UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 30, 1996
nStor Technologies, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-8354 95-2094565
(Commission File No.) (I.R.S. Employer
Identification No.)
100 Century Blvd.
West Palm Beach, Florida 33417
(Address and Zip Code of Principal Executive Offices)
(561) 640-3131
Registrant's telephone number, including area code
Not Applicable
(Former name or former address,
if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to an Asset Purchase Agreement (the "Acquisition
Agreement"), dated November 30, 1996, between Parity Systems,
Inc. ("Parity"), a privately-owned California corporation
headquartered in Los Gatos, California, and nStor Corporation,
Inc. ("nStor"), a subsidiary of Registrant and a Delaware
corporation, effective December 1, 1996 nStor acquired certain
assets and assumed certain liabilities of Parity (the
"Business"). The closing of the acquisition took place on
December 30, 1996.
The purchase price consisted of approximately $5.8 million in
cash, including approximately $3 million to repay the outstanding
balance of Parity's bank line of credit, plus a three year
warrant to purchase 500,000 shares of Registrant's common stock
at $2.10 per share, the market price on October 17, 1996, the
date of execution of the Letter of Intent regarding the Parity
acquisition. The purchase price includes $300,000 to be held in
escrow for up to three years in connection with certain
indemnifications made by Parity.
The Business acquired by nStor consists of the design,
manufacture and sale of computer storage subsystems, memory
devices and peripheral equipment, and the integration of storage
management solutions, digital media management, and client/server
systems for RISC-based UNIX and Windows NT Server environments.
The acquisition enables nStor to gain access to the rapidly-expanding
mid-range UNIX market and expands nStor's product line
to include high-performance storage and data
protection/management solutions, backup/data recovery solutions,
hierarchial storage management, visual asset management systems
and compact disc recorder technology.
In connection with the acquisition, as of December 31, 1996 nStor
entered into a two year Employment Agreement, with Norbert Witt
("Witt"), the president and a principal shareholder of Parity,
under which nStor has agreed to pay Witt an annual base salary of
$200,000, plus incentive compensation of 5% and 3% of the net
earnings, as defined, of the Parity Division for 1997 and 1998,
respectively, up to an annual maximum of $100,000. Witt is also
entitled to be granted options to purchase 100,000 shares of
Registrant's common stock at $2.10 per share, which options vest
ratably during the term of employment.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
As of the date of filing of this Current Report on Form 8-K, it
is impracticable for the Registrant to provide the financial
statements required by this Item 7(a). In accordance with Item
7(a)(4) of Form 8-K, such financial statements shall be filed by
amendment to this Form 8-K no later than 60 days after January
14, 1997.
(b) Pro Forma Financial Information
As of the date of filing of this Current Report on Form 8-K, it
is impracticable for the Registrant to provide the pro forma
financial information required by this Item 7(b). In accordance
with Item 7(b) of Form 8-K, such financial statements shall be
filed by amendment to this Form 8-K no later than 60 days after
January 14, 1997.
(c) Exhibits
Description of Documents
10.1 Asset Purchase Agreement Between Parity Systems, Inc.
("Parity") and nStor Corporation, Inc. ("nStor"), dated
as of November 30, 1996.
10.2 Employment Agreement Between nStor and Norbert Witt,
effective as of December 31, 1996 (to be filed by
amendment).
10.3 Form of Warrant, dated December 30, 1996, granting Parity
the right to purchase 500,000 shares of the Registrant's
common stock.
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
nSTOR TECHNOLOGIES, INC.
/s/ Mark Levy
_________________________
Mark Levy, President
Date: January 10, 1997
ASSET PURCHASE AGREEMENT
BETWEEN
PARITY SYSTEMS, INC.
AND
nSTOR CORPORATION, INC.
TABLE OF CONTENTS
1. PURCHASE AND CONSIDERATION
1.1 Purchase of Selected Assets
1.2 Assignment of Contracts
1.3 Excluded Assets and Liabilities
1.4 Assumption of Liabiities
1.5 Purchase Price
1.6 Terms of Payment
1.7 Instruments of Transfer
1.8 Purchase Price Allocation
1.9 Transfer Taxes
1.10 Proration of Certain Items
2. CLOSING
2.1 The Closing
2.2 Actions at the Closing
3. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization
3.2 Authority
3.3 Effect of Agreement
3.4 Title to Selected
3.5 Litigation
3.6 Intellectual Property
3.7 Employees
3.8 Brokers or Finders
3.9 Financial Informat
3.10 Operation in the Ordinary Course
3.11 Performance of Assumed Contracts
3.12 Compliance with Law
3.13 Taxes
3.14 Licenses and Permits
3.15 Labor Contracts
3.16 Accounts Receivable
3.17 Insurance
3.18 Accuracy of Information Furnished
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Organization
4.2 Authority
4.3 Effect of Agreement
4.4 Brokers or Finders
4.5 Litigation
5. COVENANTS OF SELLER
5.1 Operation of Business Prior to Actual Closing Date
5.2 Access and Assistance
5.3 No Actions to Make Representations and
Warranties Untrue
5.4 Legal Requirements
5.5 Consummation of Transaction
5.6 Employment by Purchaser of Business Employees
5.7 Due Diligence/Confidentiality
5.8 Discharge of Debts
5.9 Notice of Certain Events
5.10 Waiver of Bulk Sales Notice Compliance
5.11 Subsequent Actions
5.12 Tax Returns; Taxes
5.13 Payment of Transfer Taxes
5.14 Covenant Not to Compete
6. COVENANTS OF PURCHASER
6.1 No Actions to Make Representations and
Warranties Untrue
6.2 Compliance with Legal Requirements
7. ADDITIONAL AGREEMENTS
7.1 Public Disclosure
7.2 Expenses
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
8.1 Representations, Warranties and Covenants
8.2 Certificate
8.3 Governmental Approvals
8.4 Closing Documents
8.5 No Litigation
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
9.1 Representations, Warranties and Covenants
9.2 Certificate
9.3 Governmental Approvals
9.4 Closing Documents
9.5 No Litigation
9.6 Third Party Consents
9.7 Assignment of Lease
9.8 Certificates
9.10 Sales, Use and Ad Valorem Taxes
9.11 Norbert Witt
9.12 Silicon Graphics License
10. TERMINATION
10.1 Agreement Termination
10.2 Effect of Termination
10.3 Risk of Loss
11. INDEMNIFICATION
11.1 Indemnification by Seller
11.2 Indemnification by Purchaser
11.3 Procedure for Making Claims
11.4 Participation in Defense of Third Party Claims
11.5 Holdback
11.6 Survival of Indemnification
12. MISCELLANEOUS PROVISIONS
12.1 Survival of Representations, Warranties
and Covenants
12.2 Assignment, Successors and Assigns
12.3 Notices
12.4 Alterations and Waivers
12.5 Governing Law
12.6 Severability
12.7 No Third-Party Beneficiaries
12.8 Integration and Entire Agreement
12.9 Counterparts
12.10 Headings
12.11 Specific Performance
12.12 Arbitration
12.13 Further Assurances
12.14 Time of the Essence
12.15 Attorney's Fees
INDEX TO SCHEDULES
Schedule Description
1.1.1 Fixed Assets
1.1.2 Inventory
1.1.3 Repair Inventory
1.1.4 Intellectual Property
1.1.6 Accounts Receivable
1.1.7 Cash
1.2.1 Real Property Leases
1.2.2 Open Purchase Orders and Contracts
1.2.3 Warranty, Return and Service Obligations
1.2.4 Open Customer Orders
1.2.5 Licenses and Distributor Agreements
1.4.3 Accounts Payable
1.4.4 Line of Credit
1.4.5 Shareholder Loan
1.5 Warrant Certificate
1.8 Purchase Price
3.7 Business Employees
3.17 Insurance
11.5 Escrow Agreement
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is dated as
of November 30, 1996, between PARITY SYSTEMS, INC., a California
corporation ("Seller"), and nSTOR CORPORATION, INC., a Delaware
corporation ("Purchaser").
RECITALS:
A. Seller is engaged in the business of the design,
manufacture and sale of storage sub-systems, memory devices and
peripheral equipment (the "Business").
B. Purchaser desires to purchase from Seller and Seller
desires to sell to Purchaser, on the terms and subject to the
conditions of this Agreement, selected assets, liabilities and
goodwill of Seller relating to the Business.
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, and other good and
valuable consideration, the receipt, adequacy and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. PURCHASE AND CONSIDERATION
1.1 Purchase of Selected Assets. Subject to the terms and
conditions of this Agreement and except as provided in Section
1.3 hereof, Seller agrees to transfer, convey, assign and
deliver to Purchaser as of the Effective Closing Date (as
defined in Section 2 below), and Purchaser agrees to buy from
Seller, free and clear of all encumbrances, the following
selected assets and properties, owned by Seller and pertaining
to the Business (the "Selected Assets"):
1.1.1 all of the fixed assets, equipment, furniture and
fixtures of the Business, including without limitation, the
telephone system, computers, test equipment, office furniture,
copiers and related equipment set forth on Schedule 1.1.1
hereto;
1.1.2 the inventory of new cabinets, controllers,
supplies, work in process, parts inventory and finished goods as
set forth on Schedule 1.1.2;
1.1.3 the inventory of repair and customer evaluation
products and parts, including hard disc drives as set forth on
Schedule 1.1.3;
1.1.4 all licenses, trade secrets, goodwill, technical
data and know-how, patents, trade names and trademarks and other
intellectual property, and all drawings, specifications, written
procedures and manuals as set forth on Schedule 1.1.4;
1.1.5 subject to the provisions of Section 1.3.1 below,
all books and records of the Business, including all sales and
credit records, advertising and sales material, marketing
literature, customer lists, purchasing records and personnel and
payroll records;
1.1.6 the accounts receivable set forth on Schedule
1.1.6; and
1.1.7 the cash, bank accounts, deposits with utilities
or suppliers and any other deposits set forth on Schedule 1.1.7.
1.2 Assignment of Contracts. As of the Effective Closing
Date and subject to Purchaser's review and approval of the
agreements, Seller will assign to Purchaser and Purchaser will
assume and perform Seller's obligations under the following
agreements ("Assumed Contracts"):
1.2.1 real property leases for the facilities
located at 110 Knowles Drive, Los Gatos, CA 95030; 7755
Center Avenue, Suite 800, Huntington Beach, CA 92647; 20
Trafalgar Square, Suite 48, Nashua, New Hampshire 03063;
300 N. Cleveland-Massillon Road, Akron, Ohio; and 130
Allison Court, Vacaville, California 95688, copies of which
leases are set forth on Schedule 1.2.1 hereto;
1.2.2 all open purchase orders and contracts
issued in connection with the Business as set forth on
Schedule 1.2.2 hereto;
1.2.3 all warranty, return and service obligations
of the Business as set forth on Schedule 1.2.3 hereto;
1.2.4 all open customer orders received in
connection with the Business prior to the Closing Date as
set forth on Schedule 1.2.4 hereto; and
1.2.5 the licenses, distributor agreements and
other such agreements as are set forth on Schedule 1.2.5.
Purchaser's assumption of each of the Assumed Contracts is
conditioned on Seller obtaining any necessary third party
consents to the assignment of Seller's obligations under such
contracts.
1.3 Excluded Assets and Liabilities. Subject to Section
2.1, Seller shall retain and Purchaser shall not acquire or
assume the following ("Excluded Assets" and "Excluded
Liabilities"):
1.3.1 corporate minute books, financial books and
records, and tax returns of Seller relating to the
Business;
1.3.2 all losses, costs, expenses, claims,
liabilities, deficiencies, judgments and damages ("Losses")
arising out of, resulting from, or incident to, acts or
events occurring before the Effective Closing Date related
to the Selected Assets, Assumed Contracts or the Business;
1.3.3 any salaries, wages, commissions, bonuses,
benefits and other amounts payable to Seller's officers,
directors and employees through the Effective Closing Date;
and
1.3.4 any unaccrued salaries, contractual
benefits, bonuses, commissions or any other liabilities or
amounts due to Nick Scharf, the interim Chief Executive
Officer of Seller.
1.3.5 all Losses and liabilities not expressly
assumed in Section 1.4 below.
1.4 Assumption of Liabilities. Subject to Section 2.1,
Purchaser will assume, as of the Effective Closing Date, the
following, and only the following liabilities of Seller
("Assumed Liabilities"):
1.4.1 all Losses arising out of, resulting from,
or incident to, acts or events occurring after the
Effective Closing Date related to the Selected Assets;
1.4.2 all Losses arising out of, resulting from,
or incident to, acts or events occurring after the
Effective Closing Date related to the Assumed Contracts
assigned to Purchaser;
1.4.3 the trade accounts payable incurred by
Seller relating to goods ordered in the conduct of the
Business as of the Effective Closing Date as set forth on
Schedule 1.4.3 attached hereto;
1.4.4 the outstanding balance on that certain line
of credit with Imperial Bank described on the attached
Schedule 1.4.4; provided however, that Purchaser's
assumption of such line of credit is conditioned upon
Purchaser approving any additional draws on the line after
the date of this Agreement. Alternatively, Purchaser shall
have the right to pay off said line of credit at Closing
and, in that event, Seller shall promptly provide such
satisfactions or other evidence of payment as may be
reasonably required by Purchaser; and
1.4.5 the outstanding balance due on that certain
promissory note from Seller to Norbert Witt on the terms as
set forth on the attached Schedule 1.4.5.
1.5 Purchase Price. The purchase price for the Selected
Assets and Assumed Contracts with the Assumed Liabilities shall
be $2,800,000.00 plus a warrant for the purchase of 500,000
shares of the common stock of nStor Technologies, Inc., formerly
known as IMGE, Inc. ("Warrant", the cash and the Warrant being
collectively referred to herein as the "Purchase Price"). The
terms and conditions of the Warrant shall be as set forth in the
Warrant Certificate attached as Schedule 1.5 hereto.
1.6 Terms of Payment. Purchaser shall pay Seller at
Closing $2,800,000.00, as adjusted by any prorations, escrows or
adjustments provided for in this Agreement in immediately
available funds and shall deliver the Warrant Certificate.
1.7 Instruments of Transfer. The sale, assignment,
transfer, conveyance and delivery of the Selected Assets and
Assumed Contracts shall be made by such bills of sale and other
recordable instruments of assignment, transfer and conveyance
prepared by Seller and in form and substance reasonably required
by counsel for Purchaser.
1.8 Purchase Price Allocation. Each of the parties agrees
to report this transaction for state, federal and other tax
purposes in accordance with the allocation of the Purchase
Price, and not to file any tax return or report or otherwise
take a position with federal, state or other tax authorities
which is inconsistent with such allocations. Seller will
deliver a schedule with such allocation by February 15, 1997.
1.9 Transfer Taxes. All sales, use, value-added, gross
receipts, excise, registration, stamp duty, transfer or other
similar taxes or governmental fees ("Transfer Taxes") imposed or
levied by reason of, in connection with or attributable to this
Agreement and the transactions contemplated hereby shall be
split equally between the parties. The parties shall cooperate
with each other to the extent reasonably requested and legally
permitted to minimize any Transfer Taxes.
1.10 Proration of Certain Items. There shall be
apportioned between Seller and Buyer as of 12:01 a.m. the day
following the Effective Closing Date all real and personal
property taxes, gross receipts taxes, sales and use taxes
(except for Transfer Taxes), inventory and ad valorem taxes,
rent, utility charges, equipment lease payments and all other
charges customarily apportioned in connection with a transfer of
real property. The parties shall estimate all such prorations
at the Closing based upon the most recent assessments and the
appropriate party shall make payment therefor at the Closing,
with any adjustments based on actual assessments rendered
thereafter to be paid by the appropriate party promptly after
receipt of written notice thereof.
2. CLOSING.
2.1 The Closing. The transactions contemplated by this
Agreement shall be consummated (the "Closing") at the offices of
Morgan, Franich, Fredkin & Marsh, 99 Almaden Blvd., Suite 1000,
San Jose, CA 95113, on December 31, 1996, or at such other time
or place as the parties shall mutually agree (the "Actual
Closing Date"). The Closing, whenever it occurs, shall be
retroactive to December 1, 1996 (the "Effective Closing Date")
and Purchaser shall be deemed to have purchased the Selected
Assets and assumed the Assumed Liabilities as of the Effective
Closing Date and all income and expenses shall be prorated
accordingly. All income derived from the Selected Assets and
the Assumed Contracts after the Effective Closing Date up to the
Actual Closing Date shall belong to Purchaser. All ancillary
documents related to the contemplated transaction (including but
not limited to the contemplated Bill of Sale and Assignment of
Contracts) will also be deemed to commence and/or take effect as
of the Effective Closing Date. For purposes of risk of loss,
Seller shall remain obligated and liable for any loss or
liability arising out of (i) any casualty (including, without
limitation, fire, theft, earthquake, or flood) occurring to the
Selected Assets prior to the Actual Closing date, (ii) any claim
or suit alleging or based on wrongful acts or omission of Seller
occurring prior to the Actual Closing Date, (iii) employee
related claims or suits based upon events occurring prior to the
Actual Closing Date, and (iv) other claims or suits which relate
to Seller's ownership, occupancy, or operation of the Facility
and which are based upon events prior to the Actual Closing
Date.
2.2 Actions at the Closing. At the Closing:
2.2.1 Purchaser will deliver a cashier's check or
proof of wire transfer payable to the Seller pursuant to
Sections 1.5 and 1.6 hereof;
2.2.2 Purchaser will deliver the Warrant
Certificate to Seller pursuant to Sections 1.5 and 1.6
hereof;
2.2.3 Seller will execute and deliver to the
Purchaser a bill of sale and assignment of assets and all
other affidavits, bills of sale, endorsements, assignments
and other instruments as necessary or appropriate in
Purchaser's reasonable discretion to sell, convey, assign,
transfer and deliver to Purchaser good title, free and
clear of all liens or encumbrances, to all the Selected
Assets and the Assumed Contracts to evidence the due
execution, delivery and performance of the Agreement and
satisfaction of the conditions and obligations of the
Seller hereunder; and
2.2.4 Seller will deliver to Purchaser an opinion
letter of Seller's counsel in form and substance as
reasonably required by Purchaser.
2.2.5 Seller will deliver to Purchaser duly
executed landlord's consents and estoppel certificates
signed by the landlord and tenant of the leases described
in Section 1.2.1, which documents will be in form and
substance reasonably satisfactory to counsel for Purchaser.
2.2.6 Purchaser will deliver to Seller an opinion
letter of Purchaser's counsel regarding the authority of
Purchaser to enter into this Agreement, in form and
substance reasonably satisfactory to Purchaser's counsel.
Simultaneously with the Closing, Seller, through its
officers, agents and employees, shall put Purchaser into full
possession and enjoyment of the Selected Assets and Assumed
Contracts to be conveyed and transferred by this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants to Purchaser as follows:
3.1 Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the
State of California. Seller has all requisite corporate power
and authority to, and is entitled to, carry on the Business as
now conducted and to own or lease the Selected Assets and
properties represented by the Assumed Contracts. To the best of
Seller's knowledge without independent investigation, Seller is
qualified to do business in all foreign jurisdictions in which
it is required to be so qualified, except where the failure so
to be qualified would not have a material adverse effect on the
Business, Selected Assets or Assumed Contracts.
3.2 Authority. Seller has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by
all requisite corporate action of Seller. This Agreement has
been duly executed and delivered by and constitutes the valid
and binding obligation, enforceable in accordance with its
terms, of Seller. Seller will deliver to Purchaser at Closing
such corporate resolutions and other documents reasonably
required by Purchaser to evidence Seller's authority to
consummate this transaction.
3.3 Effect of Agreement. The execution and delivery of
this Agreement by Seller do not, and the consummation of the
transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, result in a material
breach of, constitute a material default under or material
violation of, or result in the creation of any lien, charge or
encumbrance against the Selected Assets or Assumed Contracts
pursuant to any provision of the Articles of Incorporation or
Bylaws of Seller, and to the best knowledge of Seller, any law
or regulation of any governmental authority or any provision of
any agreement, judgment or decree affecting Seller, the Selected
Assets or Assumed Contracts, nor will it give to any other
person or entity any interests or rights of any kind, including
rights of termination, acceleration, or cancellation, in or with
respect to any of the Selected Assets or Assumed Contracts.
Except as specifically disclosed by Seller to Purchaser in
writing with respect to the Assumed Contracts, no consent of any
person not a party to this Agreement and no consent of any
governmental authority is required to be obtained on the part of
the Seller to permit the consummation of the transactions
contemplated by this Agreement, including the transfer to
Purchaser of all right, title and interest in and to the
Selected Assets, free and clear of any liens.
3.4 Title to Selected Assets. Except for the liens
evidenced by UCC-1 Financing Statements in favor of Seagate
Technology, Inc. and Imperial Bank, Seller has good and
marketable title to all of the Selected Assets, all of the
Selected Assets are free and clear of restrictions on or
conditions to transfer or assignment. At the Closing and
effective as of the Effective Closing Date, Seller will sell,
convey, assign, transfer and deliver to Purchaser good title to
all of the Selected Assets free and clear of any mortgages,
liens, pledges, encumbrances, claims, conditions and
restrictions. Seller will warrant and defend the title to the
Selected Assets against the claims of all persons whomsoever.
All of the Selected Assets are located at the facility located
at 110 Knowles Drive, Los Gatos, CA.
3.5 Litigation. There is no action, suit, or
investigation in progress or pending before any court or
governmental agency against Seller in connection with the
Selected Assets or Assumed Contracts, nor to Seller's knowledge
after due inquiry, is there any basis for any such claim, suit
or other proceeding. There is no suit, action, investigation or
other proceeding commenced, pending or, to Seller's knowledge,
threatened against or affecting Seller in any court or before
any tribunal or governmental body, in which it is sought to
restrain or prohibit the ability of Seller to perform the
material obligations required of it under this Agreement or the
consummation of the transactions contemplated herein.
3.6 Intellectual Property. Seller owns undisputed title
to the intellectual property set forth on Schedule 1.1.4
("Intellectual Property") free and clear of any third party
liens, encumbrances, charges or ownership claims. Seller has
taken all necessary steps to protect its proprietary,
confidential and trade secret rights regarding the Intellectual
Property and, none of such rights has heretofore been assigned,
transferred, licensed or otherwise made available to any third
party. No proceedings have been instituted or threatened, nor
has any claim been made, against Seller alleging any such
infringement or violation of the Intellectual Property. For the
intellectual property which Seller uses, but does not own, if
any, Seller is licensed to use and transfer such intellectual
property and is not in breach of, or default under, such license
agreements and no breach or default will occur as a result of
the transactions contemplated herein. True and accurate copies
of any such agreements are set forth in Schedule 1.2.5. To the
best of Seller's knowledge, Seller is not infringing on the
patent, trademark, copyright or other trade secret rights of any
third party and Seller has not done anything or failed to do
anything that could invalidate or adversely affect the
enforceability of Seller's rights to the Intellectual Property.
3.7 Employees. Schedule 3.7 contains a list of the names,
titles, job description, aggregate annual compensation and a
description of any benefits of all persons employed by Seller
("Business Employees"). Seller has no written employment
agreements with any of the Business Employees except as set
forth on Schedule 3.7.
3.8 Brokers or Finders. Seller is not obligated, directly
or indirectly, to any person for brokerage or finders' fee,
agents' commissions or any similar charges in connection with
this Agreement except Broadview Associates, L.L.C.
("Broadview"). Seller is solely responsible for paying the
commission to Broadview pursuant to the terms of a separate
listing agreement and only in the event of a fully consummated
closing.
3.9 Financial Information. Seller has previously
furnished to Purchaser true and correct copies of the audited
financial statements of Seller covering the period from January
1, 1993, through December 31, 1995, and unaudited financial
statements for January 1, 1996 through September 30, 1996 (the
"Financial Information"). The Financial Information is
accurately derived from the financial books and records of
Seller and fairly presents the results of operations and the
financial condition purported to be reflected therein in
conformity with Seller's internal financial reporting standards
consistently applied.
3.10 Operation in the Ordinary Course. Since December 31,
1995 the Business has been operated, and, as of the Effective
Closing Date will have been operated, in the ordinary course,
except to the extent that Purchaser has otherwise agreed (or may
prior to the Actual Closing Date otherwise agree) in writing or
as is expressly contemplated by this Agreement.
3.11 Performance of Assumed Contracts. Seller is not in
material default under, nor has it breached any provision of,
any of the Assumed Contracts, or other obligation of the Seller,
and there are no oral modifications or past practices
inconsistent with the written terms of any of the foregoing.
All of the Assumed Contracts are presently in full force and
effect. To the knowledge of Seller, the other parties to the
Assumed Contracts have complied with their obligations
thereunder and are not in breach thereof. Seller has fully
performed each material term, condition and covenant of each of
the Assumed Contracts required to be performed on or prior to
the date hereof. Seller knows of no state of facts which, with
the giving of notice or the passing of time, or both, would give
rise to any default under the terms of any of the Assumed
Contracts.
3.12 Compliance with Law. To the best of Seller's
knowledge, Seller's conduct of the Business does not violate,
nor is the Seller in default under, any law, statute, ordinance,
rule, regulation, code, license, permit, guideline, order,
arbitration award, judgment or decree, including, without
limitation, civil rights legislation, equal employment
opportunity legislation, occupational safety and health
legislation, legislation pertaining to illegal bribes or
kickbacks, and laws of foreign jurisdictions in which sales are
made, and Purchaser will not after the Actual Closing Date incur
any liability or obligation as a result of any such violation or
default existing at the Effective Closing Date or arising or
accruing thereafter but based upon conditions existing at the
Closing. No expenditures are anticipated which are necessary or
appropriate for the continuation of the Business in compliance
with any such law, statute, rule, regulation, code, license,
permit, guidelines, order, arbitration award, judgment or
decree.
3.13 Taxes. Except as disclosed to Purchaser in writing
prior to Closing, there is no tax audit or examination now
pending or, to the Seller's knowledge, threatened with respect
to Seller. All taxes and assessments which Seller was or is
required by law to withhold or collect, including without
limitation state sales and use taxes, have been and are being
withheld or collected by it and have been paid over to the
proper governmental authorities or, if not yet due, are being
held by Seller for such payment. All such taxes and assessments
which are not yet due will be paid as they become due. All tax
returns which Seller is required to file for periods prior to
the date hereof have been or will be filed by Seller and all
such tax returns are correct to the best of Seller's knowledge.
3.14 Licenses and Permits. Seller holds all necessary
licenses and permits required by federal, state or local
governmental agencies for the operation of the Business.
3.15 Labor Contracts. Seller is not now, nor has it ever
been, a party to any collective bargaining agreement or bound to
any other agreement with a labor union. To the best of Seller's
knowledge, there are no investigations pending, nor are there
any uncorrected or unresolved citations, complaints or charges
issued by any agency responsible for administering or enforcing
laws relating to labor relations, employee safety or health,
fair labor standards and equal employment opportunity nor, to
the best knowledge of Seller's knowledge, are any such
investigations, citations, complaints or charges threatened.
3.16 Accounts Receivable. To the best knowledge of Seller,
all of the accounts receivable listed on Schedule 1.1.6 and all
accounts receivable arising after the date of this Agreement are
collectible in full in the ordinary course of Seller's business
within 90 days of the date of Seller's invoice.
3.17 Insurance. Copies of the policies of insurance
maintained by Seller on the Selected Assets are set forth on
Schedule 3.17 attached hereto. All of such insurance is
currently in effect and will be maintained by Seller pursuant to
its terms at all times prior to the Actual Closing Date.
3.18 Accuracy of Information Furnished. No representation
or warranty by Seller in this Agreement, and no schedule,
certificate or document furnished or to be furnished to
Purchaser pursuant to this Agreement contains or will contain
any knowingly untrue statement of fact, or omits or will omit to
state a material fact necessary to make the statements herein or
therein accurate and not misleading. All schedules,
certificates, and documents attached hereto or furnished or to
be furnished to Purchaser pursuant to this Agreement are true,
correct and complete in all respects.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to Seller as follows:
4.1 Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware. Purchaser has all requisite corporate
power and authority to, and is entitled to, carry on its
business as now conducted and to own or lease its properties as
and in the places where such business is now conducted and such
properties are now owned, leased or operated. Purchaser is
qualified to do business in all foreign jurisdictions in which
it is required to be so qualified, except where the failure so
to be qualified would not have a material adverse effect on the
business or assets of Purchaser.
4.2 Authority. Purchaser has all requisite corporate
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Purchaser and the consummation
by Purchaser of the transactions contemplated hereby have been
duly authorized by all requisite corporate action of Purchaser.
This Agreement has been duly executed and delivered by and
constitutes the valid and binding obligation, enforceable in
accordance with its terms, of Purchaser. Purchaser shall
deliver to Seller at Closing a corporate resolution authorizing
Purchaser to consummate this transaction.
4.3 Effect of Agreement. The execution and delivery of
this Agreement by Purchaser do not, and the consummation of the
transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, result in a material
breach of, constitute a material default under or material
violation of any provision of the Articles of Incorporation or
Bylaws of Purchaser, and to the best knowledge of Purchaser, any
law or regulation of any governmental authority or any provision
of any agreement, judgment or decree affecting Seller. Except
as specifically disclosed by Purchaser to Seller in writing, no
consent of any person not a party to this Agreement and no
consent of any governmental authority is required to be obtained
on the part of the Purchaser to permit the consummation of the
transactions contemplated by this Agreement.
4.4 Brokers or Finders. Purchaser is not obligated
directly or indirectly, to any person for brokerage or finders'
fee, agents' commissions or similar charges in connection with
this Agreement.
4.5 Litigation. There is no suit, action, investigation
or other proceedings commenced, pending or, to Purchaser's
knowledge, threatened against or affecting Purchaser in any
court or before any tribunal or governmental body, in which it
is sought to restrain, prohibit or adversely affect the ability
of Purchaser to perform the obligations required of it under
this Agreement or the consummation of the transactions
contemplated herein.
5. COVENANTS OF SELLER. Seller covenants and agrees as
follows:
5.1 Operation of Business Prior to Actual Closing Date.
During the period from the date of this Agreement up to the
Actual Closing Date, Seller shall (i) use the Selected Assets in
the usual, regular and ordinary course and in substantially the
same manner as heretofore used, (ii) preserve existing business
relationships with Business Employees and others directly
involved with the Business, (iii) conduct the Business in
compliance with all applicable laws and regulations, (iv)
maintain existing insurance against loss or damage to the
Selected Assets and such other insurance with respect to the
Selected Assets as has heretofore been maintained, (v) not sell,
dispose of or encumber or enter into any agreement for the sale,
disposition or encumbrance of, all or any part of the Selected
Assets, except in the ordinary course of business, (vi) not
enter into any employment contract with a Business Employee or
increase the annual compensation of a Business Employee, (vii)
perform in all material respects all of its obligations under
the Assumed Contracts, (viii) not voluntarily take action which
would make the representations and warranties contained in
Section 3 untrue, (ix) preserve the good will of suppliers,
customers and others having a business relationship with the
Business, and (x) not change its credit criteria and vigorously
pursue collection of its accounts receivable that are more than
60 days past due. Seller will not enter into any contract or
commitment with respect to the Business, the Selected Assets, or
the Assumed Contracts, not in the ordinary course of business,
without Purchaser's prior written consent.
5.2 Access and Assistance. From the date of execution of
this Agreement and up to the Actual Closing Date, Seller shall
make immediately available to and allow Purchaser and its
authorized agents access to Seller's business and records and
shall cause the Seller's employees and agents to reasonably
cooperate with Purchaser in an examination of the Selected
Assets and Assumed Contracts and to disclose to and discuss with
Purchaser the financial condition and business operations of the
Business.
5.3 No Actions to Make Representations and Warranties
Untrue. Seller shall not take any action that would result in
any of the representations and warranties of Seller set forth in
this Agreement becoming materially untrue or in any of the
conditions of the Closing set forth in Section 9 not being
satisfied.
5.4 Legal Requirements. Seller will comply promptly with
all legal requirements which may be imposed on Seller with
respect to the consummation of the transactions contemplated by
this Agreement and will promptly cooperate with and furnish
information to the Purchaser in connection with any such
requirements imposed upon the Purchaser in connection with the
consummation of the transactions contemplated by this Agreement.
Seller will obtain (and will cooperate with the Purchaser in
obtaining) any consent, approval, order or authorization of, or
any registration, declaration or filing with, any governmental
entity or other person, required to be obtained or made by
Seller (or by the Purchaser) in connection with the taking of
any action contemplated by this Agreement.
5.5 Consummation of Transaction. Seller will execute and
deliver, or cause to be executed and delivered, such affidavits,
bills of sale, endorsements, assignments, consents and other
instruments in form and substance reasonably required by
Purchaser to put Purchaser in possession of the Selected Assets
and Assumed Contracts acquired hereunder.
5.6 Employment by Purchaser of Business Employees.
5.6.1 Negotiation with Business Employees.
Purchaser may negotiate with and enter into employment
relationships with Business Employees contingent upon the
consummation of this transaction. Seller shall take all
steps reasonably necessary to assist Purchaser in hiring
and retaining the services of current Business Employees
whom Purchaser desires to employ. All Business Employees
will remain on Seller's payroll, through and including the
Actual Closing Date, unless they voluntarily terminate
their employment or are earlier hired by Purchaser.
5.6.2 No Obligation to Hire Business Employees.
Seller understands and agrees that (a) Purchaser is under
no obligation to offer employment with Purchaser to any
employees of Seller, (b) it is within the sole discretion
of Purchaser to determine to whom offers of employment with
Purchaser will be extended and from whom such offers will
be withheld, (c) it is within the sole discretion of
Purchaser to determine the terms of employment to be
offered to such employees, and (d) those employees of
Seller who are given offers of employment with Purchaser
will become immediately upon their acceptance of such
offers new employees of Purchaser for all purposes,
including but not limited to that of determining their
eligibility for Purchaser's employment benefits.
5.6.3 No Third-Party Beneficiaries. The covenants
of Purchaser and Seller in this Section 5.6 shall not
create any right in any Business Employee or his or her
heirs, executors, beneficiaries, or personal
representatives.
5.7 Due Diligence/Confidentiality. From the date of
execution of this Agreement and up to the Actual Closing Date,
Purchaser, its attorneys, accountants and representatives will
have access to all information relevant to the business,
operations, accounts, records, contracts, inventory, fixed
assets and customers of Seller and the Business; including
without limitation, copies of Deloitte-Touche's work papers
relating to Seller and the Business. Purchaser acknowledges
that its satisfactory completion of due diligence is not a pre-condition
to the Closing. In the event that the transactions
contemplated by this Agreement are not consummated, all copies
of documents and other records will be returned to the party
which supplied such information and no written or electronic
form of such information will be retained by either party.
5.8 Discharge of Debts. Prior to the Actual Closing Date,
and excluding only the Line of Credit described in Section 1.4.4
and the Promissory Note described in Section 1.4.5, Seller shall
promptly pay when due its debts, liabilities and obligations
associated with the Selected Assets and the Assumed Contracts,
or shall obtain full releases from the same or make sufficient
provisions to pay the same or to be released therefrom.
5.9 Notice of Certain Events. Seller shall promptly
notify Purchaser of any material adverse change to the Selected
Assets, Assumed Contracts or Seller's ability to consummate the
transactions contemplated hereby which occur subsequent to the
date of execution of this Agreement and prior to the Actual
Closing Date.
5.10 Waiver of Bulk Sales Notice Compliance. Purchaser
waives compliance with the notice and other provisions of any
laws relating to bulk sales and bulk transfer of assets which
may be applicable to the transactions contemplated by this
Agreement. Seller agrees to pay all valid accounts payable that
are not listed on Schedule 1.4.3 and to indemnify Purchaser as
provided in Section 11 of this Agreement for any damage, loss,
cost, or expense (including reasonable attorneys' fees),
incurred by Purchaser as a result of such accounts payable or
Seller's failure to comply with the provisions of the Uniform
Commercial Code or other applicable statutes or laws of any
jurisdiction relating to the bulk transfer of property.
5.11 Subsequent Actions. At any time, and from time to
time, after the Closing, Seller shall, promptly upon request by
Purchaser, execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such
action as Purchaser may reasonably request in order more
effectively to transfer, convey and assign to Purchaser, or to
confirm Purchaser's title to, the Selected Assets and Assumed
Contracts, to put Purchaser in possession and control thereof
and to assist Purchaser in exercising all rights with respect
thereto. All such documents shall be in form reasonably
satisfactory to Seller's legal counsel.
5.12 Tax Returns; Taxes. Seller agrees to continue to
timely file within the time period for filing, or any extension
granted with respect thereto, all federal, state, local and
other returns and reports relating to any and all taxes required
to be filed by it before the Actual Closing Date and to pay all
taxes due pursuant to such returns and reports.
5.13 Payment of Transfer Taxes. Seller and Purchaser,
equally, shall pay when due all Transfer Taxes arising in
connection with the sale of the Selected Assets and Assumed
Contracts to Purchaser.
5.14 Covenant Not to Compete. For a period of three years
from the Effective Closing Date, Seller, its affiliates, and
each of them shall not, individually or collectively, anywhere
in the world,
5.14.1 directly or indirectly compete with Purchaser
in the Business, carry on or engage in a business similar
to the Business, compete with Purchaser in the Business, or
engage, directly or indirectly, in any business in
competition with the Purchaser in the Business, directly or
indirectly through any person or entity, or in any
capacity, including, without limitation, agent, lender,
trustee, consultant, shareholder, director, officer,
employee or partner;
5.14.2 perform any services as employee, consultant,
or otherwise, for any person, firm, partnership, joint
venture, corporation or other entity that competes with
Purchaser in the Business;
5.14.3 employ, solicit for employment, or advise or
recommend to any other person that such person employ, or
solicit for employment, any present employee of Seller
without Purchaser's prior written consent, which will not
be unreasonably withheld;
5.14.4 solicit customers of the Business as conducted
by the Seller; provided, however, that Seller may solicit
customers of the Business so long as such solicitation is
solely for the purpose of selling goods or services not
sold or offered by Purchaser; or
5.14.5 deal with, invest in, lend money to, guarantee
loans of, make gifts to, advise, or by any other means
assist any other person or entity to so compete with
Purchaser in the Business.
For purposes of this Agreement, the term "affiliates" shall
mean any person or entity that directly or indirectly through
one or more intermediaries, controls or is controlled by, or is
under common control with, Seller. "Affiliates" shall not be
deemed to include shareholders of Seller.
Seller and its officers, directors and shareholders,
jointly and severally, further agree that, for a period of three
years from the Effective Closing Date, they will not disclose to
anyone other than Purchaser any trade secrets or confidential
information about the Business or affairs of the Business not
generally available to the public, including without limitation,
information relating to the actual and potential customers of
the Business and their needs and requirements for products
manufactured or supplied by the Business, unless they are
required by court order to disclose any such information in
response to discovery, in which case they will use reasonable
efforts to obtain protective orders.
Seller acknowledges that the duration and geographic scope
of this covenant not to compete is reasonable and that this
covenant not to compete is a material inducement to Purchaser
entering into this Agreement. If for any reason any court of
competent jurisdiction shall find the provisions of this Section
5.14 unreasonable in duration or in geographic scope, the
prohibitions herein shall be restricted to such time and
geographic areas as such court determines to be reasonable.
Seller, its affiliates and shareholders, jointly and
severally, recognize that any breach of this Section 5.14 by any
of them is likely to result in irreparable injury to Purchaser
and agree that Purchaser shall be entitled, if it so elects, to
institute and prosecute proceedings, either in law or in equity,
to obtain damages for any breach of this Agreement by any of
them, or to enjoin any of them from activities in violation of
this Agreement. The rights and remedies provided in this
section in favor of Purchaser shall not be deemed exclusive, but
shall be cumulative and shall be in addition to all other rights
and remedies available to Purchaser under this Agreement, the
instruments and agreements delivered pursuant to this Agreement,
any statute, or at law or in equity.
6. COVENANTS OF PURCHASER. Purchaser covenants and agrees as
follows:
6.1 No Actions to Make Representations and Warranties
Untrue. The Purchaser shall not take any action that would
result in any of the representations and warranties of the
Purchaser set forth in this Agreement becoming materially untrue
or in any of the conditions to the Closing set forth in Section
8 not being satisfied.
6.2 Compliance with Legal Requirements. The Purchaser
will take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed on it with
respect to the consummation of the transactions contemplated by
this Agreement and will promptly cooperate with and furnish
information to Seller in connection with any such requirements
imposed upon Seller in connection with the consummation of the
transactions contemplated by this Agreement. The Purchaser will
take all reasonable actions necessary to obtain (and will
cooperate with Seller in obtaining) any consent, approval, order
or authorization of, or any registration, declaration or filing
with, any governmental entity, domestic or foreign, or other
person, required to be obtained or made by the Purchaser or by
nStor Technologies, Inc. (or by Seller) in connection with the
taking of any action contemplated by this Agreement.
7. ADDITIONAL AGREEMENTS.
7.1 Public Disclosure. Except as and to the extent
required by law or to communicate with their respective
attorneys and consultants, without the prior written consent of
the other party, neither Purchaser nor Seller shall, and each
shall direct its representatives not to, directly or indirectly,
make any comment, statement or communication with respect to, or
otherwise disclose or permit the disclosure of the existence of,
discussions regarding a possible transaction between the parties
hereto or any of the terms, conditions or other aspects of the
transactions contemplated by this Agreement. Seller
acknowledges that Purchaser will publicly disclose the existence
of this Agreement once it has been fully executed by the
parties.
7.2 Expenses. Except as otherwise provided in this
Agreement, each party will bear its expenses incident to the
negotiation and execution of this Agreement and the transactions
contemplated hereby, including, without limitation, all fees of
its legal counsel, accountants and consultants, whether or not
such transactions are consummated.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The
obligations of Seller to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the
satisfaction at the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by Seller.
8.1 Representations, Warranties and Covenants. The
representations and warranties of Purchaser in this Agreement
shall be true and correct on and as of the Actual Closing Date
as though such representations and warranties were made on and
as of such date and Purchaser shall have performed and complied
with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the
Actual Closing Date.
8.2 Certificate. Seller shall have been provided with a
certificate executed by the President, Chief Executive Officer
or Chief Financial Officer of Purchaser to the effect that, as
of the Actual Closing Date:
8.2.1 all representations and warranties made by
Purchaser under this Agreement are true and complete; and
8.2.2 all covenants, obligations and conditions of
this Agreement to be performed by Purchaser on or before
such date have been so performed.
8.3 Governmental Approvals. All consents, approvals,
orders and authorizations of, and registrations, declarations
and filings with, and expirations of waiting periods imposed by,
any governmental entity, domestic or foreign, necessary for the
consummation of the transactions contemplated by this Agreement
shall have been obtained or filed or have occurred.
8.4 Closing Documents. Seller shall have received, in
form and substance reasonably satisfactory to Seller and its
counsel, all closing documents required to be delivered to it
pursuant to this Agreement.
8.5 No Litigation. No action, suit, proceeding or
investigation shall be pending or threatened before any
government entity, domestic or foreign, to restrain or prohibit,
or to obtain specific damages, in respect of this Agreement or
the consummation of the transactions contemplated hereby.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the
satisfaction at the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by
Purchaser.
9.1 Representations, Warranties and Covenants. The
representations and warranties of Seller in this Agreement shall
be true and correct on and as of the Actual Closing Date as
though such representations and warranties were made on and as
of such date and Seller shall have performed and complied with
all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the
Actual Closing Date.
9.2 Certificate. Purchaser shall have been provided with
a certificate executed by the President, Chief Executive Officer
or Chief Financial Officer of Seller to the effect that, as of
the Actual Closing Date:
9.2.1 all representations and warranties made by
Seller under this Agreement are true and complete; and
9.2.2 all covenants, obligations and conditions of
this Agreement to be performed by Seller on or before such
date have been so performed.
9.3 Governmental Approvals. All consents, approvals,
orders and authorizations of, and registrations, declarations
and filings with, and expirations of waiting periods imposed by,
any governmental entity, domestic or foreign, necessary for the
consummation of the transactions contemplated by this Agreement
shall have been obtained or filed or have occurred.
9.4 Closing Documents. Purchaser shall have received, in
form and substance reasonably satisfactory to Purchaser and its
counsel, all closing documents required to be delivered to it
pursuant to this Agreement.
9.5 No Litigation. No action, suit, proceeding or
investigation shall be pending or threatened before any
government entity, domestic or foreign, to restrain or prohibit,
or to obtain specific damages, in respect of this Agreement or
the consummation of the transactions contemplated hereby.
9.6 Third Party Consents. Purchaser shall have been
furnished with evidence satisfactory to it of the consent or
approval of those persons whose consent or approval shall be
required in order to permit the sale, conveyance, assignment,
transfer and delivery of all the Selected Assets and Assumed
Contracts to Purchaser.
9.7 Assignment of Lease. Purchaser shall have accepted an
assignment of the leases for the Business facilities described
in Section 1.2.1, and the necessary consents of the respective
landlords shall have been obtained.
9.8 Certificates. Seller shall have obtained certificates
of good standing from California Secretary of State as to the
good standing of the Seller and from the California Franchise
Tax Board as to due payment by Seller of all taxes due, and
shall have provided Purchaser with true and correct certified
copies thereof. In addition, Seller shall provide Purchaser
with true and correct certified tax clearance certificates from
the appropriate agencies of all states in which Seller is
registered to act as a tax collecting agent, and such other
states as are reasonably requested by Purchaser that all sales
taxes and other taxes owed by Seller and relating to the
Business, the Selected Assets and the Assumed Contracts have
been paid. Notwithstanding the foregoing, Purchaser
acknowledges that the "no tax due" certificate from the
California Board of Equalization may not be obtained by Seller
prior to Closing and consents to such certificate being provided
post-Closing. Seller agrees to use its best efforts to obtain
such certificate as soon as possible.
9.9 No Material Adverse Change. Since the Effective
Closing Date, there shall have been no material adverse change
in the condition, financial or otherwise, of the Business, the
Selected Assets, the Assumed Contracts, or the Seller.
9.10 Sales, Use and Ad Valorem Taxes. Seller shall pay (i)
all federal, state, county and city sales, use and similar
transfer taxes relating to the Business prior to Closing; and
(ii) ad valorem taxes relating to the Selected Assets and
Assumed Contracts prorated based on the assessment period prior
to the Effective Closing Date. Subject to Section 2.1 above, it
is the express intention of the parties hereto that Purchaser
shall incur no federal, state or local tax liability as a result
of the operation of the Business prior to the Effective Closing
Date, and that Seller shall incur no federal, state or local tax
liability as a result of Purchaser's operations of the Business
after the Effective Closing Date.
9.11 Norbert Witt. Purchaser shall have entered into an
Employment Agreement, Employee Proprietary Information Agreement
and Non-Competition Agreement with Norbert Witt containing terms
and provisions which are acceptable to Purchaser in its
reasonable discretion.
9.12 Silicon Graphics License. Purchaser shall have
entered into a license agreement with Silicon Graphics
Incorporated (or accepted an assignment of Seller's license)
containing terms and provisions acceptable to Purchaser in its
sole discretion.
10. TERMINATION.
10.1 Agreement Termination. This Agreement may be
terminated and the transactions contemplated herein may be
abandoned at any time prior to or on the Actual Closing Date:
(a) by Seller or Purchaser if any condition precedent has not
been satisfied or waived or if there has been a material
misrepresentation, breach of warranty, or breach of covenant by
the other in any of its representations, warranties or covenants
set forth herein; or (b) by mutual written agreement of the
parties hereto. If the Actual Closing Date does not occur by
December 31, 1996, this Agreement shall terminate effective as
of 5:00 p.m. (E.D.T.) on such date, unless such date is extended
by mutual written agreement of the parties hereto, in which case
this Agreement shall terminate on the date selected by the
parties for such extension, at the aforementioned time of day.
10.2 Effect of Termination. If this Agreement shall be
terminated as provided in Section 10.1, the obligations of the
parties hereunder shall terminate without liability of any party
to any other party except as otherwise expressly set forth
herein.
10.3 Risk of Loss. Until the Actual Closing Date, all
Selected Assets shall remain at the risk of Seller. In the
event that prior to completion of the Closing any Selected Asset
is damaged, destroyed or lost, or the value of any Selected
Asset is materially diminished, Purchaser, at is option, may (a)
terminate this Agreement, (b) reduce the Purchase Price by the
value thereof, if destroyed or lost, or by the cost of repair,
if damaged, or (c) complete the purchase without reduction of
the Purchase Price and take an assignment of all insurance
proceeds and other payments to Seller as a result of such
damage, destruction or loss.
11. INDEMNIFICATION.
11.1 Indemnification by Seller. Subject to the terms and
conditions of this Article 11, Seller shall indemnify and save
Purchaser, its shareholders, officers, directors or employees
(collectively, the "Purchaser" as used in this Article 11)
harmless from and against any and all losses, claims, damages,
liabilities, costs, expenses or deficiencies including, but not
limited to, reasonable attorneys' fees and other costs and
expenses reasonably incident to proceedings or investigations or
the defense or settlement of any claim or claims, incurred by or
asserted against Purchaser, the Selected Assets or the Assumed
Contracts due to or resulting from:
11.1.1 the inaccuracy or breach of any representation
or warranty of Seller given in or pursuant to this
Agreement;
11.1.2 any breach or default in the performance by
Seller of any of its covenants, obligations or agreements
in or pursuant to this Agreement;
11.1.3 any liability or obligation of Seller not
expressly assumed by the Purchaser pursuant to this
Agreement, including without limitation, the matters
described in Section 2.1 above;
11.1.4 the ownership, conduct or operation of the
Business or the ownership or use of the Selected Assets or
Assumed Contracts at any time prior to the Effective
Closing Date, or any incident, occurrence, condition or
claim existing, arising or accruing prior to the Effective
Closing Date and relating to the operation or conduct of
the Business or the ownership or use of the Selected Assets
or Assumed Contracts other than any liability or obligation
of Seller expressly assumed by Purchaser pursuant to this
Agreement; and
11.1.5 tax liabilities pertaining to operations of
the Business prior to the Closing.
The foregoing are collectively referred to as "Indemnifiable
Damages"; provided however, that Purchaser shall not assert a
claim against Seller for Indemnifiable Damages unless the
aggregate of such damages exceeds $50,000.00 (the "Indemnity
Threshold"). In the event the aggregate amount of claims
exceeds the Indemnity Threshold then Purchaser shall be entitled
to recover from Seller all of its Indemnifiable Damages.
11.2 Indemnification by Purchaser. Subject to the terms and
conditions of Section 2.1 above and of this Article 11,
Purchaser shall indemnify and save Seller, its shareholders,
officers, directors or employees (collectively, the "Seller" as
used in this Article 11) harmless from and against any and all
losses, claims, damages, liabilities, costs, expenses or
deficiencies including, but not limited to, reasonable
attorneys' fees and other costs and expenses reasonably incident
to proceedings or investigations or the defense or settlement of
any claim or claims, incurred by or asserted against Seller, due
to or resulting from: (i) Purchaser's ownership or use of the
Selected Assets or Assumed Contracts at any time after the
Effective Closing Date; (ii) any incident, occurrence,
condition or claim existing, arising or accruing after the
Effective Closing Date and relating to Purchaser's ownership or
use of the Selected Assets or Assumed Contracts; (iii)
Purchaser's default of any of its obligations under the Assumed
Liabilities or (iv) a breach by Purchaser of any of its
representations, warranties or covenants contained in this
Agreement.
The foregoing are collectively referred to as "Indemnifiable
Damages"; provided however, that Seller shall not assert a claim
against Purchaser for Indemnifiable Damages unless the aggregate
of such damages exceeds $50,000.00 (the "Indemnity Threshold").
In the event the aggregate amount of claims exceeds the
Indemnity Threshold, then Seller shall be entitled to recover
from Purchaser all of its Indemnifiable Damages; provided,
however, that Purchaser's liability under this Section 11.2
shall not exceed $200,000.00.
11.3 Procedure for Making Claims. If and when a party (the
"Indemnified Party") desires to assert a claim for Indemnifiable
Damages against the other party (the "Indemnifying Party")
pursuant to the provisions of this Article 11, the Indemnified
Party shall simultaneously deliver to the Indemnifying Party,
reasonably promptly after its receipt of a claim or specific and
affirmative awareness of a potential claim, a certificate signed
by its president (the "Notice of Claim"): (i) stating that the
Indemnified Party has paid or accrued (or intends to pay or
accrue) Indemnifiable Damages to which it is entitled to
indemnification pursuant to this Article 11 and the amount
thereof (to the extent then known); and, (ii) specifying to the
extent possible (A) the individual items of loss, damage,
liability, cost, expense or deficiency included in the amount so
stated, (B) the date each such item was or will be paid or
accrued and (C) the basis upon which Indemnifiable Damages are
claimed. If the Indemnifying Party shall object to such Notice
of Claim, it shall deliver written notice of objection (the
"Notice of Objection") to the Indemnified Party within fifteen
(15) days after delivery of the Notice of Claim. The Notice of
Objection shall set forth the grounds upon which the objection
is based and state whether the Indemnifying Party objects to all
or only a portion of the matter described in the Notice of
Claim. If the Notice of Objection shall not have been so
delivered within such fifteen (15) day period, the Indemnifying
Party shall be conclusively deemed to have acknowledged the
correctness of the claim or claims specified in the Notice of
Claim for the full amount thereof, and the Indemnifiable Damages
set forth in the Notice of Claim shall be promptly paid to the
Indemnified Party, without the necessity of further action. If
the Indemnifying Party shall make timely objection to a claim or
claims set forth in any Notice of Claim, and if such claim or
claims shall not have been resolved or compromised within sixty
(60) days from the date of delivery of the Notice of Objection,
then such claims shall be settled by arbitration pursuant to
Section 12.12 hereof. The arbitrators shall promptly obtain
such information regarding the matter the arbitrators deem
necessary and shall decide the matter and render a written award
which shall be delivered to the parties. Any award shall be a
conclusive determination of the matter and shall be binding upon
the parties. If, by arbitration, it shall be determined that
the Indemnified Party shall be entitled to any Indemnifiable
Damages by reason of its claim or claims, the Indemnifiable
Damages so determined shall be paid by the Indemnifying Party in
the same manner as if it had not delivered a Notice of
Objection.
11.4 Participation in Defense of Third Party Claims. If
any third party shall assert any claim against the Indemnified
Party which, if successful, might result in an obligation of the
Indemnifying Party to pay Indemnifiable Damages and which can be
remedied to the sole satisfaction of the Indemnified Party by
the payment of money damages without further adverse consequence
to the Indemnified Party, the Indemnifying Party, at its sole
expense, may assume the primary defense thereof with counsel
reasonably acceptable to the Indemnified Party, but only if and
so long as: (i) the Indemnifying Party diligently pursues the
defense of such claim; and (ii) the Indemnifying Party
acknowledges to the Indemnified Party in writing that the claim,
if resolved or settled adversely to the Indemnified Party, is
one for which the Indemnifying Party is obligated to indemnify
the Indemnified Party hereunder. If Indemnifying Party fails or
is unable to so elect to assume the primary defense of any such
claim, the Indemnified Party may (but need not) do so; in which
event the Indemnified Party may defend, settle or compromise the
claim, at the expense and cost of the Indemnifying Party, in any
such manner as the Indemnified Party reasonably deems
appropriate.
11.5 Holdback. As security for the indemnities set out in
this Section 11, but without limitation of Seller's liability
under this paragraph, Purchaser will retain out of the cash
portion of the purchase price payable under Section 1.5, the sum
of $300,000.00, which shall be held in escrow pursuant to the
terms of the escrow agreement attached hereto as Schedule 11.5.
Nothing in this paragraph will be construed as limiting the
liability of Seller under this agreement to the escrowed funds
deposited under this paragraph, nor will that amount be
considered as liquidated damages for any breach under this
Agreement.
11.6 Survival of Indemnification. Seller's obligation to
pay Indemnifiable Damages arising out of claims described in
Section 11.1 hereof shall survive the Closing as follows:
11.6.1 Indemnifiable Damages relating to claims
described in Sections 11.1.1 and 11.1.4 shall be limited to
an aggregate amount of $200,000.00 and to claims asserted
within one (1) year after the Actual Closing Date.
11.6.2 Indemnifiable Damages relating to claims
described in Sections 11.1.2 and 11.1.5 shall be limited to
the Purchase Price and shall survive the closing of this
transaction indefinitely.
11.6.3 Indemnifiable Damages relating to claims
described in Section 11.1.3 shall be unlimited in amount
and shall survive the Closing of this transaction
indefinitely.
12. MISCELLANEOUS PROVISIONS.
12.1 Survival of Representations, Warranties and Covenants.
Except as otherwise specifically set forth herein, the
respective representations, warranties and covenants of each
party hereto contained herein shall survive the Closing.
12.2 Assignment, Successors and Assigns.
12.2.1 This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and assigns; subject only to the
provisions of California Corporations Code Section 2011.
12.2.2 Neither party to this Agreement may assign
its rights and obligations hereunder without the other
party's prior written consent. Notwithstanding the
foregoing, Purchaser shall have the absolute right to
assign its rights and obligations under this Agreement to
nStor Technologies, Inc., or any subsidiary of nStor
Technologies, Inc.
12.3 Notices. All notices or other communications which
are required or may be given pursuant to the terms of this
Agreement shall be in writing, shall be effective upon receipt,
and shall be delivered by Federal Express or other overnight
courier, personal delivery or certified or registered air mail,
addressed as follows:
If to Seller or Parity Systems, Inc.
Shareholder: 110 Knowles Drive
Los Gatos, California 95030
Attn: Norbert Witt, President
with a copy to: Thoits, Love, Hershberger & McLean
Professional Corporation
245 Lytton Avenue, Suite 300
Palo Alto, California 94301
Attn: Stephen A. Dennis, Esquire
If to Purchaser: nStor Corporation, Inc.
450 Technology Park
Lake Mary, Florida 32746
Attn: R. Daniel Smith, President
with a copy to: Thomas R. Harbert, Esquire
Mateer & Harbert, P.A.
225 E. Robinson St., Suite 600
Orlando, Florida 32801
Any of the addresses or addressees set forth above may be
changed from time to time by written notice from the party
requesting the change.
12.4 Alterations and Waivers. The waiver, amendment or
modification of any provision of this Agreement or any right,
power or remedy hereunder, whether by agreement of the parties
or by custom, course of dealing or trade practice, shall not be
effective unless in writing and signed by the party against whom
enforcement of such waiver, amendment or modification is sought.
12.5 Governing Law. This agreement shall be construed,
governed and enforced in accordance with the laws of the State
of California, without reference to its choice of law
provisions. The parties hereby acknowledge that jurisdiction
and venue for any action or proceeding brought to enforce or
interpret the terms of this Agreement shall lie in the state or
federal courts sitting in Santa Clara County, California.
12.6 Severability. In the event any provision of this
Agreement or the application of any such provision shall be held
to be prohibited or unenforceable in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability. The remaining
provisions of this Agreement shall remain in full, force and
effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. The parties shall use
their best efforts to replace the provision that is contrary to
law with a legal one approximating to the extent possible the
original intent of the parties.
12.7 No Third-Party Beneficiaries. Nothing contained in
this Agreement shall be construed to give any person other than
Purchaser and Seller any legal or equitable right, remedy or
claim under or with respect to this Agreement, the Selected
Assets or the Assumed Contracts.
12.8 Integration and Entire Agreement. This Agreement and
the Schedules and other documents referred to herein set forth
the entire understanding between the parties and supersede all
previous and contemporaneous written or oral negotiations,
commitments, understandings, and agreements relating to the
subject matter hereof and merge all prior and contemporaneous
discussions between the parties. No party shall be bound by any
definition, condition, representation, warranty, covenant or
provision other than as contained herein.
12.9 Counterparts. For the convenience of the parties,
this Agreement may be executed in one or more counterparts; each
of which shall be deemed an original, but all of which together
constitute one and the same instrument.
12.10 Headings. All Section headings and captions are
inserted solely for convenience of reference, are not to be
considered a part of this Agreement and shall not affect the
meaning or interpretation hereof.
12.11 Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for any
breach of the provisions of thus Agreement and agree that the
obligations of the parties hereunder shall be specifically
enforceable.
12.12 Arbitration. The parties agree to resolve all
disputes arising under the terms of this Agreement which cannot
be resolved by direct negotiation, by resort to the alternate
dispute resolution procedures set forth in this section;
provided, however, that either party may apply to a court of
competent jurisdiction for the issuance of a temporary
injunction in order to maintain the status quo ante during the
pendency of alternate dispute resolution proceedings. The
parties agree that the dispute will be submitted to binding
arbitration in accordance with the rules of the American
Arbitration Association. If either party refuses to join in a
request for the appointment of the mediator or arbitrator within
ten days after notice from the other party, then the party
giving notice may proceed with the application for the
appointment of a mediator or arbitrator ex parte. The parties
agree that the cost of mediation will be divided equally between
them. The cost of arbitration will be divided equally between
the parties, unless, the arbitrator, in its discretion,
determines that the non-prevailing party should bear the cost of
arbitration. The arbitrator may also have discretion to award
attorneys' fees to the prevailing party.
12.13 Further Assurances. Seller agrees that
subsequent to the Closing it will, without additional
consideration, execute and record such documents as Purchaser
may reasonably request for the purpose of evidencing or
perfecting all right, title and interest in and to the Selected
Assets and Assumed Contracts in Purchaser.
12.14 Time of the Essence. It is understood and agreed
that time is of the essence in the closing of this transaction
and the performance of this Agreement.
12.15 Attorney's Fees. In the event any action
(including arbitration) is brought to enforce or interpret the
terms and provisions of this Agreement, the prevailing party
shall be entitled to recover all of its costs and expenses
incurred in such action, including without limitation reasonable
attorney's fees, from the non-prevailing party.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first above written.
"SELLER"
PARITY SYSTEMS, INC., a
California corporation
By: /s/ Norbert Witt
Title: President and Chief Executive Officer
"PURCHASER"
nSTOR CORPORATION, INC.
a Delaware corporation
By: /s/ R. Dan Smith
Title: President and Chief Executive Officer
EXHIBIT 10.3
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE ACT OR AN
OPINION OF LEGAL COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
IS OBTAINED STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT UNDER THE LIMITED CIRCUMSTANCES DESCRIBED HEREIN.
DATED: December 26, 1996 NO. 1-A
WARRANT
nSTOR TECHNOLOGIES, INC.
Warrant to Purchase 500,000 Shares
of Common Stock, par value $.05 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON DECEMBER 30, 1999
This certifies that, for value received, Parity Systems, Inc., a
California corporation ("Parity") or registered assigns
(collectively with Parity, the "Holder"), is entitled to purchase
from nStor Technologies, Inc., a Delaware corporation (the
"Company"), Five Hundred Thousand (500,000) fully paid and
nonassessable shares (the "Shares") of the Common Stock, par value
$.05 per share, of the Company ("Common Stock") at a price of $2.10
per Share (the "Exercise Price") at any time from and after
December 30, 1996 to and including 5:00 p.m. Eastern Standard Time
on December 30, 1999 (the "Exercise Period"), subject to the terms,
conditions and adjustments set forth in this Warrant (the
"Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole
or in part by the Holder during the Exercise Period upon
presentation and surrender hereof, with the attached Purchase Form
duly executed, at the office of the Company located at 100 Century
Boulevard, West Palm Beach, FL 33417, accompanied by full payment
of the Exercise Price multiplied by the number of Shares of the
Company being purchased (the "Purchase Price"), whereupon the
Company shall cause the appropriate number of Shares to be issued
and shall deliver to the Holder, as promptly as practicable, a
certificate representing the Shares being purchased. This Warrant
may be exercised for not less than 1,000 Shares and in additional
increments of 1,000 Shares at any time and from time to time during
the Exercise Period. Upon each partial exercise hereof, a new
Warrant evidencing the remainder of the Shares will be issued to
the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise
Period, and otherwise of like tenor as the Warrant partially
exercised. The Purchase Price shall be payable by delivery of a
certified or bank cashier's check payable to the Company, or by
wire transfer of immediately available funds to an account
designated in writing by the Company, in the amount of the Purchase
Price. The Holder shall be deemed for all purposes to have become
the holder of record of Shares so purchased upon exercise of this
Warrant as of the close of business on the date as of which this
Warrant, together with a duly executed Purchase Form, was delivered
to the Company and payment of the Purchase Price was made,
regardless of the date of delivery of any certificate representing
the Shares so purchased, except that if the Company were subject to
any legal requirements prohibiting it from issuing shares of Common
Stock on such date, the Holder shall be deemed to have become the
record holder of such Shares on the next succeeding date as of
which the Company ceased to be so prohibited.
2. Exchange; Restrictions on Transfer or Assignment. This
Warrant is exchangeable, without expense, at the option of the
Holder, upon surrender hereof to the Company for other Warrants of
like tenor of different denominations entitling the Holder to
purchase in the aggregate the same number of Shares purchasable
hereunder. This Warrant and the Holder's rights hereunder may not
be transferred, assigned or subjected to a pledge or security
interest, except that Parity may transfer this Warrant in whole or
in part (in minimum increments of 1,000 Shares) to (i) any
successor entity such as a liquidating trust, formed to hold assets
of Parity in connection with the dissolution and winding up of
Parity's affairs (a "Successor"); or (ii) any person who at the
time of such transfer is a shareholder, director or officer of
Parity or any Successor, by surrender of this Warrant to the
Company at its principal office with the assignment form attached
hereto duly completed and executed (with signature guaranteed),
whereupon the Company, if it determines that the proposed
assignment is permitted pursuant to the provisions hereof, shall
register the assignment of this Warrant in accordance with the
information contained in the assignment instrument and shall,
without charge, execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees named in such assignment
instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not
theretofore exercised, transferred or assigned) and this Warrant
shall promptly be cancelled. Conditions to the transfer of this
Warrant or any portion thereof shall be that (x) Parity deliver to
the Company an opinion of counsel, reasonably satisfactory in form
and substance to the Company's counsel, to the effect that the
proposed transfer will not be in violation of the Securities Act of
1933, as amended (the "Act") or of any applicable state law and
that (y) the proposed transferee deliver to the Company his or its
written agreement to accept and be bound by all of the terms and
conditions of this Warrant. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or
exchanged.
3. Rights and Obligations of Warrant Holders. This Warrant does
not confer upon the Holder any rights as a shareholder of the
Company, either at law or in equity. The rights of the Holder are
limited to those expressed herein and the Holder, by acceptance
hereof, consents to and agrees to be bound by and to comply with
all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if
any, may, prior to any presentation of this Warrant for
registration of transfer, deem and treat the person in whose name
this Warrant is registered as the absolute, true and lawful owner
of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the
contrary.
4. Covenants and Warranties of the Company Stock. The Company
covenants and agrees that (i) all Shares which may be issued and
delivered upon exercise of this Warrant and payment of the Purchase
Price will, upon delivery, be duly authorized, validly issued,
fully-paid and nonassessable shares of Common Stock; and (ii) the
Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common
Stock sufficient to permit the exercise in full of this Warrant.
The Company will take all such actions as may be necessary to
assure that all shares of Common Stock may be so issued without
violation by the Company of any applicable law or government
regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of
issuance, which the Company will transmit promptly upon issuance of
such shares).
The Company represents and warrants that: (i) the Company is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware; (ii) the Company has all
requisite corporate power and authority to issue this Warrant and
to consummate the transactions contemplated hereby, and such
issuance and consummation will not conflict with, result in a
material breach of, constitute a material default under or material
violation of any provision of the Company's Articles of
Incorporation or Bylaws, and to the best knowledge of the Company,
any law or regulation of any governmental authority or any
provision of any agreement, judgment or decree affecting the
Company; and (iii) all corporate action required to be taken by the
Company in connection with the execution and delivery of this
Warrant and the performance of the Company's obligations hereunder
has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges
that this Warrant and the Shares issuable upon exercise thereof
have not been registered under the Act or applicable state law. The
Holder agrees, by acceptance of this Warrant, (i) that no sale,
transfer or distribution of this Warrant or the Shares shall be
made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable
prospectus delivery requirements and the restrictions on transfer
set forth herein, and (ii) that if distribution of this Warrant or
any Shares is proposed to be made by it otherwise than by delivery
of a prospectus meeting the requirements of Section 10 of the Act,
such action shall be taken only after submission to the Company of
an opinion of counsel, reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed
distribution will not be in violation of the Act or of applicable
state law.
6. Adjustment. The number of Shares purchasable upon the
exercise of this Warrant and the Exercise Price per Share are
subject to adjustment from time to time as provided in this Section
6.
(a) Subdivision or Combination of Shares. If the Company
shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares (including a stock split effected
as a stock dividend) or combine its outstanding shares of Common
Stock into a lesser number of shares, the number of Shares issuable
upon exercise of this Warrant shall be adjusted to such number as
is obtained by multiplying the number of shares issuable upon
exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate
number of shares of Common Stock outstanding immediately after
giving effect to such subdivision or combination and the
denominator of which is the aggregate number of shares of Common
Stock outstanding immediately prior to such subdivision or
combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied
by the number of Shares issuable upon full exercise of this Warrant
(as increased or decreased to reflect such subdivision or
combination of outstanding shares of Common Stock, as the case may
be), equal the product of the Exercise Price per Share in effect
immediately prior to such subdivision or combination multiplied by
the number of Shares issuable upon exercise of this Warrant
immediately prior to such subdivision or combination.
(b) Effect of Sale, Merger or Consolidation. If any capital
reorganization or reclassification of the capital stock of the
Company, or consolidation or merger of the Company with another
corporation, or sale of all or substantially all of the Company's
assets to another corporation shall be effected after the date
hereof in such a way that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provision shall be made whereby the Holder
shall thereafter have the right to purchase and receive, upon the
basis and the terms and conditions specified in this Warrant and in
lieu of the Shares immediately theretofore purchasable and
receivable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or
in exchange for a number of outstanding shares of Common Stock
equal to the number of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of this
Warrant, and in any such case appropriate provision shall be made
with respect to the rights and interests of the Holder to the end
that the provisions of this Warrant (including, without limitation,
provisions for adjustments of the Exercise Price and of the number
of Shares issuable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be possible, in relation
to any shares of stock, securities or assets thereafter deliverable
upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets
shall assume, by written instrument executed and delivered to the
Holder at its last address appearing on the books of the Company,
the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence,
the Holder may be entitled to purchase.
(c) Notice to Holder of Adjustment. Whenever the number of
Shares purchasable upon exercise of this Warrant or the Exercise
Price per Share is adjusted as herein provided, the Company shall
cause to be mailed to the Holder, in accordance with the provisions
of Section 10 hereof, notice setting forth the adjusted number of
Shares purchasable upon the exercise of the Warrant and the
adjusted Exercise Price and showing in reasonable detail the
computation of the adjustment and the facts upon which such
adjustment is based.
(d) Notices to Holder of Certain Events. If at any time
after the date hereof:
(i) the Company shall declare any dividend or other
distribution upon or with respect to the Common Stock payable
otherwise than in cash out of the consolidated net income of
the Company and any subsidiaries thereof, including any
dividend payable in shares of Common Stock or other securities
of the Company; or
(ii) the Company shall offer for subscription to
the holders of its Common Stock any additional shares of stock
of any class or any other securities convertible into stock or
any rights to subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company (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 result of the
subdivision or combination of shares), or any conversion of
the Shares into securities of another corporation, or a sale
of all or substantially all of the assets of the Company, or
a consolidation or merger of the Company with another
corporation (other than a merger with a subsidiary in which
the Company is the continuing corporation and which does not
result in any reclassification or change of the Shares
issuable upon exercise of the Warrants); or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to
be mailed to the Holder, not less than ten (10) days before any
record date or other date set for the definitive action, written
notice of the date upon which the books of the Company shall close
or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such
reorganization, reclassification, conversion, sale, consolidation,
merger, dissolution, liquidation or winding up shall take place, as
the case may be. Such notice shall also set forth facts as shall
indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the number of Shares and
the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice
shall also specify the date as of which the holder of record of the
shares of Common Stock shall participate in said dividend,
distribution or subscription rights or shall be entitled to
exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation
or winding up, as the case may be (on which date in the event of
voluntary or involuntary dissolution, liquidation or winding up of
the Company, the right to exercise the Warrants shall terminate).
(e) Fractional Shares. The Company shall not be required to
issue any fraction of a Share upon the exercise of this Warrant.
The number of full Shares which shall be issuable upon the full or
partial exercise of this Warrant shall be computed on the basis of
the aggregate number of Shares as to which this Warrant is being
exercised. In lieu of any fractional interest in a Share otherwise
deliverable upon the exercise of this Warrant, the Company shall
pay a cash adjustment (which may be effected as a reduction of the
amount to be paid by the Holder upon such exercise) in respect of
such fraction of a Share in an amount equal to the same fraction
multiplied by the closing sales price of the Common Stock on the
principal securities exchange on which the Common Stock is traded,
or if the Common Stock is not so listed for trading, the closing
bid price of the Common Stock, in each case on the date of the
notice of exercise required pursuant to Section 1 above, or the
next succeeding trading date, if the date of such notice is not a
trading date, or if the Common Stock is not traded on such dates,
the next succeeding trading date on which the Common Stock is
traded.
(f) No Other Adjustments. No adjustment to the number of
Shares subject to this Warrant or the Exercise Price per Share
shall be made pursuant to this Section 6 except as expressly
provided herein.
7. Registration.
(a) Demand Registration Right
(i) Following receipt by the Company of a written request
("Demand Registration Notice") from the Holders on or after March
1, 1997 to register, in whole or in part, under the Act, the Shares
to be issued to the Holders upon the exercise of this Warrant, the
Company will, as promptly as practicable: (A) prepare and file with
the Securities and Exchange Commission ("SEC") a registration
statement relating to the offering and sale of all of the Shares by
the Holders on a delayed or continuous basis pursuant to Rule 415
under the Act; (B) prepare and file with the appropriate Blue Sky
authorities the necessary documents to register or qualify such
Shares; (C) use its reasonable best efforts to cause such
registration statement to become effective as soon as practicable
after the preparation and filing of such registration statement and
to keep such registration statement and Blue Sky filings current
and effective until such time as an amendment is required to be
filed pursuant to the provisions of Section 10(a)(3) of the Act,
but in no event longer than one hundred eighty (180) days; and (D)
cause the Shares to be listed on each securities exchange or in
each securities market on which the Company's stock is listed. The
right to demand registration in accordance with this Section
7(a)(i) shall expire upon the expiration of this Warrant. The
Company shall also be entitled to include in any registration
statement referred to in this Section 7(a), for sale in accordance
with the method of disposition specified by the requesting holders,
shares of Common Stock to be sold by holders of either Common Stock
or rights to acquire Common Stock to whom the Company has
previously granted any registration rights and shares of Common
Stock to be sold by the Company for its own account.
(ii) Notwithstanding any other provision of this Warrant, the
Company's obligations under this Section 7(a) shall be subject to
and limited by the following terms and conditions:
(A) The Company shall not be obligated to register Shares
until it has received Demand Registration Notices from Holders who,
in the aggregate, own greater than 250,000 Shares issuable upon the
exercise of this Warrant.
(B) If the Company files a registration statement to register
shares of Common Stock for a public offering within sixty (60) days
following receipt by the Company of the requisite number of Demand
Registration Notices, the Holder shall not have the right to demand
registration of Shares pursuant to this Section 7(a); provided,
however, that the Holder shall have the right to register Shares
pursuant to Section 7(b) hereof.
(C) The Company may defer its obligations to register Shares
under this Section 7(a) for a period of up to ninety (90) days if
such registration would materially and adversely affect a proposed
business or financial transaction material to the Company
(including a subsequent public offering by the Company).
(D) The Company shall not be obligated to keep any
registration statement in effect for more than one hundred eighty
(180) days following the effective date thereof and may deregister
all or any portion of any unsold Shares covered thereby after such
time.
(E) The Company shall not be obligated to file more than one
registration statement.
(b) Piggy-Back Registration Right
(i) In the event the Company shall, at any time prior to the
expiration of this Warrant, file a registration statement with the
SEC to register shares of Common Stock, the Company shall furnish
the Holders with at least thirty (30) days prior written notice
thereof and such Holders shall have the option to include the
Shares to be issued to the Holders upon the exercise of this
Warrant in such registration statement. The Holders shall exercise
the "piggy-back registration rights" granted pursuant to this
Section 7(b) by giving written notice to the Company within twenty
(20) days of the receipt of the aforementioned written notice from
the Company.
(ii) Notwithstanding any other provision of this Warrant, the
Company's obligations under this Section 7(b) shall be subject to
and limited by the following terms and conditions:
(A) The obligations of the Company set forth under this
Section 7(b) shall not arise upon the filing of a registration
statement relating solely to shares of Common Stock issued pursuant
to employee stock option or other benefit plans, a merger of other
business combination or a registration statement which does not
include substantially the same information as Form S-1, Form S-2 or
Form S-3, or any successor forms thereto.
(B) If the Company files a registration statement in
connection with a proposed underwritten primary or secondary public
offering of Common Stock, the Company shall use its best efforts to
cause the managing underwriter of the proposed offering to grant
any request by the Holder that Shares purchased by the Holder upon
the exercise of this Warrant be included in the proposed public
offering on terms and conditions which are customary under industry
practice. Notwithstanding any other provision of this Agreement,
if the managing underwriter of a proposed primary or secondary
public offering of the Common Stock gives written notice to the
Company that, in the reasonable opinion of such managing
underwriter, marketing factors require a limitation of the total
number of shares of Common Stock to be underwritten, then the
number of Shares purchased by the Holder upon the exercise of this
Warrant which the Company shall be obligated to include in the
registration statement shall be reduced in accordance with the
limitations imposed by the managing underwriter. Any such
limitation imposed by the managing underwriter shall be imposed pro
rata among all holders of Common Stock exercising rights granted
pursuant to this Section 7(b) or otherwise, in accordance with the
amount of Common Stock which each such person requested to be
included in the registration statement.
(c) Allocation of Expenses
The Company will pay all Registration Expenses (as hereinafter
defined) of all registrations under this Warrant; provided,
however, that if a registration is withdrawn at the request of the
Holders requesting such registration (other than as a result of
information concerning the business or financial condition of the
Company which is made known to the Holders after the date on which
such registration was requested), each of the Holders shall pay the
Registration Expenses of such registration pro rata in accordance
with the number of its Shares included in such registration. For
purposes of this Section 7(c), the term "Registration Expenses"
shall mean all expenses incurred by the Company in complying with
this Section 7, including, without limitation, all registration and
filing fees, exchange listing fees, printing expenses, fees and
disbursements of counsel for the Company, state Blue Sky fees and
expenses, transfer agent fees, cost of engraving of stock
certificates, costs for mailing and tombstone advertising, cost of
preparing the registration statement, related exhibits, amendments
and supplements thereto, underwriting documents, selected dealer
agreements, preliminary and final prospectuses, and the expense of
any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling
commissions attributable to the Shares and the fees and expenses of
the Holder's own counsel and accountants, which shall be borne by
such holders.
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holders,
and each person, if any, who controls such Holders within the
meaning of Section 15 of the Act, from and against any and all
losses, claims, damages, expenses and liabilities caused by any
untrue statement of a material fact contained in any registration
statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact therein necessary
to make the statement therein not misleading provided, however,
that the foregoing indemnification and agreement to hold harmless
shall not apply insofar as such losses, claims, damages, expenses
and liabilities are caused by any such untrue statement or
omissions based upon information furnished in writing to the
Company by any such Holder expressly for use in any registration
statement or prospectus.
(b) The Holders will indemnify the Company, and each person
who controls the Company within the meaning of Section 15 of the
Act, from and against any and all losses, claims, damages, expenses
and liabilities caused by an untrue statement of a material fact
contained in any registration statement or contained in a
prospectus furnished thereunder or caused by an omission to state
a material fact therein necessary to make the statement therein not
misleading insofar as such losses, claims, damages, expenses and
liabilities caused by such untrue statement or omission based upon
information furnished in writing to the Company by any such Holder
expressly for use in any registration statement or prospectus.
(c) Promptly after the receipt by any indemnified party of
notice of the commencement of any action, said indemnified party
will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying
party in writing of the commencement thereof; but the omission to
so notify the indemnifying party will not relieve it from any
liabilities which it may have to them otherwise than under this
Section 8, except if such delay prejudices the indemnifying party.
In case any such action is brought against any party who may seek
indemnification hereunder and the indemnifying party is notified of
the commencement thereof as provided herein, the indemnifying party
will be entitled to participate in, and, to the extent that it may
wish, to assume the defense thereof, with counsel satisfactory to
the indemnified party, and after notice from the indemnifying party
to such indemnified party of the indemnifying party's election so
to assume the defense thereof, the indemnifying party will not be
liable under this Section 8 for any legal or other expense
subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation.
The indemnifying party will not be liable for any settlement
effected without its written consent.
9. Survival. The various rights and obligations of the Holder
and of the Company as set forth in Sections 4, 5, 6, 7 and 8 hereof
shall survive the exercise of this Warrant and the surrender of
this instrument upon such exercise.
10. Notice. All notices required by this Warrant to be given or
made by the Company shall be given or made by first class mail,
postage prepaid, addressed to the registered holder hereof at the
address of such holder as shown on the books of the Company.
11. Loss or Destruction. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any loss, theft or
destruction, upon delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company and its counsel, or,
in the case of any such mutilation, upon surrender and cancellation
of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed,
waived, discharged or terminated except by a written instrument
executed by the Company and the Holder.
(b) This Warrant shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of
Florida, without regard to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in
such a manner as to be effective, valid and enforceable under
applicable law, but if any provision of this Warrant is held to be
invalid, illegal or unenforceable under any applicable law or rule
in any jurisdiction, such provision will be ineffective only to the
extent of such invalidity, illegality or unenforceability in such
jurisdiction, without invalidating the remainder of this Warrant in
such jurisdiction or any provision hereof in any other
jurisdiction.
(d) No course of dealing or delay or failure to exercise any
right hereunder on the part of the Holder shall operate as a waiver
of such right or otherwise prejudice the Holder's rights, power or
remedies.
(e) The Company shall pay all expenses incurred by it in
connection with, and all documentary stamp and other taxes (other
than stock transfer taxes) and other governmental charges that may
be imposed in respect of, the issue, sale and delivery of this
Warrant and the Shares issuable upon the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors and assigns of
the Company and the successors and permitted assigns of the Holder.
IN WITNESS WHEREOF the Company has caused this Warrant to be
executed by its duly authorized officer as of the 26 day of
December, 1996.
ATTEST: nSTOR TECHNOLOGIES, INC.
By: /s/ Michelle Parchesco By: /s/ Joseph D. Weingard
Name: Michelle Parchesco Name: Joseph D. Weingard
Title: Title: Vice President
