<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1998
REGISTRATION NO. 333-40329
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NUMBER 2 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 94-2793941
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION 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 OFFICER
SYQUEST TECHNOLOGY, INC.
47071 BAYSIDE PARKWAY
FREMONT, CA 94538
(510) 226-4000
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF AGENT FOR SERVICE)
COPIES TO:
ROBERT C. FRIESE
STEVEN O. GASSER
SHARTSIS, FRIESE & GINSBURG LLP
ONE MARITIME PLAZA, EIGHTEENTH FLOOR
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
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock $.0001 par value............. 45,822,888 $2.61 $119,597,737 $36,241
</TABLE>
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- -------------------------------------------------------------------------------
(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 4, (ii) a presently
indeterminate number of shares issuable upon conversion of or otherwise
in respect of Registrant's Convertible Preferred Stock, Series 5, and
(iii) 25,628,848 shares issuable upon exercise of certain outstanding
stock purchase warrants, as such numbers may be adjusted in accordance
with Rule 416, including without limitation, adjustments as a result of
floating rate conversion prices.
(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 for
the five consecutive days preceding February 23, 1998.
---------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AND OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER SECURITIES LAWS OF ANY +
+SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 24, 1998
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
45,822,888 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 February 20, 1998 was $2.531 per share.
The shares of Common Stock offered hereby by the Selling Stockholders consist
of (i) in accordance with Rule 416 of the Securities Act of 1933, as amended
(the "Securities Act") a presently indeterminate number of shares issued or
issuable upon conversion or otherwise in respect of 3,600 shares of the
Company's 5% Cumulative Convertible Preferred Stock, Series 4, par value $.0001
(the "Series 4 Preferred Stock"), (ii) a presently indeterminate number of
shares issuable upon conversion or otherwise in respect of 30,000 shares of the
Company's Convertible Preferred Stock, Series 5, par value .0001 (the "Series 5
Preferred Stock") and, (iii) up to 25,628,848 shares issuable upon exercise of
certain outstanding stock purchase warrants (the "Stock Purchase Warrants").
For the purposes of calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders holding Series 4 Preferred
Stock, the number of shares of Common Stock calculated to be issuable in
connection with the conversion of the Series 4 Preferred Stock is based on a
conversion price that is derived from the closing market price of the Common
Stock on the first day that Series 4 Preferred Stock was issued, which price is
$2.343. For the purposes of calculating the number of shares of Common Stock
beneficially owned by the Selling Stockholders holding Series 5 Preferred
Stock, the number of shares of Common Stock calculated to be issuable in
connection with the conversion of the Series 5 Preferred Stock is based on a
conversion price that is derived from the closing market price of the Common
Stock on the day that Series 5 Preferred Stock was issued to the holder
thereof, which price ranged from $2.438 to $3.375. The number of shares
available for resale is subject to adjustment and could be materially less or
more than such estimated amount depending on factors which cannot be predicted
by SyQuest at this time, including, among others, the future market price of
the Common Stock. This presentation is not intended, and should in no way be
construed, to constitute a prediction as to the future market price of the
Common Stock. THE SECURITIES BEING OFFERED HEREUNDER REPRESENT APPROXIMATELY
34% OF THE ISSUED AND OUTSTANDING COMMON STOCK AND COMMITTED COMMON STOCK OF
THE COMPANY. See "Risk Factors--Convertible Securities, Warrants and Options;
Potential Dilution and Adverse Impact on Additional Financing" and "Selling
Stockholders."
-----------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" AT PAGE 5 OF THIS PROSPECTUS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998
<PAGE>
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 $88,241. 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 Securities 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 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
Securities Act. See "Use of Proceeds" and "Plan of Distribution."
2
<PAGE>
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, 1997;
2) The Company's Report on Form 10-Q for the quarter ended December 31,
1997;
3) The Company's Current Reports on Form 8-K dated October 4, 1997,
November 14, 1997, December 18, 1997, and February 13, 1998;
4) The Company's Registration Statement on Form 8-A registering the Common
Stock under Section 12(g) of the Exchange Act;
5) The Company's Proxy Statement for its special meeting of stockholders
held November 5, 1997; and
6) The Company's Proxy Statement for its 1998 Annual Meeting filed January
28, 1998.
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.
3
<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to SyQuest Technology, Inc.,
47071 Bayside Parkway, Fremont, California 94538, telephone (510) 226-4000,
Attn: Bob L. Corey, Executive Vice President, Finance and Chief Financial
Officer.
"SyQuest" and "SyJet" are registered trademarks of the Company. "EZ135," "EZ
Flyer," "SparQ" and "Quest" are trademarks of the Company. This Prospectus also
includes trademarks of companies other than SyQuest Technology, Inc.
THE COMPANY
The Company designs, develops, manufactures, and markets removable hard disk
cartridges, associated disk drives and free-standing storage systems. The
Company's products combine the advantages of fixed hard disk drives with the
benefits of removability, which include unlimited incremental expansion of data
storage capacity, transfer and sharing of data and software among personal
computers, and backup, archival storage and physical security of data. The
Company's principal products have been 3.5 inch and 5.25 inch cartridges,
drives and storage systems used with personal computers and work stations. The
Company's 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.
4
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION IN
THIS PROSPECTUS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.
THE DISCUSSION IN THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS, BELIEFS,
EXPECTATIONS AND INTENTIONS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THE
FOLLOWING RISK FACTORS, AS WELL AS FACTORS DISCUSSED ELSEWHERE IN THIS
PROSPECTUS. THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ
AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY
APPEAR IN THIS PROSPECTUS.
SUSTAINED LOSSES; NEED FOR ADDITIONAL FINANCING; FUTURE CAPITAL NEEDS
As a result of new product introductions and funding continued operating
losses, the Company needs sufficient capital to implement a marketing strategy
that will adequately address the appropriate markets and generate sales demand
for its current and planned future products. Accumulated losses during the
fiscal years ended September 30, 1995, 1996 and 1997 totaled approximately
$220 million. The Company incurred an additional loss of $36.8 million for the
3 months ended December 31, 1997.There can be no assurances that the Company
will cease incurring losses despite new product introductions, as there can be
no assurances that the Company's products will be accepted in the marketplace.
Continued losses would result in liquidity and cash flow problems and could
affect product delivery efforts. Further sustained losses will necessitate
future additional financings that if raised through the issuance of equity
securities, will reduce the percentage ownership of the stockholders of the
Company. Existing stockholders may experience additional dilution, and
securities issued in conjunction with new financings may have rights,
preferences and privileges senior to those of holders of the Company's Common
Stock. See "Risk Factors--Convertible Securities, Warrants and Options;
Potential Dilution and Adverse Impact on Additional Financing." There can be
no assurance, however, that additional financing will be available when
needed, if at all, or on favorable terms.
As a result of the sustained losses, the Company has available significant
deferred tax assets at September 30, 1996 and 1997, respectively. Realization
of these deferred tax assets is dependent on future earnings, if any, the
timing and amount of which are uncertain. Consequently, management believes
that is more likely than not that the Company will not realize these deferred
tax assets as there can be no assurances that the Company will not continue
incurring losses for U.S. income tax purposes. Accordingly, a valuation
allowance, in an amount equal to the net deferred tax asset as of September
30, 1996 and 1997 has been established to reflect these uncertainties.
The Company has funded the cumulative losses primarily by issuance of
additional capital stock for cash proceeds of approximately $122 million. At
the November 1997 Special Stockholders' Meeting the Stockholders approved
increasing the Company's authorized capital stock from 120 million common
shares to 240 million common shares. Further sustained losses will necessitate
future additional financings that if raised through the issuance of equity
securities would cause existing stockholders to experience additional
dilution. The Company currently has approximately 73 million shares of Common
Stock available for future financing. Should additional shares be needed, the
Company will have to obtain stockholder approval to increase the authorized
number of shares of Common Stock.
The Company currently has a domestic and a foreign line of credit. As of
December 31, 1997, the indebtedness under those lines of credit was $20.6
million and $7.0 million, respectively. The domestic line of credit currently
expires in May 1998, and the foreign line of credit expires in March 1998. If
the Company is unable to negotiate an extension of those lines of credit, such
inability would likely have a material adverse effect on the Company.
5
<PAGE>
The inability to raise additional financings when needed and continued
losses will adversely affect the Company's ability to maintain its listing on
the Nasdaq National Market. Should the Company fail to meet such listing
standards, it may be delisted from the Nasdaq Stock Market. The Company's
inability to maintain that listing would 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.
The following table sets forth in summary form as of February 20, 1988 the
Company's material financing activities from June 1996 through February 13,
1998. The terms of these financings are described in eight of the Company's
Reports on Form 8-K dated, respectively, June 14, 1996, October 31, 1996,
November 11, 1996, February 28, 1997, May 30, 1997, August 4, 1997, October 4,
1997, and February 13, 1998.
<TABLE>
<CAPTION>
RESULTING
PREFERRED GROSS COMMON WARRANTS
DATE SERIES/TRANSACTION SHARES PROCEEDS SHARES ISSUED
---- ------------------ --------- ------------ ---------- ----------
<C> <S> <C> <C> <C> <C>
6/96 7% Cumulative Convertible Preferred 20,000(2) $ 20,000,000 10,301,708 --
Stock, Series 1
7/96 6% Convertible Subordinated -- $ 7,700,000(6) -- --
Debenture(1)
9/96-10/96 Various Debt to Equity exchanges -- 24,440,000(6) 8,047,269 --
2/97-4/97
10/96 Cumulative Convertible Preferred 5,500(2) $ 5,500,000 3,289,981 1,096,660
Stock, Series 1
10/96 5% Cumulative Convertible Preferred 24,500(2) $ 24,500,000 12,440,447 4,146,816
Stock, Series 2
11/96 Common Stock Sale -- $ 8,500,000 1,500,000 1,875,000
4/97 5% Cumulative Convertible Preferred 50,000 $ 5,000,000 2,485,070 5,000,000
Stock, Series 3
5/97 5% Cumulative Convertible Preferred 280,000(3) $ 28,000,000 10,069,645 28,000,000
Stock, Series 4
8/97 Common Stock Sale -- $ 3,500,000 1,382,716 3,500,000
9/97-10/97 Convertible Preferred Stock, Series 30,000(4) $ 30,000,000 -- 21,000,000
5
2/98 5% Cumulative Convertible Preferred 28,000(5) -- 8,311,688 4,155,844
Stock, Series 7
------- ------------ ---------- ----------
Total 438,000 $185,140,000 57,828,524(7) 68,774,320
======= ============ ========== ==========
</TABLE>
- --------
(1) The 6% Convertible Subordinated Debenture, was issued as part of a debt to
equity transaction, $2,775,000 is convertible into up to 400,000 shares of
the Company's Common Stock at a conversion price of $6.9375 per share.
(2) All preferred shares have been converted into the resulting common stock
noted.
(3) 53,580 shares of the Series 4 Preferred Stock remain unconverted.
(4) There have been no conversions of the Series 5 Preferred Stock.
(5) The 5% Cumulative Convertible Preferred Stock, Series 7 (the "Series 7"
Preferred Stock) and the Common Stock to which it is convertible is not
being registered pursuant to this prospectus. $8.75 million of the $28.0
million is being held in escrow pending the effectiveness of the Company's
registration statement on Form S-3, No. 333-40329 before March 16, 1998.
If the registration statement is not declared effective by that date, the
escrowed funds will be returned to the investors and 1,475,548 warrants
and 8,750 shares of the Series 7 Preferred Shares will be cancelled,
unless the parties agree otherwise.
(6) No cash proceeds were received by the Company.
(7) On February 20, 1998, assuming the conversion of all remaining preferred
stock, the exercise of all warrants and other stock commitments, the
Company would have approximately 166.5 million shares issued and
outstanding
As of September 30, 1997, the Company had approximately $7.1 million in cash
and cash equivalents. During the fiscal year ended September 30, 1997,
approximately $74.1 million of cash was used for operating activities and
approximately $6 million of cash was used for capital expenditures. Net
accounts receivable at September 30, 1997 totaled $19.5 million. Days sales
outstanding in accounts receivable were 59 days at the end of the fiscal 1997
which is a slight decline of 4 days, or 7 percent, from the end of fiscal
1996. Management believes, based upon the additional $66.0 million cash raised
in the first and second quarter of fiscal 1998, anticipated extension of its
bank credit lines and available cash balances, it has sufficient cash
resources to fund
6
<PAGE>
operations through the end of fiscal 1998. There can be no assurance that the
Company will be successful in achieving its internal financial plan. The
Company may need additional funds for promoting new products and working
capital required to support increased sales and support the required
investments in accounts receivable and inventory. Management's financial plans
for fiscal 1998 anticipate raising additional equity capital primarily through
exercise of currently outstanding 30 million warrants issued in conjunction
with previously completed financial transactions. If these outstanding
warrants were to be exercised the Company would receive cash proceeds of
approximately $90 million, however, the outstanding warrants do not include
any demand or call provisions. Management may have to entice existing warrant
holders to exercise their warrants by offering discounts to the contractual
exercise price and/or issuing exchange warrants at market or negotiated
discount exercise prices. Management believes it has sources of equity capital
beyond the exercise of currently outstanding warrants through issuance of
additional convertible preferred stock or issuance of debt instruments such as
convertible debentures. There can be no assurance, however, that such
financings would be available when needed, if at all, or on favorable terms
and conditions. If results of operations for fiscal 1998 do not meet
management's expectations, or additional capital is not available, management
believes it has the ability to reduce certain expenditures so as not to
require additional capital. The precise amount and timing of the funding needs
cannot be determined accurately at this time, and will depend on a number of
factors, including the market demand for the Company's products, the quality
of product development efforts, availability of critical components,
management of working capital, and continuation of normal payment terms and
conditions for purchase of materials and services.
The Company currently does not enter into foreign currency forward exchange
contracts to hedge exposure related to foreign currency exchange risk and it
does not enter into transactions involving derivative financial instruments
for trading purposes. At September 30, 1997 and 1996, the Company had no
forward exchange contracts outstanding.
CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS; POTENTIAL DILUTION AND ADVERSE
IMPACT ON ADDITIONAL FINANCING
At the November 5, 1997, Special Meeting of Stockholders, the Company's
stockholders approved an increase in the number of authorized shares of Common
Stock from 120 million to 240 million shares. Those shares, if and when
issued, will dilute the percentage ownership of the Company's existing
stockholders.
As of February 20, 1998, the Company had outstanding options and warrants to
purchase approximately 68.6 million shares of Common Stock, at a weighted
average exercise price of approximately $2.80 per share. The exact number of
shares of Common Stock issuable upon conversion of the Series 4 Preferred
Stock, the Series 5 Preferred Stock and the Series 7 Preferred Stock
(collectively, the "Preferred Stock") cannot be estimated with certainty
because, generally, such issuances of Common Stock will vary inversely with
the market price of the Common Stock at the time of such conversion, and there
is no cap on the number of shares of Common Stock that may be issuable. The
number of shares of Common Stock issuable upon conversion of the Preferred
Stock is also subject to various adjustments to prevent dilution resulting
from stock splits, stock dividends or similar transactions. Further, the
Company may, at its election, choose to issue additional shares of Series 4
Preferred Stock in lieu of cash dividends due to the holders of such stock,
and will issue additional shares of Series 7 Preferred Stock as dividends to
the holders of Series 7 Preferred Stock. On February 20, 1998, assuming the
conversion of all remaining Preferred Stock, the exercise of all warrants and
other stock commitments, the Company would have had approximately 166.5
million shares of Common Stock issued and outstanding.
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 became exercisable
in July 1997 for 1,875,000 shares of Common Stock. On August 4, 1997, the
Company also sold 1,382,716 shares of Common Stock and warrants to acquire an
additional 3.5 million shares of Common Stock, which Common Stock is being
registered for resale in this Prospectus.
To the extent that such options and warrants are exercised, shares of Common
Stock, Series 4 Preferred Stock or Series 7 Preferred Stock are issued in lieu
of cash dividends or convertible securities are converted,
7
<PAGE>
substantial dilution of the interests of the Company's stockholders is likely
to result and the market price of the Common Stock may be materially adversely
affected. Such dilution will be greater if the future market price of the
Common Stock decreases as the number of conversion shares to be issued
increases. For the life of such warrants, options and convertible securities,
the holders will have the opportunity to profit from a rise in the price of
the underlying securities. The existence of such warrants, options and
convertible securities is likely to affect materially and adversely the terms
on which the Company can obtain additional financing, and the holders of such
warrants, options and convertible securities can be expected to exercise them
at a time when the Company would otherwise, in all likelihood, be able to
obtain additional capital by an offering of its unissued capital stock on
terms more favorable to the Company than those provided by such warrants,
options and convertible securities.
The Company has filed Registration Statements on Form S-8 under the Act to
register shares of Common Stock subject to stock options and to the Company's
employee stock purchase plan that will permit the resale of such shares,
subject to Rule 144 volume limitations applicable to affiliates of the Company
and vesting restrictions. The Company has also registered the Common Stock
issuable upon exercise of the warrants and conversion of the convertible
securities pursuant to a prospectus included in Registration Statement Nos.
333-7369 and 333-17119 and 333-28225. Such registered shares can be sold
without any holding period or sales volume limitations. The registration of
the shares set forth in the Selling Stockholders table set forth below is in
addition to the shares previously registered.
UNCERTAINTY OF MARKET ACCEPTANCE OF PRODUCTS
The Company's future success will depend on market acceptance of its new
products and the Company's ability to establish its new products as industry
standards. In December 1996, the Company began shipping its SyJet 1.5 Gigabyte
Removable Cartridge Hard Drive (SyJet) product line. While the Company
believes that the SyJet product line has been favorably received by the
marketplace, there can be no assurance that the level of acceptance will
continue or grow. Through March 31, 1997, SyJet production was constrained by
industry-wide shortages of critical components and other production
shortfalls. On November 3, 1997, the Company announced its SparQ 1.0 Gigabyte
Removable Cartridge Hard Drive (SparQ) product line. The first customer
shipments of the SparQ product occurred in November 1997. The Company began
shipments of its newest product, SparQ, during the quarter ended December 31,
1997. SparQ is a 1.0 gigabyte removable storage solution consisting of a hard
disk drive and removable cartridges which is competitively priced at $199 with
an additional 3 cartridges priced at $99. The initial demand for the product
has been substantial and the Company believes that SparQ could become a major
contributor to net revenue in future quarters; however, there can be no
assurance of continued acceptance by the marketplace. The Company incurred a
substantial loss in the quarter ended December 31, 1997 primarily as a result
of substantial expenses incurred for the advertising and marketing campaign
associated with the launch of SparQ, the impact of price reductions during the
quarter in response to continued price competition, manufacturing start-up
costs related to SparQ and an inability to ship against customer orders. This
inability to ship against customer orders resulted primarily from production
start-up inefficiencies related to SparQ, manufacturing yield problems related
to SyJet cartridges and late delivery of raw materials, and additional tooling
and capital equipment needed for production to meet customer demand. In an
effort to increase shipments of SparQ to meet anticipated customer demand, the
Company has decided to increase the deployment of available resources to
SparQ. SparQ was designed and released as a low cost mass market removable
storage solution and, consequently, the Company must achieve a significant
ramp in units of productions. On November 10, 1997, the Company announced its
Quest 4.7 Gigabyte Removable Cartridge Hard Drive (Quest) product line. The
Company had first customer shipments in December 1997. Management has decided
to focus the distribution of Quest exclusively on Original Equipment
Manufacturer (OEM) opportunities. The cost of distribution into the OEM
channel is less than that of the retail marketplace. The production ramp-up
for Quest will only occur with the support of OEM demand for this product.
While the Company continues its sales and marketing campaigns to
successfully launch these new products there can be no assurance that they
will continue to be accepted in the marketplace. Further, the Company
continues its efforts to increase its manufacturing output for these new
products to meet the sales and projected sales demand, but there can be no
assurances that the Company will be successful in manufacturing the required
unit volumes.
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SyQuest removable-cartridge hard drive technology is different from the most
widely used data storage devices today (hard disk drives, floppy disk drives
and CD-ROM drives). Although other types of read/writable data storage devices
have achieved widespread market acceptance in recent years and there can be no
assurance that the Company's new products will achieve the same market
acceptance. Whether the Company's new products will achieve significant market
acceptance will depend upon a number of factors, including the price,
performance and other characteristics of competing solutions introduced by
other vendors, the timing of the introduction of such products, and the
success of the Company in establishing OEM arrangements for the Company's new
products. See "Risk Factors--Competition" and "--Shortages of Critical
Components; Absence of Supply Contracts; Supplier Workouts." There can be no
assurance that the Company will be successful in achieving market acceptance.
In addition, the two formats of removable media storage which have gained
widespread market acceptance to date -- floppy disk drives and CD-ROM drives
- -- are both used by software manufacturers as a means of software
distribution. While the Company's products are also used for some software
distribution, there can be no assurances that software distribution on the
Company's will continue. The failure of the Company's new products to achieve
widespread commercial acceptance would have a material adverse effect on the
Company's financial results and business.
DECLINING SALES OF THE EZ FLYER 230 AND LEGACY PRODUCTS
While the Company believes that the EZ Flyer 230 will continue to be a
contributor to the Company's revenue in the near future, there can be no
assurances, in the face of increased competition and higher capacity
solutions, that the demand for the EZ Flyer 230 will continue at current
levels.
The Company has a group of "legacy" products that represent earlier
generations of removable cartridge hard drive products. These legacy products
have generally been replaced by new generation products with greater
performance and capacity. The Company continues to sell its legacy products to
support installed systems still in use in the marketplace. There can be no
assurances that sales of legacy products will continue.
SHORTAGES OF CRITICAL COMPONENTS; ABSENCE OF SUPPLY CONTRACTS; SUPPLIER
WORKOUTS
Many components incorporated in, or used in the manufacture of, the
Company's products are currently only available from sole source suppliers.
During the 1996 and 1997 fiscal years, the Company experienced disruption in
its supply of certain components for a number of reasons including industry-
wide shortages and the shortage of cash to pay suppliers. During fiscal 1996,
component shortages due to limited cash availability affected the Company's
ability to produce EZ Flyer 230 and SyJet products and limited the Company's
ability to implement certain improvement plans. Moreover, the Company may
continue from time to time to experience difficulty in the future in obtaining
a sufficient supply of many key components due to the shortage of cash to pay
suppliers or supplier shortages or other reasons. A disruption in the supply
of key components would have a material adverse effect on the Company's
ability to generate sales and the ability to successfully produce product in
volumes necessary to meet demand. If such disruptions are repeated, the
Company's ability to generate sales and increase revenues will be materially
adversely affected.
On July 15, 1996, the Company issued a Debenture to one of its suppliers
pursuant to which up to 400,000 shares of Common Stock could be issued to such
supplier at a conversion price of $6.9375 per share. Subsequently, the Company
negotiated with other suppliers to extend the payment dates on amounts owed.
The Company conducted similar negotiations with other suppliers, converting a
total of approximately $43.1 million of accounts payable and other obligations
to those suppliers, to notes payable to reflect extended repayment terms. In
September and October 1996, February, March, April and December 1997, the
Company exchanged certain of those notes payable for an aggregate of 8,188,571
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
financial condition, most of the Company's suppliers have transitioned from
doing business with the Company on a C.O.D. basis and are selling to the
Company under more standard commercial terms and as such, the Company no
longer has to pay on a C.O.D. basis. However, if the Company were to
experience a shortage of cash as noted above, many of its key suppliers may
again require C.O.D. payments which would place a significant demand on the
Company's available cash resources that may limit its financial flexibility
and ability to meet market demand for its products.
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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
one or more readily available components, 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 increase market share and otherwise
adversely affect the Company's business and financial results.
COMPETITION
The data storage industry is highly competitive. The Company believes that
its products compete most directly with other removable-media data storage
devices, such as disk drives offered by Iomega Corporation and magneto optical
disk drives. Although the Company believes that its products offer performance
and certain other advantages over most other removable-media storage devices
available today, the Company believes that the price/performance levels of
existing removable-media products will improve and that other companies will
introduce new removable-media storage devices. Accordingly, the Company
believes its products will face increasingly intense competition. In
particular, a consortium comprising Compaq Computer, 3M, OR Technology and
Matsushita-Kotobuki Electronics Industries Ltd. has announced and is selling
the LS120, a high capacity floptical drive that is compatible with
conventional floppy disks. Each of Mitsubishi Electric Corp. and Mitsumi has
also announced that it plans to manufacture a high capacity, floppy drive that
is downward compatible with existing floppy diskettes. Additionally, Avastor,
Nomai and Caleb have products that complete with SyQuest products. Sony
Corporation and Fuji Photo Film Co. have also announced a jointly developed
"HiFD" 3.5 floppy disk system with a 200 Megabyte storage capacity. If
successfully marketed, these drives would compete with the Company's EZ Flyer
230 products. The Iomega Zip drive, a high capacity floppy disk drive, is also
a competitor to EZ Flyer 230. The JAZ and JAZ II drives are removable hard
drives and compete directly with SyQuest's products. In addition, to the
extent that SyQuest drives are used for incremental primary storage capacity,
they also compete with conventional hard disk drives. In addition, the leading
suppliers of conventional hard disk drives could at any time determine to
enter the removable-media storage market.
As new and competing removable-media storage solutions are introduced, it is
possible that the first such solution to achieve a significant market presence
will emerge as an industry standard and achieve a dominant market position. If
such is the case, there can be no assurance that the Company's products would
achieve significant market acceptance, particularly given the Company's size
and market position relative to its competitors.
TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The Company operates in an industry that is subject both to rapid
technological change and rapid change in consumer demands. For example, over
the last 10 years the typical hard disk drive included in a new personal
computer has increased in capacity from approximately 40 megabytes (Mbs) to 3
gigabytes (GB) or more, while the market price per megabyte of a hard disk
drive has dramatically decreased. The Company's future success will depend in
significant part on its ability continually to develop and introduce, in a
timely manner, new removable cartridge hard drive products with improved
features, and to develop and manufacture those new products within a cost
structure that enables the Company to sell such products at lower prices than
those of comparable products today. In addition, the Company depends on
technological developments from other vendors for the components in its
products (such as heads, semiconductor devices and media). The Company's
products are targeted for sale into the Company's traditional customer base in
the desktop publishing, pre-press and service bureau segments, computer, audio
and video OEMs, retail, as well as to a broad array of users in the SOHO
(Small Office/Home Office) market segment. There can be no assurance that the
Company will be successful in developing, manufacturing and marketing cost
effective products that meet both the performance and price demands of the
data storage market.
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<PAGE>
DEPENDENCE ON STRATEGIC MARKETING ALLIANCES
The Company's business strategy will be enhanced in significant part by
establishing successful strategic alliances with a variety of key companies
within the computer, audio and video industries. Among the types of alliances
contemplated by the Company's business strategy are: OEM arrangements with
personal computer, audio and video product manufacturers that will include
SyQuest products as a standard feature or factory-installed option in their
personal computers; reseller arrangements (including private and co-branding
arrangements) with major vendors of computer products covering the resale of
the Company's products by such companies; and licensing arrangements under
which the Company grants certain computer manufacturers on a royalty-bearing
basis the right to manufacture and sell its drives or media. Moreover, the
Company believes that establishing strategic alliances (especially OEM
arrangements) is important to the success of its business, and there can be no
assurance that the Company will be successful in doing so. In addition, the
Company's strategic alliances are generally not covered by binding contracts
and may be subject to unilateral termination by the Company's strategic
partners, and may also require the Company to share control over its
manufacturing and marketing programs and technologies.
RELIANCE ON MANUFACTURING RELATIONSHIPS; NOMAI LAWSUITS
The Company plans to continue to use independent parties to manufacture for
the Company a portion of the Company's components. The Company currently has
manufacturing relationships for cartridges and others for manufacture and
subassembly of components. 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.
In January of 1997, the Company filed a suit against one such manufacturer,
Nomai, S.A., and the following related parties: Nomus, Inc., Marc Frouin,
Herve Frouin, Electronique d2, and La Cie Ltd., entitled SyQuest Technology,
Inc. v. Nomai, S.A. et al. (Case No. C97-0271 FMS) (the "Nomai Action"). The
Nomai action alleges patent and trademark infringement, misrepresentation,
breach of contract and other claims. During April through June 1997, Nomus,
Inc., Marc Frouin and Herve Frouin (collectively the "Nomai Parties") filed
certain Cross-Complaints against the Company. The Company and the Nomai
Parties resolved the claims alleged in the Nomai Action on December 16, 1997
pursuant to a settlement agreement ("Settlement Agreement"). In accordance
with such Settlement Agreement, a Stipulation to Dismiss the Company's
Complaint and the Nomai Parties' Cross-Complaints with prejudice was filed.
The Nomai Action remains pending against defendants Electronique d2 and La Cie
Ltd.
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 has the requisite skills to manufacture the
Company's removable cartridge hard drives and products. Legend and the Company
would contribute the capital required for the joint venture. In December 1996,
the Company and Legend announced a distribution agreement whereby Legend has
become the exclusive distributor of the Company's products in the developing
Chinese market.
There can be no assurance that the Company will be successful in
establishing the joint venture, that the financing agreement with Legend will
be consummated or be successful, or that the Company will successfully
establish additional relationships in the future or successfully manage such
manufacturing relationships.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company has experienced and in the future may continue to experience
significant fluctuations in its quarterly operating results. Those
fluctuations have had, and in the future may have, an adverse effect on the
Company's liquidity. Factors such as price reductions, the introduction and
market acceptance of new products,
11
<PAGE>
product returns, the availability of critical components, the lower gross
profits associated with the Company's newer products and decreasing demand for
the Company's older 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. A decline in the market price of the Common Stock would
have an adverse effect on the Company's ability to raise needed capital on
acceptable terms to management.
The revenue, operating loss and loss per share for the four quarters of the
fiscal year ended September 30, 1997 are presented below to illustrate the
quarterly fluctuations during the most recent fiscal year. The loss per share
has been recalculated in order to be presented on a consistent basis with the
restatement discussed in Note 10 to the Company's Consolidated Financial
Statements on the Company's Annual Report on Form 10-K, as amended, for the
year ended September 30, 1997. The accounting presentation had no impact on
the reported operating loss.
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4
------ ------ ------ ------
(IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C>
(1) Revenue.................................... $ 48.3 $ 16.8 $ 31.7 $ 25.9
Net Loss....................................... $ (6.8) $(33.7) $(10.7) $(17.5)
Basic and Diluted Loss Per Share............... $(0.86) $(1.31) $(0.31) $(0.33)
Weighted average shares........................ 14,673 26,206 44,054 53,806
</TABLE>
- --------
(1) Table is presented in millions, except per share amounts.
INTERNATIONAL OPERATIONS
International sales generated a significant portion of the Company's
revenues in fiscal years 1995, 1996 and 1997, and the Company expects
international sales to continue to constitute a significant percentage of its
total sales in the future. The international portion of the Company's business
is subject to a number of inherent risks, including difficulties in building
and managing foreign operations and foreign reseller networks, the differing
product needs of foreign customers, fluctuations in the value of foreign
currencies, import-export duties and quotas, and regulatory, economic or
political changes. Moreover, the Company relies on foreign companies for the
supply of certain critical components and is increasingly relying on foreign
companies for the manufacture of certain of its products, and these
relationships may be subject to some of the same risks affecting its
international sales. There can be no assurance that these factors will not
materially and adversely affect the Company's international sales and its
overall business and financial performance.
The Company's international sales are predominantly denominated in U.S.
dollars. Accordingly, a significant decrease in the valuation of the U.S.
dollar and the resultant increase in the price of the Company's foreign
currency priced products could have a material adverse effect on the Company's
sales.
MANAGEMENT CHANGES; DEPENDENCE ON KEY PERSONNEL
The Company's success will depend in large part on the capabilities of the
members of the new management team, most of whom have been with the Company
for less than 18 months, to implement a successful turnaround strategy. 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 on its ability to
attract and retain highly-skilled management and other personnel. Competition
for such personnel in the computer industry is intense, and the Company has
from time to time experienced difficulty in finding sufficient numbers of
qualified professional and production personnel. There can be no assurance
that the Company will be successful in attracting and retaining the quantity
and quality of personnel that it needs.
VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS
The market prices for shares of high technology companies including the
securities of SyQuest have been volatile. The Company's Common Stock has in
the past experienced substantial levels of short selling, which has
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<PAGE>
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's policy is to retain its earnings to finance future growth and
it has paid no cash dividends in the last three fiscal years. The Company does
not anticipate declaring cash dividends on its Common Stock in the foreseeable
future. In addition, the payment of cash dividends is restricted by certain of
the Company's borrowing arrangements. See page 10 and Note 4 of the Notes to
Consolidated Financial Statements in the Company's Annual Report on Form 10-K,
as amended, for the year ended September 30, 1997.
CERTAIN MARKETING AND SALES RISKS
As is common practice in its industry, the Company's arrangements with its
customers generally allow customers, in the event of a price decrease, credit
equal to the difference between the price originally paid and the new decreased
price on units in the customers' inventories on the date of the price decrease.
When a price decrease is anticipated, the Company establishes reserves for
amounts it estimates will be reimbursed to qualifying customers. There can be
no assurance that these reserves will be sufficient or that any future returns
or price protection charges will not have material adverse effects on the
Company's results of operations, particularly because future results will
depend heavily on recently introduced products for which the Company has little
or no operating history. In addition, customers generally have stock rotation
rights permitting them to return slower-moving products in inventory within
specified time periods in return for compensating orders of other products. Any
buildup of inventory at the Company or in its distribution channels that does
not sell through to end users could have material adverse effects on the
Company's operating results and financial condition.
As is typical in the industry, from time to time the Company experiences
product defects and product returns especially during periods of transition to
new products. There can be no assurance that the Company will not experience
quality or reliability problems in the future that have material adverse
effects on the Company's business and financial results.
The Company markets its products primarily through computer product
distributors and retailers. Distribution channels for personal computers and
accessories have been characterized by rapid change, including consolidation
and financial difficulties of distributors. The loss or ineffectiveness of any
of the Company's major distributors could have a material adverse effect on the
Company's results of operations. In addition, since the Company grants credit
to its customers, a substantial portion of outstanding accounts receivable are
due from computer product distributors and certain large retailers. At
September 30, 1997, the customers with the ten highest accounts receivable
balances totaled $15.2 million, or 60%, 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 approximately
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<PAGE>
440,000 shares of preferred stock have been issued: 20,000 shares of 7%
Cumulative Preferred Stock; 5,500 shares of Convertible Preferred Stock,
24,500 shares of Series 2 Preferred Stock; 50,000 shares of Series 3 Preferred
Stock, 280,000 shares of Series 4 Preferred Stock, 30,000 shares of Series 5
Preferred Stock, and 30,000 shares of Series 7 Preferred Stock all of which,
except for the Series 4 Preferred Stock, Series 5 Preferred Stock, and Series
7 Preferred Stock have been converted to Common 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 in the Company.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; INTELLECTUAL PROPERTY LITIGATION
The Company's success depends heavily on the establishment and maintenance
of proprietary technologies. The Company relies on a combination of patent,
copyright and trade secret law to protect the technology in its drives and
cartridges. The Company holds numerous U.S. and foreign patent applications
relating to its drives and hard disk cartridges. Many of these patents,
however, do not pertain to the Company's recent product generations, and there
can be no assurance that additional patents will issue in the future. There
can be no assurance that the steps taken by the Company to protect its
technology will be adequate to prevent misappropriation of its technology by
third parties, or that third parties will not be able independently to develop
similar technology. In particular, the Company's sales would be materially
adversely affected if any unlicensed parties develop removable cartridges
compatible with the Company's disk drives.
The Company filed suit against Nomai, S.A. (Nomai) and Maxell in France for
copyright and patent infringement. The Company initiated an arbitration
proceeding against Nomai seeking payment of outstanding royalties of
approximately $1 million. In 1996, the Company provided a reserve of
approximately $1,000,000 for the collection of those royalties. These actions
will be settled as part of the Settlement Agreement See Reliance on
Manufacturing Relationships; Nomai lawsuits.
On January 27, 1997, the Company filed a suit against Nomai, S.A.,
Electronique d2 and La Cie Ltd. in Federal District Court in San Francisco for
patent, trademark and copyright infringement, unfair competition and breach of
contract. The suit alleges that Nomai and others have illegally used the
Company's proprietary technology in certain of Nomai's competing products. The
suit seeks to block further sales of such products along with damages deriving
from harm done to the Company by this conduct. Nomai filed a counter claim
including claims for breach of contract, misrepresentation, interference with
contract and unfair competition. This suit has largely been resolved pursuant
to the Settlement Agreement--See Reliance on Manufacturing Relationships;
Nomai lawsuits.
On July 29, 1997, Iomega Corporation ("Iomega") initiated an action for
patent and trademark infringement against SyQuest in the United States
District Court for the District of Delaware. The suit alleges that SyQuest's
SyJet and EZFlyer 230 products infringe United States Utility Patent No. 5,
644,444, entitled "Read/Write Protect Scheme for a Disk Cartridge and Drive,"
and that the cartridges sold by SyQuest for use with its SyJet and EZFlyer 230
products infringe United States Design Patent No. Des. 378,518, entitled
"Computer Storage Disk Cartridge." The suit further alleges that SyQuest has
infringed Iomega's claimed "Jet" trademark and engaged in unfair competition
through the use of the "SyJet" name for one of it products. Iomega seeks a
judgment of infringement, monetary damages, injunctive relief, disgorgement of
profits, trebled actual
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<PAGE>
damages on the disputed products and attorney's fees. Iomega also seeks
exemplary damages and attorneys' fees based on SyQuest's alleged willful
infringement of Iomega's claimed trademark. SyQuest has filed an answer and
counterclaim denying infringement and requesting a declaratory judgment that
the patents-in-suit are invalid and not infringed. The case is in the early
stages of discovery. In interrogatory responses served December 3, 1997, Iomega
asserted that SyQuest's recently introduced SparQ product and not yet
introduced Quest product infringe Iomega's design patent and that it is
investigating whether it believes that the SparQ or Quest products infringe
Iomega's utility patent. The Court has set a trial date of January 11, 1999.
SyQuest believes it has meritorious defenses to Iomega's allegations and
intends to defend the case vigorously.
On December 3, 1997, SPARC International , Inc. filed a lawsuit in the United
States District Court in and for the Northern District of California. The
lawsuit alleges that the Company's use of the trademark SparQ in connection
with its recently introduced SparQ removable cartridge hard drive product
constitutes an infringement of the SPARC trademark owned by SPARC
International, Inc. The complaint requests money damages and a preliminary and
permanent injunction enjoining the Company from further infringement. On
December 19, 1997, SPARC International, Inc. filed a motion seeking a
preliminary injunction enjoining the Company from using the SparQ trademark on
its removable cartridge hard drive products and requesting a hearing on January
26, 1998. The Company filed a motion requesting a later hearing date and a
hearing date has been scheduled for March 23, 1998. The Company believes that
it does not infringe any valid trademarks of SPARC International, Inc. and
intends to defend itself against this action.
On or about June 10, 1997, the Company initiated litigation against
Castlewood Systems, Inc. and eleven (11) former Company employees in Santa
Clara Superior Court, No. 766757 asserting ten (10) causes of action, including
claims for misappropriation of trade secrets, unfair competition, and breach of
fiduciary duty. On or about July 16, 1997, Castlewood filed a Cross-Complaint
against the Company, alleging three (3) causes of action (interference with
prospective economic advantage; unfair competition; trade libel). The complaint
seeks money damages and an injunction from engaging in such conduct. Since that
time, the parties have engaged exclusively in hearings before Thomas E.
Schatzel, Esq., the Court-appointed Discovery Referee, to finalize the
Company's identification of trade secrets in accordance with the requirements
of the California Code Civil Procedure (S) 2019 (d). The Company's Seconded
Amended Identification of Trade Secrets was deemed acceptable by the Discovery
Referee on October 20, 1997. Discovery has only recently begun, and there can
be no assurance as to what financial effect this litigation may have on the
Company.
On March 7, 1997, RKS Design, Inc. filed suit against the Company alleging
that the Company failed to pay $48,394.21 of interest charges on fees charged
for design services rendered to its EZ Flyer and SyJet products. The suit
request damages including profits associated with these products, interests and
attorneys' fees. The Company has filed a counterclaim asserting, inter alia,
that no amount is owing to RKS, and that the Company is entitled to a refund of
certain overpayments made to RKS. The Company does not believe that this claim
will have a material adverse affect on the Company or its financial position or
its results of operations
Periodically, the Company is made aware that technology used by the Company
in the manufacture of some or all of its products may infringe on product or
process technology rights held by others. Resolution of whether the Company's
manufacture of products has infringed on valid rights held by others could have
a material adverse effect on the Company's financial position or results of
operations, and may require material changes in production processes and
products. Several companies have individually contacted the Company concerning
its alleged use of intellectual property belonging to them. Companies that have
contacted the Company include one company that has alleged that the Company's
products infringe six U.S. patents. It is the Company's belief that the claims
are without merit or that the infringement claims relate to component parts
purchased from vendors. The Company also believes that in the event this
company prevailed on its claims, the Company would be indemnified by its
vendors for any liability arising from the alleged infringements and that this
matter will not have a material adverse effect on 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 drive products
infringe several of that company's 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.
15
<PAGE>
Patent and similar litigation frequently is complex and expensive and its
outcome can be difficult to predict. There can be no assurance that the Company
will prevail in any proceedings that have been or may be commenced against the
Company. In addition, certain technology used in the Company's products is
licensed from third parties. The termination of any such license arrangements
could have a material adverse effect on the Company's business and financial
results.
Due to the inherent uncertainty of litigation, management is unable to
predict the outcome of the above litigation. No loss contingency has been
provided for any of the above described litigation as the amounts of any loss,
if any, are not yet determinable or reasonably estimable. A materially
unfavorable outcome of the above litigation could have an adverse effect on the
Company's financial condition, results of operations and cash flows.
SECURITIES CLASS--LITIGATION AND DERIVATIVE LITIGATION
The Company has been named as a defendant in four putative class action
lawsuits. Two of the actions, Ravens, et al. v. Iftikar, et al. (filed April 2,
1996) and Belleza, et al. v. Iftikar, et al. (filed May 24, 1996) have been
brought in the United States District Court for the Northern District of
California and have been assigned to the Honorable Vaughn Walker (collectively,
the "Federal Lawsuit"). Certain current and former officers and directors also
have been named as defendants in the Federal Lawsuit. 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 certain alleged material misrepresentations and omissions and seek
unspecified damages. In general, the litigation alleges insider trading by
certain officers and directors of the Company, failures to disclose on a timely
basis contamination problems in the SQ3270 drive, failure to disclose on a
timely basis that the EZ135 drive could not be sold profitably given the cost
of production, and the failure of certain of the Company's financial statements
to reflect properly the value of inventory relating to those two drives. In
January 1997, the federal court denied the motion of certain plaintiffs to be
appointed lead plaintiffs under the Private Securities Litigation Reform Act of
1995 (the "Reform Act") on the ground, inter alia, that the plaintiffs'
published notice to the class did not constitute adequate notice of the
litigation under the Reform Act. In July 1997, the Court denied a motion for
reconsideration of its prior order and directed the plaintiffs to issue a
revised notice and/or amend their complaint by August 22, 1997, or be subject
to a motion to dismiss or for summary judgement. Plaintiffs have informed the
Court that they elect to stand on the existing notice and complaint.
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"). 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
Kaufman Lawsuit and the Ravens Lawsuit (collectively the "State Court Lawsuit")
have been consolidated and a Consolidated Amended Complaint was filed on
December 6, 1996. The allegations are essentially the same as in the Federal
Lawsuits and seek unspecified damages and punitive damages on behalf of all
persons who purchased the Company's Common Stock from October 21, 1994 through
February 1, 1996. Pursuant to a Stipulation and Order entered on August 6,
1997, the State Court Lawsuit has been referred to mediation before a retired
federal judge.
On May 14, 1996, the Company was served with a shareholder derivative action
filed in Alameda County, California, Superior Court entitled John Nitti, et al.
v. Syed Iftikar, et al (the "Derivate Lawsuit"). 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. Counsel for plaintiffs in the Derivative Lawsuit
are participating in the mediation ordered for the State Court Lawsuit that is
described above.
16
<PAGE>
The Company intends to defend the Federal Lawsuit, the State Court Lawsuit
and the Derivative Lawsuit vigorously, but there can be no assurance as to what
financial effect this litigation may have on the Company. If there is an
adverse result, the Company does not expect any particular product line to be
affected as the plaintiffs seek monetary damages, rather than injunctive
relief. Nevertheless, a materially unfavorable outcome could have an adverse
effect on the Company's financial condition, results of operations and cash
flow. No loss contingency has been provided for these lawsuits as the amount of
losses, if any, are not yet determinable or reasonably estimable.
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.
17
<PAGE>
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 warrants, and the Company will receive the exercise prices payable
upon any exercise of such warrants. There can be no assurance that all or any
part of the warrants will be exercised.
SELLING STOCKHOLDERS
The Selling Stockholders are (i) certain persons who provided (or helped
facilitate) equity financing to the Company or designees of such persons, (ii)
certain persons who provided (or are providing) services to the Company and
(iii) a creditor of the Company who acquired Common Stock in exchange for
cancellation of certain trade payables of the Company. The shares of Common
Stock covered by this Prospectus are being registered so that the Selling
Stockholders may offer the shares for resale from time to time. See "Plan of
Distribution." Except as described below, none of the Selling Stockholders has
had a material relationship with the Company within the past three years other
than as a result of the ownership of the Common Stock and other securities of
the Company.
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by each of the Selling
Stockholders as of October 27, 1997, and the number of shares which may be
offered for resale pursuant to this Prospectus. The number of shares of Common
Stock beneficially owned by the Selling Stockholders holding Series 4
Preferred Stock is based on a conversion price of $2.343 which is derived from
the closing market price of the Common Stock on the day that Series 4
Preferred Stock was first issued. The number of shares of Common Stock
beneficially owned by the Selling Stockholders holding Series 5 Preferred
Stock is based on a conversion price ranging from $2.438 to $3.375, which is
derived from the closing market price of the Common Stock on the first day
that Series 5 Preferred Stock was issued to each holder of Series 5 Preferred
Stock. 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 150% of the number of share issuable on a hypothetical conversion at
the prices stated above with respect to the Series 4 Preferred Stock and the
Series 5 Preferred Stock, which prices are below or equal to the closing
market price of the Common Stock as of October 27, 1997, which price was
$3.375. The registration statement of which this Prospectus is a part includes
in accordance with Rule 416 of the Securities Act, an indeterminate number of
shares issuable upon conversion of the Series 4 Preferred Stock and the Series
5 Preferred Stock as a result of the floating rate conversion features
thereof. If the price per share of the Common Stock falls below the cap amount
for either Series 4 Preferred Stock or Series 5 Preferred Stock, respectively
(e.g., $2.343 for Series 4 Preferred Stock), the number of shares of Common
Stock issuable on conversion of such preferred stock will increase from the
amounts listed in the following table. The use of such hypothetical conversion
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.
18
<PAGE>
The information included below is based on 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. The following table has been prepared on the assumption that all
shares of Common Stock offered under this Prospectus will be sold.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF COMMON COMMON STOCK
STOCK BENEFICIALLY SHARES OF BENEFICIALLY
OWNED PRIOR TO COMMON STOCK OWNED AFTER
NAME OFFERING/(1)(2)/BEING OFFERED OFFERING/(3)/
- ---- ------------------ ------------- ------------
<S> <C> <C> <C>
Bain & Company, Inc./(4)........ 513,649 590,474 0
CC Investments, LDC/(5)(6)...... 8,550,861 6,576,292 0
Capital Ventures
International/(5)............... 3,775,431 3,288,146 0
RGC International Investors,
LDC(5)(7)....................... 7,329,936 6,576,292 0
Nelson Partners/(5)(8).......... 4,369,881 7,013,997 0
Olympus Securities, Ltd./(5)(8). 6,927,512 8,572,664 0
Multiple Import Export, Ltd.(5). 1,481,481 5,722,222 0
Jayhawk Investments, L.P./(9)... 3,736,429 3,736,429 0
Jayhawk Institutional
Partners/(9).................... 1,046,296 1,046,296 0
The Silikahn Route/(10)(11)..... 254,428 254,428 0
Silicon Valley Bank/(11)........ 166,667 166,667 0
Greyrock Business Credit/(11)... 333,333 333,333 0
Wharton Capital
Partners/(11)(12)............... 14,420 1,804,347 0
CAM Advanced Technologies/(13).. 141,302 141,302 0
---------- ---------- ---
TOTAL......................... 33,296,504 45,822,888 0
</TABLE>
- --------
(1) Unless otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable.
(2) As required by regulations of the Securities and Exchange Commission, the
number of shares shown as beneficially owned includes shares which can be
purchased within 60 days after October 27, 1997. The actual number of
shares of Common Stock beneficially owned is subject to adjustment and
could be materially less or more than the estimated amount indicated
depending on factors which cannot be predicted by the Company at this
time, including, among others, the market price of the Common Stock
prevailing at the actual date of conversion of Preferred Stock, and
whether or to what extent dividends to the holders of certain Preferred
Stock are paid in Common Stock.
(3) Assumes the sale of all shares offered hereby, and in the case of Bain &
Company, Inc, CC Investments, LDC, Capital Ventures International, RGC
International Investors, LDC, Nelson Partners, Olympus Securities, Ltd.,
and Wharton Capital Partners, the sale of all such Selling Stockholder's
shares of Common Stock registered for resale by Registration Statement
Nos. 333-17119 or 333-28225, as applicable.
(4) The Selling Stockholder holds shares of Series 4 Preferred Stock of the
Company, which are convertible into shares of Common Stock. Each share of
Series 4 Preferred Stock may be converted into a number of shares of
Common Stock at a conversion price which is the greater of the
arithmetical average of the closing sale prices of the Common Stock for
the five consecutive trading days preceding the conversion or 90% of the
closing sale price the day before the conversion, but in any event not
greater than $2.343. The holder of Series 4 Preferred Stock also holds a
warrant to purchase shares of the Company's Common Stock at an exercise
price equal to the greater of 130% of the arithmetical average of the
closing sales price per share of Common Stock on the five consecutive
trading days preceding the delivery of the exercise notice and 130% of
such closing sale price on the day immediately prior to the delivery of
the exercise notice, but in any event not greater than $3.0469. The number
of shares of Common Stock underlying the warrants issued to the holder of
Series 4 Preferred Stock equals the purchase price for the Series 4
Preferred Stock. For example, if a holder purchased $1 million of Series 4
Preferred Stock, it would receive a warrant to acquire 1 million shares of
Common Stock. The warrants issued to the Selling Stockholder are not
exercisable until the lapse of a period ending on the sixty-fifth day
after such Selling Stockholder delivers a notice to the Company
designating an aggregate number of warrant shares to be purchased. Once
such notice is given and the 65-day period has passed, the Selling
Stockholder may exercise its warrant up to the number of shares designated
in the 65-day notice by providing further notice to the
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<PAGE>
Company that such Selling Stockholder is exercising the warrant. The number
of shares shown as being offered in the table is based on (i) 150% of the
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 the Series 4 Preferred Shares were first issued), and (ii) the
number of warrant shares the Selling Stockholder acquired as part of the
purchase of Series 4 Preferred Shares. The Selling Stockholder can convert
Series 4 Preferred Stock into Common Stock only to the extent that the
number of shares issued thereby, combined with the number of shares of
Common Stock already held by such Selling Stockholder and its affiliates,
would not exceed 4.9% of the then outstanding Common Stock, as determined
in accordance with Section 13(d) of the Exchange Act. For a further
description of the rights of the holder of Series 4 Preferred Stock, see
the Certificate of Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, and form of warrant attached as
Exhibit 4.27 to this Registration Statement.
(5) Each of the listed Selling Stockholders holds shares of Series 5 Preferred
Stock of the Company, which are convertible into shares of Common Stock.
Each share of Series 5 Preferred Stock may be converted into a number of
shares of Common Stock at a conversion price which is the greater of the
arithmetical average of the closing sale prices of the Common Stock for
the five consecutive trading days preceding the conversion or 90% of the
closing sale price the day before the conversion, but in any event not
greater than the price of the Common Stock on the date the Series 5
Preferred Shares were issued to the holder thereof. Except for certain of
the warrants held by Olympus Securities Ltd. and Nelson Partners, the
holders of Series 5 Preferred Stock also hold a warrant to purchase shares
of the Company's Common Stock at an exercise price equal to the greater of
130% of the arithmetical average of the closing sales price per share of
common stock on the five consecutive trading days preceding the delivery
of the exercise notice and 130% of such closing sale price on the day
immediately prior to the delivery of the exercise notice, but in any event
not greater than $3.0469. With regard to Olympus Securities Ltd. and
Nelson Partners, they each acquired additional Series 5 Preferred Shares
and a corresponding warrant, which warrant exercise price is capped at
$3.4375 per share. Olympus Securities Ltd. holds a warrant to acquire
1,925,000 such shares and Nelson Partners holds a warrant to acquire
1,575,000 such shares. The number of shares of Common Stock underlying the
warrants issued to the holders of Series 5 Preferred Stock equals 70% of
the purchase price for the Series 5 Preferred Stock. For example, if a
holder purchased $1 million of Series 5 Preferred Stock, it would receive
a warrant to acquire 700,000 shares of Common Stock. The warrants issued
to the Selling Stockholder are not exercisable until the lapse of a period
ending on the sixty-fifth day after such Selling Stockholder delivers a
notice to the Company designating an aggregate number of warrant shares to
be purchased. Once such notice is given and the 65-day period has passed,
the Selling Stockholder may exercise its warrant up to the number of
shares designated In the 65-day notice by providing further notice to the
Company that such Selling Stockholder is exercising the warrant. The
number of shares shown as being offered in the table is based on (i) 150%
of the shares issuable upon conversion, at a conversion price ranging from
$2.438 to $3.375 depending on the price of the Common Stock on the date
the Series 5 Preferred Shares were issued to the holder thereof and (ii)
the number of warrant shares each Selling Stockholder (or its designee)
acquired as part of the purchase of Series 5 Preferred Shares.
Notwithstanding the foregoing, each listed Selling Stockholder can convert
Series 5 Preferred Stock into Common Stock only to the extent that the
number of shares issued thereby, combined with the number of shares of
Common Stock already held by such Selling Stockholder and its affiliates,
would not exceed 4.9% of the then outstanding Common Stock, as determined
in accordance with Section 13(d) of the Exchange Act. For a further
description of the rights of holders of Series 5 Preferred Stock, see the
Certificate of Designations, Preferences and Rights of Convertible
Preferred Stock, Series 5, and the related Securities Purchase Agreement
(with exhibits) filed as an exhibit to the Company's Current Report on
Form 8-K dated August 4, 1997 and dated October 4, 1997.
(6) On February 13, 1998, CC Investments acquired 7,500 shares of Registrant's
Series 7 Preferred Stock and a warrant to acquire 1,686,341 shares of
Common Stock. The shares of Common Stock into which the Series 7 Preferred
Stock can be converted and the shares of Common Stock into which the
warrant can be exercised have not been included in the number of shares of
Common Stock CC Investments beneficially owns as the Series 7 Preferred
Stock and warrant were acquired after the date set to determine beneficial
ownership. The sale of the Series 7 Preferred Stock is discussed in detail
in Registrant's Current Report on Form 8-K dated February 13, 1998, which
Report is incorporated by reference into this Prospectus.
(7) The number of shares of Common Stock beneficially owned by RGC
International Investors, LDC ("RGC") includes 27,248 shares of Common
Stock underlying warrants issued to Rose Glen Funding, Inc. ("Rose Glen"),
an affiliate of Rose Glen Capital Management, L.P. (the investment manager
of RGC), from October 1996 through February 1997 as part of a financing
separate from the Company's sale of Series 4 Preferred Stock, which shares
of Common Stock have been previously registered by the Company pursuant to
Registration Statement No. 333-17119. On February 13, 1998, RGC acquired
10,000 shares of Registrant's Series 7 Preferred Stock and a warrant to
acquire 1,686,341 shares of Common Stock. The shares of Common Stock into
which the Series 7 Preferred Stock can be converted and the shares of
Common Stock into which the warrant can be exercised have not been
included in the number of shares of
20
<PAGE>
Common Stock RGC beneficially owns as the Series 7 Preferred Stock and
warrant were acquired after the date set to determine beneficial ownership.
The sale of the Series 7 Preferred Stock is discussed in detail in
Registrants's Current Report on Form 8-K dated February 13, 1998, which
Report is incorporated by reference into this Prospectus.
(8) The number of shares of Common Stock beneficially owned by Nelson Partners
("Nelson") and Olympus Securities, Ltd. ("Olympus") includes 2,318,883
shares of Common Stock and 2,217,030 shares of Common Stock, respectively,
underlying Series 4 Preferred Stock converted into Common Stock, related
warrants and additional warrants issued to Nelson and Olympus, which
securities were issued from October 1996 through May 1997, which shares of
Common Stock have been previously registered by the Company pursuant to
Registration Statement Nos. 333-17119 and 333-28225. Citadel Limited
Partnership is the managing general partner of Nelson and the trading
Manager of Olympus, and consequently, has voting control and investment
discretion over securities held by both Nelson and Olympus. The ownership
information for Nelson does not include the shares owned by Olympus and
the ownership information for Olympus does not include the shares owned by
Nelson. On February 13, 1998, Nelson acquired 875 shares and Olympus
acquired 1,625 shares of Registrant's Series 7 Preferred Stock. They also
acquired a warrant for 147,555 and 274,300 shares of Common Stock,
respectively. The shares of Common Stock into which the Series 7 Preferred
Stock can be converted and the shares of Common Stock into which the
warrants can be exercised have not been included in the number of shares
of Common Stock Nelson or Olympus beneficially own as the Series 7
Preferred Stock and warrants were acquired after the date set to determine
beneficial ownership. The sale of the Series 7 Preferred Stock is
discussed in detail in Registrant's Current Report on Form 8-K dated
February 13, 1998, which Report is incorporated by reference into this
Prospectus.
(9) Jayhawk Investments, L.P. and Jayhawk Institutional Partners, L.P.
purchased 1,086,420 and 296,296 shares of the Company's Common Stock,
respectively. Both Selling Stockholders each also hold a warrant to
purchase shares of the Company's Common Stock at an exercise price equal
to the greater of the arithmetical average of the closing sales price per
share of common stock on the five consecutive trading days preceding the
delivery of the exercise notice and 90% of such closing sale price on the
day immediately prior to the delivery of the exercise notice, but in any
event not greater than $3.0469. Since the original issuance of the
warrants, the maximum exercise price per share has been reduced from
$3.0469 to $2.00. The number of shares of Common Stock underlying the
warrants issued to the Selling Stockholders equals the purchase price for
the Common Stock acquired. For example, if a holder purchased $1 million
of Common Stock, it would receive a warrant to acquire 1 million shares of
Common Stock. The warrants issued to the Selling Stockholders are not
exercisable until the lapse of a period ending on the sixty-fifth day
after such Selling Stockholder delivers a notice to the Company
designating an aggregate number of warrant shares to be purchased. Once
such notice is given and the 65-day period has passed, the Selling
Stockholder may exercise its warrant up to the number of shares designated
in the 65-day notice by providing further notice to the Company that such
Selling Stockholder is exercising the warrant. For a further description
of the rights of such Selling Stockholders, see the Securities Purchase
Agreement (with exhibits) filed as an exhibit to the Company's Current
Report on Form 8-K dated August 4, 1997.
(10) The Listed Selling Stockholder has the right to acquire Common Stock
pursuant to certain warrants to purchase shares of Common Stock. The
Company granted such Stock Purchase Warrants as part of the Selling
Stockholders' compensation for their providing certain consulting
services for the Company. One of the warrants is exercisable into 132,923
shares of common stock at an exercise price of the greater of 130% of the
arithmetical average of the closing sales price per share of common stock
on the five consecutive trading days preceding the delivery of the
exercise notice and 130% of such closing sale price on the day
immediately prior to the delivery of the exercise notice, but in any
event not greater than $3.0469. The exercise price of the other warrants
is the greater of 130% of the arithmetical average of the closing sales
price per share of common stock on the five consecutive trading days
preceding the delivery of the exercise notice and 130% of such closing
sale price on the day immediately prior to the delivery of the exercise
notice, but in any event not greater than 130% of the closing sale price
on the date the warrant is issued. A warrant to acquire 48,797 shares of
Common Stock was issued as of August 15, 1997, a warrant to acquire
35,854 shares of Common Stock was issued as of September, 1997, and a
warrant to acquire 35,854 shares of Common Stock was issued as of October
15, 1997. The warrants issued to the Selling Stockholder are not
exercisable until the lapse of a period ending on the sixty-fifth day
after such Selling Stockholder delivers a notice to the Company
designating an aggregate number of warrant shares to be purchased. Once
such notice is given and the 65-day period has passed, the Selling
Stockholder may exercise its warrants up to the number of shares
designated in the 65-day notice by providing further notice to the
Company that such Selling Stockholder is exercising the warrant. A copy
of each warrant is filed with this Registration Statement as Exhibit
4.30.
(11) Each Listed Selling Stockholder has the right to acquire Common Stock
pursuant to certain warrants to purchase shares of Common Stock. The
Company granted such Stock Purchase Warrants as part of the Selling
Stockholders' compensation for either their providing certain consulting
services or their facilitation of certain financings for the
21
<PAGE>
Company. The exercise price for warrants is the greater of 130% of the
arithmetical average of the closing sales price per share of common stock on
the five consecutive trading days preceding the delivery of the exercise
notice and 130% of such closing sale price on the day immediately prior to
the delivery of the exercise notice, but in any event not greater than
$3.0469. The warrants issued to the Selling Stockholder are not exercisable
until the lapse of a period ending on the sixty-fifth day after such Selling
Stockholder delivers a notice to the Company designating an aggregate number
of warrant shares to be purchased. Once such notice is given and the 65-day
period has passed, the Selling Stockholder may exercise its warrants up to
the number of shares designated in the 65-day notice by providing further
notice to the Company that such Selling Stockholder is exercising the
warrant.
(12) In connection with facilitating prior financings, the Company previously
committed to issue a warrant to such Selling Stockholder to acquire
500,000 shares of Common Stock at an exercise price of $7.15 per share. In
addition, the Company also issued warrants to acquire a total of 250,000
shares of Common Stock to such Selling Stockholder and to State Capital
market Group Ltd. at either $7.15 or $10.875 per share, which warrants
were registered pursuant to Registration Statement No. 333-28225. The
warrants to acquire said 750,000 shares of Common Stock have been
cancelled, and in exchange the Selling Stockholder has received a warrant
to acquire 500,000 shares of Common Stock on the terms and conditions
described in footnote (10), above.
(13) The Selling Stockholder holds shares of Common Stock received from the
Company in exchange for cancellation of certain trade payables of the
Company owed to the Selling Stockholder. The Selling Stockholder has
executed a form of Securities Purchase Agreement and related Registration
Rights Agreement filed as an exhibit to the Company's Current Report on
Form 8-K dated December 18, 1997. The Selling Stockholder is a vendor of
the Company.
22
<PAGE>
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 on 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
Securities 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
Securities 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 Securities 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 and schedule of SyQuest Technology,
Inc. at September 30, 1996, and for each of the two years in the period ended
September 30, 1996, incorporated, by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated herein by
reference, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended September 30,
1997, have been so incorporated in the reliance on the report of Price
Waterhouse LLP., independent accountants, given on the authority of the said
firm as experts in auditing and accounting.
23
<PAGE>
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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 OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
The Company................................................................ 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 18
Selling Stockholders....................................................... 18
Plan of Distribution....................................................... 23
Legal Matters.............................................................. 23
Experts.................................................................... 23
</TABLE>
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
45,822,888 SHARES
SYQUEST TECHNOLOGY, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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.
<TABLE>
<S> <C>
Registration fee.................................................... $36,241
Blue sky qualification fees and expenses............................ --
Printing............................................................ 1,000
Legal fees and expenses............................................. 45,000
Accounting fees and expenses........................................ 5,000
Miscellaneous....................................................... 1,000
-------
Total............................................................. $88,241
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company has the power, pursuant to Section 102(7) of the Delaware
General Corporation Law, to limit the liability of directors of the Company
for certain breaches of fiduciary duty and, pursuant to Section 145 of the
Delaware General Corporation Law, to indemnify its officers and directors and
other persons for certain acts.
The Company's Restated Certificate of Incorporation includes the following
provisions:
The personal liability of the directors of the corporation for monetary
damages for breach of fiduciary duty as a director shall be eliminated to
the fullest extent permissible under Delaware law as the same exists or as
may hereafter be amended. Neither any amendment nor repeal of this Article,
nor the adoption of any provision of this Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the effect of
this Article in respect of any matter occurring, or any cause of action,
suit or claim that, but for this Article would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
The corporation is authorized to provide indemnification of officers,
directors, employees or agents of the corporation for breach of duty to the
corporation and its stockholders through By-law provisions or through
agreements with such officers, directors, employees or agents, or both, in
excess of the indemnification otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject to the limits on such excess
indemnification set forth in Section 102(b)(7) of the Delaware General
Corporation Law.
Pursuant to Section 145 of the Delaware General Corporation Law, a
corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred by them
in connection with any suit to which they are, or are threatened to be
made, a party by reason of their serving in such positions so long as they
acted in good faith and in a manner they reasonably believed to be in, or
not opposed to, the best interests of a corporation and with respect to any
criminal action, they had no reasonable cause to believe their conduct was
unlawful.
The Company believes that these provisions are necessary to attract and
retain qualified persons as directors and officers. These provisions do not
eliminate liability for breach of the director's duty of loyalty to the
Company or its stockholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law, for any
transaction from which the director derived an improper personal benefit or
for any willful or negligent payment of any unlawful dividend or any
unlawful stock purchase agreement or redemption.
II-1
<PAGE>
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article VI of the Company's Bylaws provides that the Company, by action
of the Board of Directors, shall, to the fullest extent permitted by the
General Corporation Law of Delaware, indemnify any and all persons who it
shall have power to indemnify against any and all of the expenses,
liabilities or other matters.
The Company has entered into indemnification agreements with each of its
directors and executive officers which provide for mandatory
indemnification and advancement of legal expenses so long as the individual
is entitled to indemnification as determined in the manner provided in the
agreement. The burden is on the Company to establish the individual is not
so entitled.
The Company has purchased and maintains an insurance policy covering the
officers and directors of the Company with respect to certain liabilities
arising under the Act or otherwise. Under the terms of their registration
rights agreements, certain of the Selling Stockholders may be obligated to
indemnify the Company and its directors and officers under certain
circumstances for liabilities under the Act.
ITEM 16. EXHIBITS.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company. Incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K/A
for the fiscal period ended September 30, 1996.
3.2 Amendment to Restated Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.2 of the Company's Registration
Statement on Form S-3 filed December 2, 1996 (File No. 333-17119), as
amended.
4.1 Corrected Certificate of Designations, Preferences and Rights of 7%
Cumulative Convertible Preferred Stock, Series 1. Incorporated by
reference to Exhibit 3.1 to the Company's 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 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
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 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 Report on Form 8-K dated May 30, 1997
(the "May 30, 1997, Form 8-K").
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
4.23 Securities Purchase Agreement dated May 1, 1997, between the Company
and New Enterprises Associates VII L.P., including as Annex A thereto
the Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series 4, as Annex B thereto
the form of Warrant Certificate issued pursuant thereto, as Annex C
thereto the form of Delivery Letter, and as Annex D thereto the
corrections to be made to the Certificate of Designations.
Incorporated by reference to the May 30, 1997, Form 8-K.
4.24 Securities Purchase Agreement dated August 4, 1997, between the
Company and Jayhawk Investments, L.P., including as Exhibit A thereto
the form of Warrant Certificate issued pursuant thereto. Incorporated
by reference to the August 4, 1997, Form 8-K.
4.25 Securities Purchase Agreement dated September 3, 1997, between the
Company and Olympus Securities, Inc., including as Exhibit A thereto
the Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series 5, as Exhibit B thereto
the form of Warrant Certificate issued pursuant thereto, as Exhibit C
thereto the form of Delivery Letter, and as Exhibit D thereto the form
of conversion notice. Incorporated by reference to the August 4, 1997,
Form 8-K.
4.26 Securities Purchase Agreement dated October 3, 1997, between the
Company and Olympus Securities, Inc., including as Exhibit A thereto
the Certificate of Designations, Preferences and Rights of 5%
Cumulative Convertible Preferred Stock, Series 5, as Exhibit B thereto
the form of Warrant Certificate issued pursuant thereto, as Exhibit C
thereto the form of Delivery Letter, and as Exhibit D thereto the form
of conversion notice. Incorporated by reference to the August 4, 1997,
Form 8-K.
4.27 Securities Purchase Agreement dated October 13, 1997, between the
Company and Bain & Company, Inc., including as Annex A thereto the
Certificate of Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, and as Annex B thereto the form
of Warrant Certificate issued pursuant thereto. Reference is made to
Exhibit 4.27.*
4.28 Warrant Certificates dated as of June 27, 1997, issued to Silicon
Valley Bank. Incorporated by reference to Exhibit 10.1 to the
Company's Report on Form 8-K dated June 27, 1997 (the "June 27, 1997,
Form 8-K").
4.29 Warrant Certificates dated as of June 27, 1997, issued to Greyrock
Business Credit. Incorporated by reference to Exhibit 10.2 to the June
27, 1997, Form 8-K.
4.30 Warrant Certificates dated as of July 23, 1997, August 15, 1997,
September 15, 1997, and October 15, 1997, issued to The Silakhan
Route. Incorporated by reference to Exhibits 10.3, 10.4, 10.5 and 10.6
to the June 27, 1997, Form 8-K.
4.31 Warrant Certificate dated as of November 10, 1997, issued to Wharton
Capital Partners. Incorporated by reference to Exhibit 10.7 to the
June 27, 1997, Form 8-K.
4.32 Securities Purchase Agreement dated December 18, 1997, between the
Company and CAM Advanced Technologies, including as Exhibit A thereto
the Registration Rights Agreement. Incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K dated
December 18, 1997.
4.33 Subscription Agreement dated November 12, 1996, 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 Report on Form 8-K dated
November 11, 1996.
5.1 Opinion of Shartsis, Friese & Ginsburg LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Price Waterhouse LLP, independent accountants.
23.3 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).
</TABLE>
- --------
*Previously filed.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers, and
controlling persons of the Company pursuant to provisions described in Item
15, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
To include any prospectus required by Section 10(a)(3) of the Act;
To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post effective amendment
by these paragraphs is contained in periodic reports filed by the
Company pursuant to Section 13 or Section 1 5(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the Company's annual report pursuant to Section 13(a) or 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be the new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE>
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 24th day of
February, 1998.
Syquest Technology, Inc.
By: /s/ Bob L. Corey
_________________________________
Bob L. Corey,
Executive Vice President, Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
/s/ Edwin L. Harper President, Chief
- ----------------------------------- Executive Officer and February 24,
EDWIN L. HARPER Director (Principal 1998
Executive Officer)
/s/ Bob L. Corey Executive Vice
- ----------------------------------- President, Finance February 24,
BOB L. COREY and Chief Financial 1998
Officer (Principal
Financial and
Accounting Officer)
/s/ Edward L. Marinaro Chairman of the Board
- ----------------------------------- and Director February 24,
EDWARD L. MARINARO 1998
/s/ Joseph Baia Director
- ----------------------------------- February 24,
JOSEPH BAIA 1998
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.1 of the
Company's Annual Report on Form 10-K/A for the fiscal
period ended September 30, 1996........................
3.2 Amendment to Restated Certificate of Incorporation of
the Company. Incorporated by reference to Exhibit 3.2
of the Company's Registration Statement on Form S-3
filed December 2, 1996 (File No. 333-17119), as
amended................................................
4.1 Corrected Certificate of Designations, Preferences and
Rights of 7% Cumulative Convertible Preferred Stock,
Series 1. Incorporated by reference to Exhibit 3.1 to
the Company's 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 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..................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
<C> <S> <C>
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 Report on
Form 8-K dated February 28, 1997 (the "February 28,
1997, Form 8-K").......................................
4.18 Securities Purchase Agreement dated as of February 28,
1997, between the Company and A-Com Enterprises
Company, Ltd., including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.2 to the February 28, 1997,
Form 8-K...............................................
4.19 Securities Purchase Agreement dated as of March 19,
1997, between the Company and Seksun Precision
Engineering Limited, including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.3 to the February 28, 1997,
Form 8-K...............................................
4.20 Securities Purchase Agreement dated as of March 26,
1997, between the Company and Tongkah SDN.BHD.,
including the exhibit form of Registration Rights
Agreement. Incorporated by reference to Exhibit 10.4 to
the February 28, 1997, Form 8-K........................
4.21 Securities Purchase Agreement dated as of March 26,
1997, between the Company and Silicon Systems, Inc.,
including the exhibit form of Registration Rights
Agreement. Incorporated by reference to Exhibit 10.5 to
the February 28, 1997, Form 8-K........................
4.22 Securities Purchase Agreement dated as of April 15,
1997, between the Company and Jardine Matheson &
Company, Ltd., including the exhibit form of
Registration Rights Agreement. Incorporated by
reference to Exhibit 10.1 to the Company's Report on
Form 8-K dated May 30, 1997 (the "May 30, 1997, Form 8-
K")....................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
------- ----------------------- ------------
<C> <S> <C>
4.23 Securities Purchase Agreement dated May 1, 1997,
between the Company and New Enterprises Associates VII
L.P., including as Annex A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 4, as Annex B
thereto the form of Warrant Certificate issued pursuant
thereto, as Annex C thereto the form of Delivery
Letter, and as Annex D thereto the corrections to be
made to the Certificate of Designations. Incorporated
by reference to the May 30, 1997, Form 8-K.............
4.24 Securities Purchase Agreement dated August 4, 1997,
between the Company and Jayhawk Investments, L.P.,
including as Exhibit A thereto the form of Warrant
Certificate issued pursuant thereto. Incorporated by
reference to the August 4, 1997, Form 8-K..............
4.25 Securities Purchase Agreement dated September 3, 1997,
between the Company and Olympus Securities, Inc.,
including as Exhibit A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 5, as Exhibit B
thereto the form of Warrant Certificate issued pursuant
thereto, as Exhibit C thereto the form of Delivery
Letter, and as Exhibit D thereto the form of conversion
notice. Incorporated by reference to the August 4,
1997, Form 8-K.........................................
4.26 Securities Purchase Agreement dated October 3, 1997,
between the Company and Olympus Securities, Inc.,
including as Exhibit A thereto the Certificate of
Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 5, as Exhibit B
thereto the form of Warrant Certificate issued pursuant
thereto, as Exhibit C thereto the form of Delivery
Letter, and as Exhibit D thereto the form of conversion
notice. Incorporated by reference to the August 4,
1997, Form 8-K.........................................
4.27 Securities Purchase Agreement dated October 13, 1997,
between the Company and Bain & Company, Inc., including
as Annex A thereto the Certificate of Designations,
Preferences and Rights of 5% Cumulative Convertible
Preferred Stock, Series 4, and as Annex B thereto the
form of Warrant Certificate issued pursuant thereto.
Reference is made to Exhibit 4.27*.....................
4.28 Warrant Certificates dated as of June 27, 1997, issued
to Silicon Valley Bank. Incorporated by reference to
Exhibit 10.1 to the Company's Report on Form 8-K dated
June 27, 1997 (the "June 27, 1997, Form 8-K")..........
4.29 Warrant Certificates dated as of June 27, 1997, issued
to Greyrock Business Credit. Incorporated by reference
to Exhibit 10.2 to the June 27, 1997, Form 8-K.........
4.30 Warrant Certificates dated as of July 23, 1997, August
15, 1997, September 15, 1997, and October 15, 1997,
issued to The Silakhan Route. Incorporated by reference
to Exhibits 10.3, 10.4, 10.5 and 10.6 to the June 27,
1997, Form 8-K.........................................
4.31 Warrant Certificate dated as of November 10, 1997,
issued to Wharton Capital Partners. Incorporated by
reference to Exhibit 10.7 to the June 27, 1997, Form 8-
K......................................................
4.32 Securities Purchase Agreement dated December 18, 1997,
between the Company and CAM Advanced Technologies,
including as Exhibit A thereto the Registration Rights
Agreement. Incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K dated December
18, 1997...............................................
4.33 Subscription Agreement dated November 12, 1996, 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 Report on
Form 8-K dated November 11, 1996.
5.1 Opinion of Shartsis, Friese & Ginsburg LLP.............
23.1 Consent of Ernst & Young LLP, independent auditors.....
23.2 Consent of Price Waterhouse LLP, independent
accountants............................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
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<C> <S> <C>
23.3 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)......................................
</TABLE>
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*Previously filed.
<PAGE>
[LETTERHEAD OF SHARTSIS, FRIESE & GINSBURG LLP]
February 24, 1998
EXHIBIT 5.1
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Re: SyQuest Technology, Inc.
Registration Statement on Form S-3
----------------------------------
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, Registration Statement No. 333-40329 (the
"Registration Statement"), filed with the Securities and Exchange Commission,
relating to 45,822,888 shares of Common Stock, par value $.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.
Very truly yours,
SHARTSIS, FRIESE & GINSBURG LLP
By /s/ Steven O. Gasser
----------------------------
Steven O. Gasser
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SyQuest Technology,
Inc. for the registration of 45,822,888 shares of its common stock and to the
incorporation by reference therein of our report dated December 11, 1996, except
for Note 1, paragraph 5, as to which the date is June 27, 1997, with respect to
the consolidated financial statements and schedule of SyQuest Technology, Inc.
included in its Annual Report (Form 10-K/A) for the year ended September 30,
1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
February 24, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated December 29, 1997, except for Note 14, paragraph 3 which is as of February
17, 1998, appearing on page 30 of SyQuest Technology Inc.'s Annual Report on
Form 10-K, Amendment No. 1 for the year ended September 30, 1997. We also
consent to the reference under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
San Jose, California
February 24, 1998
