1
EXHIBIT 10.11
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT is entered into as of December 22, 1997 (the
"Effective Date") by and among ARTECON, INC., a California corporation
("Company"), STORAGE DIMENSIONS, INC., a Delaware corporation ("Parent"), and CP
ACQUISITION, L.P. NO. 4A, a Delaware limited partnership, CP ACQUISITION, L.P.
NO. 4B, a Delaware limited partnership, CAPITAL PARTNERS, INC., a Connecticut
corporation, and FGS, INC., a Delaware corporation (each a "Stockholder" and
collectively the "Stockholders").
RECITALS
A. Company, Parent and Storage Acquisition Corp., a California
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), are entering
into an Agreement and Plan of Merger and Reorganization of even date herewith
(the "Merger Agreement"); capitalized terms used but not otherwise defined in
this Agreement shall have the meanings assigned to such terms in the Merger
Agreement, which provides for, among other things, the Merger on the terms set
forth therein.
B. As of the date hereof, the Stockholders are the record and beneficial
holders of an aggregate of 2,900,623 shares of Common Stock of Parent, which
shares represent all of the Parent Securities (as defined herein) held of record
or beneficially by the Stockholders and their affiliates.
C. As a condition to the willingness of the Company to enter into the
Merger Agreement, the Company has required that each Stockholder agree, and in
order to induce the Company to enter into the Merger Agreement each Stockholder
has agreed, to enter into and be bound by the terms of this Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
1.1 "Parent Securities" shall mean all shares of any class of capital
stock of Parent and any other Parent securities entitled to vote generally for
the election of directors or on any other matter submitted to a vote of
securityholders, outstanding before and/or after the Merger, and any rights to
acquire Parent Securities or other Parent Securities or rights convertible into
or exchangeable or exercisable for the purchase of Parent Common Stock or such
other Parent voting securities.
1.2 "affiliate" shall mean present or future affiliates within the
meaning of Rule 405 of the Securities Act of 1933, as amended (the "Securities
Act").
1.
2
1.3 "beneficially owned" shall have the meaning set forth in Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
SECTION 2. STANDSTILL BY STOCKHOLDERS
2.1 RESTRICTIONS ON ACTIONS OF PARENT SECURITIES. Except as permitted by
Section 2.2 and subject to the terms of this Agreement, each Stockholder agrees
that, from the date hereof until the earlier to occur of (i) the date that is
five (5) years from the Closing Date, and (ii) the date on which the
Stockholders and their affiliates beneficially hold in the aggregate less than
five percent (5%) of the outstanding voting stock of Parent (such earlier date
being referred to as the "Termination Date"), it shall not (acting individually
or in conjunction with one or more other Stockholders) nor shall it permit any
of its affiliates to:
(a) acquire or offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise, any Parent Securities not already owned,
beneficially or of record, by the Stockholders as of the date hereof, except for
Parent Securities issued to the Stockholders in connection with any stock split
or other reclassification affecting the outstanding securities of Parent or
stock dividend or other pro rata distribution by Parent to holders of its
outstanding securities;
(b) solicit proxies or become a "participant" in a "solicitation"
(as such terms are defined in Regulation 14A under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) with respect to any matter involving
Parent or otherwise initiate, propose or solicit any stockholder, or induce any
other person to initiate any stockholder proposal or a tender offer for shares
of Parent Securities or any change of control of Parent, or for the purpose of
convening a stockholders' meeting of Parent;
(c) deposit any Parent Securities in any voting trust or subject
them to any voting agreement or other agreement of similar effect (other than
the Voting Agreements entered into in connection with the Merger Agreement);
(d) join any partnership, limited partnership, syndicate, or
other group for the purpose of acquiring, holding or disposing of Parent
Securities within the meaning of Section 13(d) of the Exchange Act;
(e) acquire or offer to acquire or hold, or agree to acquire or
hold, directly or indirectly or permit any person or entity under any
Stockholder's control to acquire, offer to acquire or hold, or agree to acquire
or hold, directly or indirectly, by purchase or otherwise, more than five
percent (5%) of any class of equity securities of any entity which is the
beneficial owner of more than five percent (5%) of the outstanding voting power
of Parent Securities; or
(f) otherwise take any action individually or jointly with any
partnership, limited partnership, syndicate, or other group or assist any other
person, corporation, entity or group in taking any action it could not
individually take under this Agreement.
2.
3
2.2 PERMITTED ACQUISITIONS.
(a) Notwithstanding the limitations imposed on the Stockholders
and their affiliates under Section 2.1 of this Agreement, one or more
Stockholders or their affiliates may acquire from time to time up to that number
of Parent Securities such that immediately following each such acquisition, the
total number of Parent Securities owned beneficially or of record by all
Stockholders and all of their respective affiliates together does not exceed
that percentage of the Common Stock of Parent (the "Maximum Percentage"),
calculated after giving pro forma effect to the exercise of all outstanding
options and warrants and the conversion of all outstanding securities
convertible into Common Stock of Parent, held by all Stockholders and their
affiliates immediately after the Effective Time. Any Stockholder or its
affiliates that acquire shares of Parent Securities under this Section 2 shall,
promptly following such acquisition, provide written notice of such acquisition
to Parent or, if such acquisition is prior to the Closing Date, to the Company.
(b) If, as a result of any purchase or other acquisition of
securities of Parent other than pursuant to the provisions set forth above in
Section 2(a), any Stockholder or affiliate thereof shall at any time own any
Parent Securities such that the total number of Parent Securities owned by all
Stockholders and their affiliates together exceeds the maximum percentage
permitted by this Section 2 (such excess securities so purchased or otherwise
acquired shall be referred to as "Prohibited Securities"), subject to the
provisions of all applicable securities laws, such Stockholder shall sell as
promptly as practicable Parent Securities having voting power at least equal to
the voting power of the Prohibited Securities. Prior to such sale, each
Stockholder agrees, and hereby grants Parent its irrevocable proxy, to vote the
Prohibited Securities in accordance with the recommendation of the Parent's
management in any matter submitted to a vote of the stockholders of Parent
(provided, however, that the foregoing paragraph shall not be deemed to limit
Parent's remedies in the event that Prohibited Securities were acquired in
violation of this Section 2). Notwithstanding the foregoing, if the aggregate
beneficial ownership of the Stockholders and their affiliates exceeds the
Maximum Percentage solely as a result of any stock repurchase or other action
effected by Parent or the Company which has the effect of reducing the number of
outstanding Parent capital stock, then securities of Parent held by the
Stockholders shall not be deemed to be Prohibited Securities and the provisions
of this Section 2.2(b) shall not be applicable to any such excess holdings.
SECTION 3. WAIVER OF RESTRICTIONS. The provisions of this Agreement may be
waived with respect to any proposed acquisition or transfer of Parent Securities
solely (i) after the Closing Date by Parent and (ii) prior to the Closing Date
by Parent and the Company, upon duly authorized action of their respective
Boards of Directors.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Each Stockholder hereby represents and warrants to Parent and the
Company as follows:
4.1 DUE AUTHORIZATION. Each Stockholder has full power and capacity to
execute and deliver this Agreement and to make the representations, warranties
and agreements herein
3.
4
and to perform such Stockholder's obligations hereunder. The Stockholders that
are parties to this Agreement represent all of the current affiliates of Capital
Partners, Inc. who own, beneficially or of record, Parent Securities.
4.2 ACKNOWLEDGMENT. Each Stockholder has carefully read this Agreement
and has discussed with counsel, to the extent such Stockholder felt necessary,
the requirements, limitations and restrictions on its ability to sell, transfer
or otherwise dispose of its Parent Securities and fully understands the
requirements, limitations and restrictions this Agreement places upon such
Stockholder's ability to transfer, sell or otherwise dispose of such Parent
Securities.
4.3 NO CONFLICTS. The execution and delivery of this Agreement by
Stockholder do not, and the performance of this Agreement by Stockholder will
not: (i) conflict with or violate any current law, order, decree or judgment
applicable to Stockholder or its affiliates or by which Stockholder, its
affiliates or any of their properties is bound or affected; or (ii) result in
any breach of or constitute a default (with notice or lapse of time, or both)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of any indenture or other loan document provisions or other
Contract, license, franchise, permit or other instrument or obligation to which
such Stockholder or any of its affiliates is a party or by which Stockholder,
its affiliate or any of their properties is bound or affected.
4.4 TITLE TO PARENT SECURITIES. Each Stockholder further represents that
it is the beneficial owner of the number of shares of Parent Securities set
forth below, which Parent Securities represent all Parent Securities owned
beneficially or of record by such Stockholder.
4.5 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Agreement are accurate in all respects as of the date of this
Agreement, will be accurate in all respects at all times through the
consummation of the Merger, and will be accurate in all material respects as of
the date of the consummation of the Merger as if made on that date.
Notwithstanding the previous sentence, the representations and warranties
contained in this Agreement shall expire on the Closing Date.
SECTION 5. MISCELLANEOUS
5.1 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such costs and expenses.
4.
5
5.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given by delivery in person, by facsimile,
cable, telegram, telex or other standard form of telecommunications, or by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows (or such other address for a party as shall be specified in
a notice given in accordance with this Section 5.2) and shall be deemed to have
been given one business day after transmission by facsimile, cable, telegram,
telex of other standard form of telecommunications or four days after deposit in
the U.S.
mail:
if to Stockholder:
Capital Partners, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxx 000 Xxxxxxxxx, XX 00000
if to Parent:
Storage Dimensions, Inc.
0000 XxXxxxxx Xxxx.
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
if to Company:
Artecon, Inc.
0000 Xx Xxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
5.
6
5.3 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
5.4 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto. This Agreement
shall terminate in the event the Merger Agreement is validly terminated pursuant
to its terms so long as any termination does not occur by reason of any breach
by Parent.
5.5 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of
Stockholder's rights, interests or obligations hereunder shall be assigned by
Stockholder (whether by operation of law or otherwise) without the prior written
consent of the Company and Parent. The Company and Parent may assign all or any
of their rights and obligations hereunder without the consent of any Person.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any Person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
5.6 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
5.7 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, as applied to contracts entered into and to
be performed entirely within the State of California.
5.8 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
6.
7
IN WITNESS WHEREOF, the Company, Parent and each Stockholder have caused
this Agreement to be executed, as of the date first written above.
ARTECON, INC.
By: /s/ XXXXX X. XXXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and CEO
STORAGE DIMENSIONS, INC.
By:/s/ XXXXX X. EEG
-------------------------------
Name: Xxxxx X. Eeg
Title: President and CEO
STOCKHOLDERS:
CP ACQUISITION, L.P. NO. 4A
By: /s/ A. XXXXXX XXXXXXX
-------------------------------
Name:
Title:
Parent Securities owned as of the date
of this Standstill Agreement:
1,676,440 shares of Common Stock
CP ACQUISITION, L.P. NO. 4B
By: /s/ A. XXXXXX XXXXXXX
-------------------------------
Name:
Title:
Parent Securities owned as of the date
of this Standstill Agreement:
926,790 shares of Common Stock
7.
8
CAPITAL PARTNERS, INC.
By: /s/ A. XXXXXX XXXXXXX
-------------------------------
Name:
Title:
Parent Securities owned as of the date
of this Standstill Agreement:
3,612 shares of Common Stock
FGS, INC.
By: /s/ A. XXXXXX XXXXXXX
-------------------------------
Name:
Title:
Parent Securities owned as of the date
of this Standstill Agreement:
293,781 shares of Common Stock
