Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
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This Securities Purchase Agreement (the "Agreement") dated February
13, 1998 is entered into by and between SyQuest Technology, Inc., a Delaware
corporation (together with its successors, "SyQuest"), and Olympus Securities,
Ltd., a Bermuda corporation ("Investor").
Unless otherwise defined herein, capitalized terms used herein and not
defined herein shall have the meanings given to them in Regulation D (as now if
effect or as hereafter amended, "Regulation D") under the Securities Act of
1933, as amended (the "1933 Act").
The parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the basis of the
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representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
a. Convertible Preferred Stock. SyQuest agrees to issue and sell
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to Investor, and Investor agrees to purchase from SyQuest, on the Closing
Date specified in Section 2 hereof, 1,625 shares of SyQuest's 5% Cumulative
Convertible Preferred Stock, Series 7, stated value $1,000 per share (the
"Preferred Shares"), having the terms and conditions set forth in the
Certificate of Designations, Preferences and Rights of 5% Cumulative
Convertible Preferred Stock, Series 7 (the "Certificate of Designations")
which is attached hereto as Exhibit A, at a purchase price per share of
$1,000, for an aggregate purchase price of $1,625,000 (the "Purchase
Price"). The shares of Common Stock issuable upon conversion of the
Preferred Shares are referred to herein as the "Conversion Shares."
b. Warrant. In consideration of the purchase of the Preferred
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Shares by Investor, SyQuest will issue to Investor on the Closing Date
specified in Section 2 hereof, a warrant or warrants having the terms set
forth in the warrant certificate attached hereto as Exhibit B (the
"Warrant") to purchase up to 274,030 shares (subject to adjustment) of
SyQuest's Common Stock, par value $.0001 per share (the "Common Stock").
The shares of Common Stock issuable pursuant to the Warrant are referred to
herein as the "Warrant Shares."
c. Converted Stock. The term "Converted Stock" shall apply to
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any Common Stock issued or to be issued upon conversion of the Preferred
Shares pursuant to the terms of this Agreement and the Certificate of
Designation or upon the exercises of the Warrant.
2. Closing Date. Upon satisfaction or, if applicable, waiver of
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the conditions set forth in Sections 7 and 8 hereof, the delivery of the
Preferred Shares referred to in Section 1(a) and the Warrant referred to in
Section 1(b) (the "Closing") shall take place initially via facsimile at 2:00
p.m. (Pacific Standard Time) on February 13, 1998, or at such other date and
time as Investor and SyQuest may agree (such date and time being referred to
herein as the
"Closing Date"), provided that the original certificates shall be delivered via
Federal Express to Investor at the address set forth in Section 13 hereof.
At the Closing, the following deliveries shall be made:
a. Preferred Shares. SyQuest shall deliver the certificate
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representing the Preferred Shares, duly registered on the books of SyQuest
in the name of Investor, against payment by Investor by wire transfer of
the purchase price specified in Section 1(a) hereof in immediately
available funds to the following account: Account Name: Bank of America,
0000 Xxxxxxx Xxxx., 0xx Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Account No.
1233456287, ABA No. 000000000.
b. Warrant. SyQuest shall deliver the certificate representing
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the Warrant to Investor. Such certificate shall be substantially in the
form attached hereto as Exhibit B.
c. Closing Documents. The closing documents required by
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Sections 7 and 8 shall be delivered to Investor and SyQuest, respectively.
d. Delivery Notice. An executed copy of the delivery notice in
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the form attached hereto as Exhibit C shall be delivered to Investor.
The foregoing deliveries shall be deemed to occur simultaneously as
part of a single transaction, and no delivery shall be deemed to have been made
until all such deliveries have been made.
3. Representations and Warranties of SyQuest. Except as disclosed in
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any report, form, schedule, statement or other document (collectively, "SEC
Filings") filed by the Company prior to the Closing with the SEC under the 1933
Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), or as
disclosed in the Schedule of Exceptions attached hereto, SyQuest hereby
represents and warrants to Investor on the date hereof and on the Closing Date,
on the date any Preferred Share is converted (each a "Conversion Date") and on
each Exercise Date (as defined in the Warrant) as follows:
a. SyQuest has been duly incorporated and is validly existing in
good standing under the laws of State of Delaware, or, after the Closing
Date if another entity has succeeded SyQuest in accordance with the terms
hereof, under the laws of a state of the United States.
b. The execution, delivery and performance of this Agreement
(including the issuance of the Preferred Shares) and the Warrant by SyQuest
have been duly authorized by all requisite corporate action and no further
consent or authorization of SyQuest, its Board of Directors or its
stockholders is required. This Agreement and the Warrant have been duly
executed and delivered by SyQuest and, when duly
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authorized, executed and delivered by Investor, will be valid and binding
agreements, enforceable against SyQuest in accordance with their terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
c. SyQuest has full corporate power and authority necessary to
execute and deliver this Agreement and the Warrant and to perform its
obligations hereunder (including the issuance of the Preferred Shares) and
thereunder.
d. No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution and delivery by
SyQuest of this Agreement and the Warrant or the performance by SyQuest of
any of its obligations hereunder (including the issuance of the Preferred
Shares) or thereunder, other than, with respect to any Exercise Date, any
consent, approval, authorization or order which is received on or prior to
such date.
e. Neither the execution and delivery by SyQuest of this
Agreement and the Warrant nor the performance by SyQuest of any of its
obligations hereunder or thereunder:
(1) violates, conflicts with, results in a breach of, or
constitutes a default (or an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a
default) under (A) the Certificate of Incorporation or by-laws of
SyQuest or any of its subsidiaries or any Certificate of Designation
relating to any securities of SyQuest or any of its subsidiaries, (B)
any decree, judgment, order, law, treaty, rule, regulation or
determination of which SyQuest is aware (after due inquiry) of any
court, governmental agency or body, or arbitrator having jurisdiction
over SyQuest or any of its subsidiaries or any of their respective
properties or assets, (C) the terms of any bond, debenture, note or
any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which SyQuest or any of its subsidiaries is a party, by
which SyQuest or any of its subsidiaries is bound, or to which any of
the properties or assets of SyQuest or any of its subsidiaries is
subject, (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which SyQuest or any of its
subsidiaries is a party or (E) any rules of the National Association
of Securities Dealers, Inc. applicable to SyQuest or the transactions
contemplated hereby; or
(2) results in the creation or imposition of any lien,
charge or encumbrance upon (A) any Preferred Share, the Warrant or any
Converted Stock or (B) any of the properties or assets of SyQuest or
any of its subsidiaries.
f. SyQuest has validly reserved a total of 40,000 shares of its
5% Cumulative Convertible Preferred Stock, Series 7 for issuance pursuant
to the terms
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hereof, and shall have authorized and reserved for the purpose of issuance
a number of shares of Common Stock to provide for the issuance of the
Converted Stock equal to (i) the actual number of Warrant Shares available
under the Warrant, and (ii) the number of shares issuable upon the
hypothetical conversion of all Preferred Shares as of the Closing Date plus
fifty percent. When issued to Investor against payment therefor in
accordance with the terms of this Agreement, the Certificate of Designation
or the Warrant, each share of Preferred Stock and Converted Stock:
(1) will have been duly and validly authorized, duly and
validly issued, fully paid and nonassessable;
(2) will be free and clear of any security interests,
liens, claims or other encumbrances (other than those resulting solely
from actions by Investor); and
(3) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
SyQuest.
g. Reserved.
h. On the Closing Date, there is no pending or, to the best
knowledge of SyQuest, threatened action, suit, proceeding or investigation
before any court, gov ernmental agency, self regulatory agency, or body, or
arbitrator having jurisdiction over SyQuest or any of its affiliates that
would materially adversely affect SyQuest, or the execution or performance
of its obligations under this Agreement or the Warrant, provided, however,
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that the representations and warranties contained in this Section 3.h shall
not apply to any action, threatened action, suit, proceeding or
investigation initiated by Investor.
i. SyQuest has timely filed all filings with the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act or under
Section 13(a) or 15(d) of the 1934 Act (each, an "SEC Filing") required to
be filed by SyQuest pursuant to such Acts, and no SEC Filing, or press
release containing information material to the business of SyQuest as a
whole, contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements, in the
light of the circumstances under which they were made, not misleading.
j. Since the date of SyQuest's most recent SEC Filing, there has
not been, and SyQuest is not aware of any development that would require an
amendment to SyQuest's Registration Statement on Form S-3 (registration
number 333-28225) in order to permit public offers and sales of shares of
Common Stock thereunder.
k. Reserved.
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l. Capitalization. As of February 5, 1998, the authorized
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capital stock of the Company consisted of (i) 240,000,000 shares of Common
Stock of which approximately 71.7 million shares were issued and
outstanding, and (ii) 4,000,000 shares of Preferred Stock of which
approximately 82,813 shares were issued and outstanding. All such shares
of Common Stock are, and all shares which may be issued pursuant to stock
options, warrants or other convertible rights will be, when issued and paid
for in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive
rights in respect thereof. There are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever granted or issued by the Company and relating to, or securities
or rights granted or issued by the Company and 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. There are no outstanding debt securities issued by the
Company. 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 in connection with the sale
of the Company's 5% Cumulative Convertible Preferred Stock, Series 7 and
the securities identified in its Amended Report on Form S-3, No. 333-40329
filed with the SEC on January 9, 1998. The Company has furnished to
Investor true and correct copies of the Certificate of Incorporation and
the Company's By-laws, as in effect on the date hereof (the "Bylaws").
m. Dilutive Effect. The Company understands and acknowledges
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that the number of Converted Stock issuable upon conversion of the
Preferred Shares and exercise of Warrants will increase in certain
circumstances. The Company further acknowledges that its obligation to
issue Converted Stock upon conversion of the Preferred Shares and exercise
of Warrants in accordance with this Agreement and the Certificate of
Designations is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
n. Intellectual Property Rights. To the best of the Company's
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knowledge, the Company and its Subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets
and rights necessary to conduct their respect businesses as now conducted.
None of the Company's trademarks, trade names, service marks, service xxxx
registration, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets
or other intellectual property rights have expired or terminated, or are
expected to expire or terminate within two years from the date of this
Agreement that would materially effect the business of the Company. The
Company and its Subsidiaries do not have any knowledge of any material
infringement by the Company or its Subsidiaries of trademark, trade name
rights,
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patents, patent rights, copyright, inventions, licenses, service names,
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 there is no material claim,
action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties.
o. Acknowledgment Regarding Investor's Purchase of Preferred Shares.
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SyQuest acknowledges and agrees that Investor is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. SyQuest further acknowledges that
Investor is not 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 Investor or any of
its respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to Investor's
purchase of the Preferred Shares.
3A. Registration Provisions.
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a. SyQuest shall, as promptly as practicable hereafter and at
its own expense, file a registration statement (the "Registration
Statement") under the 1933 Act covering the sale or resale of the Common
Stock issuable upon conversion of the Preferred Shares as of the Closing
Date plus fifty percent, and exercise of the Warrant (each a "Covered
Security"), and shall use its best efforts to cause such Registration
Statement to be declared effective not later than the earlier of (i) 90
days from the date SyQuest's registration statement number 333-40329 is
declared effective, or (ii) 120 days from the Closing Date, provided
however, if the SEC reviews such Registration Statement, then the date by
which the Registration Statement is to be declared effective shall be
extended by 30 days). SyQuest shall amend such Registration Statement from
time to time upon the request of Investor if the maximum number of shares
of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrant is greater than the number of shares of Common
Stock registered pursuant to such Registration Statement, unless an
amendment is not required for the registration and sale of such securities
under such Registration Statement pursuant to Rule 416 or any other rule
under the 1933 Act; provided that Investor shall have provided such
information and cooperation in connection therewith as SyQuest may
reasonably request.
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b. SyQuest will use its best efforts to: (i) keep such
registration effective until the earlier of (A) the second anniversary of
the issuance of each Covered Security, (B) such date as all of the Covered
Securities shall have been sold by Investor or (C) such time as all of the
Covered Securities held by Investor can be sold by Investor or any of its
affiliates within a three-month period without compliance with the
registration requirements of the 1933 Act pursuant to Rule 144 under the
1933 Act ("Rule 144"); (ii) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement (as so amended and supplemented
from time to time, the "Prospectus") as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all Covered
Securities by Investor or any of its affiliates; (iii) furnish such number
of Prospectuses and other documents incident thereto, including any
amendment of or supplement to the Prospectus, as Investor from time to time
may reasonably request; (iv) cause all Covered Securities that are Common
Stock to be listed on each securities exchange and quoted on each quotation
service on which similar securities issued by SyQuest are then listed or
quoted; (v) provide a transfer agent and registrar for all Covered
Securities and a CUSIP number for all Covered Securities; (vi) otherwise
use its best efforts to comply with all applicable rules and regulations of
the SEC; and (vii) file the documents required of SyQuest and otherwise use
its best efforts to obtain and maintain requisite blue sky clearance in (A)
all jurisdictions in which any of the Covered Securities are originally
sold and (B) all other states specified in writing by Investor, provided,
however, that as to this clause (B), SyQuest shall not be required to
qualify to do business or consent to service of process in any state in
which it is not now so qualified or has not so consented.
c. SyQuest shall furnish to Investor upon request a reasonable
number of copies of a supplement to or an amendment of such Prospectus as
may be necessary in order to facilitate the public sale or other
disposition of all or any of the Covered Securities by Investor or any of
its affiliates pursuant to the Registration Statement.
d. With a view to making available to Investor and its
affiliates the benefits of Rule 144 and Form S-3 under the 1933 Act,
SyQuest covenants and agrees to: (i) make and keep available adequate
current public information (within the meaning of Rule 144(c)) concerning
SyQuest, until the earlier of (A) the second anniversary of the issuance of
each Covered Security or (B) such date as all of the Covered Securities
shall have been resold by Investor or any of its affiliates; (ii) maintain
its status as a Reporting Issuer and file with the SEC in a timely manner
all reports and other documents required of SyQuest for use of Form S-3;
and (iii) furnish to Investor upon request, as long as Investor owns any
Covered Securities, (A) a written statement by SyQuest that it has complied
with the reporting requirements of the 1933 Act and the 1934 Act, (B) a
copy of the most recent annual or quarterly report of SyQuest, and (C) such
other information as may be reasonably requested in order to avail Investor
and its affiliates of Rule 144 or Form S-3 with respect to such Covered
Securities.
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e. Notwithstanding anything else in this Section 3A, if, at any
time during which a Prospectus is required to be delivered in connection
with the sale of any Covered Securities, SyQuest determines in good faith
that a development has occurred or a condition exists as a result of which
the Registration Statement or the Prospectus contains a material
misstatement or omission, SyQuest will immediately notify Investor thereof
by telephone and in writing. Upon receipt of such notification, Investor
and its affiliates will immediately suspend all offers and sales of any
Covered Securities pursuant to the Registration Statement. In such event,
SyQuest will amend or supplement the Registration Statement as promptly as
practicable and will take such other steps as may be required to permit
sales of the Covered Securities thereunder by Investor and its affiliates
in accordance with applicable federal and state securities laws. SyQuest
will promptly notify Investor after it has determined in good faith that
such sales have become permissible in such manner and will promptly deliver
copies of the Registration Statement and the Prospectus (as so amended or
supplemented) to Investor in accordance with paragraph (b) of this Section
3A. Notwithstanding the foregoing, (A) under no circumstances shall
SyQuest be entitled to exercise its right to suspend sales of any Covered
Securities pursuant to the Registration Statement more than two times in
any twelve-month period, (B) the period during which such sales may be
suspended (each a "Blackout Period") shall not exceed thirty days and (C)
no Blackout Period may commence less than thirty days after the end of the
preceding Blackout Period.
Upon the commencement of a Blackout Period pursuant to this Section
3A, Investor will immediately notify SyQuest of any contracts to sell any
Covered Securities (each a "Sales Contract") that Investor or any of its
affiliates has entered into prior to the commencement of such Blackout
Period and that would require delivery of such Covered Securities during
such Blackout Period, which notice will contain the aggregate sale price
and volume of Covered Securities pursuant to such Sales Contract. Upon
receipt of such notice, SyQuest will immediately notify Investor of its
election either (i) to terminate the Blackout Period and, as promptly as
practicable, amend or supplement the Registration Statement or the
Prospectus in order to correct the material misstatement or omission and
deliver to Investor copies of such amended or supplemented Registration
Statement and Prospectus in accordance with paragraph (b) of this Section
3A or (ii) to continue the Blackout Period in accordance with this
paragraph. If SyQuest elects to continue the Blackout Period, and Investor
or any of its affiliates is therefore unable to consummate the sale of
Covered Securities pursuant to the Sales Contract (such unsold Covered
Securities being hereinafter referred to herein as the "Unsold
Securities"), SyQuest will promptly indemnify each Investor Indemnified
Party (as such term is defined in Section 11.a below) against any
Proceeding (as such term is defined in Section 11.a below) that each
Investor Indemnified Party may incur arising out of or in connection with
Investor's breach or alleged breach or inability to effect settlement of
any such Sales Contract, and SyQuest shall reimburse each Investor
Indemnified Party for any reasonable costs or expenses (including
reasonable legal fees) incurred by such party relating to such Proceeding,
including any costs incurred by Investor in connection with its need to
purchase
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securities for any sales effected prior to its notification of the Blackout
Period (which costs shall be equal to the reasonable transaction costs plus
the difference between the purchase price of such securities and the price
under the Sales Contract)(collectively, the "Indemnification Amount");
provided, however, that each Investor Indemnified Party shall take all
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actions reasonably necessary or appropriate to mitigate such
Indemnification Amount. The Company shall pay the Indemnification Amount
within two business days of the Company's receipt of written notice from
the Investor Indemnified Party setting forth such amounts.
f. From the date hereof through a period of ninety (90) days
following the date that the Registration Statement is first declared
effective, SyQuest shall not register any securities other than securities
issued in connection with (1) the sale of up to $30,000,000 of Preferred
Shares and corresponding warrants on substantially the same terms as
provided in this Agreement (including the Preferred Shares and Warrant sold
pursuant to this Agreement), (2) any exchange of indebtedness of SyQuest
for shares of stock of SyQuest, (3) any provision of services or sale of
goods to SyQuest, (4) any stock option plan, stock purchase plan, stock
bonus plan or other plan for the benefit of employees, officers or
directors of SyQuest, (5) the exercise of any rights, warrants or options
heretofore granted or issued by SyQuest for the acquisition of any
securities, (6) transactions disclosed in the Schedule of Exceptions, or
(7) any transaction not involving the receipt of new consideration by
SyQuest for securities hereafter issued by SyQuest.
4. Representations and Warranties of Investor. Investor hereby
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represents and warrants to SyQuest on the date hereof and on the Closing Date,
and agrees with SyQuest, as follows:
a. The execution, delivery and performance of this Agreement by
Investor have been duly authorized by all requisite corporate action and no
further consent or authorization of Investor, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and
delivered by Investor and, when duly authorized, executed and delivered by
SyQuest, will be a valid and binding agreement, enforceable against
Investor in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
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b. Investor understands that no United States federal or state
agency has passed on, reviewed or made any recommendation or endorsement of
the Preferred Shares or the Warrant.
c. In making the decision to purchase the Preferred Shares or
the Warrant in accordance with this Agreement, Investor has relied solely
upon independent investigations made by it and not upon any representations
made by SyQuest other than those made in this Agreement.
d. Subject to Section 3A hereof, Investor understands that the
Preferred Shares, the Warrant and the Converted Stock have not been
registered under the 1933 Act and may not be re-offered or resold other
than pursuant to such registration or an available exemption therefrom.
e. Investment Purpose. Investor is purchasing the Preferred
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Shares and the Warrant for its own account for investment only and not with
a view to, or for resale in connection with, the public sale or
distribution thereof except pursuant to sales registered under the 1933
Act. Investor is not purchasing the Preferred Shares or Warrant for the
purpose of covering, and will not use any Conversion Shares, Dividend
Shares or Warrant Shares (collectively, "Derivative Shares") to cover, any
short sale position in the Common Stock that existed prior to the Closing
Date.
f. Accredited Investor Status. Investor is an "accredited
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investor" as that term is defined in Regulation D. Investor is able to
bear the economic risk of Investor's investment hereunder.
g. Reliance on Exemptions. Investor understands that the
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Preferred Shares, the Warrant and the Derivative Shares are being or will
be offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities
laws and that SyQuest is relying on the truth and accuracy of, and
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of
Investor to acquire Preferred Shares, the Warrant and Derivative Shares.
h. Sophistication. A principal executive officer of Investor,
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or Investor's agent, who is acting on behalf of Investor in connection with
the transactions contemplated hereby has such knowledge and experience in
financial and business matters that such officer is capable of evaluating
the merits and risks of the investment by Investor contemplated by this
Agreement and has the capacity to protect Investor's interests.
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i. Information. Investor has been furnished with all materials
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and information relating to the business, management, properties, financial
condition, operations, affairs and prospects of SyQuest and all materials
and information relating to the offer and sale of the Preferred Shares, the
Warrant and the Derivative Shares, as have been requested by Investor.
Investor has been afforded the opportunity to ask all questions of SyQuest
that Investor considered appropriate or desirable to ask in connection with
this Agreement and has received answers to such inquiries that Investor
considers satisfactory. Investor understands that its investment in the
Preferred Shares, the Warrant and Derivative Shares involves and will
involve a high degree of risk. Investor has sought such investment,
accounting, legal and tax advice as it has considered necessary to an
informed investment decision with respect to its acquisition of Preferred
Shares, the Warrant and the Derivative Shares.
j. Transfer or Resale. Investor understands that (i) except as
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otherwise provided in section 3A hereof, the Preferred Shares, the Warrant
and the Derivative 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) Investor shall have delivered to SyQuest an opinion of
counsel, reasonably satisfactory in form, scope and substance to SyQuest,
to the effect that the securities to be so offered, sold, assigned or
transferred may be so offered, 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 ("Rule 144") may be
made only in accordance with the terms of Rule 144 and, if Rule 144 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 SyQuest nor any other
person is under any obligation to register such securities (other than
pursuant to section 3A hereof) under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder.
5. Covenants of SyQuest. Except as set forth in the Schedule of
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Exceptions attached hereto, SyQuest covenants and agrees with Investor as
follows:
a. For so long as any of the Preferred Shares or any portion of
the Warrant remains outstanding, SyQuest will use its best efforts to (i)
maintain the eligibility of the Common Stock for quotation on NASDAQ
National Market ("NASDAQ") or listing on a national securities exchange (as
defined in the 0000 Xxx) and (ii) regain the eligibility of the Common
Stock for quotation on NASDAQ in the event that the Common Stock is
delisted by NASDAQ.
b. SyQuest will (i) provide Investor with an opportunity to
review and comment on any public disclosure by SyQuest of information
regarding this Agreement
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and the transactions contemplated hereby, (ii) promptly notify Investor if
there is any public disclosure by SyQuest of material information regarding
SyQuest or its financial condition, prospects or results of operation and
(iii) provide Investor with copies of all SEC Filings.
c. Except for the sale and issuance of an aggregate of 30,000
shares of Preferred Stock (plus shares to be issued as dividends) to the
parties identified on Exhibit D hereto, plus the sale of up to 1,000 shares
of Preferred Stock (plus shares to be issued as dividends) to certain
service provider(s), SyQuest shall not issue or sell any Preferred Shares.
d. SyQuest will comply with the terms and conditions of the
Preferred Shares and of the Warrant as set forth in the Warrant (as duly
amended from time to time by the parties hereto).
e. For so long as any of the Preferred Shares or any portion of
the Warrant remains outstanding, SyQuest shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but
unissued Common Stock, for issuance upon conversion of such Preferred
Shares or exercise of such Warrant, 150% of the maximum number of shares of
Conversion Shares then so issuable and 100% of the maximum number of
Warrant Shares then so issuable. If at any time the number of authorized
but unissued shares of Common Stock is not sufficient to effect the
conversion of all the outstanding Preferred Shares and the exercise of the
Warrant for all the Warrant Shares issuable thereunder, SyQuest shall use
its best efforts to increase its number of authorized shares of Common
Stock to such number of shares as shall be sufficient to effect such
conversion and exercise, including causing the SyQuest Board of Directors
to call a meeting of stockholders and recommend such increase, and after
obtaining any such approval SyQuest shall reserve for issuance to Investor
the number of shares of Common Stock required to effect such conversion and
exercise.
f. SyQuest will cause the Common Stock issuable pursuant to
conversion of the Preferred Shares and exercise of the Warrant to be duly
listed and admitted for trading on NASDAQ or, if NASDAQ is not then the
principal trading market for the Common Stock, on a national securities
exchange (as defined in the 1934 Act).
6. Covenants of Investor. Investor hereby covenants and agrees with
---------------------
SyQuest, as follows:
a. Neither Investor nor any of its affiliates nor any person
acting on its or their behalf will at any time offer or sell any Preferred
Shares, the Warrant or any Converted Stock other than pursuant to
registration under the 1933 Act or pursuant to an available exemption
therefrom.
12
b. Investor will agree not to convert its Preferred Stock for a
maximum period of sixty days following a successful public offering of the
Common Stock in excess of $25,000,000 in a single transaction, if all other
convertible security holders are bound by the same restriction.
c. Investor shall use a form of notice in substantially the same
form as attached hereto as Exhibit E in order to convert its Preferred
Shares and to provide notice of such conversion to SyQuest.
6A. Legend. Investor understands that the certificates or other
------
instruments representing the Preferred Shares, the Warrant and, until such time
as the Derivative Shares shall have been sold pursuant to a registration under
the 1933 Act as contemplated by this Agreement, the stock certificates
representing the Derivative Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such certificates or other instruments):
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 SAID ACT AND
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.
The legend set forth above shall be removed and SyQuest shall issue a
certificate without such legend to any holder of Preferred Shares, the Warrant
or Derivative Shares if, unless otherwise required by state securities laws, (a)
the same are sold pursuant to an effective registration statement under the 1933
Act, or (b) in connection with a sale transaction, such holder provides SyQuest
with an opinion of counsel, in form, substance and scope reasonably acceptable
to SyQuest, to the effect that a public sale, assignment or transfer thereof may
be lawfully effected without registration under the 1933 Act, or (c) such holder
provides SyQuest with assurances reasonably satisfactory to SyQuest that the
same may be publicly sold pursuant to Rule 144 without restriction.
7. Conditions Precedent to Investor's Obligations. The obligations
----------------------------------------------
of Investor hereunder are subject to the performance by SyQuest of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent, unless expressly waived in writing by Investor:
13
a. On the Closing Date, on each Conversion Date and on each Exercise
Date (as defined in the Warrant), (i) to the extent provided in Section 3
hereof, the representations and warranties made by SyQuest in this
Agreement shall be true and correct, and (ii) SyQuest shall have complied
fully with all the covenants and agreements in this Agreement and the
Warrant required to be satisfied on or before such date; and Investor shall
have received on the Closing Date a certificate of the Chief Executive
Officer and the Chief Financial Officer of SyQuest dated such date and to
such effect.
b. On the Closing Date, SyQuest shall have delivered to Investor
an opinion of counsel reasonably satisfactory to Investor, dated the date
of delivery, confirming in substance the matters covered in paragraphs a,
b, c, d, e, f and h of Section 3 hereof.
c. Prior to the Closing, the Certificate of Designation will
have been accepted for filing with the Secretary of State of the State of
Delaware in accordance with the Delaware General Corporation Law.
d. On the Closing Date, SyQuest shall have delivered to Investor
the opinion of counsel reasonably satisfactory to Investor, dated the
Closing Date, to the effect that the offer and sale of the Preferred Shares
and the Warrant hereunder do not require registration under the 1933 Act.
8. Conditions Precedent to SyQuest's Obligations. The obligations of
---------------------------------------------
SyQuest to issue Preferred Shares and Warrants hereunder are subject to the
performance by Investor of its obligations hereunder and to the satisfaction of
the additional conditions precedent, unless expressly waived in writing by
SyQuest, that on the Closing Date, (i) the representations and warranties made
by Investor in this Agreement shall be true, complete and correct, except for
those which only speak to a specific date or time, (ii) Investor shall have
complied fully with all the covenants and agreements in this Agreement required
to be satisfied on or before the Closing Date, and (iii) SyQuest shall have
received on the Closing Date a certificate of an appropriate officer or agent of
Investor dated such date and to such effect.
9. Fees and Expenses. SyQuest agrees to pay Investor's reasonable
-----------------
fees and costs actually incurred incident to the preparation of this Agreement
and related documents up to $5,000 upon presentation of evidence reasonably
satisfactory to SyQuest that such fees and costs were actually incurred.
10. Non-Performance.
---------------
If, on the date hereof, on the Closing Date, on any Conversion Date or
on any Exercise Date, SyQuest shall fail to deliver the Warrant, Preferred
Shares or Converted Stock to Investor required to be delivered pursuant to this
Agreement for any reason other than the failure of any condition precedent to
SyQuest's obligations hereunder or the failure by Investor
14
to comply in all material respects with its obligations under Sections 3A.e,
4.e., and 4.j., then SyQuest shall:
(1) hold Investor harmless against any loss, claim or damage
(including without limitation, incidental and consequential damages)
arising from or as a result of such failure by SyQuest; and
(2) reimburse Investor for all of its reasonable out-of-pocket
expenses, including fees and disbursements of its counsel, incurred by
Investor in connection with this Agreement and the Warrant and the
transactions contemplated herein and therein;
provided, however, that SyQuest shall then be under no further liability to
-------- -------
Investor except as provided in the Warrant, this Section 10 and Section 11
hereof.
11. Indemnification.
---------------
a. Indemnification of Investor. SyQuest hereby agrees to
---------------------------
indemnify Investor and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of Section
20 of the 0000 Xxx) any of the foregoing persons (each an "Investor
Indemnified Party") against any claim, demand, action, liability, damages,
loss, cost, settlement, disposition or expense (including, without
limitation, reasonable legal fees) and any costs associated with any "buy-
ins" (a "Proceeding"), that it may incur in connection with any of the
transactions contemplated hereby arising out of or based upon:
any untrue or alleged untrue statement of a material fact by SyQuest
or any of its affiliates or any person acting on its or their behalf
or omission or alleged omission to state any material fact necessary
in order to make the statements made, in the light of the
circumstances under which they were made, not misleading by SyQuest
or any of its affiliates or any person acting on its or their behalf,
in connection with such statements or omissions made or incorporated
in the Registration Statement.
and SyQuest hereby agrees to reimburse each Investor Indemnified Party for any
reasonable legal or other expenses incurred by such Investor Indemnified Party
in investigating or defending any such Proceeding; provided, however, that the
-----------------
foregoing indemnity shall not apply to any Proceeding which directly and
primarily results from the Investor Indemnified Party's gross negligence or
wilful misconduct.
b. Indemnification of SyQuest. Investor hereby agrees to
--------------------------
indemnify SyQuest and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of Section
20 of the 0000 Xxx) any of the
15
foregoing persons (each a "SyQuest Indemnified Party") against any
Proceeding, that it may incur in connection with any of the transactions
contemplated hereby arising out of or based upon:
any untrue or alleged untrue statement of a material fact by Investor
or any of its affiliates or any person acting on its or their behalf
or omission or alleged omission to state any material fact necessary
in order to make the statements made, in the light of the
circumstances under which they were made, not misleading by Investor
or any of its affiliates or any person acting on its or their behalf,
in connection with any written statements provided to the Company by
such Investor explicitly for use in the Registration Statement.
and Investor hereby agrees to reimburse each SyQuest Indemnified Party for any
reasonable legal or other expenses incurred by such SyQuest Indemnified Party in
investigating or defending any such Proceeding; provided, however, that the
------------------
foregoing indemnity shall not apply to any Proceeding to the extent that it
arises out of or is based upon the gross negligence or wilful misconduct of
SyQuest in connection therewith.
c. Conduct of Claims.
-----------------
(1) Whenever a claim for indemnification shall arise under
this Section 11, the party seeking indemnification (the "Indemnified
Party"), shall notify the party from whom such indemnification is
sought (the "Indemnifying Party") in writing of the Proceeding and the
facts constituting the basis for such claim in reasonable detail;
(2) Upon delivery of such notice, such Indemnified Party
shall have a duty to take all reasonable steps to mitigate any losses,
liabilities, costs, charges and expenses relating to any such
Proceeding;
(3) Such Indemnifying Party shall have the right to retain
counsel of its choice in connection with such Proceeding and to
participate at its own expense in the defense of any such Proceeding;
provided, however, that counsel for the Indemnifying Party shall not
-------- -------
(except with the consent of the relevant Indemnified Party) also be
counsel to such Indemnified Party. In no event shall the Indemnifying
Party be liable for fees and expenses of more than one counsel
separate from its own counsel for all Indemnified Parties in
connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances; and
(4) No Indemnifying Party shall, without the prior written
consent of the Indemnified Parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry
of any judgment with respect to any
16
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification could be sought under this Section 11
unless such settlement, compromise or consent (A) includes an
unconditional release of each Indemnified Party from all liability
arising out of such litigation, investigation, proceeding or claim and
(B) does not include a statement constituting an admission of fault,
culpability or a failure to act by or on behalf of any Indemnified
Party.
12. Survival of the Representations, Warranties, etc. The respective
------------------------------------------------
representations, warranties, and agreements made herein by or on behalf of the
parties hereto shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or controlled by or
under common control with, such party and will survive delivery of and payment
for the Preferred Shares, the Warrant and any Converted Stock issuable
hereunder.
13. Notices. All communications hereunder shall be in writing, and
-------
a. if sent to Investor, shall be delivered by hand, sent by
registered mail or transmitted and confirmed by facsimile to Investor at:
Olympus Securities, Ltd.
c/o Leeds Management Services
000 Xxxxx Xxxxxx
Xxxxxxxx XX00
Xxxxxxx
Attn: Xxxx Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Citadel Investment Group, L.L.C.
000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Simpler
Telephone: 000-000-0000
Facsimile: 000-000-0000
17
b. if sent to SyQuest, shall be delivered by hand, sent by
registered mail or transmitted and confirmed by facsimile to SyQuest at:
SyQuest Technology, Inc.
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
14. Miscellaneous
-------------
a. This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement.
b. This Agreement and the Warrant shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and assigns
and, with respect to Section 11 hereof, their respective officers, directors,
employees, agents, affiliates and controlling persons, and no other person shall
have any right or obligation hereunder. SyQuest may not assign this Agreement
or the Warrant.
c. This Agreement and the Warrant shall be governed by, and
construed in accordance with, the internal laws of the State of California, and
each of the parties hereto hereby submits to the non-exclusive jurisdiction of
any Federal court in the Northern District of California or appropriate State
court in California and any court hearing any appeal therefrom, over any suit,
action or proceeding against it arising out of or based upon this Agreement and
the Warrant (a "Related Proceeding"). Each of the parties hereto hereby waives
any objection to any Related Proceeding in such courts whether on the grounds of
venue, residence or domicile or on the ground that the Related Proceeding has
been brought in an inconvenient forum.
d. The provisions of this Agreement and the Warrant are
severable, and if any clause or provision hereof shall be held invalid, illegal
or unenforceable as a whole
18
or in part, such invalidity or unenforceability shall not in any manner affect
any other clause or provision of this Agreement or the Warrant.
e. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
f. This Agreement (including the Warrant and the terms and
conditions of the Certificate of Designations relating to the Preferred Shares)
constitutes the entire agreement and supersedes all prior agreements and
understandings, written or oral, between the parties hereto with respect to the
subject matter of this Agreement and the Warrant and is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder
or under the terms of the Warrant and term sheets between such parties.
g. The term "affiliate" is used herein as defined in Rule
144(a)(1) under the 1933 Act.
h. Notwithstanding any provision of the Certificate of
Designations to the contrary, the Company may hereafter authorize additional or
other capital stock for issuance to Beijing Legend Group Ltd. and its affiliates
that is senior, equal or junior to the Preferred Shares, in respect of the
preferences as to dividends and distributions and payments on the liquidation,
dissolution and winding up of the Company, provided that any such prefer ence
shall not exceed Beijing Legend Group Ltd.'s investment in SyQuest.
15. Time of Essence. Time shall be of the essence in this Agreement
---------------
and the Warrant.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By: /s/ Xxxxx X. Xxxxxx, President
-------------------------------
Name:
Title:
XXXXXX PARTNERS
By: /s/ Xxxxx Xxxxxxxx
-------------------------------
Name:
Title: Officer
19
SCHEDULE OF EXCEPTIONS
Regarding section 3.l, the number of shares of Common Stock issuable on
conversion of SyQuest's outstanding (a) 5% Cumulative Convertible Preferred
Stock, Series 3, (b) 5% Cumulative Convertible Preferred Stock, Series 4, and
(c) Convertible Preferred Stock, Series 5 may vary based on the average closing
prices of the Common Stock for the five days preceding conversion. In addition,
as of February 5, 1998, there are: (i) stock options and other commitments to
employees to issue approximately 8.4 million shares of SyQuest's Common Stock;
(ii) warrants for the issuance of approximately 60.2 million shares of SyQuest's
Common Stock; and (iii) other commitments (principally for preferred stock
dividends) to issue approximately 300,000 shares of SyQuest's Common Stock.
The Company has also committed, either orally or in writing, to issue
and register approximately 7.5 million shares of common stock (or warrants to
acquire shares of common stock) to certain trade vendors, service providers and
existing investors. The Company has also orally committed to issue and register
approximately $900,000 of its 5% Cumulative Convertible Preferred Stock, Series
7 to a service provider.
20
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES 7
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred on the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of forty thousand (40,000) shares of 5% Cumulative
Convertible Preferred Stock, Series 7, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 40,000 shares of 5%
Cumulative Convertible Preferred Stock, Series 7, $.0001 par value (the
"Series 7 Preferred Shares"), which shall have the following powers,
designations, preferences and other special rights:
1. Dividends. The holders of the Series 7 Preferred Shares shall be
---------
entitled to a dividend of five percent per annum of the Stated Value (as
defined below), on a cumulative basis (prorated for any portion of the
applicable period during which the Series 7 Preferred Shares are
outstanding). Dividends shall accrue from the date of issuance of the
Series 7 Preferred Shares and shall be payable on the last day of each
calendar quarter, commencing March 30, 1998, through and including the date
on which the Series 7 Preferred Shares are converted. Dividends shall be
paid in additional Series 7 Preferred Shares as long as there are
authorized but unissued Series 7 Preferred Shares available, provided
however, the Company may not pay dividends in additional Series 7 Preferred
Shares to the extent that the number of authorized and unissued Series 7
Preferred Shares is insufficient to make such payment or the ability of the
holders of the
21
Series 7 Preferred Shares to convert Series 7 Preferred Shares is
restricted by Section 2(h) below. The number of such additional Series 7
Preferred Shares issued as a dividend shall be determined by dividing the
aggregate amount of such dividend payable to such holder by 1000; provided
that no fraction of a Series 7 Preferred Share shall be issued, but in lieu
thereof, the Company shall pay in cash an amount equal to such fraction
multiplied by $1000. If the Company cannot pay such dividends in
additional Series 7 Preferred Shares, such dividends shall be payable in
cash.
2. Conversion of Series 7 Preferred Shares. The holders of the
---------------------------------------
Series 7 Preferred Shares shall have the right, at their option, to convert
the Series 7 Preferred Shares into shares of the common stock of the
Company, $.0001 par value, as such stock now exists or may be changed from
time to time hereafter ("Common Stock"), on the following terms and
conditions:
(a) Conversion Right. Any or all of the Series 7 Preferred Shares
----------------
shall be convertible at any time (except as limited herein, by Section
3A.e. of the purchase agreement with the Company governing the terms of
such holder's purchase of Series 7 Preferred Shares (the "Purchase
Agreement")) into whole, fully paid and nonassessable shares of Common
Stock, at the conversion price (the "Conversion Price") in effect at the
time of conversion determined as hereinafter provided. Each Series 7
Preferred Share shall have a stated value of $1,000 (the "Stated Value")
for the purpose of such conversion and the number of shares of Common Stock
issuable on conversion of each Series 7 Preferred Share shall be determined
by dividing the Stated Value thereof by the Conversion Price then in
effect.
(b) Conversion Price. The Conversion Price shall be the greater
----------------
of (1) the arithmetical average of the closing sale prices per share of
Common Stock on the five consecutive trading days preceding the delivery of
any Conversion Notice (as that term is hereinafter defined), as reported by
the Nasdaq National Market (the "NNM"), or, if the NNM is not then the
principal trading market for the Common Stock, on the principal trading
market for the Common Stock at that time, or, if there is then no such
principal trading market, the fair market value per share of Common Stock
during such period as determined in good faith by the Board of Directors of
the Company, and (2) ninety percent of such closing sale price on the day
immediately preceding the delivery of the Conversion Notice (as that term
is hereinafter defined); provided that the Conversion Price shall not be
greater than $3.00. If the value of the Common Stock is so to be
determined by the Board of Directors of the Company and the holders of the
Series 7 Preferred Shares disagree with said valuation, the value of the
Common Stock will be determined by binding arbitration in accordance with
the Commercial Arbitration Rules then prevailing of the American
Arbitration Association, and such arbitration shall proceed in San
Francisco, California, or at such other place as agreed to in writing by
the Company and the holders of the Series 7 Preferred Shares.
22
(c) Adjustment to Conversion Price. In the event that the
------------------------------
Company shall declare a dividend or make a distribution on or with respect
to the outstanding shares of its Common Stock in shares of its Common
Stock, subdivide its outstanding shares of Common Stock into a greater
number of shares, or combine its outstanding shares of Common Stock into a
smaller number of shares, then, in each such event, the Conversion Price in
effect at the time of the record date for such dividend or distribution or
the effective date of such subdivision or combination shall be
proportionately adjusted, if necessary, as determined in good faith by the
Board of Directors of the Company, so that the holder of any Series 7
Preferred Shares surrendered for conversion after such time shall be
entitled to receive the aggregate number of shares of Common Stock that the
holder would have owned or been entitled to receive had such Series 7
Preferred Shares been converted immediately prior to such record date or
effective date and the resulting Common Stock had been subject to such
dividend, distribution, subdivision or combination. Such adjustment shall
be made successively whenever any event specified above shall occur.
(d) Limitation on Beneficial Ownership. The Company shall not be
----------------------------------
required to effect any conversion of Series 7 Preferred Shares and no
holder of Preferred Shares shall have the right to convert any Series 7
Preferred Shares pursuant to Section 2 to the extent that after giving
effect to such conversion such person (together with such person's
affiliates) would beneficially own 5.00% or more of the outstanding shares
of the Common Stock following such conversion. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned
by a person and its affiliates shall include the number of shares of Common
Stock issuable upon conversion of the Series 7 Preferred Shares with
respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be issuable
upon (i) conversion of the remaining, unconverted Series 7 Preferred Shares
beneficially owned by such person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by such person and its
affiliates. Except as set forth in the preceding sentence, for purposes of
this Section 2(d), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended. A
holder of preferred Shares may waive the restrictions of this paragraph
only upon not less than 61 days prior written notice to the Company (with
such waiver taking effect only upon the expiration of such 61 day notice
period). Notwithstanding anything to the contrary contained herein, each
Conversion Notice (as defined below) shall constitute a representation by
the holder submitting such Conversion Notice that, after giving effect to
such Conversion Notice, the holder will not beneficially own (as determined
in accordance with this Section 2(d)) more than 5.00% of the outstanding
shares of Common Stock as reflected in the Company's most recent Form 10-Q
or Form 10-K, as the case may be, or more recent
23
public press release or other public notice by the Company setting forth
the number of shares of Common Stock outstanding.
(e) Conversion Notice. On presentation and surrender to the
-----------------
Company (or at any office or agency maintained for the transfer of the
Series 7 Preferred Shares) of the certificate(s) ("Preferred Stock
Certificate(s)") for Series 7 Preferred Shares so to be converted, duly
endorsed in blank for transfer or accompanied by proper instruments of
assignment or transfer in blank and written notice of conversion (a
"Conversion Notice"), the holder of such Series 7 Preferred Shares shall be
entitled, subject to the limitations herein contained, to receive in
exchange therefor a certificate or certificates for whole, fully paid and
nonassessable shares of Common Stock, which certificates shall be delivered
by the fourth trading day after the date of delivery of the Conversion
Notice and Preferred Stock Certificates for the Series 7 Preferred Shares
being converted, and cash for any fractional share of Common Stock on the
foregoing basis. If the Common Stock can be issued without a restrictive
legend pursuant to the Purchase Agreement, on request made by the holders
of the Series 7 Preferred Shares in the Conversion Notice, the Company will
authorize and instruct its transfer agent to issue the Common Stock
electronically. The Conversion Notice shall be deemed delivered and
received on the business day when it is transmitted by facsimile if so
transmitted by 5:00 p.m. California time and if the Company receives the
Preferred Stock Certificate(s) either (1) by 10:00 a.m. California time
within the following two business days, or (2) on the next business day
after it is deposited for next day delivery with a nationally recognized
overnight delivery service. The Series 7 Preferred Shares shall be deemed
to have been converted, and the person converting the same to have become
the holder of record of Common Stock, for all purposes as of the date of
delivery of the Conversion Notice.
(f) Reservation of Shares. The Company shall, as soon as
---------------------
practicable hereafter and then for so long as any of the Series 7 Preferred
Shares are outstanding, reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series 7 Preferred Shares, such number of shares of
Common Stock as required pursuant to the Purchase Agreement between the
Company and the holder of the Series 7 Preferred Shares.
(g) Fractional Shares. The Company shall not issue any fraction
-----------------
of a share of Common Stock on any conversion, but shall pay cash therefor
at the Conversion Price then in effect multiplied by such fraction.
(h) Taxes. The Company shall pay any and all taxes that may be
-----
imposed on it with respect to the issuance and delivery of Common Stock on
the conversion of Series 7 Preferred Shares as herein provided. The
Company shall not be required in any event to pay any transfer or other
taxes by reason of the issuance of such Common Stock in names other than
those in which the Series 7 Preferred Shares surrendered for conversion are
registered on the Company's records, and no such
24
conversion or issuance of Common Stock shall be made unless and until the
person requesting such issuance shall have paid to the Company the amount
of any such tax, or shall have established to the satisfaction of the
Company and its transfer agent, if any, that such tax has been paid.
(i) The 19.9% Limit. The number of shares of Common Stock
---------------
issuable on conversion of the Series 7 Preferred Shares shall be limited to
the 19.9% Limit (defined below) unless and until (1) the stockholder
approval referred to in section (2)(k) (the "Stockholder Consent") is
obtained, (2) the Company is notified by the NNM, the National Association
of Securities Dealers, or other appropriate regulatory agency that
Stockholder Consent is not required to issue shares of Common Stock in
excess of the 19.9% Limit (defined below), or (3) the Company lists its
shares on an electronic bulletin board or other trading market as would
allow the Excess Preferred Shares (defined below) to be converted into
Common Stock without Stockholder Consent. The 19.9% Limit shall equal the
product of .199 multiplied by the number of shares of Common Stock
outstanding (adjusted to reflect any split, subdivision, combination or
consolidation of the Common Stock, whether by reclassification,
distribution of a dividend with respect to the outstanding Common Stock
payable in shares of Common Stock, or otherwise, or any recapitalization of
the Common Stock) on the date of the first issuance of Series 7 Preferred
Shares (the "19.9% Limit").
(j) Limitation of Issuance of Common Stock. Unless and until (1) the
--------------------------------------
Stockholder Consent is obtained, (2) the Company is notified by the NNM,
the National Association of Securities Dealers, or other appropriate
regulatory agency that Stockholder Consent is not required to issue shares
of Common Stock in excess of the 19.9% Limit, or (3) the Company elects to
list its shares on an electronic bulletin board or in such manner as would
allow the Excess Preferred Shares (defined below) to be converted into
Common Stock without Stockholder Consent, no purchaser of Series 7
Preferred Shares pursuant to the Purchase Agreements (the "Purchasers")
shall be issued, upon conversion of Series 7 Preferred Shares, shares of
Common Stock in an amount greater than the product of (i) the 19.9% Limit
multiplied by (ii) a fraction, the numerator of which is the number of
Series 7 Preferred Shares issued to such Purchaser pursuant to its
respective Purchase Agreement and the denominator of which is the aggregate
amount of all the Series 7 Preferred shares issued to the Purchasers
pursuant to the Purchase Agreements (the "Cap Allocation Amount"). In the
event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Series 7 Preferred Shares, the transferee shall be allocated a
pro rata portion of such Purchaser's Cap Allocation Amount. In the event
that any holder of Series 7 Preferred Shares shall convert all of such
holder's Series 7 Preferred Shares into a number of shares of Common Stock
which, in the aggregate, is less than such holder's Cap Allocation Amount,
then the difference between such holder's Cap Allocation Amount and the
number of shares of Common Stock actually issued to such holder shall be
allocated to the respective Cap Allocation Amounts of the remaining holders
of Preferred Shares on a pro rata basis in proportion to the
25
number of Preferred Shares then held by each such holder. In the event
that any holder of Series 7 Preferred Shares attempts to convert such
holder's Series 7 Preferred Shares into a number of shares of Common Stock
which, in the aggregate, would be greater than such holder's Cap Allocation
Amount, then the Series 7 Preferred Shares which would be convertible into
a number of shares of Common Stock equal to difference between the number
of shares of Common Stock issuable but for such holder's Cap Allocation
Amount and such holder's Cap Allocation Amount, as adjusted by the previous
sentence, (the "Excess Preferred Shares") shall be redeemable as set forth
in Section 9 hereof.
(k) Stockholder Approval. The Company shall use its best efforts
--------------------
to obtain Stockholder Consent to issue shares of Common Stock in excess of
the 19.9% Limit at its 1998 annual meeting, which meeting shall occur on or
before May 31, 1998, unless it has been notified by the NNM, the National
Association of Securities Dealers, or an affilate thereof that Stockholder
Consent is not required to issues shares of Common Stock in excess of the
19.9% Limit.
3. Voting Rights. Holders of Series 7 Preferred Shares shall have no
-------------
voting rights, except as required by law.
4. Liquidation, Dissolution, Winding Up. In the event of any
------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Series 7 Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"Preferred Funds"), before any amount shall be paid to the holders of the
Common Stock, an amount equal to the Stated Value per Preferred Share plus
all accrued but unpaid dividends; provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Series 7
Preferred Shares and holders of shares of other classes or series of
preferred stock of the Company that are of equal rank with the Series 7
Preferred Shares as to payments of Preferred Funds (the "Pari Passu
Shares"), then each holder of Series 7 Preferred Shares and Pari Passu
Shares shall receive a percentage of the Preferred Funds equal to the full
amount of Preferred Funds payable to such holder as a percentage of the
full amount of Preferred Funds payable to all holders of Series 7 Preferred
Shares and Pari Passu Shares. The purchase or redemption by the Company of
stock of any class, in any manner permitted by law, shall not, for the
purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or
into any other corporation or corporations, nor the sale or transfer by the
Company of less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or winding up
of the Company. No holder of Series 7 Preferred Shares shall be entitled
to receive any amounts with respect thereto on any liquidation, dissolution
or winding up of the Company other than the amounts provided for herein.
26
5. Preferred Rank. With respect to preferences as to payments on the
--------------
liquidation, dissolution or winding up of the Company, the Series 7
Preferred Shares shall rank (1) senior to the Common Stock, (2) with
respect to all other existing capital stock of the Company, senior to such
capital stock if permitted by the terms of such capital stock or, if not so
permitted, on a parity with such capital stock if permitted by the terms of
such capital stock or, if not so permitted, junior to such capital stock,
and (3) senior to all series of any class of the Company's capital stock
issued after the date of the filing of this Certificate. So long as any of
the Series 7 Preferred Shares are outstanding, no Common Stock and no other
capital stock of the Company ranking junior to the Series 7 Preferred
Shares will be redeemed, purchased or otherwise acquired for any
consideration by the Company (except by conversion into or exchange for
stock of the Company ranking junior to the Series 7 Preferred Shares)
unless in each case the Company offers to redeem the Series 7 Preferred
Shares on substantially the same terms (provided that the redemption price
shall not be less than $1,000 per Series 7 Preferred Share).
Notwithstanding any provision hereof to the contrary, the Company may
hereafter authorize additional or other capital stock for issuance to
Beijing Legend Group Ltd. and its affiliates that is senior, equal or
junior to the Series 7 Preferred Shares, in respect of the preferences as
to payments on the liquidation, dissolution and winding up of the Company,
but the Company may not otherwise hereafter, for so long as any Series 7
Preferred Shares are outstanding, authorize additional or other capital
stock that is of senior or equal rank to the Series 7 Preferred Shares, in
respect of the preferences as to dividends and distributions and payments
on the liquidation, dissolution and winding up of the Company. In the
event of the merger or consolidation of the Company with or into another
corporation, the Series 7 Preferred Shares shall maintain their relative
powers, designations and preferences provided herein.
6. Lost or Stolen Certificates. On receipt by the Company of
---------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation
of any Preferred Stock Certificate, and (in the case of loss, theft or
destruction) of any indemnification undertaking by the holder to the
Company that is reasonably satisfactory to the Company, and on surrender
and cancellation of such Preferred Stock Certificate, if mutilated, the
Company shall execute and deliver a new Preferred Stock Certificate of like
tenor and date; provided that the Company shall not be obligated to re-
issue any lost, stolen or destroyed Preferred Stock Certificate if the
holder thereof complies with this Section 6 and contemporaneously requests
the Company to convert such Series 7 Preferred Shares into Common Stock.
7. Amendment. So long as any Series 7 Preferred Shares are
---------
outstanding, the Company shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of
at least a majority of the total number of Series 7 Preferred Shares
outstanding, voting separately as a class, amend or repeal any provision
of, or add any provision to, the Company's Certificate of Incorporation,
27
if such action would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the Series 7
Preferred Shares.
8. Company's Right to Redeem at Its Election. At any time after the
-----------------------------------------
issuance of Preferred Shares, the Company shall have the right, in its sole
discretion, to redeem (a "Redemption"), from time to time, any or all of
the Preferred Shares. If the Company elects to redeem some, but not all,
of the Preferred Shares then outstanding, the Company shall redeem a pro-
rata amount (based on the number of Preferred Shares then held by holders
of the Preferred Shares) from each holder of the Preferred Shares.
(a) Redemption Price. The "Redemption Price" shall be an amount
----------------
per Preferred Share equal to one-hundred twenty percent (120%) of the
Stated Value plus all accrued but unpaid dividends.
(b) Mechanics of Redemption. The Company shall effect each
-----------------------
Redemption by delivering written notice ("Notice of Redemption") to each
holder of the Preferred Shares at the address and facsimile number of such
holder appearing in the Company's Preferred Share register. Such Notice of
Redemption shall be deemed to have been delivered and received (i) on the
day it is sent if delivered by facsimile so as to be received prior to 5:00
p.m. local time at the holder of Preferred Shares' facsimile number as
listed in the Purchase Agreement, or one (1) business day later if it is
delivered so as to be received after 5:00 p.m. local time at the holder of
Preferred Shares' facsimile number as listed in the Purchase Agreement,
(ii) one (1) business day, if delivery is within the United States, after
the Company's sending (by overnight courier) of such Notice of Redemption,
or (iii) two (2) business days, if delivery is outside the United States,
after the Company's sending (by two (2) day courier) of such Notice of
Redemption. Such Notice of Redemption shall indicate (y) the number of
Preferred Shares that have been selected for redemption, and (z) the date
that such redemption is to become effective. Once the Notice of Redemption
is deemed to have been delivered and received, the Preferred Shares
designated for a Redemption may be converted into shares of Common Stock if
a Conversion Notice is delivered in accordance with Section 2(d) hereof
within seven trading days of the date the Notice of Redemption is deemed
delivered and received. After such seven day period, any Preferred Shares
designated for Redemption not so converted shall no longer be convertible
into Common Stock, and such Preferred Shares shall be delivered to the
Company by the seventh business day after the Notice of Redemption is
deemed delivered and received.
(c) Payment of Redemption Price. Each holder submitting
---------------------------
Preferred Shares being redeemed under this Section 8 shall deliver such
holder's Preferred Stock Certificates so redeemed to the Company, and the
Company shall pay the applicable Redemption Price to that holder within
five (5) business days after such holder's Preferred Stock Certificates (or
an indemnification undertaking satisfactory to the
28
Company with respect to such shares in the case of their loss, theft or
destruction) are delivered to the Company.
(d) Company Must Have Immediately Available Funds or Credit
-------------------------------------------------------
Facilities. The Company shall not be entitled to send any Notice of
----------
Redemption at the Company's election pursuant to this Section 8 and begin
the redemption procedure herein, unless it has:
(i) the full amount of the Redemption Price at the Company's
election in cash, available in a demand or other immediately available
account in a bank or similar financial institution;
(ii) credit facilities, with a bank or similar financial
institutions that are immediately available and unrestricted for use in
redeeming the Preferred Shares, in the full amount of the Redemption Price;
(iii) a written agreement with a standby underwriter or
qualified buyer ready, willing and able to purchase from the Company a
sufficient number of shares of stock to provide proceeds necessary to
redeem any stock that is not converted prior to a Redemption; or
(iv) a combination of the items set forth in the preceding
clauses (i), (ii) and (iii), aggregating the full amount of the Redemption
Price.
9. Holder's Right to Redeem. Provided the holder of Series 7
------------------------
Preferred Shares is entitled to require the Company to redeem Excess
Preferred Shares as set forth in Section 2(i) hereof, the following
provisions shall apply:
(a) Redemption Price. The "Excess Preferred Share Redemption
----------------
Price" shall be an amount per Preferred Share equal to one-hundred twenty
percent (120%) of the Stated Value plus all accrued but unpaid dividends.
(b) Mechanics of Redemption. The holder of Excess Preferred
-----------------------
Shares shall effect each redemption by delivering written notice ("Holder's
Notice of Redemption") to the Company stating the number of Excess
Preferred Shares to be redeemed along with the Preferred Stock Certificate
covering such shares. Such Holder's Notice of Redemption shall be deemed to
have been delivered and received on the business day when it is transmitted
by facsimile if so transmitted by 5:00 p.m. California time and if the
Company receives the Preferred Stock Certificate(s) covering the shares to
be redeemed either (1) by 10:00 a.m. California time within the following
two business days, or (2) on the next business day after it is deposited
for next day delivery with a nationally recognized overnight delivery
service.
29
(c) Payment of Redemption Price. Each holder submitting Excess
---------------------------
Preferred Shares being redeemed under this Section 9 shall deliver such
holder's Preferred Stock Certificates so redeemed to the Company as
required in Section 9(b) hereof, and the Company shall pay the applicable
Excess Preferred Share Redemption Price to that holder within fifteen (15)
business days after such holder's Preferred Stock Certificates (or an
indemnification undertaking satisfactory to the Company with respect to
such shares in the case of their loss, theft or destruction) are delivered
to the Company.
30
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Xxx X. Xxxxx, its Chief Financial Officer, as of February 12, 1998.
SYQUEST TECHNOLOGY, INC.
By:
-----------------------------------
Title: Executive Vice President and
Chief Financial Officer
31
EXHIBIT B
THE SECURITIES REPRESENTED BY OR ISSUABLE ON EXERCISE OF 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, AND 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.
Warrant No.
COMMON STOCK PURCHASE WARRANT
SYQUEST TECHNOLOGY, INC.
This Warrant certifies that ____________ ("Holder"), or its registered
assigns, is the registered holder of one Warrant (the "Warrant") expiring on
January 30, 2005 (the "Termination Date") to purchase shares of common stock,
par value $.0001 per share (the "Common Stock"), of SYQUEST TECHNOLOGY, INC., a
Delaware corporation (the "Issuer"). This Warrant entitles the holder to
purchase from the Issuer up to _________ Warrant Shares (as defined below),
subject to adjustment, at a per share Exercise Price (as defined below). A
"Warrant Share" initially represents one fully paid and nonassessable share of
Common Stock, subject to adjustment pursuant to paragraph 10.
This Warrant was issued on February 13, 1998 (the "Closing Date"), pursuant
to the Securities Purchase Agreement dated February 13, 1998 (the "Purchase
Agreement"), between the Issuer and Holder, and is subject to the terms and
conditions thereof. Unless otherwise defined herein, capitalized terms used
herein have the meanings respectively ascribed to them in the Purchase
Agreement. A copy of the Purchase Agreement may be obtained by the registered
holder hereof upon written request to the Issuer.
The exercise price per Warrant Share (plus transfer taxes, if applicable,
the "Exercise Price") shall be $3.075. If the Company's stockholders approve the
issuance of shares of Common Stock in excess of the 19.9% Limit (as defined in
the Certificate of Designations),
32
then the Exercise Price shall be the greater of (a) 120 percent of the
arithmetical average of the closing sale prices per share of Common Stock on the
five consecutive trading days preceding the delivery of any Exercise Notice (as
defined below) as reported by the Nasdaq National Market (the "NNM") or, if the
NNM is not then the principal trading market for the Common Stock, on the
principal trading market for the Common Stock at that time or, if there is then
no such principal trading market, the fair market value per share of Common
Stock during such period as determined in good faith by the Board of Directors
of the Issuer and (b) the closing sale price on the day immediately preceding
the delivery of the Exercise Notice; provided that in no event shall the
Exercise Price exceed $3.075. If the value of the Common Stock is to be
determined by the Board of Directors of the Issuer and the holder of this
Warrant disagrees with said valuation, the value of the Common Stock will be
determined by binding arbitration in accordance with the then prevailing
commercial arbitration rules of the American Arbitration Association, and such
arbitration shall proceed in San Francisco, California, or at such other place
as agreed to in writing by the Issuer and the holder of this Warrant. The
Exercise Price multiplied by the Exercise Amount (as defined below) at any
Exercise Date (as defined below) is referred to as a "Warrant Purchase Price".
For each month (prorated daily for partial months) after the earlier of
either (i) 90 days from the date SyQuest's registratation statement number 333-
40329 is declared effective, or (ii) 120 days from the Closing Date, provided
however, if the SEC reviews the Registration Statement, then for each month
(prorated daily for partial months) after the earlier of either (i) 120 days
from the date SyQuest's registratation statement number 333-40329 is declared
effective, or (ii) 150 days from the Closing Date, the Company does not maintain
an effective registration statement which is available for the resale of all the
Common Stock underlying this Warrant and the Preferred Shares (as defined in the
Purchase Agreement), provided that the Company is otherwise required pursuant to
Section 3A.b. of the Purchase Agreement to maintain such registration, the
Company shall either (1) increase by 10% the number of shares of Common Stock
then available pursuant to this Warrant, or (2) make a cash payment equal to
1.5% of the face value of the 5% Cumulative Convertible Preferred Stock, Series
6 then held by Holder. The Company, in its sole and absolute discretion, shall
determine whether to increase the number of shares available under the Warrant
or to make such cash payment.
This Warrant shall have the following additional terms:
1. This Warrant may be exercised on any Business Day prior to the Termination
Date (an "Exercise Date") for any quantity of Warrant Shares, such that the
aggregate number of Warrant Shares issued hereunder is less than or equal
to the number of shares then available pursuant to this Warrant, provided,
however, that in no event shall the holder be entitled to exercise this
Warrant for a number of Warrant Shares in excess of that number of Warrant
Shares which, upon giving effect to such exercise, would cause the
aggregate number of shares of Common Stock beneficially owned by the holder
and its affiliates to equal or exceed 5.00% of the outstanding shares of
the Common Stock following such exercise. For purpose of the foregoing
proviso, the aggregate number of shares of Common Stock beneficially owned
by the holder and its affiliates shall
33
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such proviso is being
made, but shall exclude shares of Common Stock which would be issuable upon
(i) exercise of the remaining, unexercised Warrants beneficially owned by
the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
beneficially owned by the holder and its affiliates (including, without
limitation, any convertible notes or preferred stock) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of
this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. The
holder may waive the foregoing limitation by written notice to the Company
upon not less than 61 days prior written notice (with such waiver taking
effect only upon the expiration of such 61 day notice period). To exercise
this Warrant, the registered holder must, prior to the Termination Date,
surrender this Warrant to the Issuer at its principal office with the
Exercise Notice attached hereto (an "Exercise Notice") duly completed and
signed by the registered holder hereof and stating the total number of
Warrant Shares in respect of which this Warrant is then exercised (the
"Exercise Amount") and tender the applicable Warrant Purchase Price. This
Warrant shall be exercisable only in the minimum amount of 10,000 Warrant
Shares and integral multiples of 10,000 Warrant Shares in excess thereof
(or such lesser amount as shall constitute the full amount remaining of
this Warrant). As used herein the term "Business Day" means any day on
which banks in the State of California are open for business.
2. On the Business Day following an Exercise Date (an "Issue Date"), the
Issuer shall issue and cause to be delivered to the registered holder
hereof at such address as such holder shall specify in the Exercise Notice
a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of this Warrant, registered in such holder's
name, together with cash (if any) as provided in paragraph 4. Such
certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a
holder of record of such Warrant Shares as of such Exercise Date. If the
certificate or certificates for the number of the Warrant Shares can be
issued without a restrictive legend pursuant to the Purchase Agreement, on
request made by the holders of the Warrant in the Exercise Notice, the
Company will authorize and instruct its transfer agent to issue the such
certificate or certificates electronically.
3. If on such Issue Date the number of Warrant Shares to be delivered shall be
less than the total number of Warrant Shares deliverable hereunder, there
shall be issued to the holder hereof or his assignee on such Issue Date a
new warrant substantially identical to this Warrant, except that such new
warrant shall evidence the right to purchase the number of Warrant Shares
equal to (x) the total number of Warrant Shares deliverable hereunder less
(y) the number of Warrant Shares so delivered.
34
4. The Issuer shall not be required to issue fractional Warrant Shares on the
exercise of this Warrant. The number of full Warrant Shares which shall be
issuable upon the exercise of this Warrant shall be computed on the basis
of the aggregate number of Warrant Shares purchasable on exercise of this
Warrant so presented. If any fraction of a Warrant Share would, except for
the provisions of this paragraph 4, be issuable on the exercise of this
Warrant, the Issuer shall pay an amount in cash equal to the last per share
sale price of the Common Stock (on the NNM or the Principal Market, as the
case may be) on the day immediately preceding the Exercise Date, multiplied
by such fraction (subject to adjustment pursuant to paragraph 10); provided
that if at the time that the Exercise Price is to be determined the NNM is
not the principal trading market for the Common Stock and there is no
Principal Market, then the amount of cash to be paid per fractional Warrant
Share shall be determined in good faith by the Board of Directors of the
Issuer. If the holder of this Warrant disagrees with such determination,
the amount of cash to be paid per fractional Warrant Share will be
determined by binding arbitration in accordance with the then prevailing
commercial arbitration rules of the American Arbitration Association, and
such arbitration shall proceed in San Francisco, California, or at such
other place as agreed to in writing by the Issuer and the holder of this
Warrant.
5. For so long as this Warrant has not been exercised in full, the Issuer
shall at all times prior to the Termination Date reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, for issuance upon exercise of this Warrant, the maximum
number of shares of Common Stock then so issuable. In furtherance of the
foregoing, but subject to adjustment pursuant to paragraph 10 and to
increase pursuant to the fourth paragraph hereof, the Issuer shall reserve
for issuance hereunder not less than _________ shares of Common Stock. In
the event the number of shares of Common Stock or other securities issuable
in respect of the Warrant Shares exceeds the authorized number of shares of
Common Stock or other securities, the Issuer shall promptly take all
actions necessary to increase the authorized number, including causing its
Board of Directors to call a special meeting of stockholders within thirty
days of the date on which such excess first existed and recommend such
increase for approval by the Issuer's stockholders. The Issuer shall use
its best efforts to obtain stockholder approval of the increase to the
authorized number of shares of Common Stock.
6. By accepting delivery of this Warrant, the registered holder hereof
covenants and agrees with the Issuer not to exercise or transfer this
Warrant or any Warrant Shares except in compliance with this Warrant.
7. By accepting this Warrant, the registered holder hereof covenants and
agrees with the Issuer that this Warrant may not be sold, assigned,
conveyed, encumbered, pledged, hypothecated or in any other manner disposed
of or transferred, as a whole or in part, unless and until such holder
shall deliver to the Issuer (i) written notice of such transfer and of the
name and address of the transferee, (ii) a written agreement, in form and
substance reasonably satisfactory to the Issuer, of the transferee to
comply with the
35
applicable terms of the Purchase Agreement and this Warrant and (iii) an
opinion of counsel for such holder, reasonably satisfactory to the Issuer
in form, scope and substance, that such transaction will comply with all
applicable securities laws and regulations. If a portion of this Warrant
is transferred, all rights of the registered holder hereunder may be
exercised by the transferee (subject to the requirement that such
transferee shall provide a like opinion of counsel in respect of the number
of Warrant Shares transferred with the portion of this Warrant), provided
that any registered holder of this Warrant may deliver an Exercise Notice
subject to such holder's portion of this Warrant.
8. The Issuer will pay all documentary stamp taxes (if any) attributable to
the issuance of Warrant Shares upon the exercise of this Warrant by the
registered holder hereof; provided that the Issuer shall not be required to
pay any tax or taxes which may be payable in respect of any transfer
involved in the registration of this Warrant or any certificates for
Warrant Shares in a name other than that of the registered holder of this
Warrant surrendered upon the exercise of this Warrant, and the Issuer shall
not be required to issue or deliver this Warrant or certificates for
Warrant Shares unless or until the person or persons requesting the
issuance thereof shall have paid to the Issuer the amount of such tax or
shall have established to the satisfaction of the Issuer that such tax has
been paid.
9. In case this Warrant shall be mutilated, lost, stolen or destroyed, the
Issuer may in its discretion issue in exchange and substitution for and
upon cancellation of the mutilated Warrant, or in lieu of and substitution
for the lost, stolen or destroyed Warrant, a new Warrant of like tenor, but
only upon receipt of evidence reasonably satisfactory to the Issuer of such
loss, theft or destruction of such Warrant and indemnity, if requested,
reasonably satisfactory to the Issuer. Applicants for a substitute Warrant
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Issuer may prescribe.
10. 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 Issuer with or into another corporation (other than a
consolidation or merger in which the Issuer is the continuing corporation
and which does not result in any reclassification, capital reorganization
or other change of outstanding shares of Common Stock), the Issuer 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 10. The
foregoing provisions shall similarly apply to successive reclassifications,
36
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.
11. If and whenever the Issuer 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 Exercise Price shall be
proportionately adjusted in the manner determined by the Issuer'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 Exercise Price
shall be rounded to the nearest cent.
12. If the Company fails to provide the information required by paragraph (i)
of the Exercise Notice, the holder of the Warrant shall not be required to
include said paragraph (i) in its Exercise Notice, and assuming all other
requirements for the issuance of the Warrant Shares have been satisfied,
the Company will be obligated to issue the Warrant Shares in accordance
with this Warrant.
This Warrant shall not be valid unless signed by the Issuer.
IN WITNESS WHEREOF, SyQuest Technology, Inc. has caused this Warrant to be
signed by its duly authorized officer.
Dated: February 13, 1998
SYQUEST TECHNOLOGY, INC.
By: _______________________
Name:
Title:
37
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise of the Warrant)
[DATE]
SyQuest Technology, Inc.
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Re: Warrant No.
-------------------------
Ladies and Gentlemen:
The undersigned is the registered holder of the above-referenced
warrant (the "Warrant") issued by SyQuest Technology, Inc. (the "Company"), the
original of which is attached hereto, and hereby elects to exercise the Warrant
to purchase _________ Warrant Shares (as defined in the Warrant) and herewith
tenders $_____________ by certified or official bank check to the order of the
Company as payment for such Warrant Shares in accordance with the terms of the
Warrant and the Purchase Agreement (as defined in the Warrant).
The undersigned represents and warrants to the Company on the date
hereof, and agrees with the Company, as follows:
(a) The execution and delivery of this Exercise Notice by the
undersigned has been duly authorized by all requisite corporate action and
no further consent or authorization of the undersigned, its Board of
Directors or its stockholders is required.
(b) Investor understands that no United States federal or state
agency has passed on, reviewed or made any recommendation or endorsement of
the Warrant Shares.
(c) In making the decision to purchase the Warrant Shares in
accordance with the Warrant, the undersigned has relied solely upon
independent investigations made by it and not upon any representations made
by the Company other than those in the Purchase Agreement.
(d) Subject to Section 3A of the Purchase Agreement, the
undersigned understands that the Warrant Shares have not been registered
under the 1933 Act and may not be re-offered or resold other than pursuant
to such registration or an available exemption therefrom.
(e) The undersigned is purchasing the Warrant Shares for its own
account for investment only and not with a view to, or for resale in
connection with, the public sale or distribution thereof except pursuant to
sales registered under the 1933 Act.
38
(f) The undersigned is an "accredited investor" as that term is
defined in Regulation D. The undersigned is able to bear the economic risk
of the undersigned's investment hereunder.
(g) The undersigned understands that the Warrant Shares are being
or will be 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 on the truth and accuracy of, and the
undersigned's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the undersigned set forth herein in
order to determine the availability of such exemptions and the eligibility
of the undersigned to acquire the Warrant Shares.
(h) A principal executive officer of the undersigned, or the
undersigned's agent, who is acting on behalf of the undersigned in
connection with the transactions contemplated hereby has such knowledge and
experience in financial and business matters that such officer is capable
of evaluating the merits and risks of the investment by the undersigned
contemplated by this Warrant and has the capacity to protect the
undersigned interests.
(i) The undersigned has been furnished with all materials and
information relating to the business, management, properties, financial
condition, operations, affairs and prospects of the Company and all
materials and information relating to the offer and sale of the Warrant
Shares, as have been requested by the undersigned. The undersigned has
been afforded the opportunity to ask all questions of the Company that the
undersigned considered appropriate or desirable to ask in connection with
this Warrant and has received answers to such inquiries that the
undersigned considers satisfactory. The undersigned understands that its
investment in the Warrant Shares involves and will involve a high degree of
risk. The undersigned has sought such investment, accounting, legal and
tax advice as it has considered necessary to an informed investment
decision with respect to its acquisition of the Warrant Shares.
(j) The undersigned understands that (i) except as otherwise
provided in section 3A of the Purchase Agreement, 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) the
undersigned 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 so offered, sold, assigned or transferred
may be so offered, 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 ("Rule 144") may be made only in
accordance with the terms of Rule 144 and, if Rule 144 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 register such securities
39
(other than pursuant to section 3A hereof) under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
In accordance with the attached Warrant, the undersigned requests that
certificates for such Warrant Shares be registered in the name of and delivered
to the undersigned at the following address:
________________________
________________________
________________________
[IF THE NUMBER OF WARRANT SHARES TO BE DELIVERED IS LESS THAN THE
TOTAL NUMBER OF WARRANT SHARES DELIVERABLE UNDER THE WARRANT, INSERT THE
FOLLOWING -- The undersigned requests that a new warrant substantially
identical to the attached Warrant be issued to the undersigned evidencing the
right to purchase the number of Warrant Shares equal to (x) the total number of
Warrant Shares deliverable under the Warrant less (y) the number of Warrant
Shares to be delivered in connection with this exercise.]
[ADDRESS]
By: _____________________________
Name:
Title:
40
EXHIBIT C
[DATE]
VIA FACSIMILE
-------------
---------------------------
---------------------------
---------------------------
---------------------------
Re: STOCK PURCHASE AGREEMENT (THE "AGREEMENT") DATED ,
===============
1998, AND RELATED DOCUMENTS
---------------------------
Ladies and Gentlemen:
Attached please find a copy of the certificate representing the
Preferred Shares, (ii) the Warrant Certificate, (ii) the Securities Purchase
Agreement, and (iv) the Officers' Certificate. We have the executed originals
of the foregoing documents. Upon our confirmation of the payment by _____ to
SyQuest of the $____________ purchase price on the Closing Date, we will send
the executed originals required to be sent pursuant to the Agreement by
overnight courier to the following address:
-------------------------
-------------------------
-------------------------
Capitalized terms not otherwise defined in this letter shall have the
meanings ascribed in such terms in the Agreement.
Very truly yours,
______________________
By _______________________________
Name:
Title:
41
EXHIBIT E
List of Investors
Olympus Securities, Ltd., a Bermuda corporation
Xxxxxx Partners, a Bermuda Exempted General Partnership
RGC International Investors, LDC a Cayman Island Limited Duration Company
CC Investments LDC, a Cayman Islands Limited Duration Company
Southbrook International Investments, Ltd., a British Virgin Islands corporation
Combination, Inc., a company formed under the laws of the Turks and Caicos
Rutgers Casualty Insurance Company, a New Jersey corporation
Kentucky National Insurance Company, a Kentucky corporation
HSI Partnership, a New York general partnership
EXHIBIT E
SYQUEST TECHNOLOGY, INC.
NOTICE OF CONVERSION
Certificate of Designations, Preferences and Rights of 5% Cumulative Convertible
Preferred Stock, Series 7 of SyQuest Technology, Inc. (the "Designation"). In
accordance with and pursuant to the Designation, the undersigned hereby elects
to convert the number of shares of Convertible Preferred Stock, Series 7, par
value $.0001 (the "Preferred Shares"), of SyQuest Technology, Inc., a Delaware
corporation (the "Company"), indicated below into shares of Common Stock, par
value $.0001 (the "Common Stock"), of the Company by tendering the stock
certificate(s) representing the share(s) of the Preferred Stock specified below
as of the date specified below:
Date of Conversion _________________________________
Number of shares of the Preferred
Stock to be converted: _________________________________
Stock certificates no(s). of the
Preferred Stock to be converted: _________________________________
Please confirm the following information:
Conversion Price: _________________________________
Number of shares of Common Stock
to be issued: _________________________________
By issuing this Notice of Conversion, the undersigned represents and warrants
that (i) except as otherwise provided in section 3A Purchase Agreement (as
defined in the Designation), the Preferred Shares and the Conversion Shares (as
defined in the Purchase Agreement) 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) the undersigned 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 so offered, sold, assigned or
transferred may be so offered, sold, assigned or transferred pursuant to an
exemption from such registration; (ii) any sale of such securities made in
reliance on Rule 144 ("Rule 144") promulgated under the Securities Act of 1933,
as amended (the "1933 Act") may be made only in accordance with the terms of
Rule 144 and, if Rule 144 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 register such securities (other than pursuant
to section 3A of the
43
Purchase Agreement) under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
Please issue the Common Stock into which the shares of Preferred Stock are being
converted in the following name and to the following address:
Issue to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Name of converting holder:
--------------------------------------
Duly executed: By
-----------------------------------
Name & Title:
--------------------------------------
Dated:
--------------------------------------
44
