EXHIBIT 10.7
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF OCTOBER 31, 1996
nSTOR TECHNOLOGIES, INC.,
nSTOR CORPORATION, INC.
AND R. XXXXXX XXXXX
AGREEMENT AND PLAN OF REORGANIZATION
Table of Contents
1. Plan of Reorganization
2. Exchange of Shares
3. Closing
4. Delivery of Shares
5. Representations, Warranties and Covenants of Xxxxx
6. Representations, Warranties and Covenants of nStor
7. Survival of Representations and Warranties
8. Indemnification
9. Conditions to Obligations of nStor
10. Conditions to Obligations of Xxxxx
11. Termination
12. Notices
13. No Broker
14. Enforcement Costs
15. Miscellaneous
a. Characterization of the Transaction
b. Expenses
c. Captions
d. No Waiver
e. Successors and Assigns
f. Exclusive Agreement; Amendment
g. Counterparts
h. Governing Law
i. Gender and Number
j. Further Assurances
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement" or
"Plan of Reorganization"), dated as of October 31, 1996, by and
among nSTOR TECHNOLOGIES, INC., a Delaware corporation ("nSTOR"),
nSTOR CORPORATION, INC., a Delaware corporation (the "Company")
and R. XXXXXX XXXXX ("Xxxxx"), an individual residing in the
State of Florida.
WITNESSETH:
WHEREAS, nSTOR owns an aggregate of one thousand two hundred
(1,200) shares of the common stock, par value $.05 per share of
the Company (the "Common Stock"), constituting eighty percent
(80%) of the issued and outstanding shares of Common Stock, and
Xxxxx owns an aggregate of three hundred (300) shares of Common
Stock (the "Xxxxx Shares"), constituting twenty percent (20%) of
the issued and outstanding shares of Common Stock, said shares
constituting all of the shares of Common Stock which are issued
and outstanding as of the date hereof; and
WHEREAS, Xxxxx desires to exchange the Xxxxx Shares for one
million shares of the voting common stock, par value $.05 per
share of nStor (the "nStor Shares"), upon the terms and
conditions hereinafter set forth; and
WHEREAS, the Board of Directors of nStor and the Company
deem it advisable and in the best interests of such corporations
that the exchange described above be completed on the terms and
conditions hereinafter set forth and in accordance with all
applicable laws.
NOW, THEREFORE, in consideration of these premises and of
the mutual promises of the parties hereto, the parties hereto
agree as follows:
1. Plan of Reorganization. It is the intention of the
parties hereto that pursuant to this Plan of Reorganization, the
Xxxxx Shares shall be acquired by nStor in exchange solely for
the nStor Shares so as to qualify as a tax-free reorganization as
defined in section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code").
2. Exchange of Shares. Subject to the terms and
conditions contained in this Agreement and in reliance upon the
representations, warranties and covenants of the parties hereto,
and pursuant to the requirements of section 368(a)(1)(B) of the
Code and the regulations promulgated thereunder, on the Closing
Date (as hereinafter defined) nStor shall issue and deliver to
Xxxxx the nStor Shares in exchange for the sale, transfer and
delivery by Xxxxx to nStor of the Xxxxx Shares. Immediately
after the exchange, nStor shall have "control" of the Company (as
defined in section 368(c) of the Code).
3. Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the executive offices of nStor at 10:00 a.m. on December __,
1996, or at such other place, date and time as nStor and Xxxxx
may mutually agree upon in writing (the "Closing Date").
4. Delivery of Shares. At the Closing:
(a) Xxxxx shall deliver to nStor duly issued
certificate(s) representing the Xxxxx Shares, duly endorsed for
transfer or accompanied by duly endorsed stock powers, as nStor
shall designate, together with any required documentary stamps
affixed and cancelled at the expense of Xxxxx.
(b) nStor shall issue and deliver to Xxxxx a duly
issued certificate representing the nStor Shares. Except for the
nStor Shares to be delivered to Xxxxx pursuant to this Section 4,
Xxxxx shall not receive any other consideration of any type or
kind in exchange for the Xxxxx Shares, including, without
limitation, the payment of cash, the issuance of options, or the
assumption of any personal liabilities of Xxxxx by nStor.
5. Representations, Warranties and Covenants of Xxxxx.
Xxxxx represents and warrants to, and covenants with nStor as
follows:
x. Xxxxx is the sole lawful owner of record and
beneficially, of the Xxxxx Shares, free and clear of all security
interests, liens, pledges, encumbrances, charges, options, rights
of first refusal, mortgages, indentures, assessments,
restrictions and claims of every type or kind (collectively
"Encumbrances"). The Xxxxx Shares are not subject to any
restrictions on transfer of any kind. To the best knowledge of
Xxxxx, upon the consummation of the transactions contemplated by
this Plan of Reorganization, nStor will be the sole owner of
record and beneficially, of all of the issued and outstanding
shares of the capital stock of the Company, free and clear of all
Encumbrances.
x. Xxxxx has the full right, power and authority to
enter into and to perform this Agreement and all other
agreements, certificates and documents executed or delivered, or
to be executed or delivered by Xxxxx in connection herewith.
Xxxxx has the full right, power and authority to sell, assign,
transfer and deliver the Shares as provided in this Agreement,
and such delivery will convey to nStor lawful, valid and
marketable title to the Xxxxx Shares, free and clear of all
Encumbrances. This Agreement has been duly authorized, executed
and delivered by Xxxxx, and is a legal, valid and binding
obligation of Xxxxx, enforceable in accordance with its terms,
subject to bankruptcy, reorganization, insolvency and other laws
affecting the enforcement of creditors' rights generally.
c. Except as set forth on Schedule 5(c), there is no
action, suit, claim, inquiry, proceeding, or investigation by or
before any court or governmental body pending or, to the best
knowledge of Xxxxx, threatened against or involving Xxxxx or the
Company, nor is there any valid basis for any such action,
proceeding or investigation. Neither Xxxxx, nor to the best
knowledge of Xxxxx the Company, is in default under, or in
violation of, any agreement, commitment or restriction to which
Xxxxx or the Company is a party or by which Xxxxx or the Company
or any of their respective properties or assets is bound.
d. Neither the execution and the delivery of this
Agreement, nor the consummation by Xxxxx or, to the best
knowledge of Xxxxx, the Company of the transactions contemplated
hereby, nor compliance with any of the provisions hereof will (i)
violate any statute, law, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority or
(ii) violate, be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) under any agreement or commitment to which
Xxxxx or the Company is a party, or result in the termination of,
or accelerate the performance by any person of any of its
obligations thereunder, or cause the acceleration of the maturity
of any debt or obligation pursuant to, or result in the creation
or imposition of any Encumbrance upon any of their respective
properties or assets under any agreement or commitment to which
the Company or Xxxxx is a party or by which any of their
respective properties or assets is bound. All consents of any
person or entity necessary for the execution, delivery and
performance of this Agreement by Xxxxx or, to the best knowledge
of Xxxxx, the Company have been obtained.
x. Xxxxx understands and represents that: (i) Xxxxx
must bear the economic risk of an investment in the nStor Shares
for an indefinite period of time because the nStor Shares have
not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), or under any state securities laws and,
therefore, cannot be resold unless they are subsequently
registered under the 1933 Act and the pertinent state securities
laws or unless an exemption from such registration is available;
(ii) Xxxxx is purchasing the nStor Shares for investment for the
account of Xxxxx, not for the accountant of any other person, and
not with any present view toward resale or other "distribution"
thereof within the meaning of the 1933 Act; and (iii) Xxxxx
agrees not to resell or otherwise dispose of all or any part of
the nStor Shares, except as permitted by law, including, without
limitation, any and all applicable provisions of this Agreement
and any regulations under the 1933 Act.
x. Xxxxx is aware that an investment in the nStor
Shares is highly speculative and subject to substantial risks.
Xxxxx is capable of bearing the high degree of economic risk and
burdens of this investment, including the possibility of a
complete loss of his investment and the lack of a public market
and limited transferability of the nStor Shares, which may make
the liquidation of this investment impossible for an indefinite
period of time. The financial condition of Xxxxx is such that he
is under no present or contemplated future need to dispose of any
of the Xxxxx Shares to satisfy any existing or contemplated
undertaking, need or indebtedness. Xxxxx has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the nStor
Shares. Xxxxx has obtained, in his judgment, sufficient
information to evaluate the merits and risks of his receipt of
the nStor Shares and understands the business in which nStor is
engaged. Xxxxx has been advised that he should obtain
professional accounting, tax, legal and financial advice with
respect to the economic, tax and legal ramifications of the
transactions contemplated in this Agreement.
x. Xxxxx acknowledges that the nStor Shares purchased
pursuant to this Agreement are deemed "restricted securities" as
defined in the 1933 Act. Until the nStor Shares become
registered with the Securities and Exchange Commission, each
certificate representing the nStor Shares shall bear a legend in
substantially the following form:
THE SHARE(S) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND THE COMPANY
HAS RELIED UPON AN EXEMPTION TO THE REGISTRATION REQUIREMENT
UNDER THE ACT FOR THE SALE OF THE SHARES(S) REPRESENTED BY
THIS CERTIFICATE TO ITS HOLDER. THEREFORE, THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED STOCK AND MAY
NOT BE SOLD OR TRANSFERRED TO ANY THIRD PARTY WITHOUT EITHER
BEING REGISTERED UNDER THE ACT OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
x. Xxxxx shall file all applications, reports,
notices and related documents with applicable regulatory
authorities necessary to consummate this Plan of Reorganization
and the transactions contemplated hereunder as determined by
nStor in its sole discretion.
6. Representations, Warranties and Covenants of nStor.
nStor represents and warrants to, and covenants with Xxxxx as
follows:
a. nStor is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and has full corporate power and authority to execute
and deliver this agreement and to perform its obligations
hereunder. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate
action on the part of nStor. This Agreement constitutes a valid
and binding obligation of nStor and is enforceable against it in
accordance with its terms, subject to bankruptcy, reorganization,
insolvency, and other laws affecting the enforcement of
creditors' rights generally.
b. Neither the execution and delivery of this
Agreement nor the performance of the obligations of nStor
hereunder will: (i) violate any provision of its certificate of
incorporation or bylaws (or other governing instrument); (ii)
violate, be in conflict with or constitute a default (or an event
which, with notice or lapse of time, or both would constitute a
default) under any agreement or commitment to which it is a
party; or (iii) violate any statute, law rule or regulation of
any order, writ, injunction or decree of any court or
governmental authority.
c. Upon their issuance pursuant to the terms and
conditions hereof, the nStor Shares will be validly issued, duly
authorized, fully paid and nonassessable.
d. nStor has provided Xxxxx with, or reasonable
access to, all information reasonably requested by Xxxxx with
respect to nStor, including all available financial statements of
nStor.
e. nStor has filed with the United States Securities
and Exchange Commission (the "SEC") its Annual Report on Form 10-K
and its Annual Report to Shareholders for the year ended
October 31, 1995, all Quarterly Reports on Form 10-Q due to be
filed with the SEC since October 31, 1995, all necessary Current
Reports on Form 8-K since October 31, 1995, and nStor's Proxy
Statement for its 1995 Annual meeting of Shareholders
(collectively, the "SEC Documents"). Each of the SEC Documents,
as of the date the same were filed with the SEC, conformed in all
material respects to the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder, and, as of their filing date, none of such documents
contained an untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading. nStor is not
aware of any event which would require the filing of a Form 8-K
after the date hereof.
7. Survival of Representations and Warranties. All
representations, warranties, covenants and agreements contained
in this Agreement shall survive the Closing, notwithstanding any
investigation conducted or knowledge acquired with respect
thereto.
8. Indemnification. Xxxxx hereby agrees to indemnify,
save harmless and defend nStor and each of its shareholders,
subsidiaries, affiliates, officers and directors, from and
against any and all losses, liabilities, fines, judgments,
claims, damages, settlement payments, actions or causes of
action, Encumbrances, costs and expenses (including reasonable
attorney's fees) incurred by any of them by reason of, or arising
out of: (i) any false or misleading or inaccurate representation
or warranty by Xxxxx contained in this Agreement or in any
document, instrument, certificate, schedule or written statement
prepared for use and delivered to nStor by Xxxxx in connection
with the transactions contemplated by this Agreement or any
breach of any such representation or warranty; (ii) any breach by
Xxxxx of any provision of this Agreement; (iii) any matter or
event occurring or arising on or before the Closing Date which,
if known on the Closing Date, would, whether but for any
qualification as to materiality or the absence of actual
knowledge provided for in this Agreement, have constituted such a
false, misleading or inaccurate representation or warranty or
such breach.
9. Conditions to Obligations of nStor. The obligation of
nStor to perform this Agreement are subject to the satisfaction
of the following conditions on or prior to the Closing Date,
unless waived in writing by nStor, and Xxxxx shall use his best
efforts to cause such conditions to be fulfilled:
a. The representations and warranties of Xxxxx set
forth in this Agreement shall be true and correct in all
materials respects as of the date hereof and on the Closing Date
as though made on and as of the Closing Date.
x. Xxxxx shall have duly performed and complied in all
material respects, on or before the Closing Date, all agreements
and obligations required to performed by him under this
Agreement.
c. Except as set forth on Schedule 9(c), no action,
suit or other proceeding shall be pending or overtly threatened
before or by any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the consummation
of the transactions contemplated by this Agreement or seeking to
obtain substantial damages in respect thereof, or involving a
claim that consummation thereof would result in the violation of
any law, decree, rule or regulation of any governmental authority
having appropriate jurisdiction. Xxxxx shall have obtained all
necessary consents, waivers, permits and approvals, if any are
required, from third parties or governmental authorities in
connection with the execution, delivery and performance of his
obligations under this Agreement and the transactions con-
templated hereby including any consents, waivers, permits, or
approvals necessary to convey the Xxxxx Shares to nStor.
10. Conditions to Obligations of Xxxxx. The obligation of
Xxxxx to perform this Agreement are subject to the satisfaction
of the following conditions on or prior to the Closing Date,
unless waived in writing by Xxxxx, and nStor shall use his best
efforts to cause such conditions to be fulfilled:
a. The representations and warranties of nStor set
forth in this Agreement shall be true and correct in all
materials respects as of the date hereof and on the Closing Date
as though made on and as of the Closing Date.
b. nStor shall have duly performed and complied in all
material respects, on or before the Closing Date, with all
agreements and obligations required to performed by it under this
Agreement.
c. Except as set forth on Schedule 10(c), no action,
suit or other proceeding shall be pending or overtly threatened
before or by any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the consummation
of the transactions contemplated by this Agreement or seeking to
obtain substantial damages in respect thereof, or involving a
claim that consummation thereof would result in the violation of
any law, decree, rule or regulation of any governmental authority
having appropriate jurisdiction. nStor shall have obtained all
necessary consents, waivers, permits and approvals, if any are
required, from third parties or governmental authorities in
connection with the execution, delivery and performance of its
obligations under this Agreement and the transactions con-
templated hereby including any consents, waivers, permits, or
approvals necessary to convey the nStor Shares to Xxxxx.
11. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
a. by mutual consent in writing of all of the parties
hereto;
b. by Xxxxx with written notice to nStor if one or
more of the conditions specified in Section 10 is not satisfied
at the time at which the Closing would otherwise occur;
c. by nStor with written notice to Xxxxx if one or
more of the conditions specified in Section 9 is not satisfied at
the time at which the Closing would otherwise occur; or
d. by either nStor or Xxxxx if there has been a
material breach of a representation, warranty or covenant
contained in this Agreement on the part of the other party.
In the event this Agreement is terminated pursuant to this
Section 11, this Agreement shall terminate and forthwith become
void, without any liability or further obligation of any party to
the other except to the extent that such termination results from
a material breach by any such party of any of its
representations, warranties or covenants set forth herein.
12. Notices. Any notice, payment, demand or communication
required or permitted to be given by any provision of this
Agreement shall be in writing and shall be delivered personally
to the party or to an officer of the party to whom the same is
directed, or sent by registered or certified mail, addressed to
the person to whom directed at the following address, or to such
other address as such party may from time to time specify by
notice to the parties:
if to nStor, to: Xxxx Xxxx, President
nStor Technologies, Inc.
000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
With a copy to: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxxx X. Xxxxxxx, Esq.
August, Comiter, Kulunas & Xxxxxxx, P.A.
000 Xxxxxxxxxx Xxxxxx Xxxxx, #0000
Xxxx Xxxx Xxxxx, XX 00000
(000) 000-0000
If to the Company, to: nStor Corporation, Inc.
000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Att: Xxxx Xxxx
If to Xxxxx, to: Mr. R. Xxxxxx Xxxxx
nStor Corporation, Inc.
000 Xxxxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxx 00000
With a copy to: X. Xxxxxxx Grocock, Esq.
Grocock Xxxxxx & Xxxxxxxx
Suite 200
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Any such notice shall be deemed to be delivered, given and
received for all purposes as of the date so delivered, if
delivered personally or if sent by registered or certified mail,
postage and charges prepaid. Any Party may from time to time
specify a different address by choice to the other Parties.
13. No Broker. The parties acknowledge and agree that no
agent, broker, person or firm acting on behalf of Xxxxx, nStor or
the Company is or will be entitled to any commission or brokerage
or finder's fee from any of the parties hereto or from any person
controlling, controlled by, or in a common control with any of
the parties hereto in connection with any of the transactions
contemplated by this Agreement.
14. Enforcement Costs. If any legal action or other
proceeding is brought for the enforcement of this Agreement or
because of any alleged dispute, breach, default or
misrepresentation in connection with any provision of this
Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees, costs and all
expenses (including, without limitation, all such fees, costs and
expenses incident to appeals) incurred in that action or
proceeding, in addition to any other relief to which such party
or parties may be entitled.
15. Miscellaneous.
a. Characterization of the Transaction. The parties
hereto consent and agree that the transaction contemplated by
this Plan of Reorganization is intended to be characterized as a
tax-free code section 368(a)(1)(B) reorganization. Each party
shall take any and all necessary or appropriate action to ensure
that the transaction contemplated by this Agreement is
characterized consistent therewith.
b. Expenses. The parties shall bear their own
expenses incident to the preparation, negotiation, execution and
delivery of this Agreement.
c. Captions. The captions in this Agreement are for
convenience only and shall not be given any effect in the
interpretation of this Agreement.
d. No Waiver. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the
right thereafter to insist upon adherence to that term of any
other term of this Agreement. Any waiver must be in writing.
e. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns; provided that this Agreement
may not be assigned by any party without the consent of the other
parties hereto.
f. Exclusive Agreement; Amendment. The recitals set
forth above are true and complete and are hereby incorporated
into this Agreement by reference. This Agreement supersedes all
prior agreements among the parties with respect to its subject
matter, and is intended as a complete and exclusive statement of
the terms of the Agreement among the parties with respect
thereto. This Agreement may be amended by, but only by, a
writing executed by all parties hereto. Upon the closing of the
Plan of Reorganization, that certain Shareholders' Agreement by
and among nStor Corporation, Inc., IMGE, Inc. and R. Xxxxxx Xxxxx
dated June 18, 1996 shall terminate and become null and void.
g. Counterparts. This Agreement may be executed in
two or more counterparts, all of which taken together shall
constitute an original.
h. Governing Law. This Agreement and (unless
otherwise provided) all amendments hereto and waivers and
consents hereunder shall be governed by the laws of the State of
Florida without regard to the conflicts of law principles
thereof. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts
of the State of Florida, and each of the parties hereby consents
to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any
objection to venue laid therein.
i. Gender and Number. All references in this
Agreement to the masculine gender shall include the feminine and
neuter genders, and vice versa, and all references to the
singular shall include the plural, and vice versa.
j. Further Assurances. The parties shall cooperate
and take such actions, and execute such other documents, as
either may reasonably request in order to carry out the
provisions or purpose of this Agreement, including without
limitation the execution and delivery by Xxxxx of additional
stock powers duly executed in blank with respect to the Xxxxx
Shares.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the date first set forth above.
nSTOR:
nSTOR TECHNOLOGIES, INC.
/s/ Xxxx Xxxx
By:___________________________
Xxxx Xxxx
President
COMPANY:
nSTOR CORPORATION, INC.
/s/ R. Xxxxxx Xxxxx
By:_________________________
R. Xxxxxx Xxxxx
XXXXX
/s/ R. Xxxxxx Xxxxx
____________________________
R. Xxxxxx Xxxxx
EXHIBIT 10.8
nSTOR TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
1. Purpose. The nStor Technologies, Inc. 1996 Stock
Option Plan (the "Plan") is intended to further the interest of
nStor Technologies, Inc., a Delaware corporation (the "Company"),
its subsidiaries and its shareholders by providing incentives in
the form of stock option grants to certain key employees who
contribute materially to the success and profitability of the
Company. The grants shall recognize and reward outstanding
individual performances and contributions and shall give such
persons a proprietary interest in the Company, thus enhancing
their personal interest in the Company's continued success and
progress. The Plan shall also assist the Company and any
subsidiaries it may have in attracting and retaining key
personnel. The Plan is also intended to provide the Company
flexibility and the means to reward directors and other non-employees
who render valuable contributions to the Company.
2. Definitions. The following definitions shall apply to
this Plan:
(a) "Agreement" means a written agreement entered into
between the Company and a Recipient that embodies the terms and
restrictions of the Option granted to the Recipient.
(b) "Board" means the board of directors of the
Company.
(c) "Change in Control" occurs if (i) there occurs any
transaction (which shall include a series of transactions
occurring within sixty (60) days) that has the result that
shareholders of the Company immediately before such transaction
cease to own at least fifty-one percent (51%) of the voting stock
of the Company or any entity that results from the participation
of the Company in a merger, reorganization, consolidation,
liquidation or any other form of corporate transaction; (ii) the
shareholders of the Company approve a plan of merger,
consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger,
consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); (iii) the Company disposes of all or
substantially all of its assets; or (iv) a majority or more of
the directors nominated by the Board to serve as directors, each
having agreed to serve in such capacity, fail to be elected in a
contested election of directors.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee appointed by the
Board, in accordance with Section 3 hereof, to administer the
Plan.
(f) "Common Stock" means the common stock, par value
$.05 per share, of the Company or such other class of shares or
securities to which the Plan may apply pursuant to Section 13 of
the Plan.
(g) "Company" means nStor Technologies, Inc.
(h) "Date of Grant" means the date on which the Option
is granted.
(i) "Dispose Of" means pledge, hypothecate, give,
assign, encumber, sell, grant an option with respect to, or
otherwise transfer, to any party, whether or not such party is a
shareholder of the Company.
(j) "Effective Date" means October 5, 1996.
(k) "Eligible Person" means any person who performs or
has in the past performed services for the Company or any
Subsidiary, whether as a director, officer, employee, consultant
or other independent contractor, and any person who performs
services relating to the Company in his or her capacity as an
employee or independent contractor of a corporation or other
entity that provides services for the Company.
(l) "Employee" means any person employed on an hourly
or salaried basis by the Company or any parent or Subsidiary of
the Company that now exists or hereafter is organized or acquired
by or acquires the Company.
(m) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(n) "Fair Market Value" means the fair market value of
the Common Stock. If the Common Stock is not publicly traded on
the date as of which fair market value is being determined, the
Board shall determine the fair market value of the Shares using
such factors as the Board considers relevant, such as the price
at which recent sales have been made, the book value of the
Common Stock, and the Company's current and projected earnings.
In determining the fair market value of the Shares, the Board
may, but is not required to, utilize information from or opinions
of outside advisors. If the Common Stock is publicly traded on
the date as of which fair market value is being determined, the
fair market value shall be the average of the high and low sale
prices of the Common Stock as reported by the National
Association of Securities Dealer Automated Quotations ("Nasdaq")
on that date, or, if the Common Stock is listed on a stock
exchange, the average of the high and low sale prices of the
Common Stock on that date, as reported in The Wall Street
Journal. If trading in the Common Stock or a price quotation
does not occur on the date as of which fair market value is being
determined, the next preceding date on which the Common Stock was
traded or a price was quoted shall determine the fair market
value.
(o) "Incentive Stock Option" means a stock option
granted pursuant to either this Plan or any other plan of the
Company that satisfies the requirements of Section 422 of the
Code and Section 14 hereof and that entitles the Recipient to
purchase stock of the Company or in a corporation that at the
time of grant of the option was a parent or Subsidiary of the
Company or a predecessor corporation of any such corporation. If
the requirements of Section 14 of the Plan are in conflict with
any other provision of the Plan with respect to an Incentive
Stock Option, the provisions of Section 14 of the Plan shall
control.
(p) "Non-Employee Director" shall have the meaning
ascribed to such term in Rule 16b-3 promulgated under the
Exchange Act.
(q) "Nonqualified Stock Option" means an Option which
is not an Incentive Stock Option.
(r) "Option" means a stock option granted pursuant to
the Plan. Each Option shall be a Nonqualified Stock Option
unless expressly designated as an Incentive Stock Option by the
Plan Administrators in establishing the terms of the Option at
grant.
(s) "Option Shareholder" shall mean a Recipient who
has exercised his or her Option.
(t) "Option Shares" means Shares issued upon exercise
of an Option.
(u) "Permanent and Total Disability" shall have the
meaning ascribed to such term in Section 22(e)(3) of the Code.
(v) "Plan" means this nStor Technologies, Inc. 1996
Stock Option Plan.
(w) "Plan Administrators" shall have the meaning
ascribed to the term in Section 3 hereof.
(x) "Recipient" means a person who receives an Option.
(y) "Shares" means shares of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(z) "Shareholder Approval" means a vote of the
shareholders of the Company to approve, or to ratify the approval
by the Company's Board of, this Plan in accordance with the laws
of the Company's state of incorporation and other laws or rules
applicable to the Company (including rules of any stock exchange
on which the Company's securities are listed or admitted for
trading).
(aa) "Subsidiary" means any corporation fifty percent
or more of the voting securities of which are owned directly or
indirectly by the Company at any time during the existence of
this Plan.
3. Administration. This Plan shall be administered by the
Board or the Committee (in either event, the "Plan
Administrators"). The Committee shall be comprised solely of two
or more members of the Board who shall be Non-Employee Directors.
The Plan Administrators shall have authority to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to prescribe the form of any agreement or
instrument executed in connection herewith, and to make all other
determinations necessary or advisable for the administration of
the Plan. All such interpretations, rules, regulations and
determinations shall be conclusive and binding on all persons and
for all purposes. A majority of the Plan Administrators
constitutes a quorum for purposes of administering the Plan, and
all determinations of the Plan Administrators shall be made by a
majority of the members present at a meeting at which a quorum is
present or by the unanimous, written consent of the Plan
Administrators. Notwithstanding the foregoing, the Plan
Administrators shall not have any discretion with respect to
Options granted to Non-Employee Directors pursuant to Subsection
5(b)(2) of the Plan.
4. Shares Subject to Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares
that may be subject to Options under the Plan shall be 2,500,000.
If an Option should expire or become unexercisable for any reason
without having been exercised, the unpurchased Shares that were
subject to the Option shall, unless the Plan has then terminated,
be available for other Options under the Plan.
5. Option Grants.
(a) Discretionary Grants. Any Eligible Person that
the Plan Administrators in their sole and absolute discretion
designate is eligible to receive an Option under this Plan. The
award by the Plan Administrators of an Option to a Recipient in
any year does not require the Plan Administrators to award an
Option to that Recipient in any other year. Furthermore, the
Plan Administrators may award different Options to different
Recipients and has full discretion to choose whether to grant
Options to any eligible person. The Plan Administrators may
consider such factors as it deems pertinent in selecting
Recipients and in determining the amount of their Options,
including, without limitation, (i) the financial condition of the
Company or its Subsidiaries; (ii) expected profits for the
current or future years; (iii) the contributions of a prospective
Recipient to the profitability and success of the Company or its
Subsidiaries; and (iv) the adequacy of the prospective
Recipient's other compensation. Recipients may include persons
to whom stock, stock options, stock appreciation rights, or other
benefits previously were granted under this or another plan of
the Company or any Subsidiary, whether or not the previously
granted benefits have been fully exercised or vested.
(b) Non-Employee Director Grants.
(1) Initial Grants. Each category of Non-Employee
Director of the Company described below shall be automatically
granted an Option to purchase shares of Common Stock of the
Company in the amounts, and effective as of the dates, set forth
below:
a. for any Non-Employee serving on the Board at the
Effective Date, the number of shares of Common Stock set forth on
Schedule A hereto, to be effective as of the Effective Date;
b. for any Non-Employee Director elected by the
shareholders of the Company subsequent to the Effective Date,
such number of shares of Common Stock as the Board may determine,
to be effective as of the date of such Non-Employee Director's
election to the Board; and
c. for any Non-Employee Director appointed by the
Board subsequent to the Effective Date, such number of shares of
Common Stock as the Board may determine, to be effective at the
time such Non-Employee Director's appointment to the Board
becomes effective.
(2) Annual Grants. Each Non-Employee Director shall
automatically be granted, effective each anniversary of his
appointment to the Board, an Option to purchase 20,000 shares of
Common Stock.
(3) Exercise Price. The exercise price of each Share
subject to an Option granted to an Non-Employee Director shall be
the Fair Market Value of the Common Stock on the date the Option
is granted.
(4) Exercise of Options. All Options granted to a Non-Employee
Director shall become exercisable on the first
anniversary of the Date of Grant provided, however, that such
Non-Employee Director continues to serve as a member of the
Company's Board as of such date. Options may be exercised by the
Non-Employee Director for a period of ten years from the Date of
Grant provided, however, that in the event of the death of a Non-Employee
Director, the Option shall be exercisable only within
the twelve months next succeeding the date of death, and then
only (i) by the executor or administrator of the Non-Employee
Director's estate or by the person or persons to whom the Non-Employee
Director's rights under the Option shall pass by the
Non-Employee Director's will or the laws of descent and
distribution, and (ii) if and to the extent that the Non-Employee
Director was entitled to exercise the Option at the date of the
Non-Employee Director's death, provided that in no event shall
the Option be exercisable more than ten years after the Date of
Grant.
(c) No Right of Employment. A Recipient's right, if any,
to continue to serve the Company and its Subsidiaries as an
officer, Employee, or otherwise shall not be enlarged or
otherwise affected by his designation as a Recipient under this
Plan, and such designation shall not in any way restrict the
right of the Company or any Subsidiary, as the case may be, to
terminate at any time the employment or affiliation of any
Recipient.
6. Option Requirements. Each Option granted to a
Recipient under Section 5 of the Plan shall contain such
provisions as the Plan Administrators at the Date of Grant shall
deem appropriate. Each Option granted to a Recipient shall
satisfy the following requirements:
(a) Written Agreement. Each Option granted to a
Recipient shall be evidenced by an Agreement. The terms of the
Agreement need not be identical for different Recipients. The
Agreement shall include a description of the substance of each of
the requirements in this Section 6 with respect to that
particular Option.
(b) Number of Shares. Each Agreement shall specify
the number of Shares that may be purchased by exercise of the
Option.
(c) Exercise Price. Unless provided otherwise by the
Plan Administrators in establishing the terms of the Option at
grant, the exercise price of each Share subject to an Option
shall not be less than the Fair Market Value of the Share on the
Option's Date of Grant.
(d) Duration of Option. Each Option granted to a
Recipient shall expire on the tenth anniversary of its Date of
Grant, or at such earlier or later date as is set by the Plan
Administrators in establishing the terms of the Option at grant,
or at such later date as is set by the Plan Administrators
subsequent to the Date of Grant but prior to the tenth
anniversary of the Date of Grant. If the Recipient's employment
or affiliation with the Company terminates before the expiration
date of an Option, the Options owned by the Recipient shall
expire on the earlier of the date stated in this Subsection 6(d)
or the date stated in following Subsections of this Section 6.
Furthermore, expiration of an Option may be accelerated under
Subsection 6(g) of the Plan.
(e) Vesting of Option and Exercisability. Unless
otherwise provided for by the Plan Administrators in establishing
the terms of the Option at grant, a Recipient's interest in an
Option shall vest according to the schedule described in this
Subsection 6(e) and shall be exercisable as to not more than the
vested percentage of the Shares subject to the Option at any
point in time. To the extent an Option is either unexercisable
or unexercised, the unexercised portion shall accumulate until
the Option both becomes exercisable and is exercised, subject to
the provisions of Subsection 6(d) of the Plan.
Anniversary of Date of Grant Percent Vested
Prior to 1st anniversary 0%
1st 20%
2nd 40%
3rd 60%
4th 80%
5th 100%
The Plan Administrators, in their sole and absolute discretion,
may accelerate the vesting of any Option at any time.
(f) Death, Disability or Termination of Service or
Affiliation.
(1) In the case of the retirement at or
after age 65, death or Permanent and Total Disability of the
Recipient, then all Options which would have otherwise vested and
become exercisable in the one (1) year period following such
event shall continue to so vest and become exercisable as so
scheduled and, together with any previously exercisable Options
held by the Recipient, shall expire on the one year anniversary
of the Recipient's retirement, death, or if earlier, the date
specified in Subsection 6(d), unless the Plan Administrators set
an earlier or later expiration date in establishing the terms of
the Options at grant or a later expiration date subsequent to the
Date of Grant but prior to the one year anniversary of the
Recipient's retirement or death.
(2) If the Recipient ceases employment or affiliation
with the Company for any reason other than retirement, death or
Permanent and Total Disability, all Options held by the Recipient
shall expire three months following the last day that the
Recipient is employed by or affiliated with the Company, or at
such earlier or later date as is set by the Plan Administrators
in establishing the terms of the Option at grant, or at such
later date as is set by the Plan Administrators subsequent to the
date of grant but prior to the thirtieth day following the last
day the Recipient is employed by or affiliated with the Company.
The Option may be exercised only for the number of Shares for
which it could have been exercised on such termination date
pursuant to Subsection 6(e), subject to any adjustment under
Section 13 of the Plan. Notwithstanding any provisions set forth
herein, if the Recipient shall (i) commit any act of malfeasance
or wrongdoing affecting the Company or any parent or any
Subsidiary, (ii) breach any covenant not to compete or employment
agreement with the Company or any parent or Subsidiary, or (iii)
engage in conduct that would warrant the Recipient's discharge
for cause, any unexercised part of the Option shall lapse
immediately upon the earlier of the occurrence of such event or
the last day the Recipient is employed by or affiliated with the
Company.
(g) Change in Control. Contingent upon the occurrence of
a Change in Control, the Board may, but is not required to, take
one or more of the following actions:
(1) accelerate the vesting of any Option;
(2) terminate all Options outstanding under the Plan
effective upon the date of the Change in Control and make, within
ninety days after the date of the Change in Control, a cash
payment to the Recipient equal to the difference between the
Exercise Price and the Fair Market Value of the vested but
unexercised Shares subject to the terminated Option on the date
of the Change in Control; or
(3) accelerate the expiration of the Options to a
date not earlier than the fifteenth day after the date of the
Change in Control.
(h) Conditions Required for Exercise. Options granted to
Recipients under the Plan shall be exercisable only to the extent
they are vested according to Subsection 6(e) hereof.
Furthermore, each Option granted under the Plan is exercisable
only if the issuance of Shares pursuant to the exercise would be
in compliance with applicable securities laws, as contemplated by
Section 9 hereof. The Plan Administrators may provide for
additional conditions for the exercise of any Option in
establishing the terms of the Option at grant.
7. Method of Exercise. Subject to the requirements of
Subsections 6(e) and 6(f) hereof, an Option granted under this
Plan may be exercised in whole or in part. An Option granted
under this Plan shall be deemed exercised when the person
entitled to exercise the Option (a) delivers written notice to
the Chief Executive Officer of the Company (or his designee) of
the decision to exercise, (b) concurrently tenders to the Company
full payment for the Shares to be purchased pursuant to the
exercise, (c) remits to the Company in cash upon demand 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 Plan and (d) complies with such
other reasonable requirements as the Plan Administrators
establish pursuant to Sections 9 and 10 hereof. Payment for
Shares with respect to which an Option is exercised may be made
in cash, or by certified check or wholly or partially in the form
of Common Stock having a Fair Market Value on the date of
exercise equal to the exercise price. No person shall have the
rights of a shareholder with respect to Shares subject to an
Option granted under this Plan until a certificate or
certificates for the Shares have been delivered to him. An
Option granted under this Plan may not be exercised in increments
of less than one hundred Shares, or, if less, one hundred percent
of the full number of Shares as to which it can be exercised. A
partial exercise of an Option shall not affect the holder's right
to exercise the Option from time to time in accordance with this
Plan as to the remaining Shares subject to the Option.
8. Option Share Transfer Restrictions and Repurchase
Rights. The Plan Administrators may, in establishing the terms
of an Option at grant, restrict the ability of the Recipient to
transfer Option Shares to any person other than the Company and
may grant to the Company the right to repurchase Option Shares.
9. Compliance with Law.
(a) Securities Laws. No Option granted hereunder
shall be exercisable, in whole or in part, and the Company shall
not be obligated to sell any Option Shares if such exercise and
sale would, in the opinion of counsel for the Company, violate
the applicable requirements of Federal or state securities laws.
Each Option shall be subject to the further requirement, that, if
at any time the Company shall determine in its sole discretion
that the listing or qualification of the Option Shares under any
securities exchange or market requirements or under any
applicable law, or the consent or approval of any governmental
body, is necessary or desirable as a condition of, or in
connection with, the issuance of Option Shares, such Option may
not be exercised unless such listing, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Company.
(b) Delivery of Certificates. If any law or
regulation of any state of Federal commission or agency shall
require the Company or the Recipient to take any action with
respect to the Option Shares, then the date upon which the
Company shall deliver or cause to be delivered the certificate or
certificates for the Option Shares shall be postponed until full
compliance shall have been made with all such requirements. Any
certificate issued to evidence Option Shares may bear such
legends and statements, and shall be subject to such transfer
restrictions, as the Plan Administrators deem advisable to assure
compliance with federal and state laws and regulations and with
the requirements of this Section 9 and to reflect the provisions
of Section 8 hereof.
(c) Section 16 of the Exchange Act. With respect to
persons subject to Section 16 of the Exchange Act, transactions
under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the Exchange Act or its successor
under the Exchange Act. To the extent any provision of the Plan
or action by the Plan Administrators fails to so comply, it shall
be deemed null and void, to the extent permitted by law and
deemed advisable by the Plan Administrators.
10. Taxes. The Company shall have the right to withhold
from payments otherwise due and owing to the Recipient (or his
beneficiary) or to require the Recipient (or his beneficiary) to
remit to the Company in cash upon demand 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 Plan as a condition to the issuance of
Shares upon Option exercise (whether to the Recipient or to his
beneficiary). Each person who acquires the right to exercise an
Option or to ownership of Shares by bequest or inheritance may be
required by the Plan Administrators to furnish reasonable
evidence of ownership of the Option as a condition to his
exercise of the Option. In addition, the Plan Administrators may
require such consents and releases of taxing authorities as the
Plan Administrators deem advisable.
11. Designation of Beneficiary. Each Recipient shall
designate in the Agreement a beneficiary to receive Options
awarded hereunder in the event of his death prior to full
exercise of such Options; provided, that if no such beneficiary
is designated or if the beneficiary so designated does not
survive the Recipient, the estate of such Recipient shall be
deemed to be the Recipient's beneficiary. Recipients may, by
written notice to the Plan Administrators, change the beneficiary
designated in any outstanding Agreement.
12. Assignability. An Option granted under this Plan is
not transferable except by will or the laws of descent and
distribution. During the lifetime of a Recipient, all rights of
the Options are exercisable only by the Recipient.
13. Adjustment Upon Change of Shares. If a merger,
reorganization, consolidation, reclassification,
recapitalization, combination or exchange of shares, stock split,
stock dividend, rights offering, or other expansion or
contraction of the Common Stock of the Company occurs, the number
and class of Shares for which Options are authorized to be
granted under this Plan, the number and class of Shares then
subject to Options previously granted to Recipients under this
Plan, and the price per Share payable upon exercise of each
Option outstanding under this Plan shall be equitably adjusted by
the Board to reflect such changes. To the extent deemed
equitable and appropriate by the Board, subject to any required
action by shareholders, in any merger, consolidation,
reorganization, liquidation or dissolution, any Option granted
under the Plan shall pertain to the securities and other property
to which a holder of the number of Shares of stock covered by the
Option would have been entitled to receive in connection with
such event.
14. Incentive Stock Option Requirements. Notwithstanding
any other provision of the Plan, the following requirements apply
to each Incentive Stock Option granted pursuant to the Plan.
(a) Only Employees of the Company shall be eligible
to receive grants of Incentive Stock Options.
(b) The written agreement that evidences an Option
grant shall state that the Option is an Incentive Stock Option.
(c) The exercise price of each Share subject to an
Incentive Stock Option shall equal the Fair Market Value of the
Share on the Option's Date of Grant.
(d) Each Incentive Stock Option shall expire no later
than the earliest of:
(1) the tenth anniversary of the Option's Date of
Grant;
(2) the one year anniversary of the Recipient's
death; or
(3) ninety days following the termination of the
Recipient's employment or affiliation with the Company.
(e) An Incentive Stock Option granted to an
individual who, on the Date of Grant, owns stock possessing more
than ten percent of the total combined voting power of all
classes of stock of either the Company or any parent or
Subsidiary, shall be granted at an exercise price of 110 percent
of Fair Market Value on the Date of Grant and shall be
exercisable only during the five-year period immediately
following the Date of Grant. In calculating stock ownership of
any person, the attribution rules of Section 424(d) of the Code
shall apply. Furthermore, in calculating stock ownership, any
stock that the individual may purchase under outstanding options
shall not be considered.
(f) The aggregate Fair Market Value determined on the
Date of Grant, of stock in the Company with respect to which any
Incentive Stock Options under the Plan and all other plans of the
Company or its Subsidiaries (within the meaning of Section 422(b)
of the Code) may become exercisable by any individual for the
first time in any calendar year shall not exceed $100,000.
15. Liability of the Company. The Company, its parent and
any Subsidiary that is in existence or hereafter comes into
existence shall not be liable to any person for any tax
consequences expected but not realized by a Recipient or other
person due to the exercise of an Option.
16. Termination and Amendment of Plan. This Plan shall
automatically terminate at such time as the Company shall submit
a proposal to the Company's shareholders for Shareholder Approval
and such proposal fails to achieve the requisite number of votes.
Notwithstanding Shareholder Approval, the Board may amend or
terminate this Plan at any time or from time to time without the
approval of the shareholders of the Company as to such amendment
or termination; provided, however, that without the approval of
the shareholders to the extent provided in Section 422 of the
Code, no amendment shall be effective that:
(a) increases the aggregate number of Shares that may
be delivered upon the exercise of Options granted under the Plan;
(b) materially modifies the eligibility requirements
for participation in the Plan; or
(c) amends the requirements of Subsections 16(a) or
16(b) hereof.
Any amendment, whether with or without the approval of share-
holders, that alters the terms or provisions of an Option granted
before the amendment (unless the alteration is expressly
permitted under this Plan) shall be effective only with the
consent of the Recipient to whom the Option was granted or the
holder currently entitled to exercise it.
17. Expenses of Plan. The Company shall bear the expenses
of administering the Plan.
18. Duration of Plan. Options may be granted under this
Plan only during the ten years immediately following the
Effective Date.
19. Applicable Law. The validity, interpretation, and
enforcement of this Plan are governed in all respects by the laws
of Florida and the United States of America.
