Exhibit 10.5
SECURITIES PURCHASE AGREEMENT
[Cygni]
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October 8,
1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company"), and the undersigned buyer (the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Buyer wishes to purchase, in the amounts and upon the terms and
conditions stated in this Agreement, shares (the "Preferred Shares") of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Stock"), which shall be convertible into shares of the
Company's Common Stock (the "Common Stock"), $.001 par value (as converted, the
"Conversion Shares"), and pursuant to which certain shares of Common Stock may
be issued to the Buyer in payment of dividends (the "Dividend Shares");
C. The Buyer shall receive upon each conversion of Preferred Shares a
warrant to acquire one share of Common Stock for each three shares of Common
Stock issued upon conversion of such Preferred Shares (the "Warrants"), which
Warrants shall expire three years after the date of issuance; and
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit F
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
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a. Purchase of Preferred Shares. The Company shall issue and sell to
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the Buyer and the Buyer shall purchase the number of Preferred Shares set forth
below the Buyer's signature, which shall be convertible into Conversion Shares
in accordance with the terms of the Certificate of Designations, Preferences and
Rights of 5% Cumulative Convertible Preferred Stock, Series 2 in the form
attached hereto as Exhibit A (the "Certificate of Designation"). The per share
purchase price (the "Purchase Price") of the Preferred Shares shall be $1,000.
The Preferred Shares shall be allocated among the entities constituting the
Buyer as specified on their respective counterpart signature pages and shall be
sold at a closing as hereinafter provided and as set forth in the signature
pages.
b. Closing. The date and time of the closing (the "Closing") of the
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issuance and sale of the Preferred Shares shall be 2:00 p.m. Eastern Daylight
Savings Time on October 15, 1996 (or such later date as is mutually agreed to by
the Company and the entities constituting the Buyer).
c. Form of Payment. The Buyer shall pay the Purchase Price for the
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Preferred Shares by wire transfer of immediately available United States Dollars
on the Closing date, to be deposited into an escrow account (the "Escrow
Account") established at Silicon Valley Bank, Santa Clara, California, pursuant
to an Escrow Agreement in substantially the form of Exhibit B attached hereto
(the "Escrow Agreement"). At the Closing, the Company shall deliver stock
certificates, duly executed on behalf of the Company, representing the Preferred
Shares (the "Stock Certificates") to the Buyer.
d. Warrant Issuances. The Company will issue to Buyer or its
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designee within five (5) days after any conversion of Preferred Shares a Warrant
in substantially the form of Exhibit C attached hereto, to acquire one share of
Common Stock for each three Conversion Shares that are issued on such conversion
of Preferred Shares, with an exercise price equal to the lower $7.15 per share
and 110 percent of the Average Market Price (as that term is defined in Exhibit
A hereto) per share of Common Stock for the five trading days preceding such
conversion. Each Warrant shall expire to the extent not exercised on the third
anniversary of the date of the relevant conversion.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants to the Company as to itself,
severally, and not jointly, that:
a. Investment Purpose. The Buyer is purchasing the Preferred Shares
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and the Warrants for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof except pursuant to sales registered under the ▇▇▇▇ ▇▇▇. The Buyer is not
purchasing the Preferred Shares for the purpose of covering short sale positions
in the Common Stock established on or prior to the date of the Closing. The
Buyer understands that it shall be a condition to the issuance of the Conversion
Shares, the Dividend Shares and the shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") that the Warrants, Conversion
Shares, Dividend Shares and Warrant Shares are subject to the representations
set forth in this Section 2(a).
b. Accredited Investor Status. The Buyer is an "accredited investor"
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as that term is defined in Rule 501(a)(3) or Rule 501(a)(8) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the Preferred
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Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
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d. Information. The Buyer and its advisors, if any, have been
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furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares, Warrants, Conversion Shares, Dividend Shares and Warrant Shares which
have been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. The Buyer acknowledges
that the Buyer has requested only publicly available information and has
specifically declined to receive nonpublic information that may be material,
notwithstanding that the Company has offered to make all such information
available to the Buyer. Such nonpublic material information may include, for
example, information regarding other financings, potential strategic alliances,
distributor and customer arrangements, potential acquisitions and joint
ventures, new product developments, technological developments, supplier
arrangements, developments in manufacturing techniques, personnel changes and
other matters that could have material effects on the Company, and the Buyer
acknowledges that it is expressly assuming the risk that material nonpublic
information, which it has not received and does not desire to receive, might
have caused the Buyer not to make the investments contemplated hereby had the
Buyer received such information. The Buyer understands that its investment in
the Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares involves a high degree of risk, including, without limitation, the risks
arising from the facts that the Company's stockholders' equity is negative in an
amount in excess of $30,000,000, that the Company expects to incur a loss for
the quarter ended September 30, 1996, and that no assurance can be given that
the Company will not incur continuing losses or will be profitable. The Buyer
has sought such accounting, legal and tax advice as it has considered necessary
to an informed investment decision with respect to its acquisition of the
Preferred Shares, Warrants, Conversion Shares, Dividend Shares and Warrant
Shares.
e. No Governmental Review. The Buyer understands that no United
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States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Warrants, Conversion Shares, Dividend Shares and Warrant Shares or the fairness
or suitability of the investment in the Preferred Shares, Warrants, Conversion
Shares, Dividend Shares or Warrant Shares nor have such authorities passed upon
or endorsed the merits of the offering of the Preferred Shares, Warrants,
Conversion Shares, Dividend Shares and Warrant Shares.
f. Transfer or Resale. The Buyer understands that (i) except as
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provided in the Registration Rights Agreement, the Preferred Shares, the
Warrants, the Conversion Shares, the Dividend Shares and the Warrant Shares have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (a)
subsequently registered thereunder, or (b) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the securities to be sold, assigned
or transferred may be sold, assigned or transferred pursuant to an exemption
from such registration; (ii) any sale of such securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the ▇▇▇▇ ▇▇▇) 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
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any obligation to register such securities (other than pursuant to the
Registration Rights Agreement) under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
g. Legends. The Buyer understands that the certificates or other
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instruments representing the Preferred Shares and the Warrants and, until such
time as the Conversion Shares, the Dividend Shares and the Warrant Shares
(collectively, the "Registrable Securities") have been sold pursuant to a
registration under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Registrable Securities shall
bear a restrictive legend in substantially the following form (and a stop-
transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY
ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST
ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Preferred Shares or
Warrants or any Registrable Securities upon which it is stamped, if, unless
otherwise required by state securities laws, (a) the Registrable Securities are
sold pursuant to a sale that is registered under the 1933 Act, or (b) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale, assignment or transfer of the
Preferred Shares, the Warrants or such Registrable Securities may be made
without registration under the 1933 Act, or (c) such holder provides the Company
with reasonable assurances that the Preferred Shares, the Warrants or such
Registrable Securities can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.
h. Authorization; Enforcement. This Agreement has been duly and
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validly authorized, executed and delivered by the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and its
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subsidiaries are corporations duly organized and existing in good standing under
the laws of the jurisdiction in which they are incorporated, except, in the case
of any such subsidiaries, as would not have a Material Adverse Effect (as
defined below), and have the requisite corporate power to own their properties
and to carry on their business as now being conducted. Each of the Company and
its subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on the operations, properties or financial condition
of the Company and its subsidiaries taken as a whole.
b. Authorization; Enforcement. (i) The Company has the
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requisite corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, and to issue the Preferred Shares, the
Warrants and the Registrable Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Company, and (iv) this Agreement and the
Registration Rights Agreement constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
c. Capitalization. As of October 3, 1996, the authorized
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capital stock of the Company consists of (i) 60,000,000 shares of Common Stock
of which 12,219,415 shares were issued and outstanding, and (ii) 4,000,000
shares of Preferred Stock of which 20,000 shares were issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities, and (iii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement). The Company has furnished to the Buyer true and correct copies of
the Company's Certificate of Incorporation, as amended, as in effect on the date
hereof ("Certificate of Incorporation"), and the Company's By-laws, as in effect
on the date hereof (the "Bylaws").
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d. Issuance of Securities. The Registrable Securities and Preferred
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Shares are duly authorized and, upon issuance in accordance with the terms
hereof and thereof, shall be validly issued, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issue thereof.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby will not (i)
result in a violation of the Certificate of Incorporation or Bylaws (other than
as results from the limit on the number of authorized shares of Common Stock) or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted through the
Registration Period (as defined herein), in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations which
either singly or in the aggregate do not have a Material Adverse Effect. Except
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement in accordance with the terms hereof.
f. SEC Documents, Financial Statements. Since September 30, 1995,
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the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has delivered to the Buyer true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects
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the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer and referred to
in Section 2(d) of this Agreement contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
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since June 30, 1996 there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. Absence of Litigation. Except as set forth in its Form 10-Q for
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the quarter ended June 30, 1996, or in Schedule 3(h), there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the documents contemplated herein.
i. Purpose of Investment. The Company recognizes that the Buyer's
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investment in the Company is being made in order to provide financing for the
Company's ongoing operations and especially for the development and introduction
of new products, including the marketing of such products.
4. COVENANTS.
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a. Best Efforts. Each party shall use its best efforts timely
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to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to
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the Preferred Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing.
c. Reporting Status. Until the earlier of (i) the date as of
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which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto),
or (ii) the date on which (A) the Investors shall have sold all the Registrable
Securities and (B) none of the Preferred Shares is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
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sale of the Preferred Shares for the Company's internal working capital
purposes, including costs and
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expenses of the Company's business operations and product development,
production and marketing, and for repayment of the existing debt obligation to
Silicon Valley Bank in an amount up to $5,000,000.
e. Financial Information. The Company agrees to send the
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following reports to the Buyer during the Registration Period: (i) within five
(5) days after the filing thereof with the SEC, a copy of its Annual Reports on
Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-
K; and (ii) within one day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have
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authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of the Conversion Shares, the
Dividend Shares and the Warrant Shares.
g. Listing. The Company shall promptly secure the listing of
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the Registrable Securities upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares of
Registrable Securities from time to time issuable under the terms of this
Agreement and the Registration Rights Agreement.
h. Other Offerings. The Company shall not, within sixty days
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from the date hereof, sell or enter into a contract to sell any shares of Common
Stock, or any options, warrants, rights or securities entitling the holder
thereof to acquire any shares of Common Stock, at a price that is not
substantially equivalent to or greater than the fair market value of such Common
Stock, options, warrants, rights or securities at the time of the sale, except
for sales of not more than 5,000 shares of the Company's Convertible Preferred
Stock, Series 1.
i. Legal Expenses. The Company shall pay all expenses incurred
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in connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the Registration Rights Agreement, including,
without limitation, Buyer's attorneys' fees and expenses, up to an aggregate
amount of Ten Thousand Dollars ($10,000).
j. If a Buyer shall have given a notice of conversion as
provided in the Certificate of Designation, the Company's obligation to issue
and deliver the certificates for Common Stock upon such conversion shall be
absolute and unconditional, irrespective of the absence of any action by such
Buyer to enforce the same, any waiver or consent with respect to such
conversion, the recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any other
obligation of the Company to such Buyer, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
Buyer of any obligation to the Company, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to such
Buyer in connection with such conversion. If the Company fails to issue and
deliver the certificates for the Common Stock to such Buyer converting shares of
Preferred Stock pursuant to the Certificate of Designation as and when required
to do so, in addition to any other liabilities the Company may have under the
Certificate of Designation and under applicable law, the Company shall pay or
reimburse such Buyer on demand for all out-of pocket costs, liabilities, damages
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and expenses, including, without limitation, fees and expenses of legal counsel,
incurred by such Buyer as a result of such failure.
k. As used in Section 2(c) of the Certificate of Designation,
the term "month" shall mean a period of 30 consecutive calendar days.
5. TRANSFER AGENT INSTRUCTIONS.
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The Company shall instruct its transfer agent to issue
certificates, registered in the name of each of the entities constituting the
Buyer that holds the related Preferred Shares or Warrants or its nominee, for
the Conversion Shares, Dividend Shares and Warrant Shares in such amounts as
specified from time to time by such entity to the Company. All such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company shall provide instructions and opinions of counsel to its transfer
agent in accordance with Section 3(m) of the Registration Rights Agreement. The
Company warrants that no instruction other than such instructions referred to in
this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof, in the case of the Registrable Securities, will be given by the Company
to its transfer agent and that the Preferred Shares and the Registrable
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Registrable Securities. If the Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, that registration of a resale by the Buyer of any of the Preferred
Shares or the Registrable Securities is not required under the 1933 Act, the
Company shall permit the transfer, and promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
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The obligation of the Company hereunder to sell the Preferred
Shares is subject to the satisfaction, at or before the date of the Closing, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware.
c. The Buyer shall have delivered to the Escrow Account, in
accordance with the Escrow Agreement, the Purchase Price for all Preferred
Shares being purchased by wire transfer of immediately available funds pursuant
to the wiring instructions provided by the Company.
d. The representations and warranties of each Buyer shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific
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date), and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Buyer at or prior
to the date of the Closing.
e. The Escrow Agreement shall have been duly executed and
delivered to the Company.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
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The obligation of the Buyer to purchase the Preferred Shares at
the Closing is subject to the satisfaction, at or before the date of the
Closing, of each of the following conditions, provided that these conditions are
for the sole benefit of each of the entities constituting the Buyer and may be
waived by any such entity for itself only at any time in its sole discretion:
a. The parties shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to each other.
b. The Certificate of Designation shall have been filed with
the Secretary of State of Delaware, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.
c. The Common Stock shall be authorized for quotation on the
Nasdaq National Market or the Nasdaq SmallCap Market and trading in the Common
Stock on Nasdaq National Market or the Nasdaq SmallCap Market shall not have
been suspended by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
date of the Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the Closing. The
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the date of the Closing, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer.
e. The Buyer shall have received the opinion of the Company's
counsel dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of Exhibit D
attached hereto.
f. The Company shall have executed and delivered to the Buyer
the Stock Certificates for the Preferred Shares.
g. The Board of Directors of the Company shall have adopted
resolutions in substantially the form of Exhibit E attached hereto.
h. The Company shall not have received from Nasdaq or the
National Association of Securities Dealers, Inc. any written or oral
communication as to its actual or
10
potential ineligibility for continued listing of the Common Stock on the Nasdaq
National Market, the substance of which shall not have been publicly disclosed.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the State of California without
regard to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for
--------
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
----------------------------
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
-------
under the terms of this Agreement shall be sent by mail or delivered personally
or by courier or by facsimile and shall be effective five days after being
placed in the mail, if mailed, certified or registered, return receipt
requested, or upon receipt, if delivered personally or by courier or by
facsimile, in each case properly addressed to the party to receive the same.
The addresses for such communications shall be:
If to the Company:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
11
With copy to:
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Buyer, at the addresses on the signature pages.
Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. Neither the Company nor the Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, any of the entities constituting the Buyer may assign its rights
hereunder to any of its "affiliates," as that term is defined under the 1934
Act, without the consent of the Company, provided, however, that any such
assignment shall not release such entity from its obligations hereunder unless
such obligations are assumed by such affiliate and the Company has consented to
such assignment and assumption.
h. No Third Party Beneficiaries. This Agreement is intended
----------------------------
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
--------
8(l), the representations and warranties of the Company and the Buyer contained
in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5,
8(g), 8(h) and 8(k), and this subsection shall survive the closing. Each party
which constitutes the Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Buyer shall have the right
---------
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
------------------
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
-----------
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date.
12
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYER:
------- -----
SYQUEST TECHNOLOGY, INC. CYGNI S.A.
--------------------------------------
By:__________________________________
Name: By: /s/ ▇. ▇▇▇▇▇▇▇
__________________________________
Its: Name: ▇. ▇▇▇▇▇▇▇
Its: Authorized Signatory
▇/▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇-▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇
Number of Preferred Shares
to be purchased at Closing: 1,000
-----------
________________________________________
By: ____________________________________
Name:
Its:
Address: _____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing: ___________
________________________________________
By: ____________________________________
Name:
Its:
Address: _____________________________
_____________________________
_____________________________
Number of Preferred Shares
to be purchased at Closing: ___________
13
EXHIBIT B
ESCROW AGREEMENT
[CYGNI S.A.]
ESCROW AGREEMENT (the "Agreement") dated as of October 8, 1996, among CYGNI
S.A. (the "Buyer"), SyQuest Technology, Inc., a Delaware corporation (the
"Company"), and AM Capital Management Group, a New York corporation, as Escrow
Agent (the "Escrow Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Buyer and the Company have entered into a Securities Purchase
Agreement dated as of October 8, 1996 (the "Purchase Agreement"), pursuant to
which the Company has agreed to sell, and the Buyer has agreed to purchase, an
aggregate of 25,000 shares of the Company's 5% Cumulative Convertible Preferred
Stock, Series 2, $.001 par value per share (the "Preferred Shares"); and
WHEREAS, the Buyer and the Company have agreed to place into escrow the
$25,000,000 purchase price for the Preferred Shares to be available for
disbursements to the Company for its business operations and product
development, introduction and marketing on and after the date hereof and
repayment of a loan owed to Silicon Valley Bank; and
WHEREAS, it is a condition of the Company obligation to sell, and the
Buyer's obligation to purchase, the Preferred Shares that this Escrow Agreement
be executed and delivered; and
WHEREAS, the Escrow Agent is willing to act hereunder on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth below, the parties hereto hereby agree as follows:
1. ESCROW ACCOUNT.
--------------
1.1 Deposit. On the date of the Closing under, and to the extent
-------
required by, the Purchase Agreement, the Buyer shall cause to be wire
transferred to the Escrow Agent $25,000,000 (the "Escrow"), to be held by the
Escrow Agent in a separate interest-bearing money market account established at
Silicon Valley Bank or any other banking institution that the Company may
designate (the "Bank"), Account No. 3300039539 or another account subject to
this Agreement to which the Company may direct that the Escrow be transferred
(the "Escrow Account"), subject to the terms and provisions contained herein.
Interest shall accrue on the Escrow Account at the highest rate paid by the Bank
on accounts which permit multiple withdrawals from an account within any
particular monthly period. The Escrow Agent shall provide the Company with all
Bank statements, notices and other writings
which it receives from the Bank in connection with the Escrow Account. The
Escrow, together with all interest thereon, shall at all times remain (until
disbursed in accordance with this Agreement) the property of the Company,
subject only to the restrictions as to the use thereof expressly provided in
this Escrow Agreement.
1.2 Transfer of Escrow Account. The Company may at any time hereafter
--------------------------
request by notice to the Escrow Agent that the Escrow Account be transferred to
another banking institution. In such event, the Escrow Agent shall, within two
business days after receiving such notice, transfer the remaining Escrow as the
Company may instruct, whereupon the transferee banking institution shall become
the "Bank" for purposes of this Agreement and the account into which the
remaining Escrow is deposited shall become the "Escrow Account", in all cases
subject to this Agreement.
2. DISBURSEMENTS.
-------------
2.1 Disbursements. If at any time, or from time to time during the
-------------
term of this Agreement, the Company shall deliver to the Escrow Agent a request
in writing signed by the Company for a disbursement from the Escrow accompanied
by a certification, in substantially the form attached hereto as Exhibit A,
executed by the Company's Chief Executive Officer or Chief Financial Officer,
stating that the amount of the Escrow to be disbursed shall be used by the
Company solely for costs and expenses of the Company's business operations and
product development, introduction and marketing after the date hereof, or for
payment of accrued interest on and repayment of any loan heretofore made to the
Company by Silicon Valley Bank in an aggregate amount not in excess of
$5,000,000, the Escrow Agent shall pay such amount of the Escrow as specified in
such request within forty-eight hours of receipt of such request by the Escrow
Agent by wire transfer as directed in such request.
2.2 Controversies. If any controversy arises between one or more of
-------------
the parties hereto, or between any of the parties hereto and any person not a
party hereto, as to whether or not or to whom the Escrow Agent shall deliver the
Escrow or any portion thereof or as to any other matter arising out of or
relating to this Escrow Agreement, the Escrow Agent shall not be required to
determine the same and need not make any delivery of the Escrow concerned or any
portion thereof but may retain the same until the rights of the parties to the
dispute shall have been finally determined by agreement or by final judgment of
a court of competent jurisdiction after all appeals have been finally determined
(or the time for further appeals has expired without an appeal having been
made). The Escrow Agent shall deliver that portion of the Escrow concerned
covered by such agreement or final order within five days after the Escrow Agent
receives a copy thereof. The Escrow Agent shall assume that no such controversy
has arisen unless and until it receives written notice from the Buyer or the
Company that such controversy has arisen, which refers specifically to this
Agreement and identifies the adverse claimants to the controversy.
2.3 No Other Disbursements. No portion of the Escrow monies shall be
----------------------
disbursed or otherwise transferred except in accordance with this section 2,
section 4 or
2
section 5.1(b). Without limiting the foregoing, neither Escrow Agent nor Buyer
shall be entitled to any right of offset against the Escrow or otherwise
entitled to receive any portion of the Escrow.
3. ESCROW AGENT. The acceptance by the Escrow Agent of its duties
------------
hereunder is subject to the following terms and conditions, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent:
3.1 The Escrow Agent shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or validity of any cash,
investments or other amounts deposited with or held by it.
3.2 The Escrow Agent shall be protected in acting upon any written
notice, certificate, instruction, request or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
3.3 The Escrow Agent shall not be liable for any act done hereunder
except in the case of its gross negligence, willful misconduct or bad faith.
3.4 The Escrow Agent shall not be obligated or permitted to
investigate the correctness or accuracy of any statement made in the certificate
presented pursuant to Section 2.1 or to require documentation or evidence
substantiating any such certificate.
3.5 The Escrow Agent shall have no duties as Escrow Agent except those
which are expressly set forth herein, and in any modification or amendment
hereof; provided, however, that no such modification or amendment hereof shall
affect its duties unless it shall have given its written consent thereto.
4. TERMINATION. This Agreement shall terminate on the earlier of (a) the
-----------
date on which the Escrow shall have been fully disbursed in accordance with the
terms and conditions of this Agreement, and (b) any other date agreed to by the
Buyer and the Company, in which event the Escrow shall be disbursed in full to
the Company.
5. MISCELLANEOUS.
-------------
5.1 Indemnification of Escrow Agent.
-------------------------------
(a) The Company agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss incurred without gross negligence, willful
misconduct or bad faith on the Escrow Agent's part, arising out of or in
connection with the administration of this Agreement, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
3
This indemnification shall not apply to any direct claim against the Escrow
Agent by the Company alleging a breach of this Agreement.
(b) In the event of any dispute as to the nature of the rights or
obligations of the Buyer, the Company or the Escrow Agent hereunder, the Escrow
Agent may at any time or from time to time interplead, deposit and/or pay all or
any part of the Escrow Funds with or to a court of competent jurisdiction in
Fremont, California (including the nearest federal courts thereto), in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Buyer. Upon such interpleader, deposit or
payment, the Escrow Agent shall immediately and automatically be relieved and
discharged from all further obligations and responsibilities hereunder,
including the decision to interplead, deposit or pay such funds.
5.2 Other Escrow Agreements. The parties acknowledge that the
-----------------------
Company, the Escrow Agent, other purchasers of Preferred Shares and the
purchasers of the Company's Convertible Preferred Stock, Series 1, are
concurrently herewith entering into other Escrow Agreements in substantially the
same form as this Agreement (the "Other Agreements"). The parties contemplate
that deposits into the Escrow Account shall be made under this Agreement and the
Other Agreements, which together shall govern the rights and obligations of the
parties hereto and thereto with respect to the Escrow Account, the Escrow and
other funds deposited into the Escrow Account and the rights and duties of the
parties with respect thereto, as if this Agreement and the Other Agreements were
a single agreement among all of the parties hereto and thereto.
5.3 Amendments. This Agreement may be modified or amended only by a
----------
written instrument executed by each of the parties hereto.
5.4 Notices. All communications required or permitted to be given
-------
under this Agreement to any party hereto shall be sent by first class mail or
facsimile to such party at the address, except in the case of the Escrow Agent,
of such party set forth in the Purchase Agreement and, in the case of the Escrow
Agent, at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
5.5 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Escrow Agent shall not assign its duties under this
Agreement.
5.6 Governing Law. This Agreement shall be governed by and construed
-------------
and interpreted in accordance with the laws of the State of Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement.
4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By:___________________________________
Name:
Its:
BUYER:
-----
______________________________________
By:___________________________________
Name:
Its:
______________________________________
By:___________________________________
Name:
Its:
______________________________________
By:___________________________________
Name:
Its:
ESCROW AGENT:
AM CAPITAL MANAGEMENT GROUP
By:___________________________________
Name: ▇▇▇▇▇▇▇ Arnouse
Its: President
5
EXHIBIT A
CERTIFICATION
Reference is made to the Escrow Agreement dated as of October 8, 1996,
by and among the investors named therein, SyQuest Technology, Inc. and AM
Capital Management Group (the "Escrow Agreement"). Capitalized terms used and
not otherwise defined herein have the meanings respectively ascribed to them in
the Escrow Agreement.
The undersigned hereby certifies to the Escrow Agent that the attached
request for disbursement from the Escrow has been duly authorized by the Company
and that the proceeds from the disbursement requested therein by the Company
shall be used by the Company solely for (a) costs and expenses of the Company's
business operations and product development, introduction and marketing incurred
after the date of the Escrow Agreement or (b) payment of accrued interest on and
repayment of any loan made, prior to October 9, 1996, to the Company by Silicon
Valley Bank in an aggregate amount not in excess of $5,000,000.
IN WITNESS WHEREOF, the undersigned has executed this Certification as
this ____ day of ___________, 199__.
SYQUEST TECHNOLOGY, INC.
By:_____________________________
Name:
Title:
6
EXHIBIT C
[FORM OF WARRANT]
[Cygni]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
SYQUEST TECHNOLOGY, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.___________________ Number of Shares _____
Date of Issuance [DATE OF CONVERSION], 199_
SyQuest Technology, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, __________________________________
("Holder"), the registered holder hereof, is entitled, subject to the terms set
forth below, to purchase from the Company upon surrender of this Warrant, at any
time or times on or after the date hereof but not after 5:00 P.M. San Francisco
time on the Expiration Date (as defined herein) [EQUAL TO ONE-THIRD OF THE
NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF 5% PREFERRED SHARES]
_________________ (_________) fully paid nonassessable shares of Common Stock
(as defined herein) of the Company (the "Warrant Shares") at a purchase price of
[THE LOWER OF $7.15 PER SHARE AND 110% OF THE AVERAGE MARKET PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET FOR THE FIVE TRADING DAYS PRECEDING THE
CONVERSION DATE] U.S. $_______ per share in lawful money of the United States.
Section 1.
(a) Definitions. The following words and terms as used in this
-----------
Warrant have the following meanings:
"Common Stock" means (a) the Company's common stock, par value
------------
$.001 per share, and (b) any capital stock into which such common stock shall
have been changed or any capital stock resulting from a reclassification of such
common stock.
"Convertible Securities" mean any securities issued by the
----------------------
Company which are convertible into or exchangeable for, directly or indirectly,
shares of Common Stock.
"Expiration Date" means the date three years from the date of
---------------
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of San Francisco or
the State of California (a "Holiday"), the next preceding date that is not a
Holiday.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Transfer" shall include any disposition of any Warrants or
--------
Warrant Shares, or of any interest in either thereof which would constitute a
sale thereof within the meaning of the Securities Act of 1933, as amended, or
the securities laws of California or such other state or states as may be
applicable.
"Warrant" shall mean this Warrant and all Warrants issued in
-------
exchange, transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S. $_____ per share.
----------------------
(b) Other Definitional Provisions.
-----------------------------
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof,"
and "hereunder," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "Section,"
"Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. Exercise of Warrant.
-------------------
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised, as a whole or in part, at any time during normal business hours on or
after the opening of business on the date hereof and prior to 5:00 P.M. San
Francisco Time on the Expiration Date.
2
The rights represented by this Warrant may be exercised by the holder hereof
then registered on the books of the Company, as a whole or from time to time in
part (except that this Warrant shall not be exercisable as to a fractional
share) by (i) delivery of a written notice, in the form of the Subscription
Notice attached as Exhibit A hereto, of such holder's election to exercise this
Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price multiplied by the number of Warrant Shares as to which the
Warrant is being exercised (plus any applicable issue or transfer taxes) in cash
or by check, for the number of Warrant Shares as to which this Warrant shall
have been exercised, and (iii) the surrender of this Warrant, properly endorsed,
at the principal office of the Company (or at such other agency or office of the
Company as the Company may designate by notice to the holder hereof); provided,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 8 shall be applicable. In the event of any exercise
of the rights represented by this Warrant in compliance with this Section 2(a),
a certificate or certificates for the Warrant Shares so purchased, registered in
the name of, or as directed by, the holder, shall be delivered to, or as
directed by, such holder within a reasonable time after such rights shall have
been so exercised.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall issue a new
Warrant identical in all respects to the Warrant exercised except (i) it shall
represent rights to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under the Warrant exercised, less the number
of Warrant Shares with respect to which such Warrant is exercised, and (ii) the
holder thereof shall be deemed to have become the holder of record of such
Warrant Shares immediately prior to the close of business on the date on which
the Warrant is surrendered and payment of the amount due in respect of such
exercise and any applicable taxes is made, irrespective of the date of delivery
of such share certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are properly
closed, such person shall be deemed to have become the holder of such Warrant
Shares at the opening of business on the next succeeding date on which the stock
transfer books are open.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
----------------------------
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
-----
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
3
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
---------------------------------------
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant.
Section 6. No Limitation on Corporate Action. No provisions of this
---------------------------------
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
-------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an
"accredited investor" as such term is defined in Rule 501(a)(3) or Rule
501(a)(8) of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act (an "Accredited Investor") and an "excluded purchaser"
for purposes of Section 25102(f) of the California Corporate Securities Law of
1968 (an "Excluded Purchaser"). Upon exercise of this Warrant, the holder
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the Warrant Shares so purchased are being acquired solely
for the holder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale and that such
holder is an Accredited Investor and an Excluded Purchaser. If such holder
cannot make such representations because they would be factually incorrect, it
shall be a condition to such holder's exercise of the Warrant that the Company
receive such other representations as the Company considers reasonably necessary
to assure the Company that the issuance of its securities upon exercise of the
Warrant shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
--------------------------------------------------
(a) Prior to any sale, transfer or other disposition of this
Warrant or the Warrant Shares not pursuant to an effective registration
statement, the holder thereof will give ten (10) days' notice to the Company of
such holder's intention to effect such transfer. Each such notice shall describe
the manner and circumstances of the proposed transfer and, if such transfer is
not registered under the Securities Act, shall be accompanied by an opinion,
4
addressed to the Company and reasonably satisfactory in form and substance to
it, of counsel (reasonably satisfactory to the Company) for such holder, stating
that, in the opinion of such counsel, such transfer will be a transaction exempt
from registration under the Securities Act.
(b) If such sale, transfer or other disposition may in the opinion
of such counsel be effected without registration under the Securities Act, such
holder shall thereupon be entitled to the terms of the notice delivered by such
holder to the Company. If in the opinion of such counsel such transfer may not
be effected without registration under the Securities Act, such holder shall not
be entitled to so transfer this Warrant or the Warrant Shares unless the Company
shall have filed a registration statement relating to such proposed transfer and
such registration statement shall have become effective under the Securities
Act.
(c) Any Warrant Shares issued upon exercise of this Warrant may
bear one or more of the legends in similar form to the legend set forth on this
Warrant, except as otherwise provided in the Securities Purchase Agreement dated
as of October 8, 1996, between the Company and the other investors named
therein, or in the Registration Rights Agreement dated as of October 8, 1996,
between the Company and the investors named therein.
(d) The Company acknowledges that it has entered into a
Registration Rights Agreement entitling certain holders of Warrant Shares to
require the Company to cause such Warrant Shares to be registered under the
Securities Act.
Section 9. Adjustments.
-----------
(a) Reclassification and Reorganization. In case of any
-----------------------------------
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. Any such provision shall include provision for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 9. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company acting in good faith.
5
(b) Dividends and Stock Splits. If and whenever the Company shall effect a
--------------------------
stock dividend, a stock split, a stock combination, or a reverse stock split of
the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
--------------------------------------------
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such
terms as to indemnity or otherwise as it may in its discretion impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed.
Section 11. Notice. All notices and other communications under this
------
Warrant shall (a) be in writing (which shall include communications by
facsimile), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, or by facsimile, or (ii) delivered by hand, and (c) be
given at the following respective addresses and facsimile numbers and to the
attention of the following persons:
(a) if to the Company, to it at:
SyQuest Technology, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
(b) if to Holder, to it at the address set forth below Holder's
signature on the signature page hereof.
or at such other address or facsimile number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the fifth Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by facsimile, when such
communication is transmitted to the appropriate number determined as above
provided in this Section and the appropriate answer back is received or receipt
is otherwise acknowledged, and (iii) if given by hand delivery, when left at the
address of the addressee addressed as above provided, except that notices of a
change of address, facsimile or telephone number, shall not be deemed furnished,
until actually received.
6
Section 12. Miscellaneous. This Warrant and any term hereof may be
-------------
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of Delaware.
Section 13. Date. The date of this Warrant is _____________, 199__. This
----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
SYQUEST TECHNOLOGY, INC.
By:______________________________
Name:____________________________
Title:___________________________
ACCEPTED:
--------
[HOLDER]
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
__________________________
__________________________
__________________________
7
EXHIBIT A TO WARRANT
--------------------
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
SYQUEST TECHNOLOGY, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by this Warrant specified below according to the
conditions thereof and herewith makes payment of U.S. $_______________, the
aggregate Warrant Exercise Price of such Warrant Shares in full. Capitalized
terms used herein have the meanings respectively ascribed to them in the
Warrant.
The undersigned further certifies that:
1. It is acquiring the Warrant Shares for its own account and not as
nominee for any other party, for investment and not with a view to, or sale in
connection with, any distribution thereof, nor with any present intention of
distributing any of the same except in compliance with all applicable securities
laws; and
2. As of this date, it is an "accredited investor" as such term is
defined in Rule 501(a)(3) or Rule 501(a)(8) of Regulation D as promulgated by
the Securities and Exchange Commission under the Securities Act and an "excluded
purchaser" for purposes of Section 25102(f) of the California Corporate
Securities Law of 1968.
Dated: ______________, _____ [HOLDER]
By:___________________________________
Name:_________________________________
Title:________________________________
Address:
______________________________________
______________________________________
______________________________________
Number of Warrant Shares Being
Purchased:
8
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
[PANGAEA]
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October
8, 1996 by and among SyQuest Technology, Inc., a Delaware corporation, with
headquarters located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Company"), and the undersigned buyers (collectively, the "Buyer").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement to (i) issue and sell to the Buyer shares of the
Company's 5% Cumulative Convertible Preferred Stock, Series 2, $.001 par value
per share (the "Preferred Shares"), which will be convertible into shares of the
Company's common stock (the "Common Stock"), par value $.001 per share (as
converted, the "Conversion Shares"), pursuant to which certain shares of Common
Stock may be issued to the Buyer in payment of dividends (the "Dividend
Shares"), and (ii) issue Warrants (the "Warrants") which will be exercisable to
purchase shares of Common Stock (the "Warrant Shares"); and
B. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have
the following meanings:
i. "Investor" means the Buyer and any transferee or
assignee thereof to whom the Buyer assigns this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9
hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States Securities and
Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Dividend Shares.
iv. "Registration Statement" or "Registration Statements" means
a registration statement or statements of the Company filed under the ▇▇▇▇ ▇▇▇.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall use its best
----------------------
efforts to prepare, and, on or before thirty (30) days after the date of the
issuance of the relevant Preferred Shares, file with the SEC a Registration
Statement or Registration Statements (as is necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration) (any of which may contain a combined prospectus with
other registrations by the Company), covering the resale of the Registrable
Securities issuable upon conversion of or in connection with the relevant
Preferred Shares, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act, such Registration
Statement(s) also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of the Preferred Shares or
exercise of the Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions. The Registration Statement(s) (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to and approved by the Buyer and its
counsel prior to its filing or other submission, such approval not to be
unreasonably withheld.
b. Underwritten Offering. If any offering pursuant to a
---------------------
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority of the Registrable Securities
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer their interest in the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
send to each Investor who is entitled to registration rights under this Section
2(c) written notice of such determination and, if within twenty (20) days
2
after receipt of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder; provided
that no portion of the equity securities which the Company is offering for its
own account shall be excluded; provided, further that the Company shall be
entitled to exclude Registrable Securities to the extent necessary to avoid
breaching obligations existing prior to the date hereof to other stockholders of
the Company. Any exclusion of Registrable Securities shall be made pro rata
among the Investors seeking to include Registrable Securities, in proportion to
the number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a) hereof. The obligations of the Company under this Section 2(c) may
be waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
d. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Buyer and any other Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3.
In the event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, the Company shall register the sale on another
appropriate form.
3
3. RELATED OBLIGATIONS.
-------------------
a. The Company shall use its best efforts to cause such
Registration Statement(s) relating to Registrable Securities to become effective
as soon as possible after such filing, and keep the Registration Statement(s)
effective pursuant to Rule 415 at all times until the earlier of (i) the date as
of which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Registrable Securities and (B) none of the Preferred Shares is outstanding (the
period ending on the earlier of such dates being hereinafter called the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s) as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and (ii) such number of copies of a prospectus, including
a preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold forty percent or more of the Registrable
Securities being offered reasonably request (but in no event in more than five
states of the United States), (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such
4
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (a) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company, or (e) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
a Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel, designated
as selling stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the Registration
Statement(s) and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects.
i. At the request of the Investors who hold a majority of the Registrable
Securities being sold, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
5
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(j). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
6
l. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i) or (ii),
the Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure the inclusion for quotation on the Nasdaq SmallCap Market for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
securities in a timely fashion that complies with then mandated securities
settlement procedures for regular way market transactions and delivery of
unlegended securities in settlement of such sales.
n. The Company shall take all other reasonable actions necessary
to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the ▇▇▇▇ ▇▇▇) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
4. OTHER OBLIGATIONS.
-----------------
a. At least five (5) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to
7
the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees,
8
and fees and disbursements of counsel for the Company and fees and disbursements
of one counsel for the Investors, shall be borne by the Company, subject, with
respect to expenses incurred by the Investors, to the limit stated in Section
4(h) of the Securities Purchase Agreement.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend each Investor who holds such Registrable Securities,
the directors, officers and each person who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), if any, and any underwriter (as defined in the ▇▇▇▇ ▇▇▇) for the
Investors, and the directors and officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, "Claims") to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
9
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered to each broker or dealer
executing a sale of Registrable Securities the prospectus made available by the
Company; and (iv) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify, hold harmless
and defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to
10
information such persons so furnished in writing by such persons expressly for
inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The Company shall pay reasonable fees for only one
separate legal counsel for the Investors, and such legal counsel shall be
selected by the Investors holding a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates;
provided, that legal fees of such firm shall be reasonable. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
11
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee of all or any portion of Registrable Securities if: (i) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, (vi) such transferee shall be an "accredited investor" as that term
defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii) in
the event the assignment occurs subsequent to the date of effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a), the
transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
12
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier or by facsimile and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier or facsimile, in each case properly
addressed to the party to receive such notice. The addresses for such
communications shall be:
If to the Company:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
With copy to:
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Buyer, at the addresses on the signature pages of the
Securities Purchase Agreement.
Each party shall provide notice to the other party of any change
in address.
13
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement, the Securities Purchase Agreement and the
Escrow Agreement constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement and the Securities Purchase Agreement
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request
14
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
-------
SYQUEST TECHNOLOGY, INC.
By:_____________________________
Name:
Its:
BUYER:
-----
________________________________
By:_____________________________
Name:
Its:
________________________________
By:_____________________________
Name:
Its:
________________________________
By:_____________________________
Name:
Its:
15
Schedule 3(c)
-------------
1. As of June 30, 1996, the Company had options outstanding to purchase a
total of 3,252,244 shares of its Common Stock. As of October 3, 1996, the
Company had options outstanding to purchase a total of 2,790,345 shares of its
Common Stock.
2. The Company has concluded negotiations with certain of its suppliers and is
currently in negotiations with certain other suppliers regarding amounts owed to
those suppliers. Agreements have been reached with certain suppliers and
agreements are being negotiated with others to provide for payment of such
amounts by the Company through on various terms, including notes and convertible
debentures, as well as the possible issuance of Common Stock in exchange for
forgiveness of indebtedness. Certain of the arrangements may provide that the
debt will not be cancelled until such time as the supplier obtains proceeds from
the sale of the shares issued in the arrangement. Equity securities issued for
cancellation of debt, as well as for the Common Stock issuable upon conversion
of debentures, may include registration rights.
3. The Company has issued a warrant to purchase 100,000 shares of Common Stock
to ▇▇▇▇▇▇▇ Capital Corporation, and has a commitment to issue a warrant to (a)
▇▇▇▇▇▇▇ & Co. to purchase 75,000 shares of Common Stock, and (b) to W.I. ▇▇▇▇▇▇
Group to purchase 500,000 shares of Common Stock.
Schedule 3(e)
-------------
There are no dislosures to be made pursuant to this Schedule 3(e).
Schedule 3(g)
-------------
Since March 31, 1996, the Company has suffered certain material adverse changes
and developments, including the following;
The Company has continued to incur losses each month and sales for the
period were significantly below those for the corresponding period of 1995.
As a result of these and other factors, past-due accounts payable continued
to be high during the period, amounts borrowable under the Company's line
of credit decreased and the Company's overall liquidity has been materially
and adversely affected. Suppliers were placed on a payment plans for
repayment of amounts owed. Reference is made to (i) the Company's press
release dated May 7, 1996, (ii) the Company's report on Form 10-Q for the
quarter ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) various news-wire stories of June 5,
1996, containing Nasdaq's statements in connection with the Company's lack
of compliance with Nasdaq listing requirements, (iv) the Company's report
on Form 10-Q for the quarter ended June 30, 1996, (v) the Company's press
release dated September 16, 1996, (vi) the Company's Current Report on Form
8-K dated June 14, 1996, (vii) the events and developments described in the
Company's Amendment Number 1 to Form S-3 Registration Statement filed
August 29, 1996, (viii) Nasdaq's granting of an exception through October
31, 1996, to the net tangible assets and capital and surplus requirements
for listing on the Nasdaq Stock Market, and (ix) the granting of an
exception to the rules of the National Association of Securities Dealers,
Inc., which would otherwise require stockholder approval of the
transactions contemplated by this Agreement, such exception having been
granted because the Company's audit committee was of the opinion that a
failure to complete immediately the transactions contemplated by this
Agreement would seriously jeopardize the financial viability of the
Company. Such documents and information are incorporated herein by this
reference. See Schedule 3(h) for information regarding litigation, which is
also incorporated by reference.
Schedule 3(h)
-------------
There are no actions, suits, proceedings, inquiries or investigations pending or
threatened against the Company that are not set forth in Form 10-Q for the
quarter ended June 30, 1996 that would have a Materially Adverse Effect or which
would adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the Agreement or any of
the documents contemplated therein.
