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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 18, 1997
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674 94-2793941
(Commission File Number) (IRS Employer Identification No.)
47071 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(510) 226-4000
Not Applicable
(Former name or former address, if changed since last report.)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5 Other Events
Exchange of Debt for Equity
On December 18, 1997, Registrant exchanged $432,738 of its trade
debt owed to CAM Advanced Technologies (M) Sdn. Bhd. ("CAM") for 141,302 shares
(the "Shares") of Registrant's common stock ("Common Stock") pursuant to Rule
506 of Regulation D under the Securities Act of 1933, as amended (the
"Securities Act").
CAM warranted to Registrant that it is an accredited investor
under Regulation D. Registrant entered into a registration rights agreement with
CAM, whereby Registrant is required to register such Shares for resale.
THE FOREGOING DESCRIPTION OF THE DEBT TO EQUITY CONVERSIONS IS ONLY A BRIEF
SUMMARY, DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO EXHIBIT 10.1 TO THIS REPORT ON FORM 8-K, WHICH IS INCORPORATED
HEREIN BY THIS REFERENCE.
Filing of Registration Statement on Form S-3.
On January 9, 1997, Registrant filed an amendment to its
registration statement on Form S-3, which registration statement was previously
filed on November 14, 1997, Registration No. 333-40329. Said amended
registration statement relates to the registration of Registrant's Common Stock
for resale by certain Stockholders (as described in the Registration Statement
attached hereto as Exhibit 99.1 and incorporated herein by this reference). As
part of the registration statement, Registrant updated the risk factors and
other information relevant to a decision whether to invest in Registrant's
Common Stock.
Item 7 Financial Statements, Pro Forma Financial Information
and Exhibits
(c) Exhibits
10.1 Securities Purchase Agreement dated as of December 18, 1997, between
Registrant and CAM Advanced Technologies (M) Sdn. Bhd. including the
exhibit form of Registration Rights Agreement.
99.1 Registrant's Registration Statement, as amended, of Form S-3, as filed
with the Securities and Exchange Commission on January 9, 1998.
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Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SYQUEST TECHNOLOGY, INC.
(Registrant)
Dated: January 9, 1998 By /s/ Bob L. Corey
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Bob L. Corey
Chief Financial Officer
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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
December 18, 1997, by and between SyQuest Technology International ("Sub"),
SYQUEST TECHNOLOGY, INC., a Delaware corporation that owns all of the issued and
outstanding capital stock of Sub ("Parent"), and CAM Advanced Technologies (M)
Sdn Bhd, a Malaysia company ("Purchaser"), with reference to the following
facts:
A. Sub owes Purchaser for products manufactured and delivered by Purchaser
pursuant to the purchase orders and related invoices (the "Purchase
Orders") listed on Schedule A to this Agreement in the aggregate amount of
$432,738 (the "Purchaser Order Amount").
B. In consideration of cancellation of the amounts owed to Purchaser equal to
the sum of the Purchase Order Amount, Parent will issue to Purchaser shares
of the Common Stock of Parent, to repay the amounts due to Purchaser with
such shares, valued at the last sale price (the "Closing Price") as
reported in the Nasdaq National Market on the last trading day preceding
the date of this Agreement (the "Closing Date"), but in no event shall
Parent be obligated to issue hereunder in excess of 250,000 of its Common
Stock.
C. Parent will execute and deliver to Purchaser that certain Registration
Rights Agreement dated as of the date hereof (the "Registration Rights
Agreement") in further consideration of the agreements of Purchaser herein.
In consideration of the premises and the mutual covenants and conditions
herein, the parties hereby agree as follows:
1. Purchase Order Amount. Sub acknowledges that Sub owes Purchaser the
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Purchase Order Amount shown on Schedule A attached hereto and
incorporated herein by reference, for products manufactured and
delivered by Purchaser to Sub in response to the Purchase Orders
issued by Sub to Purchaser, and that notwithstanding any payment or
credit term contained in the Purchase Orders, the Purchase Order
Amount is currently due and payable in full. If any such product
shipped to Sub is defective, Sub and Parent shall have the right to
return such product to and request delivery of substitute product from
Purchaser and if such substitute product is not delivered, the
Purchase Order Amount, to the extent not then paid or discharged
hereunder or otherwise, shall be reduced accordingly, or if the
Purchase Order Amount shall then have been paid or otherwise
discharged in full, the cost thereof shall forthwith be refunded by
Purchaser to Sub in cash.
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2. Payment.
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(a) Issuance of Shares. Parent shall instruct its transfer agent to
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issue to Purchaser on the Closing Date the number of shares of
Parent's Common Stock equal to the quotient of the Purchase Order
Amount (as it shall then have been reduced under section 1)
divided by the Closing Price, rounded down to the nearest lower
whole number of shares, but in no event shall Parent be required
to issue hereunder in excess of 250,000 shares of its Common
Stock. Such shares are hereinafter called the "Shares".
(b) Payment of Balance. If Parent is unable to issue the full number
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of Shares necessary to repay the Purchase Order Amount due to the
limit on the number of Shares provided in section 2(a), Parent
shall pay the balance due (the "Balance"), to Purchaser as
follows:
(i) If the Balance is not more than $50,000, the full amount of
the Balance shall be paid by Sub to Purchaser within ten
(10) days of the Closing Date, by check or wire transfer;
(ii) If the Balance is more than $50,000 but not more than
$100,000, the Balance shall be paid by Sub by check or wire
transfer to Purchaser in three equal installments of
principal and interest (at the annual rate of ten percent),
one such installment to be paid on each of ten (10) days
after the Closing Date, the 90th day after the Closing Date,
and the 150th day after the Closing Date; and
(iii) If the Balance is more than $100,000, the Balance shall be
paid by Sub to Purchaser (with interest at the annual rate
of ten percent) over a period of not less than twelve
months, with the payment schedule to be determined by mutual
agreement of Parent and Purchaser.
(c) Extinguishment of Indebtedness. On the Closing Date, Parent and
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Sub shall be deemed to have paid and discharged all or a portion
of the Purchase Order Amount equal to the product of the number
of Shares multiplied by the Closing Price. Purchaser agrees
that, except to the extent of the unpaid Balance, if any, Parent
and Sub shall be deemed to have paid and discharged the Purchase
Order Amount in full on the Closing Date. If, after the Closing
Date, any Balance remains unpaid, Parent and Sub shall be deemed
to have paid and discharged the Purchase Order Amount in full on
payment of the final installment of the Balance.
3. Limitation on Disposition. Purchaser shall not sell, assign or
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otherwise transfer any Shares received hereunder until such time as the Shares
become registered pursuant to an
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effective registration statement. Once the Shares received hereunder are
registered pursuant to an effective registration statement, Purchaser shall not
sell, assign or otherwise transfer more than fifteen percent (15%) per month of
such Shares originally recieved hereunder.
4. Representations and Warranties of Parent and Sub. Parent and Sub
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hereby represent and warrant to Purchaser as follows:
(a) Corporate Existence and Power. Parent is a corporation duly
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organized and existing, and in good standing, under the laws of
the State of Delaware and has all requisite corporate power to
execute and deliver this Agreement and the Registration Rights
Agreement, to issue the Shares pursuant hereto and otherwise to
carry out and perform its obligations under the terms of this
Agreement. To the best knowledge of the current executive
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, Sub is a corporation duly organized
and existing under the laws of Singapore and in good standing
under such laws, and Sub has all requisite corporate power to
execute and deliver this Agreement and otherwise to carry out and
perform its obligations under this Agreement.
(b) Corporate Action; Enforceability. All corporate action on the
--------------------------------
part of Parent necessary for the execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the issuance of Shares pursuant hereto has been
taken, and this Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Parent enforceable
against Parent in accordance with their respective terms. To the
best knowledge of the current executive officers of Parent,
without having conducted an investigation of the records of
Parent or Sub, all corporate action on the part of Sub necessary
for the execution, delivery and performance by Sub of this
Agreement has been taken, and this Agreement constitutes valid
and binding obligations of Sub enforceable against Sub in
accordance with its terms.
(c) Valid Issuance. The Shares, when issued in compliance with this
--------------
Agreement, will be validly issued, fully paid, nonassessable and
free of any restrictions on transfer other than pursuant to
applicable state, federal and foreign securities laws.
(d) SEC Documents. Parent has furnished to Purchaser true and
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complete copies of its Annual Report on Form 10-K for the fiscal
year ended September 30, 1996, as amended on Form 10-K/A, its
Quarterly Reports on Form 10-Q for the quarters ended December
31, 1996, March 31, 1997, and June 30, 1997, its Current Reports
on Form 8-K, and its Form S-3 filed on January 6, 1997, and July
2, 1997, in each case as filed with
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the Securities and Exchange Commission (the "SEC"). Such Reports
are hereinafter collectively called the "Reports". To the best
knowledge of the current executive officers of Parent, without
having conducted an investigation of the records of Parent or
Sub, as of their respective filing dates (except as thereafter
amended), the Reports complied in all material respects with the
applicable requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(e) No Contravention. To the best knowledge of the current executive
----------------
officers of Parent, without having conducted an investigation of
the records of Parent or Sub, neither the execution and delivery
of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will (i) conflict with, or
result in any breach or violation of, any provision of the
certificate of incorporation or by-laws of Parent or Sub; (ii)
constitute, with or without notice or the passage of time or
both, a material breach, violation or default under any order,
writ, injunction, decree, law, statute, rule or regulation,
governmental permit or license of Parent or Sub or to which
either of their properties is subject; or (iii) except as
provided in the Registration Rights Agreement, require any
consent, approval or authorization of, notification to, or filing
with, any court, governmental agency or regulatory or
administrative authority on the part of Parent or Sub, except for
filings under the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the Nasdaq National
Market rules.
(f) Exemption from Registration. Assuming the accuracy and
---------------------------
completeness of the representations and warranties in section 4,
the offer, sale and issuance of the Shares as contemplated by
this Agreement are exempt from the registration requirements of
the Securities Act.
5. Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Parent and Sub as follows:
(a) Authority. Purchaser has the full power and authority to execute
---------
and deliver this Agreement and the Registration Rights Agreement
and to perform its obligations hereunder and thereunder.
(b) Enforceability. This Agreement and the Registration Rights
--------------
Agreement are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective
terms.
(c) Securities Laws Representations. Purchaser is acquiring the
-------------------------------
Shares for Purchaser's own account and not with a view to or for
sale in connection with any distribution. Purchaser has such
knowledge and experience in
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financial and business matters that Purchaser is capable of
evaluating the merits and risks of its investment in the Shares,
is able to bear the economic risk of such investment and is able
to protect the Purchaser's own interests in connection with this
transaction. Purchaser acknowledges having had access to such
information concerning Parent, Sub and their affiliates as
Purchaser deems necessary to enable Purchaser to make an informed
decision concerning an investment in the Shares. In entering
into this Agreement and consummating the transactions
contemplated hereby, Purchaser is relying solely on its own
investigation of Parent, Sub and their affiliates and their
businesses, management, financial condition, properties and
prospects and the merits and risks of such transactions.
Purchaser is aware that the Shares have not been registered under
the Securities Act and the Shares may not be transferred by
Purchaser unless they are subsequently registered under the
Securities Act or an exemption from such registration is
available. The Shares shall not be transferred without
registration under the Securities Act or an applicable exemption
therefrom. Purchaser is an accredited investor as that term is
defined in Rule 501(a) of Regulation D promulgated by the SEC
under the Securities Act. Purchaser acknowledges that until the
Shares are sold pursuant to registration under the Securities Act
or an available exemption therefrom, all certificates
representing Shares shall bear the following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS, OR COMPLIANCE WITH RULE
144 PROMULGATED UNDER SUCH ACT AND EXEMPTION FROM ALL APPLICABLE
STATE SECURITIES LAWS, AS CONFIRMED BY THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY.
6. Additional Representation. Each of Parent and Sub jointly and
-------------------------
severally represent and warrant to Purchaser and Purchaser represents
and warrants to Parent and Sub that it is the sole and lawful owner of
all right, title and interest in and to all of the claims related to
the Purchase Orders and that it has not heretofore voluntarily, by
operation of law or otherwise, assigned or transferred or purported to
assign or transfer to any person whomsoever any such claim.
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7. Closing.
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(a) The issuance of the Shares shall take place as of the date
hereof, and shall be consummated by mail or otherwise in
accordance with arrangements reasonably acceptable to Parent and
Purchaser. Within ten (10) days of the Closing Date, Parent
shall deliver to Purchaser a certificate representing the Shares
and a check for all or part of the Balance, if any, to be paid on
the Closing Date pursuant to section 2(b) above, in payment,
discharge and cancellation of indebtedness equal to part or all
of the Purchase Order Amount as provided in section 2(c).
8. General Provisions.
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(a) Successors. This Agreement shall bind and inure to the benefit
----------
of the parties hereto and their respective successors and
assigns.
(b) Governing Law. Any action or proceeding to interpret, construe
-------------
or enforce this Agreement may be instituted and prosecuted only
in a state court located in Alameda County, State of California,
or, if requisite jurisdiction exists, in the United States
District Court for the Northern District of California. This
Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California.
(c) Entire Agreement. This Agreement and Registration Rights
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Agreement constitute the entire agreement of the parties and
supersede all prior or contemporaneous agreements,
communications, negotiations and understandings, written or oral,
between the parties, regarding the subject matter hereof and
thereof.
(d) Waiver, Modification, or Amendment. No waiver, modification or
----------------------------------
amendment of this Agreement shall be enforceable unless in
writing and executed by the party against whom such waiver,
modification or amendment is claimed.
(e) Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the legality, validity and
enforceability of the remaining provisions shall not be affected
or impaired.
(f) Attorneys' Fees. In the event of litigation or other proceedings
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in connection with or related to this Agreement, the prevailing
party in such litigation or proceedings shall be entitled to
reimbursement from the opposing party of all reasonable expenses,
including, without limitation,
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reasonable attorneys' fees and expenses and expenses of
investigation in connection with such litigation or proceedings.
(g) Currency. All dollar amounts are expressed in U.S. Dollars.
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(h) Communications and Notices. All notices and other communications
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required or permitted hereunder shall be in writing in the
English language and shall be deemed duly delivered and received
when delivered personally, when transmitted by facsimile if
receipt is acknowledged by the addressee, two days after being
deposited for next-day or second-day delivery with an
internationally recognized overnight or two-day delivery service,
or four days after being deposited as first class mail with the
United States Postal Service, properly addressed as follows:
If to Parent or Sub: SyQuest Technology, Inc.
4701 Bayside Parkway
Fremont, California 94538
Attention: Legal Department
Facsimile: (510) 226-4091
With a copy to: Steven O. Gasser, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Facsimile: (415) 421-2922
If to Purchaser: CAM Advanced Technologies (M)
1088 MD 6, Tingkat Perusahaan 6
Kawasan Perusahaan Prai IV
13600 Prai, Pnang
Malaysia
Attention: Mr. Loy Soo Toon
Facsimile: 604-5079218
Telephone: 604-5072328
Any party may change its address or facsimile number set forth above by giving
written notice thereof to the other party in the manner prescribed herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as the day and the year first
set forth above.
SYQUEST TECHNOLOGY, INC.
By: /s/ Michael Clemens
--------------------
Name: Michael Clemens
Title: Vice-President, Financial
Services and Treasurer
SYQUEST TECHNOLOGY INTERNATIONAL
By: /s/ Michael Clemens
--------------------
Name: Michael Clemens
Title: Director
CAM Advanced Technologies (M) Sdn Bhd
By:/s/ Loy Soo Toon
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Name: Loy Soo Toon
Title: Director
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EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
December 18, 1997, by and among SyQuest Technology, Inc., a Delaware corporation
(the "Company"), and CAM Advanced Technologies (M) Sdn Bhd, a Malaysia company
(the "Buyer"), with reference to the following facts:
In connection with the Securities Purchase Agreement by and among the
Buyer, the Company and a subsidiary of the Company of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, on the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyer shares of the Company's Common Stock, par value $.0001 per
share. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
-----------
herein have the respective meanings respectively ascribed to them in the
Securities Purchase Agreement. As used in this Agreement, the following terms
have the following meanings:
1.1 "Investor" means the Buyer and any transferee or assignee
thereof to whom the Buyer transfers or assigns this Agreement and who agrees to
become a party to and be bound by this agreement in accordance with section 9.
1.2 "Register", "registered", and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
1.3 "Registrable Securities" means the Shares.
1.4 "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
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2. REGISTRATION.
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2.1 Mandatory Registration. The Company shall use its best reasonable
----------------------
efforts to prepare and, on or before one hundred-twenty (120) days after the
date of the issuance of the Shares, file with the SEC a Registration Statement
or Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration) (any of which may contain a combined prospectus with other
registrations by the Company), covering the resale of the Registrable
Securities.
2.2 Suspension or Termination of S-3 Registration Statement. The Company
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may suspend or terminate any Registration Statement filed pursuant to the
provisions of section 2.1 if the Company determines in good faith that the
continued effectiveness of such Registration Statement might (a) interfere with
or affect the negotiation or completion of any transaction that is being
contemplated by the Company, (b) involve continuing disclosure obligations that
might not be in the best interest of the Company's shareholders or (c) be
seriously detrimental to the Company; provided that (1) any such suspension or
termination extends for no more than ninety (90) days, (2) the Company
undertakes no more than two (2) such suspensions or terminations in any one
calendar year, (3) the Company re-establishes the effectiveness of such
Registration Statement promptly following the cessation of the cause for such
suspension or termination, but in no event later than the expiration of such 90-
day period and (4) the Registration Period (as hereinafter defined) set forth in
section 3.1(b) shall, if applicable, be extended by the period of each such
suspension or termination.
2.3 Piggy-Back Registrations.
------------------------
(a) If at any time prior to the expiration of the Registration
Period the Company shall file with the SEC a Registration Statement relating to
an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans or on any form that
does not permit secondary sales), the Company shall send to each Investor who is
entitled to registration rights under this section 2.3 written notice of such
determination and the Company shall use its best reasonable efforts to include
in such Registration Statement (and any qualification under "blue sky" laws or
other compliance), except as set forth in section 2.3(c) and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request or requests made by such Investor and received by the Company within
(10) days after the written notice from the Company is mailed or delivered by
the Company. Such written request may specify all or part of an Investor's
Registrable Securities.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Investors as a part of the written notice given pursuant to section
2.3(a). In such event, the right of any Investor to registration pursuant to
this section 2.3 shall be conditioned upon such Investor's
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participation in such underwriting and the inclusion of such Investor's
Registrable Securities in the underwriting to the extent provided herein. All
Investors proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein (the "Other
Stockholders") distributing their securities through such underwriting) enter
into any underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Notwithstanding any other provisions of this section 2.3, if
the representative of the underwriters advises the Company in writing that
marketing or other factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all holders requesting registration, and the number of
shares that are entitled to be included in the registration and underwriting
shall be allocated first to the Company for securities being sold for its own
account and thereafter allocated among the Investors and Other Stockholders
requesting inclusion of securities of the Company having registration rights
(the "Other Shares") pro rata on the basis of the number of shares of
Registrable Securities and Other Shares held by such Investors and Other
Stockholders; provided that the Company shall be entitled to exclude Registrable
Securities to the extent necessary to permit the inclusion of Other Shares of
Other Stockholders having registration rights pursuant to any agreement with the
Company entered into prior to the date hereof; and provided further that such
allocation shall not operate to reduce the aggregate number of Registrable
Securities and Other Shares to be included in such registration, and if any
Investor or Other Stockholder does not request inclusion of the maximum number
of Registrable Securities and Other Shares allocated to him, her or it pursuant
to the foregoing procedure, the remaining portion of his, her or its allocation
shall be reallocated among those requesting Investors and Other Stockholders
whose allocations do not satisfy their requests pro rata on the basis of the
number of Registrable Securities and Other Shares held by such Investors and
Other Stockholders, and this procedure shall be repeated until all of the
Registrable Securities and Other Shares that may be included in the registration
on behalf of the Investors and Other Stockholders shall have been so allocated.
The Company shall not limit the number of Registrable Securities to be included
in a registration pursuant to this Agreement in order to include securities held
by stockholders with no registration rights. If any person does not agree to the
terms of any such underwriting, such person shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or Other Shares excluded or withdrawn from such underwriting shall be withdrawn
from such registration. Nothing in this section 2.3 shall give Investors the
right to require the Company to commence such registration or complete it once
the process has commenced.
(d) No right to registration of Registrable Securities under this
section 2.3 shall be construed to limit any registration required under section
2.1. The obligations of the Company under this section 2.3 may be waived by
Investors holding a majority of the Registrable Securities.
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2.4 Eligibility for Form S-3. The Company represents and warrants that
------------------------
it meets the requirements for the use of Form S-3 for registration of the sale
by the Buyer and any other Investor of the Registrable Securities, and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner to maintain such eligibility for the use of Form S-3. If Form
S-3 is not available for sale by the Investors of the Registrable Securities,
upon request of the Investors the Company shall register the sale on another
appropriate form. The Company shall have a reasonable period of time to complete
such registration.
2.5 Market Stand-Off Agreement. The Investors agree, without consent of
--------------------------
managing underwriter(s), not to effect any sale or distribution of Registrable
Securities (other than in connection with the Investors' own registration
pursuant to section 2.3), including a disposition pursuant to Rule 144 of the
1933 Act, during the period beginning ten (10) days prior to the Company's good
faith estimate of the filing of, and ending on the date ninety (90) days after
the effective date of, a Company - initiated registration; provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective.
3. REGISTRATION OBLIGATIONS.
------------------------
3.1 Registration Statements. The Company shall use its best reasonable
-----------------------
efforts to cause such Registration Statement(s) relating to Registrable
Securities to become effective as soon as possible after the filing thereof and,
subject to the provisions of section 2.2, keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earliest of (a) the date
as of which the Investors may sell all of the Registrable Securities without
registration pursuant to Rule 144 promulgated under the 1933 Act, (b) the second
anniversary of the date hereof (subject to extension in accordance with the
provisions of section 2.2), and (c) the date on which the Investors shall have
sold all the Registrable Securities (the "Registration Period"). Such
Registration Statement(s) (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
3.2 Amendments and Supplements. The Company shall prepare and file with
--------------------------
the SEC such amendments (including post-effective amendments) and supplements to
the Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s) as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
4
<PAGE>
3.3 Prospectus Delivery. The Company shall furnish to each Investor
-------------------
whose Registrable Securities are included in the Registration Statement(s) and
its legal counsel (a) promptly after the same is prepared and publicly
distributed, filed with the SEC or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and (b) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request to facilitate the disposition of the Registrable Securities owned by
such Investor.
3.4 Blue Sky Laws. The Company shall use reasonable efforts to (a)
-------------
register and qualify the Registrable Securities covered by the Registration
Statement(s) under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority of the
Registrable Securities being offered reasonably request (but in no event in more
than five states of the United States), (b) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided that the Company
shall not be required in connection therewith or as a condition thereto to (1)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this section 3.4, (2) subject itself to general
taxation in any such jurisdiction, (3) file a general consent to service of
process in any such jurisdiction, (4) provide any undertakings that cause more
than nominal expense or burden to the Company, or (5) make any change in its
certificate of incorporation or bylaws, which the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders.
3.5 Corrections. As promptly as practicable after becoming aware of such
-----------
event, the Company shall notify each Investor selling Registrable Securities of
the happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
incomplete, and use its best reasonable efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.
3.6 Stop Orders. Except as otherwise permitted by this Agreement, the
-----------
Company shall use its best reasonable efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, use its best reasonable efforts to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
5
<PAGE>
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
3.7 Selling Stockholders' Counsel. The Company shall permit a single
-----------------------------
firm of counsel, designated as selling stockholders' counsel by the Investors
who hold a majority of the Registrable Securities being sold and compensated by
such Investors, to review and comment on the Registration Statement(s) (and all
amendments and supplements thereto but only if they directly relate to such
Investors) a reasonable period prior to their filing with the SEC, and shall not
file any document in a form to which such counsel reasonably objects. Failure to
object in writing within three days shall be deemed to be an approval of the
Registration Statement (s).
3.8 Due Diligence. The Company shall make available for inspection by
-------------
one firm of attorneys and one firm of accountants or other agents retained by
the Investors at their expense (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by such Inspector to enable such Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information that any Inspector may reasonably request
for purposes of such due diligence; provided that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, consistent with and implementing the
confidentiality obligations of this section 3.10. Each Investor agrees that it
shall, on learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow and cooperate with the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
3.9 Listing. The Company shall use its best reasonable efforts either to
-------
(a) cause all the Registrable Securities covered by a Registration Statement to
be listed on each national securities exchange on which the Common Stock is then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (b) secure designation and quotation of all
the Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or, if, despite the Company's best efforts to satisfy the
preceding clause (a) or (b), the Company is unsuccessful in satisfying the
preceding clause (a) or (b), to
6
<PAGE>
secure the inclusion for quotation on the Nasdaq SmallCap Market or, on the
Nasdaq Electronic Bulletin Board.
3.10 Certificates. The Company shall cooperate with the Investors who
------------
hold Registrable Securities being offered and, to the extent applicable, any
managing underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
3.11 Other Action. The Company shall take all other reasonable actions
------------
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
4. OTHER OBLIGATIONS OF THE INVESTORS.
----------------------------------
4.1 Investor Information. At least five days prior to the first
--------------------
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor
that elects to have any of such Investor's Registrable Securities included in
the Registration Statement. It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of an Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
4.2 Cooperation. Each Investor by such Investor's acceptance of the
-----------
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 Corrections. Each Investor agrees that, on receipt of any notice
-----------
from the Company of the happening of any event of the kind described in section
2.2, 3.5 or 3.6, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by section 3.5 or 3.6 and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice .
7
<PAGE>
4.4 Underwriting Arrangements. No Investor may participate in any
-------------------------
underwritten registration hereunder unless such Investor (a) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel and other advisers for any Investor (collectively,
"Selling Expenses").
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than Selling
------------------------
Expenses, incurred in connection with registrations, filings or qualifications
pursuant to sections 2 and 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company, shall be borne by the Company.
6. INDEMNIFICATION. If any Registrable Securities are included in a
---------------
Registration Statement under this Agreement:
6.1 By the Company. To the extent permitted by law, the Company will
--------------
indemnify, hold harmless and defend each Investor, each director and officer of
and person, if any, who controls such Investor within the meaning of the 1933
Act or the 1934 Act, and each underwriter (as defined in the 1933 Act) for the
Investors, and each director and officer of, and each person, if any, who
controls, such underwriter within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
on: (a) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (b) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (c) any violation or alleged violation caused by the
Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the preceding clauses (a), (b) and (c)
being, collectively, "Violations"). Subject to the restrictions in section 6.4
with respect to the number of legal counsel, the Company shall reimburse each
Indemnified Person promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by such
Indemnified Person in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary herein, the indemnification agreement
in this section 6.1: (1) shall not apply to a Claim
8
<PAGE>
arising out of or based on a Violation that occurs in reliance on and in
conformity with information furnished in writing to the Company by, or caused
by, any Indemnified Person or underwriter for such Indemnified Person in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to section 3.3; (2) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to section 3.3; (3) shall not be available to the extent that such
Claim is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company; and (4) shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to section 9.
6.2 By the Investors. In connection with any Registration Statement in
----------------
which an Investor is participating, each such Investor agrees to indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth
in section 6.1, the Company, each of its directors, each of its officers who
signs the Registration Statement, each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act, any underwriter and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based on any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance on and in conformity with written information furnished to the Company
by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based on any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided that the
indemnity agreement in this section 6.2 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld; and
provided further that the Investor shall be liable under this section 6.2 for
only such amount of a Claim as does not exceed the net proceeds to such Investor
as a result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
section 9. Notwithstanding anything to the contrary herein, the indemnification
agreement in this section 6.2 with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue
9
<PAGE>
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
6.3 By Others. The Company shall be entitled to receive indemnities from
---------
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
6.4 Procedures. Promptly after receipt by an Indemnified Person or
----------
Indemnified Party under this section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time after the
threat or commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified Party under this
section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action. The indemnification required by this section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION. To the extent that any indemnification by an indemnifying
------------
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under section 6 to the fullest extent permitted by law; provided that (a)
no contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in section
6, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (c) contribution by any seller of
Registrable Securities shall be limited
10
<PAGE>
in amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
--------------------------
Investors the benefits of Rule 144 under the 1933 Act or any other similar rule
or regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
8.1 Information. Make and keep public information available, as those
-----------
terms are understood and defined in Rule 144;
8.2 Reports. File with the SEC in a timely manner all reports and other
-------
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements, and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and
8.3 Confirmation. Furnish to each Investor so long as such Investor owns
------------
Registrable Securities, promptly on request, (a) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (b) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (c) such other information as may be reasonably requested to permit
the investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
---------------------------------
register securities granted to an Investor by the Company pursuant to section 2
may not be transferred or assigned by an Investor except in a private sale to a
transferee or assignee of not less than 100,000 shares of the Registrable
Securities and: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the 1933 Act and applicable state securities laws, (d) at or before the time the
Company receives the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to become a party
to and be bound by this Agreement, (e) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (f) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D under the 1933 Act, and (g) if the
assignment occurs after the date of effectiveness of the Registration Statement
required to be filed pursuant to section 2.1, the transferee or assignee agrees
to pay all reasonable expenses of amending or supplementing such Registration
Statement to reflect such assignment. Any such transferee or assignee shall be
deemed to be an Investor hereunder, in the place and stead of the transferring
11
<PAGE>
or assigning Investor with respect to the Registrable Securities so transferred
and assigned, from and after the effective date of such permitted transfer,
assignment and assumption.
10. AMENDMENT OF REGISTRATION RIGHTS. This Agreement may be amended and the
--------------------------------
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Investors who hold a majority of the Registrable Securities. Any
amendment or waiver effected in accordance with this section 10 shall be binding
on each Investor and the Company.
11. MISCELLANEOUS.
-------------
11.1 Holder. A person or entity is deemed to be a holder of Registrable
------
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act on the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
11.2 Notices. Any notices or other communications required or permitted
-------
to be given under this Agreement shall be sent by registered or certified mail,
return receipt requested, or delivered personally or by facsimile or courier and
shall be effective five days after being placed in the mail, if mailed, or on
receipt, if delivered personally or by courier or facsimile, in each case
properly addressed to the party to receive such notice. The addresses for such
communications shall be:
If to the Company:
47071 Bayside Parkway
Fremont, CA 94538
Telephone: (510) 226-4000
Facsimile: (510) 226-4091
Attention: Legal Department
With copy to:
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Attention: Steven O. Gasser, Esq.
If to the Buyer, at the addresses on the signature page of this
Agreement.
12
<PAGE>
Each party shall provide notice to the other party of any change in address.
11.3 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware without
regard to the principles of conflict of laws.
11.4 Severability. If any provision of this Agreement shall be invalid
------------
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
11.5 Entire Agreement. This Agreement and the Securities Purchase
----------------
Agreement together constitute the entire agreement of the parties and supersede
all prior or contemporaneous negotiations, correspondence, understandings and
agreements, written or oral, regarding the subject matter hereof.
11.6 Successors and Assigns. Subject to section 9, this Agreement shall
----------------------
inure to the benefit of and bind the parties hereto and their respective
permitted successors and assigns.
11.7 Headings; References. The headings in this Agreement are for
--------------------
convenience of reference only and are not part of this Agreement. References to
sections herein refer to sections of this Agreement, except as otherwise
indicated. The singular includes the plural and vice versa, as the context may
require.
11.8 Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. If any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
additional original executed signature pages to be physically delivered to the
other party within five days of the execution and delivery hereof.
11.9 Further Assurances. Each party shall do and perform, or cause to be
------------------
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
By:____________________________
SYQUEST TECHNOLOGY, INC.
13
<PAGE>
Name: Michael Clemens
Its: Vice-President, Financial
Services and Treasurer
BUYER:
CAM ADVANCED TECHNOLOGIES (M) SDN BHD.
By:_____________________________
Name: Loy Soo Toon
Its: Director
Address:
1088 MD 6, Tingkat Perusahaan 6
Kawasan Perusahaan Prai IV
13600 Prai, Pnang
Malaysia
Facsimile: 011-65-256-0622
14
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1998
REGISTRATION NO. 333-40329
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NUMBER 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SYQUEST TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 94-2793941
(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:
STEVEN O. GASSER
GREGORY D. DEUTSCH
SHARTSIS, FRIESE & GINSBURG LLP
ONE MARITIME PLAZA, EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111
(415) 421-4500
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
===============================================================================
<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
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.0001 par value............. 41,162,859 $3.06 $125,958,349 $38,169
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(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 January 8, 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 JANUARY 9, 1998
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
41,162,859 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 December 31, 1997 was $3.344 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 $78,169. See "Plan
of Distribution." The aggregate proceeds to the Selling Stockholders from the
Common Stock will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any. The Company
has agreed to indemnify the Selling Stockholders and certain other persons
against certain liabilities, including liabilities under the Act.
The Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market, in privately negotiated transactions or otherwise. The
Selling Stockholders and any agents, broker-dealers or underwriters that
participate in the distribution of the Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Act"), and any commission received by them and any profit on the resale
of the Common Stock purchased by them may be deemed to be underwriting
discounts or commissions under the Act. See "Use of Proceeds" and "Plan of
Distribution."
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 for the fiscal year ended
September 30, 1997;
2) The Company's Current Reports on Form 8-K dated October 4, 1997,
November 14, 1997, and December 18, 1997;
3) The Company's Registration Statement on Form 8-A registering the Common
Stock under Section 12(9) of the Exchange Act; and
4) The Company's Proxy Statement for its special meeting of stockholders
held November 5, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are
3
<PAGE>
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. 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 $92 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 existing stockholders would experience additional dilution.
The inability to raise additional financings when needed and continued
losses will adversely effect 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 the Company's material
financing activities from June 1996 through October 1997. The terms of these
financings are described in seven 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, and October 4, 1997.
5
<PAGE>
<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(5) -- --
Debenture(1)
9/96-10/96 Various Debt to Equity exchanges -- 24,440,000(5) 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 5% Cumulative Convertible Preferred 30,000(4) $ 30,000,000 -- 21,000,000
Stock, Series 5
------- ------------ ---------- ----------
Total 410,000 $157,140,000 49,516,836(6) 64,618,476
======= ============ ========== ==========
</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) No cash proceeds were received by the Company.
(6) On December 10, 1997, assuming the conversion of all remaining preferred
stock, the exercise of warrants and other stock commitments, the Company
would have approximately 153 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 ending 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 current
fiscal year which is a slight decline of 4 days or 7 percent from the end of
fiscal 1996. Management believes, based upon the additional $36.0 million cash
raised in the first quarter of fiscal 1998, anticipated extension of its bank
credit lines and available cash balances, it has sufficient cash resources to
fund operation 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 a debt instrument such
as a convertible debenture. There can be no assurance, however, that such
financing 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.
6
<PAGE>
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 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 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 December 10, 1997, the Company had outstanding options and warrants to
purchase approximately 80,000,000 shares of Common Stock, at a weighted
average exercise price of $2.755 per share. The exact number of shares of
Common Stock issuable upon conversion of the Series 4 Preferred Stock and the
Series 5 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 the Series 4 Preferred Stock. On December 10, 1997, assuming
the conversion of all remaining preferred stock, the exercise of all warrants
and other stock commitments, the Company would have approximately 153 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
for 1,875,000 shares of Common Stock.
To the extent that such options and warrants are exercised, shares of Common
Stock or Series 4 Preferred Stock are issued in lieu of cash dividends or
convertible securities are converted, substantial dilution of the interests of
the Company's stockholders is likely to result and the market price of the
Common Stock may be materially adversely affected. Such dilution will be
greater if the future market price of the Common Stock decreases as the number
of conversion shares to be issued will increase. 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 upon market acceptance of its new
products and upon the Company's ability to establish its new products as
industry standards. In December 1996, the Company began
7
<PAGE>
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 Company had first customer shipments in November, 1997. The initial
acceptance of the market place for SparQ has been favorable, however, there
can be no assurance that the level of acceptance will continue to grow. 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. The initial acceptance of the marketplace for
Quest has been favorable, however, there can be no assurance that the level of
acceptance will continue to grow.
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 and there can be no
assurances that the Company will be successful in manufacturing the required
unit volumes.
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). Other types of read/writable data storage device has
achieved widespread market acceptance in recent years and there can be no
assurance that the Company's new products will achieve 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.
CONTINUED 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 fiscal year and fiscal 1997, the Company experienced
disruption in its supply of certain components for a number of reasons
including, industry wide shortages and the shortage of cash to pay suppliers.
During fiscal 1996, component shortages due to limited cash availability
affected the Company's ability to produce EZ Flyer 230 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 and other reasons. A disruption in the
supply of key components would have had a material adverse affect on the
Company's ability to generate sales and the ability to successfully produce
product in volumes
8
<PAGE>
necessary to meet demand. If such disruptions are repeated, the Company's
ability to generate sales and increase revenues will be materially adversely
effected.
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 and April 1997, the Company
received certain of those notes payable in exchange for an aggregate of
8,047,269 shares of Common Stock. As a result of the Company's completion of
recent financing transactions and other efforts by management to improve
SyQuest's financial condition, most of the Company 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.
The Company purchases all of its sole and limited source components and
equipment pursuant to purchase orders placed from time to time and has no
guaranteed supply arrangements. The inability to obtain sufficient components
and equipment, to obtain or develop alternative sources of supply at
competitive prices and quality, or to avoid manufacturing delays could prevent
the Company from producing sufficient quantities of its products to satisfy
market demand, result in delays in product shipments, increase the Company's
material or manufacturing costs, or cause an imbalance in the inventory level
of certain components. Moreover, difficulties in obtaining sufficient
components may cause the Company to modify the design of its products to use a
more readily available component, and such design modifications may result in
increased costs and product performance problems. Any or all of these problems
could in turn result in the loss of customers, provide an opportunity for
competing products to achieve market acceptance and otherwise adversely affect
the Company's business and financial results.
COMPETITION
The data storage industry is highly competitive. The Company believes that
its products compete most directly with other removable-media data storage
devices, such as disk drives offered by Iomega Corporation and magneto optical
disk drives. Although the Company believes that its products offer performance
and certain other advantages over most other removable-media storage devices
available today, the Company believes that the price/performance levels of
existing removable-media products will improve and that other companies will
introduce new removable-media storage devices. Accordingly, the Company
believes its products will face increasingly intense competition. In
particular, a consortium comprising Compaq Computer, 3M, 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 recently 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
9
<PAGE>
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.
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.
In January of 1997, the Company filed a suit against Nomai, S.A., 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") alleging 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 have 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
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<PAGE>
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
will 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. The Company's manufacturing relationships are
generally not covered by binding contracts and may be subject to unilateral
termination by the Company's manufacturing partners. Moreover, there can be no
assurance that third-party manufacturers will be willing or able to meet the
Company's quantity or quality requirements for manufactured products.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company has experienced and in the future may continue to experience
significant fluctuations in its quarterly operating results. 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, product returns, the availability of
critical components have had an impact on the Company's products and have
contributed 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 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)
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
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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 upon the capabilities of the
members of the new management team to implement a successful turnaround
strategy, most of whom have been with the Company for less than 18 months. The
inability of such individuals to become familiar with the widespread
operations of the Company and its subsidiaries and turn around the financial
situation of the Company could have a material adverse effect on the Company.
The Company's success will also depend in significant part upon its ability to
attract and retain highly-skilled management and other personnel. Competition
for such personnel in the computer industry is intense, and the Company has
from time to time experienced difficulty in finding sufficient numbers of
qualified professional and production personnel. 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 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 on the Company's Annual Report on Form 10-K,
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
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<PAGE>
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 410,000 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 and
30,000 shares of the Series 5 Preferred Stock, all of which, except for the
Series 4 Preferred Stock and Series 5 Preferred Stock, have been converted.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of these preferred shares and
any preferred stock that may be issued in the future. Such issuance, while
providing desirable flexibility in connection with possible financings and
acquisitions and other corporate purposes, could make it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. In addition, preferred stock may have other rights, including
economic rights, senior to the Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the Common
Stock. The Company is also subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibit the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
first becomes an "interested stockholder," unless the business combination is
approved in a prescribed manner. The application of Section 203 could also
have the effect of delaying or preventing a change of control of the Company.
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
13
<PAGE>
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 and injunctive relief. Iomega also
seeks exemplary damages and attorneys' fees based on SyQuest's alleged willful
infringement of Iomega's patents and 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
against the Company. 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 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 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.
14
<PAGE>
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 upon its financial
condition or results of operations. Another company has notified the Company
that it believes a number of the Company's removable cartridge hard drives
products infringe several of its patents relating to the use of spin motors in
disc drives. The Company believes that its removable cartridge hard drive
products do not infringe the claims of these patents and that some or all of
the asserted patents are invalid.
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.
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. 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 federal 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 federal 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
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<PAGE>
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 and February 1, 1996. Pursuant to a Stipulation and Order entered on
August 6, 1997, the State Court Lawsuit has been referred to mediation by a
retired federal judge.
On May 14, 1996, the Company was served with a shareholder's derivative
action filed in Alameda County, California, Superior Court entitled John Nitti,
et al. v. Syed Iftikar, et al (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.
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
effected as the plaintiffs seek monetary, 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 amounts of any loss, 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.
USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered hereby are
solely for the account of the Selling Stockholders. Accordingly, the Company
will receive none of the proceeds from the sale thereof. However, certain of
the shares of Common Stock offered hereby are issuable in the future upon the
exercise of the outstanding warrants, and the Company will receive the exercise
prices payable upon any exercise of the warrants. There can be no assurance
that all or any part of the warrants will be exercised.
SELLING STOCKHOLDERS
The Selling Stockholders are (i) certain persons who provided (or helped
facilitate) equity financing to the Company or designees of such persons, (ii)
certain persons who provided (or are providing) certain 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. 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 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 first day that Series 5 Preferred Stock
was issued to each holder of Series 5 Preferred Stock, which
16
<PAGE>
price ranged from $2.438 to $3.375, depending on the holder. The calculation
of the total number of shares of Common Stock to be offered by the holders of
such convertible securities, however, is an estimate based on a hypothetical
conversion at the prices stated above with respect to the Series 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
is $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
conversions prices is not intended, and should in no way be construed, to
constitute a prediction as to the future market price of the Common Stock.
The information included below is based upon information provided by the
Selling Stockholders. Because the Selling Stockholders may offer all, some or
none of their Common Stock, no definitive estimate as to the number of shares
thereof that will be held by the Selling Stockholders after such offering can
be provided and the following table has been prepared on the assumption that
all shares of Common Stock offered under this Prospectus will be sold.
<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)........ 513,649 513,649 0
CC Investments, LDC/(5)......... 8,550,861 5,550,861 0
Capital Ventures
International/(5)............... 3,775,431 2,775,431 0
RGC International Investors,
LDC(5)(6)....................... 7,329,936 5,550,861 0
Nelson Partners/(5)(7).......... 4,369,881 5,988,498 0
Olympus Securities, Ltd./(5)(7). 6,927,512 7,319,276 0
Multiple Import Export, Ltd.(5). 1,481,481 4,981,481 0
Jayhawk Investments, L.P./(8)... 0 3,736,429 0
Jayhawk Institutional
Partners/(8).................... 0 1,046,296 0
The Silikahn Route/(9)(10)...... 0 254,428 0
Silicon Valley Bank/(10)........ 0 166,667 0
Greyrock Business Credit/(10)... 333,333 333,333 0
Wharton Capital
Partners/(10)(11)............... 14,420 1,804,347 0
CAM Advanced Technologies/(12).. 0 141,302 0
---------- ---------- ---
TOTAL......................... 33,296,504 41,162,859 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 upon factors which cannot be predicted by the Company at this
time, including, among others, the market price of the Common Stock
prevailing at the actual date of conversion of Preferred Stock, and
whether or to what extent dividends to the holders of certain Preferred
Stock are paid in Common Stock.
(3) Assumes the sale of all shares offered hereby, 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
17
<PAGE>
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 Company that such Selling Stockholder is
exercising the warrant. The number of shares shown as being offered in the
table is based on (i) shares issuable upon conversion, at a conversion price
of $2.343 (which is the conversion price based on the price per share of the
Common stock on the date of the Series 4 Preferred Shares were first issued)
and (ii) the number of warrant shares 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) 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) 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
18
<PAGE>
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.
(7) 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.
(8) 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. 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.
(9) 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.
(10) 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 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.
(11) 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
19
<PAGE>
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.
(12) 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.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the Selling
Stockholders hereunder pursuant to contractual registration rights.
The shares of Common Stock offered hereunder may be sold from time to time by
the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market or
on any exchange which the common stock is listed for trading or in the over-
the-counter market or otherwise at prices and on terms then prevailing or
related to the then current market price, or in negotiated transactions. The
shares of Common Stock may be sold to or through one or more broker-dealers,
acting as agent or principal in underwritten offerings, block trades, agency
placements, exchange distributions, brokerage transactions or otherwise, or in
any combination of transactions. The shares of Common Stock offered hereunder
may be used to settle sales of Common Stock effected on or after the date
Preferred Stock is converted into Common Stock.
In connection with any transaction involving the Common Stock, broker-dealers
or others may receive from the Selling Stockholders, and may in turn pay to
other broker-dealers or others, compensation in the form of commissions,
discounts or concessions in amounts to be negotiated at the time. Broker-
dealers and any other persons participating in a distribution of the Common
Stock may be deemed to be "underwriters" within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Act.
Any or all of the sales or other transactions involving the Common Stock
described above, whether effected by the Selling Stockholders, any broker
dealer or others, may be made pursuant to this Prospectus. In addition, any
shares of Common Stock that qualify for sale pursuant to Rule 144 under the Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
To comply with the securities laws of certain states, if applicable, the
Common Stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, shares of Common Stock may not be
sold unless they have been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with under applicable state securities laws.
The Company and the Selling Stockholders have agreed, and hereafter may
further agree, to indemnify each other and certain persons, including broker-
dealers or others, against certain liabilities in connection with any offering
of the Common Stock, including liabilities arising under the Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Shartsis, Friese
& Ginsburg LLP, San Francisco, California.
20
<PAGE>
EXPERTS
The consolidated financial statements of SyQuest Technology, Inc. appearing
in the SyQuest Technology, Inc. Annual Report on Form 10-K for the fiscal year
ended September 30, 1997, have been audited by Price Waterhouse LLP,
independent accountants, and the Annual Report on Form 10-K for the fiscal
years ended September 30, 1996 and 1995 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their respective reports thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
21
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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............................................................ 16
Selling Stockholders....................................................... 16
Plan of Distribution....................................................... 20
Legal Matters.............................................................. 20
Experts.................................................................... 21
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
41,162,859 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.................................................... $38,169
Blue sky qualification fees and expenses............................ --
Printing............................................................ 1,000
Legal fees and expenses............................................. 35,000
Accounting fees and expenses........................................ 3,000
Miscellaneous....................................................... 1,000
-------
Total............................................................. $78,169
=======
</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
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<TABLE>
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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. (to be filed by a
Subsequent Amendment)
23.1 Consent of Ernst & Young LLP, independent auditors (to be filed by a
Subsequent Amendment).
23.2 Consent of Price Waterhouse LLP, independent auditors (to be filed by
a Subsequent Amendment).
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.
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 9th day of
January, 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.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/ Edwin L. Harper President, Chief January 9, 1998
- ----------------------------------- Executive Officer and
EDWIN L. HARPER Director (Principal
Executive Officer)
/s/ Bob L. Corey Executive Vice January 9, 1998
- ----------------------------------- President, Finance
BOB L. COREY and Chief Financial
Officer (Principal
Financial and
Accounting Officer)
/s/ Edward L. Marinaro Chairman of the Board January 9, 1998
- ----------------------------------- and Director
EDWARD L. MARINARO
/s/ C. Richard Kramlich Director January 9, 1998
- -----------------------------------
C. RICHARD KRAMLIC
/s/ Joseph Baia Director January 9, 1998
- -----------------------------------
JOSEPH BAIA
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
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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>
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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>
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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 (to be filed
by a Subsequent Amendment).............................
23.1 Consent of Ernst & Young LLP, independent auditors (to
be filed by a Subsequent Amendment)....................
23.2 Consent of Price Waterhouse LLP, independent auditors
(to be filed by a Subsequent Amendment)................
</TABLE>
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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.
