SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 10-K/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 08354
nStor Technologies, Inc.
(exact name of registrant as specified in its charter)
Delaware 95-2094565
(State of Incorporation) (I.R.S. Employer ID No.)
450 Technology Park, Lake Mary, Florida 32746
(Address of principal executive offices)
Registrant's telephone number, including area code: 407-829-3500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.05 per share
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NONAFFILIATES OF THE REGISTRANT
Common Stock, par value $.05 per share ("Common Stock"), was the
only class of voting common equity of the Registrant outstanding on
December 31, 1998. Based on the last sales price of the Common
Stock on the American Stock Exchange ("AMEX") on March 31, 1999
($2.125), the aggregate market value of the approximately
16,279,000 shares of the voting Common Stock held by persons other
than officers, directors and persons known to the Registrant to be
the beneficial owners (as that term is defined under the rules of
the Securities and Exchange Commission) of more than five percent
of the Common Stock on that date was approximately $34.6 million.
By the foregoing statements, the Registrant does not intend to
imply that any of these officers, directors or beneficial owners
are affiliates of the Registrant or that the aggregate market
value, as computed pursuant to rules of the Securities and Exchange
Commission, is in any way indicative of the amount which could be
obtained for such shares of Common Stock.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Section 12, 13, or
14(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes ____ No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest practicable
date:
21,492,258 shares of Common Stock, par value $.05
per share, were outstanding as of March 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement of nStor Technologies, Inc.
for the 1999 Annual Meeting of Stockholders
(incorporated in Part III)
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PART I AND II
Registrant incorporates by reference, Parts I and II of
Registrants Form 10-K for the year ended December 31,
1998, filed with the Securities and Exchange Commission
on April 15, 1999.
PART I AMENDMENT
Item 1. Business
Recent Developments
Proposed Acquisition
In order to finance the proposed acquisition of 75% of the
outstanding common stock of Andataco, Inc. ("Andataco") from David
Sykes, and the related purchase of a note in the principal amount
of $5,196,000 issued to Mr. Sykes by Andataco, we are currently
negotiating with unrelated private investors to obtain between $7.5
million and $10 million in a private placement of convertible
preferred stock. As presently contemplated, such financing
arrangement provides for H. Irwin Levy, Chairman of the Board of
Directors and a major stockholder, to arrange for the investment of
up to $1 million in shares of common stock in the event that only
$7.5 million in financing is obtained. There can be no assurance,
however, that we will be successful in obtaining the funds
necessary to finance the proposed acquisition or that the
acquisition will be completed.
PART II AMENDMENTS
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Financing Activities with Private Investors
Effective as of March 30, 1999, we agreed to issue an aggregate of
645,000 shares of our common stock in satisfaction of $1,290,000 of
these recent borrowings, of which $790,000 was payable to Mr. Levy
and $500,000 was payable to an unrelated private investor.
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Recent Developments
In order to finance the proposed acquisition of 75% of the
outstanding common stock of Andataco, Inc. ("Andataco") from David
Sykes, and the related purchase of a note in the principal amount
of $5,196,000 issued to Mr. Sykes by Andataco, we are currently
negotiating with unrelated private investors to obtain between $7.5
million and $10 million in a private placement of convertible
preferred stock. As presently contemplated, such financing
arrangement provides for H. Irwin Levy, Chairman of the Board of
Directors and a major stockholder, to arrange for the investment of
up to $1 million in shares of common stock in the event that only
$7.5 million in financing is obtained. There can be no assurance,
however, that we will be successful in obtaining the funds
necessary to finance the proposed acquisition or that the
acquisition will be completed.
Item 8. Financial Statements and Supplemental Data
Note 6 to Consolidated Financial Statements
Borrowings
Subordinated and Director Loans
Effective as of March 30, 1999, the Company agreed to issue an
aggregate of 645,000 of newly issued shares of common stock in
satisfaction of $1,290,000 of recent borrowings, of which $790,000
was payable to Mr. Levy, under a Promissory Note, and $500,000 was
payable to an unrelated private investor.
Note 15 to Consolidated Financial Statements
Subsequent Events
Effective as of March 30, 1999, the Company agreed to issue 645,000
shares of the Company's common stock in satisfaction of $1,290,000 of
the approximate $3.1 million of recent borrowings. Of this amount,
$790,000 was payable to Mr. Levy and $500,000 was payable to an unrelated
private investor.
In order to finance the proposed acquisition of 75% of the
outstanding common stock of Andataco, Inc. ("Andataco") from David
Sykes, and the related purchase of a note in the principal amount
of $5,196,000 issued to Mr. Sykes by Andataco, we are currently
negotiating with unrelated private investors to obtain between $7.5
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million and $10 million in a private placement of convertible
preferred stock. As presently contemplated, such financing
arrangement provides for H. Irwin Levy, Chairman of the Board of
Directors and a major stockholder, to arrange for the investment of
up to $1 million in shares of common stock in the event that only
$7.5 million in financing is obtained. There can be no assurance,
however, that we will be successful in obtaining the funds
necessary to finance the proposed acquisition or that the
acquisition will be completed.
PART III
Item 10. Directors and Executive Officers of the Registrant
MANAGEMENT
Directors and Executive Officers of the Company - Set forth
below is the name, age, position with the Company, the year in
which each was first appointed or elected an officer or director,
and certain other information with respect to each director and
executive officer:
Director Officer
Name Age Position Since Since
H. Irwin Levy 72 Chairman of the Board 1995 (1) -
Michael L. Wise 54 Vice Chairman of the Board 1989 1998 (2)
and Vice President
Lawrence F. Steffann 46 Director and President 1998 1998
Mark F. Levy 44 Director and Vice President 1992 (3) 1995 (3)
Larry J. Calise 41 Chief Financial Officer - 1998
and Treasurer
Bernard R. Green 80 Director 1997 -
James E. McGrath 44 Director 1999 (4) -
_________
(1) Mr. H. Irwin Levy previously served as Chairman of the Board
of Directors of the Company from 1987 until July 1991.
(2) Mr. Wise previously served as President of the Company from
March 1989 until December 1990 and from October 1992 until
July 1996. He also served as Chairman of the Board of
Directors from July 1991 until June 1998.
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(3) Mr. Mark Levy previously served as President from July 1996 to
June 1998 and as Vice President, Secretary, and a Director of
the Company from 1985 to 1990.
(4) Mr. McGrath was appointed to the Board of Directors in January
1999.
H. Irwin Levy is Chairman of the Board and Chief Executive
Officer of Hilcoast Development Corp. ("Hilcoast") and certain
affiliated companies, all of which are privately held businesses,
which position he has held since August 1992. Since December 1997,
Mr. Levy has served as Chairman of the Board of CV Reit, Inc., a
New York Stock Exchange listed Real Estate Investment Trust ("CV
Reit") and was Chairman of the Board and Chief Executive Officer of
CV Reit from 1985 until July 1992. He is currently of counsel to
the West Palm Beach law firm of Levy Kneen Mariani Curtin Kornfeld
and del Russo which provides legal services to the Company.
Michael L. Wise is currently Chairman of the Board of
Directors and Chief Executive Officer of Netword, Inc., a publicly
held company that provides a utility for navigating the internet.
Mr. Wise has been associated with the Company in various positions
since 1986 and was the founder of IMNET Corporation of Delaware
("IMNET") which became a subsidiary of the Company in 1988. Mr.
Wise served as President and Chairman of the Board of IMNET from
July 1986 to June 1990. Mr. Wise has a PhD in physics.
Lawrence F. Steffann was appointed president and a director of
the Company in June 1998. Mr. Steffann was previously president of
World Wide Ventures from January 1997 to May 1998, a company which
provided consulting services to start-up technology companies.
Previously, he held numerous executive management positions with
Boca Research, Inc. from September 1990 to January 1997, including
Chief Operating Officer from August 1995 to January 1997.
Mark F. Levy is President of Cenvill Recreation, Inc. and
certain affiliated companies, all of which are privately held
businesses. Mr. Levy is the son of H. Irwin Levy and is licensed
to practice law in the State of Florida.
Larry J. Calise, a Certified Public Accountant, was appointed
Chief Financial Officer of the Company in April 1998. Prior to
joining the Company in December 1997, Mr. Calise served as Chief
Financial Officer of American Executive Centers, Inc., a provider
of business support services from 1996 to 1997. From 1986 until
1996, Mr. Calise held various positions, including Vice President-Finance
and Administration for a division of Alexander Proudfoot,
Plc, an international management consulting firm.
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Bernard R. Green is consultant to, and previously for more
than forty years, managing or senior partner of, the accounting
firm of Friedman, Alpren & Green of New York, New York and West
Palm Beach, Florida. Mr. Green previously served as a director of
Hilcoast from July 1992 until February 1997 and has been a private
investor for more than twenty years.
James E. McGrath is Chairman of the Board of Directors of
Xycom, Inc., a private high-technology factory automation company
and Chairman of the Board of Directors and Chief Executive officer
of Fairfax Capital Partners, Inc., a privately held merchant bank.
Mr. McGrath was also a co-founder and a Director of American
Medical Response, Inc. (from its inception in 1992 until its merger
with Laidlaw Industries in 1997), a New York Stock Exchange listed
company providing ambulance services. In addition, Mr. McGrath
served as Chairman of the Board of Directors of Perceptron, Inc.
from 1993 until 1996, a publicly traded company, also in the high-technology
industry.
Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1998 (see "Executive
Compensation"), the Board of Directors held seven meetings. No
director attended fewer than 75 percent of the aggregate number of
meetings of the Board of Directors held during the period he served
on the Board.
The Audit Committee which met once during fiscal 1998, currently
consists of Michael L. Wise, Bernard R. Green and Joseph D.
Weingard (a consultant to the Company). The Audit Committee's
responsibilities include overseeing the financial reporting process
and the effectiveness of the Company's internal, accounting and
financial controls, and making recommendations to the Board,
including the designation of independent auditors on an annual
basis.
The Compensation Committee, which did not meet during fiscal 1998,
currently consists of Michael L. Wise, Mark F. Levy and Lawrence F.
Steffann. The Compensation Committee's responsibilities include
reviewing and approving executive compensation, including benefits,
and stock options granted under the Company's 1996 Stock Option
Plan.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and
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persons who own more than ten percent of the Company's outstanding
Common Stock, to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports
they file.
To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and written
representations that no other reports were required, the officers,
directors and greater than ten percent beneficial owners of the
Company have complied with all applicable Section 16(a) filing
requirements except as follows: (i) due to an administrative
oversight, Lawrence F. Steffann did not file Initial Statement of
Beneficial Ownership of Securities on Form 3 on a timely basis with
respect to commencement of his employment on June 1, 1998; and (ii)
based solely upon the Company's review of R. Daniel Smith's
Statement of Changes in Beneficial Ownership on Form 4 dated
October 27, 1998, in which he reported twelve dispositions of the
Company's common stock (August 3, 1998 to September 30, 1998), the
Company determined all twelve transactions were not reported on a
timely basis. Mr. Smith served as a director of the Company from
Janaury 1997 through November 17, 1998.
Item 11. Executive Compensation
The following table sets forth for the fiscal years ended December
31, 1998 and 1997 and October 31, 1996, the compensation awarded
to, earned by or paid to those persons who were, during fiscal
1998, (i) the Chief Executive Officer of the Company and (ii)
certain other executive officers of the Company (collectively, the
"Named Officers"). As a result of the Company changing its fiscal
year end from October 31 to December 31, fiscal 1997 includes the
two month transition period ended December 31, 1996, a fourteen
month period.
Mark F. Levy served as President and Chief Executive Officer
of the Company from July 1996 until June 1998, at which time
Lawrence F. Steffann was appointed as the Company's President and
Chief Executive officer.
Summary Compensation Table
Name and All Other Annual
Principal Position Year Salary Bonus Compensation
Lawrence F. Steffann 1998 $103,007(1) - -
President and Chief 1997 - - -
Executive Officer 1996 - - -
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Name and All Other Annual
Principal Position Year Salary Bonus Compensation
Mark F. Levy 1998 - - $39,000(2)
Vice President 1997 - - $39,500(2)
1996 - - $34,000(2)
R. Daniel Smith 1998 $106,878(3)
Former Executive 1997 $296,500 - -
Vice President 1996 $ 65,400(4) - -
__________
(1) Represents salary received by Mr. Steffann commencing June 1, 1998, the
first date Mr. Steffann became employed by the Company.
(2) Consists of Board meeting fees and monthly management/consulting fees
for services rendered by Mr. Levy in his capacity as a director and
officer of the Company.
(3) Represents salary received by Mr. Smith from January 1, 1998 to May 21,
1998, the date on which he resigned as Executive Vice President.
(4) Represents salary received by Mr. Smith commencing June 3, 1996, the
first date Mr. Smith became employed by the Company.
Employment Agreement
The Company entered into an employment agreement with Lawrence
F. Steffann, effective as of June 1, 1998, pursuant to which Mr.
Steffann is employed as President of the Company and its
operating subsidiary, nStor Corportion, Inc. The agreement
provides for the employment of Mr. Steffann through June 1,
2001, at an annual base salary of $200,000 (which salary was
increased to $250,000 annually effective January 1, 1999, the
payment of which is currently being deferred), subject to annual
increases in the discretion of the Board of Directors. The
agreement further provides for the payment of a one-time bonus
of $25,000 subject to the Company's attainment of certain
operating targets for fiscal 1998, and for annual cash bonuses
commencing with fiscal 1999, in the discretion of the Board of
Directors. In addition, the Company is required to provide Mr.
Steffann with a term life insurance policy in the amount of $1
million. Mr. Steffann was also granted options to purchase
750,000 shares of Common Stock. If Mr. Steffann's employment is
terminated by the Company without cause (as defined therein),
the employment agreement provides that Mr. Steffann will
continue to receive his base salary for a period of twelve
months following termination. Following a change in control of
the Company (as defined in the agreement), if Mr. Steffan's
employment is terminated by the Company, or is terminated by Mr.
Steffann at his election due to a reduction in his job description,
responsibilities or authority, the agreement provides that all
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options to purchase Common Stock granted to Mr. Steffann are to
immediately vest. The employment agreement contains a non-competition
covenant which restricts Mr. Steffann from competing with the Company
during the term of the agreement and, except in the case of termination
of employment by the Company without cause, for three years thereafter.
Option/Stock Appreciation Rights ("SAR") Grants
The following table sets forth information regarding options to
purchase the Company's Common Stock granted during fiscal 1998 to
the Named Officers pursuant to the 1996 Stock Option Plan ("the
Plan"). No SARs were granted.
Individual Grants Potential
------------------- Realizable
Percent Value
Number of of Total at Assumed
Securities Options/ Annual Rates
Underlying SARs of Stock Price
Options/ Granted to Exercise Appreciation
SARs Employees or Base Expira- for Option Term
Granted in Fiscal Price tion ---------------------
(#) 1998 ($/sh) Date 5%($) 10%($)
---------- ---------- -------- ------- ---------- ----------
Lawrence F.
Steffann 750,000 (1) 39% $1.20 6/01/08 $1,466,005 $2,334,368
Mark F. Levy(3) 20,000 (2) 1% $ .50 10/06/08 $16,289 $25,937
17,500 (2) 1% $1.50 11/01/08 $42,758 $68,086
__________
(1) Effective as of June 1, 1998, the Company granted a conditional Employee
Incentive Stock Option to Mr. Steffann to purchase 750,000 shares of the
Company's common stock. The grant is conditional because of the 2.5
million share limitation under the Plan. The agreement provides for the
removal of the condition upon approval by the Company's shareholders (at
its 1999 Annual Meeting of Stockholders) of an amendment to the Plan to
increase the number of shares reserved for issuance under the Plan.
(2) The Company granted an option to purchase 17,500 shares of the Company's
Common Stock on November 1, 1998 for services provided to the Company
during fiscal 1998, all of which became exercisable upon the date of
grant. The Company granted an option to purchase 20,000 shares of the
Company's Common Stock on October 6, 1998 pursuant to the Plan which
provides for annual grants to directors on each director's anniversary of
his appointment to the Board of Directors. The shares underlying the
options become exercisable one year from the date of grant provided the
director remains a director at that time.
(3) Mr. Levy is not a salaried employee of the Company (see discussion under
"Directors Compensation").
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Aggregated Fiscal Year-End Option Value Table
The following table sets forth certain information concerning
unexercised stock options held by the Named Officers as of December
31, 1998. No options were exercised by any of the Named Officers
during fiscal 1998. No SAR's have been granted or are outstanding.
OPTION EXERCISES DURING 1998
AND YEAR-END OPTION VALUES
Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired December 31, 1998 (#) December 31, 1998 ($)(1)
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
Lawrence
F.
Steffann -0- -0- 125,000 625,000 $193,750 $968,750
Mark F.
Levy -0- -0- 147,500 20,000 $ 66,625 $ 45,000
R. Daniel
Smith -0- -0- 400,000 -0- $260,000 $ -0-
__________
(1) The closing price for the Company's Common Stock, as reported by the
American Stock Exchange ("Amex") on December 31, 1998, was $2.75. Value
is calculated by multiplying (a) the difference between $2.75 and the
option exercise price by (b) the number of common shares of common stock
underlying the option.
Compensation Committee Interlocks and Insider Participation
Since the Compensation Committee did not meet during fiscal 1998,
the entire Board of Directors participated in deliberations
concerning compensation paid to the Company's executive officers.
Lawrence F. Steffann, an employee of the Company, is also a member
of the Board of Directors.
Directors Compensation
Non-salaried directors of the Company Receive $1,500 for each
directors' meeting attended. Members of the Company's Audit
Committee receive annual compensation of $5,000. Michael L. Wise,
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Vice Chairman of the Board, waived his Audit Committee
compensation. With the exception of Lawrence F. Steffann, none of
the current directors are salaried employees of the Company. In
addition to the above-described compensation received by the Named
Officers during fiscal 1998, non-salaried directors earned
compensation in the form of monthly management/consulting fees,
board fees and/or committee fees for services rendered to the
Company in their respective capacities as directors or officers as
follows: Michael L. Wise - $25,000, H. Irwin Levy - $19,500,
Bernard R. Green - $24,500. Commencing in September 1997, all
directors agreed to defer receipt of all fees earned until certain
events occur including obtaining sufficient financing. Mr. Wise's
compensation is payable to Yadgim Partners, of which Mr. Wise's
wife is a general partner.
Pursuant to the Company's 1996 Stock Option Plan, each non-employee
director shall automatically be granted, effective each anniversary
of said director's appointment to the Board, an option to purchase
20,000 shares of Common Stock at the then fair market value of the
Common Stock.
Item 12. Security Ownership of Management and Certain
Certain Beneficial Owners
The following table sets forth, as of March 31, 1999, information
with respect to the beneficial ownership of the Company's Common
Stock by (i) each person known by the Company to beneficially own
more than 5% of the outstanding shares of Common Stock, (ii) each
director and executive officer of the Company, including executive
officers named in the Summary Compensation Table under "Executive
Compensation" and (iii) all directors and executive officers of the
Company as a group.
Amount and
Nature of Percent of
Name and Address of Beneficial Outstanding
Beneficial Owner Ownership (1) Shares
H. Irwin Levy 4,018,099 (2) 18.2%
100 Century Blvd.
West Palm Beach, FL 33417
Bernard Marden 3,465,359 14.9%
1290 S. Ocean Blvd.
Palm Beach, FL 33480
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Amount and
Nature of Percent of
Name and Address of Beneficial Outstanding
Beneficial Owner Ownership (1) Shares
Herbert Gimelstob 1,764,467 7.8%
7777 West Glades Road
Boca Raton, FL 33434
Maurice Halperin 1,312,200 5.8%
2500 N. Military Trail
Boca Raton, FL 33431
Michael L. Wise 1,016,312 (3) 4.7%
285 Tanglewood Crossing
Lawrence, NY 11559
Mark F. Levy 806,666 (4) 3.7%
100 Century Blvd.
West Palm Beach, FL 33417
Bernard R. Green 351,333 (5) 1.6%
583 North Lake Way
Palm Beach, FL 33480
Lawrence F. Steffann 260,000 1.2%
450 Technology park
Lake Mary, FL 32746
James E. McGrath 50,000 (6)
101 Tremont Street
Boston, MA 02108
Larry J. Calise 25,000 (6)
450 Technology Park
Lake Mary, FL 32746
All executive officers, 6,132,410 27.5%
directors and director
nominees as a group (7 persons)
__________
(1) Unless otherwise indicated, each stockholder listed has the
sole power to vote and direct disposition of the shares of
Common Stock shown as beneficially owned by such stockholder.
For purposes of this table, a person or group of persons is
deemed to have "beneficial ownership" of the following shares
which such person or group has the right to acquire pursuant
to options, warrants, convertible equity securities or
subscription agreements that are exercisable, convertible or
obtainable within 60 days of the date hereof: Mr. H. Irwin
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Levy - 560,000 shares; Mr. Marden - 1,750,000 shares; Mr.
Gimelstob - 1,200,000 shares; Mr. Halperin - 1,150,000 shares;
Mr. Wise - 182,000 shares; Mr. Mark F. Levy - 120,000 shares;
Mr. Green - 20,000 shares; Mr. Steffann - 250,000 shares; Mr.
McGrath - 50,000 shares; Mr. Calise - 25,000 shares; and all
executive officers and directors as a group - 1,207,000
shares. See "Executive Compensation".
(2) Includes 166,666 shares owned by a corporation controlled by
Mr. Levy.
(3) Includes 227,410 shares owned by a retirement trust controlled
by Mr. Wise. Also includes the following, as to which Mr. Wise
disclaims beneficial ownership: 389,502 shares owned by Mr.
Wise's wife, 65,000 shares owned by Mr. Wise's child, 50,400
shares owned jointly by Mr. Wise's wife and his mother and
18,000 shares owned by a general partnership controlled by Mr.
Wise's wife.
(4) Includes (as to which Mr. Levy disclaims beneficial ownership)
10,000 shares owned by Mr. Levy's wife, 7,500 shares owned by
Mr. Levy as guardian for his minor children and 41,666 shares
owned by a corporation controlled by Mr. Levy as guardian for
his minor children.
(5) Includes 20,000 shares owned by Mr. Green's wife and 10,000
shares owned by a trust in which Mr. Green's wife is a
trustee. Mr. Green disclaims beneficial ownership as to these
shares.
(6) Less than 1%.
Item 13. Certain Relationships and Related Transactions
Loans Made by a Director to the Company
At December 31, 1997, the Company's long-term debt included
$950,000 due to H. Irwin Levy. During 1998, Mr. Levy and a company
controlled by Mr. Levy (collectively, "Mr. Levy") loaned an
additional net amount of $3,350,000 (consisting of $6,765,000
advanced, less $3,415,000 repaid) to the Company, with interest at
10% per annum. During April 1998, Mr. Levy sold participation
interests in $1,000,000 of these loans, including $500,000 to
unrelated private investors, $125,000 to a company controlled by
Mark F. Levy, $125,000 to a company controlled by other members of
Mr. Levy's family and $250,000 to Bernard R. Green. In addition,
in April 1998, the Company issued $1 million of 8% Convertible
Preferred Stock, Series B, ("Series B Preferred Stock") to Mr. Levy
in satisfaction of $1 million of Mr. Levy's loans. In September
and October 1998, the Company issued 8% Convertible Preferred
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Stock, Series C ("Series C Preferred Stock") with a stated value of
$2 million to Mr. Levy in satisfaction of $2 million of Mr. Levy's
loans, leaving an outstanding balance due to Mr. Levy of $1,300,000
as of December 31, 1998.
In October 1998, the Company exchanged the $1 million of Series B
Preferred Stock held by Mr. Levy for Series C Preferred Stock
bringing Mr. Levy's aggregate investment in Series C Preferred
Stock to $3 million. See Note 10 to Consolidated Financial
Statements for a description of certain classes of preferred stock.
In connection with loans made by Mr. Levy to the Company during
1997, warrants were issued to Mr. Levy in January and February 1998
to purchase up to 10,000 shares of Common Stock of the Company at
a purchase price of $2.35 per share, exercisable on the date of
grant, expiring on October 1, 2000.
In connection with certain loans made by Mr. Levy (the
"Subordinated Director Loans") to the Company during 1998, warrants
were issued to Mr. Levy to purchase 666,666 shares of the Company's
common stock of which 250,000 warrants were subsequently
transferred to unrelated private investors, 41,666 to a company
controlled by Mr. Mark Levy and 41,667 to a company controlled by
other members of Mr. Levy's family, all as part of Mr. Levy's sale
of participation interests. The warrants had an exercise price of
$1.50 per share, exercisable on the date of grant and expiring on
March 5, 2001. Effective September 22, 1998, the maturity date for
the Subordinated Director Loan was extended for one year to
September 5, 2000. As consideration for the extension, the Company
replaced the previously issued warrants with new warrants under
identical terms but with an exercise price of $1.25 per share.
Pursuant to a Promissory Note dated March 1, 1999, Mr. Levy has
agreed to loan the Company up to an additional $1 million through
September 30, 1999. From March 1, 1999 through March 30, 1999, the
Company borrowed $790,000 under that Note. Effective as of March
30, 1999, the Company agreed to issue 395,000 shares of newly
issued Common Stock of the Company to Mr. Levy in satisfaction of
the $790,000 in borrowings.
Repayment of Loan Made to Previous Director
In December 1998, the Company received approximately $117,000 as
repayment on a loan made to Richard Reiss, Jr., a former director
of the Company. Mr. Reiss used the proceeds from the $130,000 loan
to acquire, in the open market, 50,000 shares of the Company's
common stock. Upon his resignation as a director of the Company,
in November 1998, Mr. Reiss sold his 50,000 shares of common stock
and remitted the proceeds to the Company. At the time of
repayment, the outstanding principal and interest amounted to
approximately $147,000.
15
<PAGE>
PART IV
Registrant incorporates by reference, Part IV of Registrant's Form
10-K for the year ended December 31, 1997, filed with the
Securities and Exchange Commission on April 15, 1999.
In addition, pursuant to Item 14.(a)(3) - Exhibits, the following
exhibits are being filed by Registrant herewith.
Exhibit
Number
4.1 Registration Rights Agreement dated April 14, 1999, between
Registrant and Bernard Marden.
4.2 Subscription Agreement between Registrant and Bernard Marden.
4.3 Warrant dated April 14, 1999 between Registrant and Bernard
Marden.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
nSTOR TECHNOLOGIES, INC.
/s/ Lawrence F. Steffann
By:___________________________________
Lawrence F. Steffann, President
Dated: April 26, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registratn and in the capacities and on the dates
indicated.
/s/ Lawrence F. Steffann
April 26, 1999 ____________________________________________
Lawrence F. Steffann, President and Director
/s/ Mark F. Levy
April 26, 1999 ____________________________________________
Mark F. Levy, Vice President and Director
/s/ Michael L. Wise
April 27, 1999 ____________________________________________
Michael L. Wise, Vice President and Director
/s/ Larry J. Calise
April 26, 1999 ____________________________________________
Larry J. Calise, Principal Financial
Officer and Principal Accounting Officer
/s/ Bernard R. Green
April 22, 1999 ____________________________________________
Bernard R. Green, Director
/s/ H. Irwin Levy
April 26, 1999 ____________________________________________
H. Irwin Levy, Director
/s/ James E. McGrath
April 27, 1999 ____________________________________________
James E. McGrath, Director
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 14,1999
(this "Agreement"), is made by and among nStor Technologies, Inc.,
a Delaware corporation (the "Company"), and Bernard Marden (the
"Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Convertible Subordinated
Promissory Note, of even date herewith between the Investor and the
Company (the "Note"), the Investor has agreed, upon the terms and
subject to the conditions of the Note, to loan a total of $1.0 million
to the Company;
WHEREAS, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively,
the "Securities Act"), and applicable state securities laws with respect
to the shares of the Company's common stock (the "Shares") issuable upon
the conversion of the Note;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "register," "registered" and "registration" refer to
a registration effected by preparing and filing a Registration Statement
or Statements on Form S-3 or another form acceptable to Investor in
compliance with the Securities Act and pursuant to Rule 415 under the
Securities Act or any successor rule providing for offering securities on
a continuous basis ("Rule 415") and the declaration or ordering of
effectiveness of such Registration Statement by the United States Securities
and Exchange Commission ("SEC").
(ii) "Registration Statement" means a registration
statement under the Securities Act.
(iii) "Common Stock" shall mean the common stock of
the Company, par value $.05 per share.
(b) Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Note.
2. Registration.
(a) The Company shall prepare and file with the SEC, no
later than 180 days from the date hereof, a registration statement
on Form S-3 covering the Shares.
(b) The Company represents and warrants that it meets
the requirements for the use of Form S-3 for registration of the
sale by the Investor of the Registerable Securities and the Company
shall file all reports required to be filed by the Company with the
SEC in a timely manner so as to maintain such eligibility for the
use of Form S-3.
(c) Notwithstanding the registration of the resale of
Common Stock in accordance with Section 2(a), if at any time of
offer and sale of such Common Stock such securities can be sold
pursuant to Rule 144 promulgated under the Securities Act ("Rule
144") in the manner, amount and on such terms as the Investor
wishes to offer and sell such securities, the Investor may endeavor
to offer and sell such securities pursuant to Rule 144.
3. Obligations of the Company. In connection with the
registration of the Common Stock, the Company shall:
(a) Prepare and file with the SEC promptly (but in no
event later than the applicable time periods set forth in Section
2(a)) a Registration Statement or Statements with respect to the
Common stock and thereafter use its best efforts to cause the
Registration Statement to become effective as soon as possible
after such filing, and keep the Registration Statement, if the
Registration Statement utilizes to Rule 415, effective at all times
until such date as is two years, after the date such Registration
Statement is first ordered effective by the SEC. In any case, the
Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) filed by the Company
shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with
the Registration Statement as may be necessary to keep the
Registration Statement effective for the time periods set forth in
Section 3(a);
(c) Furnish to the Investor (i) promptly after the same
is prepared and publicly distributed, filed with the SEC or
received by the Company, one copy of the Registration Statement and
any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto and (ii) such number of
copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as the
Investor may reasonably request in order to facilitate the
disposition of the Common Stock owned by the Investor;
(d) Use reasonable efforts to (i) register and qualify
the Common Stock covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the may
reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and
supplements, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all
times that the Registration Statement is required to be effective
under Section 3(a) hereof and (iv) take all other actions
reasonably necessary or advisable to qualify the Common Stock for
sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition
thereto to (I) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section
3(d), (II) subject itself to general taxation in any such
jurisdiction, (III) file a general consent to service of process in
any such jurisdiction, (IV) provide any undertakings that cause
more than nominal expense or burden to the Company or (V) make any
change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
(e) As promptly as practicable after becoming aware of
such event, notify the Investor of the happening of any event of
which the Company has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts
promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver
a number of copies of such supplement or amendment to the Investor
as the Investor may reasonably request;
(f) As promptly as practicable after becoming aware of
such event, notify the of the issuance by the SEC of any stop order
or other suspension of effectiveness of the Registration Statement
at the earliest possible time;
(g) Permit counsel designated as selling stockholders'
counsel by the Investor to review the Registration Statement and
all amendments and supplements thereto a reasonable period of time
prior to their filing with the SEC, and shall not file any document
in a form to which such counsel reasonably objects;
(h) Make available for inspection by the Investor, any
underwriter participating in any disposition pursuant to the
Registration Statement and any attorney, accountant or other agent
retained by the Investor or underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent
corporate documents and properties of the Company (collectively,
the "Records"), as shall be reasonably necessary to enable each
Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall
hold in confidence (making such confidential information known only
to officers, agents or employees thereof who have a need to know),
shall not use any information so obtained for any purpose other
than preparation or review of the registration statement, and shall
not make any disclosure (except to an Investor or underwriter) of
any Record or other information which the Company determines in
good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (ii) the release of such Records is
requested pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (iii) the information
in such Records has been made generally available to the public
other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector or
Investor until and unless the Investor or Inspector shall have
entered into confidentiality agreements (in a form as is customary
in similar circumstances) with the Company with respect thereto,
substantially in the form of this Section 3(h). The Investor
agrees that he shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company
shall hold in confidence and shall not make any disclosure
of information concerning an Investor provided to the Company
pursuant to Section 4(a) hereof unless (i) disclosure of such
information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental
body of competent jurisdiction or (iv) such information has been
made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning
an Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Investor,
to undertake, at Investor's expense, appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(i) Use its best efforts either to (i) cause all the
Common Stock covered by the Registration Statement to be listed on
the American Stock Exchange or other national securities exchange
and on each additional national securities exchange on which
similar securities issued by the Company are then listed, if any,
if the listing of such Common Stock is then permitted under the
rules of such exchange or (ii) secure designation of all the Common
Stock covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System
("Nasdaq") "national market system security" within the meaning of
Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the quotation of the Common
Stock on the Nasdaq National Market System; or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or
(ii), the Company is unsuccessful in satisfying the preceding
clause (i) or (ii), to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Common Stock;
(j) Provide a transfer agent and registrar, which may be
a single entity, for the Common Stock not later than the effective
date of the Registration Statement;
(k) Cooperate with the Investor to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Common Stock to be sold pursuant to the denominations
or amounts as the case may be, and registered in such names as the
Investor may reasonably request; and
(l) take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Common
Stock pursuant to the Registration Statement.
4. Obligations of the Investor. In connection with the
registration of the Common Stock, the Investor shall have the
following obligations:
(a) It shall be a condition precedent to the obligations
of the Company to complete the registration pursuant to this
Agreement with respect to the Investor that the Investor shall
furnish to the Company such information regarding itself and the
intended method of disposition of the Common Stock held by it as
shall be reasonably required to effect the registration of the
Common Stock and shall execute such documents in connection with
such registration as the Company may reasonably request. At least
fifteen (15) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify the Investor of
the information the Company requires from the Investor (the
"Requested Information"). For each day that the Requested
Information is not received beginning five business days from the
date of its request, the Company shall have the right to extend the
period for filing set forth Section 2(a) hereof by one day.
(b) The Investor agrees to cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of the Registration Statement hereunder.
(c) The Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind
described in Section 3(e) or 3(f), the Investor will immediately
discontinue disposition of Common Stock pursuant to the Registration
Statement until such Investor's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 3(e) or 3(f) and, if so
directed by the Company, the Investor shall deliver to the Company (at
the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession, of
the prospectus covering such Common Stock current at the time of receipt
of such notice;
(d) In the event the Investor determines to engage the
services of an underwriter, the Investor agrees to enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of the Common Stock.
5. Expenses of Registration. All expenses (other than
brokerage commissions or discounts) incurred in connection with
registrations, filings or qualifications pursuant to Section 2,
including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investor shall bear the fees
and out-of-pocket expenses of the one legal counsel selected by the
Investor pursuant to Section 3(g) hereof.
6. Indemnification.
(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless the Investor, any
underwriter (as defined in the Securities Act) for the Investor,
the directors, if any, of such underwriter and the officers, if
any, of such underwriter, and each person, if any, who controls any
such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses,
claims, damages, expenses or liabilities (joint or several)
(collectively "Claims") to which any of them become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or threatened,
in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with
the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act or any state
securities law or any rule or regulation under the Securities Act,
the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section
6(d) with respect to the number of legal counsel, the Company shall
reimburse the Investor and each such underwriters or controlling
person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6(a) (I)
shall not apply to a Claim arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or
any such amendment thereof or supplement thereto; (II) with respect
to any preliminary prospectus shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased
the Common Stock that are the subject thereof (or to the benefit of
any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented;
(III) shall not be available to the extent such Claim is based on
a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; and (IV) shall not apply
to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld.
(b) By the Investor. In connection with any
Registration Statement in which an Investor is participating, the
Investor agrees to indemnify and hold harmless, to the same extent
and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act (collectively and
together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under
the Securities Act, the Exchange Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs (I)
in reliance upon and in conformity with written information
furnished to the Company by the Investor expressly for use in
connection with such Registration Statement or (II) the Investor's
violation of Regulation M; and the Investor will promptly reimburse
any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written
consent of the Investor, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Common
Stock by the Investor. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
(c) The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in any
distribution, to the same extent as provided above, with respect to
information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying parties and the
Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if, in the
reasonable written opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party or other party
represented by such counsel in such proceeding. The Company shall
pay for only one separate legal counsel for the Investor. The
failure to deliver written notice to the indemnifying party within
a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss,
damage or liability is incurred and is due and payable.
(e) Contribution. To the extent any indemnification
provided for herein is prohibited or limited by law, the
indemnifying party agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable under
Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6, (ii) no seller of
Common Stock guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any seller of Common Stock who was not guilty
of such fraudulent misrepresentation and (iii) contribution by any
seller of Common Stock shall be limited in amount to the net amount
of proceeds received by such seller from the sale of such Common Stock.
7. Reports under Exchange Act. With a view to making
available to the Investor the benefits of Rule 144 or any other
similar rule or regulation of the SEC that may at any time permit
the Investor to sell securities of the Company to the public
without Registration, until such time as the Investor has sold all
the Common Stock pursuant to a Registration Statement or Rule 144,
the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act
and the Exchange Act; and
(c) furnish to the Investor so long as the Investor owns
Common Stock, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of
the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company and (iii) such
other information as may be reasonably requested to permit the
Investor to sell such securities pursuant to Rule 144 without
Registration. In addition, Investor shall continue to receive a
monthly report from the Company.
8. Assignment of the Registration Rights. The rights to
have the Company register Common Stock pursuant to this Agreement
may not be assigned unless the Company agrees to the assignment in
writing.
9. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and Investor. Any amendment of waiver effected in
accordance with this Section 9 shall be binding upon the Investor
and the Company.
10. Miscellaneous.
(a) If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with
respect to the same Common Stock, the company shall act upon the
basis of instructions, notice or election received from the
registered owner of such Common Stock.
(b) Notices required or permitted to be given hereunder
shall be in writing and shall be deemed to be sufficiently given
when personally delivered or when sent by registered mail, return
receipt requested, addressed (i) if to the Company, at nStor
Technologies, Inc., 100 Century Blvd., West Palm Beach, FL 33417,
attn: Mark Levy, and (ii) if to the Investor, at the address set
forth under its name in the Subscription Agreement, or at such
other address as each such party furnishes by notice given in
accordance with this Section 10(b), and shall be effective, when
personally delivered, upon receipt, and when so sent by certified
mail, four business days after deposit with the United States
Postal Service.
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Florida
applicable to the agreements made and to be performed entirely
within such state, without giving effect to rules governing the
conflict of laws. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to
the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other
provision hereof.
(e) This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context
may require.
(h) The headings in the Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This
Agreement, once executed by a party, may be delivered to the other party
hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
nSTOR TECHNOLOGIES, INC.
/s/ Mark F. Levy
By:_____________________________________
Mark F. Levy, Vice President
INVESTOR
/s/ Bernard Marden
________________________________________
Bernard Marden
Exhibit 4.2
SUBSCRIPTION AGREEMENT
nStor Technologies, Inc., a Delaware corporation (the
"Company"), and Bernard Marden (the "Investor"), hereby agree as
follows:
11. Sale and Purchase of Shares.
(a) Subject to the prior approval of the Company's
Board of Directors, the Company agrees to issue to the Investor, and
the Investor agrees to purchase from the Company, on the terms and
conditions set forth in this Subscription Agreement (the "Agree-
ment"), 500,000 shares (the "Shares") of the Company's common
stock, par value $0.05 per share (the "Common Stock").
(b) The Company shall issue the Shares in consideration
of, and against payment by, the Investor of One Million Dollars
($1,000,000), by wire transfer to an account designated by the
Company.
(c) The closing shall take place at such time and
place as shall be mutually agreed.
12. Certain Representations of the Investor.
The Investor hereby represents and warrants to the
Company, its officers and directors, the following:
(a) The Investor is an individual resident of Palm
Beach County, in the state of Florida.
(b) The Investor has read carefully and understands
this Agreement and has consulted his own attorney or accountant with
respect to the investment contemplated hereby and its suitability
for the Investor.
(c) The Company has made available to the Investor, or
his designated representatives, during the course of this
transaction and prior to the purchase of any of the securities referred
to herein, the opportunity to ask questions of and receive answers
from the officers and directors of the Company concerning the
terms and conditions of the offering or otherwise relating to the
financial data and business of the Company, to the extent that
the Company or its officers and directors possess such information or
can acquire it without unreasonable effort or expense. The
Company has also made available to the Investor for inspection,
documents, records, books and other written information about the Company,
its business and this investment at the office of the Company at 100
Century Blvd., West Palm Beach, FL 33417.
(d) The Investor understands and represents that: (i)
the Investor must bear the economic risk of this investment for
an indefinite period of time because the Shares have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act"), or under any state securities laws and, therefore, cannot
be resold unless they are subsequently registered under the 1933 Act
and the pertinent state securities laws or unless an exemption
from such registration is available; (ii) the Investor is purchasing
the Shares for investment for his own account and not for the account
of any other person, and not with any present view toward resale
or other "distribution" thereof within the meaning of the 1933 Act;
and (iii) the Investor agrees not to resell or otherwise dispose
of all or any part of the Shares, except as permitted by law,
including, without limitation, any and all applicable provisions
of this Agreement and any regulations under the 1933 Act.
(e) The Investor has such knowledge and experience in
financial and business matters that he is capable of evaluating
the merits and risks of an investment in the Shares. The Investor
represents, warrants and covenants that he is an "Accredited
Investor" within the meaning of Rule 501 of the 1933 Act. In
particular, the Investor qualifies as such pursuant to
Subsections (a)(5) and (6) of Rule 501, which provides that an Accredited
Investor shall include:
any natural person whose individual net worth,
or joint net worth with that person's spouse,
at the time of his purchase exceeds $1,000,000; and
any natural person who had an individual
income in excess of $200,000 in each of the
two most recent years or joint income with
that person's spouse in excess of $300,000 in
each of those years and has a reasonable
expectation of reaching the same income level
in the current year."
(f) The Investor is aware that an investment in the
Shares is highly speculative and subject to substantial risks.
The Investor is capable of bearing the high degree of economic risk
and burdens of this investment, including the possibility of a
complete loss of his investment and the lack of a public market and
limited transferability of the Shares, which may make the liquidation of
this investment impossible for an indefinite period of time. The
financial condition of the Investor is such that he is under no
present or contemplated future need to dispose of any of the
Shares to satisfy any existing or contemplated undertaking, need or
indebtedness.
(g) All of the information that either Investor has
set forth or represented in this Agreement, with respect to his
financial position and business and investment experience is
correct and complete as of the date of this Agreement and, if
there should be any material change in such information prior to the
purchase of Shares, the Investor will immediately furnish the
revised or corrected information to the Company.
(h) The Investor is, as of the date hereof, the
beneficial owner of _____ shares of the Company's Common Stock.
(i) The Investor agrees that he shall be bound by all
of the terms, conditions, duties and obligations of this Agreement
insofar as such matters affect the Company and/or the Investor.
13. Restricted Stock and Legend.
(a) The Investor acknowledges that the Shares offered
hereunder are being offered pursuant to a private placement
exemption under the 1933 Act, and that the Shares are deemed
"restricted securities" as defined in the 1933 Act. Until the
securities offered hereunder become registered with the
Securities and Exchange Commission, each certificate representing a share of
Common Stock shall bear a legend in substantially the following form:
THE SHARE(S) REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE
SECURITIES LAWS, AND THE COMPANY HAS RELIED UPON AN
EXEMPTION TO THE REGISTRATION REQUIREMENT UNDER THE
ACT FOR THE SALE OF THE SHARE(S) REPRESENTED BY
THIS CERTIFICATE TO ITS HOLDER. THEREFORE, THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE
RESTRICTED STOCK AND MAY NOT BE SOLD OR TRANSFERRED
TO ANY THIRD PARTY WITHOUT EITHER BEING REGISTERED
UNDER THE ACT OR AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
(b) Prior to any transfer or attempted transfer of any
of the Shares issued hereunder, or any interest therein, the
Investor shall give the Company written notice of his intention
to make such transfer, describing the manner of the intended
transfer and the proposed transferee. Promptly after receiving such
written notice, the Company shall present copies thereof to counsel for
the Company and to any special counsel designated by such Investor or
by such holder. If in the opinion of each of such counsel the
proposed transfer may be effected without registration of the
Shares under the applicable federal or state securities laws, as
promptly as practicable, the Company shall notify the Investor of
such opinions, whereupon the Shares proposed to be transferred
shall be transferred in accordance with the terms of said notice.
The Company shall not be required to effect any such transfer
prior to the receipt of such favorable opinion(s); provided, however,
the Company may waive the requirement that Investor obtain an opinion
of counsel, in its sole and absolute discretion. As a condition
to such favorable opinion, counsel for the Company may require an
investment letter to be executed by the proposed transferee.
14. No Assignment.
This Agreement is neither transferable nor assignable
by the Investor without the prior written consent of the Company.
15. General.
(a) This Agreement shall be binding upon the Investor
and the Company and their respective representatives, successors,
and permitted assigns;
(b) This Agreement shall be governed, construed and
enforced in accordance with the internal laws of the State of
Florida;
(c) all covenants, agreements, representations and
warranties made herein or otherwise made in writing by any party
pursuant hereto shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby;
(d) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument; and
(e) Notices required or permitted to be given
hereunder shall be in writing and shall be deemed to be sufficiently given
when personally delivered or when sent by registered mail, return
receipt requested, addressed (i) if to the Company, at nStor
Technologies, Inc., 100 Century Blvd., West Palm Beach, FL 33417,
attn: Mark Levy, and (ii) if to the Investor, at the address set
forth under its name below, or at such other address as each such
party furnishes by notice given in accordance with this
Section 5(e), and shall be effective, when personally delivered,
upon receipt, and when so sent by certified mail, four business
days after deposit with the United States Postal Service.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the 14th day of April, 1999.
nStor Technologies, Inc. Investor
a Delaware corporation
/s/ Mark Levy /s/ Bernard Marden
By:___________________________ __________________________
Mark Levy Bernard Marden
Its: Vice President
__________________________
Address
__________________________
Address
EXHIBIT 4.3
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: April 14, 1999 NO. __
WARRANT
nSTOR TECHNOLOGIES, INC.
Warrant to Purchase 250,000 Shares
of Common Stock, par value $.05 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON APRIL 13, 2002
The Company (as hereafter defined) has previously issued to
Holder (as hereafter defined) 500,000 shares of the Company's common
stock, par value $.05 per share (the "Common Stock"). As
additional consideration for the Holder's purchase of the Common
Stock, the Company desires to issue this Warrant (as hereafter
defined) in accordance with the terms and conditions set forth
herein.
This certifies that, for value received, Bernard Marden
("Marden"), or registered assigns (collectively with Marden, the "Holder"),
is entitled to purchase from nStor Technologies, Inc., a Delaware
corporation (the "Company"), Two Hundred Fifty Thousand (250,000)
fully paid and nonassessable shares (the "Shares") of the Common
Stock of the Company at a price of $2.00 per Share (the "Exercise
Price") at any time from and after April 14, 1999 to and
including 5:00 p.m. Eastern Standard Time on April 14, 2002 (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 the Holder may transfer this Warrant in
whole or in part (in minimum increments of 1,000 Shares) to a
corporation controlled by or under common control with the Holder, 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 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. 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 will at no time close its shareholder
books or records in any manner which interferes with the timely
exercise of this Warrant.
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. Piggy-Back Registration.
(a) In the event the Company shall, at any time prior to the
expiration of this Warrant, file a registration statement with
the Securities and Exchange Commission (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 by giving written
notice to the Company within twenty (20) days of the receipt of the
aforementioned written notice from the Company.
(b) Notwithstanding any other provision of this Warrant, the
Company's obligations under this Section 7 shall be subject to
and limited by the following terms and conditions:
(i) The obligations of the Company set forth under this
Section 7 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.
(ii) 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 or otherwise, in accordance with the amount of Common
Stock which each such person requested to be included in the
registration statement.
(c) 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, 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.
(1) 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.
(2) 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.
(3) 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 14 day of April, 1999.
ATTEST: nSTOR TECHNOLOGIES, INC.
By:/s/ Bernard Marden By: /s/ Mark F. Levy
Name: Name:
Title: Title:
ASSIGNMENT
To be executed by the registered holder to effect a permitted
transfer of the within Warrant. Capitalized terms have the same
meanings ascribed to them in the within Warrant.
FOR VALUE RECEIVED _______________________________________
("Assignor")
hereby sells, assigns and transfers unto
______________________________________
("Assignee")
(Name)
______________________________________
(Address)
______________________________________
the right to purchase __________ shares of Common Stock of nStor
Technologies, Inc. evidenced by the within Warrant, together with
all right, title and interest therein, and does irrevocably
constitute and appoint _____________________________ attorney to
transfer the said right on the books of said corporation with
full power of substitution in the premises.
In satisfaction of a condition to the effectiveness of this
assignment, Assignor hereby certifies that Assignee is a
corporation controlled by or under common control with Assignor.
Date: ______________________ Assignor:
By_________________________
Its_________________________
Signature: __________________
PURCHASE FORM
To be executed upon exercise of the within Warrant.
Capitalized terms have the same meanings ascribed to them in the within
Warrant.
TO: nStor Technologies, Inc.
The undersigned hereby exercises the right to purchase
_____________ Shares of Common Stock evidenced by the within
Warrant, according to the terms and conditions thereof, and
hereby makes payment of the Purchase Price. The undersigned requests
that certificates for the Shares shall be issued in the name set forth
below:
Dated: April 14, 1999
Name:_________________________________
______________________________________
(Address)
Social Security No. _________________
or other identifying number
