Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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nSTOR TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 95-2094565
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(State of Incorporation) (I.R.S. Employer Identification Number)
450 Technology Park, Lake Mary, FL 32746 - (407) 829-3500
(Address and Telephone Number of Registrant's
Principal Executive Offices)
Lawrence F. Steffann
450 Technology Park, Lake Mary, FL 32746 - (407) 829-3500
(Name, Address and Telephone Number of Agent for Service)
Copies of communications to:
Donn A. Beloff, Esq
Akerman, Senterfitt & Eidson, P.A.
450 East Las Olas Boulevard
Ft. Lauderdale, Florida 33301
(954) 463-2700
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.|_|
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Aggregate Aggregate Amount of
Title of Securities Amount to be Price Offering Registration
to be Registered Registered (1) Per Share Price Fee
- ----------------- -------------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common stock, par value $.05 per share (2) 100,000 $2.78(6) $ 278,000 $ 77.28
Common stock, par value $.05 per share (3) 1,761,799 $2.78(6) $ 4,897,801 $1,361.59
Common stock, par value $.05 per share (4) 500,000 $2.78(6) $ 1,390,000 $ 386.42
Common stock, par value $.05 per share (5) 10,084,999 $2.78(6) $28,036,297 $7,794.09
---------- ----------- ---------
Total 12,446,798 $34,602,098 $9,619.38
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</TABLE>
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(1) In the event of a stock split, stock dividend, or similar transaction
involving the common stock of the Company, the number of shares registered
hereby shall be automatically increased pursuant to Rule 416 to cover the
additional shares of common stock.
(2) Represents shares issuable upon exercise of outstanding nonqualified stock
options.
(3) Represents shares issuable upon exercise of outstanding warrants.
(4) Represents shares issued in a private transaction.
(5) Represents shares issuable upon the conversion of outstanding shares of the
Company's Series A, Series C, Series D, Series E and Series F convertible
preferred stock.
(6) Estimated solely for the purpose of calculating the registration fee under
Rule 457 based upon the average of the high and low prices reported on the
consolidated reporting system for the American Stock Exchange on June 30,
1999 of $2.78.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION
DATED JULY 2, 1999
PROSPECTUS
12,446,798 SHARES
nSTOR TECHNOLOGIES, INC.
COMMON STOCK
------------------------------
This Prospectus relates to an aggregate of up to 12,446,798 shares of
common stock of nStor Technologies, Inc. being offered for sale from time to
time by the selling stockholders named in this Prospectus as follows:
o up to 100,000 shares issuable upon the exercise of stock options
issued in connection with the acquisition of the assets of Parity
Systems, Inc.;
o up to 1,761,799 shares issuable upon the exercise of warrants issued
in connection with the issuance of shares of the Company's convertible
preferred stock, loans to the Company, the acquisition of the assets
of Parity Systems, Inc. and a Consulting Agreement;
o up to 500,000 shares of common stock of the Company issued in a
private transaction; and
o up to 10,084,999 shares issuable upon the conversion of shares of the
Company's Series A, Series C, Series D, Series E and Series F
convertible preferred stock.
If all of the warrants and options listed above are exercised, we would
receive $4,853,437. See "USE OF PROCEEDS." We are paying all expenses of
registration incurred in connection with this offering, but all brokerage
commissions, discounts and other expenses incurred by individual selling
stockholders will be borne by the individual selling stockholders. We will not
be entitled to any of the proceeds from sales by selling stockholders.
Our common stock is quoted on the American Stock Exchange under the symbol
"NSO". On June 30, 1999, the last reported sales price of the common stock on
the American Stock Exchange was $2.75 per share.
This investment involves a high degree of risk. See "Risk Factors"
beginning on Page 4.
We may amend or supplement this Prospectus from time to time by filing
amendments or supplements as required. You should read the entire Prospectus and
any amendments or supplements carefully before you make your investment
decision.
Our principal executive offices are located at 450 Technology Park, Lake
Mary, Florida 32746. Our telephone number is (407) 829-3500.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is ______, 1999
<PAGE>
Table of Contents
Page
----
WHERE YOU CAN FIND MORE INFORMATION......................................... 1
THE COMPANY................................................................. 2
THE OFFERING................................................................ 3
RISK FACTORS................................................................ 4
RECENT DEVELOPMENTS......................................................... 9
SELLING STOCKHOLDERS........................................................ 10
USE OF PROCEEDS............................................................. 12
DESCRIPTION OF SECURITIES................................................... 12
PLAN OF DISTRIBUTION........................................................ 13
LEGAL MATTERS............................................................... 14
EXPERTS ................................................................... 14
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act").
1. The Company's Annual Report filed on Form 10-K for the fiscal year ended
December 31, 1998, as amended by a Form 10-K/A filed on April 28, 1999;
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;
3. The Company's Current Report on Form 8-K filed on June 23, 1999, as amended
by a form 8-K/A filed on July 2, 1999; and
4. The description of the common stock contained in the Company's Registration
Statement filed on Form 8- A, as filed with the SEC on April 16, 1997,
pursuant to Section 12(b) of the Exchange Act.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Lawrence F. Steffann
nStor Technologies, Inc.
450 Technology Park
Lake Mary, Florida 32746
(407) 829-3500
You should rely only on information incorporated by reference or provided
in this Prospectus and any prospectus supplement. We have not authorized anyone
else to provide you with different information.
From time to time, information we provide or statements made by our
directors, officers or employees may constitute "forward-looking" statements
under the Private Securities Litigation Reform Act of 1995 and are subject to
numerous risks and uncertainties. Any statements made in this Prospectus,
including any statements incorporated herein by reference, that are not
statements of historical fact are forward-looking statements (including, but not
limited to, statements concerning the characteristics and growth of our market
and customers, our objectives and plans for future operations and products and
our liquidity and capital resources). Such forward-looking statements and other
forward-looking statements are based on a number of assumptions and involve a
number of risks and uncertainties, and, accordingly, actual results could differ
materially. Factors that may cause such differences include, but are not limited
to:
o the continued and future acceptance of our products;
o the rate of growth in the industries to which we market our products;
o the presence of competitors with greater technical, marketing and
financial resources;
o our ability to promptly and effectively respond to technological
change to meet evolving customer needs;
o capacity and supply constraints or difficulties; and
o our ability to successfully expand our operations.
For a further discussion of these and other significant factors to consider in
connection with forward-looking statements, see the discussion in this
Prospectus under the heading "RISK FACTORS."
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THE COMPANY
Since 1996, nStor Technologies, Inc. has been designing, manufacturing, and
marketing a full line of cross-platform storage solutions, including advanced
external RAID (Redundant Array of Independent Disks) subsystems (which we refer
to as our "RAID Business"), data storage products and tape backup solutions. The
Company was incorporated as a Delaware corporation in 1959.
In October 1992, we exchanged substantially all of the operating assets of
our previous business for securities issued by IMNET Systems, Inc. In 1996, we
sold those securities and in June 1996, through our wholly owned subsidiary,
nStor Corporation, Inc., acquired the RAID Business from Seagate Technologies,
Inc. In December 1996, nStor Corporation, Inc. acquired substantially all of the
assets and assumed certain liabilities of Parity Systems, Inc. The assets
acquired from Parity Systems are used in the design, manufacture and sale of
computer storage subsystems, memory devices and peripheral equipment, and the
integration of storage management solutions, digital media management, and
client/server systems for UNIX and Windows NT server environments. (UNIX and
Windows NT are computer operating systems.) On April 23, 1998, nStor
Corporation, Inc. acquired all of the outstanding common stock of Borg Adaptive
Technologies, Inc. Borg Adaptive Technologies is the developer of AdaptiveRAID,
a patented RAID technology.
On June 8, 1999, we acquired 76% of the outstanding common stock of
Andataco, Inc., a Massachusetts corporation. We currently intend to acquire the
remaining outstanding shares of Andataco by merging Andataco with and into a
wholly-owned subsidiary which we will create for that purpose and issuing new
shares of our common stock to the former Andataco shareholders. In the purchase
agreement with the selling stockholders of Andataco, we have agreed that, if we
acquire the remaining outstanding shares of Andataco, we will pay the greater of
the per share amount paid for the initial shares ($.283) or the fair market
value as determined by an independent valuation. Andataco designs, develops,
manufactures, markets and supports high performance, high availability
information storage solutions for the open system market in the Windows NT and
UNIX environments, including Sun Microsystems, Hewlett-Packard, Silicon Graphics
and NT-based computing systems.
On June 1, 1999, we had 77 full-time employees and Andataco had 141
full-time employees. nStor Corporation, Inc.'s operations are primarily
conducted, and its executive offices are located, at a facility in Lake Mary,
Florida 32746 (in the Orlando area). Its telephone number is (407) 829-3500.
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THE OFFERING
<TABLE>
<S> <C>
Common stock outstanding as of June 1, 1999 22,639,258 shares
Shares offered by selling stockholders: 12,446,798 shares
Shares issuable upon exercise of stock options 100,000 shares
Shares issuable upon exercise of warrants 1,761,799 shares
Shares issuable upon conversion of preferred stock 10,084,999 shares
Shares of common stock issued in private placement 500,000 shares
Risk Factors The shares involve a high degree of risk. Investors
should carefully consider the information set forth
under "RISK FACTORS."
Proceeds to Company if the warrants and stock options $4,853,437
are exercised in full
Use of Proceeds Working capital and general corporate purposes.
See "USE OF PROCEEDS."
Amex trading symbol NSO
- -----------------------------
</TABLE>
3
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus or incorporated
herein by reference, the following risk factors should be considered carefully
in evaluating the Company and its business before purchasing the shares offered
in this Prospectus.
We have experienced recent losses and may require additional financing to
satisfy our working capital needs
We have experienced net losses for the fiscal years ended December 31, 1997
($7,886,000), December 31, 1998 ($10,407,000) and for the fiscal quarter ended
March 31, 1999 ($2,471,000), respectively. We also expect to have a net loss for
the fiscal quarter ending June 30, 1999. At March 31, 1999, we had an
accumulated deficit of ($40,974,000) and we expect to have an accumulated
deficit as of June 30, 1999. There can be no assurance that we will be able to
achieve or maintain profitability on a quarterly or annual basis or that we will
be able to achieve revenue growth.
Andataco, Inc. has experienced net losses for the fiscal years ended
October 31, 1997 ($6,209,000), October 31, 1998 ($2,434,000) and for the fiscal
quarters ended January 31, 1999 ($697,000) and April 30, 1999 ($894,000),
respectively. Andataco also expects to have a net loss for the fiscal quarter
ending July 31, 1999. At April 30, 1999, Andataco had an accumulated deficit of
($9,634,000) and we expect Andataco to have an accumulated deficit as of July
31, 1999.
In late 1997, we determined that amounts available under our bank line of
credit would not be sufficient to satisfy our cash requirements and that, as a
result, additional debt and/or equity financing would be necessary. During the
period beginning in late 1997 and ending in June 1999, we have been able to
obtain approximately $22.3 million from private investors, including $10.0
million from the sale of convertible preferred stock, $6.8 million from
subordinated loans which will mature on September 5, 2000, $3.2 million from the
exercise of warrants and options to purchase 2,428,832 shares of common stock
and $2.3 million from the private sale of common stock. Although we believe
that, as a result of the receipt of these additional funds, amounts available
from our line of credit will be sufficient to satisfy our presently contemplated
working capital needs for the foreseeable future, there can be no assurance that
we may not require additional capital beyond our currently forecasted needs. In
addition, there can be no assurance that any such additional required capital
would be available on terms acceptable to us, if at all, at such time or times
as we might require such funds.
We have, from time to time, been unable to comply with the financial covenants
of our bank lines of credit
From time to time, we have been unable to comply with certain of the
financial covenants of our bank lines of credit and have requested that our
lenders forbear from exercising the remedies available to them under such
circumstances. In each such case, our banks agreed with our request. At April
30, 1999, Andataco was not in compliance with the financial covenant concerning
its minimum tangible net worth. Andataco's lender has notified Andataco that it
will waive its rights and remedies associated with that default, subject to
certain conditions. The bank and Andataco are currently negotiating the specific
conditions of the waiver. The outstanding balance of Andataco's line of credit
was $6.1 million as of June 30, 1999. In the event that Andataco is
unsuccessful in its negotiations with its lender, it would be required to seek
other sources of capital to satisfy its obligations under its line of credit.
There can be no assurance that any such additional required capital would be
available on terms acceptable to Andataco, if at all, at such time or times as
Andataco might require such funds. In such event, our business, financial
condition and results of operations could be materially and adversely affected.
We have a limited history of operating and integrating our acquired businesses
We have acquired all of our operating assets within the last three years.
The success of our recent business combinations will depend in large part on our
ability to consolidate our operations, integrate departments, systems and
procedures and obtain business efficiencies, economies of scale and related cost
savings. The significant management challenges presented by such consolidation
and integration may prevent the desired cost savings. There can be no assurance
that we will be able to successfully consolidate our business operations or
achieve returns that would justify
4
<PAGE>
our investment in our acquired businesses. This consolidation process will
require substantial time and attention on the part of our management. We may not
be able to successfully integrate the operations of these companies, if at all.
If we are unable to integrate or successfully manage the companies we have
acquired, our business, financial condition and results of operations could be
materially and adversely affected.
We may be unable to attract and retain qualified employees
Our ability to provide high-quality products on a timely basis requires
that we employ an adequate number of skilled engineers and technicians.
Accordingly, our ability to increase our productivity and profitability will be
limited by our ability to attract and retain skilled personnel. We, like many of
our competitors, are currently experiencing shortages of qualified personnel. We
cannot be certain that we will be able to maintain an adequate skilled labor
force necessary to operate efficiently and to support our growth strategy or
that our labor expenses will not increase as a result of a shortage in the
supply of skilled personnel.
Shares eligible for future sale by our current stockholders may adversely affect
our stock price
If our current stockholders sell substantial amounts of our common stock,
including shares issued upon the exercise of outstanding options and warrants or
the conversion of outstanding preferred stock, in the public market following
this offering, then the market price of our common stock could fall.
Restrictions under the securities laws and certain lock-up agreements limit the
number of shares of common stock available for sale in the public market. Except
as provided below, substantially all of the shares of the common stock
(22,639,258 shares as of the date of this Prospectus) are freely tradable
without restriction or further registration under the Securities Act, unless
such shares are held by our "affiliates" as that term is defined in Rule 144
under the Securities Act. Approximately 11,804,000 shares of common stock are
held by officers and directors and are deemed restricted securities within the
meaning of Rule 144. Restricted securities may be sold in the public market only
if they have been registered under the Securities Act or if their sales qualify
under Rule 144 or another available exemption from the registration requirements
of the Securities Act. All of the Shares offered for sale in this Prospectus
will be freely tradable if sold using this Prospectus. See "SELLING
STOCKHOLDERS."
We may be unable to develop new products or respond to technological changes
The markets for our products are characterized by rapidly changing
technology, evolving industry standards and relatively short product life
cycles. Our ability to compete successfully will depend on our ability to
enhance our existing products and introduce new products on a timely and
cost-effective basis. There can be no assurance that we will be successful in
introducing such new products or enhancements. Delays in product enhancements
and developments or the failure of our new products or enhancements to gain
market acceptance would have an adverse effect on our business and operating
results. In addition, there can be no assurance that new products or
technologies developed by others, or the emergence of new industry standards,
will not render our products or technologies noncompetitive or obsolete. Despite
testing, new products may be affected by quality, reliability or
interoperability problems, which could result in:
o returns;
o delays in collecting accounts receivable;
o unexpected service or warranty expenses;
o reduced orders; or
o a decline in our competitive position.
We may be unable to successfully compete with other companies in the industry
The market for our products is highly competitive. Our competitors may
offer systems at lower prices than we offer and we must compete on the basis of
product performance in specific applications. Some of these competitors have
greater financial, manufacturing and marketing resources than we have.
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<PAGE>
Our ability to compete successfully depends upon our ability to continue to
develop high performance products that obtain market acceptance and can be sold
at competitive prices. Although we believe that our products have certain
significant competitive advantages, there can be no assurance that we will be
able to compete successfully in the future or that other companies may not
develop products with better performance and thus reduce the demand for our
products. As more companies enter the markets in which we sell our products, we
may encounter increased price competition for such products which could
materially and adversely affect our operating results. Our original equipment
manufacturer customers and other manufacturers could develop their own disk
arrays or could integrate competitive RAID disk arrays into their systems rather
than purchasing our products, which could materially and adversely affect our
operating results.
We are a party to litigation which could adversely affect the Company
In June and August 1996, we and two of our directors were served with two
separate complaints filed in the Supreme Court of the State of New York, County
of Nassau, in which the plaintiffs claim to have had contractual and proprietary
interests in the prospect of a transaction to purchase certain net assets
acquired by nStor. The plaintiffs seek compensatory damages, punitive damages,
and equitable relief for alleged interference with the plaintiffs' alleged
rights and for alleged breach of contract. Our counsel believes that we have
good defenses to both claims and that we will not incur any material liability.
We are unaware of any facts that would support any of the plaintiffs' claims
and, accordingly, we believe that the claims are without merit. An unfavorable
outcome in such litigation could have an adverse effect on the Company.
We have no long-term purchase commitments from our customers
We have no long-term purchase commitments from our customers and customers
generally may cancel their orders on 30 days' notice. Accordingly, there can be
no assurance that orders from existing customers, including our principal
customers, will continue at their historical levels, or that we will be able to
obtain orders from new customers. In addition, there can be no assurance that
existing customers, including our principal customers, will not develop their
own storage solutions internally and as a result reduce or eliminate purchases.
Loss of one or more of our principal customers, or cancellation or rescheduling
of material orders already placed, could materially and adversely affect our
operating results.
We may not be able to successfully protect our patents and other intellectual
property rights, and may be subject to claims of infringement by others
We currently hold one patent and have one patent pending on our products.
In addition, we rely on a combination of trade secrets, copyrights and
trademarks and employee and third-party nondisclosure agreements to protect our
intellectual property rights. There can be no assurance that the steps taken to
protect our rights will be adequate to prevent misappropriation of our
technology or to preclude competitors from developing products with features
similar to our products. Furthermore, there can be no assurance that, in the
future, third parties will not assert infringement claims against us or with
respect to our products for which we have indemnification obligations to certain
of our customers. Asserting our rights or defending against third-party claims
could involve substantial expense, which we may not be able to afford and which
could have a material adverse effect on our operating results. In the event a
third party were successful in a claim that one of our products infringed the
third party's proprietary rights, we may have to pay substantial damages or
royalties, remove that product from the marketplace or expend substantial
amounts in order to modify the product so that it no longer infringes such
proprietary rights, any of which could have a material adverse effect on our
operating results.
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<PAGE>
The inability to obtain materials from suppliers could disrupt our business
We depend heavily on our suppliers to provide high quality materials on a
timely basis and at reasonable prices. Although many of the components for our
products are available from numerous sources at competitive prices, certain of
the components used in our products are presently available from a limited
number of suppliers or from a single supplier. Furthermore, because of increased
industry demand for many of those components, their manufacturers may, from time
to time, not be able to make delivery of orders on a timely basis. In addition,
manufacturers of components on which we rely may choose, for numerous reasons,
not to continue to make those components, or the next generation of those
components, available to us.
We have no long-term supply contracts. There can be no assurance that we
will be able to obtain, on a timely basis, all of the components we require. If
we cannot obtain essential components as required, we could be unable to meet
demand for our products, thereby materially adversely affecting our operating
results and allowing competitors to gain market share. In addition, scarcity of
such components could result in cost increases and adversely affect our
operating results.
The price of our common stock has been, and may continue to be, volatile
Our common stock has experienced in the past, and could experience in the
future, substantial price volatility as a result of a number of factors,
including:
o quarter to quarter variations in the actual or our anticipated
financial results;
o announcements by us, our competitors or our customers;
o government regulations; and
o developments in the industry.
In addition, the stock market has experienced extreme price and volume
fluctuations which have affected the market price of many technology companies
in particular and which have at times been unrelated to the operating
performance of the specific companies whose stock is traded. Broad market
fluctuations and general economic conditions may adversely affect the market
price of our common stock.
We may not have access to sufficient funding to support our operations
We have expended and will continue to be required to expend substantial
funds to continue research and development, and for other aspects of our
business. Although we believe that we have access to resources sufficient to
fund our operations for at least the next twelve months, we may need or elect to
raise additional capital. Our capital requirements will depend on many factors,
including:
o the problems, delays, expenses and complications frequently
encountered by technology companies;
o the progress of our research, development and product testing
programs;
o the success of our sales and marketing programs;
o costs in filing, prosecuting, defending and enforcing intellectual
property rights;
o the extent and terms of any collaborative research, manufacturing,
marketing or other arrangements; and
o changes in economic, regulatory or competitive conditions or our
planned business.
Estimates about the adequacy of funding for our activities are based on certain
assumptions, including the assumption that research, development and testing
relating to our products under development can be conducted at projected costs
and within projected time frames and that such products can be successfully
marketed.
To satisfy our capital requirements, we may seek to raise funds in the
public or private capital markets. Our ability to raise additional funds in the
public or private markets will be adversely affected if the results of our
ongoing or future research and development programs are not favorable. We may
seek additional funding through corporate collaborations and other financing
vehicles. There can be no assurance that any such funding will be available, or
7
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if available, that it will be available on acceptable terms. If adequate funds
are not available, we may be required to curtail our operations significantly,
or we may be required to obtain funds through arrangements with future
collaborative partners or others that may require us to relinquish rights to
some or all of our technologies or products under development. If we are
successful in obtaining additional financing, the terms of the financing may
have the effect of diluting or adversely affecting the holdings or the rights of
the holders of our common stock.
Future acquisitions could adversely affect our stock price or disrupt our
operations
We may pursue acquisitions of complementary technologies, product lines or
businesses. Future acquisitions could result in dilutive issuances of equity
securities and the incurrence of additional debt and amortization expenses
related to goodwill and intangible assets that could adversely affect our
operating results. In addition, gross margins of acquired products, necessary
product or technology development expenditures and other factors that may be
involved in any such acquired business could result in dilution to our earnings.
Acquisitions also may involve numerous other risks, including:
o difficulties in the assimilation of the operations and products of the
acquired business;
o dependence on new products and processes;
o the diversion of management's attention from other business concerns;
o risks of entering markets in which we have no or limited direct prior
experience; and
o the potential loss of key employees of the acquired business and
difficulties in attracting additional key employees necessary to
absorb added management responsibilities.
No assurance can be given as to the effect of any future acquisition on our
business or operating results.
The Year 2000 issue could disrupt our business
As many computer systems, software programs and other equipment with
embedded chips or processors (collectively, "Information Systems") use only two
digits rather than four to define the applicable year, they may be unable to
process accurately certain data, during or after the year 2000. As a result,
business and governmental entities are at risk for possible miscalculations or
systems failures causing disruptions in their business operations. This is
commonly known as the Year 2000 ("Y2K") issue. The Y2K issue concerns not only
Information Systems used solely within a company, but also concerns third
parties, such as customers, vendors and creditors, using Information Systems
that may interact with or affect a company's operations.
If needed remediations and conversions to the Information Systems are not
made on a timely basis by our materially-significant customers or vendors, we
could be affected by business disruption, operational problems, financial loss,
legal liability to third parties and similar risks, any of which could have a
material adverse effect on our operations, liquidity or financial condition.
Factors which could cause material differences in results, many of which are
outside of our control, include, but are not limited to, the accuracy of
representations by manufacturers of our Information Systems that their products
are Y2K compliant, the ability of their companies' customers and vendors to
identify and resolve their own Y2K issues, and our ability to respond to
unforeseen Y2K complications.
We have implemented a Y2K readiness program with the objective of having
all of our significant Information Systems functioning properly with respect to
Y2K before January 1, 2000. The first component of our readiness program was to
identify the internal Information Systems that are susceptible to system
failures or processing errors as a result of the Y2K issue. This effort is
substantially complete and no significant issues requiring remediation or
replacement have been identified.
As to the second component of the Y2K readiness program, we have identified
our significant customers, vendors and creditors that are believed, at this
time, to be critical to business operations subsequent to January 1, 2000.
Through the use of questionnaires, interviews and other available means, we have
ascertained that we have no significant exposure to Y2K problems at this time.
However, there can be no assurance that the representations made to us by third
parties are accurate or complete and there is a possibility that normal business
operations could be disrupted.
8
<PAGE>
The third component of our Y2K readiness program was the evaluation of our
existing products', and planned future products', Y2K functionality. All of the
date dependent software which we have developed has been validated as being Y2K
compliant using commercially acceptable methods, including: expanding year
fields to four digits; windowing; and date encoding techniques. Our other
products have been verified as Y2K compliant based on the absence of date
dependencies in hardware, software and firmware code.
The total cost of these Y2K compliance activities is not expected to exceed
$50,000. The costs and time necessary to complete the Y2K modification and
testing processes are based on our best estimates, which were derived utilizing
numerous assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no assurance that these estimates will be achieved and actual
results could differ from the estimates. Our Y2K readiness program is an ongoing
process and the estimates of costs and completion dates for various components
of the Y2K readiness program described above are subject to change.
Certain provisions of our certificate of incorporation and Delaware law could
make an acquisition of our company more difficult
Our Restated Certificate of Incorporation authorizes the issuance of
1,000,000 shares of preferred stock. Our Board of Directors has the power to
issue any or all of the shares of preferred stock, including the authority to
establish one or more classes or series and to fix the powers, preferences,
rights and limitations of such class or series, without seeking shareholder
approval. See "DESCRIPTION OF SECURITIES - Preferred Stock." Furthermore, as a
Delaware corporation, we are subject to Section 203 of the Delaware General
Corporation Law regarding "business combinations." This statutory provision and
the power to issue preferred stock may, in certain circumstances, deter or
discourage takeover attempts and other changes in control not approved by
management and the Board of Directors. As a result, our shareholders may lose
opportunities to dispose of their shares at the higher prices generally
available in takeover attempts or that may be available under a merger proposal.
In addition, the statutory provision and the existence of preferred stock may
have the effect of permitting our current management to retain its position and
place it in a better position to resist changes that shareholders may wish to
make if they are dissatisfied with the conduct of the business.
RECENT DEVELOPMENTS
In March 1999, we entered into a new Original Equipment Manufacturer
relationship to supply high-performance RAID storage enclosures to Silicon
Graphics, Inc., a major server manufacturer. We began shipping products under
Silicon Graphic's initial $5.8 million purchase order in May 1999. The initial
term of the arrangement is expected to be for three years. A discontinuation or
significant reduction of orders under that relationship could have a material
adverse effect on our business.
On June 8, 1999, we purchased 18,021,281 shares of the common stock of
Andataco, Inc., representing approximately 76% of the total issued and
outstanding capital stock of Andataco, from the Sykes Family Trust and the Sykes
Children's Trust of 1993 for $5.1 million. The purchase price was paid in the
form of two, 9.5% subordinated promissory notes. The principal balance of the
notes is due on June 17, 2004 and interest is payable monthly.
As part of the acquisition of Andataco, we also acquired from W. David
Sykes, the President of Andataco, a promissory note in the original principal
amount of $5,196,000 payable by Andataco to Sykes. The purchase price for the
promissory note was: $500,000 in cash, $150,000 of which had been paid prior to
the closing; 4,654 shares of our newly-issued Series F convertible preferred
stock which are convertible into an aggregate of 1,551,333 shares of our common
stock based on a conversion price of $3.00 per share; and three-year warrants to
purchase an additional 155,133 shares of our common stock for $3.30 per share.
Mr. Sykes has entered into a three year employment agreement with nStor
Corporation, Inc., our wholly- owned subsidiary, which will become effective
upon our acquisition of the remaining 24% of the outstanding shares of capital
stock of Andataco. In connection with that employment agreement, Mr. Sykes
received three-year options to purchase 1.1 million shares of our common stock
at $2.00 per share. Mr. Sykes will continue to serve as the President of
Andataco.
9
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of common stock by the selling stockholders.
<TABLE>
<CAPTION>
Percentage of
Shares of Shares of Shares of Common Stock
Common Stock Common Stock Common Stock Owned After the
Selling Stockholder Owned Offered Hereby Retained Offering
- ------------------- ------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
H. Irwin Levy(1) 7,568,099 3,615,000(2) 3,953,099 28.7%
Bernard Marden 3,973,025 2,116,666(3) 1,856,359 16.4%
Maurice Halperin 2,989,700 2,567,000(4) 422,700 11.9%
Herbert Gimelstob 2,131,133 1,566,666(5) 564,467 8.8%
W. David Sykes(6) 1,706,466 1,706,466(7) -- 7.0%
James P. Marden 276,750 100,000(8) 176,750 1.2%
Patrice Auld 276,750 100,000(8) 176,750 1.2%
Norbert D. Witt 172,157 172,157(9) -- (10)
Jack R. Faraone 108,509 108,509(11) -- (10)
Management Techniques, Inc. 75,000 75,000(12) -- (10)
Joseph E. Nance 34,181 34,181(11) -- (10)
Cecil H. Kaplinsky 29,839 29,839(11) -- (10)
Richard C. Bush 27,127 27,127(11) -- (10)
Michael N. Witt 25,498 25,498(11) -- (10)
Stephen R. Witt 25,498 25,498(11) -- (10)
Joanne M. Witt 25,498 25,498(11) -- (10)
Nicholas M. Scharf 25,005 25,005(11) -- (10)
Michael N. Witt, as Custodian 24,415 24,415(11) -- (10)
for Bryan M. Witt until age 25 under
C.U.T.M.A.
Warren Christensen 13,566 13,566(11) -- (10)
George D. McCready 13,566 13,566(11) -- (10)
John J. Dugan 13,566 13,566(11) -- (10)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Arthur H. Hale 13,566 13,566(11) -- (10)
Michael N. Witt, as Custodian 11,936 11,936(11) -- (10)
for Kyle Lawrence Witt until
age 25 under C.U.T.M.A.
Joanne M. Witt, as Custodian 10,307 10,307(11) -- (10)
for Tylar Marie Witt until age 25
under C.U.T.M.A.
Eugene A. Kruschke 8,136 8,136(11) -- (10)
David L. Williamson 8,136 8,136(11) -- (10)
John B. Miller 5,424 5,424(11) -- (10)
Phillip Shreffler 4,070 4,070(11) -- (10)
</TABLE>
- -----------
(1) Mr. Levy is the Chairman of our Board of Directors.
(2) Represents: 3,000,000 shares issuable upon conversion of shares of the
Company's Series C Convertible preferred stock; and 65,000 shares issuable
upon the exercise of currently exercisable (at $2.35 per share) warrants,
expiring October 1, 2000; both of which are owned of record by Mr. Levy.
Also includes: 500,000 shares issuable upon conversion of shares of the
Company's Series E Convertible preferred stock; and 50,000 shares issuable
upon the exercise of currently exercisable (at $3.30 per share) warrants,
expiring June 8, 2002; both of which are owned of record by Hilcoast
Development Corp., an affiliate of Mr. Levy.
(3) Represents: 500,000 shares sold to Mr. Marden in April 1999 in a private
placement transaction; 1,000,000 shares issuable upon conversion of shares
of the Company's Series D Convertible preferred stock; 333,333 shares
issuable upon conversion of the Company's Series E Convertible preferred
stock; 250,000 shares issuable upon the exercise of currently exercisable
(at $2.00 per share) warrants, expiring October 1, 2000; and 33,333 shares
issuable upon the exercise of currently exercisable (at $3.33 per share)
warrants, expiring June 8, 2002.
(4) Represents: 1,667,000 shares issuable upon conversion of shares of the
Company's Series A Convertible preferred stock; 700,000 shares issuable
upon conversion of shares of the Company's Series D Convertible preferred
stock; and 200,000 shares issuable upon the exercise of currently
exercisable (at $3.00 per share) warrants, expiring January 25, 2002.
(5) Represents: 1,000,000 shares issuable upon conversion of shares of the
Company's Series D Convertible preferred stock; 333,333 shares issuable
upon conversion of the Company's Series E Convertible preferred stock;
200,000 shares issuable upon the exercise of currently exercisable (at
$3.00 per share) warrants, expiring January 25, 2002; and 33,333 shares
issuable upon the exercise of currently exercisable (at $3.30 per share)
warrants, expiring June 8, 2002.
(6) Mr. Sykes is the President of Andataco and Vice President-Sales of the
Company.
(7) Represents: 1,551,333 shares issuable upon conversion of shares of the
Company's Series F Convertible preferred stock; and 155,133 shares issuable
upon the exercise of currently exercisable (at $3.30 per share) warrants,
expiring June 8, 2002.
(8) Represents shares issuable upon the exercise of currently exercisable
(at $3.00 per share) warrants, expiring January 25, 2002.
(9) Represents: 100,000 shares issuable upon the exercise of currently
exercisable (at $2.10 per share) stock options, expiring December 31, 1999;
and 72,157 shares issuable upon the exercise of currently exercisable
(at $2.10 per share) warrants, expiring December 30, 1999.
(10) Less than 1%.
(11) Represents shares issuable upon the exercise of currently exercisable
(at $2.10 per share) warrants, expiring December 30, 1999.
(12) Represents shares issuable upon the exercise of currently exercisable
(at $3.25 per share) warrants, expiring November 1, 1999.
11
<PAGE>
USE OF PROCEEDS
If all of the warrants and options are exercised, we will receive proceeds
in the amount of $4,853,437. Such proceeds will be used for working capital and
general corporate purposes. We will not receive any proceeds from the sale of
the Shares by the selling stockholders.
DESCRIPTION OF SECURITIES
The following description of our capital stock is not complete and is
subject in all respects to the Delaware General Corporation Law and to the
provisions of our Restated Certificate of Incorporation, as amended (the
"Charter"), and Bylaws.
Our authorized capital stock consists of 40,000,000 shares of common stock
having a par value of $.05 per share and 1,000,000 shares of preferred stock
having a par value of $.01 per share.
Preferred Stock
The Board of Directors is permitted to issue shares of preferred stock in
one or more series and to fix the relative rights, preferences and limitations
of each series. Among such rights, preferences and limitations are dividend
rates, provisions of redemption, rights upon liquidation, conversion privileges
and voting powers. Should the Board of Directors elect to exercise this
authority, the rights and privileges of holders of shares of common stock could
be made subject to the rights and privileges of any such series of preferred
stock. The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire, or discouraging a third party from
acquiring, a majority of our outstanding voting stock.
We have five series of preferred stock. The Series A preferred stock
accrues dividends at 8% per annum, payable quarterly, is convertible into shares
of the common stock based on a fixed conversion price of $0.60 per share,
commencing July 7, 1999, and has an automatic conversion feature in which each
share not converted as of July 7, 2000 shall automatically convert into shares
of the common stock. There are 1,666.67 shares of Series A preferred stock
issued and outstanding as of the date of this Prospectus.
The Series C preferred stock accrues dividends at 8% per annum, payable
quarterly, is convertible into shares of the common stock based on a fixed
conversion price of $1.00 per share, commencing July 7, 1999, and has an
automatic conversion feature in which each share not converted as of July 7,
2000 shall automatically convert into the common stock. There are 3,000 shares
of Series C preferred stock issued and outstanding as of the date of this
Prospectus.
The Series D preferred stock accrues dividends at 8% per annum, payable
quarterly, is convertible into shares of the common stock based on a fixed
conversion price of $1.00 per share, commencing April 27, 1999, and has an
automatic conversion feature in which any shares not converted into the common
stock as of October 28, 2001 shall automatically be so converted. There are
2,700 shares of Series D preferred stock issued and outstanding as of the date
of this Prospectus.
The Series E preferred stock accrues dividends at 8% per annum during the
first year after issuance, 9% per annum during the second year after issuance
and 10% per annum after the second anniversary of issuance, payable quarterly.
The Series E preferred stock is convertible into shares of the common stock
based on a fixed conversion price of $3.00 per share, commencing June 8, 1999.
There are 3,500 shares of Series E preferred stock issued and outstanding as of
the date of this Prospectus.
The Series F preferred stock accrues dividends at 8% per annum during the
first year after issuance, 9% per annum during the second year after issuance
and 10% per annum after the second anniversary of issuance, payable quarterly.
The Series F preferred stock is convertible into shares of the common stock
based on a fixed conversion
12
<PAGE>
price of $3.00 per share, commencing June 8, 1999. There are 4,654 shares of
Series F preferred stock issued and outstanding as of the date of this
Prospectus.
Warrants
The number of shares of common stock purchasable upon the exercise of
warrants is subject to adjustment in the event that we subdivide our outstanding
shares of common stock into a greater number of shares (including a stock split
effected as a stock dividend) or combine our outstanding shares of common stock
into a lesser number of shares. In addition, in the event of a capital
reorganization or reclassification of our capital stock, or our consolidation or
merger with another corporation, or sale of all or substantially all of our
assets, then the holders of the warrants have the right to purchase, in lieu of
common stock, such securities or assets as may be issued with respect to or in
exchange for a number of outstanding shares of common stock equal to the number
of shares of common stock which could be purchased upon the exercise of the
warrants immediately prior to any such transaction.
PLAN OF DISTRIBUTION
Shares
We will issue shares of common stock, from time to time, upon the exercise
of warrants or stock options, or the conversion of the preferred stock, by the
holders thereof. We will receive from the warrant and option holders the
exercise price of the warrants or stock options, respectively, upon such
exercise. See "DESCRIPTION OF SECURITIES - Warrants."
We are registering this offering of shares on behalf of the selling
stockholders, and we will pay all costs, expenses and fees related to such
registration, including all registration and filing fees, printing expenses,
fees and disbursements of our counsel, blue sky fees and expenses and the
expenses of any special audits or "cold comfort" letters. The selling
stockholders will pay all selling expenses, including all underwriting discounts
and selling commissions, all fees and disbursements of their counsel and all
"road show" and other marketing expenses we incur or any marketing expenses
incurred by underwriters which are not otherwise paid by such underwriters.
The selling stockholders may sell their shares from time to time in one or
more transactions on AMEX or in private, negotiated transactions. The selling
stockholders will determine the prices at which they sell those shares. Such
transactions may or may not involve brokers or dealers.
If the selling stockholders use a broker-dealer to complete their sale of
the shares, such broker-dealer may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders or from you,
as purchaser (which compensation might exceed customary commissions).
We have agreed to indemnify the selling stockholders, and the selling
stockholders have agreed to indemnify us, against certain liabilities arising
under the Securities Act of 1933. The selling stockholders may indemnify any
agent, dealer or broker-dealer that participates in sales of shares against
similar liabilities.
Lock-Up Agreements
In connection with the issuance of our Series F preferred stock in the
Andataco transaction, each of the holders of our Series A, C, D and E preferred
stock (Messrs. Levy, Gimelstob, Halperin and Marden and Hilcoast Development
Corp.) agreed not to sell any shares of common stock issuable upon conversion of
the Series A, C, D or E preferred stock until the earlier to occur of:
o the six month anniversary of the date of effectiveness of the
registration statement which includes this prospectus;
o the sale by the initial holders of the Series F preferred stock of all
of such shares and any shares of common stock into which any such
shares of Series F preferred stock may have been converted; or
13
<PAGE>
o our completion of an underwritten public offering of securities by the
Company which includes the shares of common stock into which the
shares of Series F preferred stock have been converted.
LEGAL MATTERS
The validity of the issuance of the shares being offered hereby will be
passed upon for us by Akerman, Senterfitt & Eidson, P.A., Ft. Lauderdale,
Florida 33301.
EXPERTS
Our financial statements incorporated by reference in this Prospectus have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their report incorporated herein by
reference, and are incorporated herein in reliance upon such report given upon
the authority of said firm as experts in auditing and accounting.
The financial statements of Andataco, Inc. incorporated in this Prospectus
by reference to nStor Technologies, Inc.'s Form 8-K filed June 23, 1999 have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants given on the authority of said firm as experts in
auditing and accounting.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee $ 9,619.38
Amex listing fee 17,500
Legal fees and expenses 15,000
Accountants' fees 10,000
Miscellaneous 3,000
----------
Total $55,119,38
==========
Item 15. Indemnification of Directors and Officers.
The Company, a Delaware corporation, has included in its Certificate of
Incorporation and Bylaws provisions to (i) eliminate the personal liability of
its directors for monetary damages resulting from breaches of their fiduciary
duty, provided that such provision does not eliminate liability for breaches of
the duty of loyalty, acts or omissions not in good faith or which involves
intentional misconduct or a knowing violation of law, violations under Section
174 of the Delaware General Corporation Law or for any transaction from which
the director derived an improper personal benefit and (ii) indemnify its
directors and officers to the fullest extent permitted by the Delaware
corporation law. The Company believes that these provisions are necessary to
attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company, the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 16. Exhibits.
The exhibits filed as part of this Registration Statement are as follows:
Exhibit
Number Description
------- -----------
2.1 Purchase Agreement, dated as of March 2, 1999, by and among
the Registrant, W. David Sykes and the Sykes Children's
Trust of 1993 dated November 22, 1993(1)
2.2 Amendment No. 1 to Purchase Agreement, dated as of April 26,
1999, by and among the Registrant, W. David Sykes, the Sykes
Family Trust and the Sykes Children's Trust of 1993 dated
November 22, 1993(1)
2.3 Amendment No. 2 to Purchase Agreement, dated as of June 8,
1999, by and among the Registrant, W. David Sykes, the Sykes
Family Trust and the Sykes Children's Trust of 1993 dated
November 22, 1993(1)
4.1 Restated Certificate of Incorporation, as amended, of the
Registrant(2)
4.2 Restated Bylaws of the Registrant(3)
4.3 Nonqualified Stock Option Agreement, dated as of March 26,
1999, between the Registrant and Norbert D. Witt
II-1
<PAGE>
4.4 Form of Warrant
4.5 Certificate of Designation of Series A Convertible Preferred
Stock of the Registrant(4)
4.6 Certificate of Designation of Series C Convertible Preferred
Stock of the Registrant(4)
4.7 Certificate of Designation of Series D Convertible Preferred
Stock of the Registrant(4)
4.8 Certificate of Designation of Series E Convertible Preferred
Stock of the Registrant(1)
4.9 Certificate of Designation of Series F Convertible Preferred
Stock of the Registrant(1)
4.10 Form of Registration Rights Agreement for Convertible
Preferred Stock of the Registrant(1)
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
23.1 Consent of BDO Seidman, LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Akerman, Senterfitt & Eidson, P.A. (included in
opinion filed as Exhibit 5.1)
24.1 Power of Attorney
- ------------
(1) Incorporated by reference to the Registrant's Form 8-K dated June 8, 1999.
(2) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1998.
(3) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended October 31, 1996.
(4) Incorporated by reference to the Registrant's Form 10-Q for the fiscal
quarter ended September 30, 1998.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof), which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934, as amended, that are incorporated by reference in the
Registration Statement.
II-2
<PAGE>
2. That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
4. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, as
amended, each filing of the Registrant's Annual Report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934, as amended, that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
5. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted
to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
nStor Technologies, Inc., certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of West Palm Beach, State of Florida, on
the 30th day of June, 1999.
nSTOR TECHNOLOGIES, INC.
By: /s/ Mark F. Levy
----------------------------
Mark F. Levy, Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mark F. Levy and Lawrence F. Steffann and each of
them, his true and lawful attorney-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities set forth below.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ H. Irwin Levy Chairman of the Board June 30, 1999
- ------------------------
H. Irwin Levy
/s/ Lawrence F. Steffann President (Principal Executive June 30, 1999
- ------------------------ Officer) and Director
Lawrence F. Steffann
/s/ Jack Jaiven Treasurer (Principal Financial and June 30, 1999
- ------------------------ Accounting Officer)
Jack Jaiven
/s/ Mark F. Levy Vice President and Director June 30, 1999
- ------------------------
Mark F. Levy
Vice President and Director _______, 1999
- ------------------------
Michael L. Wise
/s/ Bernard R. Green Director June 30, 1999
- ------------------------
Bernard R. Green
Director _______, 1999
- ------------------------
James E. McGrath
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
-------- -----------
2.1 Purchase Agreement, dated as of March 2, 1999, by and among
the Registrant, W. David Sykes and the Sykes Children's
Trust of 1993 dated November 22, 1993(1)
2.2 Amendment No. 1 to Purchase Agreement, dated as of April 26,
1999, by and among the Registrant, W. David Sykes, the Sykes
Family Trust and the Sykes Children's Trust of 1993 dated
November 22, 1993(1)
2.3 Amendment No. 2 to Purchase Agreement, dated as of June 8,
1999, by and among the Registrant, W. David Sykes, the Sykes
Family Trust and the Sykes Children's Trust of 1993 dated
November 22, 1993(1)
4.1 Restated Certificate of Incorporation, as amended, of the
Registrant(2)
4.2 Restated Bylaws of the Registrant(3)
4.3 Nonqualified Stock Option Agreement, dated as of March 26,
1999, between the Registrant and Norbert D. Witt
4.4 Form of Warrant
4.5 Certificate of Designation of Series A Convertible Preferred
Stock of the Registrant(4)
4.6 Certificate of Designation of Series C Convertible Preferred
Stock of the Registrant(4)
4.7 Certificate of Designation of Series D Convertible Preferred
Stock of the Registrant(4)
4.8 Certificate of Designation of Series E Convertible Preferred
Stock of the Registrant(1)
4.9 Certificate of Designation of Series F Convertible Preferred
Stock of the Registrant(1)
4.10 Form of Registration Rights Agreement for Convertible
Preferred Stock of the Registrant(1)
5.1 Opinion of Akerman, Senterfitt & Eidson, P.A.
23.1 Consent of BDO Seidman, LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Akerman, Senterfitt & Eidson, P.A. (included in
opinion filed as Exhibit 5.1)
24.1 Power of Attorney
- ------------
(1) Incorporated by reference to the Registrant's Form 8-K dated June 8, 1999.
(2) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1998.
(3) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1997.
(4) Incorporated by reference to the Registrant's Form 10-Q for the fiscal
quarter ended September 30, 1998.
NSTOR TECHNOLOGIES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement"), effective as of March
26, 1999, is made by and between nStor Technologies, Inc., a Delaware
corporation (the "Company"), and Norbert D. Witt (the "Recipient").
In consideration of the mutual covenants herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Grant of Option. The Company grants to the Recipient an option to
purchase 100,000 shares of the Company's common stock in accordance with the
terms and conditions of this Agreement (the "Option").
2. Option Price. The purchase price of the shares of stock covered by
the Option shall be $2.10 per share.
3. Adjustments in Option. In the event that the outstanding shares of
stock subject to the Option are changed into or exchanged for a different number
or kind of shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock split, stock
dividend or combination of shares, the shares subject to the Option and the
price per share shall be equitably adjusted to reflect such changes. Such
adjustment in the Option shall be made without change in the total price
applicable to the unexercised portion of the Option (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices)
and with any necessary corresponding adjustment in the Option price per share.
Any such adjustment made by the Company shall be final and binding upon the
Recipient, the Company and all other interested persons.
4. Manner of Exercise. The Option, or any portion thereof, may be
exercised only in accordance with the terms of this Agreement and solely by
delivery to the Secretary of the Company of all of the following items prior to
the time when the Option or such portion becomes unexercisable under the terms
of this Agreement:
(a) Notice in writing signed by the Recipient or the other
person then entitled to exercise the Option or portion thereof, stating
that the Option or portion thereof is thereby exercised, such notice
complying with all applicable rules (if any) established by the
Company;
(b) Full payment (in cash or by cashiers' or certified check)
for the shares with respect to which the Option or portion thereof is
exercised;
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(c) Full payment (in cash or by cashiers' or certified check)
upon demand of an amount sufficient to satisfy any federal (including
FICA and FUTA amounts), state, and/or local withholding tax
requirements at the time the Recipient or his beneficiary recognizes
income for federal, state, and/or local tax purposes as the result of
the receipt of Shares pursuant to the exercise of the Option or portion
thereof;
(d) Unless a registration statement is filed with the
Securities and Exchange Commission and is effective with respect to the
shares underlying the Option, a bona fide written representation and
agreement, in a form satisfactory to the Company, signed by the
Recipient or other person then entitled to exercise the Option or
portion thereof, stating that the shares of stock are being acquired
for his own account, for investment and without any present intention
of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act of 1933, as amended (the "Act"),
and then applicable rules and regulations thereunder, and that the
Recipient or other person then entitled to exercise such Option or
portion will indemnify the Company against and hold it free and
harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The
Company may, in its absolute discretion, take whatever additional
actions it deems appropriate to ensure the observance and performance
of such representations and agreement and to effect compliance with all
federal and state securities laws or regulations. Without limiting the
generality of the foregoing, the Company may require an opinion of
counsel acceptable to it to the effect that any subsequent transfer of
shares acquired on an Option exercise does not violate the Act and may
issue stop-transfer orders covering such shares.
(e) In the event the Option or any portion thereof shall be
exercised by any person or persons other than the Recipient,
appropriate proof, satisfactory to the Company, of the right of such
person or persons to exercise the Option.
5. Conditions to Issuance of Stock Certificates. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have
been reacquired by the Company. Such shares shall be fully paid and
nonassessable.
6. Rights of Shareholders. The Recipient shall not be, nor have any of
the rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
the Recipient.
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7. Vesting and Exercisability. The Recipient's interest in the Option
shall vest and shall be exercisable as of the date hereof.
8. Duration of Option. The Option shall expire on December 31, 1999.
9. Transfer of Option. Except as otherwise provided in this Section 9,
neither the Option nor any interest or right therein or part thereof shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition is voluntary
or involuntary or by operation of law, by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy)
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that this Section 9 shall not prevent transfers by will or by
the applicable laws of descent and distribution. In the event of the Recipient's
death, the Option shall be exercisable by the executor or administrator of the
Recipient's estate or by the person or persons to whom the Recipient's rights
under the Option shall pass by the Recipient's will or the applicable laws of
descent and distribution.
10. Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary and
any notice to be given to the Recipient shall be addressed to him at the address
given beneath his signature below. By a notice given pursuant to this Section
10, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Recipient shall,
if the Recipient is then deceased, be given to the Recipient's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 10. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope
addressed as aforesaid, deposited (with postage prepaid) in a United States
postal receptacle.
11. Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.
12. Modifications. Any modifications or amendment of any provision of
this Agreement must be in writing and bear the signature of the duly authorized
representatives of both parties.
13. Applicable Law. The validity of this Agreement and the rights,
obligations and relations of the parties hereunder shall be construed and
determined under and in accordance with the laws of the State of Florida therein
as applied to contracts to be performed in Florida between Florida residents.
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14. Entire Agreement. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and merges all prior discussions between them and supersedes and
replaces any and every other agreement or understanding which may have existed
between the parties to the extent that any such agreements or understanding
relates to any stock options issued or to be issued to the Recipient.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties as of the date first written above.
NSTOR
TECHNOLOGIES, INC.
By/s/ Mark Levy
------------------
Mark Levy
Vice President
Optionee:
/s/Norbert D. Witt
------------------
Norbert D. Witt
4
THE SECURITIES 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 SECURITIES
REPRESENTED BY THIS CERTIFICATE TO ITS HOLDER. THEREFORE, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES AND MAY NOT BE SOLD OR
TRANSFERRED TO ANY THIRD PARTY WITHOUT EITHER BEING REGISTERED UNDER THE ACT OR
UPON RECEIPT OF AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT.
DATED: __________, 199__ NO. __
WARRANT
nSTOR TECHNOLOGIES, INC.
Warrant to Purchase ___________ Shares
of Common Stock, par value $.05 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON ________, ____
This certifies that, for value received, _________________
("__________"), or registered assigns (collectively with _____________, the
"Holder"), is entitled to purchase from nStor Technologies, Inc., a Delaware
corporation (the "Company"), ______________________________ (__________) fully
paid and nonassessable shares (the "Shares") of the Common Stock, par value $.05
per share, of the Company ("Common Stock") at a price of $_____ per Share (the
"Exercise Price") at any time from and after _______, 199__ to and including
5:00 p.m. Eastern Standard Time on ________, ____ (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
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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 canceled.
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.
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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
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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 8 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.
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(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).
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(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. Survival. The various rights and obligations of the Holder and of
the Company as set forth in Sections 3, 4, and 5 hereof shall survive the
exercise of this Warrant and the surrender of this instrument upon such
exercise.
8. 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.
9. 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.
10. 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
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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 ____ day of ________, 199__.
ATTEST: nSTOR TECHNOLOGIES, INC.
By: By:
Name: Name:
Title: Title:
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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:_________________
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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: Name:_______________________________
_______________________________
(Address)
_______________________________
Social Security No.____________
or other identifying number
9
EXHIBIT 5.1
AKERMAN, SENTERFITT & EIDSON, P.A.
450 East Las Olas Boulevard
Fort Lauderdale, Florida 33301
July 2, 1999
nStor Technologies, Inc.
450 Technology Park
Lake Mary, Florida 32746
Re: Registration Statement on Form S-3
Gentlemen:
You have requested our opinion in connection with the above-referenced
registration statement, (the "Registration Statement"), under which certain
shareholders (the "Selling Shareholders") intend to offer and sell in a public
offering, from time to time, an aggregate of 12,446,798 shares of the common
stock, $.05 par value per share (the "Shares"), of nStor Technologies, Inc. (the
"Company"), consisting of: (i) up to 100,000 shares issuable upon the exercise
of stock options (the "Options") issued in connection with the acquisition of
the assets of Parity Systems, Inc. (the "Option Shares"); (ii) up to 1,761,799
shares issuable upon the exercise of warrants (the "Warrants") issued in
connection with the issuance of shares of the Company's convertible preferred
stock, loans to the Company, the acquisition of the assets of Parity Systems,
Inc. and a Consulting Agreement (the "Warrant Shares"); (iii) up to 500,000
shares of common stock of the Company issued in a private transaction (the
"Restricted Shares"); and (iv) up to 10,084,999 shares issuable upon the
conversion (the "Conversion Shares") of shares of the Company's Series A, Series
C, Series D, Series E and Series F convertible preferred stock (the Warrant
Shares, the Restricted Shares and the Conversion Shares are sometimes
collectively referred to as the "Shares").
We have reviewed copies of the Articles of Incorporation and Bylaws of the
Company, and have examined such corporate documents and records and other
certificates, and have made such investigations of law, as we have deemed
necessary in order to render the opinion hereinafter set forth.
Based upon and subject to the foregoing, we render the following opinions:
The Warrant Shares, the Option Shares, the Restricted Shares and the
Conversion Shares are duly authorized. The Warrant Shares, the Option
Shares and the Conversion Shares, when issued in accordance with the terms
of the Warrants, the Options and the convertible preferred stock,
respectively, against payment of the exercise price therefor (as
applicable), will be, assuming no change in the applicable law or pertinent
facts, validly issued, fully paid and nonassessable. The Restricted Shares
are validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the caption "Legal Matters"
in the Registration Statement and to the use of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not hereby admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
Akerman, Senterfitt & Eidson, P.A.
/s/ Akerman, Senterfitt & Eidson, P.A.
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
nStor Technologies, Inc.
Lake Mary, Florida
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 5,
1999 (except for Note 15, which is as of April 15, 1999) relating to the
consolidated financial statements of nStor Technologies, Inc. and subsidiaries
appearing in the Company's Annual Report on Form 10-K and 10-K/A for the year
ended December 31, 1998.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Orlando, Florida
July 1, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
nStor Technologies, Inc.
Lake Mary, Florida
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of nStor Technologies, Inc. of our report dated January
13, 1999 relating to the financial statements of Andataco, Inc. for the year
ended October 31, 1998, which appears in nStor Technologies, Inc.'s Form 8-K
filed June 23, 1999. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Diego, California
July 2, 1999
