As filed with the Securities and Exchange Commission on July 2, 1997.
Registration No. 33-28225
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------
AMENDMENT NUMBER 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------------
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in
its charter)
DELAWARE 94-2793
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Id
Number)
47071 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(510) 226-4000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
------------------------------
EDWIN L. HARPER
PRESIDENT AND CHIEF EXECUTIVE O
SYQUEST TECHNOLOGY, INC.
47071 BAYSIDE PARKWAY
FREMONT, CA 94538
(510) 226-4000
(Name, address, including zip code and telephone number,
including area code of agent for service)
____________________________________
COPIES TO:
STEVEN O. GASSER
BENJAMIN L. DOUGLAS
SHARTSIS, FRIESE & GINSBURG LLP
ONE MARITIME PLAZA, EIGHTEENTH
SAN FRANCISCO, CA 94111
(415) 421-6500
Approximate date of commencement of proposed sale to
the public:
As soon as practicable after the Registration
Statement becomes effective.
- ------------------------------------------------------
If the only securities being registered on this Form
are being offered pursuant to dividend or interest
reinvestment plans please check the following box. [ ]
If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or
interest reinvestment plans, check the following box.
[X]
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ]
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration
statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Securities Amount to be Proposed Proposed
to be Registered Registered/ Maximum Maximum
Offering Aggregate
Price Per Offering
Share 1 Price 2
Common Stock $.0001
par value........ 54,640,512 $1.844 $100,757,104.13
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- ----------------------------------------------------
1 Includes (i) a presently indeterminate number of
shares issued or issuable upon conversion of or otherwise in
respect of Registrant's 5% Cumulative Convertible Preferred
Stock, Series 3, (ii) a presently indeterminate number of
shares issuable upon conversion of or otherwise in respect
of Registrant's 5% Cumulative Convertible Preferred Stock,
Series 4, (iii) 34,325,000 shares issuable upon exercise of
certain outstanding stock purchase warrants, and (iv)
6,172,432 shares issued to six suppliers of Registrant as
part of restructuring by Registrant of certain trade
payables, as such numbers may be adjusted in accordance with
Rule 416, including without limitation, adjustments as a
result of floating rate conversion prices.
2 Estimated solely for the purpose of calculating the
amount of the registration fee pursuant to Rule 457(c),
based on the average of the high and low prices of Common
Stock reported in the Nasdaq National Market on June
25,1997.
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
54,640,512 SHARES
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
All of the shares of Common Stock, par value $.0001
per share ("Common Stock") of SyQuest Technology, Inc., a
Delaware corporation ("SyQuest" or the "Company"), offered
hereby are being offered for resale by certain stockholders
of the Company (the "Selling Stockholders") as described
more fully herein. The Company will not receive any proceeds
from the sale of the shares offered hereby. The Common Stock
of the Company is quoted on the Nasdaq National Market under
the symbol "SYQT." The last reported sales price of the
Company's Common Stock on the
Nasdaq National Market on June 25, 1997 was $1.844 per
share.
The shares of Common Stock offered hereby by the
Selling Stockholders consist of (i) in accordance with Rule
416 of the Securities Act of 1933, as amended (the
"Securities Act") a presently indeterminate number of shares
issued or issuable upon conversion or otherwise in respect
of 50,000 shares of the Company's 5% Cumulative Convertible
Preferred Stock, Series 3, par value $.001 (the "Series 3
Preferred Stock"), (ii) a presently indeterminate number of
shares issuable upon conversion or otherwise in respect of
280,000 shares of the Company's 5% Cumulative Convertible
Preferred Stock, Series 4, par value .001 (the "Series 4
Preferred Stock"), (iii) up to 34,325,000 shares issuable
upon exercise of certain outstanding stock purchase warrants
(the "Stock Purchase Warrants") and (iv) up to 6,172,432
shares issued to six suppliers of the Company as part of a
restructuring by the Company of certain trade payables. For
the purposes of calculating the number of shares of Common
Stock beneficially owned by the Selling Stockholders holding
Series 3 Preferred Stock, the number of shares of Common
Stock calculated to be issuable in connection with the
conversion of the Series 3 Preferred Stock is based on a
conversion price that is derived from the closing market
price of the Common Stock on the first day that Series 3
Preferred Stock was issued, which price is $2.343. For the
purposes of calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders holding
Series 4 Preferred Stock, the number of shares of Common
Stock calculated to be issuable in connection with the
conversion of the Series 4 Preferred Stock is based on a
conversion price that is derived from the closing market
price of the Common Stock on the first day that Series 4
Preferred Stock was issued, which price is $2.343. The
number of shares available for resale is subject to
adjustment and could be materially less or more than such
estimated amount depending on factors which cannot be
predicted by SyQuest at this time, including, among others,
the future market price of the Common Stock. This
presentation is not intended, and should in no way be
construed, to constitute a prediction as to the future
market price of the Common Stock. See "Risk Factors --
Convertible Securities, Warrants and Options; Potential
Dilution and Adverse Impact on Additional Financing" and
"Selling Stockholders."
________________________________
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE 3 OF THIS PROSPECTUS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is July 2, 1997
All expenses of this offering will be paid by the
Company except for commissions, fees and discounts of any
underwriters, brokers, dealers or agents retained by the
Selling Stockholders. Estimated expenses payable by the
Company in connection with this offering are approximately
$123,394.33. See "Plan of Distribution." The aggregate
proceeds to the Selling Stockholders from the Common Stock
will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts,
if any. The Company has agreed to indemnify the Selling
Stockholders and certain other persons against certain
liabilities, including liabilities under the Act.
The Selling Stockholders, directly or through agents,
broker-dealers or underwriters, may sell the Common Stock
offered hereby from time to time on terms to be determined
at the time of sale, in transactions on the Nasdaq National
Market, in privately negotiated transactions or otherwise.
The Selling Stockholders and any agents, broker-dealers or
underwriters that participate in the distribution of the
Common Stock may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the
"Act"), and any commission received by them and any profit
on the resale of the Common Stock purchased by them may be
deemed to be underwriting discounts or commissions under the
Act. See "Use of Proceeds" and "Plan of Distribution."
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files annual and
quarterly reports, proxy statements and other information
with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other
information may be inspected and copied at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New
York, New York 10048; and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material
can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Common Stock of the
Company is quoted on the Nasdaq National Market. Reports
and other information concerning the Company may be
inspected at the National Association of Securities Dealers,
Inc. at 1735 K Street, N.W., Washington, D.C. 20006. The
Commission also maintains a World Wide Web site
(http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding
registrants, including the Company, that file electronically
with the Commission.
A registration statement on Form S-3 with respect to
the Common Stock offered hereby (the "Registration
Statement") has been filed with the Commission under the
Act. This Prospectus does not contain all of the
information contained in such Registration Statement and the
exhibits and schedules thereto, certain portions of which
have been omitted pursuant to the rules and regulations of
the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document
are not necessarily complete and, in each instance,
reference is hereby made to the copy of such contract or
document filed as an exhibit to the Registration Statement.
The Registration Statement, including exhibits thereto, may
be inspected without charge at the Commission's principal
office in Washington, D.C., and copies of all or any part
thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, Washington, D.C. 20549,
upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the
Commission under the Exchange Act are hereby incorporated by
reference into this Prospectus:
1) The Company's Annual Report on Form 10-K, as
amended, for the fiscal year ended September 30, 1996;
2) The Company's Current Reports on Form 8-K dated
October 31, 1996, as
amended, November 11, 1996, November 25, 1996, December 2,
1996, December 30, 1996; January 23, 1997, February 3, 1997,
February 28, 1997, April 15, 1997 and June 11, 1997;
3) The Company's Registration Statement on Form 8-A
registering the Common Stock under Section 12(g) of the
Exchange Act; and
4) The Company's Current Reports on Form 10-Q for
the Quarters ended December 31, 1996, and March 31, 1997.
All documents filed by the Company pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be
incorporated by reference herein and to be a part hereof
from the date of filing of such documents. Any statement
contained in this Prospectus or in a document incorporated
or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein
or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each
person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the documents that
have been incorporated by reference herein (not including
exhibits to such documents unless such exhibits are
specifically incorporated by reference herein or into such
documents). Such request may be directed to SyQuest
Technology, Inc., 47071 Bayside Parkway, Fremont, California
94538, telephone (510) 226-4000, Attn: Henry C. Montgomery,
Executive Vice President, Finance and Chief Financial
Officer.
"SyQuest" is a registered trademark of the Company,
"EZ135," and "EZ Flyer" and "SyJet" are trademarks of the
Company. This Prospectus also includes trademarks of
companies other than SyQuest Technology, Inc.
THE COMPANY
The Company designs, develops, manufactures, and
markets removable hard disk cartridges, associated disk
drives and free-standing storage systems. The Company's
products combine the advantages of fixed hard disk drives
with the benefits of removability, which include unlimited
incremental expansion of data storage capacity, transfer and
sharing of data and software among personal computers, and
backup, archival storage and physical security of data. The
Company's principal products have been 5.25 inch and 3.5
inch cartridges, drives and storage systems used with
personal computers and work stations manufactured and sold
by manufacturers of such products. These products are
typically purchased by distributors, mail order firms,
national retail chains, value added resellers, original
equipment manufacturers ("OEMs") for integration into their
equipment, government contractors and others for resale to
the end users.
The Company's principal executive offices are located
at 47071 Bayside Parkway, Fremont, California 94538,
telephone (510) 226-4000.
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY. THE
DISCUSSION IN THIS PROSPECTUS CONTAINS, IN ADDITION TO
HISTORICAL INFORMATION, CERTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF
THE COMPANY'S PLANS, BELIEFS, EXPECTATIONS AND INTENTIONS.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE THE FOLLOWING RISK FACTORS, AS WELL AS FACTORS
DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE CAUTIONARY
STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS BEING
APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS
WHEREVER THEY APPEAR IN THIS PROSPECTUS.
NEED FOR ADDITIONAL FINANCING; FUTURE CAPITAL NEEDS.
The Company has incurred losses in its fiscal year
ended September 30, 1995, and in its fiscal year ended
September 30, 1996. To meet its working capital needs, the
Company has engaged in a series of financing transactions
during calendar 1996 and 1997.
In June 1996, the Company closed the sale of 20,000
shares of 7% Cumulative Convertible Preferred Stock, Series
1 (the "7% Cumulative Preferred Stock") for $20 million in
gross proceeds. In July 1996, the Company issued a $7.7
million 6% Convertible Subordinated Debenture (the
"Debenture") to one of its suppliers, of which a portion is
convertible into up to 400,000 shares of the Company's
Common Stock at a conversion price of $6.9375 per share.
Subsequently, the Company worked out repayment schedules
with other major suppliers and converted approximately $43.1
million of accounts payable and other obligations to notes
payable reflecting extended repayment terms. From late
September 1996, through October 30, 1996, and from late
February 1997, through late April 1997, the Company
exchanged with ten of these suppliers approximately $24.44
million of notes payable for 8,047,269 shares of Common
Stock in the aggregate. In October 1996, the Company sold
5,500 shares of Cumulative Convertible Preferred Stock,
Series 1 ("Convertible Preferred Stock") for $5.5 million in
gross proceeds and sold 24,500 shares of 5% Cumulative
Convertible Preferred Stock, Series 2 ("Series 2 Preferred
Stock") for $24.5 million in gross proceeds. In November
1996, the Company sold 1,500,000 shares of its Common Stock
for approximately $8.5 million to an international
investment firm and granted that investor warrants to
purchase up to 1,875,000 shares of Common Stock, depending
on, among other things, the number of shares of Common Stock
owned by such investor on July 12, 1997. In March 1997, the
Company sold 50,000 shares of the Series 3 Preferred Stock
for $5 million in gross proceeds. In May 1997, the Company
sold 280,000 shares of the Series 4 Preferred Stock for $28
million in gross proceeds. The terms of these financings
are described in three of the Company's Current Reports on
Form 8-K dated, respectively, June 14, 1996, October 31,
1996, November 11, 1996, April 14, 1997, and May 30, 1997.
As of March 31, 1997, the Company had $3.2 million in
cash and cash equivalents. For the six months ended, March
31, 1997, the Company used approximately $41.0 million of
cash in operating activities and an additional $2.0 million
in capital equipment purchases. The Company believes that,
based on a number of events occurring, the current sources
of financing available to the Company will be sufficient to
fund the Company's operations into the near future. 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. If
results of operations for fiscal 1997 do not meet
management's expectations, or additional capital is not
available, management has the ability and intent to reduce
certain expenditures so as not to require additional capital
resources. The precise amount and timing of the Company's
funding needs cannot be determined accurately at this time,
and will depend upon a number of factors, including the
market demand for the Company's products, the progress of
the Company's product development efforts, the availability
of critical components, the Company's strategic alliances,
if any, for the manufacture of its products, the Company's
inventory and accounts receivable management and whether key
suppliers will grant payment terms for the purchase of
materials and services. If additional funds are raised
through the issuance of equity securities, the percentage
ownership of the stockholders of the Company will be
reduced, stockholders may experience additional dilution,
and such securities may have rights, preferences and
privileges senior to those of holders of the Company's
Common Stock. See "Risk Factors -- Convertible Securities,
Warrants and Options; Potential Dilution and Adverse Impact
on Additional Financing."
RISK OF LOSING NASDAQ LISTING.
The Company believes that with the recent equity
financings in the gross amount of approximately $33 million
and the recent exchanges of debt-to-equity in the
approximate amount of $12.87 million, the Company satisfies
the listing requirements of a Nasdaq National Market issuer.
However, the Company continues to incur losses, and as such
there can be no assurance that the Company will continue to
meet the listing requirements of The Nasdaq National Market
in the future. Should the Company fail to meet such listing
standards, it may be delisted from the Nasdaq Stock Market.
Trading, if any, in the listed securities would thereafter
be conducted on the Electronic Bulletin Board or the
National Quotation Bureau's "pink sheets." As a result,
should delisting occur, an investor may find it difficult to
dispose of, or to obtain accurate quotations of the price
of, the Company's securities. This would likely have a
material and adverse effect on the market price of the
Company's Common Stock and on the Company's ability to raise
additional capital.
CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS; POTENTIAL
DILUTION AND ADVERSE IMPACT ON ADDITIONAL FINANCING.
As of May 23, 1997, the Company had outstanding
options and warrants to purchase an aggregate of 45,790,642
shares of Common Stock, at a weighted average exercise price
of $2.6590 per share. The exact number of shares of Common
Stock issuable upon conversion of the 7% Cumulative
Preferred Stock, the Series 3 Preferred Stock and the Series
4 Preferred Stock (collectively, the "Preferred Stock")
cannot be estimated with certainty because, generally, such
issuances of Common Stock will vary inversely with the
market price of the Common Stock at the time of such
conversion, and there is no cap on the number of shares of
Common Stock that may be issuable. The number of shares of
Common Stock issuable upon conversion of the Preferred Stock
is also subject to various adjustments to prevent dilution
resulting from stock splits, stock dividends or similar
transactions. Further, the Company may, at its election,
choose to issue additional shares of Series 3 Preferred
Stock or Series 4 Preferred Stock in lieu of cash dividends
due to the holders of the Series 3 Preferred Stock and the
Series 4 Preferred Stock, respectively.
In addition, on November 13, 1996, SyQuest sold to an
investor 1,500,000 shares of Common Stock that became freely
tradeable, subject to compliance with applicable securities
laws, on approximately February 12, 1997. As part of this
same transaction, the Company issued a warrant that will
become exercisable for between 375,000 shares and 1,875,000
shares of Common Stock, depending on a number of factors.
To the extent that such options and warrants are
exercised, shares of Common Stock or Series 3 Preferred
Stock or Series 4 Preferred Stock are issued in lieu of cash
dividends or convertible securities are converted,
substantial dilution of the interests of the Company's
stockholders is likely to result and the market price of the
Common Stock may be materially adversely affected. Such
dilution will be greater if the future market price of the
Common Stock decreases. For the life of such warrants,
options and convertible securities the holders will have the
opportunity to profit from a rise in the price of the
underlying securities. The existence of such warrants,
options and convertible securities is likely to affect
materially and adversely the terms on which the Company can
obtain additional financing, and the holders of such
warrants, options and convertible securities can be expected
to exercise them at a time when the Company would otherwise,
in all likelihood, be able to obtain additional capital by
an offering of its unissued capital stock on terms more
favorable to the Company than those provided by such
warrants, options and convertible securities.
The Company has filed Registration Statements on Form
S-8 under the Act to register shares of Common Stock subject
to stock options and to the Company's employee stock
purchase plan that will permit the resale of such shares,
subject to Rule 144 volume limitations applicable to
affiliates of the Company and vesting restrictions. The
Company has also registered the Common Stock issuable upon
exercise of the warrants and conversion of the convertible
securities pursuant to a prospectus included in Registration
Statement Nos. 333-7369 and 333-17119. Such registered
shares can be sold without any holding period or sales
volume limitations. The registration of the shares set
forth in the Selling Stockholders table set forth below is
in addition to the shares previously registered.
UNCERTAINTY OF MARKET ACCEPTANCE OF PRODUCTS.
The Company's future success will depend upon market
acceptance of its new products and upon the Company's
ability to establish its new products as industry standards.
In December 1996, the Company began shipping its SyJet 1.5
Gigabyte Removable Cartridge Hard Drive (SyJet) product
line. During the quarter ended March 31, 1997, the Company
commenced volume sales of SyJet which accounted for
approximately 46.4% of the total Company sales for the
quarter then ended. While the Company believes that the
SyJet product line has been favorably received by the
marketplace, there can be no assurance that the level of
acceptance will continue or grow. Through March 31, 1997,
SyJet production was constrained by industry-wide shortages
of critical components and other production shortfalls.
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 continue to be accepted in the
marketplace.
The SyQuest technology is different from the most
widely used data storage devices today (hard disk drives,
floppy disk drives and CD-ROM drives). No new type of
read/writeable data storage device has achieved widespread
market acceptance in recent years and there can be no
assurance that the Company's new products will achieve
market acceptance. Whether the Company's new products will
achieve significant market acceptance will depend upon a
number of factors, including the price, performance and
other characteristics of competing solutions introduced by
other vendors, the timing of the introduction of such
products, and the success of the Company in establishing OEM
arrangements for the Company's new products. See "Risk
Factors - Competition" and "- Shortages of Critical
Components; Absence of Supply Contracts; Supplier Workouts."
There can be no assurance that the Company will be
successful in satisfying any of these factors. In addition,
the two formats of removable-media storage which have gained
widespread market acceptance to date--floppy disk drives and
CD-ROM drives--are both used by software manufacturers as a
means of software distribution. The Company's products are
not currently used for software distribution. The failure of
the Company's new products to achieve widespread commercial
acceptance would have a material adverse effect on the
Company's financial results and business.
CONTINUED SALES OF THE EZ FLYER 230, AND; DISCONTINUATION
OF EZ135.
Through the second quarter ended March 31, 1997, EZ
Flyer 230 sales accounted for approximately 25.0% of the
Company's revenue compared to approximately 34.4% for the
first quarter ended December 31, 1996. While the Company
believes that the EZ Flyer 230 will continue to be an
important contributor to the Company's revenue in the near
future, there can be no assurances, in the face of increased
competition and higher capacity solutions, that the demand
for the EZ Flyer 230 will continue at current levels.
The Company's EZ135 products accounted for 4% of
revenue for the second quarter ended March 31, 1997,
compared to 16.1%, 16.0%, 45.0%, 46.0% and 42.0% for the
quarters ended December 31, 1996, September 30, 1996, June
30, 1996, March 31, 1996, and December 31, 1995,
respectively. The Company discontinued production of the
EZ135 during the fourth quarter of fiscal 1996. However,
the Company continues to sell available stock. While the
EZ135 has made a contribution to revenue during the quarter
ended March 31, 1997, there can be no assurances that sales
of this product line will continue.
SHORTAGES OF CRITICAL COMPONENTS; ABSENCE OF SUPPLY
CONTRACTS; SUPPLIER WORKOUTS.
Many components incorporated in, or used in the
manufacture of, the Company's products are currently only
available from sole source suppliers. During the 1996 fiscal
year and the first two quarters of fiscal 1997, the Company
experienced disruption in its supply of certain components
for a number of reasons including, industry wide shortages
and the shortage of cash to pay suppliers. During fiscal
1996, component shortages due to limited cash availability
affected the Company's ability to produce EZ Flyer 230
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
have had a material adverse affect on the Company's ability
to generate sales and the ability to successfully produce
the SyJet product in volumes necessary to meet demand. If
such disruption continues, the Company's ability to generate
sales and increase revenues will be materially adversely
effected.
On July 15, 1996, the Company issued the Debenture to
one of its suppliers pursuant to which up to 400,000 shares
of Common Stock could be issued to such supplier at a
conversion price of $6.9375 per share. Subsequently, the
Company negotiated with other suppliers to extend the
payment dates on amounts owed. The Company conducted
similar negotiations with other suppliers, converting a total
of approximately $43.1 million of accounts payable and other
obligations to those suppliers, to notes payable to reflect
extended repayment terms. In September and October 1996,
February, March and April 1997, the Company received certain
of those notes payable in exchange for an aggregate of
8,047,269 shares of Common Stock. As a result of the
Company's completion of recent financing transactions and
other efforts by management to improve SyQuest's balance
sheet, a number of Company suppliers have begun to
transition from doing business with the Company on a C.O.D.
basis and are selling to the Company under more standard
commercial terms. However, many of SyQuest's key suppliers
continue to do business with SyQuest on a C.O.D. basis,
which requirement places demands on the Company's available
cash resources that may limit its financial flexibility and
its ability to meet market demand for its products.
The Company purchases all of its sole and limited
source components and equipment pursuant to purchase orders
placed from time to time and has no guaranteed supply
arrangements. The inability to obtain sufficient components
and equipment, to obtain or develop alternative sources of
supply at competitive prices and quality, or to avoid
manufacturing delays could prevent the Company from
producing sufficient quantities of its products to satisfy
market demand, result in delays in product shipments,
increase the Company's material or manufacturing costs, or
cause an imbalance in the inventory level of certain
components. Moreover, difficulties in obtaining sufficient
components may cause the Company to modify the design of its
products to use a more readily available component, and such
design modifications may result in increased costs and
product performance problems. Any or all of these problems
could in turn result in the loss of customers, provide an
opportunity for competing products to achieve market
acceptance and otherwise adversely affect the Company's
business and financial results.
COMPETITION.
The data storage industry is highly competitive. The
Company believes that its products compete most directly
with other removable-media data storage devices, such as
disk drives offered by Iomega Corporation and magneto
optical disk drives. Although the Company believes that its
products offer performance and certain other advantages over
most other removable-media storage devices available today,
the Company believes that the price/performance levels of
existing removable-media products will improve and that
other companies will introduce new removable-media storage
devices. Accordingly, the Company believes its products
will face increasingly intense competition. In particular, a
consortium comprising Compaq Computer, 3M, Insite and
Matsushita-Kotobuki Electronics Industries Ltd. has
announced and is selling the LS120, a high capacity
floptical drive that is compatible with conventional floppy
disks. Each of Mitsubishi Electric Corp. and Mitsumi has
also announced that it plans to manufacture a high capacity,
floppy drive that is downward compatible with existing
floppy diskettes. If successfully marketed, these drives
would compete with the Company's EZ products. The Iomega
Zip drive, a high capacity floppy disk drive, is a
competitor to EZ Flyer 230. The JAZ drive is Iomega's first
removable hard drive and competes directly with SyQuest's
products. In addition, to the extent that SyQuest drives
are used for incremental primary storage capacity, they also
compete with conventional hard disk drives. In addition,
the leading suppliers of conventional hard disk drives could
at any time determine to enter the removable-media storage
market.
As new and competing removable-media storage solutions
are introduced, it is possible that the first such solution
to achieve a significant market presence will emerge as an
industry standard and achieve a dominant market position.
If such is the case, there can be no assurance that the
Company's products would achieve significant market
acceptance, particularly given the Company's size and market
position relative to its competitors.
TECHNOLOGICAL CHANGE AND NEW PRODUCTS.
The Company operates in an industry that is subject
both to rapid technological change and rapid change in
consumer demands. For example, over the last 10 years the
typical hard disk drive included in a new personal computer
has increased in capacity from approximately 40 megabytes
(Mbs) to 2 gigabyte (GB) or more, while the market price per
megabyte of a hard disk drive has dramatically decreased.
The Company's future success will depend in significant part
on its ability continually to develop and introduce, in a
timely manner, new removable disk drive products with
improved features, and to develop and manufacture those new
products within a cost structure that enables the Company to
sell such products at lower prices than those of comparable
products today. In addition, the Company depends on
technological developments from other vendors for the
components in its products (such as heads, semiconductor
devices and media). The Company has recently introduced its
EZ Flyer 230 which is targeted for sale to the Company's
traditional customer base in the desktop publishing,
prepress and service bureau segments, as well as to a broad
array of users in the SOHO (Small Office/Home Office) market
segment. The SyJet 1.5 GB removable cartridge hard drive is
targeted towards computer, audio and video OEMs, as well as
retail, the Company's traditional customer base and the SOHO
market segment. The Company believes that this product will
compete with the Iomega JAZ. There can be no assurance that
the Company will be successful in developing, manufacturing
and marketing cost effective products (including the EZ
Flyer 230 and the SyJet 1.5 GB) that meet both the
performance and price demands of the data storage market.
DEPENDENCE ON STRATEGIC MARKETING ALLIANCES.
The Company's business strategy depends in significant
part on establishing successful strategic alliances with a
variety of key companies within the computer, audio and
video industries. Among the types of alliances contemplated
by the Company's business strategy are: OEM arrangements
with personal computer, audio and video manufacturers that
will include SyQuest products as a standard feature or
factory-installed option in their personal computers;
reseller arrangements (including private and co-branding
arrangements) with major vendors of computer products
covering the resale of the Company's products by such
companies; and licensing arrangements under which the
Company grants certain computer manufacturers on a royalty-
bearing basis the right to manufacture and sell its drives
or media. Moreover, the Company believes that establishing
strategic alliances (especially OEM arrangements) is
critical to the success of its business, and there can be no
assurance that the Company will be successful in doing so.
In addition, the Company's strategic alliances are generally
not covered by binding contracts and may be subject to
unilateral termination by the Company's strategic partners,
and may also require the Company to share control over its
manufacturing and marketing programs and technologies.
RELIANCE ON MANUFACTURING RELATIONSHIPS; NOMAI LAWSUITS.
The Company plans to continue to use independent
parties to manufacture for the Company a portion of the
Company's components. The Company currently has
manufacturing relationships for cartridges and others for
manufacture and subassembly of components.
On November 18, 1996, the Company and Herve Frouin and
Marc Frouin (the "Frouins"), owners of a controlling
interest in Nomai, announced the execution of a letter of
intent proposing a transaction (the "Proposed Transaction")
in which the Company would acquire a controlling interest in
Nomai from the Frouins in exchange for 3,422,968 shares of
the Company's Common Stock, and would commence a tender
offer to acquire up to 100% of the publicly held shares of
Nomai. On November 25, 1996, however, the Company announced
that plans to acquire Nomai have been terminated. The
Company subsequently filed a suit against Nomai, the Frouins
and certain other defendants in the United States District
Court for the Northern District of California alleging,
among other things, patent infringement and violation of
trademark and unfair competition laws. On May 23, 1997,
Nomai filed a counterclaim against the Company alleging,
among other things, breach of contract and violations of the
unfair competition laws. Settlement discussions are
continuing, but there can be no assurance that any
settlement will be reached.
In September 1996, the Company and Legend Group
("Legend"), the largest computer systems manufacturer and
distributor in the People's Republic of China, announced an
intention to form a joint venture company for the
manufacture and distribution of the Company's removable
cartridge hard drives and products in China and to make
Legend the exclusive distributor of the Company's products
in the developing Chinese market. The Company would provide
the proposed joint venture company with training and
manufacturing know-how to insure that the joint venture had
the requisite skills to manufacture the Company's removable
cartridge hard drives and products. It is anticipated that
both Legend and the Company would contribute the capital
required for the joint venture. The Company and Legend have
entered into a Memorandum of Understanding under which
Legend would invest up to $20 million in the Company.
Negotiations regarding such an equity investment have been
deferred. The completion of any such investment may require
approval of the Company's stockholders pursuant to Nasdaq
listing rules and may be subject to a waiting period
pursuant to the Hart-Scott-Rodino Act. In December 1996,
the Company and Legend announced a distribution agreement
whereby Legend has become the exclusive distributor of the
Company's products in the developing Chinese market.
There can be no assurance that the Company will be
successful in prosecuting its lawsuits against or in
maintaining its manufacturing relationships with Nomai, that
the joint venture or financing agreement with Legend will be
consummated or successful, or that the Company will
successfully establish additional relationships in the
future or successfully manage such manufacturing
relationships. The lawsuit against Nomai and either the
completion of or failure to complete the proposed
transactions with Legend could have numerous consequences
that could affect the Company materially and adversely. The
Company's manufacturing relationships are generally not
covered by binding contracts and may be subject to
unilateral termination by the Company's manufacturing
partners. Moreover, there can be no assurance that third-
party manufacturers will be willing or able to meet the
Company's quantity or quality requirements for manufactured
products.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS.
The Company has experienced and in the future may
continue to experience significant fluctuations in its
quarterly operating results. Factors such as price
reductions, the introduction and market acceptance of new
products, product returns, the availability of critical
components and the lower gross margins associated with the
Company's newly introduced products could contribute to this
quarterly variability. Moreover, the Company's expense
levels are based in part on expectations of future sales
levels, and a shortfall in expected sales could therefore
result in a disproportionate decrease in the Company's
results of operations. As a result of these and other
factors, it is likely that the Company's operating results
in some future period will be below the expectations of
investors, which would be likely to result in a significant
reduction in the market price of the Common Stock.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; INTELLECTUAL PROPERTY
LITIGATION.
The Company's success depends heavily on the
establishment and maintenance of proprietary technologies.
The Company relies on a combination of patent, copyright and
trade secret law to protect the technology in its drives and
cartridges. The Company holds numerous U.S. and foreign
patent applications relating to its drives and hard disk
cartridges. Many of these patents, however, do not pertain
to the Company's recent product generations, and there can
be no assurance that additional patents will issue in the
future. There can be no assurance that the steps taken by
the Company to protect its technology will be adequate to
prevent misappropriation of its technology by third parties,
or that third parties will not be able independently to
develop similar technology. In particular, the Company's
sales have been and will continue to be materially adversely
affected when parties develop cartridges compatible with the
Company's disk drives.
The Company filed suit against Nomai, S.A. (Nomai) and
Maxell in France for copyright and patent infringement. The
Company initiated an arbitration proceeding against Nomai
seeking payment of outstanding royalties of approximately $1
million. The arbitration process began in May 1995, in San
Jose, California and is under way.
On January 27, 1997, the Company filed a suit against
Nomai, S.A.,
Electronique d2 and La Cie Ltd. in Federal district court
in San Francisco for patent, trademark and copyright
infringement, unfair competition and breach of contract.
The suit alleges that Nomai and others have illegally used
the Company's proprietary
technology in certain of Nomai's competing products. The
suit seeks to block further sales of such products along
with damages deriving from harm done to the Company by this
conduct. Nomai has filed a counter claim including claims
for breach of contract, misrepresentation, interference with
contract and unfair
competition.
From time to time the Company receives notices
alleging that the Company's products infringe third party
proprietary rights. A third party notified the Company in
June 1995, that such party believes the Company infringes on
six of its U.S. patents. It is the Company's belief that
the claims are without merit or that the infringement claims
relate to component parts purchased from vendors. The
Company also believes that if 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 effect upon its
financial condition or results of operations.
One company has notified the Company that it believes
the Company's products infringe six U.S. patents. It is the
Company's belief that the claims are without merit or that
the infringement claims relate to component parts purchased from vendor
The Company also believes that in the event this company
prevailed on its claims, the Company would be indemnified by
its vendors for any liability arising from the alleged
infringements and that this matter will not have a material
adverse effect upon its financial condition or results of
operations. Another company has notified the Company that
it believes a number of the Company's removable cartridge
hard drives products infringe several of its patents
relating to the use of spin motors in disc drives. The
Company believes that its removable cartridge hard drive
products do not infringe the claims of these patents and
that some or all of the asserted patents are invalid.
The Company, in the normal course of business,
receives and makes inquiries relating to other intellectual
property matters including alleged patent infringement. The
Company may negotiate licenses or other settlements when it
considers such action
appropriate.
Patent and similar litigation frequently is complex
and expensive and its outcome can be difficult to predict.
There can be no assurance that the Company will prevail in
any proceedings that may be commenced against the Company.
In addition, certain technology used in the Company's
products is licensed from third parties. The termination of
any such license arrangements could have a material adverse
effect on the Company's business and financial results.
INTERNATIONAL OPERATIONS.
International sales generated a significant portion of
the Company's revenues in fiscal years 1995 and 1996, and
the Company expects international sales to continue to
constitute a significant percentage of its total sales in
the future. The international portion of the Company's
business is subject to a number of inherent risks, including
difficulties in building and managing foreign operations and
foreign reseller networks, the differing product needs of
foreign customers, fluctuations in the value of foreign
currencies, import- export duties and quotas, and
regulatory, economic or political changes. Moreover, the
Company relies on foreign companies for the supply of
certain critical components and is increasingly relying on
foreign companies for the manufacture of certain of its
products, and these relationships may be subject to some of
the same risks affecting its international sales. There can
be no assurance that these factors will not materially and
adversely affect the Company's international sales and its
overall business and financial performance.
The Company's international sales are predominantly
denominated in U.S. dollars. Accordingly, a significant
increase in the valuation of the U.S. dollar and the
resultant increase in the price of the Company's foreign
currency priced products could have a material adverse
effect on the Company's sales.
MANAGEMENT CHANGES; DEPENDENCE ON KEY PERSONNEL.
The Chairman of the Board, the President and Chief
Executive Officer, the Executive Vice President and Chief
Financial Officer, the Executive Vice President-Sales, the
Chief Technical Officer and the Executive Vice President-
Operations, have been with the Company approximately one
year or less. Syed Iftikar, the Company's former Chairman
of the Board, President and Chief Executive Officer, ceased
to be an officer of the Company on June 13, 1996, and
resigned as a director on August 15, 1996.
The Company's success will depend in large part upon
the capabilities of the new management team. The inability
of such individuals to become familiar with the widespread
operations of the Company and its subsidiaries and turn
around the financial situation of the Company could have a
material adverse effect on the Company. The Company's
success will also depend in significant part upon its
ability to attract and retain highly-skilled management and
other personnel. Competition for such personnel in the
computer industry is intense, and the Company has from time
to time experienced difficulty in finding sufficient numbers
of qualified professional and production personnel. The
Company has had a number of other executive officers leave
the Company over the last twelve months. There can be no
assurance that the Company will be successful in attracting
and retaining the quantity and quality of personnel that it
needs.
VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS.
The market prices for shares of high technology
companies including the securities of SyQuest have been
volatile. The Company's Common Stock has recently
experienced substantial levels of short selling, which has
depressed the market price, and increased the volatility of
the market price, of the Company's Common Stock. Factors
such as announcements of technological innovations or new
products by the Company or its competitors, variations in
the Company's quarterly operating results, continued high
levels of short selling of the Common Stock, or general
economic or stock market conditions unrelated to the
Company's operating performance may have material adverse
effects on the market price of the Common Stock. In the
past, following periods of volatility in the market price of
a company's securities, securities class action litigation
has often been instituted against such a company. Such
litigation, can result and has resulted in substantial costs
and a diversion of management attention and resources. See
"Risk Factors - Class Action and Shareholder Derivative
Lawsuits."
In addition, the Company believes that electronic
bulletin board postings regarding the Company on America
Online and other similar services, certain of which have in
the past contained false information about Company
developments, have in the past and may in the future
contribute to volatility in the market price of the Common
Stock. Any information concerning the Company, including
projections of future operating results, appearing in such
on-line bulletin boards or otherwise emanating from a source
other than the Company should not be relied upon as having
been supplied or endorsed by the Company.
The Company has not paid any cash dividends since its
inception, and it does not anticipate paying cash dividends
in the foreseeable future, except that certain cash
dividends may be paid in connection with the recent issuance
of the Company's Series 3 Preferred Stock and the Series 4
Preferred Stock.
CERTAIN MARKETING AND SALES RISKS.
As is common practice in its industry, the Company's
arrangements with its customers generally allow customers,
in the event of a price decrease, credit equal to the
difference between the price originally paid and the new
decreased price on units in the customers' inventories on
the date of the price decrease. When a price decrease is
anticipated, the Company establishes reserves for amounts it
estimates will be reimbursed to qualifying customers. There
can be no assurance that these reserves will be sufficient
or that any future returns or price protection charges will
not have material adverse effects on the Company's results
of operations, particularly because future results will
depend heavily on recently introduced products for which the
Company has little or no operating history. In addition,
customers generally have stock rotation rights permitting
them to return slower-moving products in inventory within
specified time periods in return for compensating orders of
other products. Any build-up of inventory at the Company or
in its distribution channels that does not sell through to
end users could have material adverse effects on the
Company's operating results and financial condition.
As is typical in the industry, from time to time the
Company experiences product defects and product returns.
There can be no assurance that the Company will not
experience quality or reliability problems in the future
that have material adverse effects on the Company's business
and financial results.
The Company markets its products primarily through
computer product distributors and retailers. Distribution
channels for personal computers and accessories have been
characterized by rapid change, including consolidation and
financial difficulties of distributors. The loss or
ineffectiveness of any of the Company's major distributors
could have a material adverse effect on the Company's
results of operations. In addition, since the Company grants
credit to its customers, a substantial portion of
outstanding accounts receivable are due from computer
product distributors and certain large retailers. At March
31, 1997, the customers with the ten highest accounts
receivable balances totaled $12.12 million, or 46%, of gross
accounts receivable at that date. The Company has no reason
to believe these receivable balances are uncollectible, but
if any one or a group of these customers' receivable
balances should be deemed uncollectible, it would have a
material adverse effect on the Company's results of
operations and financial condition.
EFFECT OF ANTI-TAKEOVER PROVISIONS.
The Company's Board of Directors has the authority to
issue up to 4,000,000 shares of preferred stock and to
determine the price, rights, preferences and privileges of
those shares, which, under certain circumstances, could be
issued without any further vote or action by the Company's
stockholders. To date, an aggregate of 380,000 shares of
preferred stock have been issued: 20,000 shares of 7%
Cumulative Preferred Stock; 5,500 shares of Convertible
Preferred Stock, 24,500 shares of Series 2 Preferred Stock;
50,000 shares of Series 3 Preferred Stock and 280,000 shares
of Series 4 Preferred Stock. The rights of the holders of
Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of these preferred
shares and any preferred stock that may be issued in the
future. Such issuance, while providing desirable
flexibility in connection with possible financings and
acquisitions and other corporate purposes, could make it
more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company. In addition,
preferred stock may have other rights, including economic
rights, senior to the Common Stock, and, as a result, the
issuance thereof could have a material adverse effect on the
market value of the Common Stock. The Company is also
subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which prohibit the
Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after
the date of the transaction in which the person first
becomes an "interested stockholder," unless the business
combination is approved in a prescribed manner. The
application of Section 203 could also have the effect of
delaying or preventing a change of control of the Company.
CLASS ACTION AND SHAREHOLDER DERIVATIVE LAWSUITS.
The Company has been named as a defendant in four
putative class action lawsuits. Two of the actions, Ravens,
et al. v. Iftikar, et al. (filed April 2, 1996) and
Bellezza, et al. v. Iftikar, et al. (filed May 24, 1996)
have been brought in the United States District Court for
the Northern District of California and have been assigned
to the Honorable Vaughn Walker (collectively, the "Federal
Lawsuit"). Certain current and former officers and directors
also have been named as defendants in the Federal Lawsuit.
Plaintiffs have petitioned the Court to consolidate the
foregoing complaints into one consolidated action. That
request, 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, which
alleges that defendants violated various California laws
through material misrepresentations and omissions, seeks
unspecified damages. The fourth purported class action,
entitled Ravens, et al. v. Iftikar, et al., was filed on
October 11, 1996, in the Superior Court of the State of
California for the County of Alameda (the "Ravens Lawsuit").
The Ravens Lawsuit, which alleges that the Company and
certain of its former officers and directors violated
various California laws through material representations and
omissions between October 21, 1994, and February 2, 1996,
and is purportedly brought on behalf of persons who
purchased stock during that period, seeks unspecified
damages. The Ravens Lawsuit has been consolidated with the
Kaufman Lawsuit discussed above. Plaintiffs are preparing a
consolidated complaint. The Company intends to defend the
cases vigorously.
On May 14, 1996, the Company was served with a
shareholder's derivative action filed in Alameda County,
California, Superior Court entitled John Nitti, et al. v.
Syed Iftikar, et al. On July 22, 1996, plaintiffs filed an
amended complaint. The action seeks to recover unspecified
damages and punitive damages on behalf of the Company from
current and former officers and directors of the Company for
alleged breach of fiduciary duty, unjust enrichment and
waste of corporate assets. The Company is a nominal
defendant in the action. The complaint alleges that the
officers and directors issued false and misleading
information and sold shares of the Company's stock at
artificially inflated prices. The allegations are
essentially the same as those in the putative class actions.
The Company intends to defend this case vigorously.
While the Company intends to vigorously defend the
lawsuits, there can be no assurance as to what financial
effect the pending litigation may have on the Company. From
time to time, the Company is involved in litigation that it
considers to be in the normal course of its business. Other
than set forth in this prospectus, the Company is not
engaged in any legal proceedings as of the date hereof
which the Company expects individually or in the aggregate
to have a material adverse effect on the Company's
financial condition or results of operations.
USE OF PROCEEDS
The proceeds from the sale of the shares of Common
Stock offered hereby are solely for the account of the
Selling Stockholders. Accordingly, the Company will receive
none of the proceeds from the sale thereof. However,
certain of the shares of Common Stock offered hereby are
issuable in the future upon the exercise of the outstanding
or issuable warrants, and the Company will receive the
exercise prices payable upon any exercise of the warrants.
There can be no assurance that all or any part of the
warrants will be exercised.
SELLING STOCKHOLDERS
The Selling Stockholders are (i) certain creditors of
the Company who acquired Common Stock in exchange for
cancellation of certain trade payables of the Company, (ii)
certain persons who provided (or helped facilitate) equity
financing to the Company or designees of such persons, and
(iii) certain persons who provided (or are providing)
certain services to the Company. The shares of Common Stock
covered by this Prospectus are being registered so that the
Selling Stockholders may offer the shares for resale from
time to time. See "Plan of Distribution." Except as
described below, none of the Selling Stockholders has had a
material relationship with the Company within the past three
years other than as a result of the ownership of the Common
Stock and other securities of the Company. C. Richard
Kramlich, a principal of New Enterprises Associates VII L.P.
("NEA"), is also a director of the Company.
The following table sets forth the names of the
Selling Stockholders, the number of shares of Common Stock
owned beneficially by each of the Selling Stockholders as of
May 6, 1997, and the number of shares which may be offered
for resale pursuant to this Prospectus. For the purposes of
calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders holding
Series 3 Preferred Stock, the number of shares of Common
Stock calculated to be issuable in connection with the
conversion of the Series 3 Preferred Stock is based on a
conversion price that is derived from the closing market
price of the Common Stock on the first day that Series 3
Preferred Stock was issued, which price is $2.343. For the
purposes of calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders holding
Series 4 Preferred Stock, the number of shares of Common
Stock calculated to be issuable in connection with the
conversion of the Series 4 Preferred Stock is based on a
conversion price that is derived from the closing market
price of the Common Stock on the first day that Series 4
Preferred Stock was issued, which price is $2.343. The
calculation of the total number of shares of Common Stock to
be offered by the holders of such convertible securities,
however, is an estimate based on a hypothetical conversion
at the prices stated above with respect to the series 3
Preferred Stock and the Series 4 Preferred Stock, which
prices are above the closing market price of the Common
Stock as of June 25, 1997, which price is $1.844. If the
$1.844 per share price were used instead of the per share
prices listed above, the number of shares of Common Stock
issuable upon conversion of the Preferred Stock would
increase. The registration statement of which this
Prospectus is a part includes in accordance with Rule 416 of
the Securities Act, an indeterminate number of shares
issuable upon conversion of the Series 3 Preferred Stock and
the Series 4 Preferred Stock as a result of the floating
rate conversion features thereof. The use of such
hypothetical conversions prices is not intended, and should
in no way be construed, to constitute a prediction as to the
future market price of the Common Stock.
The information included below is based upon
information provided by the Selling Stockholders. Because
the Selling Stockholders may offer all, some or none of
their Common Stock, no definitive estimate as to the number
of shares thereof that will be held by the Selling
Stockholders after such offering can be provided and the
following table has been prepared on the assumption that all
shares of Common Stock offered under this Prospectus will be
sold.
Name Shares of Common Shares of Common
Beneficially owned Stock being offered Be
Prior to Offering Af
(1)(2)
Nidec Corporation/(4) 600,000 600,000
Jardine Matheson
& Co., Limited/(4) 564,582 564,582
A-Corn Enterprises/(4) 548,002 548,002
Silicon Systems/(4) 811,017 811,017
Tongkah Electronics,
Sdn Bhd/(4) 3,506,874 3,506,874
Seksun Precision
Engineering Limited/(4) 141,957 141,957
Fletcher International 8,634,016 7,134,016
/(5)
RGC International
Investors, LDC/(6)(10) 4,417,930 4,280,409
New Enterprise
Associates VII L.P./(6) 7,134,016 7,134,016
Tail Wind Fund /(6)(7) 920,102 920,102
CC Investments, LDC/(6) 4,280,409 4,280,409
Capital Ventures
International/(6) 1,426,803 1,426,803
Southbrook International
Investments Ltd./(6) 1,783,504 1,783,504
Nelson Partners/(6)(11) 3,759,177 2,853,606
Olympus Securities, 3,457,172 2,853,606
Ltd./(6)(11)
Combination Inc./(6) 12,127,828 12,127,828
Gross Foundation 925,412 713,401
Inc./(6)
Millenco, L.P./(6)(7) 1,093,470 1,093,470
Moshe Bodner/(7) 483,333 483,333
Wharton Capital
Partners Ltd./(8) 514,630 500,000
State Capital
Market Group, Ltd./(8) 620,000 495,000
David Stefansky/(8) 10,000 10,000
Bain & Company, Inc./(9) 320,000 320,000
Total 58,138,901 54,640,512
(1) Unless otherwise indicated in the footnotes to this
table, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
(2) As required by regulations of the Securities and
Exchange Commission, the number of shares shown as
beneficially owned includes shares which can be purchased
within 60 days after May 23, 1997. The actual number of
shares of Common Stock beneficially owned is subject to
adjustment and could be materially less or more than the
estimated amount indicated depending upon factors which
cannot be predicted by the Company at this time, including,
among others, the market price of the Common Stock
prevailing at the actual date of conversion of Preferred
Stock, and whether or to what extent dividends to the
holders of certain Preferred Stock are paid in Common Stock.
(3) Assumes the sale of all shares offered hereby.
(4) Each of the listed Selling Stockholders hold shares of
Common Stock received from the Company in exchange for
cancellation of certain trade payables of the Company owed
to such Selling Stockholder. Each of such Selling
Stockholders has executed a form of Securities Purchase
Agreement and related Registration Rights Agreement filed as
exhibits to the Company's Current Reports on Form 8-K dated
February 28, 1997, and April 15, 1997. Each of such Selling
Stockholders is a vendor of the Company.
(5) The Selling Stockholder holds 1,500,000 shares of
Common Stock, and holds 50,000 shares of Series 3 Preferred
Stock of the Company, which are convertible into shares of
Common Stock. Each share of Series 3 Preferred Stock may be
converted into a number of shares of Common Stock at a
conversion price per share of Common Stock which is the
greater of the arithmetical average of the closing sale
prices of the Common Stock for the 5-day period preceding
the conversion or 90% of the closing sale price the day
before the conversion, but not greater than the closing sale
price on April 2, 1997 ($2.343). The conversion price is
adjusted, and the number of shares beneficially owned by the
Selling Stockholder will vary accordingly, to reflect
changes in the market price of the Common Stock, stock
dividends, stock splits and certain other circumstances. The
holders of Series 3 Preferred Stock also hold a warrant to
purchase 5,000,000 shares of Common Stock at an exercise
price equal to the greater of the arithmetical average of
the closing sales price per share of common stock on the 5
consecutive trading days preceding the delivery of the
exercise notice and 90% of such closing sale price on the
day immediately prior to the delivery of the exercise
notice, but not greater than the closing sale price per
share of the Common Stock on April 2, 1997. The warrants
issued to the Selling Stockholder are not exercisable until
the lapse of a period ending on the sixty-fifth day after
such Selling Stockholder delivers a notice to the Company
designating an aggregate number of warrant shares to be
purchased. Once such notice is given and the 65-day period
has passed, the Selling Stockholder may exercise its warrant
up to the number of shares designated in the 65-day notice
by providing further notice to the Company that such Selling
Stockholder is exercising the warrant. The number of shares
shown as being offered in the table is based on (i) shares
issuable directly upon conversion, at a conversion price of
$2.343 (which is the conversion price based on the closing
price of the Common Stock on the day the Series 3 Preferred
Stock was issued) and (ii) the warrant to acquire 5,000,000
shares issues in connection with the sale of the Series 3
Preferred Stock. Notwithstanding the foregoing, the Selling
Stockholder can convert Series 3 Preferred Stock into shares
of Common Stock only to the extent that the number of shares
issued thereby, combined with the number of shares of Common
Stock already held by such Selling Stockholder and its
affiliates, would not exceed certain limits set forth in the
controlling documents between the Company and the Selling
Stockholder. For a further description of the rights of
holders of Series 3 Preferred Stock, see the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 3, and the related
Subscription Agreement (with exhibits) filed as an exhibit
to the Company's Current Report on Form 8-K dated February
28, 1997.
(6) Each of the listed Selling Stockholders holds shares
of Series 4 Preferred Stock of the Company, which are
convertible into shares of Common Stock. Each share of
Series 4 Preferred Stock may be converted into a number of
shares of Common Stock at a conversion price which is the
greater of the arithmetical average of the closing sale
prices of the Common Stock for the five consecutive trading
days preceding the conversion or 90% of the closing sale
price the day before the conversion, but in any event not
greater than $2.343. The holders of Series 4 Preferred
Stock (or their designee) also hold a warrant to purchase
shares of the Company's Common Stock at an exercise price
equal to the greater of 130% of the arithmetical average of
the closing sales price per share of common stock on the
five consecutive trading days preceding the delivery of the
exercise notice and 130% of such closing sale price on the
day immediately prior to the delivery of the exercise
notice, but in any event not greater than $3.0469. The
number of shares of Common Stock underlying the warrants
issued to the holders of Series 4 Preferred Stock (or their
designee) equals the purchase price for the Series 4
Preferred Stock. For example, if a holder purchased $1
million of Series 4 Preferred Stock, it would receive a
warrant to acquire 1 million shares of Common Stock. The
warrants issued to the Selling Stockholder are not
exercisable until the lapse of a period ending on the sixty-
fifth day after such Selling Stockholder delivers a notice
to the Company designating an aggregate number of warrant
shares to be purchased. Once such notice is given and the
65-day period has passed, the Selling Stockholder may
exercise its warrant up to the number of shares designated
in the 65-day notice by providing further notice to the
Company that such Selling Stockholder is exercising the
warrant. The number of shares shown as being offered in the
table is based on (i) shares issuable upon conversion, at a
conversion price of $2.343 (which is the conversion price
based on the price per share of the Common stock on the date
of the Series 4 Preferred Shares were first issued) and (ii)
the number of warrant shares each Selling Stockholder (or
its designee) acquired as part of the purchase of Series 4
Preferred Shares. Notwithstanding the foregoing and except
for NEA, each listed Selling Stockholder can convert Series
4 Preferred Stock into Common Stock only to the extent that
the number of shares issued thereby, combined with the
number of shares of Common Stock already held by such
Selling Stockholder and its affiliates, would not exceed
4.9% of the then outstanding Common Stock, as determined in
accordance with Section 13(d) of the Exchange Act. For a
further description of the rights of holders of Series 4
Preferred Stock, see the Certificate of Designations,
Preferences and Rights of 5% Cumulative Convertible
Preferred Stock, Series 4, and the related Securities
Purchase Agreement (with exhibits) filed as an exhibit to
the Company's Current Report on Form 8-K dated April 15,
1997.
(7) Tail Wind Fund, and Millenco, L.P. each of which holds
shares of Series 4 Preferred Stock, has notified the Company
of its intent to designate a party other than itself to
receive certain warrants to purchase Common Stock. Tail
Wind Fund has designated Moshe Bodner to receive a warrant
to purchase 150,000 shares of Common Stock. Millenco, L.P.'s
has designated Mr. Bodner to receive a warrant to purchase
333,333 shares of Common Stock. The actual right of the
designee to receive the warrants is subject to the Company's
receiving written instruction and representations from Mr.
Bodner and Tail Wind Fund and Millenco, L.P., as the case
may be, in a form acceptable to the Company such that the
issuance will be in compliance with all applicable laws,
including the Securities Act of 1933 as amended.
(8) Each Listed Selling Stockholder has the right to
acquire Common Stock pursuant to certain warrants to
purchase shares of Common Stock. The Company granted such
Stock Purchase Warrants as part of the Selling Stockholders'
compensation for their facilitation of certain financing for
the Company. The exercise price for warrants id the greater
of 130% of the arithmetical average of the closing sales
price per share of common stock on the five consecutive
trading days preceding the delivery of the exercise notice
and 130% of such closing sale price on the day immediately
prior to the delivery of the exercise notice, but in any
event not greater than $3.0469. The warrants issued to the
Selling Stockholder are not exercisable until the lapse of a
period ending on the sixty-fifth day after such Selling
Stockholder delivers a notice to the Company designating an
aggregate number of warrant shares to be purchased. Once
such notice is given and the 65-day period has passed, the
Selling Stockholder may exercise its warrants up to the
number of shares designated in the 65-day notice by
providing further notice to the Company that such Selling
Stockholder is exercising the warrant.
(9) Bain & Company, Inc. ("Bain") received four warrants
to purchase a total of 320,000 shares of the Company's
Common Stock for services provided to the Company. The
warrants are dated as of January 16, February 16, March 16,
and April 16, 1997, and each is exercisable for four years
from the date of grant. Each warrant is for the purchase of
up to 80,000 shares of Common Stock. The exercise price per
share of Common Stock is 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 warrant exercise prices of each of the
four warrants relating to the dates of the warrant issuances
were $3.06 for the warrant issued January 16, 1997, $2.59
for the warrant issued February 16, 1997, $2.73 for the
warrant issued March 16, 1997, and $2.34 for the warrant
issued April 16, 1997. The terms of these warrants and
certain registration rights granted to Bain in connection
therewith, are more fully described in the Report on Form
10-Q for the quarter ended March 31, 1997.
(10) The number of shares of Common Stock beneficially
owned by RGC International Investors, LDC ("RDC") includes
137,521 shares of Common Stock underlying warrants issued to
Rose Glen Funding, Inc. ("Rose Glen"), an affiliate of Rose
Glenn Capital Management, L.P. (the investment manager of
RGC), from October 1996 through February 1997 as part of a
financing separate from the Company's sale of Series 4
Preferred Stock, which shares of Common Stock have been
previously registered by the Company pursuant to
Registration Statement No. 333-17119.
(11) The number of shares of Common Stock beneficially
owned by Nelson Partners ("Nelson") and Olympus Securities,
Ltd. ("Olympus") includes 905,571 shares of Common Stock and
603,566 shares of Common Stock, respectively, underlying
warrants issued to Nelson and Olympus from October 1996
through February 1997 as part of a financing separate from
the Company's sales of Series 4 Preferred Stock, which
shares of Common Stock have been previously registered by
the Company pursuant to Registration Statement No. 333-
17119. Citadel Limited Partnership is the managing general
partner of Nelson and the trading Manager of Olympus, and
consequently, has voting control and investment discretion
over securities held by both Nelson and Olympus. The
ownership information for Nelson does not include the shares
owned by Olympus and the ownership information for Olympus
does not include the shares owned by Nelson.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock
offered by the Selling Stockholders hereunder pursuant to
contractual registration rights.
The shares of Common Stock offered hereunder may be
sold from time to time by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National
Market or on any exchange which the common stock is listed
for trading or in the over-the-counter market or otherwise
at prices and on terms then prevailing or related to the
then current market price, or in negotiated transactions.
The shares of Common Stock may be sold to or through one or
more broker-dealers, acting as agent or principal in
underwritten offerings, block trades, agency placements,
exchange distributions, brokerage transactions or otherwise,
or in any combination of transactions. The shares of Common
Stock offered hereunder may be used to settle sales of
Common Stock effected on or after the date Preferred Stock
is converted into Common Stock.
In connection with any transaction involving the
Common Stock, broker- dealers or others may receive from the
Selling Stockholders, and may in turn pay to other broker-
dealers or others, compensation in the form of commissions,
discounts or concessions in amounts to be negotiated at the
time. Broker- dealers and any other persons participating
in a distribution of the Common Stock may be deemed to be
"underwriters" within the meaning of the Act in connection
with such distribution, and any such commissions, discounts
or concessions may be deemed to be underwriting discounts or
commissions under the Act.
Any or all of the sales or other transactions
involving the Common Stock described above, whether effected
by the Selling Stockholders, any broker dealer or others,
may be made pursuant to this Prospectus. In addition, any
shares of Common Stock that qualify for sale pursuant to
Rule 144 under the Act may be sold under Rule 144 rather
than pursuant to this Prospectus.
To comply with the securities laws of certain states,
if applicable, the Common Stock may be sold in such
jurisdictions only through registered or licensed brokers or
dealers. In addition, shares of Common Stock may not be
sold unless they have been registered or qualified for sale
or an exemption from registration or qualification
requirements is available and is complied with under
applicable state securities laws.
The Company and the Selling Stockholders have agreed,
and hereafter may further agree, to indemnify each other and
certain persons, including broker- dealers or others,
against certain liabilities in connection with any offering
of the Common Stock, including liabilities arising under the
Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the
Company by Shartsis, Friese & Ginsburg LLP, San Francisco,
California.
EXPERTS
The consolidated financial statements of SyQuest
Technology, Inc. appearing in the SyQuest Technology, Inc.
Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the
authority of such firm as experts in
accounting and auditing.
NO DEALER,
SALESPERSON OR OTHER
INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT
CONTAINED IN THIS
PROSPECTUS IN CONNECTION
WITH THE OFFERING COVERED
BY THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH
INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL 54,640,512 SHARES
OR A SOLICITATION OF AN
OFFER TO BUY, THE COMMON SYQUEST TECHNOLOGY, I
STOCK IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO COMMON STOCK
WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER PROSPECTUS
SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY
IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
TABLE OF CONTENTS
AVAILABLE INFORMATION................1
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...............1
THE COMPANY..........................2
RISK FACTORS.........................3
USE OF PROCEEDS.....................17
SELLING STOCKHOLDERS................18
PLAN OF DISTRIBUTION................23
LEGAL MATTERS.......................24
EXPERTS.............................24 JULY 2, 1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other
than the underwriting discounts and commission, payable by the
Company in connection with the sale of the Common Stock being
registered. All the amounts shown are estimates except for the
registration fee.
Registration fee $3
Blue sky qualification fees and expenses
Printing
Legal fees and expenses
7
Accounting fees and expenses
Miscellaneous
---
Total 11
===
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company has the power, pursuant to Section 102 (7)
of the Delaware General Corporation Law, to limit the liability of dire
of the Company for certain breaches of fiduciary duty and, pursuant to
145 of the Delaware General Corporation Law, to indemnify its officers
and directors and other persons for certain acts.
The Company's Restated Certificate of
Incorporation includes the following provisions:
The personal liability of the directors of the
corporation for monetary damages for breach of fiduciary
duty as a director shall be eliminated to the fullest extent
permissible under Delaware law as the same exists or as may
hereafter be amended. Neither any amendment nor repeal of
this Article, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of
any matter occurring, or any cause of action, suit or claim
that, but for this Article would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent
provision.
The corporation is authorized to provide
indemnification of officers, directors, employees or agents
of the corporation for breach of duty to the corporation and
its stockholders through By-law provisions or through
agreements with such officers, directors, employees or
agents, or both, in excess of the indemnification
otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject to the limits on such excess
indemnification set forth in Section 102(b)(7) of the
Delaware General Corporation Law.
Pursuant to Section 145 of the Delaware General Corpora
Law, a corporation generally has the power to indemnify its present and
former directors officers, employees and agents against expenses incurr
them in connection with any suit to which they are, or are
threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to,
the best interests of a corporation and with respect to any
criminal action, they had no reasonable cause to believe
their conduct was unlawful.
The Company believes that these provisions are necessar
to attract and retain qualified persons as directors and officers.
These provisions do not eliminate liability for breach of
the director's duty of loyalty to the Company or its
stockholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of
law, for any transaction from which the director derived an
improper personal benefit or for any willful or negligent
payment of any unlawful dividend or any unlawful stock
purchase agreement or redemption.
Section 145 of the Delaware General Corporation Law
authorizes a court to award, or a corporation's board of directors to
grant indemnification to directors and officers in terms
sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act.
Article VI of the Company's Bylaws provides that the,
Company by action of the Board of Directors, shall, to the fullest
extent permitted by the General Corporation Law of Delaware,
indemnify any and all persons who it shall have power to
indemnify against any and all of the expenses, liabilities
or other matters.
The Company has entered into indemnification
agreements with each of its directors and executive officers which
provide for mandatory indemnification and advancement of legal expenses
as the individual is entitled to indemnification as determined in the m
provided in the agreement. The burden is on the Company to
establish the individual is not so entitled.
The Company has purchased and maintains an insurance
policy covering the officers and directors of the Company with
respect to certain liabilities arising under the Act or
arising under the Act or otherwise. Under the terms of their
registration rights agreements, certain of the Selling Stockholders may
obligated to indemnify the Company and its directors and officers under
certain circumstances for liabilities under the Act.
the Act.
ITEM 16. EXHIBITS.
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
3.1 Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 of
of the Company's Annual Report on Form 10-K/A for the
fiscal period ended September 30, 1996
3.2* Amendment to Restated Certificate of
Incorporation of the Company. Incorporated by reference
Exhibit 3.2 of the Company's Registration Statement on F
S-3 filed December 2, 1996 (File No. 333-17119), as amen
4.1 Corrected Certificate of Designations,
Preferences and Rights of 7% Cumulative Convertible
Preferred Stock, Series 1. Incorporated by reference t
Exhibit 3.1 to the Company's Current Report on Form 8-K
dated June 14, 1996 (the "June 14, 1996, Form 8-K").
4.2 Securities Purchase Agreement, dated as of May
31, 1996, by and among the Company and holders of 7%
Cumulative Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 10.1 to the June 14
1996, Form 8-K.
4.3 Registration Rights Agreement dated as of May
31, 1996, by and among the Company and holders of 7%
Cumulative Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 10.2 to the June 14
1996, Form 8-K.
4.4 6% Convertible Subordinated Debenture dated July
15, 1996. Incorporated by reference to Exhibit 10.3 to
Company's Form S-3 Registration Statement No. 333-7369
("Registration 333-7369").
4.5 Registration Agreement dated July 15, 1996,
among the Company and WISRS (Malaysia) SDN.BHD.
Incorporated by reference to Exhibit 10.4 to Registratio
333-7369
4.6 Certificate of Designations, Preferences and
Rights of Convertible Preferred Stock, Series 1, as amen
and agreed to be amended. Incorporated by Reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K/
dated October 31, 1996 (the "October 31, 1996, Form 8-K/
4.7 Certificate of Designations, Preferences and
Rights of 5% Cumulative Preferred Stock, Series 2.
Incorporated by reference to Exhibit 3.2 to the October
1996, Form 8-K/A.
4.8 Securities Purchase Agreement dated as of
October 8, 1996, among the Company and the buyers of the
Convertible Preferred Stock, Series 1 including the
following exhibits: Form of Warrant, Form of Registrati
Rights Agreement, Form of Escrow Agreement and certain
Schedules to the representations. Incorporated by refer
to Exhibit 10.1 to the October 31, 1996, Form 8-K/A.
4.9 Securities Purchase Agreement dated as of
October 8, 1996, among the Company and certain buyers of
Series 2 Preferred Stock, including the following
exhibits: Form of Escrow Agreement, Form of Warrant, Fo
of Registration Rights Agreement and certain Schedules t
the representations. Incorporated by reference to Exhib
10.2 to the October 31, 1996, Form 8-K/A.
4.10 Securities Purchase Agreement dated as of
October 8, 1996, among the Company and certain buyers of
Series 2 Preferred Stock, including the following
exhibits: Form of Escrow Agreement, Form of Warrant, Fo
of Registration Rights Agreement and certain Schedules t
the representations. Incorporated by
reference to Exhibit 10.3 to the October 31, 1996, Form
4.11 Securities Purchase Agreement dated as of
October 8, 1996, among the Company and certain buyers of
Series 2 Preferred Stock, including the following
exhibits: Form of Escrow Agreement, Form of Warrant, Fo
of Registration Rights Agreement and certain Schedules t
the representations. Incorporated by reference to Exhib
10.4 to the October 31, 1996, Form 8-K/A.
4.12 Securities Purchase Agreement dated as of
October 8, 1996, among the Company and certain buyers of
Series 2 Preferred Stock, including the following
exhibits: Form of Escrow Agreement, Form of Warrant, Fo
of Registration Rights Agreement and certain Schedules t
the representations. Incorporated by reference to Exhib
10.5 to the October 31, 1996, Form 8-K/A.
4.13 Securities Purchase Agreement dated as of
September 27, 1996, between the Company and Atmel
Corporation, including the exhibit Form of Registration
Rights Agreement. Incorporated by reference to Exhibit
to the October 31, 1996, Form 8-K/A.
4.14 Securities Purchase Agreement dated as of
October 18, 1996, between the Company and Petronic
International, Inc., including the exhibit Form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.7 to the October 31, 1996, Form
4.15 Securities Purchase Agreement dated as of
October 24, 1996, between the Company and SAE Magnetics
Ltd., including the exhibit Form of Registration
Rights Agreement. Incorporated by reference to Exhibit
to the October 31, 1996, Form 8-K/A.
4.16 Securities Purchase Agreement dated as of
October 25, 1996, between the Company and Freight Solut
International, including the exhibit Form of
Registration Rights Agreement. Incorporated by referen
Exhibit 10.9 to the October 31, 1996, Form 8-K/A.
4.17 Subscription Agreement dated March 31, 1997,
between the Company and Fletcher International Limited,
including as Annex B thereto the form of Warrant
Certificate issued pursuant thereto. Incorporated by
reference to Exhibit 10.1 to the Company's Current Repo
Form 8-K dated February 28, 1997 (the"February 28, 1997
Form 8-K").
4.18 Securities Purchase Agreement dated as of
February 28, 1997, between the Company and A-Corn
Enterprises Company, Ltd., including the exhibit form o
Registration Rights Agreement. Incorporated by referen
Exhibit 10.2 to the February 28, 1997, Form 8-K.
4.19 Securities Purchase Agreement dated as of March
19, 1997, between the Company and Seksun Precision
Engineering Limited, including the exhibit form of
Registration Rights Agreement. Incorporated by referen
Exhibit 10.3 to the February 28, 1997, Form 8-K.
4.20 Securities Purchase Agreement dated as of March
26, 1997, between the Company and Tongkah SDN.BHD.,
including the exhibit form of Registration Rights
Agreement. Incorporated by reference to Exhibit 10.4 t
February 28, 1997, Form 8-K.
4.21 Securities Purchase Agreement dated as of March
26, 1997, between the Company and Silicon Systems, Inc.
including the exhibit form of Registration Rights Agree
Incorporated by reference to Exhibit 10.5 to the Februa
28, 1997, Form 8-K.
.22 Securities Purchase Agreement dated as of April
15, 1997, between the Company and Jardine Matheson &
Company, Ltd., including the exhibit form of
Registration Rights Agreement. Incorporated by referen
Exhibit 10.1 to the Company's Current Report on Form 8-
dated April 15, 1997 (the "April 15, 1997, Form 8-K").
4.23 Securities Purchase Agreements dated May 1,
1997, between the Company and New Enterprises Associate
L.P., including as Annex A thereto the
Certificate of Designations, Preferences and Rights of
Cumulative Convertible Preferred Stock, Series 4, as An
thereto the form of Warrant Certificate
issued pursuant thereto, as Annex C thereto the form of
Delivery Letter, and as Annex D thereto the corrections
be made to the Certificate of Designations. Incorporat
reference to the April 15, 1997, Form 8-K.
5.1 Opinion of Shartsis, Friese & Ginsburg LLP.
23.1 Consent of Ernst & Young LLP, independent
auditors.
23.2 Consent of Shartsis, Friese & Ginsburg LLP.
Reference is made to Exhibit 5.1.
24.1 Power of Attorney of certain officers and directors
(included in Part II of the Registration Statement
- previously filed).
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to
directors, officers, and controlling persons of the Company pursuant to
provisions described in Item 15, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed i
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person
in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this
registration statement:
To include any prospectus required by
Section 10(a)(3) of the Act;
To reflect in the prospectus any facts or event
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in the registration statement;
To include any material information with respe
to the plan of distribution not previously disclosed in the registratio
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (1)(i)
and (1)(ii) do not apply if the information required to be
included in a post effective amendment by these
paragraphs is contained in periodic reports filed by the
Company pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that
are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liabil
under the Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) That, for purposes of determining any
liability under the Act, each filing of the Company's
annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be the new
registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act,
the Company certifies that it has reasonable grounds to believe
it meets all the requirements for filing on Form S-3 and has
duly caused this Amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on
the 2nd day of July, 1997.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edwin L. Harper
Edwin L. Harper,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act, thi
Registration Statement has been signed below by the
following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DA
/s/ Edwin L. Harper President, Chief Executive July
Edwin L. Harper Officer and Director
(Principal Executive Officer)
/s/ Henry C. Montgomery Executive Vice President, July
Henry C. Montgomery Finance and Chief Financial
Officer (Principal Financial
and Accounting Officer)
/s/ Edward L. Marinaro Chairman of the Board and Director July
Edward L. Marinaro
/s/ C. Richard Kramlich Director July
C. Richard Kramlich
/s/ S. Joseph Baia** Director July
S. Joseph Baia
**By Henry C. Montgomery his
attorney in fact
/s/ Henry C. Montgomery
Henry C. Montgomery
INDEX TO EXHIBITS
Exhibit
Number
Description of Document
P
3.1 Restated Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.1 to the
Company's Annual
Report on Form 10-K for the fiscal period ended
September 30, 1995.
3.2 Amendment to Restated Certificate of Incorporation of
the Company. Incorporated by reference to Exhibit 3.2
of the Company's Registration Statement on Form S-3 filed
December 2, 1996 (File No. 333-17119),as amended
4.1 Corrected Certificate of Designations, Preferences and
right of 7% Cumulative Convertible Preferred Stock, Series
1. Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated June 14, 1996
(the "June 14, 1996, Form 8-K").
4.2 Securities Purchase Agreement, dated as of May 31,
1996, by and among the Company and holders of 7%
Cumulative Convertible
Preferred Stock, Series 1. Incorporated by reference
to Exhibit 10.1
to the June 14, 1996, Form 8-K.
4.3 Registration Rights Agreement dated as of May 31,
1996, by and among the Company and holders of 7%
Cumulative Convertible
Preferred Stock, Series 1. Incorporated by reference
to Exhibit 10.2
to the June 14,1996, Form 8-K.
4.4 6% Convertible Subordinated Debenture dated July 15,
1996. Incorporated by reference to Exhibit 10.3 to
the Company's Form S-
3 Registration Statement No. 333-7369
("Registration 333-7369").
4.5 Registration Agreement dated July 15, 1996, among the
Company and WISRS (Malaysia) SDN.BHD. Incorporated by
reference to
Exhibit 10.4 to Registration 333-7369.
4.6 Certificate of Designations, Preferences and Rights
of Convertible Preferred Stock, Series 1, as amended
and agreed to
be amended. Incorporated by reference to Exhibit 3.1
to the
Company's Current Report on Form 8-K/A dated October
31, 1996 (the October 31, 1996, Form 8-K/A")
4.7 Certificate of Designations, Preferences and Rights of
5% Cumulative
Preferred Stock, Series 2. Incorporated by
reference to Exhibit 3.2
to the October 31, 1996, Form 8-K/A.
4.8 Securities Purchase Agreement dated as of October 8,
1996, among the
Company and the buyers of the Convertible Preferred
Stock, Series 1
Including the following exhibits: Form of Warrant,
Form of Registration
Rights Agreement, Form of Escrow Agreement and certain
Schedules to the
representations. Incorporated by reference to Exhibit
10.1 to the October 31, 1996, Form 8-K/A
4.9 Securities Purchase Agreement dated as of October
8, 1996, among the Company and certain buyers of the
Series 2 Preferred Stock, including the following
exhibits: Form of Escrow Agreement, Form of Warrant, Form
of Registration Rights Agreement and certain Schedules to
the representations. Incorporated by reference to Exhibit
10.2 to the October 31, 1996, Form 8-K/A.
4.10 Securities Purchase Agreement dated as of October 8,
1996 among the Company and certain buyers of the Series 2
Preferred Stock, including
the following exhibits: Form of Escrow
Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain
Schedules to the
representations. Incorporated by reference to
Exhibit 10.3 to the
October 31, 1996, Form 8-K/A.
4.11 Securities Purchase Agreement dated as of October 8,
1996, among the Company and certain buyers of the
Series 2 Preferred
Stock, including the following exhibits: Form of
Escrow Agreement,
Form of Warrant, Form of Registration Rights
Agreement and certain
Schedules to the representations. Incorporated
by reference to
Exhibit 10.4 to the October 31, 1996, Form 8-K/A.
4.12 Securities Purchase Agreement dated as of October 8,
1996, among the
Company and certain buyers of the Series 2
Preferred Stock, including
the following exhibits: Form of Escrow Agreement,
Form of Warrant,
Form of Registration Rights Agreement and
certain Schedules to the
representations. Incorporated by reference to
Exhibit 10.5 to the
October 31, 1996, Form 8-K/A.
4.13 Securities Purchase Agreement dated as of September
27, 1996, between the Company and Atmel Corporation,
including the exhibit Form of Registration Rights
Agreement. Incorporated by reference to Exhibit 10.6 to the
October 31, 1996, Form 8-K/A.
4.14 Securities Purchase Agreement dated as of October 18,
1996, between the Company and Petronic International,
Inc., including the exhibit Form of Registration
Rights Agreement. Incorporated by reference to Exhibit 10.7
to the October 31, 1996, Form 8-K/A.
4.15 Securities Purchase Agreement dated as of October 24,
1996, between
the Company and SAE Magnetics (HK) Ltd.,
including the exhibit Form
of Registration Rights Agreement. Incorporated
by reference to Exhibit
10.8 to the October 31, 1996, Form 8-K/A.
4.16 Securities Purchase Agreement dated as of October 25,
1996, between
the Company and Freight Solutions International,
including the exhibit
Form of Registration Rights Agreement.
Incorporated by reference to
Exhibit 10.9 to the October 31, 1996, Form 8-K/A.
4.17 Subscription Agreement dated March 31, 1997, between
the Company and Fletcher International Limited, including
as Annex B thereto the form of Warrant Certificate issued
pursuant thereto. Incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated
February 28, 1997 (the "February 28, 1997, Form 8-K").
4.18 Securities Purchase Agreement dated as of February 28,
1997, between the Company and A-Corn
Enterprises Company, Ltd., including the exhibit
form of Registration Rights Agreement. Incorporated
by reference to Exhibit 10.2 to the February 28, 1997,
Form 8-K.
4.19 Securities Purchase Agreement dated as of March 19,
1997, between the Company and Seksun Precision
Engineering Limited, including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.3 to the February 28, 1997,
Form 8-K.
4.20 Securities Purchase Agreement dated as of March 26,
1997, between the
Company and Tongkah SDN.BHD., including the exhibit
form of Registration
Rights Agreement. Incorporated by reference to
Exhibit 10.4 to the
February 28, 1997, Form 8-K.
4.21 Securities Purchase Agreement dated as of March 26,
1997, between the
Company and Silicon Systems, Inc., including the
exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit
10.5 to the February 28, 1997, Form 8-K.
4.22 Securities Purchase Agreement dated as of April 15,
1997, between the Company and Jardine Matheson &
Company, Ltd., including the exhibit form of Registration
Rights Agreement. Incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated April
15, 1997 (the "April 15, 1997, Form 8-K").
4.23 Securities Purchase Agreements dated May 1, 1997,
between the Company
and New Enterprises Associates VII L.P., including as
Annex A thereto
the Certificate of Designations, Preferences and
Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, as Annex B
thereto the form of
Warrant Certificate issued pursuant thereto, as Annex
C thereto the form
of Delivery Letter, and as Annex D thereto the
corrections to be made to
the Certificate of Designations. Incorporated by
reference to the April
15, 1997, Form 8-K.
5.1 Opinion of Shartsis, Friese & Ginsburg LLP.
38
23.1 Consent of Ernst & Young LLP, independent auditors.
39
23.2 Consent of Shartsis, Friese & Ginsburg LLP.
Reference is made to Exhibit 5.1.
24.1 Power of Attorney of certain officers and directors
(included in Part II of the Registration Statement).
Exhibit 5.1
June 27, 1997
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Re: SyQuest Technology, Inc. - Registration
Statement on Form S-3
Dear Ladies and Gentlemen:
We are counsel for SyQuest Technology, Inc., a
Delaware corporation (the "Company"), in connection with its
Registration Statement on Form S-3, under the Securities Act
of 1933, as amended (the "Registration Statement"), to be
filed with the Securities and Exchange Commission, relating
to 54,640,512 shares of Common Stock, par value $0.0001 per
share of the Company (the "Common Stock"). It is our
opinion that the shares of Common Stock to be offered and
sold pursuant to the Registration Statement, as issued, or
when issued upon the conversion of or in lieu of payment of
cash dividends on certain shares of the Company's Preferred
Stock or the exercise of certain warrants in accordance with
the terms thereof, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion with
the Securities and Exchange Commission as Exhibit 5.1 of the
Registration Statement.
Sincerely yours,
SHARTSIS, FRIESE &
GINSBURG LLP
Steven O. Gasser
Exhibit 23.1
CONSENT OF ERNST AND YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference of firm under the caption
"Experts" in the Registration Statement (Form S-3) and the
related Prospectus of SyQuest Technology, Inc. for the
registration of 54,640,512 shares of its common stock and to
the incorporation by reference therein of our report dated
December 11, 1996, except for note 15, paragraph 11, as to
which the date is June 27, 1997, with respect to the
consolidated financial statements and schedule of SyQuest
Technology, Inc. included in the Annual Report (Form 10-K/A)
for the year ended September 30, 1996, filed with the
Securities and Exchange Commission.
/s/
Ernst and
San Jose, California
June 27, 1997
