EXCHANGE AGREEMENT
This Exchange Agreement is entered into as of the 12th day of April,
2001 by and between nStor Technologies, Inc., a Delaware corporation ("nStor"),
Xxxxx Family Trust ("Xxxxx Family Trust") and Xxxxx Childrens Trust of 1993
("Xxxxx Childrens Trust" and together with the Xxxxx Family Trust, the
"Noteholders").
WHEREAS, nStor is the maker of certain promissory notes issued to the
Noteholders in the aggregate principal amount of $5,100,000.00 (the "Notes"),
which Notes mature on June 17, 2004; and
WHEREAS, nStor and the Noteholders have agreed that the Notes should be
satisfied, without payment of principal, in accordance with their terms, in
exchange for the issuance by nStor to each Noteholder of the aggregate number of
shares of its Series H Convertible Preferred Stock, par value $.01 per share
("Series H Preferred Stock") set forth on Schedule I, which shares are
convertible into shares of the Company's common stock, par value $.05 per share
("nStor Common Stock") at a conversion price of $0.72 per share.
NOW THEREFORE, the parties hereto agree as follows:
1. Exchange of Notes for Securities.
a. On the Closing Date (as hereinafter defined), the Noteholders shall
deliver the Notes, duly endorsed to nStor, together with a Release, in the form
attached as Exhibit A, discharging nStor from all liability with respect to any
principal due under the Notes.
b. nStor agrees that it shall amend its certificate of incorporation as
soon as reasonably practicable after the date hereof to create the Series H
Preferred Stock having the rights, preferences and privileges set forth in the
Certificate of Designation for the Series H Preferred Stock, a form of which is
attached hereto as Exhibit B and, immediately after the filing of such
amendment, shall issue certificates representing the number of shares of Series
H Preferred Stock set forth in Schedule I (the "Preferred Shares") to be
distributed among the Noteholders in the manner set forth therein. The Preferred
Shares, and the shares of nStor Common Stock issuable upon conversion of the
Series H Preferred Stock (the "Conversion Shares"), are collectively referred to
herein as the "Securities". The "Closing Date" shall be such date as the parties
may mutually agree. The closing of the transactions contemplated hereby shall
take place at such place as the parties may agree.
2. Representations of nStor. As of the date hereof, nStor hereby represents
and warrants to the Noteholders the following, with the express intent that the
Noteholders shall rely on such representations and warranties:
a. nStor is a corporation validly existing under the laws of the State of
Delaware.
b. The execution, delivery and performance of this Exchange Agreement have
been duly authorized, and are not in conflict with nStor's certificate of
incorporation or its bylaws and nStor has all necessary corporate power and
authority to perform its obligations under this Exchange Agreement and the
ancillary agreements related hereto
c. The Preferred Shares, when delivered to the Noteholders in accordance
with the terms hereof, will be duly authorized, validly issued, fully paid, and
nonassessable.
d. There is no class or series of Preferred Stock of the Company having
liquidation, dividend, redemption, voting or other rights or preferences
superior to the Series H Preferred Stock.
e. The Conversion Shares, when delivered to the Noteholders in accordance
with the terms of the Certificate of Designation of the Series H Preferred
Stock, will be duly authorized, validly issued, fully paid and non-assessable.
3. Representations of Noteholders. Each Noteholder hereby represents and
warrants to nStor the following:
a. Each Noteholder is the sole lawful holder of its Note, possesses all
right, title and interest therein, has the requisite legal capacity and
authority to transfer its Note, and has not transferred, pledged, or
hypothecated its Note or any interest therein to any third party. The Notes
delivered to nStor at the Closing will be the original Notes.
b. Each Noteholder understands and represents that (i) it must bear the
economic risk of this investment for an indefinite period of time because the
Securities have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or under any state securities laws and, therefore,
cannot be resold unless they are subsequently registered under the Securities
Act and the pertinent state securities laws or unless an exemption from such
registration is available; and (ii) it is purchasing the Securities for
investment for its own account and not for the account of any other person, and
not with any present view toward resale or other "distribution" thereof within
that meaning of the Securities Act.
c. The Noteholder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Securities. The Noteholder is aware that an investment in the
Securities is highly speculative and subject to substantial risks. The
Noteholder is capable of bearing the high degree of economic risk and burdens of
this investment, including the possibility of a complete loss of its investment.
The financial condition of the Noteholder is such that it is under no present or
contemplated future need to dispose of any of the Securities to satisfy any
existing or contemplated undertaking, need or indebtedness.
4. Books and Records. nStor has made available to each Noteholder, or its
designated representative, during the course of this transaction and prior to
the issuance of any of the Securities, the opportunity to ask questions of and
receive answers from nStor's officers and directors concerning nStor's financial
condition and business, to the extent that nStor or its officers and directors
possess such information or can acquire it without unreasonable effort or
expense. nStor has also made available to each Noteholder for inspection,
various documents, records, books and other written information about nStor, its
business and this investment.
5. Restricted Stock and Legend. The Noteholders acknowledge that the
Securities offered hereunder are being offered pursuant to a private placement
exemption under the Securities Act, and that the Securities are deemed
"restricted securities" as defined in the Securities Act. Until the Preferred
Shares or Conversion Shares become registered with the Securities and Exchange
Commission (the "Commission"), each certificate representing a Preferred Share
or a Conversion Share 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 CORPORATION HAS RELIED UPON AN EXEMPTION
TO THE REGISTRATION REQUIREMENT UNDER THE ACT FOR THE SALE OF THE
SHARE(S) REPRESENTED BY THIS CERTIFICATE TO ITS HOLDER. THEREFORE, THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED STOCK AND MAY NOT
BE SOLD OR TRANSFERRED TO ANY THIRD PARTY WITHOUT EITHER BEING
REGISTERED UNDER THE ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
6. Resales. The Noteholders agree not to resell or otherwise dispose of all
or any part of the Securities, except as permitted by law, including, without
limitation, any and all applicable provisions of this Exchange Agreement and any
regulations under the Securities Act. Prior to any transfer or attempted
transfer of any of the Series H Preferred Stock, or Conversion Shares prior to
the registration thereof under the applicable federal or state securities laws,
or any interest therein, the Noteholders shall give nStor written notice of
their intention to make such transfer, describing the manner of the intended
transfer and the proposed transferee. Promptly after receiving such written
notice, nStor shall present copies thereof to its counsel or to any special
counsel designated by the Noteholders or by such transferee, who shall be
reasonably acceptable to nStor. If in the opinion of such counsel the proposed
transfer may be effected without registration of the Securities under the
applicable federal or state securities laws, as promptly as practicable, the
Securities proposed to be transferred shall be transferred in accordance with
the terms of said notice. nStor shall not be required to effect any such
transfer prior to the receipt of such favorable opinion(s); provided, however,
nStor may waive the requirement that the Noteholders obtain an opinion of
counsel, in its sole and absolute discretion. As a condition to such favorable
opinion, counsel for nStor may require an investment letter to be executed by
the proposed transferee.
7. Registration Rights Agreement. The Conversion Shares shall constitute
Registrable Securities (as such term is defined in that certain Registration
Rights Agreement dated as of the date hereof by and between the Company and
certain third parties, including the Noteholders (the "Registration Rights
Agreement")). Each Noteholder is entitled to all of the benefits afforded to a
holder of any such Registrable Securities under the Registration Rights
Agreement and each Noteholder agrees to be bound by and comply with the terms
and conditions of the Registration Rights Agreement applicable to the
Noteholder.
8. Legal Fees. nStor hereby agrees to pay all reasonable legal fees of the
Noteholders in connection with the negotiation and execution of this Exchange
Agreement. In addition, nStor will reimburse the Noteholders for reasonable
legal fees incurred in connection with the preparation of all filings required
of the Noteholders under Section 16 and Rules 13d, or 13g, as applicable, of the
Securities Exchange Act of 1934, as amended.
9. Miscellaneous.
a. If nStor receives conflicting instructions, notices or elections from
two or more persons or entities with respect to the same Securities, nStor shall
act upon the basis of instructions, notice or election received from the
registered owner of such Securities.
b. Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or when
sent by registered mail, return receipt requested, addressed if to nStor, at
nStor Technologies, Inc., 000 Xxxxxxx Xxxx., Xxxx Xxxx Xxxxx, XX 00000, attn:
Xxxx Xxxxxx, with a copy to Xxxxx Xxxxxxxxx, President of nStor, 00000 Xxxx Xxx
Xxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, and if to a Noteholder, at the address for
the delivery of notice to such Noteholder set forth with such Noteholder's name
below, or at such other address as each such party furnishes by notice given in
accordance with this Section 8(b), and shall be effective, when personally
delivered, upon receipt, and when so sent by certified mail, four business days
after deposit with the United States Postal Service.
c. Failure of any party to exercise any right or remedy under this Exchange
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Exchange Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Florida applicable to the agreements
made and to be performed entirely within such state, without giving effect to
rules governing the conflict of laws. In the event that any provision of this
Exchange Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
e. This Exchange Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Exchange Agreement supersedes all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof.
f. This Exchange Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties hereto.
g. All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
h. The headings in this Exchange Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
i. This Exchange Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Exchange Agreement, once executed by a party, may
be delivered to the other party hereto by telephone line facsimile transmission
of a copy of this Exchange Agreement bearing the signature of the party so
delivering this Exchange Agreement.
IN WITNESS WHEREOF, the parties have caused this Exchange Agreement to be
duly executed as of the day and year first above written.
nSTOR TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx, as VP
------------------------
Name: Xxxx Xxxxxx
Title: Vice President
NOTEHOLDERS:
XXXXX FAMILY TRUST
By: /s/ W. Xxxxx Xxxxx, Trustee
-----------------------------
Name: W. Xxxxx Xxxxx
Title: Trustee
Address: 0000 Xxxxx Xxxxx
Xxx Xxx, XX 00000
XXXXX CHILDRENS TRUST OF 1993
By: /s/ Xxxxx X Xxxxxx III
-----------------------------
Name: Xxxxx X. Xxxxxx III
Title: Trustee
Address: 0000 Xxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
SCHEDULE I
NOTEHOLDERS
Principal Number of
Noteholder Description Date of Note Amount of the Preferred
---------- of Note ------------ the Note Shares
----------- ------------- Issued
-----------
Xxxxx FamilyTrust 9.5% June 8, 1999 $4,807,260.00 4,807.26
Subordinated
Note
Xxxxx Childrens 9.5% June 8, 1999 $292,740.00 292.74
Trust of 1993 Subordinated
Note
