EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
----------------------
This Subscription Agreement (the "Agreement") dated March 31, 1997 is
entered into by and between SyQuest Technology, Inc., a Delaware corporation
(together with its successors, "SyQuest"), and ▇▇▇▇▇▇▇▇ International Limited, a
company organized under the laws of the Cayman Islands (together with its
successors, "▇▇▇▇▇▇▇▇").
Unless otherwise defined herein, capitalized terms used herein and not
defined herein shall have the meanings given to them in Regulation S (as now if
effect or as hereafter amended, "Regulation S") under the Securities Act of
1933, as amended (the "Securities Act").
The parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the basis of the
-----------------
representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
a. 5% Convertible Preferred Stock. SyQuest agrees to issue and
------------------------------
sell to ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇ agrees to purchase from SyQuest, on the
Closing Date specified in Section 2 hereof, 50,000 shares of SyQuest's 5%
Cumulative Convertible Preferred Stock, Series 3, stated value $100 per
share (the "Preferred Shares"), having the terms and conditions set forth
in the Certificate of Designation which is attached hereto as Annex A at a
purchase price per share equal to one hundred dollars ($100), for an
aggregate purchase price of $5,000,000.
b. Warrant. In consideration of the purchase of the Preferred
-------
Shares by ▇▇▇▇▇▇▇▇, SyQuest will issue to ▇▇▇▇▇▇▇▇ on the Closing Date
specified in Section 2 hereof, a warrant having the terms set forth in the
warrant certificate attached hereto as Annex B (the "Warrant") to purchase
up to 5,000,000 shares (subject to adjustment) of SyQuest's Common Stock,
par value $.001 per share (the "Common Stock"), which, subject to the terms
and conditions of this Agreement and the Warrant, will be freely tradable.
The shares of Common Stock issuable pursuant to the Warrant are referred to
herein as the "Warrant Shares."
c. Converted Stock. The term "Converted Stock" shall apply to
---------------
any Common Stock issued or to be issued to ▇▇▇▇▇▇▇▇ upon conversion of the
Preferred Shares pursuant to the terms of this Agreement and the
Certificate of Designation or upon the exercises of the Warrant.
2. Closing Date. Upon satisfaction or, if applicable, waiver of
------------
the conditions set forth in Sections 8 and 9 hereof, the delivery of the
Preferred Shares referred to in Section 1(a) and the Warrant referred to in
Section 1(b) (the "Closing") shall take place initially via facsimile at 1:00
p.m. (New York time) on April 1, 1997, or at such other date and time as
▇▇▇▇▇▇▇▇ and SyQuest may agree (such date and time being referred to herein as
the "Closing Date"), provided that the original certificates shall be delivered
via Federal Express to ▇▇▇▇▇▇▇▇ at the address set forth in Section 13 hereof.
At the Closing, the following deliveries shall be made:
a. Preferred Shares. SyQuest shall deliver the certificate
----------------
representing the Preferred Shares, duly registered on the books of SyQuest
in the name of ▇▇▇▇▇▇▇▇, against payment by ▇▇▇▇▇▇▇▇ of the purchase price
specified in Section 1(a) hereof in immediately available funds to the
following account: Account Name: Bank of America, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Account No. 1233456287, ABA No.
▇▇▇▇▇▇▇▇▇.
b. Warrant. SyQuest shall deliver the certificate representing
-------
the Warrant to ▇▇▇▇▇▇▇▇. Such certificate shall be substantially in the
form attached hereto as Annex B.
c. Closing Documents. The closing documents required by
-----------------
Sections 7 and 8 shall be delivered to ▇▇▇▇▇▇▇▇ and SyQuest, respectively.
d. Delivery Notice. An executed copy of the delivery notice in
---------------
the form attached hereto as Annex C shall be delivered to ▇▇▇▇▇▇▇▇.
The foregoing deliveries shall be deemed to occur simultaneously as
part of a single transaction, and no delivery shall be deemed to have been made
until all such deliveries have been made.
3. Representations and Warranties of SyQuest. Except as set forth
-----------------------------------------
in the Schedule of Exceptions attached hereto, SyQuest hereby represents and
warrants to ▇▇▇▇▇▇▇▇ on the date hereof and on the Closing Date, on the date any
Preferred Share is converted (each a "Conversion Date") and on each Exercise
Date (as defined in the Warrant Certificate) as follows:
a. SyQuest has been duly incorporated and is validly existing in
good standing under the laws of Delaware, or, after the Closing Date if
another entity has succeeded SyQuest in accordance with the terms hereof,
under the laws of one of the United States.
b. The execution, delivery and performance of this Agreement
(including the issuance of the Preferred Shares) and the Warrant
Certificate by SyQuest have been duly authorized by all requisite corporate
action and no further consent or authorization of SyQuest, its Board of
Directors or its stockholders is required. This Agreement and the Warrant
Certificate have been duly executed and delivered by SyQuest and, when duly
authorized, executed and delivered by ▇▇▇▇▇▇▇▇, will be valid
2
and binding agreements enforceable against SyQuest in accordance with their
terms, sub ject to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
c. SyQuest has full corporate power and authority necessary to
execute and deliver this Agreement and the Warrant Certificate and to
perform its obligations hereunder (including the issuance of the Preferred
Shares) and thereunder.
d. No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution and delivery by
SyQuest of this Agreement and the Warrant Certificate or the performance by
SyQuest of any of its obligations hereunder (including the issuance of the
Preferred Shares) or thereunder, other than, with respect to any Exercise
Date, any consent, approval, authorization or order which is received on or
prior to such date.
e. Neither the execution and delivery by SyQuest of this
Agreement and the Warrant Certificate nor the performance by SyQuest of any
of its obligations hereunder or thereunder:
(1) violates, conflicts with, results in a breach of, or
constitutes a default (or an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a
default) under (A) the Certificate of Incorporation or by-laws of
SyQuest or any of its subsidiaries or any Certificate of Designation
relating to any securities of SyQuest or any of its subsidiaries, (B)
any decree, judgment, order, law, treaty, rule, regulation or
determination of which SyQuest is aware (after due inquiry) of any
court, governmental agency or body, or arbitrator having jurisdiction
over SyQuest or any of its subsidiaries or any of their respective
properties or assets, (C) the terms of any bond, debenture, note or
any other evidence of indebtedness, or any agreement, stock option or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which SyQuest or any of its subsidiaries is a party, by
which SyQuest or any of its subsidiaries is bound, or to which any of
the properties or assets of SyQuest or any of its subsidiaries is
subject, (D) the terms of any "lock-up" or similar provision of any
underwriting or similar agreement to which SyQuest or any of its
subsidiaries is a party or (E) any rules of the National Association
of Securities Dealers, Inc. applicable to SyQuest or the transactions
contemplated hereby; or
(2) results in the creation or imposition of any lien,
charge or encumbrance upon (A) any Preferred Share, the Warrant or any
Converted Stock or (B) any of the properties or assets of SyQuest or
any of its subsidiaries.
f. SyQuest has validly reserved 100,000 Preferred Shares for
issuance pursuant to the terms hereof. SyQuest intends to recommend at its
1997 Annual
3
Meeting of stockholders an amendment to SyQuest's Certificate of
Incorporation (the "Amendment") that would increase the number of shares of
Common Stock authorized for issuance to 120,000,000, and if the Amendment
is approved SyQuest intends to reserve for issuance to ▇▇▇▇▇▇▇▇ the maximum
number of shares of Common Stock that may be issuable from time to time
upon conversion of the Preferred Shares and exercise of the Warrant. When
issued to ▇▇▇▇▇▇▇▇ against payment therefor in accordance with the terms of
this Agreement, the Certificate of Designation or the Warrant, each share
of Preferred Stock and Converted Stock:
(1) will have been duly and validly authorized, duly and
validly issued, fully paid and non-assessable;
(2) will be free and clear of any security interests,
liens, claims or other encumbrances (other than those resulting solely
from actions by ▇▇▇▇▇▇▇▇); and
(3) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
SyQuest.
g. Reserved.
h. SyQuest is a Reporting Issuer within the meaning of
Regulation S, provided, however, that the representations and warranties
-------- -------
contained in this Section 3(h) shall not be required to be given in respect
of any Exercise Date or Conversion Date if the provisions of Section 3A are
applicable and SyQuest is in full compliance therewith and ▇▇▇▇▇▇▇▇ is
permitted to resell the Common Stock thereunder.
i. On the Closing Date, there is no pending or, to the best
knowledge of SyQuest, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having
jurisdiction over SyQuest or any of its affiliates that would materially
affect the execution by SyQuest of, or the performance by SyQuest of its
obligations under, this Agreement or the Warrant Certificate, provided,
--------
however, that the representations and warranties contained in this Section
-------
3(i) shall not apply to any action, threatened action, suit, proceeding or
investigation initiated by ▇▇▇▇▇▇▇▇.
j. SyQuest has timely filed all filings with the United States
Securities and Exchange Commission (the "SEC") under the Securities Act or
under Section 13(a) or 15(d) of the Exchange Act (each, an "SEC Filing")
required to be filed by SyQuest pursuant to such acts and no SEC Filing, or
press release containing information material to the business of SyQuest as
a whole, contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements, in the
light of the circumstances under which they were made, not misleading.
4
k. Since the date of SyQuest's most recent SEC Filing, there has
not been, and SyQuest is not aware of any development that would require an
amendment to SyQuest's Registration Statement on Form S-3 (registration
number 333-17119), as supplemented, in order to permit public offers and
sales of shares of Common Stock thereunder.
l. The offer and sale of the Preferred Shares, the Warrant and
the Warrant Shares to ▇▇▇▇▇▇▇▇ pursuant to this Agreement and the Warrant
Certificate will, subject to compliance by ▇▇▇▇▇▇▇▇ with the applicable
representations and warranties contained in Section 4 hereof and with the
applicable covenants and agreements contained in Section 6 hereof, be made
in accordance with the provisions and requirements of Regulation S and any
applicable state law, provided, however, that the representations and
-------- -------
warranties contained in this Section 3(l) shall not be required to be given
in respect of any Exercise Date if the provisions of Section 3A are
applicable and SyQuest is in full compliance therewith and ▇▇▇▇▇▇▇▇ is
permitted to resell the Common Stock thereunder.
m. Neither SyQuest nor any of its affiliates nor any person
acting on its or their behalf has engaged or will engage in any Directed
Selling Efforts with respect to the Preferred Shares, the Warrant or the
Converted Stock, and all such persons understand and have complied and will
otherwise comply with the requirements of Regulation S.
n. The transactions contemplated by this Agreement and the
Warrant are not part of a plan or scheme on the part of SyQuest, any of its
subsidiaries or any person acting on its or their behalf to evade the
registration provisions of the Securities Act.
o. SyQuest has not issued, and after the date hereof, will not
issue, any stop transfer order or other order impeding the sale and
delivery of the Preferred Shares, the Converted Stock or the Warrant
issuable hereunder except for a stop order restricting the sale of any of
the foregoing securities to any person in the United States or to or for
the account or benefit of any U.S. person during an applicable Restricted
Period or otherwise not in compliance with any applicable securities law or
regulation.
p. Except for securities sold to ▇▇▇▇▇▇▇▇ or proposed to be sold
to Beijing Legend Group Ltd. and its affiliates (the "BLC Transaction"), on
the Closing Date, neither SyQuest nor any of its affiliates has offered to
sell or sold any Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock in reliance upon Regulation S
at any time during the past 12 months and there are no outstanding
convertible or exchangeable securities that have been offered or sold in
reliance upon Regulation S, except, in each case the Warrant, the Converted
Stock and the Preferred Shares sold pursuant hereto.
5
q. Capitalization. As of the date hereof, the authorized
--------------
capital stock of SyQuest consists of 60,000,000 shares of Common Stock, and
4,000,000 shares of Preferred Stock, par value $.001 per share, of SyQuest
("Preferred Stock"). As of March 3, 1997, (i) 37,654,494 shares of Common
---------------
Stock (including the treasury shares described in clause (iii) below) and
7,823 shares of Preferred Stock were issued and outstanding, (ii)
16,075,370 shares of Common Stock were reserved for issuance upon exercise
of outstanding stock options, convertible Preferred Stock, warrants or
other rights (based, with respect to 4,053,578 shares of Common Stock, on a
conversion price of $1.92 per share of Common Stock) and (iii) 1,225,000
shares of Common Stock were held in the treasury of SyQuest. As of March
3, 1997, all the outstanding shares of Common Stock are, and all shares
which may be issued pursuant to stock options, warrants or other
convertible rights will be, when issued and paid for in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable and free of any preemptive rights in respect thereof. As of
the date hereof, except as set forth above or in SyQuest's Registration
Statement on Form S-3 (registration number 333-17119), as supplemented, and
except for shares of Common Stock or other securities issued upon
conversion, exchange, exercise or purchase associated with the securities,
options, warrants, rights and other instruments referenced above from March
3, 1997 to the date hereof, (i) no shares of capital stock or other voting
securities of SyQuest were outstanding, (ii) no equity equivalents,
interests in the ownership or earnings of SyQuest or other similar rights
were outstanding and (iii) there were no existing options, warrants, calls,
subscriptions or other rights or agreements or commitments relating to the
capital stock of SyQuest or any of its subsidiaries or obligating SyQuest
or any of its subsidiaries to issue, transfer, sell or redeem any shares of
capital stock, or other equity interest in, SyQuest or any of its
subsidiaries or obligating SyQuest or any of its subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement or commitment.
r. The parties hereto acknowledge that ▇▇▇▇▇▇▇▇ has neither
requested of nor received from SyQuest any non-public information relating
to SyQuest or the business affairs or business prospects of SyQuest and
without limiting ▇▇▇▇▇▇▇▇'▇ reliance on any of the representations,
warranties, covenants and agreements of SyQuest contained herein, ▇▇▇▇▇▇▇▇
assumes the risk that the knowledge of any of the non-public information
described in this Section 3(r) might have materially influenced ▇▇▇▇▇▇▇▇'▇
decision to enter into and perform this Agreement.
3.A Registration Provisions.
-----------------------
a. SyQuest shall, as promptly as practicable hereafter and at
its own expense, file a registration statement (the "Registration
Statement") under the Securities Act covering the sale or resale of the
maximum number of shares of Common Stock then issuable upon conversion of
the Preferred Shares and exercise of the Warrant (each a "Covered
Security"), shall use its best efforts to cause such Registration Statement
to be
6
declared effective not later than June 1, 1997 (or July 1, 1997, if the SEC
reviews such Registration Statement) and shall amend such Registration
Statement from time to time upon the request of ▇▇▇▇▇▇▇▇ if the maximum
number of shares of Common Stock issuable upon conversion of the Preferred
Shares and exercise of the Warrant is greater than the number of shares of
Common Stock registered pursuant to such Registration Statement, unless an
amendment is not required for the registration and sale of such securities
under such Registration Statement pursuant to Rule 416 or any other rule
under the Securities Act; provided that ▇▇▇▇▇▇▇▇ shall have provided such
information and coop eration in connection therewith as SyQuest may
reasonably request. Upon the effective ness of such Registration Statement
and at ▇▇▇▇▇▇▇▇'▇ request (A) SyQuest shall issue such securities to
▇▇▇▇▇▇▇▇ in accordance with the terms hereof and (B) the provisions of
Sections 3(l), (m) and (o), 4(f), (g), (h), (i) and (j), 5(a), (b), (c) and
(d), 6(a), (c) and (d) (collectively, the "Specified Provisions"), 7(a) and
(b) (to the extent applicable to the Specified Provisions), and 8(b), (c)
and (d) (to the extent applicable to the Specified Provisions) shall
thereafter be of no force and effect with respect to the issuance of such
Covered Securities.
b. SyQuest will use its best efforts to: (i) keep such
registration effective until the earlier of (A) the second anniversary of
the issuance of each Covered Security, (B) such date as all of the Covered
Securities shall have been sold by ▇▇▇▇▇▇▇▇ or (C) such time as all of the
Covered Securities held by ▇▇▇▇▇▇▇▇ can be sold by ▇▇▇▇▇▇▇▇ or any of its
affiliates within a three-month period without compliance with the registra
tion requirements of the Securities Act pursuant to Rule 144 under the
Securities Act ("Rule 144"); (ii) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement (as so amended and
supplemented from time to time, the "Prospectus") as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all Covered Securities by ▇▇▇▇▇▇▇▇ or any of its affiliates;
(iii) furnish such number of Prospectuses and other documents incident
thereto, including any amendment of or supplement to the Prospectus, as
▇▇▇▇▇▇▇▇ from time to time may reasonably request; (iv) cause all Covered
Securities that are Common Stock to be listed on each securities exchange
and quoted on each quotation service on which similar securities issued by
SyQuest are then listed or quoted; (v) provide a transfer agent and
registrar for all Covered Securities and a CUSIP number for all Covered
Securities; (vi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC; and (vii) file the documents
required of SyQuest and otherwise use its best efforts to obtain and
maintain requisite blue sky clearance in (A) all jurisdictions in which any
of the Covered Securities are originally sold and (B) all other states
specified in writing by ▇▇▇▇▇▇▇▇, provided, however, that as to this clause
(B), SyQuest shall not be required to qualify to do business or consent to
service of process in any state in which it is not now so qualified or has
not so consented.
c. SyQuest shall furnish to ▇▇▇▇▇▇▇▇ upon request a reasonable
number of copies of a supplement to or an amendment of such Prospectus as
may be necessary
7
in order to facilitate the public sale or other disposition of all or any
of the Covered Securities by ▇▇▇▇▇▇▇▇ or any of its affiliates pursuant to
the Registration Statement.
d. With a view to making available to ▇▇▇▇▇▇▇▇ and its
affiliates the benefits of Rule 144 and Form S-3 under the Securities Act,
SyQuest covenants and agrees to: (i) make and keep available adequate
current public information (within the meaning of Rule 144(c)) concerning
SyQuest, until the earlier of (A) the third anniversary of the issuance of
each Covered Security or (B) such date as all of the Covered Securities
shall have been resold by ▇▇▇▇▇▇▇▇ or any of its affiliates; (ii) maintain
its status as a Reporting Issuer and file with the SEC in a timely manner
all reports and other documents required of SyQuest for use of Form S-3;
and (iii) furnish to ▇▇▇▇▇▇▇▇ upon request, as long as ▇▇▇▇▇▇▇▇ owns any
Covered Securities, (A) a written statement by SyQuest that it has complied
with the reporting requirements of the Securities Act and the Exchange Act,
(B) a copy of the most recent annual or quarterly report of SyQuest, and
(C) such other information as may be reasonably requested in order to avail
▇▇▇▇▇▇▇▇ and its affiliates of Rule 144 or Form S-3 with respect to such
Covered Securities.
e. Notwithstanding anything else in this Section 3A, if, at any
time during which a Prospectus is required to be delivered in connection
with the sale of any Covered Securities, SyQuest determines in good faith
that a development has occurred or a condition exists as a result of which
the Registration Statement or the Prospectus contains a material
misstatement or omission, SyQuest will immediately notify ▇▇▇▇▇▇▇▇ thereof
by telephone and in writing. Upon receipt of such notification, ▇▇▇▇▇▇▇▇
and its affiliates will immediately suspend all offers and sales of any
Covered Securities pursuant to the Registration Statement. In such event,
SyQuest will amend or supplement the Registration Statement as promptly as
practicable and will take such other steps as may be required to permit
sales of the Covered Securities thereunder by ▇▇▇▇▇▇▇▇ and its affiliates
in accordance with applicable federal and state securities laws. SyQuest
will promptly notify ▇▇▇▇▇▇▇▇ after it has determined in good faith that
such sales have become permissible in such manner and will promptly deliver
copies of the Registration State ment and the Prospectus (as so amended or
supplemented) to ▇▇▇▇▇▇▇▇ in accordance with paragraph (b) of this Section
3A. Notwithstanding the foregoing, (A) under no circum stances shall
SyQuest be entitled to exercise its right to suspend sales of any Covered
Securities pursuant to the Registration Statement more than two times in
any twelve-month period, (B) the period during which such sales may be
suspended (each a "Blackout Period") shall not exceed thirty days and (C)
no Blackout Period may com mence less than 30 days after the end of the
preceding Blackout Period.
Upon the commencement of a Blackout Period pursuant to this Section
3A, ▇▇▇▇▇▇▇▇ will immediately notify SyQuest of any contracts to sell any
Covered Securities (each a "Sales Contract") that ▇▇▇▇▇▇▇▇ or any of its
affiliates has entered into prior to the commencement of such Blackout
Period and that would require delivery of such Covered Securities during
such Blackout Period, which notice will contain the aggregate sale price
and volume of Covered Securities pursuant to such Sales Contract. Upon
receipt of such
8
notice, SyQuest will immediately notify ▇▇▇▇▇▇▇▇ of its election either (i)
to terminate the Blackout Period and, as promptly as practicable, amend or
supplement the Registration Statement or the Prospectus in order to correct
the material misstatement or omission and deliver to ▇▇▇▇▇▇▇▇ copies of
such amended or supplemented Registration Statement and Prospectus in
accordance with paragraph (b) of this Section 3A or (ii) to continue the
Blackout Period in accordance with this paragraph. If SyQuest elects to
continue the Blackout Period, and ▇▇▇▇▇▇▇▇ or any of its affiliates is
therefore unable to consummate the sale of Covered Securities pursuant to
the Sales Contract (such unsold Covered Securities being hereinafter
referred to herein as the "Unsold Securities"), SyQuest will promptly
indemnify each ▇▇▇▇▇▇▇▇ Indemnified Party (as such term is defined in
Section 11(a) below) against any Proceeding (as such term is defined in
Section 11(a) below) that each ▇▇▇▇▇▇▇▇ Indemnified Party may incur arising
out of or in connection with ▇▇▇▇▇▇▇▇'▇ breach or alleged breach of any
such Sales Contract, and SyQuest shall reimburse each ▇▇▇▇▇▇▇▇ Indemnified
Party for any reasonable costs or expenses (including reasonable legal
fees) incurred by such party in investigating or defending any such
Proceeding (collectively, the "Indemnification Amount"); provided, however,
-------- -------
that each ▇▇▇▇▇▇▇▇ Indemnified Party shall take all actions reasonably
necessary or appropriate to mitigate such Indemnification Amount; and
provided further, however, that the Indemnification Amount shall be reduced
-------- ------- -------
by an amount equal to the number of Unsold Securities multi plied by the
difference between (x) the actual per share price received by ▇▇▇▇▇▇▇▇ or
any of its affiliates upon the sale of the Unsold Securities (if such sale
occurs within three Trading Days of the end of the Blackout Period) or the
closing sale price of the Common Stock on the NASDAQ National Market
("NASDAQ") or other national securities ex change on which the Common Stock
is then listed on the third Trading Day after the end of the Blackout
Period (if the Unsold Securities are not sold by ▇▇▇▇▇▇▇▇ or any of its
affiliates within three Trading Days of the end of the Blackout Period),
and (y) the per share sale price for the Unsold Securities provided in the
Sales Contract. As used herein, the term "Trading Day" means any day on
which SyQuest's Common Stock is quoted on NASDAQ or, if applicable, other
national securities exchange.
4. Representations and Warranties of ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ hereby
------------------------------------------
represents and warrants to SyQuest on the date hereof and on the Closing Date,
and agrees with SyQuest, as follows:
▇. ▇▇▇▇▇▇▇▇ has been duly incorporated and is validly existing
in good standing under the laws of the Cayman Islands.
b. The execution, delivery and performance of this Agreement by
▇▇▇▇▇▇▇▇ have been duly authorized by all requisite corporate action and no
further consent or authorization of ▇▇▇▇▇▇▇▇, its Board of Directors or its
stockholders is re quired. This Agreement has been duly executed and
delivered by ▇▇▇▇▇▇▇▇ and, when duly authorized, executed and delivered by
SyQuest, will be a valid and binding agreement enforceable against ▇▇▇▇▇▇▇▇
in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
9
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
▇. ▇▇▇▇▇▇▇▇ understands that no United States federal or state
agency has passed on, reviewed or made any recommendation or endorsement of
the Preferred Shares or the Warrant.
d. In making the decision to purchase the Preferred Shares or
the Warrant in accordance with this Agreement, ▇▇▇▇▇▇▇▇ has relied solely
upon independent investigations made by it and not upon any representations
made by SyQuest other than those made in this Agreement.
e. Subject to Section 3A, ▇▇▇▇▇▇▇▇ understands that the
Preferred Shares, the Warrant and the Converted Stock have not been
registered under the Securities Act and may not be reoffered or resold
other than pursuant to such registration or an available exemption
therefrom.
▇. ▇▇▇▇▇▇▇▇ is not a U.S. Person and is not acquiring the
Preferred Shares, the Warrant or any Converted Stock for the account or
benefit of any U.S. Person, and ▇▇▇▇▇▇▇▇ is not an affiliate of SyQuest.
g. At the time the buy orders for the Preferred Shares and the
Warrant (and any Converted Stock to be issued during the Restricted Period)
were originated, ▇▇▇▇▇▇▇▇ was located outside the United States.
h. Neither ▇▇▇▇▇▇▇▇ nor any of its affiliates nor anyone acting
on its or their behalf has engaged or will engage in any Directed Selling
Efforts with respect to the Preferred Shares, the Warrant or any Converted
Stock, and all such persons understand and have complied and will otherwise
comply with the requirements of Regulation ▇.
▇. ▇▇▇▇▇▇▇▇:
(1) will not, during the Restricted Period applicable to the
Preferred Shares, the Warrant and the Converted Stock, offer or sell
any of the foregoing securities (or create or maintain any derivative
position equivalent thereto) in the United States, to or for the
account or benefit of a U.S. Person or other than in accordance with
Regulation S; and
(2) will, after the expiration of the applicable Restricted
Period, offer, sell, pledge or otherwise transfer the Preferred
Shares, the Warrant or any Converted Stock (or create or maintain any
derivative position equivalent thereto) only pursuant to registration
under the Securities Act or an available exemption therefrom and, in
any case, in accordance with applicable state securities laws.
10
▇. ▇▇▇▇▇▇▇▇ is purchasing the Preferred Shares, the Warrant and
the Converted Stock for its own account, for the purpose of investment
and not with a view to a distribution thereof.
k. The transactions contemplated by this Agreement and the
Warrant Certificate are not part of a plan or scheme on the part of
▇▇▇▇▇▇▇▇, any of its affiliates or any person acting on its or their behalf
to evade the registration requirements of the Securities Act.
5. Covenants of SyQuest. Except as set forth in the Schedule of
--------------------
Exceptions attached hereto, SyQuest covenants and agrees with ▇▇▇▇▇▇▇▇ as
follows:
a. For so long as any of the Preferred shares or any portion of
the Warrant remains outstanding, and in any case for a period of 40 days
thereafter, SyQuest will continue to be a Reporting Issuer within the
meaning of Regulation S and will use its best efforts to (i) maintain the
eligibility of the Common Stock for quotation on NASDAQ or listing on a
national securities exchange (as defined in the Exchange Act) and (ii)
regain the eligibility of the Common Stock for quotation on NASDAQ in the
event that the Common Stock is delisted by NASDAQ.
b. Except in the BLC Transaction or with the written consent of
▇▇▇▇▇▇▇▇, for a period of six months following the date of this Agreement,
SyQuest will not offer or sell any Common Stock or any securities
convertible into or exchangeable into Common Stock in reliance upon
Regulation S and in any event will not take any action which would extend
the Restricted Period hereunder.
c. For so long as any of the Preferred shares or any portion of
the Warrant remains outstanding, and in any case for a period of 40 days
thereafter, neither SyQuest nor any of its affiliates nor any person acting
on its or their behalf will engage in any Directed Selling Efforts with
respect to the Warrant or any Converted Stock.
d. For so long as any of the Preferred Shares or any portion of
the Warrant remains outstanding, and in any case for a period of 40 days
thereafter, SyQuest will ensure that all applicable Offering Restrictions
with respect to the Warrant and the Converted Stock are thoroughly complied
with and satisfied.
e. Beginning on the date hereof and for so long as any of the
Preferred Shares or any portion of the Warrant remains outstanding, and in
any case for a period of 40 days thereafter, SyQuest will (i) provide
▇▇▇▇▇▇▇▇ with an opportunity to review and comment on any public disclosure
by SyQuest of information regarding this Agreement and the transactions
contemplated hereby, (ii) promptly notify ▇▇▇▇▇▇▇▇ if there is any public
disclosure by SyQuest of material information regarding SyQuest or its
financial condition, prospects or results of operation and (iii) provide
▇▇▇▇▇▇▇▇ with copies of all SEC Filings.
11
f. If the Amendment is not approved on or prior to June 1, 1997
and ▇▇▇▇▇▇▇▇ seeks to convert any Preferred Shares or exercise the Warrant
and SyQuest is unable to deliver the Converted Stock, then within three
months of delivery of the applicable Conversion Notice (as defined in the
Certificate of Designation) or Exercise Notice (as defined in the Warrant
Certificate), as the case may be, SyQuest must make a cash payment in lieu
of delivering the Converted Stock equal to the market value of the Common
Stock issuable pursuant to such Conversion Notice or Exercise Notice
calculated by using (i) the closing price on NASDAQ as reported by
Bloomberg, L.P. on the date of delivery of the Conversion Notice or
Exercise Notice, or (ii) if NASDAQ is not then the principal trading market
for the Common Stock, the closing price on the principal trading market for
the Common Stock at that time (the "Principal Market"), as reported by
Bloomberg L.P. on the date of delivery of the Conversion Notice or Exercise
Notice, or (iii) if NASDAQ is not then the principal trading market for the
Common Stock and there is no Principal Market, the market value as
determined in good faith by the Board of Directors of SyQuest, in each such
case plus 15% per annum interest for the period from the date of delivery
of the Conversion Notice or Exercise Notice to the date the amount is paid
in full. If SyQuest is required to make payments to ▇▇▇▇▇▇▇▇ pursuant to
this Section 5(f) because of a failure to deliver Converted Stock, the
provisions of Section 10 shall not apply to such failure to deliver
Converted Stock. If the value of the Common Stock is to be determined by
the Board of Directors of SyQuest and ▇▇▇▇▇▇▇▇ disagrees with said
valuation, the value of the Common Stock will be determined by binding
arbitration in accordance with the then prevailing commercial arbitration
rules of the American Arbitration Association, and such arbitration shall
proceed in Chicago, Illinois or at such other place as agreed to in writing
by SyQuest and ▇▇▇▇▇▇▇▇.
g. SyQuest will comply with the terms and conditions of the
Preferred Shares and of the Warrant as set forth in the Warrant Certificate
(as duly amended from time to time by the parties hereto).
h. For so long as any of the Preferred Shares or any portion of
the Warrant remains outstanding, SyQuest shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but
unissued Common Stock, for issuance upon conversion of such Preferred
Shares or exercise of such Warrant, the maximum number of shares of
Converted Stock then so issuable. If at any time the number of authorized
but unissued shares of Common Stock is not sufficient to effect the
conversion of all the outstanding Preferred Shares and the exercise of the
Warrant for all the Warrant Shares issuable thereunder, SyQuest shall use
its best efforts to increase its number of authorized shares of Common
Stock to such number of shares as shall be sufficient to effect such
conversion and exercise, including causing the SyQuest Board of Directors
to call a meeting of stockholders and recommend such increase, and after
obtaining any such approval SyQuest shall reserve for issuance to ▇▇▇▇▇▇▇▇
the number of shares of Common Stock required to effect such conversion and
exercise. At the 1997 Annual Meeting of SyQuest's stockholders, SyQuest
will recommend to its stockholders
12
the Amendment, and SyQuest shall use its best efforts to obtain stockholder
approval of the Amendment.
i. As soon as such information is available (but in no event
later than the date of filing of SyQuest's quarterly report on Form 10-Q
for the period ended March 31, 1997), SyQuest shall deliver to ▇▇▇▇▇▇▇▇ a
written notice stating the number of outstanding shares of Common Stock as
of March 31, 1997.
j. SyQuest shall not issue any Preferred Shares to any person
other than ▇▇▇▇▇▇▇▇.
k. In accordance with the terms of Regulation S, SyQuest will
file with the SEC, within 15 calendar days after the date hereof, a report
on form 8-K with respect to the transactions contemplated hereby and by the
Warrant Certificate. In addition, SyQuest shall file copies of this
Agreement, the Warrant Certificate, the Certificate of Designation and the
Schedule of Exceptions as exhibits to the Form 8-K.
l. If the Amendment is approved by SyQuest's stockholders,
SyQuest will cause the Common Stock issuable pursuant to conversion of the
Preferred Shares and exercise of the Warrant to be duly listed and admitted
for trading on NASDAQ or, if NASDAQ is not then the principal trading
market for the Common Stock, on a national securities exchange (as defined
in the Securities Exchange Act of 1934, as amended (the "Exchange Act")).
6. Covenants of ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ hereby covenants and agrees with
---------------------
SyQuest as follows:
a. During any Restricted Period applicable to the Preferred
Shares, the Warrant or the Converted Stock, neither ▇▇▇▇▇▇▇▇ nor any of its
affiliates nor any person acting on its or their behalf will:
(1) offer or sell such Preferred Shares, Warrant or Converted
Stock other than in an Offshore Transaction;
(2) engage in any Directed Selling Efforts with respect to
such Preferred Shares, Warrant or Converted Stock;
(3) offer or sell such Preferred Shares, Warrant or Converted
Stock other than: (A) in accordance with Rule 903 or Rule 904 of
Regulation S; (B) pursuant to registration under the Securities Act or
(C) pursuant to an available exemption therefrom; or
(4) offer or sell such Preferred Shares, the Warrant or
Converted Stock, to any U.S. Person or for the account or benefit of
any U.S. Person.
13
b. Neither ▇▇▇▇▇▇▇▇ nor any of its affiliates nor any person
acting on its or their behalf will at any time offer or sell any Preferred
Shares, the Warrant or any Converted Stock other than pursuant to
registration under the Securities Act or pursuant to an available exemption
therefrom.
▇. ▇▇▇▇▇▇▇▇ will agree not to convert its Preferred Stock for a
maximum period of 60 days following a successful public offering of the
Common Stock in excess of $25 million in a single transaction, if all other
convertible security holders are bound by the same restriction.
d. At the 1997 Annual Meeting of SyQuest's stockholders,
▇▇▇▇▇▇▇▇ will vote all shares of Common Stock owned by ▇▇▇▇▇▇▇▇ as of the
applicable record date in favor of an increase in the authorized number of
shares of Common Stock to 120,000,000.
6A. Legend. The term "Restricted Period," with respect to any
------
security, shall mean the Restricted Period then applicable to such security
pursuant to Regulation S (or any applicable successor thereto), provided that,
the parties agree that absent an intervening change in the applicable law, the
Restricted Period with respect to the Preferred Shares, the Warrant and the
Converted Stock will expire on the 40th day after the Closing Date. SyQuest
shall place the following legend on the certificate representing the Preferred
Shares:
The securities represented by this certificate were issued on April
2, 1997 (the "Closing Date") pursuant to the Subscription Agree ment
dated March 31, 1997 between SyQuest Technology, Inc. ("SyQuest") and
▇▇▇▇▇▇▇▇ International Limited. The securities represented by this
certificate have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and have been sold in reliance on
the exemption from registration provided by Regulation S under the
Securities Act ("Regulation S"). Prior to the expiration of a 40-day
restricted period beginning on the Closing Date (the "Restricted
Period"), the securities rep resented by this certificate may not be
offered or sold, directly or indirectly, within the United States (as
defined in Regulation S under the Securities Act), to a U.S. Person
(as defined in Regula tion S under the Securities Act) or for the
account or benefit of a U.S. Person. After the Restricted Period,
such securities may be resold in the United States or to a U.S. Person
only if they are registered under the Securities Act or an exemption
from regis tration is available.
At any time after the expiration of the Restricted Period with respect
to the Preferred Shares or the Warrant, certificates for any Converted Stock
issued or in respect of transferred shares of Common Stock will not be legended
unless required by Regulation S or
14
other applicable law, upon satisfaction of the conditions set forth in Section 8
and, if applicable, in the Warrant Certificate.
7. Conditions Precedent to ▇▇▇▇▇▇▇▇'▇ Obligations. The obligations
----------------------------------------------
of ▇▇▇▇▇▇▇▇ hereunder are subject to the performance by SyQuest of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent, unless expressly waived in writing by ▇▇▇▇▇▇▇▇:
a. On the Closing Date, on each Conversion Date and on each
Exercise Date (as defined in the Warrant Certificate), (i) to the extent
provided in Section 3 hereof, the representations and warranties made by
SyQuest in this Agreement shall be true and correct, and (ii) SyQuest shall
have complied fully with all the covenants and agreements in this Agreement
and the Warrant Certificate; and ▇▇▇▇▇▇▇▇ shall have received on each such
date a certificate of the Chief Executive Officer and the Chief Financial
Officer of SyQuest dated such date and to such effect.
b. On the Closing Date, on each Conversion Date and on each Exe
rcise Date, SyQuest shall have delivered to ▇▇▇▇▇▇▇▇ an opinion of counsel
reasonably satisfactory to ▇▇▇▇▇▇▇▇, dated the date of delivery, confirming
in substance the matters covered in paragraphs (a), (b), (c), (d), (e),
(f), (h) and (i) of Section 3 hereof and paragraph (l) of Section 5 hereof
(provided that the opinion delivered on the Closing Date need not confirm
the matters covered in paragraph (l) of Section 5 hereof); provided,
--------
however, that no such opinion delivered in respect of any Exercise Date or
-------
Conversion Date shall be required to cover the matters set forth in
paragraph (i) of Section 3 hereof.
c. Prior to the Closing, the Certificate of Designation will
have been filed with the Secretary of State of the State of Delaware in
accordance with the Delaware General Corporation Law.
d. On the Closing Date, SyQuest shall have delivered to ▇▇▇▇▇▇▇▇
the opinion of counsel reasonably satisfactory to ▇▇▇▇▇▇▇▇, dated the
Closing Date, to the effect that the offer and sale of the Preferred Shares
and the Warrant hereunder do not require registration under the Securities
Act.
As used herein the term "Business Day" means any day on which banks in
the City of New York are open for business.
8. Conditions Precedent to SyQuest's Obligations. The obligations
---------------------------------------------
of SyQuest hereunder are subject to the performance by ▇▇▇▇▇▇▇▇ of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent, unless expressly waived in writing by SyQuest:
a. On the Closing Date and on each Exercise Date (as defined in
the Warrant Certificate), (i) the representations and warranties made by
▇▇▇▇▇▇▇▇ in this
15
Agreement shall be true and correct, and (ii) ▇▇▇▇▇▇▇▇ shall have complied
fully with all the covenants and agreements in this Agreement and the
Warrant Certificate; and SyQuest shall have received on each such date a
certificate of an appropriate officer of ▇▇▇▇▇▇▇▇ dated such date and to
such effect.
b. On the Closing Date, ▇▇▇▇▇▇▇▇ shall have delivered to SyQuest
a written certification of an appropriate officer of ▇▇▇▇▇▇▇▇ dated
such date stating that ▇▇▇▇▇▇▇▇ is not a U.S. Person.
c. On each Conversion Date and each Exercise Date, ▇▇▇▇▇▇▇▇
shall have delivered to SyQuest either (i) a written certification of an
appropriate officer of ▇▇▇▇▇▇▇▇ dated such date stating that ▇▇▇▇▇▇▇▇ is
not a U.S. Person or (ii) an opinion of counsel to the effect that the
Warrant or Preferred Shares, as applicable, and the shares of Common Stock
delivered upon exercise or conversion thereof have been registered under
the Securities Act or an exemption from such registration is available.
d. On the date of any transfer by ▇▇▇▇▇▇▇▇ of the Warrant, any
Preferred Shares or any Converted Stock during the applicable Restricted
Period, ▇▇▇▇▇▇▇▇ shall have delivered to SyQuest a written certification of
an appropriate officer of ▇▇▇▇▇▇▇▇ dated such date stating that ▇▇▇▇▇▇▇▇ is
not a U.S. Person and that the Preferred Shares or the Warrant are not
being converted or exercised on behalf of a U.S. Person.
e. On the Closing Date, ▇▇▇▇▇▇▇▇ shall have delivered to SyQuest
the opinion of counsel substantially in the form attached hereto, dated the
Closing Date, to the effect that the offer and sale of the Preferred Shares
and the Warrant hereunder do not require registration under the Securities
Act.
9. Fees and Expenses. Each of ▇▇▇▇▇▇▇▇ and SyQuest agrees to pay
-----------------
its own expenses incident to the performance of its obligations hereunder,
including, but not limited to the fees, expenses and disbursements of such
party's counsel, except as is otherwise expressly provided in this Agreement and
the Warrant Certificate.
10. Non-Performance.
---------------
If, on the date hereof, on the Closing Date, on any Conversion Date or
any Exercise Date, SyQuest shall fail to deliver the Warrant, Preferred Shares
or Converted Stock to ▇▇▇▇▇▇▇▇ required to be delivered pursuant to this
Agreement for any reason other than the failure of any condition precedent to
SyQuest's obligations hereunder or the failure by ▇▇▇▇▇▇▇▇ to comply with its
obligations hereunder, then SyQuest shall:
(1) hold ▇▇▇▇▇▇▇▇ harmless against any loss, claim or damage
(including without limitation, incidental and consequential damages)
arising from or as a result of such failure by SyQuest; and
16
(2) reimburse ▇▇▇▇▇▇▇▇ for all of its reasonable out-of-pocket
expenses, including fees and disbursements of its counsel, incurred by
▇▇▇▇▇▇▇▇ in connection with this Agreement and the Warrant and the
transactions contemplat ed herein and therein;
provided, however, that SyQuest shall then be under no further liability to
-------- -------
▇▇▇▇▇▇▇▇ except as provided in the Warrant Certificate, this Section 10 and
Section 11 hereof.
11. Indemnification.
---------------
a. Indemnification of ▇▇▇▇▇▇▇▇. SyQuest hereby agrees to
---------------------------
indemnify ▇▇▇▇▇▇▇▇ and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of Section
20 of the Securities Exchange Act of 1934, as amended) any of the foregoing
persons (each a "▇▇▇▇▇▇▇▇ Indemnified Party") against any claim, demand,
action, liability, damages, loss, cost or expense (including, without
limitation, reasonable legal fees) (a "Proceeding"), that it may incur in
connection with any of the transactions contemplated hereby arising out of
or based upon:
(1) any untrue or alleged untrue statement of a material
fact by SyQuest or any of its affiliates or any person acting on its
or their behalf or omission or alleged omission to state any material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading by SyQuest or
any of its affiliates or any person acting on its or their behalf;
(2) any of the representations or warranties made by
SyQuest herein being untrue or incorrect; and
(3) any breach or non-performance by SyQuest of any of its
covenants, agreements or obligations under this Agreement and the
Warrant Certificate;
and SyQuest hereby agrees to reimburse each ▇▇▇▇▇▇▇▇ Indemnified Party for any
reasonable legal or other expenses incurred by such ▇▇▇▇▇▇▇▇ Indemnified Party
in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
-----------------
Proceeding to the extent that it arises out of or is based upon the gross
negligence or wilful misconduct of ▇▇▇▇▇▇▇▇ in connection therewith.
b. Indemnification of SyQuest. ▇▇▇▇▇▇▇▇ hereby agrees to
--------------------------
indemnify SyQuest and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of Section
20 of the Securities Exchange Act of 1934, as amended) any of the foregoing
persons (each a "SyQuest Indemnified Party")
17
against any Proceeding, that it may incur in connection with any of the
transactions contemplated hereby arising out of or based upon:
(1) any untrue or alleged untrue statement of a material
fact by ▇▇▇▇▇▇▇▇ or any of its affiliates or any person acting on its
or their behalf or omission or alleged omission to state any material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading by ▇▇▇▇▇▇▇▇
or any of its affiliates or any person acting on its or their behalf:
(2) any of the representations or warranties made by
▇▇▇▇▇▇▇▇ herein being untrue or incorrect; and
(3) any breach or non-performance by ▇▇▇▇▇▇▇▇ of any of its
covenants, agreements or obligations under this Agreement and the
Warrant Certificate;
and ▇▇▇▇▇▇▇▇ hereby agrees to reimburse each SyQuest Indemnified Party for
any reason able legal or other expenses incurred by such SyQuest
Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
-----------------
Proceeding to the extent that it arises out of or is based upon the gross
negligence or wilful misconduct of SyQuest in connection therewith.
c. Conduct of Claims.
-----------------
(1) Whenever a claim for indemnification shall arise under
this Section, the party seeking indemnification (the "Indemnified
Party"), shall notify the party from whom such indemnification is
sought (the "Indemnifying Party") in writing of the Proceeding and the
facts constituting the basis for such claim in reasonable detail;
(2) Upon delivery of such notice, such Indemnified Party
shall have a duty to take all reasonable steps to mitigate any losses,
liabilities, costs, charges and expenses relating to any such
Proceeding;
(3) Such Indemnifying Party shall have the right to retain
the counsel of its choice in connection with such Proceeding and to
participate at its own expense in the defense of any such Proceeding;
provided, however, that counsel to the Indemnifying Party shall not
-------- -------
(except with the consent of the rele vant Indemnified Party) also be
counsel to such Indemnified Party. In no event shall the Indemnifying
Party be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel for all
18
Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances; and
(4) No Indemnifying Party shall, without the prior written
consent of the Indemnified Parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry
of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section unless such
settlement, compromise or consent (A) includes an unconditional
release of each Indemnified Party from all liability arising out of
such litigation, investigation, proceeding or claim and (B) does not
include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party.
12. Survival of the Representations, Warranties, etc. The respective
------------------------------------------------
representations, warranties, and agreements made herein by or on behalf of the
parties hereto shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or under common control
with, such party and will survive delivery of and payment for the Preferred
Shares, the Warrant and any Converted Stock issuable hereunder.
13. Notices. all communications hereunder shall be in writing, and
-------
a. if sent to ▇▇▇▇▇▇▇▇, shall be delivered by hand, sent by
registered mail or transmitted and confirmed by facsimile to ▇▇▇▇▇▇▇▇ at:
▇▇▇▇▇▇▇▇ International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ Indies
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
19
b. if sent to SyQuest, shall be delivered by hand, sent by
registered mail or transmitted and confirmed by facsimile to SyQuest at:
SyQuest Technology, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
14. Miscellaneous
-------------
a. This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement.
b. This Agreement and the Warrant shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and assigns
and, with respect to Section 11 hereof, their respective officers, directors,
employees, agents, affiliates and controlling persons, and no other person shall
have any right or obligation hereunder. SyQuest may not assign this Agreement
or the Warrant Certificate.
c. This Agreement and the Warrant Certificate shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, and each of the parties hereto hereby submits to the non-exclusive
jurisdiction of any State or Federal court in the Borough of Manhattan in the
City and State of New York and any court hearing any appeal therefrom, over any
suit, action or proceeding against it arising out of or based upon this
Agreement and the Warrant (a "Related Proceeding"). Each of the parties hereto
hereby waives any objection to any Related Proceeding in such courts whether on
the grounds of venue, residence or domicile or on the ground that the Related
Proceeding has been brought in an inconvenient forum.
d. The provisions of this Agreement and the Warrant Certificate
are severable, and if any clause or provision hereof shall be held invalid,
illegal or unenforceable
20
in whole or in part, such invalidity or unenforceability shall not in any manner
affect any other clause or provision of this Agreement or the Warrant
Certificate.
e. The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
f. This Agreement (including the Warrant and the terms and
conditions of the Certificate of Designations relating to the Preferred Shares)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter of this Agreement and the Warrant and is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder or under the terms of the warrant and term sheets between such
parties.
g. The term "affiliate" is used herein as defined in Rule
144(a)(1) under the Securities Act.
15. Time of Essence. Time shall be of the essence in this Agreement
---------------
and the Warrant.
21
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
SYQUEST TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇▇▇▇▇▇ INTERNATIONAL LIMITED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director/Vice Chairman
SCHEDULE OF EXCEPTIONS
Regarding section 3.i, disclosure of the actions, suits, proceedings and
investigations in SyQuest's SEC Filings is incorporated herein by reference.
Regarding section 3.q, the number of shares of Common Stock issuable on
conversion of SyQuest's outstanding 7% Cumulative Convertible Preferred Stock,
Series 1, may vary based on the average closing prices of the Common Stock for
the five days preceding conversion. In addition to the issued and outstanding
Common Stock listed in section 3.q., as of the following dates, the Company is
deemed to have issued shares of its Common Stock to the following entities in
connection with their agreeement to exchange certain trade debt for such Common
Stock:
NO. OF
NAME DATE OF EXCHANGE SHARES
---- ---------------- --------
Seksun Precision March 19, 1997 141,957
Engineering Limited
Tongkah Electronics March 26, 1997 3,506,874
SDN.BHD.
Silicon Systems, Inc. March 26, 1997 811,017
ANNEX A
-------
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF 5% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, SERIES 3
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred on the Board of Directors of the
Company by the Certificate of Incorporation, as amended, of the Company, and
pursuant to Section 151 of the General Corporation Law of the State of Delaware,
the Board of Directors of the Company at a meeting duly held, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of one hundred thousand (100,000) shares of 5% Cumulative
Convertible Preferred Stock, Series 3, of the Company, as follows:
RESOLVED, that the Company is authorized to issue 100,000 shares of 5%
Cumulative Convertible Preferred Stock, Series 3, $.001 par value (the
"Series 3 Preferred Shares"), which shall have the following powers,
designations, preferences and other special rights:
(1) Dividends. The holders of the Series 3 Preferred Shares shall be
---------
entitled to a cash dividend of five percent per annum of the Stated Value
(as defined below), on a cumulative basis (prorated for any portion of the
applicable period during which the Series 3 Preferred Shares are
outstanding). Dividends shall accrue from the date of issuance of the
Series 3 Preferred Shares and shall be payable on the last day of each
calendar quarter, commencing June 30, 1997, through and including the date
on which the Series 3 Preferred Shares are converted. Dividends may be
paid at the Company's option in cash or, on not less than ninety days'
notice from the Company to each holder of Series 3 Preferred Shares, in
additional Series 3 Preferred Shares; provided that the Company may not
elect to pay dividends in additional Series 3 Preferred Shares to the
extent that (a) the number of authorized and unissued Series 3 Preferred
Shares is insufficient to make such payment, or (b) the ability of the
holders of Series 3 Preferred Shares to convert Series 3 Preferred Shares
or to exercise the Warrant (as hereinafter
defined) is restricted by section 2(h), below. If the Company elects to
pay to any holder of Series 3 Preferred Shares any such dividend in
additional Series 3 Preferred Shares, the number of such additional Series
3 Preferred Shares shall be determined by dividing the aggregate amount of
such dividend payable to such holder by 100; provided that no fraction of a
Series 3 Preferred Share shall be issued, but in lieu thereof, the Company
shall pay in cash an amount equal to such fraction multiplied by $100.
(2) Conversion of Series 3 Preferred Shares. The holders of the
---------------------------------------
Series 3 Preferred Shares shall have the right, at their option, but
subject to the Subscription Agreement dated March 31, 1997 (the
"Subscription Agreement"), between the Company and ▇▇▇▇▇▇▇▇ International
Limited ("▇▇▇▇▇▇▇▇"), to convert the Series 3 Preferred Shares into shares
of the common stock of the Company, $.001 par value, as such stock now
exists or may be changed from time to time hereafter ("Common Stock"), on
the following terms and conditions:
(a) Conversion Right. Any or all of the Series 3 Preferred
----------------
Shares shall be convertible at any time into whole, fully paid and
nonassessable shares of Common Stock, at the conversion price (the
"Conversion Price") in effect at the time of conversion determined as
hereinafter provided. Each Series 3 Preferred Share shall have a stated
value of $100 (the "Stated Value") for the purpose of such conversion and
the number of shares of Common Stock issuable on conversion of each Series
3 Preferred Share shall be determined by dividing the Stated Value thereof
by the Conversion Price then in effect. In the event of a conversion of
Series 3 Preferred Shares for which there are accrued and unpaid dividends,
the amount of the accrued and unpaid dividends shall be paid at the time
and in the manner provided in section (1).
(b) Conversion Price. The Conversion Price shall be the greater
----------------
of (1) the arithmetical average of the closing sale prices per share of
Common Stock on the five consecutive trading days preceding the delivery of
any Conversion Notice (as that term is hereinafter defined), as reported by
the Nasdaq National Market (the "NMS"), or, if the NMS is not then the
principal trading market for the Common Stock, on the principal trading
market for the Common Stock at that time, or, if there is then no such
principal trading market, the fair market value per share of Common Stock
during such period as determined in good faith by the Board of Directors of
the Company, and (2) ninety percent of such closing sale price on the day
immediately preceding the delivery of the Conversion Notice (as that term
is hereinafter defined); provided that the Conversion Price shall not be
greater than the closing sale price per share of Common Stock as reported
by the NMS on the first day that any Series 3 Preferred Shares are issued.
If the value of the Common Stock is so to be determined by the Board of
Directors of the Company and the holders of the Series 3 Preferred Shares
disagree with said valuation, the value of the Common Stock will be
determined by binding arbitration in accordance with the Commercial
Arbitration Rules then prevailing of the American Arbitration Association,
and such arbitration shall proceed in Chicago, Illinois, or at such other
place as agreed to in writing by the Company and the holders of the Series
3 Preferred Stock.
2
(c) Adjustment to Conversion Price. In the event that the Company
------------------------------
shall declare a dividend or make a distribution on or with respect to the
outstanding shares of its Common Stock in shares of its Common Stock,
subdivide its outstanding shares of Common Stock into a greater number of
shares, or combine its outstanding shares of Common Stock into a smaller
number of shares, then, in each such event, the Conversion Price in effect
at the time of the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be proportionately
adjusted, if necessary, as determined in good faith by the Board of
Directors of the Company, so that the holder of any Series 3 Preferred
Shares surrendered for conversion after such time shall be entitled to
receive the aggregate number of shares of Common Stock that the holder
would have owned or been entitled to receive had such Series 3 Preferred
Shares been converted immediately prior to such record date or effective
date and the resulting Common Stock had been subject to such dividend,
distribution, subdivision or combination. Such adjustment shall be made
successively whenever any event specified above shall occur.
(d) Conversion Notice. On presentation and surrender to the
-----------------
Company (or at any office or agency maintained for the transfer of the
Series 3 Preferred Shares) of the certificate(s) ("Preferred Stock
Certificate(s)") for Series 3 Preferred Shares so to be converted, duly
endorsed in blank for transfer or accompanied by proper instruments of
assignment or transfer in blank and written notice of conversion (a
"Conversion Notice"), the holder of such Series 3 Preferred Shares shall be
entitled, subject to the limitations herein contained, to receive in
exchange therefor a certificate or certificates for whole, fully paid and
nonassessable shares of Common Stock, which certificates shall be delivered
by the fourth trading day after the date of delivery of the Conversion
Notice and Preferred Stock Certificates for the Series 3 Preferred Shares
being converted, and cash for any fractional share of Common Stock on the
foregoing basis. If the Common Stock can be issued without such
restrictive legend pursuant to the Subscription Agreement, upon request
made by the holders of the Series 3 Preferred Shares in the Conversion
Notice, the Company will authorize and instruct its transfer agent to issue
the Common Stock electronically. The Conversion Notice shall be deemed
delivered and received on the business day when it is transmitted by
facsimile if so transmitted by 5:00 p.m. California time and the Company
receives the Preferred Stock Certificate(s) by 10:00 a.m. California time
the following business day, or on the next business day after it is
deposited for next-day delivery with a nationally recognized overnight
delivery service. The Series 3 Preferred Shares shall be deemed to have
been converted, and the person converting the same to have become the
holder of record of Common Stock, for all purposes as of the date of
delivery of the Conversion Notice.
(e) Reservation of Shares. The Company shall, as soon as
---------------------
practicable hereafter and then for so long as any of the Series 3 Preferred
Shares are outstanding, reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series 3 Preferred Shares, such number
3
of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series 3 Preferred Shares then
outstanding.
(f) Fractional Shares. The Company shall not issue any fraction
-----------------
of a share of Common Stock on any conversion, but shall pay in cash
therefor at the Conversion Price then in effect multiplied by such
fraction.
(g) Taxes. The Company shall pay any and all taxes that may be
-----
imposed on it with respect to the issuance and delivery of Common Stock on
the conversion of Series 3 Preferred Shares as herein provided. The
Company shall not be required in any event to pay any transfer or other
taxes by reason of the issuance of such Common Stock in names other than
those in which the Series 3 Preferred Shares surrendered for conversion are
registered on the Company's records, and no such conversion or issuance of
Common Stock shall be made unless and until the person requesting such
issuance shall have paid to the Company the amount of any such tax, or
shall have established to the satisfaction of the Company and its transfer
agent, if any, that such tax has been paid.
(h) The 19.9% Limit. If at the time that the Company receives a
---------------
Conversion Notice, the aggregate number of shares of Common Stock issuable
pursuant to such Conversion Notice and all other Conversion Notices
received at that time (the "Subject Conversion Notices"), when added to the
aggregate number of shares of Common Stock (1) previously issued on
conversion of Series 3 Preferred Shares and the exercise of that certain
Warrant to purchase Common Stock (the "Warrant") issued by the Company to
▇▇▇▇▇▇▇▇ pursuant to the Subscription Agreement on the date of initial
issuance of the Series 3 Preferred Shares and (2) issuable on conversion of
all remaining outstanding Series 3 Preferred Shares (determining such
number as if such Series 3 Preferred Shares were converted as of the
Conversion Date relating to such Conversion Notice) and (3) issuable on
exercise of the Warrant (determined based on the Exercise Price then in
effect, as defined in the Warrant) would exceed nineteen and nine-tenths
percent of the total number of shares of Common Stock outstanding (adjusted
to reflect any split, subdivision, combination or consolidation of the
Common Stock, whether by reclassification, distribution of a dividend with
respect to the outstanding Common Stock payable in shares of Common Stock,
or otherwise, or any recapitalization of the Common Stock) on the date of
the first issuance of Series 3 Preferred Shares (the "19.9% Limit") and
such circumstance would require the approval of the holders of the Common
Stock pursuant to the listing requirements of the Nasdaq Stock Market or
the rules of the National Association of Securities Dealers, Inc. (or such
stock exchange or other interdealer quotation system that is then the
Principal Market), the number of Series 3 Preferred Shares identified in
the Subject Conversion Notices that, if converted into shares of Common
Stock, would equal or exceed the 19.9% Limit (the "Excess Preferred
Shares"), shall not be converted unless and until the stockholder approval
referred to in section (2)(j) (the "Stockholder Consent") is obtained or is
no longer required. The Excess Preferred Shares will be allocated among
the holders delivering
4
Subject Conversion Notices on a pro rata basis based on the relative
number of Series 3 Preferred Shares identified in each such Subject
Conversion Notice. Any Excess Preferred shares shall not be converted into
shares of Common Stock until the later of the date on which the Stockholder
Consent is obtained and the Company receives a subsequent Conversion Notice
with respect thereto. If the Company is not otherwise notified by the
Nasdaq Stock Market or the National Association of Securities Dealers, Inc.
that Stockholder Consent is necessary, the Company will issue Common Stock
to the holders of the Series 3 Preferred Shares in excess of the 19.9%
Limit.
(i) Maximum Number. Series 3 Preferred Shares shall be
--------------
convertible only into the Maximum Number of shares of Common Stock. The
"Maximum Number" is equal to the sum of the 9% Number and the Convertible
Number. The "9% Number" is nine percent of the outstanding shares of
Common Stock as of the date of filing of this Certificate with the Delaware
Secretary of State, minus 1,500,000. The "Convertible Number" is initially
zero and thereafter may be increased on expiration of a sixty-five day
period (the "Notice Period") after the holder of Series 3 Preferred Shares
delivers a notice (a"65-Day Notice") to the Company designating an
aggregate number of shares of Common Stock in excess of the 9% Number that
will become convertible. A 65-Day Notice may be given at any time. If the
initial 65-Day Notice does not designate all of the shares of Common Stock
then issuable on conversion of such holder's Series 3 Preferred Shares,
additional Series 3 Preferred Shares will become convertible into some or
all of the remaining shares of Common Stock on delivery of one or more 65-
Day Notices increasing the Convertible Number after a further Notice
Period. From time to time following the Notice Period, the Series 3
Preferred Shares may be converted on any business day for any number of
shares of Common Stock, such that the aggregate number of shares of Common
Stock issued hereunder is less than or equal to the Maximum Number.
(j) Stockholder Approval. If there are Excess Preferred Shares
--------------------
as described in section (2)(h), the Company shall promptly use its best
efforts to obtain the Stockholder Consent, including, without limitation,
causing its Board of Directors to call a special meeting of stockholders
and recommend such approval.
(3) Voting Rights. Holders of Series 3 Preferred Shares shall have
-------------
no voting rights, except as required by law.
(4) Liquidation, Dissolution, Winding Up. In the event of any
------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of the Series 3 Preferred Shares shall be entitled to
receive in cash out of the assets of the Company, whether from capital or
from earnings available for distribution to its stockholders (the
"Preferred Funds"), before any amount shall be paid to the holders of the
Common Stock, an amount equal to the Stated Value per Preferred Share plus
any accrued and unpaid dividends; provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Series 3
Preferred Shares and holders of shares
5
of other classes or series of preferred stock of the Company that are of
equal rank with the Series 3 Preferred Shares as to payments of Preferred
Funds (the "Pari Passu Shares"), then each holder of Series 3 Preferred
Shares and Pari Passu Shares shall receive a percentage of the Preferred
Funds equal to the full amount of Preferred Funds payable to such holder as
a percentage of the full amount of Preferred Funds payable to all holders
of Series 3 Preferred Shares and Pari Passu Shares. The purchase or
redemption by the Company of stock of any class, in any manner permitted by
law, shall not, for the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the consolidation or
merger of the Company with or into any other corporation or corporations,
nor the sale or transfer by the Company of less than substantially all of
its assets, shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company. No holder of Series 3 Preferred
Shares shall be entitled to receive any amounts with respect thereto on any
liquidation, dissolution or winding up of the Company other than the
amounts provided for herein.
(5) Preferred Rank. With respect to preferences as to dividends and
--------------
distributions and payments on the liquidation, dissolution or winding up of
the Company, the Series 3 Preferred Shares shall rank (1) senior to the
Common Stock, (2) with respect to all other existing capital stock of the
Company, senior to such capital stock if permitted by the terms of such
capital stock or, if not so permitted, on a parity with such capital stock
if permitted by the terms of such capital stock or, if not so permitted,
junior to such capital stock, and (3) senior to all series of any class of
the Company's capital stock issued after the date of the filing of this
Certificate. So long as any of the Series 3 Preferred Shares are
outstanding, no Common Stock nor any other capital stock of the Company
ranking junior to the Series 3 Preferred Shares will be redeemed, purchased
or otherwise acquired for any consideration by the Company (except by
conversion into or exchange for stock of the Company ranking junior to the
Series 3 Preferred Shares) unless in each case the Company offers to redeem
the Series 3 Preferred Shares on substantially the same terms (provided
that the redemption price shall not be less than $100 per share). The
Company may hereafter authorize additional or other capital stock for
issuance in the BLC Transaction (as that term is defined in the
Subscription Agreement) that is senior, equal or junior to the Series 3
Preferred Shares, in respect of the preferences as to dividends and
distributions and payments on the liquidation, dissolution and winding up
of the Company, but the Company may not otherwise hereafter, for so long as
any Series 3 Preferred Shares are outstanding, authorize additional or
other capital stock that is of senior or equal rank to the Series 3
Preferred Shares, in respect of the preferences as to dividends and
distributions and payments on the liquidation, dissolution and winding up
of the Company. In the event of the merger or consolidation of the Company
with or into another corporation, the Series 3 Preferred Shares shall
maintain their relative powers, designations and preferences provided
herein.
(6) Lost or Stolen Certificates. On receipt by the Company of
---------------------------
evidence of the loss, theft, destruction or mutilation of any Preferred
Stock Certificate representing Series 3 Preferred Shares, and (in the case
of loss, theft or destruction) of any
6
indemnification undertaking by the holder to the Company that is reasonably
satisfactory to the Company, and on surrender and cancellation of such
Preferred Stock Certificate, if mutilated, the Company shall execute and
deliver a new Preferred Stock Certificate of like tenor and date; provided
that the Company shall not be obligated to re-issue any lost or stolen
Preferred Stock Certificate if the holder thereof contemporaneously
requests the Company to convert such Series 3 Preferred Shares into Common
Stock.
(7) Amendment. So long as any Series 3 Preferred Shares are
---------
outstanding, the Company shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of
at least a majority of the total number of Series 3 Preferred shares
outstanding, voting separately as a class, amend or repeal any provision
of, or add any provision to, the Company's Certificate of Incorporation, if
such action would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the Series 3
Preferred Shares.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
_______________________________, its ________________________________, as of
___________________, 1997.
SYQUEST TECHNOLOGY, INC.
By:_________________________________
Title:
7
ANNEX B
(Form of Warrant Certificate)
The Warrant represented by this certificate was issued on April 2,
1997 (the "Closing Date") pursuant to the Subscription Agreement dated
March 31, 1997 between SyQuest Technology, Inc. and ▇▇▇▇▇▇▇▇
International Limited. Neither the Warrant represented by this
certificate nor the securities issuable upon exercise hereof have been
registered under the Securities Act of 1933, as amended (the "Act").
The Warrant represented by this certificate may not be exercised by or
on behalf of any U.S. Person (as defined in Regulation S under the Act
("Regulation S")) unless the securities issuable upon exercise hereof
are registered under the Act or an exemption from such registration is
available. The Warrant represented hereby has been issued and sold in
reliance on the exemption from registration provided by Regulation S.
Warrant No. 59
Warrant Certificate
SYQUEST TECHNOLOGY, INC.
This Warrant Certificate certifies that ▇▇▇▇▇▇▇▇ INTERNATIONAL LIMITED
("▇▇▇▇▇▇▇▇"), or its registered assigns, is the registered holder of one Warrant
(the "Warrant") expiring on April 2, 2004 (the "Termination Date") to purchase
shares of common stock, par value $.001 per share (the "Common Stock"), of
SYQUEST TECHNOLOGY, INC., a Delaware corporation (the "Issuer"). The Warrant
entitles the holder to purchase from the Issuer up to Five Million Warrant
Shares (as defined below), subject to adjustment, at a per share Exercise Price
(as defined below). A "Warrant Share" initially represents one fully paid and
nonassessable share of Common Stock, based upon an Exchange Rate (as defined
below) of one-for-one, subject to adjustment pursuant to paragraph 10 hereof.
The Warrant represented hereby was issued on April 2, 1997 (the "Closing
Date") pursuant to the Subscription Agreement dated March 31, 1997 (the
"Subscription Agreement"), between the Issuer and ▇▇▇▇▇▇▇▇, and is subject to
the terms and conditions thereof. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings set forth in the Subscription
Agreement. A copy of the Subscription Agreement may be obtained by the
registered holder hereof upon written request to the Issuer.
The exercise price per Warrant Share (plus transfer taxes, if applicable,
the "Exercise Price") shall be the greater of (a) the arithmetical average of
the closing sale prices per share of Common Stock on the five consecutive
trading days preceding the delivery of any Exercise Notice (as defined below) as
reported by the Nasdaq Stock Market (the "NMS") or (ii) if the NMS is not then
the principal trading market for the Common Stock, on the principal trading
market for the Common Stock at that time or, if there is then no such principal
trading market, the fair market value per share of Common Stock during such
period as determined in good faith by the Board of Directors of the Issuer and
(b) 90% of such closing sale price on the day immediately preceding the delivery
of the Exercise Notice; provided that in no event shall the Exercise Price
exceed the closing sale price per share of Common Stock as reported by the NMS
on the date of initial issuance of this Warrant Certificate. If the value of the
Common Stock is to be determined by the Board of Directors of the Issuer and the
holder of this Warrant Certificate disagrees with said valuation, the value of
the Common Stock will be determined by binding arbitration in accordance with
the then prevailing commercial arbitration rules of the American Arbitration
Association, and such arbitration shall proceed in Chicago, Illinois or at such
other place as agreed to in writing by the Issuer and the holder of this Warrant
Certificate. The Exercise Price multiplied by the Exercise Amount (as defined
below) at any Exercise Date (as defined below) is referred to as a "Warrant
Purchase Price".
The number of Warrant Shares for which this Warrant may be exercised will
increase by 500,000 for each month (prorated daily for partial months) that
either of the following conditions is not satisfied: (i) the Registration
Statement (as defined in the Subscription Agreement) shall be effective not
later than June 1, 1997 (provided that such condition need not be satisfied
until July 1, 1997 if the Securities and Exchange Commission reviews the
Registration Statement), and (ii) on the day after the Issuer's 1997 Annual
Meeting of stockholders, but in any event not later than June 1, 1997, the
Issuer shall have the number of duly authorized shares of Common Stock reserved
for issuance to ▇▇▇▇▇▇▇▇ equal to the total number then issuable upon full
exercise of this Warrant and full conversion of the Preferred Shares (as defined
in the Subscription Agreement) and otherwise is able to deliver shares of Common
Stock upon such exercise or conversion.
The Warrant represented hereby shall have the following additional terms:
1. The Warrant is not exercisable until the lapse of a period ending on the
65th day (the "Notice Period") after the holder delivers a notice (a "65
Day Notice") to the Issuer designating an aggregate number of Warrant
Shares (the "Exercisable Number"). A 65 Day Notice may be given at any time
after the Closing Date. If the initial 65 Day Notice does not designate all
of the Warrant Shares, the Warrant will become exercisable for some or all
of the remaining Warrant Shares upon delivery of one or more 65 Day Notices
increasing the Exercisable Number after a further Notice Period. From time
to time following the Notice Period, the Warrant represented hereby may be
exercised on any Business Day prior to the Termination Date (an "Exercise
Date") for any quantity of Warrant Shares, such that the aggregate number
of Warrant Shares issued hereunder is less than or equal to the Exercisable
Number. To exercise the Warrant, the registered
2
holder must, prior to the Termination Date, surrender this Warrant
Certificate to the Issuer at its principal office with the Exercise Notice
attached hereto (an "Exercise Notice") duly completed and signed by the
registered holder hereof and stating the total number of Warrant Shares in
respect of which the Warrant is then exercised (the "Exercise Amount") and
tender the applicable Warrant Purchase Price. In order to exercise the
Warrant, the registered holder hereof is required to give either (a) a
written certification that it is not a U.S. Person (as defined in
Regulation S) and the Warrant is not being exercised on behalf of a U.S.
Person or (b) a written opinion of counsel to the effect that the Warrant
and the securities deliverable upon exercise hereof have been registered
under the Act or are exempt from registration thereunder. The Warrant shall
be exercisable only in the minimum amount of 10,000 Warrant Shares and
integral multiples of 10,000 Warrant Shares in excess thereof (or such
lesser amount as shall constitute the full amount remaining of this
Warrant). As used herein the term "Business Day" means any day on which
banks in the City of New York and the State of California are open for
business.
2. On the Business Day following an Exercise Date (an "Issue Date"), the
Issuer shall issue and cause to be delivered to the registered holder
hereof at such address as such holder shall specify in the Exercise Notice
a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrant, registered in such holder's
name, together with cash (if any) as provided in paragraph 4. Such
certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a
holder of record of such Warrant Shares as of such Exercise Date.
3. If on such Issue Date the number of Warrant Shares to be delivered shall be
less than the total number of Warrant Shares deliverable hereunder, there
shall be issued to the holder hereof or his assignee on such Issue Date a
new warrant certificate substantially identical to this Warrant
Certificate, except that such new warrant certificate shall evidence the
right to purchase the number of Warrant Shares equal to (x) the total
number of Warrant Shares deliverable hereunder less (y) the number of
Warrant Shares so delivered.
4. The Issuer shall not be required to issue fractional Warrant Shares on the
exercise of the Warrant represented hereby. The number of full Warrant
Shares which shall be issuable upon the exercise of the Warrant shall be
computed on the basis of the aggregate number of Warrant Shares purchasable
on exercise of the Warrant so presented. If any fraction of a Warrant
Share would, except for the provisions of this paragraph 4, be issuable on
the exercise of the Warrant, the Issuer shall pay an amount in cash equal
to the last per share sale price of the Common Stock (on the NMS or the
Principal Market, as the case may be) on the day immediately preceding the
Exercise Date, multiplied by such fraction (subject to adjustment pursuant
to paragraph 10); provided that if at the time that the Exercise Price is
to be determined the NMS is not the principal trading market for the Common
Stock and there is no Principal Market, then the amount of cash to be paid
per fractional Warrant Share shall be determined in good faith by the Board
of Directors of
3
the Issuer. If the holder of this Warrant Certificate disagrees with such
determination, the amount of cash to be paid per fractional Warrant Share
will be determined by binding arbitration in accordance with the then
prevailing commercial arbitration rules of the American Arbitration
Association, and such arbitration shall proceed in Chicago, Illinois or at
such other place as agreed to in writing by the Issuer and the holder of
this Warrant Certificate.
5. For so long as the Warrant represented hereby has not been exercised in
full, the Issuer shall at all times prior to the Termination Date reserve
and keep available, free from pre-emptive rights, out of its authorized but
unissued Common Stock, for issuance upon exercise of the Warrant
represented hereby, the maximum number of shares of Common Stock and any
other Capital Stock (as defined below) then so issuable. In furtherance of
the foregoing, subject to adjustment pursuant to paragraph 10 and to
increase pursuant to the fourth paragraph hereof, the Issuer shall reserve
for issuance hereunder, not less than 5,000,000 shares of Common Stock. In
the event the number of shares of Common Stock or other securities issuable
in respect of the Warrant Shares exceeds the authorized number of shares of
Common Stock or other securities, the Issuer shall promptly take all
actions necessary to increase the authorized number, including causing its
Board of Directors to call a special meeting of stockholders within 30 days
of the date on which such excess first existed and recommend such increase
for approval by the Issuer's stockholders. The Issuer shall use its best
efforts to obtain stockholder approval of the increase to the authorized
number of shares of Common Stock.
6. By accepting delivery of this Warrant Certificate, the registered holder
hereof covenants and agrees with the Issuer not to exercise or transfer the
Warrant or any Warrant Shares except in compliance with the terms of the
Subscription Agreement and this Warrant Certificate.
7. By accepting delivery of this Warrant Certificate, the registered holder
hereof covenants and agrees with the Issuer that the Warrant may not be
sold, assigned, conveyed, encumbered, pledged, hypothecated or in any
other manner disposed of or transferred, in whole or in part, unless and
until such holder shall deliver to the Issuer (i) written notice of such
transfer and of the name and address of the transferee, (ii) a written
agreement, in form and substance reasonably satisfactory to the Issuer, of
the transferee to comply with the applicable terms of the Subscription
Agreement and this Warrant Certificate and (iii) a written certification of
appropriate officers of the transferee that such transferee is not a "U.S.
Person" (as defined in Regulation S) or any person holding on behalf of any
U.S. Person or that such transfer is otherwise exempt from any registration
requirements. If a portion of the Warrant is transferred, all rights of the
registered holder hereunder may be exercised by the transferee (subject to
the requirement that such transferee shall provide a written certification
of appropriate officers of the transferee that such transferee is not a
U.S. Person or exercising on behalf of a U.S. Person or that such transfer
is otherwise exempt from any registration requirements in respect of the
number of Warrant Shares transferred with the portion of the Warrant),
provided that any registered holder
4
of the Warrant may deliver a 65 Day Notice, an Exercise Notice or elect the
form of consideration pursuant to paragraph 10 only with respect to the
Warrant Shares subject to such holder's portion of the Warrant, and, for
purposes of paragraph 10(d), the calculation of the Black-Scholes Warrant
Value shall be made by the registered holder(s) of a majority in interest
of the Warrant.
8. The Issuer will pay all documentary stamp taxes (if any) attributable to
the issuance of Warrant Shares upon the exercise of the Warrant by the
registered holder hereof; provided, however, that the Issuer shall not be
-------- -------
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the registration of the Warrant Certificate or any
certificates for Warrant Shares in a name other than that of the registered
holder of the Warrant Certificate surrendered upon the exercise of a
Warrant, and the Issuer shall not be required to issue or deliver the
Warrant Certificate or certificates for Warrant Shares unless or until the
person or persons requesting the issuance thereof shall have paid to the
Issuer the amount of such tax or shall have established to the satisfaction
of the Issuer that such tax has been paid.
9. In case this Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Issuer may in its discretion issue in exchange and
substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the lost, stolen or
destroyed Warrant Certificate, a new Warrant Certificate of like tenor, but
only upon receipt of evidence reasonably satisfactory to the Issuer of such
loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, reasonably satisfactory to the Issuer. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Issuer may
prescribe.
10. The number of shares of Common Stock (and other Capital Stock (as defined
below) or property) (as adjusted from time to time, the "Exchange Rate")
issuable in respect of each Warrant Share upon the exercise of the Warrant
and the terms and conditions of the Warrant are subject to adjustment by
the Issuer, in consultation with the holder hereof, from time to time as
follows:
(a) If the Issuer:
1. subdivides its outstanding shares of Common Stock into a greater
number of shares;
2. combines its outstanding shares of Common Stock into a smaller
number of shares; or
3. issues by reclassification of its Common Stock any shares of its
Capital Stock;
5
then the Exchange Rate in effect immediately prior to such action
shall be adjusted so that the registered holder hereof shall
thereafter be entitled to receive upon exercise of the Warrant in
respect of each Warrant Share the number of shares of Common Stock or
other Capital Stock of the Issuer that such holder would have received
immediately following such action if such holder had so exercised the
Warrant immediately prior to such action.
As used herein, the term "Capital Stock" means, with respect to any
corporation, any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests
(however designated) in stock issued by that corporation.
Such adjustment shall become effective simultaneously with the
effective date of any subdivision, combination or reclassification.
If, after an adjustment, the registered holder hereof would receive
upon exercise shares of two or more classes of Capital Stock of the
Issuer, the Exchange Rate shall thereafter be subject to adjustment
upon the occurrence of an action taken with respect to each such class
of Capital Stock as is contemplated hereby with respect to the Common
Stock, on terms comparable to those applicable to Common Stock
hereunder.
(b) Whenever any of the actions described in this paragraph 10 are to be
taken, the Issuer shall provide the notices required by paragraph 12
hereof.
(c) Reserved.
(d) (A) The Issuer covenants and agrees with the registered holder hereof
not to consolidate or merge with or into, or sell, transfer or lease
all or substantially all its assets to, or sell a majority of its
securities generally entitled to vote for the election of directors of
the Issuer ("Voting Securities") to, any person, unless, and (B) if
any person consummates a tender offer for the purchase of at least a
majority of the Voting Securities (any of which transactions described
in clauses (A) and (B), a "Transaction"), then, at the election of the
registered holder hereof (or if such holder does not notify the Issuer
of such election within 20 days after being notified of the
Transaction, at the election of the Issuer), on the effective date of
such Transaction (the "Transaction Date") and as a condition to the
consummation of any Transaction described in clause (A), either:
1. the Issuer shall have redeemed the Warrant represented hereby by
paying to such holder, upon surrender of this Warrant
Certificate, a cash payment equal to the Black-Scholes value of
the unexercised portion of the Warrant from the effective date of
the Transaction until the Warrant Expiration
6
Date (the "Black-Scholes Warrant Value"), computed as of such
Transaction Date; or
2. (a) such person shall expressly assume in writing all of the
obligations of the Issuer under the Subscription Agreement
and hereunder and deliver notice thereof to the registered
holder hereof; and
(b) upon consummation of such Transaction, the Warrant shall
automatically become exercisable for the common stock of the
acquiror (without regard to the form of acquisition
consideration) with similar terms and at an exercise price
that would result in a Black-Scholes Warrant Value of the
Warrant computed immediately after the Transaction equal
to the Black-Scholes Warrant Value of the Warrant computed
immediately before the Transaction.
For purposes of this paragraph 10(d), the factors to be used in the
calculation of the Black-Scholes Warrant Value are as follows:
Stock Price: the last sales price of the Common Stock
reported by Bloomberg on the last Trading Day
prior to the Transaction Date (the "Last
Trading Day")
Time To Expiration: the number of Trading Days between the Last
Trading Day and the Termination Date
Exercise Price: Exercise Price
Volatility: volatility shown by Bloomberg for the past
260 days at close on the Last Trading Day,
unless the Time to Expiration is less than
260 Trading Days, in which case the
volatility shown by Bloomberg at close on the
Last Trading Day for the number of Trading
Days from the Last Trading Day to the
Termination Date
Risk-Free Interest Rate: closing yield as of the Last Trading Day as
quoted in the Wall Street Journal for U.S.
Treasury bond with a maturity date closest to
the Termination Date
Number of Shares
Outstanding: total number of shares of Common Stock
outstanding as of the Last Trading Day
Exercisable
Common Stock: the number of shares of Common Stock
exercisable under the Warrant as of the
Transaction Date
The Black-Scholes Warrant Value will be calculated using the factors
shown above. A preliminary calculation of the Black-Scholes Warrant
Value, and, if applicable, the exercise price contemplated by
paragraph 10(d)2.(b) hereof,
7
(utilizing then-current values for each factor) will be delivered by
▇▇▇▇▇▇▇▇ to the Issuer not later than the tenth day after it receives
notice of a Transaction by the Issuer. The Issuer, in turn, will
respond within five days with any comments or questions and reach
agreement with ▇▇▇▇▇▇▇▇ on the preliminary factors. On the Transaction
Date, ▇▇▇▇▇▇▇▇, in consultation with the Issuer, will calculate the
final Black-Scholes Warrant Value utilizing the then-current values
for each factor; such calculation will be utilized to compute the
values called for in paragraph 10(d). It shall be a condition to any
Transaction that the consideration provided for herein shall be paid
in full, in the case of cash, or delivered, in the case of a warrant,
all in accordance with the terms hereof, immediately prior to the
consummation of the Transaction. As used herein, the term "Trading
Day" means any day on which the Issuer's Common Stock is quoted on
NASDAQ or, if applicable, other national securities exchange. If the
factors shown above can not be determined because the Issuer's Common
Stock is not listed on any national securities exchange or because
Bloomberg does not report the factors shown above, then the Issuer and
the holder of the Warrant shall agree on an alternative calculation so
as to satisfy the requirements of this paragraph 10(d).
(e) After an adjustment to the Exchange Rate hereunder, any subsequent
event requiring an adjustment hereunder shall cause an adjustment to
the Exchange Rate as so adjusted.
(f) Upon the issuance of any stock dividend or distribution of Common
Stock pro rata to all holders of Common Stock, the Exchange Rate shall
be adjusted so that the registered holder hereof on the record date
for such distribution shall be entitled to receive such dividend or
distribution on the same terms as the holders of Common Stock upon
exercise hereof.
11. Reserved.
12. Except as provided in the following paragraph, upon any adjustment of the
Exchange Rate pursuant to paragraph 10, the Issuer shall promptly
thereafter but in any event within 15 days following such adjustment (i)
cause to be delivered to the registered holder hereof a certificate of its
Chief Financial Officer setting forth the Exchange Rate after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based, which certificate
shall be conclusive evidence of the correctness of the matters set forth
therein, and (ii) cause to be delivered to the registered holder hereof at
its address appearing on the Warrant Register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate, such
notice may be given in advance and included as part of the notice required
to be mailed under the other provisions of this paragraph 12.
In case:
8
(a) the Issuer shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) of any proposal for a consolidation or merger to which the Issuer is a
party, the sale or transfer of all or substantially all of the assets
of the Issuer, or any reclassification or change of Common Stock
issuable upon exercise of the Warrant (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or of a tender
offer or exchange offer for shares of Common Stock; or
(c) of the voluntary or involuntary dissolution, liquidation or winding up
of the Issuer; or
(d) the Issuer proposes to take any action which would require an
adjustment of the Exchange Rate pursuant to paragraph 10;
then the Issuer shall cause to be given to the registered holder hereof at
his or her address appearing on the Warrant Register (as defined below), at
least 20 days (or 10 days in any case specified in clause (a) above) prior
to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first class mail,
postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or
(ii) the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated,
and the date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange such shares for securities or
other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up.
13. The Issuer shall serve as warrant agent (the "Warrant Agent") under this
Agreement. The Warrant Agent hereunder shall at all times maintain a
register (the "Warrant Register") of the holders of Warrants. Upon 30 days'
notice to the registered holder hereof, the Issuer may appoint a new
Warrant Agent. Such new Warrant Agent shall be a corporation doing business
and in good standing under the laws of the United States or any state
thereof, and having a combined capital and surplus of not less than
$50,000,000. The combined capital and surplus of any such new Warrant Agent
shall be deemed to be the combined capital and surplus as set forth in the
most recent annual report of its condition published by such Warrant Agent
prior to its appointment; provided that such reports are published at
--------
least annually pursuant to law or to the requirements of a federal or state
supervising or examining authority. After acceptance in writing of such
appointment by the new Warrant Agent, it shall be vested with the
9
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be
reasonably necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense
of the Issuer and shall be legally and validly executed and delivered by
the Issuer.
Any corporation into which the Issuer or any new Warrant Agent may be
merged or any corporation resulting from any consolidation to which the
Issuer or any new Warrant Agent shall be a party or any corporation to
which the Issuer or any new Warrant Agent transfers substantially all of
its corporate trust or shareholders services business shall be a successor
Warrant Agent under this Agreement without any further act; provided that
--------
such corporation (i) would be eligible for appointment as successor to the
Warrant Agent under the provisions of this paragraph 13 or (ii) is a wholly
owned subsidiary of the Warrant Agent. Any such successor Warrant Agent
shall promptly cause notice of its succession as Warrant Agent to be mailed
(by first class mail, postage prepaid) to the registered holder hereof at
such holder's last address as shown on the Warrant Register.
This Warrant Certificate shall not be valid unless signed by the Issuer.
10
IN WITNESS WHEREOF, SyQuest Technology, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officer.
Dated: April 2, 1997
SYQUEST TECHNOLOGY, INC.
By: _______________________
Name:
Title:
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise of the Warrant)
[DATE]
SyQuest Technology, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Re: Warrant No.
---------------------------
Ladies and Gentlemen:
The undersigned is the registered holder of the above-referenced
warrant (the "Warrant") issued by SyQuest Technology, Inc., evidenced by the
Warrant Certificate attached hereto, and hereby elects to exercise the Warrant
to purchase _________ Warrant Shares (as defined in such Warrant Certificate)
and herewith tenders $_____________ by certified or official bank check to the
order of SyQuest Technology, Inc. as payment for such Warrant Shares in
accordance with the terms of such Warrant Certificate and the Subscription
Agreement (as defined in the Warrant Certificate). The undersigned either (i)
hereby certifies that it is not a "U.S. Person" (as defined in Regulation S
under the Securities Act of 1933, as amended (the "Act")), it is not exercising
this Warrant on behalf of any U.S. Person and the Warrant is not being exercised
within the United States, or (ii) delivers herewith an opinion of counsel to the
effect that the Warrant and the Warrant Shares have been registered under the
Act or are exempt from registration thereunder. This exercise notice is
accompanied by the certificates required to be delivered pursuant to Section 8
of the Subscription Agreement.
In accordance with the terms of the attached Warrant Certificate, the
undersigned requests that certificates for such Warrant Shares be registered in
the name of and delivered to the undersigned at the following address:
________________________
________________________
________________________
By providing the above address, the undersigned confirms that, upon
exercise of the Warrant, the Warrant Shares will not be delivered within the
United States (as defined in Regulation S under the Act) unless (i) in an
offering deemed to meet the definition of "offshore transaction" pursuant to
paragraph (i)(3) of Rule 902 under the Act or (ii) an opinion of counsel has
been provided to the effect that the Warrant and the Warrant Shares have been
registered under the Act or an exemption from such registration is available.
[IF THE NUMBER OF WARRANT SHARES TO BE DELIVERED IS LESS THAN THE
TOTAL NUMBER OF WARRANT SHARES DELIVERABLE UNDER THE WARRANT, INSERT THE
FOLLOWING -- The undersigned requests that a new warrant certificate
substantially identical to the attached Warrant Certificate be issued to the
undersigned evidencing the right to purchase the number of Warrant Shares equal
to (x) the total number of Warrant Shares deliverable under the Warrant less (y)
the number of Warrant Shares to be delivered in connection with this exercise.]
NAME OF REGISTERED HOLDER
[ADDRESS]
By: _____________________________
Name:
Title: