EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 00000 Xxxxxxx Xxxxxxx, Xxxxxxx, XX 00000 (the
"Company"), and the investors listed on the Schedule of Investors attached
hereto as Exhibit B (individually, a "Buyer" and, collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyers wish to purchase, in the amounts set forth in the Schedule
of Investors and upon the terms and conditions stated in this Agreement, shares
(the "Preferred Shares") of the Company's Convertible Preferred Stock, Series 1,
$.001 par value per share (the "Preferred Stock"), which shall be convertible
into shares of the Company's Common Stock (the "Common Stock"), $.001 par value
(as converted, the "Conversion Shares");
C. Each Buyer shall receive upon each conversion and in certain
circumstances redemption of such Buyer's Preferred Shares a warrant to acquire
one share of Common Stock for each three shares of Common Stock issued upon
conversion of such Preferred Shares (the "Warrants"), which Warrants shall
expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit F
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
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a. Purchase of Preferred Shares. The Company shall issue and sell
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to the Buyers and the Buyers shall purchase an aggregate of 5,500 Preferred
Shares, in the respective amounts set forth opposite the Buyers' names on the
Schedule of Investors, which shall be convertible into Conversion Shares in
accordance with the terms of the Certificate of Designations, Preferences and
Rights of Convertible Preferred Stock, Series 1, in the form attached hereto as
Exhibits A and A-1 (together, the "Certificate of Designations"). The per share
purchase price (the "Purchase Price") of the Preferred Shares shall be $1,000.
The Preferred Shares shall be sold at the closing as hereinafter provided.
b. Closing. The date and time of the closing (the "Closing") of the
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issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on October 8, 1996 (or such later date as is mutually agreed to by
the Company and the Buyers).
c. Form of Payment. Each Buyer shall pay the Purchase Price for the
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number of Preferred Shares set forth opposite such Buyer's name in the Schedule
of Investors, by wire transfer of immediately available United States Dollars on
the Closing date, to be deposited into an escrow account (the "Escrow Account")
as contemplated by an Escrow Agreement in substantially the form of Exhibit G
attached hereto (the "Escrow Agreement"). At the closing, the Company shall
deliver stock certificates, duly executed on behalf of the Company, representing
the Preferred Shares (the "Stock Certificates") to the respective Buyers.
d. Warrant Issuances. The Company will issue to each Buyer,
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within five (5) days after any conversion of Preferred Shares by that Buyer, a
Warrant in substantially the form of Exhibit C attached hereto, to acquire one
share of Common Stock for each three Conversion Shares that are issued on such
conversion of Preferred Shares, with an exercise price equal to the lower of
$7.15 per share and 110 percent of the Average Market Price (as that term is
defined in the Certificate of Designations) per share of Common Stock for the
five trading days preceding such conversion. In addition, the Company will issue
to each Buyer the Warrants described in the preceding sentence upon any
redemption of Preferred Shares upon the same terms as if such Preferred Shares
were converted on the date of redemption; provided that the Company is not
required to issue Warrants to Buyer in the event the Company redeems Preferred
Shares pursuant to Section 2(h) of the Certificate of Designations in connection
with a public offering by the Company of Common Stock. Each Warrant shall be
immediately exercisable and shall expire (to the extent not exercised) on the
third anniversary of the date of the relevant conversion or redemption of
Preferred Shares, as the case may be.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants to the Company as to itself, severally,
and not jointly, that:
a. Investment Purpose. Such Buyer is purchasing the Preferred
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Shares and the Warrants for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the 1933 Act. Such Buyer is
not purchasing the Preferred Shares for the purpose of covering short sale
positions in the Common Stock established on or prior to the date of the
Closing. Such Buyer understands that it shall be a condition to the issuance of
the Conversion Shares and the shares of Common Stock issuable upon exercise of
the Warrants (the "Warrant Shares") that the Warrants, Conversion Shares and
Warrant Shares are subject to the representations set forth in the first
sentence of this Section 2(a).
b. Accredited Investor Status. Such Buyer is an "accredited
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investor" as that term is defined in Rule 501(a)(3) of Regulation D.
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c. Reliance on Exemptions. Such Buyer understands that the
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Preferred Shares, Warrants, Conversion Shares and Warrant Shares are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and such Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
Preferred Shares, Warrants, Conversion Shares and Warrant Shares.
d. Information. Such Buyer and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares and Warrant Shares which have been requested
by such Buyer. Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received answers to such
inquiries. Such Buyer understands that its investment in Preferred Shares,
Warrants, Conversion Shares and Warrant Shares involves a high degree of risk,
including, without limitation, the risks arising from the facts that the
Company's stockholders' equity is negative in an amount in excess of
$30,000,000, that the Company incurred a loss for the quarter ended September
30, 1996, and that no assurance can be given that the Company will not incur
continuing losses or will be profitable. Such Buyer has sought such accounting,
legal and tax advice as it has considered necessary to an informed investment
decision with respect to its acquisition of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares.
e. No Governmental Review. Such Buyer understands that no United
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States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares or Warrant Shares or the fairness or suitability of
the investment in the Preferred Shares, Warrants, Conversion Shares or Warrant
Shares nor have such authorities passed upon or endorsed the merits of the
offering of the Preferred Shares, Warrants, Conversion Shares and Warrant
Shares.
f. Transfer or Resale. Such Buyer understands that (i) except as
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provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) such Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration; (ii) any sale of such securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to
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register such securities (other than pursuant to the Registration Rights
Agreement) under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
g. Legends. Such Buyer understands that the certificates or other
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instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares and the Warrant Shares (collectively, the
"Registrable Securities") have been sold pursuant to a registration under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Registrable Securities shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the sale of the Registrable
Securities is registered under the 1933 Act, or (b) in connection with a sale
transaction, such holder provides the Company with an opinion of counsel, in
form, substance and scope reasonably acceptable to the Company, to the effect
that a public sale, assignment or transfer of the Preferred Shares, the Warrants
or such Registrable Securities may be made without registration under the 1933
Act, or (c) such holder provides the Company with reasonable assurances that the
Preferred Shares, the Warrants or such Registrable Securities can be sold
pursuant to Rule 144 under the 1933 Act (or a successor rule thereto) without
any restriction as to the number of securities acquired as of a particular date
that can then be immediately sold. Such Buyer agrees to sell the Registrable
Securities, including those represented by certificate(s) from which the legend
has been removed, in compliance with all applicable securities laws.
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h. Authorization; Enforcement. This Agreement has been duly and
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validly authorized, executed and delivered by such Buyer and is a valid and
binding agreement of such Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
i. Residency. Such Buyer is a resident of that country
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specified in its address on the Schedule of Investors.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to the Buyers that:
a. Organization and Qualification. The Company and its
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subsidiaries are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated,
except, in the case of any such subsidiaries, as would not have a Material
Adverse Effect (as defined below), and have the requisite corporate power to own
their properties and to carry on their business as now being conducted. Each of
the Company and its subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary and where the
failure so to qualify would have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
b. Authorization; Enforcement; Compliance with Other Instruments.
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(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Escrow Agreement and the Registration Rights
Agreement, and to issue the Preferred Shares, the Warrants and the Registrable
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Escrow Agreement and the Registration Rights
Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Preferred Shares,
the Warrants and the Registrable Securities, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required, (iii) this Agreement, the Escrow Agreement and the Registration Rights
Agreement have been duly executed and delivered by the Company, and (iv) this
Agreement, the Escrow Agreement and the Registration Rights Agreement constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
c. Capitalization. As of the date hereof, the authorized
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capital stock of the Company consists of (i) 60,000,000 shares of Common Stock
of which, as of October 3, 1996, 12,219,415 shares were issued and outstanding,
and (ii) 4,000,000 shares of Preferred
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Stock of which, as of October 3, 1996, 20,000 shares were issued and
outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. No shares of Common Stock or Preferred Stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as disclosed in
Schedule 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt securities, and
(iii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement). The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended, as in effect on the date hereof
("Certificate of Incorporation"), and the Company's By-laws, as in effect on the
date hereof (the "Bylaws").
d. Issuance of Securities. The Registrable Securities, the
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Preferred Shares and the Warrants are duly authorized and, upon issuance in
accordance with the terms hereof and thereof, shall be validly issued, fully
paid and non-assessable, and free from all taxes, liens and charges with respect
to the issue thereof.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Except as disclosed in Schedule 3(e), neither the Company nor
its subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation or Bylaws or, in any material respect, any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted through the Registration Period (as
defined herein), in violation of any law, ordinance, regulation of any
governmental entity, except for possible violations which either singly or in
the aggregate do not have a Material Adverse Effect. Except as required under
the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement in accordance with the terms hereof.
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f. SEC Documents, Financial Statements. Since September 30,
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1995, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein (other than exhibits to incorporated
documents), being hereinafter referred to as the "SEC Documents"). The Company
has delivered to each Buyer or its representative true and complete copies of
the SEC Documents, except for such exhibits, schedules and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
any Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule
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3(g), since June 30, 1996 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as expressly set forth in its
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Form 10-Q for the quarter ended June 30, 1996, or in Schedule 3(h), there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein.
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i. Purpose of Investment. The Company recognizes that the
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Buyer's investment in the Company is being made in order to provide financing
for the Company's ongoing operations and especially for the development and
introduction of new products, including the marketing of such products, and
payment of accrued interest on and repayment of any loan heretofore made to the
Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000.
j. Acknowledgement Regarding Buyers' Purchase of Preferred
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Shares. The Company acknowledges and agrees that each of the Buyers is acting
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solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Buyer or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Preferred Shares. The Company further represents to each Buyer
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
k. No Undisclosed Events or Circumstances. No event or
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circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective business, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation, was
required to be publicly disclosed or announced by the Company but which has not
been so publicly announced or disclosed.
l. No General Solicitation. Neither the Company, nor any of
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its affiliates, or, to its knowledge, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the 0000 Xxx) in connection with the offer or
sale of the Preferred Shares.
m. No Registration Required. Except as provided herein and in
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the Registration Rights Agreement, neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Preferred Shares, Registrable Securities or Warrants under the 1933 Act.
n. Employee Relations. Neither the Company nor any of its
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subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company believes that its
relations with its employees for the most part are good.
o. Intellectual Property Rights. The Company and its
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subsidiaries own or possess adequate rights to use sufficient trademarks, trade
names, service marks, service xxxx registrations, patent rights, copyrights,
licenses, approvals, governmental authorizations, trade secrets and rights to
conduct their respective businesses as now conducted; except as set forth
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on Schedule 3(o), the expiration or termination of any trademarks, trade names,
service marks, service xxxx registrations, patent rights, copyrights, licenses,
approvals, government authorizations, trade secrets or rights would not have a
Material Adverse Effect; and the Company does not have any knowledge of any
material infringement by the Company or its subsidiaries of trademark, trade
name rights, patent rights, copyrights, licenses, service marks, service xxxx
registrations, trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(o), there is no claim being made
against the Company or its subsidiaries regarding trademark, trade name, patent,
copyright, license, service marks, service xxxx registrations, trade secret or
other infringement which could have a Material Adverse Effect. The Company and
its subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
p. Restructuring of Trade Payables. The vendor payables set
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forth on Schedule 3(p) (which schedule includes the name of the vendor creditor
and the amount of the vendor payable) have been restructured as indicated on
Schedule 3(p).
q. Closing of Future Financings. The Company is currently
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negotiating additional financing transactions, which include a possible
investment by Beijing Legend Group Ltd. of approximately $20,000,000, a possible
investment by Xxxxxxxx Asset Management, Inc. or its clients of $7,000,000 to
$16,000,000 and a possible investment by a group led by New Enterprise
Associates of $5,000,000 to $27,000,000, and the Company hopes that one or both
of the latter two transactions will be completed by October 31, 1996, but the
Company does not hereby represent or warrant that any of such financing
transactions will be consummated by October 31, 1996, or at all. The Company
intends that any of these transactions, if consummated, will involve the sale of
securities at a price approximately equivalent to fair market value, except that
securities sold to Beijing Legend Group Ltd. will be sold, if at all, at a price
substantially below fair market value.
r. Dilutive Effect. The Company understands and acknowledges
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the potentially dilutive effect to the Common Stock of the issuance of the
Preferred Shares, the Warrants and the Registrable Securities.
4. COVENANTS.
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a. Best Efforts. Each party shall use its best efforts timely
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to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
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the Preferred Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of
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which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933
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Act (or successor thereto), or (ii) the date on which (A) the Investors shall
have sold all the Registrable Securities and (B) none of the Preferred Shares or
Warrants is outstanding (the "Registration Period"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
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sale of the Preferred Shares for the Company's internal working capital
purposes, including costs and expenses of the Company's business operations and
product development, production and marketing, and for payment of accrued
interest on and repayment of a loan by Silicon Valley Bank to the Company in an
aggregate amount of not more than $5,000,000.
e. Financial Information. The Company agrees to send the
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following to each Buyer during the Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-
K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii)
within one day after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries; and (iii) notice of any requested
disbursement under the Escrow Agreement.
f. Reservation of Shares. The Company shall at all times have
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authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares and
the Warrant Shares.
g. Listing. The Company shall promptly secure the listing of
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the Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement. The Company shall use its best
efforts to maintain the Common Stock's authorization for quotation on the Nasdaq
National Market or such other national securities exchange. The Company shall
promptly provide to the Buyers copies of any notices it receives from Nasdaq
regarding the continued eligibility of the Common Stock for listing on the
Nasdaq National Market.
h. Legal Expenses. The Company shall pay all expenses incurred
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in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
5. TRANSFER AGENT INSTRUCTIONS.
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The Company shall instruct its transfer agent to issue certificates,
registered in the name of the respective Buyers or their respective nominees,
for the Conversion Shares and Warrant Shares in such amounts as specified from
time to time by the respective
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Buyers to the Company. All such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company shall provide
instructions and opinions of counsel to its transfer agent in accordance with
Section 3(m) of the Registration Rights Agreement. The Company warrants that no
instruction other than such instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof, in the case of the
Registrable Securities, will be given by the Company to its transfer agent and
that the Preferred Shares, the Warrants and the Registrable Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Registration Rights Agreement and
the Warrants. Nothing in this Section shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If a Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by such Buyer of any of the Preferred
Shares, the Warrants or the Registrable Securities is not required under the
1933 Act, the Company shall permit the transfer, and promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to sell the Preferred Shares
is subject to the satisfaction, at or before the date of the Closing, of each of
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. Each Buyer shall have delivered to the Company the Purchase
Price for all Preferred Shares being purchased by such Buyer by wire transfer of
immediately available funds pursuant to the wiring instructions provided by the
Company.
d. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and each Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
11
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of each Buyer to purchase the Preferred Shares at the
Closing is subject to the satisfaction, at or before the date of the Closing, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with the
Secretary of State of Delaware, and a copy thereof certified by such Secretary
of State shall have been delivered to each Buyer.
c. Until the date of the Closing, the Common Stock shall be
authorized for quotation on the Nasdaq National Market or the Nasdaq SmallCap
Market and trading in the Common Stock on Nasdaq National Market or the Nasdaq
SmallCap Market shall not have been suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3, in which case, such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of the date of
the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. Each
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer.
e. Each Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to each Buyer
the Stock Certificates for the Preferred Shares being purchased by such Buyer.
g. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall have closed the sale of 24,500 shares of
the Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par
value per share, for an aggregate gross purchase price of $24,500,000 on the
terms and conditions and with the rights and obligations set forth in the forms
of the securities purchase agreement, registration rights agreement, escrow
agreement and certificate of designations, preferences and rights previously
delivered to Xxxxxx X. Xxxxxxxx, counsel for the Buyers.
12
i. The Escrow Agreement shall have been duly executed and
delivered to the Buyers.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
b. 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. 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.
e. Entire Agreement; Amendments. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by mail or delivered personally
or by courier and shall be effective five days after being placed in the mail,
if mailed, certified or registered, return receipt requested, or upon receipt,
if delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company:
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
13
With copy to:
Shartsis, Xxxxxx & Xxxxxxxx, LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to a Buyer, at its address on the Schedule of Investors, with a
copy to such Buyer's counsel as set forth thereon.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each of the Buyers
(which consent shall not be unreasonably withheld). A Buyer may assign its
rights hereunder without the consent of the Company, provided, however, that any
such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h), 8(j) and 8(k), and this subsection shall survive the Closing. Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. 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
14
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date without
liability of any party to any other party.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
------ -------
SYQUEST TECHNOLOGY, INC. XXXXXX PARTNERS
By:/s/ Xxxxxx X. Xxxxxxxx By:/s/ Xxxx Xxxxx
------------------------ -------------------
Name: Name:Xxxx Xxxx
Its: Its: Officer
OLYMPUS SECURITIES, LTD.
By:/s/ Xxxx Xxxxx
-------------------
Name: Xxxx Xxxxx
Its: Alternate Director
XXXX XXXX FUNDING, INC.
By: /s/ Xxxxx Xxxxxxxxxx
------------------------
Name: Xxxxx Xxxxxxxxxx
Its: PRESIDENT
15
EXHIBIT B
SCHEDULE OF INVESTORS
Investor Address and Investor's Legal Counsel Number of
Investor Name Facsimile Number and Counsel's Address Preferred Shares
------------- ---------------- --------------------- ----------------
Xxxxxx Partners c/o Leeds Management Services Citadel Limited Partnership 3,000
000 Xxxxx Xxxxxx, 5th Floor 225 West Washington
Xxxxxxxx XX00 Xxxxxx
Xxxxxxx 0xx Xxxxx
Attn: Xxxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000 Attn: Xxxx X. Xxxxxxxxx
Xxxxxxx X. Simpler
Facsimile: (000) 000-0000
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Olympus Securities, Ltd. c/o Leeds Management Services Citadel Limited Partnership 2,000
000 Xxxxx Xxxxxx, 5th Floor 225 West Washington
Xxxxxxxx XX00 Xxxxxx
Xxxxxxx 0xx Xxxxx
Attn: Xxxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000 Attn: Xxxx X. Xxxxxxxxx
Xxxxxxx X. Simpler
Facsimile: (000) 000-0000
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Xxxx Xxxx Funding, Inc. 000 Xxxx Xxxxxxxxxx Xxxx 000
Xxxxx 0000
Xxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Facsimile: 000-000-0000
17
EXHIBIT C
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION OR REDEMPTION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OR REDEMPTION OF SERIES
1 PREFERRED SHARES] _________________ (_________) fully paid nonassessable
shares of Common Stock (as defined herein) of the Company (the "Warrant Shares")
at a purchase price of [THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE
MARKET PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE
TRADING DAYS PRECEDING THE CONVERSION OR REDEMPTION DATE] U.S. $_______ per
share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any
------------
capital stock into which such Common Stock shall have been changed or any
capital stock resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. Pacific
Time on the Expiration Date. The rights represented by this Warrant may be
exercised by the holder hereof then registered on the books of the Company, as a
whole or from time to time in part (except that this Warrant shall not be
exercisable as to a fractional share) by (i) delivery of a written notice, in
the form of the Subscription Notice attached as Exhibit A hereto, of such
holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which the Warrant is being exercised (plus any applicable issue or
transfer
2
taxes) in cash or by check, for the number of Warrant Shares as to which this
Warrant shall have been exercised, and (iii) the surrender of this Warrant,
properly endorsed, at the principal office of the Company (or at such other
agency or office of the Company as the Company may designate by notice to the
holder hereof); provided, that if such Warrant Shares are to be issued in any
name other than that of the registered holder of this Warrant, such issuance
shall be deemed a transfer and the provisions of Section 8 shall be applicable.
In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2(a), a certificate or certificates for the Warrant
Shares so purchased, registered in the name of, or as directed by, the holder,
shall be delivered to, or as directed by, such holder within a reasonable time
after such rights shall have been so exercised.
(b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall issue a new Warrant
identical in all respects to the Warrant exercised except (i) it shall represent
rights to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under the Warrant exercised, less the number of Warrant Shares
with respect to which such Warrant is exercised, and (ii) the holder thereof
shall be deemed to have become the holder of record of such Warrant Shares
immediately prior to the close of business on the date on which the Warrant is
surrendered and payment of the amount due in respect of such exercise and any
applicable taxes is made, irrespective of the date of delivery of such share
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are properly closed, such person
shall be deemed to have become the holder of such Warrant Shares at the opening
of business on the next succeeding date on which the stock transfer books are
open.
Section 3. Covenants as to Common Stock. The Company covenants and
----------------------------
agrees that all Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable. The Company further covenants and agrees that during
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized and reserved a sufficient number
of shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax
-----
or taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as
---------------------------------------
such, of this Warrant shall be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote,
give or withhold consent to any corporate action (whether any reorganization,
issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive
3
notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the holder of this Warrant of the Warrant Shares which
he or she is then entitled to receive upon the due exercise of this Warrant.
Notwithstanding the foregoing, the Company will provide the holder of this
Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by
-------------------------
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment and not with a view to, or for
sale in connection with, any distribution hereof or of any of the shares of
Common Stock or other securities issuable upon the exercise thereof, and not
with any present intention of distributing any of the same. The holder of this
Warrant further represents, by acceptance hereof, that, as of this date, such
holder is an "accredited investor" as such term is defined in Rule 501(a)(1) of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act (an "Accredited Investor") and an "excluded purchaser" for
purposes of Section 25102(f) of the California Corporate Securities Law of 1968
(an "Excluded Purchaser"). Upon exercise of this Warrant, the holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for the
holder's own account and not as a nominee for any other party, for investment,
and not with a view toward distribution or resale and that such holder is an
Accredited Investor and an Excluded Purchaser. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) The holder of this Warrant understands that (i) except as
provided in the Registration Rights Agreement, this Warrant and the Warrant
Shares have not been and are not being registered under the Securities Act or
any state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (a) subsequently registered thereunder, or (b) such holder
shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the
4
Securities Act may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than pursuant to the Registration
Rights Agreement) under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
(b) Any Warrant Shares issued upon exercise of this Warrant may bear
one or more of the legends in similar form to the legend set forth on this
Warrant.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall
--------------------------
effect a stock dividend, a stock split, a stock combination, or a reverse stock
split of the Common Stock, the number of Warrant Shares purchasable hereunder
and the Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking
5
reasonably satisfactory to the Company, issue a new Warrant of like denomination
and tenor as the Warrant so lost, stolen or destroyed.
Section 11. Notice. Any notices required or permitted to be given
------
under the terms of this Warrant shall be sent by mail or delivered personally or
by courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company:
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
With copy to:
Shartsis, Xxxxxx & Xxxxxxxx, LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to Holder, to it at the address set forth below Holder's signature
on the signature page hereof.
Each party shall provide notice to the other party of any change in address.
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
Section 13. Date. The date of this Warrant is _____________, 199__.
----
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of
6
Section 8 shall continue in full force and effect after such date as to any
Warrant Shares or other securities issued upon the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By: _____________________________
Name: ___________________________
Title:___________________________
ACCEPTED:
--------
[HOLDER]
By: ________________________
Name: ______________________
Title: _____________________
Address: ___________________
____________________________
____________________________
____________________________
7
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment of U.S. $_______________, the
aggregate Warrant Exercise Price of such Warrant Shares in full.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(1) of Regulation D as promulgated by the Securities and
Exchange Commission under the Securities Act and an "excluded purchaser" for
purposes of Section 25102(f) of the California Corporate Securities Law of 1968.
[HOLDER]
Dated:____________________, 199_.
By: ____________________________________
Name: __________________________________
Title:__________________________________
Address: _______________________________
________________________________________
________________________________________
________________________________________
Number of Warrant Shares
Being Purchased: ______________________
8
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at 00000 Xxxxxxx Xxxxxxx, Xxxxxxx, XX 00000 (the
"Company"), and the undersigned buyers (each, a "Buyer" and, collectively, the
"Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement to (i) issue and sell to the Buyers shares of the Company's
Convertible Preferred Stock, Series 1, $.001 par value per share (the "Preferred
Shares"), which will be convertible into shares of the Company's common stock
(the "Common Stock"), par value $.001 per share (as converted, the "Conversion
Shares"), and (ii) issue Warrants (the "Warrants") which will be exercisable to
purchase shares of Common Stock (the "Warrant Shares"); and
B. To induce the Buyers 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
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer and any transferee or assignee thereof
to whom the Buyer assigns this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 hereof.
b. "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").
c. "Registrable Securities" means the Conversion Shares and the
Warrant Shares and any shares of Common Stock issued in respect of the
Conversion Shares or Warrant Shares as a result of any stock split, stock
dividend, recapitalization or similar event.
d. "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
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a. Mandatory Registration. The Company shall use its best efforts
----------------------
to prepare, and, on or before thirty (30) days after the date of the issuance of
the relevant Preferred 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
issuable upon conversion of or in connection with the relevant Preferred Shares,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares or exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The Company shall use its best efforts to have the Registration Statement
declared effective by the SEC within ninety (90) days after the date of issuance
of the relevant Preferred Shares. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by each Buyer and one
legal counsel selected by the Buyers prior to the Company's filing or other
submission, such approval not to be unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration
------------------------
of the Registration Period (as hereinafter defined) the Company shall file with
the SEC a Registration Statement relating to an offering for its own account or
the account of others under the 1933 Act of any of its equity securities (other
than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall send to each Investor who is
entitled to registration
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rights under this Section 2(c) written notice of such determination and, if
within twenty (20) days after receipt of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' reasonable good
faith judgment, marketing or other factors dictate such limitation is necessary
to facilitate public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder; provided that no portion of the equity securities which the
Company is offering for its own account shall be excluded; provided, further
that the Company shall be entitled to exclude Registrable Securities to the
extent necessary to avoid breaching obligations existing prior to the date
hereof to other stockholders of the Company. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; provided, however, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not entitled to
inclusion of such securities in such Registration Statement or are not entitled
to pro rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the Registration
Statement other than holders of securities entitled to inclusion of their
securities in such Registration Statement by reason of demand registration
rights or whose registration rights existed prior to the date hereof. No right
to registration of Registrable Securities under this Section 2(c) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(c) may be waived by Investors
holding a majority of the Registrable Securities. If an offering in connection
with which an Investor is entitled to registration under this Section 2(c) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
d. 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 Buyers 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 so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
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3. RELATED OBLIGATIONS.
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a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement(s) effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
the Investors may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares or Warrants is outstanding (the
"Registration Period"), which 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.
b. 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).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) 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 (ii) 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 in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) 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), (ii) 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, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a
4
condition thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause more than nominal expense or burden to the Company, or
(e) make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders. The Company shall promptly notify each Investor
who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor 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, and use its best 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.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. 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, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable
5
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (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 each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, 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, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon 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
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
6
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. 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. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. 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.
o. The Company shall otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OTHER OBLIGATIONS.
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a. At least five (5) 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 if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent
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to the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular 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.
b. 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.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), 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(f) or 3(g) 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.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
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5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts, 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 and fees and disbursements of one counsel for the
Investors, shall be borne by the Company, subject, with respect to expenses for
such counsel incurred by the Investors, to the limit stated in Section 4(h) of
the Securities Purchase Agreement.
6. INDEMNIFICATION.
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In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 0000 Xxx) for the
Investors, and the directors and officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities, attorneys' fees, amounts paid in settlement or expenses (joint or
several) (collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), 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 upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or in any filing made
in connection with the qualification of the offering under the securities or
other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact therein required to be stated or necessary to make the statements
therein not misleading, (ii) 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 (iii) any violation or alleged violation 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 foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to
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the number of legal counsel, the Company shall reimburse the Investors and each
such underwriter or controlling person, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use 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(c) hereof; (ii) 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(c) hereof; (iii) shall not be available to the extent 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 (iv) 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.
b. 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(a), 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
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) 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; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or Indemnified
Damages 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
10
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
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue 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.
c. 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 by such
persons expressly for inclusion in the Registration Statement.
d. 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 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,
however, 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 in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that legal
fees of such firm shall be reasonable. The failure to deliver written notice to
the indemnifying party within a reasonable time of the 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 Indemnified Damages are incurred or bills therefor are received
and are due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect
11
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided, however, that (i) 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, (ii) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule
144 promulgated 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:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) 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 (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) 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, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and
12
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act, and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of 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 upon each
Investor and the Company.
11. MISCELLANEOUS.
-------------
a. 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 upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon 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:
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
13
With copy to:
Shartsis, Xxxxxx & Xxxxxxxx, LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to a Buyer, at its address on Schedule A attached hereto, with a copy to
such Buyer's counsel at the address thereon.
Each party shall provide notice to the other party of any change in
address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware without regard to the principles of
conflict of laws. 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.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
14
i. 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 in order 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: BUYERS:
SYQUEST TECHNOLOGY, INC. XXXXXX PARTNERS
By:_______________________________ By:________________________________
Name: Name:
Its: Its:
OLYMPUS SECURITIES, LTD.
By:________________________________
Name:
Its:
XXXX XXXX FUNDING, INC.
By:________________________________
Name:
Its:
15
SCHEDULE A
Buyer Name and Address Name and Address of Buyer's Counsel
------------------------------- -----------------------------------
Xxxxxx Partners Citadel Limited Partnership
c/o Leeds Management Services 000 Xxxx Xxxxxxxxxx Xxxxxx
129 Front Street, 5th Floor 9th Floor
Xxxxxxxx HM12 Xxxxxxx, Xxxxxxxx 00000
Bermuda Attn: Xxxx X. Xxxxxxxxx
Attn: Xxxx Xxxxx Xxxxxxx X. Simpler
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Olympus Securities, Ltd. Citadel Limited Partnership
c/o Leeds Management Services 000 Xxxx Xxxxxxxxxx Xxxxxx
129 Front Street, 5th Floor 9th Floor
Xxxxxxxx HM12 Xxxxxxx, Xxxxxxxx 00000
Bermuda Attn: Xxxx X. Xxxxxxxxx
Attn: Xxxx Xxxxx Xxxxxxx X. Simpler
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Xxxx Xxxx Funding, Inc.
000 Xxxx Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Facsimile: 000-000-0000
16
EXHIBIT G
ESCROW AGREEMENT
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996 among Xxxxxx
Partners, Olympus Securities, Ltd. and Xxxx Xxxx Funding, Inc. (each, a "Buyer"
and, collectively, the "Buyers"), SyQuest Technology, Inc., a Delaware
corporation (the "Company"), and AM Capital Management Group, a New York
corporation, as Escrow Agent (the "Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of October 8, 1996 (the "Purchase Agreement"), pursuant to
which the Company has agreed to sell, and the Buyers have agreed to purchase, an
aggregate of 5,500 shares of the Company's Convertible Preferred Stock, Series
1, $.001 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyers and the Company have agreed to place into escrow the
$5,500,000 purchase price (the "Purchase Price") for the Preferred Shares to be
available for disbursements to the Company for its business operations and
product development, introduction and marketing after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyers' obligations to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. At such time as the Purchase Price is released to the
-------
Company by Shartsis, Xxxxxx & Xxxxxxxx, LLP, counsel for the Company, pursuant
to a letter of instructions dated as of October 8, 1996, a copy of which is
attached hereto as Exhibit B, the Purchase Price and any earnings thereon (the
"Escrow") shall be transferred to the Escrow Agent, to be held by the Escrow
Agent in a separate interest-bearing money market account established at Silicon
Valley Bank or any other banking institution that the Company may designate (the
"Bank"), Account No. 3300039539 or another account subject to this Agreement to
which the Company may direct that the Escrow be transferred (the "Escrow
Account"), subject to the terms and provisions contained herein. Interest shall
accrue on the Escrow Account at the highest rate paid by the Bank on accounts
which permit multiple withdrawals from an
account within any particular monthly period. The Escrow Agent shall provide the
Company with all Bank statements, notices and other writings which it receives
from the Bank in connection with the Escrow Account. The Escrow, together with
all interest thereon, shall at all times remain (until disbursed in accordance
with this Agreement) the property of the Company, subject only to the
restrictions as to the use thereof expressly provided in this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time
--------------------------
hereafter request by notice to the Escrow Agent that the Escrow Account be
transferred to another banking institution. In such event, the Escrow Agent
shall, within two business days after receiving such notice, transfer the
remaining Escrow as the Company may instruct, whereupon the transferee banking
institution shall become the "Bank" for purposes of this Agreement and the
account into which the remaining Escrow is deposited shall become the "Escrow
Account", in all cases subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during the
-------------
term of this Agreement, the Company shall deliver to the Escrow Agent, with a
copy to each Buyer, a request in writing signed by the Company for a
disbursement from the Escrow accompanied by a certification, in substantially
the form attached hereto as Exhibit A, executed by the Company's Chief Executive
Officer or Chief Financial Officer, stating that the amount of the Escrow to be
disbursed shall be used by the Company solely for costs and expenses of the
Company's business operations and product development, introduction and
marketing after the date hereof, or for payment of accrued interest on and
repayment of any loan heretofore made to the Company by Silicon Valley Bank in
an aggregate amount not in excess of $5,000,000, the Escrow Agent shall pay such
amount of the Escrow as specified in such request within forty-eight hours of
receipt of such request by the Escrow Agent by wire transfer as directed in such
request.
2.2 Controversies. If any controversy arises between one or more of
-------------
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyers or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2
2.3 No Other Disbursements. No portion of the Escrow monies shall be
----------------------
disbursed or otherwise transferred except in accordance with this section 2,
section 4 or section 5.1(b). Without limiting the foregoing, neither Escrow
Agent nor any Buyer shall be entitled to any right of offset against the Escrow
or otherwise entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its gross negligence, willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a) the
-----------
date on which the Escrow shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, and (b) any other date agreed to by the
Buyers and the Company, in which event the Escrow shall be disbursed in full to
the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or
3
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall not apply to any direct claim
against the Escrow Agent by the Company alleging a breach of this Agreement.
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyers, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction in
Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyers. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreement. The parties acknowledge that the
----------------------
Company, the Escrow Agent and the purchasers of the Company's 5% Cumulative
Convertible Preferred Stock, Series 2, are concurrently herewith entering into
another Escrow Agreement in substantially the same form as this Agreement (the
"Other Agreement"). The parties contemplate that deposits into the Escrow
Account shall be made under this Agreement and the Other Agreement, which shall
together govern the rights and obligations of the parties hereto and thereto
with respect to the Escrow Account, the Escrow and other funds deposited into
the Escrow Account and the rights and duties of the parties with respect
thereto, as if this Agreement and the Other Agreement were a single agreement
among all of the parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at Xxxxx Xxxxxx Xxxx, Xxxxxxx, XX 00000.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:_____________________________________
Name:
Its:
BUYER:
------
XXXXXX PARTNERS
By:_____________________________________
Name:
Its:
OLYMPUS SECURITIES, LTD.
By:_____________________________________
Name:
Its:
XXXX XXXX FUNDING, INC.
By:____________________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:_____________________________________
Name: Xxxxxxx Arnouse
Its: President
5
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996, by
and among Xxxxxx Partners, Olympus Securities, Ltd., Xxxx Xxxx Funding, Inc.,
SyQuest Technology, Inc. and AM Capital Management Group (the "Escrow
Agreement"). Capitalized terms used and not otherwise defined herein have the
meanings respectively ascribed to them in the Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for (a) costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement, or (b) payment of accrued interest on
and repayment of any loan made, prior to October 9, 1996, to the Company by
Silicon Valley Bank in an aggregate amount not in excess of $5,000,000.
IN WITNESS WHEREOF, the undersigned has executed this Certification as this
____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:_____________________________________
Name:
Title:
6
EXHIBIT B
SYQUEST TECHNOLOGY, INC.
00000 XXXXXXX XXXXXXX
XXXXXXX, XX 00000
October 8, 1996
Shartsis, Xxxxxx & Xxxxxxxx, LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Re: Securities Purchase Agreement dated as of
October 8, 1996 (the "Agreement"), between
SyQuest Technology, Inc. (the "Company") and
Xxxxxx Partners, Olympus Securities, Ltd. and
Xxxx Xxxx Funding, Inc. (the "Buyers")
---------------------------------------------
Ladies and Gentlemen:
Please refer to the Agreement. Capitalized terms used and not otherwise
defined in this letter have the meanings respectively ascribed to them in the
Agreement or the Escrow Agreement.
The Company and the Buyers have agreed that, notwithstanding anything to
the contrary in the Agreement or the Escrow Agreement, the Purchase Price of the
Preferred Shares, which is expected to aggregate $5,500,000, will be wire
transferred to your trust account, according to such wire transfer instructions
as you may furnish to the Buyers, and you will hold, subject to this letter, the
Agreement, the Registration Rights Agreement, the Escrow Agreement and other
documents to be delivered at the Closing (the "Closing Documents"), together
with all certificates representing the Preferred Shares (the "Stock
Certificates"). You are instructed to cause the Purchase Price, when received in
such trust account, to be invested in a money market account or instrument or
repurchase agreements or instruments relating to United States Treasury debt
instruments and to cause the earnings thereon to be credited to the account of
the Company, subject to these instructions. You are further instructed to
deliver the Stock Certificates and to disburse the funds held by you in such
trust account only as set forth below in this letter. All documents and funds
delivered to you pursuant to this letter shall be held in escrow and delivered
by you as set forth herein.
7
Shartis, Xxxxxx & Xxxxxxx, LLP
October 8, 1996
Page 8
If, at any time on or prior to October 31, 1996, either you receive from
the Buyers written instructions (which may be original instructions or
instructions transmitted to you by facsimile), which you believe to be genuine,
signed by each of the Buyers and instructing you to release this escrow, or you
receive from the Company a certificate (which may be an original certificate or
a certificate transmitted to you by facsimile), which you believe to be genuine,
signed by the Chief Financial Officer of the Company and stating that, after
October 8, 1996, the stockholders' equity of the Company determined in
accordance with generally accepted accounting principles was increased by
$5,000,000 or more on account of the Company's receipt of consideration for the
issuance or sale of capital stock (other than Preferred Shares and shares of 5%
Cumulative Convertible Preferred Stock, Series 2) in exchange for cash or
cancellation or forgiveness of indebtedness after that date (the "CFO
Certificate"), you shall thereupon transmit by facsimile a copy of the CFO
Certificate to Xxxxxx Xxxxxx & Zavis, attention Xxxxxx X. Xxxxxxxx, counsel for
the Buyers, and transmit all funds held by you in such trust account to the
Escrow Account pursuant to the Escrow Agreement. At the same time, you shall
send to the Buyers the Stock Certificates and deliver to the Company, counsel
for the Buyers and the Escrow Agent counterparts of the Agreement and the other
Closing Documents, whereupon the Closing shall be deemed to have occurred as of
the date that you shall have received the Purchase Price.
If you do not receive the CFO Certificate on or prior to October 31, 1996,
you shall transmit to the respective Buyers, according to such wire transfer
instructions as they may provide to you, all funds in such trust account
(including earnings, if any, on the Purchase Price) in amounts that are
proportional to the amounts the respective Buyers would otherwise have been
obligated to pay (at $1,000 per Preferred Share) under the Agreement. At the
same time, you shall return to the Company for cancellation all of the Stock
Certificates. The Company and the Buyers have agreed that, in such event, the
Agreement and all of the other Closing Documents will be null and void for all
purposes.
The Company and the Buyers have agreed that the Agreement shall not
terminate pursuant to section 8.l of the Agreement prior to November 1, 1996.
If you are notified of any controversy or dispute between the Company and
any or all of the Buyers, you shall have the same rights as the Escrow Agent
under the Escrow Agreement in the case of a controversy or dispute. The
provisions of section 3 of the Escrow Agreement shall apply to you in the same
manner as they apply to the Escrow Agent under the Escrow Agreement.
These instructions are irrevocable, may be amended only with the consent of
the Company and the Buyers, and have been approved by the Buyers as set forth
below. Please
8
Sharsis, Xxxxxx & Xxxxxxxx, LLP
October 8, 1996
Page 9
indicate your acceptance of these instructions by causing a copy of this letter
to be signed on your behalf in the space provided below.
Yours very truly,
SYQUEST TECHNOLOGY, INC.
By _____________________________________
Chairman of the Board
AGREED AND CONFIRMED: ACCEPTED:
SHARTSIS, XXXXXX & XXXXXXXX, LLP
By _________________________________ By _____________________________________
Its _____________________________ Partner
XXXXXX PARTNERS
OLYMPUS SECURITIES, LTD.
By _________________________________
Its ___________________________
XXXX XXXX FUNDING, INC.
By __________________________________
Its ____________________________
9
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a total
of 3,252,244 shares of its Common Stock. As of October 3, 1996, the Company had
options outstanding to purchase a total of 2,790,345 shares of its Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and convertible
debentures, as well as the possible issuance of Common Stock in exchange for
forgiveness of indebtedness. Certain of the arrangements may provide that the
debt will not be cancelled until such time as the supplier obtains proceeds from
the sale of the shares issued in the arrangement. Equity securities issued for
cancellation of debt, as well as for the Common Stock issuable upon conversion
of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to Xxxxxxx Capital Corporation, and has a commitment to issue a warrant to (a)
Xxxxxxx & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. Xxxxxx
Group to purchase 500,000 shares of Common Stock.
Schedule 3(e)
-------------
There are no dislosures to be made pursuant to this Schedule 3(e).
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following:
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of 1995.
As a result of these and other factors, past-due accounts payable continued
to be high during the period, amounts borrowable under the Company's line
of credit decreased and the Company's overall liquidity has been materially
and adversely affected. Suppliers were placed on a payment plans for
repayment of amounts owed. Reference is made to (i) the Company's press
release dated May 7, 1996, (ii) the Company's report on Form 10-Q for the
quarter ended Xxxxx 00, 0000, (xxx) various news-wire stories of June 5,
1996, containing Nasdaq's statements in connection with the Company's lack
of compliance with Nasdaq listing requirements, (iv) the Company's report
on Form 10-Q for the quarter ended June 30, 1996, (v) the Company's press
release dated September 16, 1996, (vi) the Company's Current Report on Form
8-K dated June 14, 1996, (vii) the events and developments described in the
Company's Amendment Number 1 to Form S-3 Registration Statement filed
August 29, 1996, (viii) Nasdaq's granting of an exception through October
31, 1996, to the net tangible assets and capital and surplus requirements
for listing on the Nasdaq Stock Market, and (ix) the granting of an
exception to the rules of the National Association of Securities Dealers,
Inc., which would otherwise require stockholder approval of the
transactions contemplated by this Agreement, such exception having been
granted because the Company's audit committee was of the opinion that a
failure to complete immediately the transactions contemplated by this
Agreement would seriously jeopardize the financial viability of the
Company. Such documents and information are incorporated herein by this
reference. See Schedule 3(h) for information regarding litigation, which
is also incorporated by reference.
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not expressly set forth in Form 10-Q for
the quarter ended June 30, 1996 that would have a Materially Adverse Effect or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, the Agreement or any
of the documents contemplated therein.
Schedule 3(o)
-------------
There are no dislosures to be made pursuant to this Schedule 3(o).
Schedule 3(p)
-------------
Contract Payment Interest
Supplier Date Start Date Term Amount Rate
-------- -------- ---------- ---- ------ --------
Adaptec 5/22/96 5/22/96 25 mo 100,763.21 --
Akashic Memories 8/8/96 9/1/96 15 mo 2,163,186.25 --
Allegro MicroSystems 7/30/96 10/15/96 24 mo 243,050.00 10%
Cherry Semiconductor 8/22/96 10/15/96 24 mo 1,110,127.37 10%
Freight Solutions 7/31/96 10/15/96 24 mo 1,844,368.91 10%
Intel 9/10/96 10/15/96 12 mo 1,163,000.00 10%
Jardine Freight Services 8/21/96 10/15/96 24 mo 1,500,038.68 10%
RMS 8/6/96 8/6/96 35 mo 2,643,466.51 --
Seagate 9/6/96 9/16/96 24 mo 1,484,684.00 10%
Shuttle Technology 9/25/96 8/15/96 24 mo 139,000.00 8%
Silicon Systems 7/29/96 10/15/96 24 mo 2,354,963.00 10%
Xxxxxxx & Assoc. 8/27/96 9/15/96 13 mo 467,339.00 --
Teletech 9/20/96 10/15/96 6 mo 500,000.00 10%
TongKah Electronics 8/21/96 9/30/96 25 mo 11,474,127.76 10%
UFE Incorporated 9/5/96 10/15/96 13 mo 209,612.49 10%
WISRS 7/15/96 8/15/96 36 mo 7,678,578.65 6%
Juno, Inc. 9/30/96 10/15/96 24 mo 656,764.10 10%
Skynet Electronic Co. Ltd. 8/26/96 10/15/96 24 mo 590,735.52 10%
A-Corn Enterprises 10/15/96 10/15/96 24 mo 1,795,353.46 10%
Xxxxxxx International 4/29/96 10/15/96 1 mo 120,205.50 10%
