June 14, 1996
CONFIDENTIAL
StreamLogic Corporation
00000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxx Xxxxx
Agreement re: Tender Offer for All Outstanding 6%
Convertible Subordinated Debentures Due 2012
Dear Mr. Smart:
This letter sets forth our mutual understanding and agreement with respect
to (i) a tender offer (the "Tender Offer") by StreamLogic Corporation
("StreamLogic") for all of the outstanding 6% Convertible Subordinated
Debentures due 2012 previously issued by StreamLogic (the "Debentures") and
(ii) the terms upon which the institutional clients advised by Xxxxxx Xxxxxx &
Co., L.P. would be willing to tender the Debentures they hold into the Tender
Offer. The institutional clients advised by Xxxxxx Xxxxxx and Co., L.P.,
collectively, hold 79% of all of the Debentures. Hereinafter, (i) Xxxxxx
Xxxxxx & Co., L.P. shall be referred to as "Xxxxxx Xxxxxx" and (ii) "per
Debenture" means per $1000 face amount of Debentures.
1. The Tender Offer. Subject to paragraph 6 of this letter, StreamLogic
shall take every reasonable effort to initiate and complete the Tender Offer.
The Tender Offer shall be an offer for all of the outstanding Debentures and
shall exchange all tendered Debentures for cash, common stock and warrants, on
the terms and conditions described below. Xxxxxx Xxxxxx shall use its best
efforts to assist StreamLogic in obtaining all approvals necessary for
completion of the Tender Offer and the transactions contemplated thereby.
2. Timing. StreamLogic shall make the Tender Offer to all holders of the
Debentures, for all of the Debentures, no later than July 1, 1996 assuming no
shareholder approval is required. If shareholder approval is required, the
Tender Offer shall be made no later than ten days after the mailing of a proxy
statement to StreamLogic's shareholders. StreamLogic should use its best
efforts to expedite preparation of a proxy statement to its shareholders if
required. The Tender Offer shall close no later than August 24, 1996 assuming
no shareholder approval is required and on the day following shareholder
approval if such approval is required or as soon thereafter as permitted by
the Securities and Exchange Commission ("SEC") and applicable law. The date on
which the Tender Offer is required to close shall hereinafter be referred to
as the "Closing Date". The exchange of the tendered Debentures for cash,
common stock and warrants on the terms and conditions described below (the
"Exchange") shall occur no later than 10 days after the Closing Date. The date
of the Exchange shall hereinafter be referred to as the "Exchange Date."
3. Exchange of Debentures for Cash. Common Stock and Warrants. In the Tender
Offer the Company shall offer to each holder of Debentures the right to
exchange for each Debenture (including interest on the Debentures which is
accrued and unpaid on the Exchange Date):
(i) cash in the amount of $233.33 per Debenture;
(ii) that number of shares of StreamLogic's common stock ("Exchange
Shares") equal to $520.00 per Debenture calculated by using the average of
the closing price of StreamLogic's common stock for the 5 trading days
prior to the Closing Date or such earlier 5 day trading average as required
by the SEC (the "Exchange Price"); provided that the maximum number of
Exchange Shares per Debenture will be 130.0 shares and the minimum number
of Exchange Shares per Debenture will be 69.33333 shares; and
(iii) warrants to purchase 40 shares of StreamLogic's common stock (the
"Warrants") per Debenture. The Warrants shall be exercisable at any time
before the fifth anniversary of the date of the Exchange and
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shall have an initial exercise price equal to 150% of the Exchange Price
(the "Exercise Price"). Each time prior to the first anniversary of the
Exchange that the average (excluding the highest price and the lowest
price) closing price of StreamLogic's common stock for a period of 5
consecutive trading days (the "Reset Period") is less than 65% of the
Exchange Price (the "Reset Price"), each holder of Warrants shall have the
option (the "Reset Election") to adjust the exercise price of the Warrants
held by such holder to 150% of the Reset Price, provided that a holder of
Warrants may exercise this option no more than one time. An agent shall be
appointed to handle the mechanics of the transmission and exchange of the
warrants (the "Warrant Agent"). The holder of the Warrants must give notice
to the Warrant Agent of its intent to exercise the Reset Election within 5
business days following the last day of the Reset Period. Notice of
exercise of the Reset Election shall be given by facsimile and perfected by
delivery of the Warrant to the Warrant Agent. Each Warrant shall be
legended to reflect the terms of the Reset Election and shall be exchanged
by the Warrant Agent for a Warrant deleting references to the Reset
Election upon exercise of the Reset Election with respect to such Warrant.
If at any time for a period of 5 consecutive trading days the average
(excluding the highest price and the lowest price) closing price of
StreamLogic's common stock exceeds 125% of the Exercise Price (after taking
into account any stock splits, consolidations or similar transactions) (the
"Option Period"), Streamlogic shall have the option (the "Warrant Exercise
Option") to require the holders of the Warrants either to exercise the
Warrants held by such holder at the Exercise Price, or the Reset Price if a
Reset Price has been set, or to cancel the Warrants. StreamLogic shall
exercise such option within five (5) business days following the last day
of the Option Period.
All shares of StreamLogics's common stock issued pursuant to exercise of
the Warrants shall be referred to as the "Warrant Shares." The Warrants
will be issued pursuant to a Warrant Agreement which shall be satisfactory
in form and substance to Xxxxxx Xxxxxx and shall have provisions
customarily included in warrants of this type including, without
limitation, the following:
(A) StreamLogic shall adjust the number of Warrant Shares to be
issued upon exercise of a Warrant to avoid dilution of the interests of
the holders of the Warrants which might result from stock splits,
consolidations, reclassifications and similar transactions of
StreamLogic's common stock.
(B) StreamLogic shall adjust, on a weighted average basis, the number
of Warrant Shares to be issued upon exercise of a Warrant to avoid
dilution which might result from any of the following:
(1) issuance of securities, options or convertible securities for
less than fair value determined with reference to the average
(excluding the highest price and the lowest price) closing price of
StreamLogic's common stock for the 20 trading days immediately prior
to the issuance thereof;
(2) redemption of any stock for more than fair value determined
with reference to the average (excluding the highest price and the
lowest price) closing price of StreamLogic's common stock for 20
trading days immediately prior to the issuance thereof;
(3) changes in the exercise price or conversion rate of options to
purchase StreamLogic's common stock or securities exchangeable or
convertible into StreamLogic's common stock; and
(4) dividends and distributions to holders of StreamLogic's common
stock.
Notwithstanding the foregoing, no adjustments shall be made pursuant
to this section 3 (iii) (A) and (B) on account of the transactions
set forth on Exhibit A.
4. Registration. On the Exchange Date, StreamLogic shall deliver to holders
of Debentures tendered pursuant to the Tender Offer Exchange Shares and upon
exercise of the Warrants StreamLogic shall deliver Warrant Shares which are
and at all times in the future will be freely tradeable to any person and
without having to comply with any holding periods, volume limits or
restrictions as to the transfer of such Exchange Shares and Warrant Shares
imposed under the securities laws. StreamLogic shall take each such measure as
may be necessary or reasonably appropriate to cause the Exchange Shares and
the Warrant Shares to be freely tradeable at all times including, without
limitation, preparation of a shelf registration statement. A shelf
registration statement shall be effective for a period of five years from the
Exchange Date or such shorter period of time if it is determined that
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all Warrant Shares and Exchange Shares are freely tradeable without the
necessity of having a registration statement and prospectus available. Once
during each twelve month period that a shelf registration covering the Warrant
Shares and Exchange Shares is in effect, StreamLogic may provide notice to the
holders of the Warrants and Exchange Shares that the shelf registration will
not be available for a period of up to 90 consecutive days (a "Withdrawal
Election"). In the event that StreamLogic makes a Withdrawal Election, the
number of days that the Withdrawal Election is in effect shall be added to the
five year term of the self registration statement. Warrants will not be
exercisable during the period of any Withdrawal Election. StreamLogic shall
pay all costs and expenses in connection with the registration of the Exchange
Shares and the Warrant Shares, if registration is necessary, and each other
measure taken by StreamLogic.
5. Agreement to Tender. The institutional clients advised by Xxxxxx Xxxxxx
and that hold Debentures will tender all of the Debentures held by them to
StreamLogic pursuant to the Tender Offer and not withdraw prior to August 12,
1996 the tender of any Debentures held by them, if (i) the Tender Offer
includes each of the terms described in paragraphs 1 through 4 above and (ii)
each of the following terms and conditions are met to the satisfaction of
Xxxxxx Xxxxxx:
(a) The Exchange Price shall not be (i) greater than $7.50 nor (ii) less
than $4.00.
(b) The Tender Offer shall be for all of the then outstanding Debentures
and on the date of the Closing Date not less than 95% of the then
outstanding Debentures shall have been irrevocably tendered to the Company
pursuant to the Tender Offer unless Xxxxxx Xxxxxx subsequently agrees to a
lower percentage.
(c) StreamLogic shall have reserved a sufficient number of shares of
common stock to accommodate the issuance of the Exchange Shares and the
Warrants to all holders of the Debentures. The Tender Offer, the Exchange
and the issuance of the Exchange Shares and the Warrants shall have been
approved and authorized by all necessary and appropriate corporate and
regulatory action, including, without limitation, (i) authorization and
approval by the shareholders, if necessary, and board of directors of
StreamLogic of the Tender Offer, the Exchange and the issuance of the
Exchange Shares and the Warrants and (ii) making such amendments and
modifications of StreamLogic's charter documents as may be necessary or
appropriate to consummate the transactions contemplated herein.
(d) StreamLogic's board of directors shall have been expanded to seven
members, of which one member shall be the person designated in writing by
Xxxxxx Xxxxxx. StreamLogic and its management shall also have agreed that
StreamLogic management will include in its slate of persons nominated to be
directors for election at the next meeting of shareholders one person
designated in writing by Xxxxxx Xxxxxx. In the event that the institutional
clients of Xxxxxx Xxxxxx transfer more than 80% of the Exchange Shares and
Warrants to persons who are not advised by Xxxxxx Xxxxxx, then Xxxxxx
Xxxxxx' right to nominate a director shall terminate.
(e) StreamLogic shall have complied with all applicable requirements of
state and federal securities laws and the NASDAQ National Market System in
connection with the Tender Offer, the Exchange and the issuance of the
Exchange Shares and the Warrants.
(f) On the Exchange Date and assuming that the Exchange has not occurred,
the Company's authorized capital stock shall consist solely of 2,000,000
shares of preferred stock and 50,000,000 shares of common stock (together,
the "Capital Stock"), of which only 15,774,967 shares of common stock will
be outstanding, exclusive of the number of shares that become outstanding
as a result of the transaction and the exercise of options and warrants
specified on Exhibit A. After giving effect to transaction and the exercise
of all outstanding options and warrants including those set forth on
Exhibit A, there shall be outstanding no more than 21,798,108 shares of
common stock and no other equity securities of StreamLogic outstanding. No
preferred stock shall be outstanding on the Exchange Date.
(g) All governmental and third party approvals to the Tender Offer, the
Exchange and the issuance of the Exchange Shares and the Warrants
contemplated herein shall have been obtained and be in full force and
effect and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Tender
Offer, the Exchange or the issuance of the Exchange Shares and the Warrants
as contemplated
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herein. Xxxxxx Xxxxxx will take all actions reasonably necessary to assist
StreamLogic in obtaining such approvals.
(h) The definitive documentation evidencing the Tender Offer, the
Exchange, the issuance of the Exchange Shares and the Warrants and related
transactions shall be reasonably satisfactory in form, substance and all
other respects to Xxxxxx Xxxxxx and its counsel.
(i) Until the Exchange Date, the Company (i) will conduct its business
only in the ordinary course and consistent with past practices and will
maintain its books and records in accordance with past practices; and (ii)
will not, without the prior written consent of Xxxxxx & Company (after it
has consulted with Xxxxxx Xxxxxx), (A) issue any equity securities or debt
securities other than in connection with the transactions set forth in
Exhibit A; (B) amend its charter documents except as provided herein; (C)
grant or issue any options, rights, warrants or convertible securities
other than in connection with the transactions set forth in Exhibit A; (D)
declare or pay any dividends or make any other distribution to
shareholders, reclassify outstanding shares, or reacquire any equity
securities; (E) reorganize, sell or dispose of any significant amount of
assets; (F) materially increase the level of compensation to any officer,
director or employee; or (G) engage in any transaction, other than the
transactions set forth in Exhibit A, the Tender Offer, the Exchange and the
issuance of the Exchange Shares and the Warrants and the other transactions
described herein, with the intention of affecting or influencing the
trading price of Stream Logic's traded common stock or with the knowledge
that the transaction could reasonable be expected to affect or influence
the trading price of StreamLogic's traded common stock; and (iii) will not
agree to do anything or take any action which could reasonably be expected
to impede, prevent, restrict or otherwise make more difficult the Tender
Offer, the Exchange, the issuance of the Exchange Shares or Warrants or any
of the other transactions contemplated herein.
(j) Until the Exchange Date, Xxxxxx & Company and its agents and
independent contractors shall have unlimited access to the properties,
books and records of StreamLogic for the purposes of conducting such
investigations, appraisals or audits as Xxxxxx & Company deems necessary or
advisable in the circumstances. The Company shall not terminate or breach
its letter agreement with Xxxxxx & Company dated April 24, 1996 prior to
the Exchange Date.
(k) On the Exchange Date, StreamLogic shall have paid (i) all amounts
then due and owing to Xxxxxx & Company pursuant to the letter agreement
dated April 24, 1996 and (ii) all amounts then due and owing to Xxxxxx
Xxxxxx White & XxXxxxxxx pursuant to its agreement dated April 22, 1996 and
(iii) all reasonable out of pocket fees and expenses of Xxxxxx Xxxxxx
incurred in connection with the preparation and negotiation of this
Agreement or in connection with the Tender Offer, the Exchange, the
issuance of the Exchange Shares and the Warrants or transactions related
thereto. StreamLogic shall pay all of its own expenses (including, without
limitation, fees and expenses of counsel) incurred by StreamLogic in
connection with this Agreement, the Tender Offer, the Exchange, the
issuance of the Exchange Shares and Warrants or transactions related
thereto.
(l) There shall not have occurred any material and adverse change in (i)
the business, operations, properties, assets, or condition (financial or
otherwise) after the date of this letter agreement of StreamLogic or (ii)
the ability of StreamLogic to perform its obligations under this Agreement
or to accomplish the Tender Offer, the Exchange, the issuance of the
Exchange Shares and Warrants or other transactions contemplated herein or
related thereto.
(m) StreamLogic shall negotiate and implement amendments to the March,
1987 Indenture between Micropolis Corporation and First Interstate Bank of
California and, if necessary, StreamLogic's charter documents which are
satisfactory to Xxxxxx Xxxxxx and to StreamLogic.
(n) This Agreement shall not be effective unless executed by Xxxxxx
Xxxxxx and Streamlogic, and a fully executed copy of this Agreement is
delivered to Xxxxxx Xxxxxx, or its counsel, prior to midnight on June 14,
1996.
(o) Any press release by Xxxxxx Xxxxxx or StreamLogic concerning the
terms set forth in this letter shall be subject to the prior reasonable
approval of the other party.
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(p) All matters referred to herein are subject to and conditioned upon
(i) compliance with all applicable laws and (ii) the consistency of the
terms hereof with any material rights of any third parties or the
unconditional consent to the Tender Offer, the Exchange, the issuance of
the Exchange Shares and Warrants and each other transaction contemplated
herein or related thereto of third parties whose material rights are not
consistent with the transactions contemplated herein.
(q) Xxxxxx Xxxxxx shall be satisfied that the common stock of StreamLogic
will continue to be listed and quoted by the NASDAQ-National Market System.
(r) There shall not be pending, instituted or threatened any legal action
or administrative proceedings before any court or governmental agency, by
any governmental agency challenging the Tender Offer.
(s) StreamLogic shall have obtained all required approvals by its
shareholders.
(t) The Trustee shall not have objected in any respect to, or taken any
action that could, adversely affect the consummation of the Tender Offer or
shall have taken any action that challenges the validity or effectiveness
of the procedures used by the Company in the making of the Tender Offer or
the acceptance of, or payment for, any of the Debentures.
6. StreamLogic's obligations to complete the Tender Offer shall be subject
to each of the following terms and conditions:
(a) The Exchange Price shall not be (i) greater than $7.50 nor (ii) less
than $4.00.
(b) The conditions set forth in Sections 5(g), 5(l), 5(r), 5(s) and 5(t)
of this letter.
(c) The definitive documentation evidencing the issuance of the Warrants
shall be reasonably satisfactory in form, substance and in all other
respects to StreamLogic.
(d) Compliance with all applicable laws.
(e) The continued listing and quotation of StreamLogic's common stock on
the NASDAQ-National Market System.
Nothing expressed or referred to in this letter agreement will be construed
to give any person other than the parties signing this letter any legal or
equitable right, remedy or claim under or with respect to this letter
agreement or any provision of this letter agreement. This letter and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this letter agreement and their successors and assigns.
----------------
If this letter is satisfactory to you as a basis for proceeding with the
Tender Offer, on the terms and conditions described above, please so signify
on the enclosed copy of this letter and return it to us at the above address.
We reserve the right to withdraw this letter at any time before it is
accepted.
Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx & Co., L.P.
By: Xxxxxx, Xxxxxx & Co., Inc.
By Xxxxxxxxx X. Xxx
Its Vice President
AGREED:
STREAMLOGIC:
STREAMLOGIC CORPORATION
By J. Xxxxx Xxxxx
Title: President, CEO
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EXHIBIT A
NO. OF SHARES,
TRANSACTION OPTIONS, WARRANTS
----------- -----------------
Shares to be Issued to FWB at Closing in early July
1996 (subject to adjustment
120 days after FWB Closing).......................... 1,256,123
Warrants outstanding to Salomon as of June 13, 1996... 80,081 at an exercise
price of $5.00 per share
Warrants outstanding to Xxxxxx as of June 13, 1996.... 1,500,000 at an exercise
price of $4.00 per share
STOCK OPTIONS:
StreamLogic Option.................................... 787,200
Micropolis Options (exercise lapse by 6/29/96)........ 838,860
Options granted on April 1, 1996...................... 657,000
Options granted on May 22, 1996....................... 70,000
Options expected to be granted by September 1, 1996... 150,000
TOTAL OPTIONS..................................... 2,503,060
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