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)
February 17, 1998
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
Sale of Equity Securities Pursuant to Regulation D
Pursuant to a series of Securities Purchase Agreements
(collectively, the "Agreements" and individually, an
"Agreement"), dated February 17, 1998, Registrant sold certain
shares of its 5% Cumulative Convertible Preferred Stock, Series 7
(the "Preferred Shares"), at a price of $1,000 per share, to the
following entities (collectively, the "Purchasers" and
individually, a "Purchaser") in the amounts set forth in the
chart below:
Amount of Preferred No. of
Name Investment Shares Warrants
Rutgers Casualty
Insurance Company 200,000 200 33,726
Kentucky National
Insurance Company 200,000 200 33,726
HSI Partnership 100,000 100 16,863
Blumfield
Investment, Inc. 300,000 300 50,589
Burstein & Lindsay
Securities Corp. 200,000 200 33,726
Maslo Fund, Ltd. 750,000 750 126,472
Star High Yield
Investment Management
Corp. 750,000 750 126,472
Each Agreement contains a provision limiting the amount of the
Company's Common Stock each Purchaser may beneficially own to
less than 5% of Registrant's outstanding and issued Common Stock,
though each Purchaser may waive that restriction by providing
sixty-one days written notice to Registrant.
The rights, preferences and privileges of the Preferred
Shares, as summarized below, are set forth in the Certificate of
Designations, Preferences and Rights of 5% Cumulative Convertible
Preferred Stock, Series 7 (the "Certificate"), filed with the
Delaware Secretary of State on February 13, 1998. The sale of
the Preferred Shares and related Warrants to the Purchasers were
made on substantially similar terms as the sale of Preferred
Shares and related Warrants to Olympus Securities, Ltd. as
reported in Registrant's Report on Form 8-K dated February 13,
1998 (the "February 13, 1998 8-K"). The agreement attached as
Exhibit 10.2 to the February 13, 1998 8-K is representative of
the Agreement for each of the Purchasers, and is incorporated
herein by reference as Exhibit 10.1.
Under each of the Agreements, the Purchaser also
acquired a warrant (a "Warrant") to purchase a number of shares
(the "Warrant Shares") of Common Stock, pursuant to a Warrant
Certificate (a "Warrant Certificate"), as set forth in chart,
above, in the form attached as Exhibit B to the Agreement.
Conversion; Registration. Subject to certain
conditions, the Preferred Shares are convertible into shares (the
"Conversion Shares") of Registrant's Common Stock at any time at
the option of the holder of the Preferred Shares. The conversion
price is the greater of the arithmetical average of the closing
sale prices of the Common Stock for each of the five consecutive
trading days preceding the conversion or 90% of the closing sale
price the day before the conversion, but in any event not greater
than $3.00.
If Registrant would be required to issue more than
19.9% of its issued and outstanding Common Stock as of February
13, 1998, on the conversion of the Preferred Shares, and to do so
would require stockholder approval, conversion of the Preferred
Shares will be limited to 19.9% until stockholder approval is
obtained or Registrant lists its Common Stock on an electronic
bulletin board. If the 19.9% limit is applicable, Registrant is
required to use its best efforts to seek stockholder approval of
the transaction at its 1998 Annual Meeting. If the stockholders
do not approve the transaction, the Series 7 shares which cannot
be converted into Common Stock will be redeemable at a 20%
premium over their face value unless the Company lists its Common
Stock on an electronic bulletin board.
Dividends. Cumulative dividends accrue on the
Preferred Shares at an annual rate of 5%. Such dividends are
payable quarterly in additional Preferred Shares until such time
as Registrant no longer has sufficient Preferred Shares available
to pay dividends. Thereafter, dividends are to be paid in cash.
Dividends may not be paid in Preferred Shares if the holder of
such Preferred Shares would not be able to convert such shares
due to ownership restrictions contained in the Certificate.
Liquidation Preference. The Preferred Shares have a
liquidation preference as to dividends, distributions and
payments on liquidation, dissolution or winding up of Registrant
senior to Common Stock, senior to other capital stock if
permitted by the terms of such other capital stock, in parity
with such capital stock if permitted by the terms of such capital
stock or, if not so permitted, junior to such capital stock, and
senior to all new series of any class of Registrant's capital
stock, except for capital stock which may be issued in the future
to Beijing Legend Group, Ltd.
Non-Voting. The Preferred Stock is non-voting, except
as required by law.
Registration Rights. The Agreements provide that
Registrant file a registration statement on Form S-3 (the
"Registration Statement") covering resales of the Conversion
Shares and the Warrant Shares (collectively, the "Converted
Securities") and use its best efforts to have the Registration
Statement declared effective not later than the earlier of either
(i) 90 days from the date SyQuest's registration statement number
333-40329 is declared effective, or (ii) June 13, 1998, provided
however, if the Securities and Exchange Commission (the "SEC")
reviews the Registration Statement, then the date by which the
Registration Statement is to be declared effective shall be
extended 30 days. The Agreements also require the Company to
keep the Registration Statement effective until the earlier of
(a) the second anniversary of the issuance of the Converted
Securities, (b) such date as all of the Converted Securities
shall have been sold by Purchaser or (c) such time as all of the
Converted Securities held by Purchaser can be sold by Purchaser
or any of its affiliates within a three month period without
compliance with the registration requirements of the Securities
Act pursuant to Rule 144 thereunder.
Warrants. The exercise price per Warrant Share (plus
transfer taxes, if applicable, the "Exercise Price") shall be
$3.075. If the Company's stockholders approve the issuance of
shares of Common Stock in excess of the 19.9% limit described
above, then the Exercise Price shall be the greater of (a) 120
percent of the arithmetical average of the closing sale prices
per share of Common Stock on the five consecutive trading days
preceding the delivery of any Exercise Notice (as defined below)
as reported by the Nasdaq National Market, provided that in no
event shall the Exercise Price exceed $3.075. The Warrants
issued to the Purchasers are immediately exercisable, subject to
the 5% beneficial ownership limitation discussed above. The
Warrants expire on January 30, 2005. The number of Warrant
Shares available to each Purchaser will increase by 10% of the
total Warrant Shares then outstanding granted for each month
(prorated daily for partial months), after the earlier of either
(i) 90 days from the date SyQuest's registration statement number
333-40329 is declared effective, or (ii) June 13, 1998, provided
however, if the SEC reviews the Registration Statement (defined
below), then for each month (prorated daily for partial months)
after the earlier of either (i) 120 days from the date SyQuest's
registration statement number 333-40329 is declared effective, or
(ii) July 13, 1998, the Company does not maintain an effective
registration statement which is available for the resale of all
the Common Stock underlying the Warrants and the Preferred
Shares. In lieu of issuing additional Warrant Shares, Registrant
may, at its election, make a cash payment equal to 1.5% of the
face value of the Preferred Shares then held by each Purchaser.
The Agreement, the Warrant and related matters are also
described in the press release attached hereto as Exhibit 99.1
and incorporated herein by this reference.
THE FOREGOING DESCRIPTION OF THE AGREEMENTS, THE CERTIFICATE AND
THE WARRANT CERTIFICATES ARE 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.
Infringement Lawsuit
On March 3, 1998, Iomega Corporation ("Iomega") filed suit
in France in the Paris Superior Court against Registrant, its
French subsidiary, SyQuest Technology SARL ("SyQuest SARL") and a
distributor of Registrant's products in France. The Lawsuit
alleges that Registrant's SyJet 1.5 gigabyte cartridge infringes
Iomega's design for its Jaz cartridge and Iomega European patent
application nos. 956002B.4 and 96917128.9 relating, respectively,
to an anti-rattle mechanism and a cartridge door. The complaint
requests money damages and requests that the court enjoin
Registrant from further infringement. Iomega has moved for
summary judgment based on alleged infringement of cartridge
design rights and a recently issued patent, seeking to block
sales of certain of the Company's products in France. Registrant
believes that neither it nor SyQuest SARL have infringed any
valid patent claims or designs of Iomega and intends to
vigorously defend against this action.
Item 7 Financial Statements, Pro Forma Financial Information
and Exhibits
10.1 Securities Purchase Agreements dated February 13, 1998,
between Registrant and Olympus Securities, Ltd., including as
Exhibit A thereto the Certification of Designations, Preferences
and Rights of 5% Cumulative Convertible Preferred Stock, Series
7, as Exhibit B thereto the form of Warrant Certificate issued
pursuant thereto, as Exhibit C thereto the form of Delivery
Letter, as Exhibit D a List of Investors, and as Exhibit E a form
of Conversion Notice, incorporated by reference to Exhibit 10.2
to Registrant's Report on Form 8-K dated February 13, 1998.
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: March 25, 1998 /s/ Bob L. Corey
Bob L. Corey,
Executive Vice President
and
Chief Financial Officer
