933 Act").
The parties hereto agree as follows:
Purchase and Sale. In consideration of and upon the
basis of the representations, warranties and
agreements and subject to the terms and
conditions set forth in this Agreement:
Convertible Preferred Stock. SyQuest agrees to
issue and sell to Investor, and Investor agrees to
purchase from SyQuest, on the Closing Date specified
in Section 2 hereof, 2,750 shares of SyQuest's
Convertible Preferred Stock, Series 5, stated value
$1,000 per share (the "Preferred Shares"), having the
terms and conditions set forth in the Certificate of
Designation which is attached hereto as Exhibit A, at
a purchase price per share of $1,000, for an aggregate
purchase price of $2,750,000 (the "Purchase Price").
Warrant. In consideration of the purchase of
the Preferred Shares by Investor, SyQuest will issue
to Investor on the Closing Date specified in Section 2
hereof, a warrant or warrants having the terms set
forth in the warrant certificate attached hereto as
Exhibit B (the "Warrant") to purchase up to 1,925,000
shares (subject to adjustment) of SyQuest's Common
Stock, par value $.0001 per share (the "Common
Stock"). The shares of Common Stock issuable pursuant
to the Warrant are referred to herein as the "Warrant
Shares."
Converted Stock. The term "Converted Stock"
shall apply to any Common Stock issued or to be issued
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.
Closing Date. Upon satisfaction or, if
applicable, waiver of the conditions set forth in
Sections 7 and 8 hereof, the delivery of the
Preferred Shares referred to in Section 1(a) and the
Warrant referred to in Section 1(b) (the "Closing")
shall take place initially via facsimile at 2:00 p.m.
(Pacific Daylight Time) on October 3, 1997, or at such
other date and time as Investor 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
Investor at the address set forth in Section 13
hereof.
At the Closing, the following deliveries
shall be made:
Preferred Shares. SyQuest shall deliver the
certificate representing the Preferred Shares, duly
registered on the books of SyQuest in the name of
Investor, against payment by Investor by wire transfer
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.
Warrant. SyQuest shall deliver the certificate
representing the Warrant to Investor. Such
certificate shall be substantially in the form
attached hereto as Exhibit B.
Closing Documents. The closing documents
required by Sections 7 and 8 shall be delivered to
Investor and SyQuest, respectively.
Delivery Notice. An executed copy of the
delivery notice in the form attached hereto as Exhibit
C shall be delivered to Investor.
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.
Representations and Warranties of SyQuest. Except
as disclosed in any report, form, schedule, statement
or other document (collectively, "SEC Filings") filed
by the Company prior to the Closing with the SEC under
the 1933 Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act"), or as disclosed in the
Schedule of Exceptions attached hereto, SyQuest hereby
represents and warrants to Investor 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) as
follows:
SyQuest has been duly incorporated and is
validly existing in good standing under the laws of
State of Delaware, or, after the Closing Date if
another entity has succeeded SyQuest in accordance
with the terms hereof, under the laws of a state of
the United States.
The execution, delivery and performance of this
Agreement (including the issuance of the Preferred
Shares) and the Warrant 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 have been duly executed and
delivered by SyQuest and, when duly authorized,
executed and delivered by Investor, will be valid and
binding agreements, enforceable against SyQuest in
accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar
laws of general applicability relating to or affecting
creditors' rights generally and to general principles
of equity.
SyQuest has full corporate power and authority
necessary to execute and deliver this Agreement and
the Warrant and to perform its obligations hereunder
(including the issuance of the Preferred Shares) and
thereunder.
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 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.
Neither the execution and delivery by SyQuest of
this Agreement and the Warrant nor the performance by
SyQuest of any of its obligations hereunder or
thereunder: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 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.
SyQuest has validly reserved a total of 30,000
shares of its Convertible Preferred Stock, Series 5
for issuance pursuant to the terms hereof. SyQuest's
board of directors will recommend at its 1997 Special
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 240,000,000, and if the
Amendment is approved SyQuest intends to reserve for
issuance to Investor 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 Investor 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: will have been duly and validly authorized,
duly and validly issued, fully paid and nonassessable;
will be free and clear of any security interests,
liens, claims or other encumbrances (other than those
resulting solely from actions by Investor); and will
not have been issued or sold in violation of any
preemptive or other similar rights of the holders of
any securities of SyQuest.
Reserved.
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, self regulatory 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, provided, however, that the representations
and warranties contained in this Section 3.h shall not
apply to any action, threatened action, suit,
proceeding or investigation initiated by Investor.
SyQuest has timely filed all filings with the
United States Securities and Exchange Commission (the
"SEC") under the 1933 Act or under Section 13(a) or
15(d) of the 1934 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.
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 333-28225) in order to permit
public offers and sales of shares of Common Stock
thereunder.
The offer and sale of the Preferred Shares, the
Warrant and the Converted Stock to Investor will,
subject to compliance by Investor with the applicable
representations and warranties contained in Section 4
hereof and with the applicable covenants and
agreements contained in Section 6 hereof, be made in
accordance with the provisions and requirements of
Regulation D and any applicable state law, provided,
however, that the representations and warranties
contained in this Section 3.k shall not be required to
be given in respect of any Exercise Date if the
provisions of Section 3A hereof are applicable and
SyQuest is in full compliance therewith and Investor
is permitted to resell the Common Stock thereunder.
Capitalization. As of September 26, 1997, the
authorized capital stock of the Company consisted of
(i) 120,000,000 shares of Common Stock of which
approximately 59.2 million shares were issued and
outstanding, and (ii) 4,000,000 shares of Preferred
Stock of which there are more than 300,000 shares
issued and outstanding. All such shares of Common
Stock are, and all shares which may be issued pursuant
to stock options, warrants or other convertible rights
will be, when issued and paid for in accordance with
the respective terms thereof, duly authorized, validly
issued, fully paid and nonassessable and free of any
preemptive rights in respect thereof. There are no
outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character
whatsoever granted or issued by the Company and
relating to, or securities or rights granted or issued
by the Company and convertible into, any shares of
capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or
any of its subsidiaries is or may become bound to
issue additional shares of capital stock of the
Company or any of its subsidiaries. There are no
outstanding debt securities issued by the Company.
There are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities
under the 1933 Act (except this Agreement). The
Company has furnished to Investor true and correct
copies of the Certificate of Incorporation and the
Company's By-laws, as in effect on the date hereof
(the "Bylaws").
3A. Registration Provisions.
a. SyQuest shall, as promptly as
practicable hereafter and at its own expense, file a
registration statement (the "Registration statement")
under the 1933 Act covering the sale or resale of the
maximum number of shares of Common Stock then issuable
upon conversion of the Preferred Shares and exercise
of the Warrant (each a "Covered Security"), shall use
its best efforts to cause such Registration Statement
to be declared effective not later than 91 days from
the date the registration statement convering the sale
or resale of the shares of common stock then issuable
upon conversion of the previously issued Convertible
Preferred Stock, Series 5 and the exercise of all
warrants related thereto is declared effective (or 121
days thereafter if the SEC reviews such Registration
Statement), and shall amend such Registration
Statement from time to time upon the request of
Investor if the maximum number of shares of Common
Stock issuable upon conversion of the Preferred Shares
and exercise of the Warrant is greater than the number
of shares of Common Stock registered pursuant to such
Registration Statement, unless an amendment is not
required for the registration and sale of such
securities under such Registration Statement pursuant
to Rule 416 or any other rule under the 1933 Act;
provided that Investor shall have provided such
information and cooperation in connection therewith as
SyQuest may reasonably request. A penalty of one
percent (1%) of the Purchase Price per month (prorated
daily for partial months) shall be imposed for each
month that the Registration Statement shall not be
declared effective as provided in this section 3A.a.
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
Investor or (C) such time as all of the Covered
Securities held by Investor can be sold by Investor or
any of its affiliates within a three-month period
without compliance with the registration requirements
of the 1933 Act pursuant to Rule 144 under the 1933
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
1933 Act with respect to the disposition of all
Covered Securities by Investor 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
Investor 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
Investor, 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
Investor upon request a reasonable number of copies of
a supplement to or an amendment of such Prospectus as
may be necessary in order to facilitate the public
sale or other disposition of all or any of the Covered
Securities by Investor or any of its affiliates
pursuant to the Registration Statement.
d. With a view to making
available to Investor and its affiliates the benefits
of Rule 144 and Form S-3 under the 1933 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 second anniversary of the
issuance of each Covered Security or (B) such date as
all of the Covered Securities shall have been resold
by Investor 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 Investor upon request, as long as Investor
owns any Covered Securities, (A) a written statement
by SyQuest that it has complied with the reporting
requirements of the 1933 Act and the 1934 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 Investor 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 Investor thereof by telephone and
in writing. Upon receipt of such notification,
Investor 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
Investor and its affiliates in accordance with
applicable federal and state securities laws. SyQuest
will promptly notify Investor after it has determined
in good faith that such sales have become permissible
in such manner and will promptly deliver copies of the
Registration Statement and the Prospectus (as so
amended or supplemented) to Investor in accordance
with paragraph (b) of this Section 3A.
Notwithstanding the foregoing, (A) under no
circumstances shall SyQuest be entitled to exercise
its right to suspend sales of any Covered Securities
pursuant to the Registration Statement more than two
times in any twelve-month period, (B) the period
during which such sales may be suspended (each a
"Blackout Period") shall not exceed thirty days and
(C) no Blackout Period may commence less than thirty
days after the end of the preceding Blackout Period.
Upon the commencement of a Blackout Period
pursuant to this Section 3A, Investor will immediately
notify SyQuest of any contracts to sell any Covered
Securities (each a "Sales Contract") that Investor or
any of its affiliates has entered into prior to the
commencement of such Blackout Period and that would
require delivery of such Covered Securities during
such Blackout Period, which notice will contain the
aggregate sale price and volume of Covered Securities
pursuant to such Sales Contract. Upon receipt of such
notice, SyQuest will immediately notify Investor 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 Investor
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
Investor 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 Investor 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 Investor Indemnified Party may
incur arising out of or in connection with Investor's
breach or alleged breach of any such Sales Contract,
and SyQuest shall reimburse each Investor 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 Investor Indemnified
Party shall take all actions reasonably necessary or
appropriate to mitigate such Indemnification Amount;
and provided further, however, that the
Indemnification Amount shall be reduced
by an amount equal to the number of Unsold Securities
multiplied by the difference between (x) the actual
per share price received by Investor or any of its
affiliates upon the sale of the Unsold Securities (if
such sale occurs within three Trading Days of the end
of the Blackout Period) or the closing sale price of
the Common Stock on the NASDAQ National Market
("NASDAQ") or other national securities exchange on
which the Common Stock is then listed on the third
Trading Day after the end of the Blackout Period (if
the Unsold Securities are not sold by Investor 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.
f. Reserved.
Representations and Warranties of Investor.
Investor hereby represents and warrants to SyQuest on
the date hereof and on the Closing Date, and agrees
with SyQuest, as follows:
The execution, delivery and performance of this
Agreement by Investor have been duly authorized by all
requisite corporate action and no further consent or
authorization of Investor, its Board of Directors or
its stockholders is required. This Agreement has been
duly executed and delivered by Investor and, when duly
authorized, executed and delivered by SyQuest, will be
a valid and binding agreement, enforceable against
Investor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or
affecting creditors' rights generally and to general
principles of equity.
Investor 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.
In making the decision to purchase the Preferred
Shares or the Warrant in accordance with this
Agreement, Investor has relied solely upon independent
investigations made by it and not upon any
representations made by SyQuest other than those made
in this Agreement.
Subject to Section 3A hereof, Investor
understands that the Preferred Shares, the Warrant and
the Converted Stock have not been registered under the
1933 Act and may not be re-offered or resold other
than pursuant to such registration or an available
exemption therefrom.
Investment Purpose. Investor is purchasing the
Preferred Shares and the Warrant for its own account
for investment only and not with a view to, or for
resale in connection with, the public sale or
distribution thereof except pursuant to sales
registered under the 1933 Act. Investor is not
purchasing the Preferred Shares or Warrant for the
purpose of covering, and will not use any Conversion
Shares, Dividend Shares or Warrant Shares
(collectively, "Derivative Shares") to cover, any
short sale position in the Common Stock. Investor
understands that it shall be a condition to the
issuance of any Derivative Shares that the
representations and warranties in this section 4 shall
be true and complete with respect to the Warrant and
such Derivative Shares.
Accredited Investor Status. Investor is an
"accredited investor" as that term is defined in
Regulation D. Investor is able to bear the economic
risk of Investor's investment hereunder.
Reliance on Exemptions. Investor understands
that the Preferred Shares, the Warrant and the
Derivative Shares are being or will be offered and
sold to it in reliance on specific exemptions from the
registration requirements of United States federal and
state securities laws and that SyQuest is relying on
the truth and accuracy of, and Investor's compliance
with, the representations, warranties, agreements,
acknowledgments and understandings of Investor set
forth herein in order to determine the availability of
such exemptions and the eligibility of Investor to
acquire Preferred Shares, the Warrant and Derivative
Shares.
Sophistication. A principal executive officer
of Investor, or Investor's agent, who is acting on
behalf of Investor in connection with the transactions
contemplated hereby has such knowledge and experience
in financial and business matters that such officer is
capable of evaluating the merits and risks of the
investment by Investor contemplated by this Agreement
and has the capacity to protect Investor's interests.
Information. Investor has been furnished with
all materials and information relating to the
business, management, properties, financial condition,
operations, affairs and prospects of SyQuest and all
materials and information relating to the offer and
sale of the Preferred Shares, the Warrant and the
Derivative Shares, as have been requested by Investor.
Investor has been afforded the opportunity to ask all
questions of SyQuest that Investor considered
appropriate or desirable to ask in connection with
this Agreement and has received answers to such
inquiries that Investor considers satisfactory.
Investor understands that its investment in the
Preferred Shares, the Warrant and Derivative Shares
involves and will involve a high degree of risk.
Investor has sought such investment, accounting, legal
and tax advice as it has considered necessary to an
informed investment decision with respect to its
acquisition of Preferred Shares, the Warrant and the
Derivative Shares.
Transfer or Resale. Investor understands that
(i) except as otherwise provided in section 3A hereof,
the Preferred Shares, the Warrant and the Derivative
Shares have not been and are not being registered
under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered
thereunder, or (b) Investor shall have delivered to
SyQuest an opinion of counsel, reasonably satisfactory
in form, scope and substance to SyQuest, to the effect
that the securities to be so offered, sold, assigned
or transferred may be so offered, sold, assigned or
transferred pursuant to an exemption from such
registration; (ii) any sale of such securities made in
reliance on Rule 144 promulgated under the 1933 Act
("Rule 144") may be made only in accordance with the
terms of Rule 144 and, if Rule 144 is not applicable,
any resale of such securities under circumstances in
which the seller (or the person through whom the sale
is made) may be deemed to be an underwriter (as that
term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC
thereunder; and (iii) neither SyQuest nor any other
person is under any obligation to register such
securities (other than pursuant to section 3A hereof)
under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any
exemption
thereunder.
Covenants of SyQuest. Except as set forth in
the Schedule of Exceptions attached hereto, SyQuest
covenants and agrees with Investor as follows:
For so long as any of the Preferred Shares or
any portion of the Warrant remains outstanding,
SyQuest will use its best efforts to (i) maintain the
eligibility of the Common Stock for quotation on
NASDAQ or listing on a national securities exchange
(as defined in the 1934 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.
SyQuest will (i) provide Investor 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 Investor 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
Investor with copies of all SEC Filings.
If the Amendment is not approved on or prior to
90 days from the Closing Date (or 120 from the Closing
Date if the Securities and Exchange Commission reviews
the proxy filing relative to the 1997 Special
Meeting), and Investor 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), 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 fifteen percent 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 Investor pursuant to this
Section 5.c because of a failure to deliver
Converted Stock, the provisions of Section 10 hereof
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
Investor disagrees with said valuation, the value of
the Common Stock will be determined by binding
arbitration in accordance with the then prevailing
commercial arbitration rules of the American
Arbitration Association, and such arbitration shall
proceed in San Francisco, California, or at any other
place approved in writing by SyQuest and Investor.
SyQuest will comply with the terms and
conditions of the Preferred Shares and of the Warrant
as set forth in the Warrant (as duly amended from time
to time by the parties hereto).
From and after such time, if ever, as the
Amendment is approved and becomes effective and for so
long thereafter 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
Investor the number of shares of Common Stock required
to effect such conversion and exercise. At the 1997
Special Meeting of SyQuest's stockholders, SyQuest
will recommend to its stockholders that they adopt the
Amendment, and SyQuest shall use its best efforts to
obtain stockholder approval of the Amendment.
As soon as such information is available (but in
no event later than the date of filing of SyQuest's
annual report on Form 10-K for the fiscal year ending
September 30, 1997), SyQuest shall deliver to Investor
a written notice stating the number of outstanding
shares of Common Stock as of the Closing Date.
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 1934 Act).
Covenants of Investor. Investor hereby covenants
and agrees with SyQuest, as follows:
Neither Investor 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 1933 Act or pursuant to an
available exemption
therefrom.
Investor will agree not to convert its Preferred
Stock for a maximum period of sixty days following a
successful public offering of the Common Stock in
excess of $25,000,000 in a single transaction, if all
other convertible security holders are bound by the
same restriction.
Investor will not at any time prior to the
earlier of 90 days from the Closing Date (or 120 from
the Closing Date if the Securities and Exchange
Commission reviews the proxy filing relative to the
1997 Special Meeting), or SyQuest's 1997 Special
Stockholders Meeting exercise the Warrant. Investor
agrees that attempted exercise of the Warrant prior to
the earlier of 90 days from the Closing Date (or 120
from the Closing Date if the Securities and Exchange
Commission reviews the proxy filing relative to the
1997 Special Meeting), or SyQuest's 1997 Special
Stockholders meeting shall be null and void, and (1)
SyQuest shall be under no obligation to issue any
Warrant Shares, and (2) Investor shall not be entitled
to any damages or other relief resulting from not
receiving such Warrant Shares.
Investor will not offer, sell or otherwise
transfer any Converted Stock prior to January 10,
1998. Investor agrees that any attempted sale or
transfer shall be null and void, that SyQuest will
have no obligation whatsoever to assist Investor
complete any such offer, sale or other transfer of
Converted Stock, and that Investor shall not be
entitled to any damages or other relief resulting from
SyQuest's action (or inaction) in connection with any
such offer, sale or other transfer.
Investor shall use a form of notice in
substantially the same form as attached hereto as
Exhibit D in order to convert its Preferred Shares and
to provide notice of such conversion to SyQuest.
6A. Legend. Investor understands that
the certificates or other instruments representing the
Preferred Shares, the Warrant and, until such time as
the Derivative Shares shall have been sold pursuant to
a registration under the 1933 Act as contemplated by
this Agreement, the stock certificates representing
the Derivative Shares shall bear a restrictive legend
in substantially the following form (and a stop-
transfer order may be placed against transfer of such
certificates or other instruments):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
The legend set forth above shall be removed and
SyQuest shall issue a certificate without such legend
to any holder of Preferred Shares, the Warrant or
Derivative Shares if, unless otherwise required by
state securities laws, (a) the same are sold pursuant
to an effective registration statement under the 1933
Act, or (b) in connection with a sale transaction,
such holder provides SyQuest with an opinion of
counsel, in form, substance and scope reasonably
acceptable to SyQuest, to the effect that a public
sale, assignment or transfer thereof may be lawfully
effected without registration under the 1933 Act, or
(c) such holder provides SyQuest with assurances
reasonably satisfactory to SyQuest that the same may
be publicly sold pursuant to Rule 144 without
restriction.
Conditions Precedent to Investor's Obligations. The
obligations of Investor 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 Investor:
On the Closing Date, on each Conversion Date and
on each Exercise Date (as defined in the Warrant), (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; and Investor 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.
On the Closing Date, SyQuest shall have
delivered to Investor an opinion of counsel reasonably
satisfactory to Investor, dated the date of delivery,
confirming in substance the matters covered in
paragraphs a, b, c, d, e, f and h of Section 3 hereof.
Prior to the Closing, the Certificate of
Designation will have been accepted for filing with
the Secretary of State of the State of Delaware in
accordance with the Delaware General Corporation Law.
On the Closing Date, SyQuest shall have
delivered to Investor the opinion of counsel
reasonably satisfactory to Investor, 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 1933 Act.
As used herein the term "Business Day"
means any day on which banks in the City of New York
are open for business.
Conditions Precedent to SyQuest's Obligations. The
obligations of SyQuest hereunder are subject to the
performance by Investor of its obligations hereunder
and to the satisfaction of the additional conditions
precedent, unless expressly waived in writing by
SyQuest, that on the Closing Date and on each Exercise
Date (as defined in the Warrant), (i) the
representations and warranties made by Investor in
this Agreement shall be true, complete and correct,
except for those which only speak to a specific date
or time, (ii) Investor shall have complied fully with
all the covenants and agreements in this Agreement and
the Warrant, and (iii) SyQuest shall have received on
each such date a certificate of an appropriate officer
or agent of Investor dated such date and to such
effect.
Fees and Expenses. SyQuest agrees to pay Investor's
reasonable legal fees and costs actually incurred
incident to the preparation of this Agreement and
related documents up to $5,000 upon presentation of
evidence reasonably satisfactory to SyQuest that such
fees and costs were actually incurred.
Non-Performance.
If, on the date hereof, on the Closing
Date, on any Conversion Date or on any Exercise Date,
SyQuest shall fail to deliver the Warrant, Preferred
Shares or Converted Stock to Investor required to be
delivered pursuant to this Agreement for any reason
other than the failure of any condition precedent to
SyQuest's obligations hereunder, the failure by the
stockholders of SyQuest to approve or adopt the
Amendment or the failure by Investor to comply with
its obligations hereunder, then SyQuest shall: hold
Investor 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 reimburse Investor for
all of its reasonable out-of-pocket
expenses, including fees and disbursements of its
counsel, incurred by Investor in connection with this
Agreement and the Warrant and the transactions
contemplated herein and therein; provided, however,
that SyQuest shall then be under no further liability
to Investor except as provided in the Warrant, this
Section 10 and Section 11 hereof.
Indemnification.
Indemnification of Investor. SyQuest hereby
agrees to indemnify Investor and each of its officers,
directors, employees, agents and affiliates and each
person that controls (within the meaning of Section 20
of the 1934 Act) any of the foregoing persons (each an
"Investor 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: 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 made, 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; any of the representations or
warranties made by SyQuest herein being untrue or
incorrect; and any breach or non-performance by
SyQuest of any of its covenants, agreements or
obligations under this Agreement and the Warrant;and
SyQuest hereby agrees to reimburse each Investor
Indemnified Party for any reasonable legal or other
expenses incurred by such Investor 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
willful misconduct of Investor in connection therewith.
Indemnification of SyQuest. Investor 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 1934 Act) any of the foregoing persons (each a
"SyQuest Indemnified Party") against any Proceeding,
that it may incur in connection with any of the
transactions contemplated hereby arising out of or
based upon:
any untrue or alleged untrue statement of a material
fact by Investor 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 made, in the light of
the circumstances under which they were made, not mis-
leading by Investor or any of its affiliates or any
person acting on its or their behalf:
any of the representations or warranties made by
Investor herein being untrue or incorrect; and
any breach or non-performance by Investor of any of
its covenants, agreements or obligations under this
Agreement and
the Warrant;
and Investor hereby agrees to reimburse each
SyQuest Indemnified Party for any reasonable legal or
other expenses incurred by such SyQuest Indemnified
Party in investigating or defending any such
Proceeding; provided, however, that the foregoing
indemnity shall not apply to any Proceeding to the
extent that it arises out of or is based upon the
gross negligence or willful misconduct of SyQuest in
connection therewith.
Conduct of Claims.
Whenever a claim for indemnification shall arise
under this Section 11, 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;
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;
Such Indemnifying Party shall have the right to
retain 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 for the Indemnifying Party shall not
(except with the consent of the relevant 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 separate
from its own counsel for all Indemnified Parties in
connection with any one action or separate but similar
or related actions in the same jurisdiction arising
out of the same general allegations or circumstances;
and
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 11 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 constituting an
admission of fault, culpability or a failure to act by
or on behalf of any Indemnified Party.
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
controlled by 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.
Notices. All communications hereunder shall be in
writing, and if sent to Investor, shall be delivered
by hand, sent by registered mail or transmitted and
confirmed by facsimile to Investor at:
Olympus Securities, Ltd.
c/o Leeds Management Services
129 Front Street
Hamilton HM12
Bermuda
Attn: Anne Dupuy
Telephone: 441-295-8617
Facsimile: 441-292-2239
with a copy to:
Citadel Investment Group, L.L.C.
225 West Washington Street
Chicago, Illinois 60606
Attention: Kenneth C. Griffin
Kenneth A. Simpler
Telephone: 312-696-6125
Facsimile: 312-368-4347
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, IL 60661-3693
Attention: Robert J. Brantman
Telephone: 312-902-5289
Facsimile: 312-902-1061
if sent to SyQuest, shall be delivered by hand,
sent by registered mail or transmitted and confirmed
by facsimile to SyQuest at:
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Attention: Chief Financial Officer
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
with a copy to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Steven O. Gasser
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Miscellaneous
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.
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.
This Agreement and the Warrant shall be governed
by, and construed in accordance with, the internal
laws of the State of California, and each of the
parties hereto hereby submits to the non-exclusive
jurisdiction of any Federal court in the Northern
District of California or appropriate State court in
California 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.
The provisions of this Agreement and the Warrant
are severable, and if any clause or provision hereof
shall be held invalid, illegal or unenforceable as a
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.
The headings of the sections of this Agreement
have been inserted for convenience of reference only
and shall not be deemed to be a part of this
Agreement.
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, written or 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.
The term "affiliate" is used herein as defined
in Rule 144(a)(1) under the 1933 Act.
Notwithstanding any provision of the Certificate
of Designations to the contrary, the Company may
hereafter authorize additional or other capital stock
for issuance to Beijing Legend Group Ltd. and its
affiliates that is senior, equal or junior to the
Preferred Shares, in respect of the preferences as to
dividends and distributions and payments on the
liquidation, dissolution and winding up of the
Company, provided that any such preference shall not
exceed Beijing Legend Group Ltd.'s investment in
SyQuest.
Notwithstanding anything to the contrary in the
Certificate of Designations or the Warrant, in no
event shall any holder of Preferred Shares or the
Warrant hereunder be entitled to convert its Preferred
Shares or exercise its Warrant if, after giving effect
to such conversion or exercise, the number of shares
of Common Stock beneficially owned by such holder and
all other persons whose holdings would be aggregated
with such holder for purposes of calculating
beneficial ownership in accordance with Sections 13(d)
and 16 of the 1934 Act, and the regulations
thereunder, including, without limitation, any person
serving as an adviser to such holder (collectively,
the "Related Persons"), would exceed four and nine-
tenths percent of the outstanding shares of Common
Stock. Common Stock issuable upon conversion of the
Preferred Shares or exercise of the Warrant shall not
be deemed to be beneficially owned by such holder or
the Related Persons for this purpose.
Time of Essence. Time shall be of the essence in
this Agreement and the Warrant.
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement, all as of the
day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:
Name:
Title:
OLYMPUS SECURITIES, LTD.
By:
Name:
Title:
SCHEDULE OF EXCEPTIONS
Regarding sections 3.b, 3.c, 3.d, 3.e and 3.f,
the Company will not have sufficient shares of Common
Stock available to issue upon conversion of the
Preferred Shares and exercise of the Warrant until
such time, if ever, as the Amendment is approved by
the Company's shareholders and becomes effective.
Regarding section 3.h, Iomega Corporation
recently filed a lawsuit against SyQuest alleging both
patent and trademark infringement.
Regarding section 3.l, the number of shares of
Common Stock issuable on conversion of SyQuest's
outstanding (a) 5% Cumulative Convertible Preferred
Stock, Series 3, (b) 5% Cumulative Convertible
Preferred Stock, Series 4, and (c) Convertible
Preferred Stock, Series 5, may vary based on the
average closing prices of the Common Stock for the
five days preceding conversion. In addition, as of
September 26, 1997, there are: (i) stock options and
other commitments to employees to issue approximately
4.5 million shares of SyQuest's Common Stock;
(ii) warrants for the issuance of approximately 35.9
million shares of SyQuest's Common Stock; and (iii)
other commitments (principally for preferred stock
dividends) to issue approximately 100,000 shares of
SyQuest's Common Stock. In connection with the
foregoing, SyQuest has granted or committed to grant
certain registration rights to (1) Jayhawk
Investments, L.P. and Jayhawk Institutional Partners,
L.P. to register a total of 4,882,716 shares of its
Common Stock, (2) to The Silikahn Route to register a
total of 132,923 shares of its Common Stock, (3)
Silicon Valley Bank to register a total of 166,667
shares of its Common Stock, (4) Greyrock Business
Credit to register a total of 333,333 shares of its
Common Stock, (5) to CAM Advanced Technologies, Inc.
to register approximately 274,000 shares of its Common
Stock, (6) to Nelson Partners to register sufficient
shares of Common Stock relating to the conversion of
its 3,375 shares of Convertible Preferred Stock,
Series 5 ("Series 5 Stock") and exercise of its
warrant for the purchase of 2,362,500 shares of Common
Stock, (7) to Olympus Securities, Ltd. to register
sufficient shares of Common Stock relating to the
conversion of its 4,125 shares of Series 5 Stock and
exercise of its warrant for the purchase of 2,887,500
shares of Common Stock, (8) to CC Investments LDC to
register sufficient shares of Common Stock relating to
the conversion of its 5,000 shares of Series 5 Stock
and exercise of its warrant for the purchase of
3,500,000 shares of Common Stock, (9) to Capital
Ventures International to register sufficient shares
of Common Stock relating to the conversion of its
2,500 shares of Series 5 Stock and exercise of its
warrant for the purchase of 1,750,000 shares of Common
Stock, (11) RGC International Investors to register
sufficient shares of Common Stock relating to the
conversion of its 5,000 shares of Series 5 Stock and
exercise of its warrant for the purchase of 3,500,000
shares of Common Stock, and (12) Multiple Import
Export, Ltd. to register sufficient shares of Common
Stock relating to the conversion of its 5,000 shares
of Series 5 Stock and exercise of its warrant for the
purchase of 3,500,000 shares of Common Stock.
SyQuest has also committed to issue $360,000 of
shares similar in nature to the Preferred Shares and a
warrant for the purchase of 360,000 shares of Common
Stock to Bain & Co., Inc., and to register (a) the
Common Stock into which such preferred shares will be
convertible, and (b) the Common Stock into which such
warrant will be exercisable.
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF CONVERTIBLE PREFERRED STOCK, SERIES 5
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 thirty thousand (30,000)
shares of Convertible Preferred Stock, Series 5, of
the Company, as follows:
RESOLVED, that the Company is authorized
to issue 30,000 shares of Convertible Preferred Stock,
Series 5, $.001 par value (the "Series 5 Preferred
Shares"), which shall have the following powers,
designations, preferences and other special rights:
Reserved.
Conversion of Series 5 Preferred Shares. The
holders of the Series 5 Preferred Shares shall have
the right, at their option, but subject to the terms
of the purchase agreement with the Company governing
the terms of such holder's purchase of Series 5
Preferred Shares (the "Purchase Agreement"), to
convert the Series 5 Preferred Shares into shares of
the common stock of the Company, $.0001 par value, as
such stock now exists or may be changed from time to
time hereafter ("Common Stock"), on the following
terms and conditions:
Conversion Right. Any or all of the Series 5
Preferred Shares shall be convertible at any time
(except as limited herein, the Purchase Agreement or
by other applicable law) 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 5 Preferred Share shall have a
stated value of $1,000 (the "Stated Value") for the
purpose of such conversion and the number of shares of
Common Stock issuable on conversion of each Series 5
Preferred Share shall be determined by dividing the
Stated Value thereof by the Conversion Price then in
effect.
Conversion Price. The Conversion Price shall be
the greater of (1) the arithmetical average of the
closing sale prices per share of Common Stock on the
five consecutive trading days preceding the
delivery of any Conversion Notice (as that term is
hereinafter defined), as reported by the Nasdaq
National Market (the "NNM"), or, if the NNM is not
then the principal trading market for the Common
Stock, on the principal trading market for the Common
Stock at that time, or, if there is then no such
principal trading market, the fair market value per
share of Common Stock during such period as determined
in good faith by the Board of Directors of the
Company, and (2) ninety percent of such closing sale
price on the day immediately preceding the delivery of
the Conversion Notice (as that term is hereinafter
defined); provided that the Conversion Price shall not
be greater than the closing sale price per share of
Common Stock as reported by the NNM on the first
business day prior to the first day that Series 5
Preferred Shares are issued to the initial holder
thereof pursuant to such holder's Purchase Agreement.
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 5 Preferred Shares
disagree with said valuation, the value of the Common
Stock will be determined by binding arbitration in
accordance with the Commercial Arbitration Rules then
prevailing of the American Arbitration Association,
and such arbitration shall proceed in San Francisco,
California, or at such other place as agreed to in
writing by the Company and the holders of the Series 5
Preferred Shares.
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 5
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 5
Preferred Shares been converted immediately prior to
such record date or effective date and the resulting
Common Stock had been subject to such dividend,
distribution, subdivision or combination. Such
adjustment shall be made successively whenever any
event specified above shall occur.
Conversion Notice. On presentation and
surrender to the Company (or at any office or agency
maintained for the transfer of the Series 5 Preferred
Shares) of the certificate(s) ("Preferred Stock
Certificate(s)") for Series 5 Preferred Shares so to
be converted, duly endorsed in blank for transfer or
accompanied by proper instruments of assignment or
transfer in blank and written notice of conversion (a
"Conversion Notice"), the holder of such Series 5
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 5 Preferred Shares being converted, and
cash for any fractional share of Common Stock on the
foregoing basis. If the Common Stock can be issued
without a restrictive legend pursuant to the Purchase
Agreement, on request made by the holders of the
Series 5 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 if the Company receives the Preferred Stock
Certificate(s) either (1) by 10:00 a.m. California
time within the following two business days, or (2) on
the next business day after it is deposited for next
day delivery with a nationally recognized overnight
delivery service. The Series 5 Preferred Shares shall
be deemed to have been converted, and the person
converting the same to have become the holder of
record of Common Stock, for all purposes as of the
date of delivery of the Conversion Notice.
Reservation of Shares. The Company shall, as
soon as practicable hereafter and then for so long as
any of the Series 5 Preferred Shares are outstanding,
reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of
effecting the conversion of the Series 5 Preferred
Shares, such number of shares of Common Stock as shall
from time to time be sufficient to effect the
conversion of all of the Series 5 Preferred Shares
then outstanding.
Fractional Shares. The Company shall not issue
any fraction of a share of Common Stock on any
conversion, but shall pay cash therefor at the
Conversion Price then in effect multiplied by such
fraction.
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 5 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 5 Preferred Shares surrendered for
conversion are registered on the Company's records,
and no such conversion or issuance of Common Stock
shall be made unless and until the person requesting
such issuance 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.
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 5 Preferred Shares and the
exercise of the Warrants to purchase Common Stock (the
"Warrants") issued by the Company to the holders of
the Series 5 Preferred Shares pursuant to the Purchase
Agreement on the date of initial issuance of the
Series 5 Preferred Shares and (2) issuable on
conversion of all remaining outstanding Series 5
Preferred Shares (determining such number as if such
Series 5 Preferred Shares were converted as of the
Conversion Date relating to such Conversion Notice)
and (3) issuable on exercise of the Warrants
(determined based on the Exercise Price then in
effect, as defined in the Warrants) 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 5 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 NNM 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 5 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)(i) (the "Stockholder
Consent") is obtained or is no longer required. The
Excess Preferred Shares will be allocated among the
holders delivering Subject Conversion Notices on a pro
rata basis based on the relative number of Series 5
Preferred Shares identified in each such Subject
Conversion Notice on any given date. 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 NNM 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 5 Preferred Shares in excess of the 19.9%
Limit.
Stockholder Approval. If there are Excess
Preferred Shares as described in section (2)(i), the
Company shall promptly use its best efforts to obtain
the Stockholder Consent, including, without
limitation, causing its Board of Directors to call a
special meeting of stockholders and recommend such
approval.
Voting Rights. Holders of Series 5 Preferred
Shares shall have no voting rights, except as required
by law.
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 5 Preferred Shares shall be entitled to
receive in cash out of the assets of the Company,
whether from capital or from earnings available for
distribution to its stockholders (the "Preferred
Funds"), before any amount shall be paid to the
holders of the Common Stock, an amount equal to the
Stated Value per Preferred Share; provided that, if
the Preferred Funds are insufficient to pay the full
amount due to the holders of Series 5 Preferred Shares
and holders of shares of other classes or series of
preferred stock of the Company that are of equal rank
with the Series 5 Preferred Shares as to payments of
Preferred Funds (the "Pari Passu Shares"), then each
holder of Series 5 Preferred Shares and Pari Passu
Shares shall receive a percentage of the Preferred
Funds equal to the full amount of Preferred Funds
payable to such holder as a percentage of the full
amount of Preferred Funds payable to all holders of
Series 5 Preferred Shares and Pari Passu Shares. The
purchase or redemption by the Company of stock of any
class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into
any other corporation or corporations, nor the sale or
transfer by the Company of less than substantially all
of its assets, shall, for the purposes hereof, be
deemed to be a liquidation, dissolution or winding up
of the Company. No holder of Series 5 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.
Preferred Rank. With respect to preferences as
to payments on the liquidation, dissolution or winding
up of the Company, the Series 5 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 5
Preferred Shares are outstanding, no Common Stock and
no other capital stock of the Company ranking junior
to the Series 5 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
5 Preferred Shares) unless in each case the Company
offers to redeem the Series 5 Preferred Shares on
substantially the same terms (provided that the
redemption price shall not be less than $1,000 per
Series 5 Preferred Share). Notwithstanding any
provision hereof to the contrary, the Company may
hereafter authorize additional or other capital stock
for issuance to Beijing Legend Group Ltd. and its
affiliates that is senior, equal or junior to the
Series 5 Preferred Shares, in respect of the
preferences as to payments on the liquidation,
dissolution and winding up of the Company, but the
Company may not otherwise hereafter, for so long as
any Series 5 Preferred Shares are outstanding,
authorize additional or other capital stock that is of
senior or equal rank to the Series 5 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 5
Preferred Shares shall maintain their relative
powers, designations and preferences provided herein.
Lost or Stolen Certificates. On receipt by the
Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of any Preferred
Stock Certificate, and (in the case of loss, theft or
destruction) of any indemnification undertaking by the
holder to the Company that is reasonably satisfactory
to the Company, and on surrender and cancellation of
such Preferred Stock Certificate, if mutilated, the
Company shall execute and deliver a new Preferred
Stock Certificate of like tenor and date; provided
that the Company shall not be obligated to reissue any
lost, stolen or destroyed Preferred Stock Certificate
if the holder thereof complies with this Section 6 and
contemporaneously requests the Company to convert such
Series 5 Preferred Shares into Common Stock.
Amendment. So long as any Series 5 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 5
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 5 Preferred Shares.
Company's Right to Redeem at Its Election. At
any time after the issuance of Preferred Shares, the
Company shall have the right, in its sole discretion,
to redeem (a "Redemption"), from time to time, any or
all of the Preferred Shares. If the Company elects to
redeem some, but not all, of the Preferred Shares then
outstanding, the Company shall redeem a pro-rata
amount (based on the number of Preferred Shares then
held by holders of the Preferred Shares) from each
holder of the Preferred Shares.
Redemption Price. The "Redemption Price" shall
be an amount per Preferred Share equal to one-hundred
twenty percent (120%) of the Stated Value.
Mechanics of Redemption. The Company shall
effect each Redemption by delivering written notice
("Notice of Redemption") to each holder of the
Preferred Shares at the address and facsimile number
of such holder appearing in the Company's Preferred
Share register. Such Notice of Redemption shall be
deemed to have been delivered and received (i) on the
day it is sent if delivered by facsimile so as to be
received prior to 5:00 p.m. local time at the holder
of Preferred Shares' facsimile number as listed in
the Purchase Agreement, or one (1) business day later
if it is delivered so as to be received after 5:00
p.m. local time at the holder of Preferred Shares'
facsimile number as listed in the Purchase Agreement,
(ii) one (1) business day, if delivery is within the
United States, after the Company's sending (by
overnight courier) of such Notice of Redemption, or
(iii) two (2) business days, if delivery is outside
the United States, after the Company's sending (by two
(2) day courier) of such Notice of Redemption. Such
Notice of Redemption shall indicate (y) the number of
Preferred Shares that have been selected for
redemption, and (z) the date that such redemption is
to become effective. Once the Notice of Redemption is
deemed to have been delivered and received, the
Preferred Shares designated for a Redemption may be
converted into shares of Common Stock if a Conversion
Notice is delivered in accordance with Section 2(d)
hereof within five business days of the date the
Notice of Redemption is deemed delivered and received.
After such five day period, any Preferred Shares
designated for Redemption not so converted shall no
longer be convertible into Common Stock, and such
Preferred Shares shall be delivered to the Company by
the seventh business day after the Notice of
Redemption is deemed delivered and received.
Payment of Redemption Price. Each holder
submitting Preferred Shares being redeemed under this
Section (8) shall deliver such holder's Preferred
Stock Certificates so redeemed to the Company, and the
Company shall pay the applicable Redemption Price to
that holder within five (5) business days after such
holder's Preferred Stock Certificates (or an
indemnification undertaking satisfactory to the
Company with respect to such shares in the case of
their loss, theft or destruction) are delivered to the
Company.
IN WITNESS WHEREOF, the Company has caused this
certificate to be signed by Bob L. Corey, its Chief
Financial Officer, as of September 3, 1997.
SYQUEST TECHNOLOGY, INC.
By:
Title: Chief Financial Officer
EXHIBIT B
THE SECURITIES REPRESENTED BY OR ISSUABLE ON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
Warrant No. 85
COMMON STOCK PURCHASE WARRANT
SYQUEST TECHNOLOGY, INC.
This Warrant certifies that ________________
("Holder"), or its registered assigns, is the
registered holder of one Warrant (the "Warrant")
expiring on May 1, 2004 (the "Termination Date") to
purchase shares of common stock, par value $.0001 per
share (the "Common Stock"), of SYQUEST TECHNOLOGY,
INC., a Delaware corporation (the "Issuer"). This
Warrant entitles the holder to purchase from the
Issuer up to __________ Warrant Shares (as defined
below), subject to adjustment, at a per share Exercise
Price (as defined below). A "Warrant Share"
initially represents one fully paid and nonassessable
share of Common Stock, subject to adjustment pursuant
to paragraph 10.
This Warrant was issued on ____________ (the
"Closing Date"), pursuant to the Securities Purchase
Agreement dated _____________ (the "Purchase
Agreement"), between the Issuer and Holder, and is
subject to the terms and conditions thereof. Unless
otherwise defined herein, capitalized terms used
herein have the meanings respectively ascribed to them
in the Purchase Agreement. A copy of the Purchase
Agreement may be obtained by the registered holder
hereof upon written request to the Issuer.
The exercise price per Warrant Share (plus
transfer taxes, if applicable, the "Exercise Price")
shall be the greater of (a) 130 percent of the
arithmetical average of the closing sale prices per
share of Common Stock on the five consecutive trading
days preceding the delivery of any Exercise Notice (as
defined below) as reported by the Nasdaq National
Market (the "NNM") or, if the NNM is not then the
principal trading market for the Common Stock, on the
principal trading market for the Common Stock at that
time or, if there is then no such principal trading
market, the fair market value per share of Common
Stock during such period as determined in good faith
by the Board of Directors of the Issuer and (b) 130
percent of such closing sale price on the day
immediately preceding the delivery of the Exercise
Notice; provided that in no event shall the Exercise
Price exceed $3.0469. If the value of the Common
Stock is to be determined by the Board of Directors of
the Issuer and the holder of this Warrant disagrees
with said valuation, the value of the Common Stock
will be determined by binding arbitration in
accordance with the then prevailing commercial
arbitration rules of the American Arbitration
Association, and such arbitration shall proceed in San
Francisco, California, or at such other place as
agreed to in writing by the Issuer and the holder of
this Warrant. The Exercise Price multiplied by the
Exercise Amount (as defined below) at any Exercise
Date (as defined below) is referred to as a "Warrant
Purchase Price".
The number of Warrant Shares for which this
Warrant may be exercised will increase by 6.67% 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
Purchase Agreement) shall be effective not later than
December 4,1997 (provided that such condition need not
be satisfied until January 5, 1998 if the Securities
and Exchange Commission reviews the Registration
statement), and (ii) on the day after the Issuer's
1997 Special Meeting of stockholders, but in any event
not later than December 4, 1997 (provided that such
condition need not be satisfied until January 5, 1998
if the Securities and Exchange Commission reviews the
proxy filing) the Issuer shall have the number of duly
authorized shares of Common Stock reserved for
issuance to Holder equal to the total number then
issuable upon full exercise of this Warrant and full
conversion of the Preferred Shares (as defined in the
Securities Purchase Agreement) or Issuer is otherwise
able to deliver shares of Common Stock upon such
exercise or conversion.
This Warrant shall have the following additional
terms:
This Warrant is not exercisable until the lapse of a
period ending on the 65th day (the "Notice Period")
after the holder delivers a notice (a "65 Day Notice")
to the Issuer designating an aggregate number of
Warrant Shares (the "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, this Warrant will become
exercisable for some or all of the remaining Warrant
Shares upon delivery of one or more 65 Day Notices
increasing the Exercisable Number after a further
Notice Period. From time to time following the Notice
Period, this Warrant may be exercised on any Business
Day prior to the Termination Date (an "Exercise Date")
for any quantity of Warrant Shares, such that the
aggregate number of Warrant Shares issued hereunder is
less than or equal to the Exercisable Number. To
exercise this Warrant, the registered holder must,
prior to the Termination Date, surrender this Warrant
to the Issuer at its principal office with the
Exercise Notice attached hereto (an "Exercise Notice")
duly completed and signed by the registered holder
hereof and stating the total number of Warrant Shares
in respect of which this Warrant is then exercised
(the "Exercise Amount") and tender the applicable
Warrant Purchase Price. This Warrant shall be
exercisable only in the minimum amount of 10,000
Warrant Shares and integral multiples of 10,000
Warrant Shares in excess thereof (or such lesser
amount as shall constitute the full amount remaining
of this Warrant). As used herein the term "Business
Day" means any day on which banks in the State of
California are open for business.
On the Business Day following an Exercise Date (an
"Issue Date"), the Issuer shall issue and cause to be
delivered to the registered holder hereof at such
address as such holder shall specify in the Exercise
Notice a certificate or certificates for the number of
full Warrant Shares issuable upon the exercise of this
Warrant, registered in such holder's name, together
with cash (if any) as provided in paragraph 4. Such
certificate or certificates shall be deemed to have
been issued and any person so designated to be named
therein shall be deemed to have become a holder of
record of such Warrant Shares as of such Exercise
Date. If the certificate or certificates for the
number of the Warrant Shares can be issued without a
restrictive legend pursuant to the Purchase Agreement,
on request made by the holders of the Warrant in the
Exercise Notice, the Company will authorize and
instruct its transfer agent to issue the such
certificate or certificates electronically.
If on such Issue Date the number of Warrant Shares to
be delivered shall be less than the total number of
Warrant Shares deliverable hereunder, there shall be
issued to the holder hereof or his assignee on such
Issue Date a new warrant substantially identical to
this Warrant, except that such new warrant shall
evidence the right to purchase the number of Warrant
Shares equal to (x) the total number of Warrant Shares
deliverable hereunder less (y) the number of Warrant
Shares so delivered.
The Issuer shall not be required to issue fractional
Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable
upon the exercise of this Warrant shall be computed on
the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented.
If any fraction of a Warrant Share would, except for
the provisions of this paragraph 4, be issuable on the
exercise of this Warrant, the Issuer shall pay an
amount in cash equal to the last per share sale price
of the Common Stock (on the NNM or the Principal
Market, as the case may be) on the day immediately
preceding the Exercise Date, multiplied by such
fraction (subject to adjustment pursuant to paragraph
10); provided that if at the time that the Exercise
Price is to be determined the NNM is not the principal
trading market for the Common Stock and there is no
Principal Market, then the amount of cash to be paid
per fractional Warrant Share shall be determined in
good faith by the Board of Directors of the Issuer.
If the holder of this Warrant disagrees with such
determination, the amount of cash to be paid per
fractional Warrant Share will be determined by binding
arbitration in accordance with the then prevailing
commercial arbitration rules of the American
Arbitration Association, and such arbitration shall
proceed in San Francisco, California, or at such
other place as agreed to in writing by the Issuer and
the holder of this
Warrant.
Only after Issuer has amended its Certificate of
Incorporation to increase the number of shares of its
authorized Common Stock to 240,000,000, and for so
long as this Warrant has not been exercised in full,
the Issuer shall at all times prior to the Termination
Date reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common
Stock, for issuance upon exercise of this Warrant, the
maximum number of shares of Common Stock then so
issuable. In furtherance of the foregoing, but
subject to adjustment pursuant to paragraph 10 and to
increase pursuant to the fourth paragraph hereof, the
Issuer shall reserve for issuance hereunder after
Issuer has amended its Certificate of Incorporation to
increase the number of shares of its authorized Common
Stock to 240,000,000, not less than ___________ shares
of Common Stock. In the event the number of shares of
Common Stock or other securities issuable in respect
of the Warrant Shares exceeds the authorized number of
shares of Common Stock or other securities, the Issuer
shall promptly take all actions necessary to increase
the authorized number, including causing its Board of
Directors to call a special meeting of stockholders
within thirty days of the date on which such excess
first existed and recommend such increase for approval
by the Issuer's stockholders. The Issuer shall use
its best efforts to obtain stockholder approval of the
increase to the authorized number of shares of Common
Stock.
By accepting delivery of this Warrant, the registered
holder hereof covenants and agrees with the Issuer not
to exercise or transfer this Warrant or any Warrant
Shares except in compliance with the Purchase
Agreement and this Warrant.
By accepting this Warrant, the registered holder
hereof covenants and agrees with the Issuer that this
Warrant may not be sold, assigned, conveyed,
encumbered, pledged, hypothecated or in any other
manner disposed of or transferred, as a whole or in
part, unless and until such holder shall deliver to
the Issuer (i) written notice of such transfer and of
the name and address of the transferee, (ii) a written
agreement, in form and substance reasonably
satisfactory to the Issuer, of the transferee to
comply with the applicable terms of the Purchase
Agreement and this Warrant and (iii) an opinion of
counsel for such holder, reasonably satisfactory to
the Issuer in form, scope and substance, that such
transaction will comply with all applicable securities
laws and regulations. If a portion of this Warrant is
transferred, all rights of the registered holder
hereunder may be exercised by the transferee (subject
to the requirement that such transferee shall provide
a like opinion of counsel in respect of the number of
Warrant Shares transferred with the portion of this
Warrant), provided that any registered holder of this
Warrant may deliver a 65 Day Notice, or
an Exercise Notice subject to such holder's portion of
this Warrant.
The Issuer will pay all documentary stamp taxes (if
any) attributable to the issuance of Warrant Shares
upon the exercise of this Warrant by the
registered holder hereof; provided that the Issuer
shall not be required to pay any tax or taxes which
may be payable in respect of any transfer
involved in the registration of this Warrant or any
certificates for Warrant Shares in a name other than
that of the registered holder of this Warrant
surrendered upon the exercise of this Warrant, and the
Issuer shall not be required to issue or deliver this
Warrant or certificates for Warrant Shares unless or
until the person or persons requesting the issuance
thereof shall have paid to the Issuer the amount of
such tax or shall have established to the satisfaction
of the Issuer that such tax has been paid.
In case this Warrant shall be mutilated, lost, stolen
or destroyed, the Issuer may in its discretion issue
in exchange and substitution for and upon cancellation
of the mutilated Warrant, or in lieu of and
substitution for the lost, stolen or destroyed
Warrant, a new Warrant of like tenor, but only upon
receipt of evidence reasonably satisfactory to the
Issuer of such loss, theft or destruction of such
Warrant and indemnity, if requested, reasonably
satisfactory to the Issuer. Applicants for a
substitute Warrant shall also comply with such other
reasonable regulations and pay such other reasonable
charges as the Issuer may prescribe.
In case of any reclassification, capital
reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation
or merger of the Issuer with or into another
corporation (other than a consolidation or merger in
which the Issuer is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares
of Common Stock), the Issuer shall cause effective
provision to be made so that the Holder shall have the
right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or
other securities or property (including cash)
receivable upon such reclassification, capital
reorganization or other change, consolidation or
merger by a holder of the number of shares of
Common Stock that could have been purchased upon
exercise of the Warrant immediately prior to such
reclassification, capital reorganization or
other change, consolidation or merger. Any such
provision shall include provision for adjustments that
shall be as nearly equivalent as may be
practicable to the adjustments provided for in this
Section 9. The foregoing provisions shall similarly
apply to successive reclassifications, capital
reorganizations and other changes of outstanding
shares of Common Stock and to successive
consolidations or mergers. If the consideration
received by the holders of Common Stock is other than
cash, the value shall be as determined by the Board of
Directors of the Company acting in good faith.
If and whenever the Issuer shall effect a stock
dividend, a stock split, a stock combination, or a
reverse stock split of the Common Stock, the number of
Warrant Shares purchasable hereunder and the Exercise
Price shall be proportionately adjusted in the manner
determined by the Issuer's Board of Directors acting
in good faith. The number of shares, as so adjusted,
shall be rounded down to the nearest whole number and
the Exercise Price shall be rounded to the nearest
cent.
//
This Warrant shall not be valid unless signed by
the Issuer.
IN WITNESS WHEREOF, SyQuest Technology, Inc. has
caused this Warrant to be signed by its duly
authorized officer.
Dated:
SYQUEST
TECHNOLOGY, INC.
By:
_______________________
Name:
Title:
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise of the Warrant)
[DATE]
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Attention: Chief Financial Officer
Re: Warrant No.
Ladies and Gentlemen:
The undersigned is the registered holder
of the above-referenced warrant (the "Warrant") issued
by SyQuest Technology, Inc., the original of which is
attached hereto, and hereby elects to exercise the
Warrant to purchase _________ Warrant Shares (as
defined in the Warrant) and herewith tenders
$_____________ by certified or official bank check to
the order of SyQuest Technology, Inc. as payment for
such Warrant Shares in accordance with the terms of
the Warrant and the Purchase Agreement (as defined in
the Warrant).
In accordance with the attached Warrant,
the undersigned requests that certificates for such
Warrant Shares be registered in the name of and
delivered to the undersigned at the following address:
________________________
________________________
________________________
[If the number of Warrant Shares to be
delivered is less than the total number of Warrant
Shares deliverable under the Warrant, insert the
following -- The undersigned requests that a new
warrant substantially identical to the attached
Warrant be issued to the undersigned evidencing the
right to purchase the number of Warrant Shares equal
to (x) the total number of Warrant Shares deliverable
under the Warrant less (y) the number of Warrant
Shares to be delivered in connection with this
exercise.]
NAME OF REGISTERED
HOLDER
[ADDRESS]
By:
_____________________________
Name:
Title:
Contact: Bob Corey
Chief Financial Officer
SyQuest Technology
(510)226-4000
FOR IMMEDIATE RELEASE
SYQUEST ADDS $14.7 MILLION IN LATEST INVESTMENT ROUND
FREMONT, Calif., October 6, 1997 -- SyQuest
Technology, Inc. (NASDAQ:SYQT), the inventor of the
high-performance cartridge category, today announced
the completion of a $10.0 million private placement
of securities and the exercise of outstanding
warrants for approximately $4.7 million. The
completion of the private placement closes the Series
5 round of financing totaling $30.0 million.
The completion of this round of financing
brings the company's total financing in the last 16
months to in excess of $159 million. The proceeds
will be used primarily to fund aggressive marketing
efforts in the U.S. and abroad.
Under the terms of the latest private
placement, the investors purchased shares of SyQuest
convertible preferred stock, Series 5, for proceeds
of $10.0 million. The investors also will receive
warrants to purchase 7.0 million shares of SyQuest
common stock. Details of the private placement will
be disclosed in a Form 8K filed with the Securities
and Exchange Commission.
Further, investors have exercised outstanding
warrants to purchase shares of common stock
generating approximately $4.7 million of proceeds to
the company. Upon completion of the exercise of
outstanding warrants the company will have
approximately 62.0 million common shares issued and
outstanding. Additionally, the company is currently
negotiating with investors for the exercise of
outstanding warrants to purchase common stock which
will potentially generate up to more than $9.0
million of additional proceeds to the company.
About SyQuest
Based in Fremont, Calif., SyQuest Technology,
Inc. invented the high performance cartridge
category. Since its inception in 1982, the company
has shipped more than 16 million cartridges which
people use to hold their ideas and creations. SyQuest
(SYQT) is publicly traded on the NASDAQ's National
Market System. SyQuest is located at 47071 Bayside
Parkway, Fremont, Calif. 94538-6517. Phone: (510)
226-4000. URL: 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 trade names are the property
of their respective companies.
