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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended December 31, 1996
Commission file number 0-19674
SYQUEST TECHNOLOGY, INC.
(Registrant)
DELAWARE 94-2793941
- ------------------------------- ------------------------
(State or other jurisdiction of ( I.R.S. Employer
incorporation or organization) Identification Number)
47071 Bayside Parkway
Fremont, California 94538
Telephone: (510) 226-4000
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(Registrant's principal executive
offices and telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No________
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As of December 31, 1996, 16,330,489 shares of the Registrant's common stock,
-----------------------------
$0.001 par value, were issued and outstanding.
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INDEX
SYQUEST TECHNOLOGY, INC.
PART I FINANCIAL INFORMATION Page no.
ITEM 1. Consolidated Condensed Financial Statements (unaudited)
Consolidated condensed statements of operations--Three months
ended December 31, 1996 and December 31, 1995.....................3
Consolidated condensed balance sheets--December 31, 1996
and September 30, 1996............................................4
Consolidated condensed statements of cash flows--Three
months ended December 31, 1996 and December 31, 1995..............5
Notes to consolidated condensed financial statements--
December 31, 1996...............................................6-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................8-14
PART II OTHER INFORMATION
ITEM 1. Legal proceedings................................................15
ITEM 2. Changes in Securities............................................17
ITEM 6. Exhibits and Reports on Form 8-K.................................19
SIGNATURES.................................................................20
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SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three months ended December 31,
1996 1995
-------- --------
Net revenues $48,312 $78,667
Cost of revenues 37,267 80,090
Provision for losses on purchase commitments - 7,839
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Gross Profit (loss) 11,045 (9,262)
Operating Expenses:
Selling, general and administrative 11,328 14,464
Research and development 5,100 7,160
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Total operating expenses 16,428 21,624
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(Loss) from operations (5,383) (30,886)
Net interest income (expense) (1,431) 85
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(Loss) before income taxes (6,814) (30,801)
Provision for income taxes - 3,000
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Net (loss) ($6,814) ($33,801)
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Net (loss) per share ($0.86) ($2.98)
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Common and common equivalent shares
used in computing per share amounts 14,673 11,324
======== ========
See notes to consolidated condensed financial statements
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SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
December 31, September 30,
1996 1996
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(UNAUDITED) (NOTE)
ASSETS
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Current assets:
Cash and cash equivalents $ 14,259 $ 3,670
Accounts receivable, net 34,921 30,341
Inventories , net 22,264 10,538
Other current assets 3,135 2,471
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Total current assets 74,579 47,020
Net property, equipment and leasehold improvements 26,476 27,180
Other assets 839 981
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$ 101,894 $ 75,181
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Bank borrowings $ 19,789 $ 19,268
Accounts payable 16,080 23,917
Accrued expenses and other liabilities 20,448 18,671
Income taxes payable - 1,966
Current portion of long-term debt 18,573 20,549
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Total current liabilities 74,890 84,371
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Other liabilities 160 192
Long-term debt 17,102 20,971
Stockholders' equity (deficit):
Preferred stock 5 18
Common stock 16 14
Additional paid in capital 149,500 102,580
Treasury stock (12,855) (12,855)
Retained (deficit) (126,924) (120,110)
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Total stockholders' equity (deficit) 9,742 (30,353)
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$ 101,894 $ 75,181
=========== ==========
Note: The consolidated condensed balance sheet at September 30, 1996 has been
derived from the audited financial statements at that date.
See notes to consolidated condensed financial statements
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SYQUEST TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended December 31,
OPERATING ACTIVITIES: 1996 1995
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<S> <C> <C>
Net (loss) ($6,814) ($33,801)
Adjustments to reconcile net (loss) to cash used in
operating activities:
Depreciation 1,680 2,343
Deferred income taxes - 3,000
Provision for bad debts 257 1,601
Other - 2
Net changes in current assets and current liabilities:
Accounts receivable (4,837) (9,470)
Inventories (11,726) (1,805)
Accounts payable 1,475 18,018
Accrued expenses and other liabilities 439 -
Other (696) 2,523
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Net cash used in operating activities (20,222) (17,589)
Investing activities:
Purchase of equipment and leasehold improvements (976) (6,908)
Other assets 142 37
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Net cash used in investing activities (834) (6,871)
Financing activities:
Proceeds from issuance of common stock 8,531 -
Proceeds from issuance of preferred stock 28,438 -
Net proceeds from bank borrowings 521 6,013
Repayments on long term debt (5,845)
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Net cash provided by financing activities 31,645 6,013
Net increase (decrease) in cash and cash equivalents 10,589 (18,447)
Cash and cash equivalents at beginning of the period 3,670 29,648
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Cash and cash equivalents at end of the period $ 14,259 $11,201
========= ========
</TABLE>
Non-Cash Financing Activities
During the period from October 18, 1996 to October 25, 1996, three suppliers
converted $9,231 thousand in notes payable to 1,504,349 shares of the Company's
common stock pursuant to agreements made by the Company with each supplier.
During December 1996, the Company accrued $81 thousand to additional paid in
capital, for the performance of professional marketing services. Consideration
for these services is to be met by the issuance of common stock purchase
warrants, entitling the buyer to purchase shares of unissued common stock of the
Company.
During December 1996, the Company paid $628 thousand of accrued preferred
dividends payable with 112,380 shares of the Company's common stock.
See notes to consolidated condensed financial statements
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SYQUEST TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
NOTE: 1- BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for fair
presentation have been included.
Operating results for the three month period ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K, as amended, for the year ended September 30, 1996.
NOTE: 2- INVENTORIES
Inventories are comprised of the following: December 31, September 30,
1996 1996
--------- --------
(In thousands)
Raw materials $11,205 $ 5,005
Work in process 3,746 4,481
Finished goods 7,313 1,052
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$22,264 $10,538
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NOTE: 3 - NET LOSS PER SHARE
At December 31, 1996, the Company had 45,560 shares of convertible preferred
stock issued and outstanding, of which 40,060 shares are entitled to receive
dividends at the rates of 7% or 5%, with an assured incremental yield embedded
in the conversion terms. The computation of earnings per share for the quarter
ended December 31, 1996, includes two adjustments increasing the loss
attributable to common shareholders and which aggregate $6.0 million. A one-time
adjustment of $5.3 million is for the "imbedded yield" representing the discount
on the assumed potential conversion of the Cumulative Convertible Preferred
Stock, Series 1 and the 5% Cumulative Preferred Stock, Series 2, both of which
were issued during the quarter ended December 31, 1996. The second adjustment of
$0.6 million is for dividends payable on the Company's preferred stock issues
that require payment of cumulative dividends. The loss per share for the three
month period ended December 31,1996 is based on the weighted average number of
shares of common stock and common stock equivalents, when appropriate,
outstanding during the period.
NOTE: 4 - LINES OF CREDIT
On January 17, 1997, the Company renegotiated its line of credit with a
financial institution, continuing the existing terms and extending the line
through January 31, 1998. The new line provides for a limit on borrowings of the
lesser of $30 million or 80 percent of the Company's eligible accounts
receivable. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K, as amended, for the year ended September 30, 1996.
NOTE: 5 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has raised significant financing during the quarter ended December
31, 1996. See Part II, item 2 of this Form 10-Q.
NOTE: 6 - INCOME TAXES
No provision for income taxes has been recorded as the Company has incurred net
losses. Deferred tax assets consisting primarily of the tax effects of net
operating loss carryforwards are fully reserved due to the uncertainty of their
realization based upon the weight of currently available information.
NOTE: 7 - LITIGATION
See Part II, item 1, of this Form 10-Q for a description of pending legal
proceedings.
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SYQUEST TECHNOLOGY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The Company continues to face significant risks associated with market
acceptance of new products. The Company faces additional risks associated with
technology and product development, risks relating to new product introduction,
changes in the Company's marketplace, liquidity issues, and risks associated
with competition from other companies. The Company has experienced delays in
development of the SyJet product and anticipates a continued decline in selling
volumes and average selling prices of its other products. As a result, the
Company is in the process of reviewing its operations with the objective to
reduce its internal cost structure. However, there can be no assurance that the
Company will be successful in overcoming the delays in delivering the SyJet
product, competing against the product offerings of companies with greater cash
and operating resources, or in securing the resources to aggressively ramp
production of the SyJet. The Company requires additional cash resources in the
near future to fund working capital requirements, meet its debt obligations and
to fund incurred losses. Management's plans with respect to meeting these cash
needs include additional equity funding, expansion of the asset-based loan
facility and restructuring of notes payable. There can be no assurance that the
Company will be able to secure additional cash resources when needed, if at all,
or on favorable terms. An inability to overcome these risk factors would have a
material adverse affect on the Company's financial performance and on its
liquidity.
Net Revenues
Net revenues for the quarter ended December 31, 1996 were $48.3 million,
compared to $78.7 million reported for the comparable prior year quarter.
Revenue continued to be affected by lower volumes on the Company's mature drive
and cartridge products not offset by new product offerings. The decline in
revenue was partially mitigated by the continued production and sale of the
EZFlyer 230 drive and associated cartridge products. While the Company continues
its efforts to increase its manufacturing output for SyJet to meet the sales
demand, there can be no assurances that the Company will be successful in
manufacturing the required unit volumes or that the product will be accepted in
the marketplace.
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Revenues to date for the Company's second fiscal quarter ending March 31, 1997
are significantly below the levels experienced in the prior quarter over the
same comparable time period. The Company believes that this is attributable to
a number of factors including its inability to meet the demand for its new SyJet
1.5 Gigabyte removable hard drive product, due to unexpected delays in ramping
up production, and a reduction in sales of the Company's mature products.
Should the current sell through rate continue, the revenues for the second
fiscal quarter will be adversely affected.
Absent a substantial increase in sales of the Company's products prior to the
end of the second fiscal quarter, the Company will incur losses in excess of
those incurred in the first fiscal quarter. Lower than expected revenues have
resulted in a reduction in the availability of cash reserves and will
necessitate that the Company raise additional equity capital in the near future.
There can be no assurances that the Company will be able to raise the capital
required. Additionally, factors such as the sell through rate in the channel,
price pressures on the Company's products, and the inability to ramp SyJet
production will have an adverse impact on revenues.
The Company is in the process of performing an extensive review of its operating
cost structure and will implement spending levels consistent with revenue
expectations.
Gross Profit (Loss)
The Company recorded a gross profit for the quarter ended December 31, 1996 of
$11.0 million, or 23 percent of net revenues, compared to a gross loss of $9.2
million, or 12 percent of net revenues, in the comparable prior year quarter.
The increase in margins is principally attributable to the realization of
significant production economies including reductions in scrap and rework. These
efficiencies have generated excess capacity.
Comparatively, prior year quarter margins were negatively affected by a $7.8
million provision recorded by the Company related to certain firm purchase
commitments to its component suppliers.
Factors such as volatility in the drive and cartridge markets, unexpected
production delays and costs, and an inability to meet production schedules and
sales demand could have an adverse effect on margins.
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Consequently, there can be no assurances that the Company will achieve necessary
improvements in margins in the future.
Selling, General and Administrative Expenses
Selling, general and administrative expenses aggregated $11.3 million, or 23.5
percent of net revenues compared to $14.4 million, or 18.4 percent of net
revenues, for the comparable prior year quarter. The decrease in aggregate
spending of 21.5 percent over the comparable prior year quarter is primarily
attributable to the Company's ongoing attempts to control costs. There can be no
assurance that the Company can continue to decrease aggregate selling, general
and administrative expenses. Additionally, during the quarter, the Company
incurred professional fees related to potential merger and litigation
activities.
Research and Development Expenses
Research and development expenses for the quarter ended December 31, 1996
aggregated $5.1 million, or 10.6 percent of net revenues, compared to $7.1
million, or 9.1 percent of net revenues, for the comparable prior year quarter.
The 28.2 percent decrease in research and development spending is principally
the result of the Company's ongoing strategic initiative to minimize expense
levels and focus engineering efforts on its primary core products. The Company
believes that it must continue to make significant investments in R&D in order
to effectively implement its product strategy and will continue to make these
investments commensurate with its revised operating cost structures.
Interest Income and Expenses
Net interest expense aggregated $1.4 million for the quarter ended December 31,
1996 compared to net interest income of $0.1 million for the comparable prior
year quarter. The increase in interest expense is principally the result of
lower average cash balances coupled with interest incurred on the Company's
borrowing.
Net Loss
Net Loss for the period was $6.8 million compared to $33.8 million for the
comparable prior year period. The change over the prior period is primarily
attributable to discontinuing production of mature products with negative gross
margins, combined with improvements from production efficiencies.
LIQUIDITY AND CAPITAL RESOURCES:
The Company is in a turnaround situation which necessitates certain actions on
behalf of the Company which affects the business
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environment in which the Company operates. Through much of fiscal 1996, the
Company was unable to obtain regular business terms with its suppliers as a
result of continued losses and liquidity issues. Consequently, the Company was
often in a position of conducting business with its suppliers on a C.O.D. basis.
During the second fiscal quarter to date, the Company has begun to experience a
return to regular business terms with key suppliers. In addition to the $9.2
million of supplier notes converted to equity in the first fiscal quarter of
1997 and the $2.3 million converted in the in the fourth quarter of fiscal 1996,
the Company intends to aggressively pursue a program to convert the remaining
supplier notes to equity. There can be no assurance that the Company will be
successful in its attempts to convert the existing notes which could have an
adverse affect on the Company's liquidity. Additionally, liquidity has been
affected by servicing debt, funding of operational losses, and SyJet development
costs. The Company intends, to raise additional capital to fund operations,
resize its operations and cost structures commensurate with revenue
expectations, and increase available lines of credit. However, there can be no
assurances that the Company will be successful in achieving these objectives.
At December 31, 1996 the Company had cash and short-term investments of $14.3
million, an increase of $10.6 million compared to $3.7 million at September 30,
1996. Borrowings under the Company's credit facilities amounted to $19.8
million at December 31, 1996 compared to $19.3 million at September 30, 1996.
Additionally, the Company increased its net worth from a deficit position of
$30.4 million at September 30, 1996 to an equity position of $9.7 million at
December 31, 1996. Working capital also increased from a negative position of
$37.4 million at September 30, 1996 to a negative position of $.3 million at
December 31, 1996. The increase in net worth and working capital is primarily
attributable to a significant increase in equity investments coupled with a
reduction in operating losses.
The Company may experience other effects in the future such as higher interest
rates, inability to borrow without collateral and higher financing costs with
regard to capital.
The Company has financed its working capital needs through a combination of
existing cash resources, asset-based borrowings, and a series of capital
financing transactions completed during calendar 1996.
Accounts receivable aggregated $34.9 million at December 31, 1996 compared to
$30.3 million at September 30, 1996, an increase of $4.6 million or 15.1
percent. The increase in accounts receivable is primarily due to an increased in
the aging as a result of slower collections. The
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Company has instituted an aggressive collections program. Inventories, net
of reserves, aggregated $22.3 million at December 31, 1996, an increase of $11.8
million, compared to the $10.5 million at September 30, 1996. The increase in
inventories is primarily attributable to production of the EZFlyer 230 and work
in process on the SyJet products.
On January 17, 1997, the Company renegotiated its line of credit with a
financial institution, continuing the existing terms and extending the line
through January 31, 1998. However, the new line provides for a limit on
borrowings of the lessor of $30 million or 80 percent of the Company's eligible
accounts receivable. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K, as amended, for the year ended September 30, 1996.
The Company has raised significant financing during the quarter ended December
31, 1996. See Part II, item 2 of this Form 10-Q. The Company's current strategy
will necessitate additional equity which if successful will cause further
dilution of existing Stockholders.
The Company has deferred further negotiation of an equity investment with the
Legend group as further documented in the Company's annual report on Form 10-K,
as amended, for the year ended September 30, 1996.
During the quarter ended December 31, 1996, the Company used $20.2 million in
cash for operating activities and $1.0 million in capital expenditures.
The Company believes that, based on a number of events occurring, the current
sources of financing available to the Company will be sufficient to fund the
Company's operations into the near future. There can be no assurance, however,
that additional financing will be available when needed, if at all, or on
favorable terms. The Company is in the process of performing an extensive review
of its operating cost structure and will implement spending levels consistent
with revenue expectations.
NOTICE CONCERNING FORWARD LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE
RESULTS, FINANCIAL CONDITION AND LIQUIDITY:
Some of the statements made in this Form 10-Q are forward-looking in nature,
including but not limited to the Company's product introduction and financing
plans and other statements that are not historical facts. Forward-looking
statements in this
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Form 10-Q include without limitation language in the form of one or more of the
following words: "intend", "believe", "will", "may", "anticipate", "plan" and
"expect." The occurrence of the events described, and the achievement of the
intended results, are subject to the future occurrence of many events, some or
all of which are not predictable or within the Company's control; therefore,
actual results may differ materially from those anticipated in any forward-
looking statements. Many risks and uncertainties which could affect the possible
results described in forward-looking statements are inherent in the Company's
industry; others are more specific to the Company's business. Risks related to
the Company's business are described in the Company's Form 10-K, as amended,
including risks associated with technology and product development, risks
relating to new product introduction and acceptance of new products, changes in
the Company's marketplace, preferred stock issuances and dilution, intellectual
property matters, regulatory and manufacturing issues, liquidity issues, and
risks associated with competition from other companies, as well as the
following:
ONGOING RISK ISSUES
Market acceptability of the Company's product continues to be paramount in
ensuring a successful turnaround strategy. The Company's product is subject to
increasing competition from several other removable-media data storage devices.
Consequently, in order to secure adequate market share, the Company must ensure
that the functionality and quality of the product is effectively communicated to
the marketplace. As a result, the Company needs sufficient capital to implement
a marketing strategy that will adequately address the appropriate markets. The
Company is also dependent on the successful production and sale of the SyJet
product line. Additionally, the decline in volumes and pricing on mature
products will have an impact on the Company. The Company must also continue
implementing an operating cost structure that will ensure spending levels
consistent with revenue expectations. Critical to each of these factors is the
Company's ability to attract additional investment capital. There can be no
assurances that the Company will successfully achieve these objectives.
FUTURE PROFITABILITY
Although the Company continues to execute its turnaround plan, adjusting
operations to reduce losses and rebuild the business, the Company does not
expect to return to profitability in the near future. Although the Company
believes it will ultimately be successful in its turnaround attempts, and that
the Company will return to profitability in the future, there can be no
assurances that
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the Company will be successful or that it will have, or be capable of obtaining,
sufficient capital to withstand prolonged operating losses.
SHORTAGES OF CRITICAL COMPONENTS; ABSENCE OF SUPPLY CONTRACTS; SUPPLIER WORKOUTS
Many components incorporated in, or used in the manufacture of, the Company's
products are currently only available from sole source suppliers. During the
1996 fiscal year, the Company experienced disruption in its supply of certain
components for a number of reasons including the shortage of cash to pay
suppliers. The Company continues to experience component shortages due to
limited cash availability which affected the Company's ability to produce
its products and limited the Company's ability to implement certain cost
reduction and productivity improvement plans. Moreover, the Company may continue
to experience difficulty in the future in obtaining a sufficient supply of many
key components due to the shortage of cash to pay suppliers and other reasons. A
disruption in the supply of key components would have a material adverse affect
on the Company's ability to generate sales and the ability to successfully
launch the SyJet products.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company has experienced and in the future may continue to experience
significant fluctuations in its quarterly operating results. Factors such as
price reductions, the introduction and market acceptance of new products,
product returns, the availability of critical components and the lower gross
margins associated with the Company's newly introduced products could contribute
to this quarterly fluctuation. Moreover, the Company's expense levels are based
in part on expectations of future sales levels, and a shortfall in expected
sales could therefore result in a disproportionate decrease in the Company's
results of operations. As a result of these and other factors, including
possible further dilution, it is likely that the Company's operating may be
affected.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in four putative class action
lawsuits. Two of the actions, Ravens, et al. v. Iftikar, et al. (filed April 2,
---------------------------------
1996) and Bellezza, et al. v. Iftikar, et al. (filed May 24, been brought in the
-----------------------------------
United States District Court for the Northern District of California and have
been assigned to the Honorable Vaughn Walker (collectively, the "Federal
Lawsuit"). Certain current and former officers and directors also have been
named as defendants in the Federal Lawsuit. Plaintiffs have petitioned the Court
to consolidate the foregoing complaints into one consolidated action. That
request, as well as other procedural matters which arose during a July 18, 1996,
case management conference, is under consideration. The plaintiffs in the
Federal Lawsuit purport to represent a class of all persons who purchased the
Company's Common Stock between October 21, 1994 and February 1, 1996. The
Federal Lawsuit alleges that the defendants violated the federal securities laws
through material misrepresentations and omissions. The third suit is a purported
class action entitled Gary S. Kaufman v. SyQuest Technology Inc., et al. was
--------------------------------------------------
filed on March 25, 1996, in the Superior Court of the State of California for
the County of Alameda (the "Kaufman Lawsuit"). Certain current and former
executive officers and directors of the Company are also named as defendants in
the Kaufman Lawsuit. The plaintiffs in the Kaufman Lawsuit purport to represent
a class of all persons who purchased the Company's Common Stock between May 2,
1995, and February 2, 1996. The Kaufman Lawsuit alleges that defendants violated
various California laws through material misrepresentations and omissions.
Unspecified damages are sought. The fourth purported class action entitled
Ravens, et al. v. Iftikar, et al., was filed on October 11, 1996 in the Superior
- ---------------------------------
Court of the State of California for the County of Alameda (the "Ravens
Lawsuit"). The Ravens Lawsuit alleges that the Company and certain of its former
officers and directors violated various California laws through material
representations and omissions between October 21, 1994 and February 2, 1996, and
is purportedly brought on behalf of persons who purchased stock during that
period. Unspecified damages are sought. The Ravens Lawsuit has been consolidated
with the Kaufman Lawsuit. Plaintiffs are preparing a consolidated complaint. The
Company intends to defend the cases vigorously.
The Company has certain insurance coverage with respect to the above claims,
however, the amount of any ultimate claims on these actions and related
insurance coverage is not presently determinable.
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<PAGE>
On May 14, 1996, the Company was served with a shareholder's derivative action
filed in Alameda County, California, Superior Court entitled John Nitti, et al.
------------------
v. Syed Iftikar, et al. On July 22, 1996, plaintiffs filed an amended complaint.
- -----------------------
The action seeks to recover unspecified damages and punitive damages on behalf
of the Company from current and former officers and directors of the Company for
alleged breach of fiduciary duty, unjust enrichment and waste of corporate
assets. The Company is a nominal defendant in the action. The complaint alleges
that the officers and directors issued false and misleading information and sold
shares of the Company's stock at artificially inflated prices. The allegations
are essentially the same as those in the putative class actions. The Company
intends to defend this case vigorously.
The Company has filed suit against Nomai, S.A. (Nomai) and Maxell in France for
copyright and patent infringement, and though it did not obtain the temporary
injunction sought against Nomai prohibiting the sale and distribution of Nomai's
200 megabyte cartridges, the underlying suit continues. The Company has also
initiated an arbitration proceeding against Nomai seeking payment of outstanding
royalties of approximately $1 million. The arbitration process began in May
1995, in San Jose, California.
On January 27, 1997, the Company has filed a suit against Nomai, S.A.,
Electronique d2 and La Cie Ltd. In Federal district court in San Francisco for
patent, trademark and copyright infringement, unfair competition and breach of
contract. The suit alleges that Nomai and others have illegally used the
Company's proprietary technology in certain of Nomai's competing products. The
suit seeks to block further sales of such products along with damages deriving
from harm done to the Company by this conduct.
A third party has notified the Company that it believes the Company infringes on
six U.S. patents. It is the Company's belief that the claims are without merit
or that the infringement claims related to component parts purchased from
vendors. The Company also believes that in the event the third party prevails on
its claims, the Company will be indemnified by its vendor for any liability
arising from the alleged infringements and that this matter will not have a
material adverse effect upon its financial condition or results of operations.
From time to time, the Company is involved in litigation that it considers to be
in the normal course of its business. Other than set forth above, the Company is
not engaged in any legal proceedings as of the date hereof which the Company
expects individually or in the aggregate to have a
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<PAGE>
material adverse effect on the Company's financial condition or results of
operations.
ITEM 2. CHANGES IN SECURITIES; POTENTIAL DILUTION AND ADVERSE IMPACT ON
ADDITIONAL FINANCING
From September 27, 1996, through October 30,1996, the Company issued to four of
its suppliers 1,874,837 shares of the Company's Common Stock in exchange for
approximately $11.6 million of its trade debt, pursuant to Regulation D under
the Securities Act of 1933, as amended (the "1933 Act"). Each of those suppliers
warranted that it is an accredited investor and received registration rights, as
described in the Company's Current Report on Form 8-K, as amended, dated October
31, 1996, which is incorporated herein by this reference (the "October 8-K").
On October 8, 1996, in reliance on Regulation D under the 1933 Act, the Company
issued to certain accredited investors 5,500 shares of its Convertible Preferred
Stock. Series 1, $0.001 par value per share (the "Convertible Preferred Stock"),
for an aggregate purchase price of $5,500,000, and granted to those investors
certain stock purchase warrants to acquire up to 550,000 shares of Common Stock
for $5.50 per share. The Convertible Preferred Stock is convertible into Common
Stock and additional warrants as described in the October 8-K.
On October 8, 1996, in reliance on Regulation D under the 1933 Act, the Company
issued to certain accredited investors 24,500 shares of its 5% Cumulative
Preferred Stock, Series 2, $0.001 par value per share (the "Series 2 Preferred
Stock"), for an aggregate purchase price of $24,500,000. The Series 2 Preferred
Stock is convertible into Common Stock and Warrants as described in the October
8-K.
In conjunction with the issuance of the Convertible Preferred Stock and the
Series 2 Preferred Stock, the Company issued to certain accredited investors, as
part of their compensation for their facilitation of those transactions, certain
stock purchase warrants to acquire up to 50,000 shares of Common Stock for
$10.875 per share and up to 75,000 shares of Common Stock for $7.15 per share.
On November 13, 1996, in reliance on Regulation S under the 1933 Act, the
Company issued to a non-U.S. company 1,500,000 shares of Common Stock that
became freely tradeable, subject to compliance with applicable securities laws,
on approximately February 12, 1997, for an aggregate purchase price of
$8,531,250. As part of this transaction, the Company also issued a warrant that
will become exercisable for between 375,000 shares
-17-
<PAGE>
and 1,875,000 shares of Common Stock, depending on a number of factors described
in the Company's Current Report on Form 8-K dated November 11, 1996, which is
incorporated herein by this reference.
As of December 16, 1996, the Company agreed to issue a total of four warrants to
acquire an aggregate of 320,000 shares of Common Stock to a consultant, Bain &
Company, Inc. ("Bain"), in exchange for consulting services to be performed by
Bain between December 16, 1996 and approximately April 16, 1997. Subject to
certain conditions, a stock purchase warrant to acquire 80,000 shares of Common
Stock has been or will be issued to Bain on each January 16, February 16, March
16, and April 16, 1997. The stock purchase warrants are exercisable for four
years from the date of grant at an exercise price per share of Common Stock
equal to the greater of (a) the arithmetic average of the closing sale price per
share, or in the absence of a closing sale price on any day, the closing bid
price per share on that day, of the Common Stock, as reported by the Nasdaq
National Market for the five consecutive trading days preceding the grant date
with respect to such warrant, and (b) the closing sale price per share, or in
the absence of a closing sale price, the closing bid price per share, of the
Common Stock, as so reported for the trading day preceding such grant date,
minus $0.10. The terms of these warrants and certain registration rights granted
to Bain in connection therewith, are more fully described in the Warrant
Purchase Agreement and Exhibits between the Company and Bain dated as of
December 16, 1996, which are attached hereto.
As of January 3, 1997, the Company had obligations to issue additional warrants
for approximately 23,426,247 shares of Common Stock, in aggregate for certain
outstanding warrants and options. While the number of shares of Common Stock
issuable under certain of the Company's obligations is fixed, the exact number
of shares of Common Stock issuable upon conversion of Preferred Stock and
exercise of warrants issued pursuant to such conversion cannot be estimated with
certainty. Generally, such issuances of Common Stock will vary inversely with
the market price of the Common Stock at the time of such conversion, and there
is no cap on the number of shares of Common Stock that may be issuable. The
number of warrants and shares of Common Stock issuable upon conversion of the
Preferred Stock is also subject to various adjustments to prevent dilution
resulting from stock splits, stock dividends or similar transactions. Further,
the Company may, at its election, choose to issue additional shares of Common
Stock in lieu of cash dividends due to the holders of the 7% Cumulative
Preferred Stock and the Series 2 Preferred Stock.
To the extent that such options and warrants are exercised, shares of Common
Stock are issued in lieu of cash dividends or convertible securities are
converted (and the warrants issuable upon such conversion are
-18-
<PAGE>
exercised), substantial dilution of the interests of the Company's stockholders
is likely to result and the market price of the Common Stock may be materially
adversely affected. Such dilution will be greater if the future market price of
the Common Stock decreases. For the life of such warrants, options and
convertible securities, the holders will have the opportunity to profit from a
rise in the price of the underlying securities. The existence of such warrants,
options and convertible securities is likely to affect materially and adversely
the terms on which the Company can obtain additional financing, and the holders
of such warrants, options and convertible securities can be expected to exercise
them at a time when the Company would otherwise, in all likelihood, be able to
obtain additional capital by an offering of its unissued capital stock on terms
more favorable to the Company than those provided by such warrants, options and
convertible securities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 11.1 Computation of Earnings per share
b. Exhibit 27.1 Financial data schedule
c. Reports on Form 8-K
A current report on Form 8-K, dated December 30, 1996, was filed by
the Company reporting under item 5 the filing of a press release
stating the Company's earnings in the fourth quarter of fiscal 1996.
A current report on Form 8-K, dated December 2, 1996, was filed by
the Company reporting under item 5 the filing of a Registration
Statement on Form S-3.
A current report on Form 8-K, dated November 5, 1996, was filed by
the Company reporting under item 5 the Company's discontinuation of
plans to acquire a controlling interest in Normai S.A.
A current report on Form 8-K, dated November 11, 1996, was filed by
the Company reporting under item 5 the continuation of the Company's
NASDAQ National Market listing and the execution of a Letter of
Intent to acquire a controlling interest in Normai, and under item 9
the sale by the Company of equity securities pursuant to Regulation
S.
A current report on Form 8-K, dated November 31, 1996, and an
amendment thereto were filed by the Company reporting under item 5
the results of the Company's Special Meeting of Stockholders held
September 26, 1996, the Company's filing with Nasdaq of a proforma
balance sheet evidencing the Nasdaq National Market, and the
Company's exchange of debt for equity with certain vendors, sale of
Convertible Preferred Stock, Series 1 and sale of 5% Cumulative
Convertible Preferred Stock, Series 2 and related warrants.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYQUEST TECHNOLOGY, INC.
(Registrant)
Date: February 14, 1997 By: /s/ Henry C. Montgomery
----------------- -----------------------
Henry C. Montgomery
Executive Vice President,
Finance & Chief Financial
Officer
-20-
<PAGE>
EXHIBIT INDEX
Sequentially
EXHIBIT Numbered Page
- ------- -------------
Exhibit 3.1 - Bylaws of SyQuest Delaware, Inc.
Exhibit 4.1 - Warrant Purchase Agreement
Exhibit 11.1 - Computation of Earnings
per share
Exhibit 27.1 - Financial data schedule
-21-
<PAGE>
EXHIBIT 3.1
<TABLE>
<S> <C>
ARTICLE I OFFICES ....................................................................................
Section 1. Registered Office.................................................................... 1
Section 2. Other Offices........................................................................ 1
ARTICLE II MEETINGS OF STOCKHOLDERS.................................................................... 1
Section 1. Place of Meetings.................................................................... 1
Section 2. Annual Meeting....................................................................... 1
Section 3. Special Meeting...................................................................... 1
Section 4. Notice of stockholders' Meetings..................................................... 2
Section 5. List of Stockholders Entitled to Vote................................................ 2
Section 6. Quorum............................................................................... 3
Section 7. Adjourned Meeting; Notice............................................................ 3
Section 8. Voting............................................................................... 3
Section 9. Waiver of Notice or Consent by Absent Stockholders................................... 4
Section 10. Stockholder Action by Written Consent Without a Meeting............................. 4
Section 11. Record Date for Stockholder Notice, voting, and Giving Consents...................... 5
Section 12. Proxies.............................................................................. 6
Section 13. Inspectors of Election............................................................... 6
ARTICLE III DIRECTORS.................................................................................. 7
Section 1. Powers............................................................................... 7
Section 2. Number and Qualification of Directors................................................ 7
Section 3. Election and Term of office of Directors............................................. 8
Section 4. Vacancies............................................................................ 8
Section 5. Place of Meetings.................................................................... 8
Section 6. Annual Meeting....................................................................... 8
Section 7. Other Regular Meetings............................................................... 9
Section S. Special Meetings..................................................................... 9
Section 9. Quorum............................................................................... 9
Section 10. Waiver of Notice..................................................................... 9
Section 11. Action Without Meeting............................................................... 10
Section 12. Telephonic Meetings.................................................................. 10
Section 13. Fees and Compensation of Directors................................................... 10
ARTICLE IV COMMITTEES.................................................................................. 10
Section 1. Committees of Directors.............................................................. 10
Section 2. Meetings and Action of Committees.................................................... 11
ARTICLE V OFFICERS..................................................................................... 11
Section 1. officers............................................................................. 11
Section 2. Election of Officers................................................................. 11
Section 3. Other Officers....................................................................... 12
Section 4. Removal and Resignation of officers.................................................. 12
Section 5. Vacancies in offices................................................................. 12
Section 6. Chairman of the Board................................................................ 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
section 7.. President............................................................................ 12
section S. Vice Presidents...................................................................... 12
section 9. Secretary............................................................................ 13
Section 10. Chief Financial Officer.............................................................. 13
ARTICLE VI INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS................................................... 14
Section 1. Right to Indemnification............................................................. 14
Section 2. Prepayment of Expenses............................................................... 14
Section 3. Claims............................................................................... 14
Section 4. Non-Exclusivity of Rights............................................................ 14
Section 5. other indemnification................................................................ 15
Section 6. Amendment or Repeal.................................................................. 15
ARTICLE VII RECORDS AND REPORTS........................................................................ 15
Section 1. Form of Records...................................................................... 15
Section 2. Inspection by Stockholders........................................................... 15
Section 3. Inspection by Directors.............................................................. 15
ARTICLE VIII GENERAL CORPORATE MATTERS................................................................ 16
Section 1. Certificates for Shares.............................................................. 16
Section 2. Lost Certificates.................................................................... 16
Section 3. Registered Stockholders.............................................................. 16
Section 4. Representation of Shares of other Corporations....................................... 17
Section 5. Construction and Definitions......................................................... 17
ARTICLE IX AMENDMENTS.................................................................................. 17
Section 1. Amendment by Stockholders............................................................ 17
Section 2. Amendment by Directors............................................................... 17
</TABLE>
<PAGE>
BY-LAWS
OF
SYQUEST DELAWARE, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be 1209 Orange
-----------------
Street, in the city of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE 11
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be held at any
-----------------
place within or outside the State of Delaware designated either by the board of
directors or the president (if not contrary to any action taken by the board of
directors). In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation in the City of
Fremont, State of California.
Section 2. Annual Meetings. The annual meeting of stock-holders of the
---------------
corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings, shall be held at
such time and place as the board of directors may determine by resolution.
Section 3. Special Meeting. A special meeting of the stockholders may be
---------------
called for any purpose or purposes at any time by the board of directors, or by
the chairman of the board, or by the president, the chief executive officer or
by one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting, but such special
meetings may not be called by any other person or persons.
If a special meeting is called by any person or persons other than the
board of directors, the chairman of the board, the president or the chief
executive officer, the request shall be in writing, specifying the time of such
meeting (such time to be not
<PAGE>
less than thirty-five (35) nor more than sixty (60) days after the receipt of
the request) and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president, any
vice president, or the secretary of the corporation. The officer receiving the
request shall cause notice to be given promptly to the stockholders entitled to
vote, in accordance with the provisions of Sections 4 and 5 of this Article II,
that a meeting will be held at the time requested by the person or persons
calling the meeting.
Section 4. Notice of Stockholders' Meetings. All notices of meetings of
--------------------------------
stockholders shall specify the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice. Unless otherwise provided by law,
the certificate of incorporation or these by-laws, the written notice of any
annual or special meeting of stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting. If mailed, notice
is given when deposited in the United States mail, postage prepaid, directed to
the stockholder at such stockholder's address as it appears on the records of
the corporation.
If action is proposed to be taken at any meeting for approval of an
amendment of the certificate of incorporation, pursuant to Section 242 of the
Corporation Law of Delaware, the notice shall set forth such amendment in full
or a brief summary of the changes to be effected thereby, as the directors shall
deem advisable.
If action is proposed to be taken at any meeting for approval of an
agreement relating to any merger or consolidation, pursuant to Section 251 of
the Corporation Law of Delaware, the notice shall be mailed to each stockholder
at least twenty (20) days prior to the date of the meeting. The notice shall
contain a copy of the agreement or a brief summary thereof, as the directors
shall deem advisable.
An affidavit of the secretary or an assistant secretary or of the transfer
agent of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
Section 5. List of Stockholders Entitled to Vote. The officer who has
-------------------------------------
charge of the stock ledger of the corporation shall prepare and make, at least
ten (10) days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least
2
<PAGE>
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The presence in person or by proxy of the holders of a
------
majority of the shares entitled to vote at any meeting of stockholders shall
constitute a quorum for the trans-action of business. The stockholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 7. Adjourned Meeting Notice. Any stockholders meeting, annual or
------------------------
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of the majority of the shares represented at that meeting, either in
person or by proxy, but in the absence of a quorum, no other business may be
transacted at that meeting, except as provided in Section 6 of this Article II.
When any meeting of stockholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at a meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or unless the
adjournment is for more than thirty (30) days from the date set for the original
meeting, in which case the board of directors shall set a new record date.
Notice of any such adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Section 4 of this Article II. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.
Section 8. Voting. Unless otherwise provided in the certificate of
------
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power upon the matter in question held by such stockholder, but no
proxy shall be voted on or after three years from its date, unless the proxy
provides for a longer period. Vote may be via voice or ballot; provided,
however, that elections for directors must be by ballot if demanded by any
stockholder at the meeting and before the voting has begun.
Any holder of shares entitled to vote on any matter may vote a part of the
shares in favor of the proposal and refrain from voting the remaining shares or,
except when the matter is the
3
<PAGE>
election of directors, vote them against the proposal, but, if the stockholder
fails to specify the number of shares which the stockholder is voting
affirmatively, it will be conclusively presumed that the stockholder's approving
vote is with respect to all shares that the stockholder is entitled to vote.
At all meetings of stockholders for the election of directors a plurality
of the votes cast shall be sufficient to elect. All other elections and
questions shall, unless otherwise provided by law, the certificate of
incorporation or these by-laws, be decided by the vote of the holders of shares
of stock having a majority of the votes which could be cast by the holders of
all shares of stock entitled to vote thereon which are present in person or
represented by proxy at the meeting.
Section 9. Waiver of Notice or Consent by Absent Stockholders. The
--------------------------------------------------
transactions of any meeting of stockholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though transacted at
a meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to a holding of the meeting, or an approval of the
minutes. Such waiver, consent or approval need not specify either the business
to be transacted or the purpose of any annual or special meeting of
stockholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of Section 4
of this Article II, such waiver, consent or approval shall state the general
nature of the proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects, at the
beginning of the meeting, to the trans-action of any business because the
meeting is not lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
required by law to be included in the notice of the meeting but not so included
if that objection is expressly made at the meeting.
Section 10. Stockholder Action by Written Consent Without a Meeting. Any
-------------------------------------------------------
action which may be taken at an annual or special meeting of stockholders may be
taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled to
vote on that action were present and voted. All such consents shall be delivered
to the corporation by delivery to its registered office in Delaware, its
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded.
4
<PAGE>
Any stockholder giving a written consent, or the stockholder's proxy
holder, or a transferee of the shares or a personal representative of the
stockholder or their respective proxy holders, may revoke the consent by a
writing received by the secretary of the corporation before written consents of
the number of shares required to authorize the proposed action have been
delivered to the corporation. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
Section 11. Record Date for Stockholder Notice, Voting, and Giving
--------------------------- ------
Consents. In order that the corporation may determine the stockholders entitled
- --------
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors, and which record date:
(a) In the case of determination of stockholders entitled to vote at
any meeting of stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than sixty (60) nor less than ten (10) days before
the date of such meeting;
(b) In the case of determination of stockholders entitled to express
consent to corporate action in writing without a meeting, shall not be more than
ten (10) days after the date upon which the resolution fixing the record date is
adopted by the board of directors;
(c) In the case of other action, shall not be more than sixty (60)
days prior to such other action.
If no record date is fixed by the board of directors:
(a) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held;
(b) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no prior action of
the board of directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the
5
<PAGE>
corporation in accordance with applicable law, or if prior action by the board
of directors is required by law, shall be at the close of business on the day on
which the board of directors adopts the resolution taking such prior action;
(c) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 12. Proxies. Each stockholder entitled to vote at a meeting of
-------
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the secretary of
the corporation.
Section 13. Inspectors of Election. The corporation may, in advance of any
----------------------
meeting of stockholders, appoint one (1) or more inspectors to act at the
meeting and make a written report thereof The corporation may designate one (1)
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the chairman of the meeting may appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of such inspector's
duties, may take and sign an oath faithfully to execute the duties of inspector
with strict impartiality and according to the best of his or her ability.
These inspectors shall:
(a) Ascertain the number of shares outstanding and the voting power
of each;
(b) Determine the shares represented at the meeting and the validity
of proxies and ballots;
(c) Count all votes and ballots;
(d) Determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors;
(e) Certify the determination of the number of shares represented at
the meeting, and the count of all votes and ballots.
- 6 -
<PAGE>
(f) Do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
The inspectors may appoint or retain other persons or entities to assist
the inspectors in the performance of their duties.
ARTICLE III
DIRECTORS
Section 1. Powers. The business of the corporation shall be managed by or
------
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of the
corporation; prescribe any powers and duties for them that are consistent with
law, with the certificate of incorporation, and with these by-laws; fix their
compensation; and require from them security for faithful service.
(b) Change the principal executive office or the principal business
office in the State of California from one location to another; cause the
corporation to be qualified to do business in any other state, territory,
dependency, or country and conduct business within or without the State of
California; and designate any place within or without the State of California
for the holding of any stockholders' meeting, or meetings, including annual
meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates.
(d) Authorize the issuance of shares of stock of the corporation on
any lawful terms, for such consideration as permitted by law.
(e) Borrow money and incur indebtedness on behalf of the corporation,
and cause to be executed and delivered for the corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypotheca-tions, and other evidence of debt and securities.
Section 2. Number and Qualification of Directors. The number of directors
-------------------------------------
of the corporation shall be not less than five (5)
7
<PAGE>
nor more than nine (9). The exact number of directors shall be five(5) until
changed, within the limits specified above, by an amendment to this section 2,
duly adopted by the board of directors or by the stockholders. The indefinite
number of directors may be changed, or a definite number fixed without provision
for an indefinite number, by a duly adopted amendment to the certificate of
incorporation or by an amendment to this by-law duly adopted by the vote or
written consent of holders of a majority of the outstanding shares entitled to
vote. Directors need not be stockholders.
Section 3. Election and Term of Office of Directors. Direc-tors shall be
----------------------------------------
elected at each annual meeting of the stockholders, but if any such annual
meeting is not held, or the directors are not elected thereat, the directors may
be elected at any special meeting of the stockholders held for that purpose. All
directors shall hold office until the expiration of the term for which elected
and until their respective successors are elected, except in the case of death,
resignation or removal of any director.
Section 4. Vacancies. Vacancies and newly created directorships resulting
---------
from any increase in the authorized number of directors may be filled by a
majority of the remaining members of the board of directors, although such
majority is less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the expiration of the term for which
elected and until their successors are duly elected and shall qualify, unless
sooner displaced.
A vacancy or vacancies in the board of directors shall be deemed to exist
in the event of the death, resignation, or removal of any director, or if the
authorized number of directors is increased, or if the stockholders fail, at any
meeting of stockholders at which any director or directors are elected, to elect
the number of directors to be voted for at that meeting. Any director may resign
at any time upon giving written notice to the corporation. The entire board of
directors or any individual director may be removed from office, prior to the
expiration of their or his term of office only in the manner and within the
limitations provided by the General Corporation Law of Delaware
Section 5. Place of Meetings. Meetings of the board of directors may be
-----------------
held at any place within or outside the State of Delaware that has been
designated in the notice of the meeting or, if not so stated or if there is no
notice, by resolution of the board or by the chairman of the board or by the
president (if not contrary to any action taken by the board of directors). In
the absence of such a designation, meetings shall be held at the principal
executive office of the corporation.
Section 6. Annual Meeting. Immediately following each annual meeting of
--------------
stockholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired
8
<PAGE>
election of officers, and the transaction of other business. Notice of this
meeting shall not be required.
Section 7. Other Regular Meetings. Other regular meetings of the board of
----------------------
directors shall be held without call at such time as shall from time to time be
fixed by the board of directors. Such regular meetings may be held without
notice.
Section 8. Special Meetings. Special meetings of the board of directors for
----------------
any purpose or purposes may be called at any time by the chairman of the board
or the president or any vice president or secretary or any two directors. Notice
of the time and place of special meetings shall be delivered personally or by
telephone to each director or sent by first-class mail or telegram, charges
prepaid, addressed to each director at that director's address as it is shown on
the records of the corporation. In case the notice is mailed, it shall be
deposited in the United States mail at least four (4) days before the time of
the holding of the meeting. In case the notice is delivered personally, or by
telephone or telegram, it shall be delivered personally, or by telephone or to
the telegraph company, at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the meeting nor
the place if the meeting is to be held at the principal executive office of the
corporation.
Section 9. Quorum. At all meetings of the board of directors a majority of
------
the authorized number of directors shall constitute a quorum for the transaction
of business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
provided by the provisions of Section 144 of the General corporation Law of
Delaware (as to approval of contracts or transactions in which a director has a
financial interest) , Section 141 (c) of the General Corporation Law of Delaware
(as to appointment of committees), the certificate of incorporation, or other
applicable law. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
Section 10. Waiver of Notice. Notice of a meeting need not be given to any
----------------
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, either before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to said director. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part
9
<PAGE>
of the minutes of the meeting. A waiver of notice need not specify the purpose
of any regular or special , meeting of the board of directors.
Section 11. Action Without Meeting. Unless otherwise restricted by the
----------------------
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all members of the board or committee, as the
case may be, shall individually or collectively consent in writing to that
action. Such action by written consent shall have the same force and effect as a
unanimous vote of the board of directors. Such written consent or consents shall
be filed with the minutes of the proceedings of the board or committee.
Section 12. Telephonic Meetings. Members of the board of directors, or any
-------------------
committee designated by the board of directors, may participate in a meeting
thereof by means of conference telephone or similar communication equipment, so
long as all persons participating in the meeting can hear one another, and all
such persons shal1 be deemed to be present in person at the meeting.
Section 13. Fees and Compensation of Directors. Directors and members of
----------------------------------
committees may receive such compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. This Section 13 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for those services.
ARTICLE IV
COMMITTEES
Section 1. Committees of Directors. The board of directors may, by
-----------------------
resolution adopted by a majority of the whole board of directors, designate one
or more committees, each consisting of one or more directors, to serve at the
pleasure of the board. The board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
Any committee, to the extent provided in the resolution of the board, shall
have and may exercise all the powers and authority of the board in the
management of the business and affairs of the
10 -
<PAGE>
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation (except as
otherwise permitted under Section 141(c) of the General Corporation Law of
Delaware), adopting an agreement of merger or consolidation under Sections 251
or 252 of the General Corporation Law of Delaware, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provide, it shall not have the power or authority to
declare a dividend to authorize the issuance of stock, or to adopt a certificate
of ownership and merger pursuant to Section 253 of the General Corporation Law
of Delaware.
Section 2. Meetings and Action of Committees. Meetings and action of
---------------------------------
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these by-laws, with such changes in the context of
those by-laws as are necessary to substitute the committee and its members for
the board of directors and its members, except that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee; special meetings of committees may also be
called by resolution of the board of directors; and notice of special meetings
of committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these by-laws.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall be a president,
--------
a secretary, and a chief financial officer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or more
vice presidents, one or more assistant secretaries, and such other officers as
may be appointed in accordance with the provisions of Section 3 of this Article
V. Any number of offices may be held by the same person.
Section 2. Election of Officers. The officers of the cor-poration, except
--------------------
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article V, shall be chosen by the board of directors, and
each shall serve at the pleasure of the board, subject to the rights, if any, of
an officer under any contract of employment.
<PAGE>
Section 3. Other Officers. The board of directors may appoint, and may
--------------
empower the president to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the by-laws or as the
board of directors may from time to time determine.
Section 4. Removal and Resignation of Officers. Subject to the rights, if
-----------------------------------
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the board of directors, at any regular or
special meeting of the board, or, except in case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. Vacancies in Offices. A vacancy in any office because of death,
--------------------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these by-laws for regular appointments to that office.
Section 6. Chairman of the Board. The chairman of the board, if such an
---------------------
officer be elected, shall, if present, preside at meetings of the board of
directors and exercise and perfom such other powers and duties as may be from
time to time assigned to him by the board of directors or prescribed by the by-
laws. If there is no president, the chairman of the board shall in addition be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article V.
Section 7. President. Subject to such supervisory powers, if any, as may be
---------
given by the board of directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He shall preside at all meetings of the stockholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or the by-laws.
Section 8. Vice Presidents. In the absence or disability of the president,
---------------
the vice presidents, if any, in order of their rank
12 -
<PAGE>
as fixed by the board of directors or, if not ranked, a vice president
designated by the board of directors, shall perform all the duties of the
president, and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the president. The vice presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors or the by-laws, and
the president, or the chairman of the board.
Section 9. Secretary. The secretary shall keep or cause to be kept, at the
---------
principal executive office or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the directors,
committees of directors, and stockholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice given,
the names of those present at directors' meetings or com-mittee meetings, the
number of shares present or represented at stockholders' meetings, and the
proceedings.
The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the board of directors, a share register, or a
duplicate share register, showing the names of all stockholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required by the by-laws or by law
to be given, and he shall keep the seal of the corporation if one be adopted, in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by the by-laws.
Section 10. Chief Financial Officer. The chief financial officer shall keep
-----------------------
and maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts, dis-
bursements, gains, losses, capital, retained earnings, and shares. The books of
account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all monies and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have other powers and
13 -
<PAGE>
perform such other duties as may be prescribed by the board of
directors or the by-laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
Section 1. Right to Indemnification. The corporation shall
------------------------
indemnify and hold harmless, to the fullest extent permitted by
applicable law as it presently exists or may hereafter be amended,
any person who was or is made or is threatened to be made a party
or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom
he is the legal representative, is or was a director, officer,
employee or agent of the corporation or any predecessor of the
corporation or is or was serving at the request of the corporation
or any predecessor of the corporation as a director, officer,
employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all
liability and loss suffered and expenses reasonably incurred by
such person. The corporation shall be required to indemnify a
person in connection with a proceeding initiated by such person
only if the proceeding was authorized by the board of directors of
the corporation.
Section 2. Prepayment of Expenses. The corporation shall pay
----------------------
the expenses incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of
expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of
an undertaking by the director or officer to repay all amounts
advanced if it should be ultimately determined that the director
or officer is not entitled to be indemnified under this Article or
otherwise.
Section 3. Claims. If a claim for indemnification or payment
------
of expenses under this Article is not paid in full within sixty
(60) days after a written claim therefor has been received by the
corporation, the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall
be entitled to be paid the expense of prosecuting such claim. In
any such action the corporation shall have the burden of proving
that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.
Section 4. Non-Exclusivity of Rights. The rights conferred
-------------------------
on any person by this Article VI shall not be exclusive of any
other rights which such person may have or hereafter acquire under
any statute, provision of the certificate of incorporation, these
by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
14
<PAGE>
Section 5. Other Indemnification. The corporation's
---------------------
obligation, if any, to indemnify any person who was or is serving
at its request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, enterprise
or non-profit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or non-profit
enterprise.
Section 6. Amendment or Repeal. Any repeal or modification
-------------------
of the foregoing provisions of this Article VI shall not adversely
affect any right or protection hereunder of any person in respect
of any act or omission occurring prior to the time of such repeal
or modification.
ARTICLE VII
RECORDS AND REPORTS
Section 1. Form of Records. Any records maintained by the
---------------
corporation in the regular course of its business, including its
stock ledger, books of account, and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly
legible form within a reasonable time. The corporation shall so
convert any records so kept upon the request of any person
entitled to inspect the same.
Section 2. Inspection by Stockholders. Any stockholder, in
--------------------------
person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of stockholders, and its other
books and records, and to make copies or extracts therefrom. A
proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an
attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power
of attorney or other such writing which authorizes the attorney or
other agent to so act on behalf of the stockholder. The demand
shall be directed to the corporation at its registered office in
Delaware or at its principal place of business.
Section 3. Inspection by Directors. Any director shall have
-----------------------
the right to examine the corporation's stock ledger, a list of its
stockholders and its other books and records for a purpose
reasonably related to his position as a director.
15
<PAGE>
ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. Certificates for Shares. Every holder of stock
-----------------------
shall be entitled to have a certificate signed by or in the name
of the corporation by the chairman or vice chairman of the board
of directors, if any, or the president or a vice president, and by
the treasurer or and assistant treasurer, or the secretary or an
assistant secretary, of the corporation, certifying the number of
shares owned by such stockholder in the corporation. Any of or all
the signatures on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before
such certificate is issued, it may be issued by the corporation
with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
The board of directors may authorize the issuance of shares as
partly paid and subject to call for the remainder of the
consideration to be paid therefor; provided that upon the face or
back of each certificate issued to represent any such partly paid
shares or upon the books and records of the corporation in the
case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefore and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully
paid shares, the corporation shall declare a dividend upon partly
paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
Section 2. Lost Certificates. Except as provided in this
-----------------
Section 2, no new certificates for shares shall be issued to
replace an old certificate unless the latter is surrendered to the
corporation and cancelled at the same time. The board of directors
may, in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of
a replacement certificate on such terms and conditions as the
board may require, including provision for indemnification of the
corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may
be made against it, including any expense or liability, on account
of the alleged loss, theft, or destruction of the certificate or
the issuance of the replacement certificate.
Section 3. Registered Stockholders. The corporation shall
-----------------------
be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any
other person,
16
<PAGE>
whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
Section 4. Representation of Shares of Other Corporations.
----------------------------------------------
The chairman of the board, the president, or any vice president,
or any other person authorized by resolution of the board of
directors or by any of the foregoing designated officers, is
authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to
these officers to vote or represent on behalf of the corporation
any and all shares held by the corporation in any other
corporation or corporations may be exercised by any of these
officers in person or by any person authorized to do so by a proxy
duly executed by these officers.
Section 5. Construction and Definitions. Unless the context
----------------------------
requires otherwise, the general provisions, rules of construction,
and definitions in the General Corporation Law of Delaware shall
govern the construction of these by-laws. Without limiting the
generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
Section 1. Amendment by Stockholders. New by-laws may be
-------------------------
adopted or these by-laws may be amended or repealed by the vote or
written assent of stockholders entitled to exercise a majority of
the voting power of the corporation, except as otherwise provided
by law or by the certificate of incorporation.
Section 2. Amendment by Directors. Subject to the rights of
----------------------
the stockholders as provided in Section 1 of this Article IX, to
adopt, amend, or repeal by-laws, by-laws may be adopted, amended,
or repealed by the board of directors.
17
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting secretary of SyQuest
Delaware, Inc. a Delaware corporation; and,
2. That the foregoing by-laws, comprising seventeen (17)
pages, constitute the by-laws of said corporation as duly adopted
by the sole incorporator of the corporation on October 3, 1991
---------------
as amended on Decmeber 1, 1996.
IN WITNESS WHEREOF, I have hereto subscribed my name this 14th
day of February , 1997.
--------
/s/ Thomas C. Tokos
_______________________________
Vice President, General Counsel
and Corporate Secretary
<PAGE>
EXHIBIT 4.1
WARRANT PURCHASE AGREEMENT
This WARRANT PURCHASE AGREEMENT is made as of December 16, 1996, by
and among SyQuest Technology, Inc., a Delaware corporation (the "Company"), and
Bain & Company, Inc., a Massachusetts corporation (the "Buyer"), with reference
to the following facts:
The Buyer has agreed to perform certain services for the Company as
described in a letter between the parties dated even date herewith (the
"Letter"), and, as consideration for such services, the Company has agreed to
deliver to Buyer common stock purchase warrants (the "Warrants") entitling Buyer
to purchase shares (the "Warrant Shares") of unissued common stock ("Common
Stock") of the Company, all on the terms and conditions herein. The purchases
and sales of the Warrants and the Warrant Shares are and will be effected in
reliance on the exemption from registration under the Securities Act of 1933, as
amended (the "1933 Act"), provided by Section 4(2) thereof and Rule 506 of
Regulation D ("Regulation D") promulgated thereunder by the United States
Securities and Exchange Commission (the "SEC"). Contemporaneously with the
execution and delivery of this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement (the "Registration Rights Agreement")
in substantially the form of Exhibit A attached hereto, pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act.
NOW, THEREFORE, the Company and the Buyer hereby agree as follows:
1. SALES OF WARRANTS.
-----------------
1.1 Purchase of Shares and Warrants. As full payment for the
-------------------------------
services described in the Letter, the Company shall issue to Buyer a total of
four (4) Warrants to acquire 320,000 Warrant Shares in the aggregate. Each of
the four (4) Warrants shall be in substantially the form of Exhibit B attached
hereto, shall entitle the holder to purchase 80,000 Warrant Shares and shall be
granted separately on the following dates (the "Grant Dates"): January 16, 1997;
February 16, 1997; March 16, 1997; and April 16, 1997. Notwithstanding the
foregoing, if the services of Buyer under the Letter are terminated (a
"Termination") by written notice prior to April 16, 1997, Buyer shall be
entitled to retain each Warrant relating to a Grant Date that precedes the date
of Termination, but shall receive no further Warrants other than a final Warrant
for a number of Warrant Shares equal to: (x) 80,000 multiplied by a fraction
equal to (y) (i) the number of calendar days elapsed between the Grant Date
preceding the date of Termination and the date of Termination (ii) divided by
thirty (30). Each Warrant will have an exercise price per Warrant Share equal to
the greater of (a) the arithmetic average of the closing sale prices per share,
or in the absence of a closing sale price on any day, the closing bid price per
share on that day, of the Common Stock, as reported by the Nasdaq National
Market for the five consecutive trading days preceding the Grant Date with
respect to such Warrant, and (b) the closing sale price per share, or in the
absence of a closing sale price, the closing bid price per share, of the Common
Stock, as so reported for the trading day preceding such Grant Date, minus
$0.10.
1.2 Deliveries. (a) The following documents shall be executed
----------
and delivered concurrently herewith:
<PAGE>
(i) The parties shall deliver the executed
Registration Rights Agreement; and
(ii) The Company shall deliver copies of resolutions
adopted by the Board of Directors of the Company approving the transactions
contemplated by this Agreement certified by an officer of the Company.
(b) Furthermore, subject to the limitations described in
Section 1.1 in the event of a Termination of Buyer, a Warrant will be delivered
by the Company to Buyer on each Grant Date.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer hereby
--------------------------------------
represents and warrants to the Company, and agrees with the Company that on and
as of the date of this Agreement:
2.1 Authorization; Enforcement. This Agreement is duly and
--------------------------
validly authorized, executed and delivered by the Buyer and a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
2.2 Investment Purpose. This Agreement is entered with the
------------------
Buyer in reliance upon the Buyer's representation that it is acquiring and will
acquire the Warrants and will purchase Warrant Shares (the Warrants and such
Warrant Shares being hereinafter collectively called the "Securities") for its
own account for investment only and not with a view towards, or for resale in
connection with, any public sale or distribution thereof, nor with any present
intention of distributing or selling the same except pursuant to effective
registrations under the 1933 Act. The Buyer is not acquiring the Securities for
the purpose of covering short sale positions in the Common Stock. The Buyer
represents that it has full power and authority to enter into this Agreement.
2.3 Accredited Investor Status. The Buyer is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a) of Regulation D promulgated by
the Securities and Exchange Commission under the 1933 Act (an "Accredited
Investor") and an "excluded purchaser" for the purpose of Section 25102(f) of
the California Corporate Securities Law of 1968, as amended (an "Excluded
Purchaser"). On delivery and exercise of the Warrants, the Buyer shall (or shall
cause a holder to whom such Warrants have been transferred to), if requested by
the Company, confirm in writing, in a form satisfactory to the Company, that the
Securities so purchased are being acquired solely for the holder's own account
and not as a nominee for any other party, for investment, and not with a view
toward distribution or resale and that such holder is an Accredited Investor and
an Excluded Purchaser. If such holder cannot make such representations because
they would be factually incorrect, it shall be a condition to such holder's
receipt and/or exercise of the Warrant that the Company receive such other
representations as the Company considers reasonably necessary to assure the
Company that the
2
<PAGE>
delivery of the Warrant and issuance of its securities on exercise of the
Warrant shall not violate any United States federal or state securities law.
2.4 Reliance on Exemptions. The Buyer understands that the
----------------------
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the holder
to acquire the Securities.
2.5 Investment Experience. The Buyer is an investor in
---------------------
securities of comparable companies and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities.
2.6 Information. The Buyer has carefully reviewed the
-----------
representations concerning the Company contained in this Agreement, and has made
detailed inquiry concerning the Company, its business, personnel and competitive
position. The Buyer further represents and warrants that in order to make an
informed decision in connection with the acquisition of the Securities:
(a) The Buyer has reviewed the merits and risks of an
investment in the Securities with its own tax and legal counsel, accounting firm
and with an investment advisor to the extent deemed advisable by the Buyer;
(b) The Buyer recognizes that an investment in the
Securities involves a high degree of risk, including, without limitation, the
risks arising from the facts that the Company incurred a loss for the quarter
and fiscal year ended September 30, 1996, and that no assurance can be given
that the Company will not incur continuing losses or will be profitable; and
(c) The Buyer: (x) has carefully reviewed the Company's
reports filed with the Securities and Exchange Commission including without
limitation the Annual Report on Form 10-K for the fiscal year ended September
30, 1996, the Proxy Statement for the Company's 1996 Annual Meeting of
Shareholders, the Proxy Statement for the Company's Special Meeting of
Shareholders held September 26, 1996 and all Form 8-Ks (and related amendments)
filed by the Company since September 30, 1996; (y) has been provided with such
additional information with respect to the Company as the Buyer or the Buyer's
agent or attorney has requested, and (z) has had the opportunity to discuss such
information with members of the management of the Company and any questions that
the Buyer had with respect thereto have been answered to the full satisfaction
of the Buyer.
2.7 No Governmental Review. The Buyer understands that no
----------------------
United States federal or state agency or any other government or governmental
agency has passed on
3
<PAGE>
or made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
2.8 Transfer or Resale. Buyer understands that the sale of the
------------------
Securities to Buyer is intended to be exempt from registration under the 1933
Act by virtue of Section 4(2) of the 1933 Act and applicable state securities
laws. Buyer will not sell, hypothecate or otherwise transfer any or all of the
Securities unless: (x) there is then in effect a registration statement under
the 1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or (y) Buyer shall have notified
the Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition, and, unless waived in writing by the Company, Buyer shall have
furnished the Company with an unqualified written opinion of counsel who shall
be reasonably satisfactory to the Company addressed to the Company and
reasonably satisfactory in form and substance to the Company's counsel to the
effect that the proposed transfer may be effected without registration under the
1933 Act, whereupon the holder of such Securities shall be entitled to transfer
such Securities in accordance with the terms of the notice delivered to the
Company.
2.9 Legends. The Buyer understands that certificates
-------
representing the Securities may bear one or all of the following restrictive
legends (and a stop-transfer order may be placed against transfer of such
certificates):
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED
OF 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 AND SUBSTANCE REASONABLY ACCEPTABLE TO SYQUEST TECHNOLOGY,
INC. THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR SUCH DISPOSITION COMPLIES
WITH RULE 144 UNDER SAID ACT."
(b) Any legend required by the laws of the State of Delaware or the
State of California, including any legend required by the
California Department of Corporations.
The Company shall issue a certificate without such legend to represent
Securities that are lawfully sold (a) pursuant to an effective registration
statement under the 1933 Act, or (b) in
4
<PAGE>
accordance with an opinion of counsel, received by and in form and substance
reasonably acceptable to the Company, to the effect that public sale or transfer
of the Securities may be made without registration under the 1933 Act.
2.10 Brokers' Fees. The Buyer has not retained any broker or
-------------
finder in connection with the transactions contemplated by this Agreement.
3. COMPANY'S REPRESENTATIONS AND WARRANTIES. Subject to and except
----------------------------------------
as may be disclosed by the Company in Exhibit C, the Company represents and
warrants to the Buyer that on and as of the date of this Agreement:
3.1 Authorization; Enforcement; Compliance with Other
-------------------------------------------------
Instruments. (i) The Company has the requisite corporate power and authority to
- -----------
enter into and perform this Agreement and to issue the Warrants and the Warrant
Shares in accordance with the terms hereof and of the Warrants, (ii) the
execution and delivery of this Agreement and the consummation by the Company of
the transactions contemplated hereby and the Exhibits hereto, including the
issuance of the Warrant Shares, have been duly authorized by the Company's Board
of Directors and no further corporate proceedings are required, (iii) this
Agreement has been duly executed and delivered by the Company, and (iv) this
Agreement constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies or by other equitable principles of general
application.
3.2 Capitalization. As of the date of this Agreement, the
--------------
authorized capital stock of the Company consists of (i) 60,000,000 shares of
Common Stock of which, as of the date of this Agreement, approximately
16,330,489 shares were issued and outstanding, and (ii) 4,000,000 shares of
preferred stock of which, as of the date of this Agreement there were
outstanding 45,560 shares. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. No shares of Common Stock or
preferred stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in the Company's SEC Documents (defined below), as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act.
3.3 Issuance of Warrant Shares. The Warrant Shares are duly
--------------------------
authorized and, upon issuance in accordance with the terms hereof and the
Warrants, shall be
5
<PAGE>
validly issued, fully paid and non-assessable, and free from all taxes, liens
and charges with respect to the issue thereof.
3.4 SEC Documents, Financial Statements. Since September 30,
-----------------------------------
1995, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein (other than exhibits to incorporated
documents), being hereinafter referred to as the "SEC Documents"). The Company
has delivered or made available to Buyer or its representative true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
4. COVENANTS.
---------
4.1 Form D. The Company agrees to file with the SEC a notice on
------
Form D with respect to the Warrant Shares as required under Regulation D and to
provide a copy thereof to Buyer promptly after such filing.
4.2 Reporting Status. The Company shall file all reports
----------------
required to be filed by it with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination, prior to the earlier of (a) the date as of which
the Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Warrant Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), and (b) the date on which
the Investors shall have sold all of the Warrant Shares. The period from the
date of this Agreement to the earlier of such dates specified in the preceding
sentence is herein called the "Registration Period".
6
<PAGE>
4.3 Financial Information. The Company agrees to send the
---------------------
following reports to the Buyer during the Registration Period: (a) within five
days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
and (b) within one business day after release thereof, a copy of each press
release issued by the Company.
4.4 Reservation of Shares. The Company shall at all times have
---------------------
authorized and reserved for issuance a sufficient number of shares of Common
Stock to provide for the issuance of the Warrant Shares.
4.5 Listing. The Company shall use its best efforts promptly to
-------
secure the listing of the Warrant Shares, when issued, on each national
securities exchange or automated quotation system, if any, on which shares of
Common Stock are then listed (subject to official notice of issuance) and to
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all such Warrant Shares from time to time issuable under the
Warrants. The Company shall use its reasonable best efforts to maintain the
authorization of the Common Stock for quotation thereon.
5. TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its
---------------------------
transfer agent to issue certificates, bearing the restrictive legends specified
in Section 2.9, registered in the names of the Buyer, for the Warrant Shares
acquired on exercise of the Warrants as therein provided. The Company shall
provide instructions and opinions of counsel to its transfer agent in accordance
with the Registration Rights Agreement. The Company warrants that no
instruction regarding the Warrant Shares, other than the instructions referred
to in this Section 5 and stop transfer instructions to give effect to Section
2.8, will be given by the Company to its transfer agent and that the Warrant
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement, the Registration Rights
Agreement and the Warrants. Nothing in this Section 5 shall affect in any way
the Buyer's obligation and agreement to comply with all applicable securities
laws on any resale of Warrants or Warrant Shares. If Buyer provides the Company
with an opinion of counsel, reasonably satisfactory in form and substance to the
Company, that registration of a resale by such Buyer of any Warrants or Warrant
Shares is not required under the 1933 Act, the Company shall permit the transfer
and promptly instruct its transfer agent to issue one or more certificates in
such name and in such denominations as may be specified by Buyer consistent with
such opinion.
6. GOVERNING LAW; MISCELLANEOUS.
----------------------------
6.1 Governing Law. This Agreement shall be governed by and
-------------
construed and interpreted in accordance with the laws of the State of California
without regard to the principles of conflict of laws.
6.2 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts shall have been signed by
each party and delivered to the
7
<PAGE>
other party. If any signature page is delivered by facsimile transmission, the
party using such means of delivery shall cause its originally executed signature
page to be physically delivered to the other party within five days of the
execution and delivery hereof.
6.3 Headings; References. The headings of this Agreement are
--------------------
for convenience of reference and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
6.4 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
6.5 Entire Agreement; Amendments. This Agreement, including the
----------------------------
schedules and exhibits hereto, the Letter, the Warrants and the Registration
Rights Agreement together constitute the entire agreement of the parties and
supersede all prior or contemporaneous negotiations, correspondence,
understandings and agreements, written or oral, regarding the subject matter
hereof. Except as specifically set forth herein, neither the Company nor the
Buyer makes any representation, warranty, covenant or undertaking with respect
to the subject matter hereof. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged
with enforcement.
6.6 Notices. Any notice or other communication required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed duly given and received when delivered personally, when transmitted by
facsimile if receipt is acknowledged by the addressee, one business day after
being deposited for next-day delivery with a nationally recognized overnight
delivery service, or three days after being deposited with the United States
Postal Service as first class mail, all charges and postage prepaid, properly
addressed as follows:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Chief Financial Officer
8
<PAGE>
With a copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: M. Greg Allio, Esq.
If to Buyer:
Bain & Company, Inc.
One Embarcadero Center, Suite 3500
San Francisco, CA 94111
Telephone: (415) 627-1223
Facsimile: (415) 627-1033
Attention: George W. Cogan
Each party shall provide notice to the other party of any change in address.
6.7 Successors and Assigns. This Agreement shall bind and inure
----------------------
to the benefit of the parties and their respective successors and assigns.
Neither the Company nor Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent shall not be unreasonably withheld).
6.8 No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
6.9 Survival. The representations and warranties of the Company
--------
and the Buyer in Sections 2 and 3 and the agreements and covenants in Sections 4
and 5 and this Section 6 shall survive after the date of this Agreement.
6.10 Publicity. The Company and the Buyer shall have the right
---------
to approve before issuance any press release or other public statement with
respect to the transactions contemplated hereby; provided that the Company shall
be entitled, without the prior approval of Buyer, to make any press release or
other public disclosure with respect to such transactions as is required by
applicable law and regulations (although Buyer or its counsel shall be consulted
by the Company in connection with any such press release or other public
disclosure prior to its release and shall be provided with a copy thereof).
6.11 Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably
9
<PAGE>
request to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the Buyer and the Company have caused this Warrant
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYER:
- ------- -----
SYQUEST TECHNOLOGY, INC. BAIN & COMPANY, INC.
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Its:___________________________ Its:___________________________
10
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
December 16, 1996, by and among SyQuest Technology, Inc., a Delaware corporation
(the "Company"), and Bain & Company, Inc. (the "Buyer"), with reference to the
following facts:
In connection with the Warrant Purchase Agreement by and among the parties
of even date herewith (the "Purchase Agreement"), the Company has agreed, on the
terms of the Purchase Agreement, to issue to the Buyer warrants (the "Warrants")
exercisable to acquire shares (the "Warrant Shares") of the Company's Common
Stock, par value $.001 per share. To induce the Buyer to execute and deliver the
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined herein
-----------
have the meanings respectively ascribed to them in the Purchase Agreement. As
used in this Agreement, the following terms have the following meanings:
1.1 "Investor" means the Buyer and any holder of Warrants or
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in accordance with Section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Warrant Shares.
1.4 "Registration Expenses" means all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses.
<PAGE>
1.5 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed with the SEC under the
1933 Act.
1.6 "Selling Expenses" means all underwriting fees, pro rata expenses,
and discounts, selling commissions and stock transfer taxes applicable to the
sale of Registrable Securities and fees and disbursements of counsel and other
advisers for any Investor.
2. REGISTRATION.
------------
2.1 Mandatory Registration. The Company shall use its reasonable
----------------------
efforts to prepare and, on or before June 1, 1997, file with the SEC a
Registration Statement on Form S-3 (or, if such form is unavailable for such a
registration, on such other form as is available for such a registration) (any
of which may contain a combined prospectus with other registrations by the
Company), covering the resale of the Registrable Securities. The Registration
Statement shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration Statement also covers such indeterminate number of
additional shares of Common Stock from or as may become issuable on exercise of
the Warrants due to stock splits, stock dividends or similar transactions. The
Company shall use reasonable efforts to have the Registration Statement declared
effective by the SEC promptly after filing. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by the Buyer or its
legal counsel prior to its filing or other submission, which approval shall not
be unreasonably withheld and which shall be deemed to be received by the Company
if Buyer or its legal counsel makes no objection in writing within five calendar
days after such Registration Statement (or other submission) is delivered to
Buyer or its legal counsel.
2.2 Underwritten Offering. If the offering under the Registration
---------------------
Statement pursuant to Section 2.1 involves an underwritten offering, the
Investors who hold a majority of the Registrable Securities subject to such
underwritten offering shall have the right to select at their expense one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
2.3 Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall send to each Investor who is
entitled to registration rights under this Section 2.3 written notice of such
determination. If, within twenty days after receipt of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the
2
<PAGE>
number of shares of Common Stock that may be included in the Registration
Statement because, in such underwriter(s)' good faith judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder; provided
that no portion of the equity securities that the Company is offering for its
own account shall be excluded. Any exclusion of Registrable Securities shall be
made pro rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; provided that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities held
by persons that are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided further that, after giving effect to the
preceding provision, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right to registration of Registrable Securities under
this Section 2.3 shall be construed to limit any registration required under
Section 2.1. The obligations of the Company under this Section 2.3 may be waived
by Investors holding a majority of the Registrable Securities. If an offering in
connection with which an Investor is entitled to registration under this Section
2.3 is an underwritten offering, each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in such an underwritten
offering using the same underwriter or underwriters and, subject to all
provisions of this Agreement, shall enter an underwriting agreement on the same
terms and conditions as other shares of Common Stock included in such
underwritten offering.
2.4 Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Investors of the Registrable Securities, and the Company shall file
all reports required to be filed by the Company with the SEC in a timely manner
to maintain such eligibility for the use of Form S-3. If Form S-3 is not
available for sale by the Investors of the Registrable Securities, the Company
shall register the sale on another appropriate form.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best efforts
-----------------------
to keep the Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (a) the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto), or (b) the date on which the
Investors shall have sold all the Registrable Securities (the "Registration
Period"); provided that the Company shall have the right to deregister any of
the Registrable Securities at any time after they may be so sold pursuant to
Rule 144(k) or are sold in a registration under Section 2.3 and shall not
thereafter have any obligation whatsoever to register the Registrable Securities
so deregistered. Such Registration Statement (including any amendments or
3
<PAGE>
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file
--------------------------
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement.
3.3 Prospectus Delivery. The Company shall furnish to each Investor
-------------------
whose Registrable Securities are included in the Registration Statement (a) and
shall furnish to such Investor's legal counsel, promptly after the same is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and (b) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as such Investor may reasonably request to facilitate the disposition of the
Registrable Securities owned by such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as the Investors who hold a majority of the Registrable
Securities being offered reasonably request (but in no event in more than five
states of the United States), (b) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (c) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (d) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided that the Company shall not be required
in connection therewith or as a condition thereto to (1) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3.4, (2) subject itself to general taxation in any such
jurisdiction, (3) file a general consent to service of process in any such
jurisdiction, (4) provide any undertakings that cause more than nominal expense
or burden to the Company, or (5) make any change in its certificate of
incorporation or bylaws, which the Board of Directors of the Company determines
to be contrary to the best interests of the Company.
3.5 Underwriting Agreement. If Investors who hold a majority of the
----------------------
Registrable Securities being offered in the offering select underwriters for the
offering, the
4
<PAGE>
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering, but the Company shall not be required to pay any fees or expenses of
such underwriter relating to the Registrable Securities.
3.6 Corrections. The Company shall promptly notify each Investor and
-----------
its legal counsel of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such statement
or omission, and deliver such number of copies of such supplement or amendment
to each Investor as such Investor may reasonably request.
3.7 Stop Orders. The Company shall use its best efforts to prevent
-----------
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (and, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for that purpose.
3.8 Selling Stockholders' Counsel. The Company shall deliver to a
-----------------------------
single firm of counsel, designated as selling stockholders' counsel by the
Investors who hold a majority of the Registrable Securities being sold, the
Registration Statement and all amendments and supplements thereto three (3)
business days prior to their filing with the SEC, and shall not file any
document in a form to which such counsel reasonably and timely objects.
3.9 Comfort Letter and Opinion. At the request of Investors who hold
--------------------------
a majority of the Registrable Securities being sold, the Company shall furnish
on one occasion only and at the expense of the Investors, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (a) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (b) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
such form and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
3.10 Due Diligence. The Company shall make available for inspection
-------------
by any Investor, any underwriter participating in any disposition pursuant to
the Registration Statement, one firm of attorneys and one firm of accountants or
other agents retained by the Investors, and one firm of attorneys retained by
all such underwriters (collectively, the "Inspectors"), all pertinent financial
and other records, and pertinent corporate documents and
5
<PAGE>
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by the Inspectors to enable the Inspectors to exercise their
due diligence responsibilities, and cause the Company's officers, directors and
employees to supply all information that the Inspectors may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
a confidentiality agreement (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this Section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.11 Investor Information. The Company shall hold in confidence and
--------------------
not make any disclosure of information concerning an Investor provided to the
Company otherwise than for inclusion in any Registration Statement or any
prospectus included in any Registration Statement, unless (a) disclosure of such
information is necessary to comply with federal or state securities laws, (b)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (c) the release of such
information is ordered pursuant to a subpoena or other final, non-appealable
order from a court or governmental body of competent jurisdiction, or (d) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, on learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to such Investor and allow such
Investor, at such Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
3.12 Listing. The Company shall use its best efforts to (a) cause all
-------
the Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which the Common Stock is then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange, or (b) secure designation and quotation of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or (c) if, despite the Company's best efforts to satisfy the
preceding clause (a) or (b), the Company is unsuccessful in satisfying the
preceding clause (a) or (b), to secure the inclusion for quotation on the Nasdaq
SmallCap Market for such Registrable Securities and (d) without limiting the
generality of the foregoing, to arrange for at least two market makers to
6
<PAGE>
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities.
3.13 Certificates. The Company shall cooperate with the Investors who
------------
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be sold pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
3.14 Other Action. The Company shall take all other reasonable
------------
actions necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to the Registration Statement.
3.15 The Company shall make generally available to its security
holders as soon as practical, but not later than ninety days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from such Investor for
inclusion in the Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of an Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude
7
<PAGE>
all of such Investor's Registrable Securities from the Registration Statement,
in which event such Investor shall have no further rights under this Agreement.
4.3 Underwriting Agreement. If Investors holding a majority of the
----------------------
Registrable Securities being registered pursuant to the Registration Statement
determine to engage the services of an underwriter, each Investor agrees to
enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required to expedite
or facilitate the disposition of the Registrable Securities, unless such
Investor notifies the Company in writing of such Investor's election to exclude
all of such Investor's Registrable Securities from the Registration Statement.
4.4 Corrections. Each Investor agrees that, on receipt of any notice
-----------
from the Company of the happening of any event of the kind described in Section
3.6 or 3.7, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3.6 or 3.7 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
4.5 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder, unless such Investor (a) agrees to sell
such Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting fees, discounts, commissions and expenses.
5. EXPENSES OF REGISTRATION. Except as otherwise specifically provided
------------------------
herein, all Registration Expenses incurred in connection with the registrations,
filings or qualifications pursuant to Sections 2 and 3 shall be borne by the
Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify, hold harmless and defend each Investor, each director and officer of
and person, if any, who controls such Investor within the meaning of the 1933
Act or the 1934 Act, and each underwriter (as defined in the 1933 Act) for the
Investors, and each director and officer of, and each person, if any, who
controls, such underwriter within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject
8
<PAGE>
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based on: (a) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (b) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(c) any violation or alleged violation caused by the Company of the 1933 Act,
the 1934 Act, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in Section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this Section 6.1: (1) shall not apply to a Claim arising out of or based on a
Violation that occurs in reliance on and in conformity with information
furnished in writing to the Company by, or caused by, any Indemnified Person or
underwriter for such Indemnified Person in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3.3; (2) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3.3; (3) shall not be
available to the extent that such Claim is based on a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the
Company; and (4) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
6.2 By the Investors. In connection with any Registration Statement
----------------
in which an Investor is participating, each such Investor agrees to indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6.1, the Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act, any underwriter and
any other stockholder selling securities pursuant to the Registration Statement
or any of its directors or officers or any person who controls such stockholder
or underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
and together with an Indemnified Person, an "Indemnified Party"), against any
Claim to which any of them may
9
<PAGE>
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim arises out of or is based on any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance on and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement or to the
extent such Claim is based on any violation or alleged violation by the Investor
of the 1933 Act, 1934 Act or any other law; and such Investor will reimburse any
legal or other expenses reasonably incurred by the Indemnified Parties in
connection with investigating or defending any such Claim; provided that the
indemnity agreement in this Section 6.2 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld; and
provided further that the Investor shall be liable under this Section 6.2 for
only such amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
6.3 By Others. The Company shall be entitled to receive indemnities
---------
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time after the
threat or commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount
10
<PAGE>
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an
------------
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided that (a) no contribution shall be made under circumstances where
the maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (b) no seller of Registrable Securities guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as
-----------
those terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and
-------
other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being understood
that nothing herein shall limit the Company's obligations under Section 4.2 of
the Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
8.3 Confirmation. Furnish to each Investor so long as such
------------
Investor owns Registrable Securities, promptly on request, (a) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, (b) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (c) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
---------------------------------
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by an Investor to any transferee of Registrable
Securities if: (a) the Investor holds not less than 50,000 of the Registrable
Securities (or Warrants to acquire not less than 50,000 of the Registrable
Securities) and agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being transferred or assigned, (c)
11
<PAGE>
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the 1933 Act
and applicable state securities laws, (d) at or before the time the Company
receives the written notice contemplated by clause (b) of this sentence the
transferee or assignee agrees in writing with the Company to become a party to
and be bound by this Agreement, (e) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement, (f) such
transferee shall be an "accredited investor" as that term defined in Regulation
D under the 1933 Act, and (g) if the assignment occurs after the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2.1, the transferee agrees to pay all reasonable expenses of amending or
supplementing such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and
--------------------------------
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), with and only with the
written consent of the Company and Investors who hold a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of
------
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Other Registration Rights Agreements. The parties acknowledge
------------------------------------
that the Company has entered into registration rights agreements similar to this
Agreement with other persons ("Other Purchasers") that have purchased shares of
the Company's capital stock. If the Company hereafter agrees with some or all of
the Other Purchasers to amend or otherwise change any of the terms or conditions
of the registration rights agreements with them, at the Company's election, in
its exclusive discretion, this Agreement shall thereupon be deemed amended or
otherwise changed in the same manner and in the same respects, and the Company
shall thereupon notify the Investors thereof.
11.3 Notices. Any notice or other communication required or permitted
-------
to be given under this Agreement shall be in writing and shall be deemed duly
given and received when delivered personally or by courier, when transmitted by
facsimile if receipt is acknowledged by the addressee, one business day after
being deposited for next-day delivery with a nationally recognized overnight
delivery service, or three days after being deposited with the United States
Postal Service as first class mail, all charges and postage prepaid, properly
addressed as follows:
12
<PAGE>
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Chief Financial Officer
With a copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: M. Greg Allio, Esq.
If to a Buyer, at its address set forth in the notice provision of the
Purchase Agreement.
Each party shall provide notice to the other party of any change in
address.
11.4 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware without
regard to the principles of conflict of laws.
11.5 Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
11.6 Entire Agreement. This Agreement, the Warrants, and the
----------------
Purchase Agreement together constitute the entire agreement of the parties and
supersede all prior or contemporaneous negotiations, correspondence,
understandings and agreements, written or oral, regarding the subject matter
hereof.
11.7 Successors and Assigns. Subject to Section 9, this Agreement
----------------------
shall inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.8 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
13
<PAGE>
11.9 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause its
originally executed signature page to be physically delivered to the other party
within five days of the execution and delivery hereof.
11.10 Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
11.11 Nonwaiver. Failure of any party to exercise any right or remedy
---------
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
BAIN & COMPANY, INC. SYQUEST TECHNOLOGY, INC.
By:_____________________________ By:___________________________
Name:___________________________ Name:_________________________
Its:____________________________ Its:__________________________
14
<PAGE>
EXHIBIT B
THE WARRANT AND ANY SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS; AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO SYQUEST TECHNOLOGY, INC. THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No.___________ Number of Shares: [80,000]
Date of Issuance: [______________ 16, 1997]
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, Bain & Company, Inc., a Massachusetts corporation
("Holder"), the registered holder hereof, is entitled, subject to the terms and
conditions set forth below, to purchase from the Company, at the times and in
the manner described below, up to Eighty Thousand (80,000) fully paid and
nonassessable shares of Common Stock (as defined herein) of the Company (the
"Warrant Shares") at a purchase price of U.S. $[_____]/*/ per Warrant Share in
lawful money of the United States.
1. Definitions.
-----------
1.1 Defined Terms. The following terms as used in this Warrant
-------------
shall have the meanings indicated as follows:
"Common Stock" means (a) the Company's Common Stock and (b) any
------------
capital stock into which such Common Stock shall have been changed or any
capital stock resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
_________________
/*/ [Each Warrant will have an exercise price per Warrant Share equal to the
greater of (a) the arithmetic average of the closing sale price per share, or in
the absence of a closing sale price on any day, the closing bid price per share
on that day, of the Common Stock, as reported by the Nasdaq National Market for
the five consecutive trading days preceding the Grant Date with respect to such
Warrant, and (b) the closing sale price per share, or in the absence of a
closing sale price, the closing bid price per share, of the Common Stock, as so
reported for the trading day preceding such Grant Date, minus $0.10.]
<PAGE>
"Exercise Price" shall be U.S. $_______ per Warrant Share.
--------------
"Expiration Date" means the date four years from the date of this
---------------
Warrant or, if such date falls on a Saturday, Sunday or other day on which banks
are required or authorized to be closed in the City and County of San Francisco,
State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares or any interest in either thereof that would constitute a sale
thereof within the meaning of the Securities Act or applicable securities laws
of any state.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement hereof or thereof.
1.2 Other Definitional Provisions.
-----------------------------
(a) Except as otherwise specified herein, all references
herein to the Company shall be deemed to include the Company's successors and to
any applicable law defined or referred to herein shall be deemed references to
such applicable law as the same may have been or may be amended or supplemented
from time to time.
(b) When used in this Warrant, the words "herein",
"hereof", and "hereunder", and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"Section", "Schedule", and "Exhibit" shall refer, respectively, to sections of
and Schedules and Exhibits to this Warrant, unless otherwise specified.
(c) Whenever the context so requires, each gender includes
each other gender, and the singular number includes the plural and vice versa.
(d) References herein to the date of this Warrant mean the
date of issuance set forth above.
2. Exercise of Warrant.
-------------------
2.1 Vesting. Subject to the terms and conditions hereof, this
-------
Warrant may be exercised at any time during normal business hours on or after
the opening of business on the date hereof and prior to 5:00 P.M. on the
Expiration Date. The minimum number of shares of Common Stock that may be
purchased upon any partial exercise of the Warrant is ten thousand (10,000)
shares and the Warrant shall not be exercisable with respect to a fraction of a
share.
2.2 Manner of Exercise. The rights represented by this Warrant
------------------
may be exercised by the holder hereof then registered on the books of the
Company by (a) delivery of a written notice, in the form of the Subscription
Notice attached as Appendix I hereto, of such
2
<PAGE>
holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (b) payment to the Company of an
amount in cash or by bank cashier's check in immediately available funds equal
to the Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus payment in cash or by bank cashier's check of
any applicable issue or transfer taxes), for the number of Warrant Shares as to
which this Warrant shall have been exercised, and (c) the surrender of this
Warrant, properly endorsed, at the principal office of the Company (or at such
other agency or office of the Company as the Company may designate by notice to
the holder hereof); provided, that if such Warrant Shares are to be issued in
any name other than that of the registered holder of this Warrant, such issuance
shall be deemed a transfer and the provisions of Section 8 shall be applicable.
In the event of any exercise of this Warrant in compliance with this Section
2.2, a certificate or certificates for the Warrant Shares so purchased,
registered in the name of, or as directed by, the holder, shall be delivered to,
or as directed by, such holder within a reasonable time after such exercise.
2.3 Issuances. Unless this Warrant shall have expired or shall
---------
have been fully exercised, the Company shall issue a new Warrant identical in
all respects to the Warrant exercised, except (a) it shall represent rights to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under the Warrant exercised, less the number of Warrant Shares with
respect to which such Warrant is exercised, and (b) the holder thereof shall be
deemed to have become the holder of record of the Warrant Shares issuable on
such exercise immediately prior to the close of business on the date on which
such holder shall have complied with the requirements hereof with respect to
such exercise, irrespective of the date of delivery of such share certificate,
except that, if such date is a date when the stock transfer books of the Company
are properly closed, such person shall be deemed to have become the holder of
such Warrant Shares at the opening of business on the next succeeding date on
which the stock transfer books are open.
3. Covenants as to Common Stock. The Company covenants and agrees
----------------------------
that all Warrant Shares that may be issued on exercise of this Warrant will, on
issuance, be validly issued, fully paid and nonassessable and that, during the
period within which this Warrant may be exercised, the Company will at all times
have authorized and reserved a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant and that the par value of such shares
will at all times be less than or equal to the applicable Exercise Price.
4. Taxes. The Company shall not be required to pay any tax or taxes
-----
attributable to the initial issuance of the Warrant Shares or any permitted
transfer involved in the issue or delivery of any certificates for Warrant
Shares in a name other than that of the registered holder hereof or upon any
transfer of this Warrant.
5. Warrant Holder Not Deemed a Stockholder. No holder, as such, of
---------------------------------------
this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of stock of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer on the holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise. Notwithstanding the
3
<PAGE>
foregoing, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the common stockholders of the
Company generally, contemporaneously with the giving thereof to such
stockholders.
6. No Limitation on Corporate Action. No provisions of this Warrant
---------------------------------
and no right or option granted or conferred hereunder shall in any way limit,
affect or abridge the exercise by the Company of any of its corporate rights or
powers to recapitalize, amend its Certificate of Incorporation, reorganize,
consolidate or merge with or into another corporation, or to transfer all or any
part of its property or assets, or the exercise of any other of its corporate
rights and powers.
7. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents and warrants to the Company that on and as of the
date hereof and on the date of any issuance of the Warrant Shares:
7.1 Authorization; Enforcement. This Warrant is duly and
--------------------------
validly authorized, executed and delivered by the holder and a valid and binding
agreement of the holder enforceable in accordance with its terms.
7.2 Investment Purpose. This Warrant is entered with the holder
------------------
in reliance upon the holder's representation that it is acquiring this Warrant
and will purchase Warrant Shares (this Warrant and such Warrant Shares being
hereinafter collectively called the "Securities") for its own account for
investment only and not with a view towards, or for resale in connection with,
any public sale or distribution thereof, nor with any present intention of
distributing or selling the same except pursuant to effective registrations
under the Securities Act. The holder of this Warrant is not acquiring the
Securities for the purpose of covering short sale positions in the Common Stock.
The holder of this Warrant represents that it has full power and authority to
enter into this Warrant.
7.3 Accredited Investor Status. The holder is an "accredited
--------------------------
investor" as that term is defined in Rule 501(a) of Regulation D promulgated by
the Securities and Exchange Commission under the Securities Act (an "Accredited
Investor") and an "excluded purchaser" for the purpose of Section 25102(f) of
the California Corporate Securities Law of 1968, as amended (an "Excluded
Purchaser"). On exercise of this Warrant, the holder shall, if requested by the
Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the holder's own
account and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale and that such holder is an Accredited
Investor and an Excluded Purchaser. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities on exercise of the Warrant shall
not violate any United States federal or state securities law.
7.4 Reliance on Exemptions. The holder of this Warrant
----------------------
understands that the Securities are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company
4
<PAGE>
is relying upon the truth and accuracy of, and the holder's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the holder set forth herein in order to determine the availability of such
exemptions and the eligibility of the holder to acquire the Securities.
7.5 Investment Experience. The holder of this Warrant is an
---------------------
investor in securities of comparable companies and acknowledges that it is able
to fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Securities.
7.6 Information. The holder of this Warrant has made detailed
-----------
inquiry concerning the Company, its business, personnel and competitive
position. The holder of this Warrant further represents and warrants that in
order to make an informed decision in connection with the acquisition of the
Securities:
(a) The holder of this Warrant has reviewed the merits and
risks of an investment in the Securities with its own tax and legal counsel,
accounting firm and with an investment advisor to the extent deemed advisable by
the holder;
(b) The holder of this Warrant recognizes that an
investment in the Securities involves a high degree of risk, including, without
limitation, the risks arising from the facts that the Company incurred a loss
for the quarter and fiscal year ended September 30, 1996, and that no assurance
can be given that the Company will not incur continuing losses or will be
profitable; and
(c) The holder: (x) has carefully reviewed the Company's
reports filed with the Securities and Exchange Commission; (y) has been provided
with such additional information with respect to the Company as the holder or
the holder's agent or attorney has requested; and (z) has had the opportunity to
discuss such information with members of the management of the Company and any
questions that the holder had with respect thereto have been answered to the
full satisfaction of the holder of this Warrant.
7.7 No Governmental Review. The holder of this Warrant
----------------------
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) The holder of this Warrant understands that (i) except
as provided in the Registration Rights Agreement, this Warrant and the Warrant
Shares have not been and are not being registered under the Securities Act or
any state securities laws, and may not be offered for sale, sold, assigned,
transferred, pledged, hypothecated, encumbered or otherwise disposed of, unless
(a) registered thereunder, or (b) such holder shall have delivered to the
Company an unqualified written opinion of counsel, reasonably satisfactory in
form and
5
<PAGE>
substance to the Company, to the effect that the securities to be sold,
assigned, transferred, pledged, hypothecated, encumbered or otherwise disposed
of may be so disposed of pursuant to an exemption from such registration; (ii)
any sale of such securities made in reliance on Rule 144 promulgated under the
Securities Act may be made only in accordance with the terms of that Rule and,
if that Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than pursuant to the Registration
Rights Agreement) under the Securities Act or any state securities law or to
comply with the requirements and conditions for any exemption thereunder.
(b) The holder agrees and understands that the certificates
representing the Warrant Shares may bear one or all of the following restrictive
legends (and a stop-transfer order may be placed against transfer of such stock
certificates):
(1) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO SYQUEST TECHNOLOGY, INC.
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS."
(2) Any legend required by the laws of the State of
Delaware or the State of California, including any legend required by the
California Department of Corporations.
The Company shall issue a certificate without such legend to represent Warrant
Shares lawfully sold by the holder in accordance with this Warrant (a) pursuant
to an effective registration statement under the Securities Act, or (b) in
accordance with an opinion of counsel, received by and in form and substance
reasonably acceptable to the Company, to the effect that public sale or transfer
of the Warrant Shares may be made without registration under the Securities Act.
9. Adjustments.
-----------
9.1 Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or similar change of outstanding shares
of
6
<PAGE>
Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable on 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 on 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 pursuant to 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 of such consideration shall be as determined by the Board
of Directors of the Company acting in good faith.
9.2 Dividends and Stock Splits. If and whenever the Company
--------------------------
shall effect a stock dividend, a stock split, a stock combination, or a reverse
stock split of the Common Stock, the number of Warrant Shares purchasable
hereunder and the Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Exercise Price shall be rounded to the nearest cent.
10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is
--------------------------------------------
lost, stolen or destroyed, the Company shall, on receipt of an indemnification
undertaking reasonably satisfactory to the Company, issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen or destroyed. If this
Warrant is mutilated, the Company shall, on receipt of the mutilated Warrant,
issue a new Warrant of like tenor as the mutilated Warrant.
11. Notice. Any notice or other communication required or permitted
------
to be given under this Warrant shall be in writing and shall be deemed duly
given and received when delivered personally or by courier, when transmitted by
facsimile if receipt is acknowledged by the addressee, one business day after
being deposited for next-day delivery with a nationally recognized overnight
delivery service, or three days after being deposited with the United States
Postal Service as first class mail, all charges and postage prepaid, properly
addressed as follows:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4114
Attention: Chief Financial Officer
7
<PAGE>
With a copy to:
Shartsis, Friese & Ginsburg, LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: M. Greg Allio, Esq.
If to Holder, to it at its address set forth below its signature
hereon.
Each party shall provide notice to the other party of any change in address.
12. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged, or terminated only by an instrument in writing signed by the
party or holder hereof against which enforcement of such change, waiver,
discharge or termination is sought. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and construed and interpreted
in accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
13. Survival. The provisions of Sections 7 and 8 shall survive any
--------
exercise hereof and the Expiration Date and continue in full force and effect as
to any Warrant Shares or other securities issued on the exercise of this
Warrant.
SYQUEST TECHNOLOGY, INC.
By:______________________________
Name:____________________________
Title:___________________________
ACCEPTED:
- --------
BAIN & COMPANY, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
Address:
One Embarcadero Center, Suite 3500
- ----------------------------------
San Francisco, CA 94111
- ----------------------------------
8
<PAGE>
APPENDIX I TO WARRANT
---------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number
specified below, which shall not be less than 10,000, of the Warrant Shares
covered by this Warrant according to the conditions thereof and herewith makes
payment of U.S. $_______________, the product of the Exercise Price multiplied
by such number of Warrant Shares.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same; and
2. As of this date, it is an "accredited investor" as such term is
defined in Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act and an "excluded purchaser" for purposes of section
25102(f) of the California Corporate Securities Law of 1968, as amended.
Dated:________________,______. ______________________________________
Name of Holder
By:___________________________________
Name:_________________________________
Title:________________________________
Address:______________________________
______________________________________
______________________________________
______________________________________
Number of Warrant Shares
Being Purchased:_____________________
9
<PAGE>
EXHIBIT 11.1
SYQUEST TECHNOLOGY, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended December 31,
1996 1995
------------ -----------
<S> <C> <C>
(Loss) before cumulative effect of cumulative preferred
stock dividends and extraordinary credit ($6,814) ($33,801)
Cumulative preferred stock dividends (573) -
Effect of incremental yield embedded in conversions
terms (5,300) -
------------ -----------
Net (loss) ($12,687) ($33,801)
Common and common equivalent shares
outstanding: 14,673 11,324
Net (loss) per share ($0.86) (2.98)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 12,756
<SECURITIES> 1,509
<RECEIVABLES> 43,326
<ALLOWANCES> 8,405
<INVENTORY> 22,264
<CURRENT-ASSETS> 74,579
<PP&E> 0
<DEPRECIATION> 36,445
<TOTAL-ASSETS> 101,894
<CURRENT-LIABILITIES> 74,890
<BONDS> 17,102
0
5
<COMMON> 16
<OTHER-SE> 136,645
<TOTAL-LIABILITY-AND-EQUITY> 101,894
<SALES> 48,312
<TOTAL-REVENUES> 48,312
<CGS> 37,267
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,488
<INCOME-PRETAX> (6,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,814)
<EPS-PRIMARY> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
