Exhibit 10
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is made and entered into as of
the 31st day of December, 2004 by and among PACIFIC TECHNOLOGY GROUP, INC., a
Nevada corporation ("PTG"), HALCO INVESTMENTS, L.C., a Florida limited liability
company ("Halco") and nSTOR TECHNOLOGIES, INC., a Delaware corporation
("Optionee").
R E C I T A L S
WHEREAS, Optionee has reached an agreement with H. ▇▇▇▇▇ ▇▇▇▇ and
certain of his affiliates to convert approximately $9.1 million of debt of the
Optionee held by ▇▇. ▇▇▇▇ and his affiliates (the "Levy Debt") to 9,100 shares
of convertible preferred stock of the Optionee with a stated value of $1,000 per
share of preferred stock (the "Stated Value"), which convertible preferred stock
shall (i) accrue dividends at 5% per annum, (ii) be convertible into common
stock of the Optionee at a conversion price of $0.25 per share beginning on the
one year anniversary of the date of issuance and (iii) be redeemable by the
Optionee at a price per share equal to the Stated Value plus accrued and unpaid
dividends (the "Debt Conversion"); and
WHEREAS, the conversion of the Levy Debt is subject to the execution by
PTG and Halco of this Option Agreement; and
WHEREAS, PTG is the current record holder of 24,784,727 shares of the
issued and outstanding common stock, par value $0.01 per share (the "Common
Stock"), of Optionee; and
WHEREAS, PTG has agreed to grant to Optionee an irrevocable, exclusive
option to purchase 20,000,000 shares of the Common Stock (the "PTG Option
Shares") from PTG as contemplated by this Agreement, subject to the conversion
of the Levy Debt; and
WHEREAS, Halco is the current beneficial holder of 50,015,048 shares of
the issued and outstanding Common Stock of Optionee; and
WHEREAS, Halco has agreed to grant to Optionee an irrevocable, exclusive
option to purchase 48,000,000 shares of the Common Stock (the "Halco Option
Shares") from Halco as contemplated by this Agreement, subject to the conversion
of the Levy Debt;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Incorporation of Recitals. The above recitals are true and correct and are
incorporated herein as if set forth in full.
2. Options. Subject to the terms and conditions of this Agreement and the
conversion of the Levy Debt:
(a) PTG hereby grants to Optionee an irrevocable, exclusive
right, privilege, and option (the "PTG Option") to purchase the PTG Option
Shares for a purchase price of Twenty-Two Cents ($0.22) per share (the "Option
Price"); and
(b) Halco hereby grants to Optionee an irrevocable, exclusive
right, privilege, and option (the "Halco Option") to purchase the Halco Option
Shares for the Option Price.
3. Option Period. The PTG Option and the Halco Option shall be exercisable at
any time, or from time to time, on or prior to November 30, 2005 and shall
terminate on November 30, 2005 (the "Option Period").
4. Exercise
(a) Optionee may exercise the PTG Option and the Halco Option in
whole or in part. If exercised in part, the Optionee shall purchase Halco Option
Shares and PTG Option Shares pro rata, based on the total number of such shares
purchased by Optionee.
(b) This Option may be exercised by delivery of written notice of
exercise (the "Exercise Notice") to PTG and Halco on any business day, at their
principal offices, addressed to the attention of the person designated in
Section 8 hereof. The Exercise Notice shall specify the number of PTG Option
Shares and Halco Option Shares with respect to which this Option is being
exercised. If Optionee provides the Exercise Notice to PTG and Halco, the
parties agree to consummate the transaction at a closing ("Closing"), which
shall take place at such time and place as the parties may agree, but in any
event no less than three (3) nor more than thirty (30) days after the giving of
the Exercise Notice.
5. Payment for and Delivery of Shares. At closing, PTG and Halco shall cause a
certificate or certificates representing the PTG Option Shares and Halco Option
Shares to be delivered to Optionee, together with stock powers executed in favor
of Optionee and such other documentation as may be necessary to transfer title
to the PTG Option Shares and Halco Option Shares to Optionee, in form and
substance reasonably satisfactory to Optionee. In exchange for delivery of the
PTG Option Shares and Halco Option Shares, Optionee shall pay the Option Price
by wire transfer of immediately available funds to the accounts designated by
PTG and Halco.
6. Covenants and Representations of PTG.
(a) PTG is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to enter into and perform its obligations under
this Agreement.
(b) The execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby have been duly and validly
authorized by the Board of Directors of PTG and no other corporate proceedings
on the part of PTG are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby.
(c) This Agreement has been duly and validly executed and
delivered by PTG and constitutes a legal, valid and binding obligation of PTG,
enforceable against PTG and in accordance with its terms.
(d) The execution, delivery and performance of this Agreement by
PTG and the consummation by it of the transactions contemplated hereby do not
require the consent, waiver, approval, license or authorization of, or result
in the acceleration of any obligation under, or constitute a default under,
any term, condition or provision of PTG's organizational documents, or any
indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, ordinance, regulation or decree or any restriction to which PTG or
any property of PTG or its subsidiaries is bound.
(e) PTG holds of record and owns directly all of the PTG Option
Shares, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act of 1933, as amended, and state
securities laws), taxes, security interests, claims, liens, charges or other
encumbrances, options, warrants, purchase rights, contracts, commitments,
equities and demands. PTG is not a party to any option, warrant, purchase
right, or other contract or commitment that could require PTG to sell,
transfer, or otherwise dispose of the PTG Option Shares (other than this
Agreement). PTG is not a party to any voting trust, proxy, shareholders
agreement, or other agreement or understanding with respect to the voting of
the PTG Option Shares. Upon Closing, any PTG Option Shares delivered to
Optionee pursuant to this Agreement shall be delivered free and clear of all
security interests, claims, liens, charges or other encumbrances.
(f) Until the termination of the Option Period, PTG covenants and
agrees that it shall not, directly or indirectly, without the prior written
consent of Optionee (which consent shall be in Optionee's sole and absolute
discretion) sell, transfer, pledge, hypothecate or convey in any manner any of
the PTG Option Shares. PTG represents and warrants that it has no knowledge of
any Transfer (as defined below) or potential Transfer. The term "Transfer"
shall mean the sale, transfer or other disposition (whether by merger,
consolidation or otherwise) of all or any part of the PTG Option Shares.
(g) During the Option Period, the certificate of certificates
representing the PTG Option Shares, together with executed stock powers, shall
be held in escrow with ▇▇▇▇ ▇▇▇▇▇, PTG's attorney pursuant to the Escrow
Agreement of even date herewith.
7. Covenants and Representations of Halco.
(a) Halco is a limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation and has the
requisite power and authority to enter into and perform its obligations under
this Agreement.
(b) The execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby have been duly and validly
authorized by the Board of Directors of Halco and no other corporate proceedings
on the part of Halco are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby.
(c) This Agreement has been duly and validly executed and
delivered by Halco and constitutes a legal, valid and binding obligation of
Halco, enforceable against Halco and in accordance with its terms.
(d) The execution, delivery and performance of this Agreement by
Halco and the consummation by it of the transactions contemplated hereby do not
require the consent, waiver, approval, license or authorization of, or result in
the acceleration of any obligation under, or constitute a default under, any
term, condition or provision of Halco's organizational documents, or any
indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, ordinance, regulation or decree or any restriction to which Halco or
any property of Haclo or its subsidiaries is bound.
(e) Halco holds of record and owns directly all of the Halco
Option Shares, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act of 1933, as amended, and state securities
laws), taxes, security interests, claims, liens, charges or other encumbrances,
options, warrants, purchase rights, contracts, commitments, equities and
demands. Halco is not a party to any option, warrant, purchase right, or other
contract or commitment that could require Halco to sell, transfer, or otherwise
dispose of the Halco Option Shares (other than this Agreement). Halco is not a
party to any voting trust, proxy, shareholders agreement, or other agreement or
understanding with respect to the voting of the Halco Option Shares. Upon
Closing, any Halco Option Shares delivered to Optionee pursuant to this
Agreement shall be delivered free and clear of all security interests, claims,
liens, charges or other encumbrances.
(f) Until the termination of the Option Period, Halco covenants
and agrees that it shall not, directly or indirectly, without the prior written
consent of Optionee (which consent shall be in Optionee's sole and absolute
discretion) sell, transfer, pledge, hypothecate or convey in any manner any of
the Halco Option Shares. Halco represents and warrants that it has no knowledge
of any Transfer (as defined below) or potential Transfer. The term "Transfer"
shall mean the sale, transfer or other disposition (whether by merger,
consolidation or otherwise) of all or any part of the Halco Option Shares.
(g) During the Option Period, the certificate of certificates
representing the Halco Option Shares, together with executed stock powers, shall
be held in escrow with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Halco's attorney pursuant to the
Escrow Agreement of even date herewith.
8. Adjustments Upon Changes in Capitalization. In the event of any change in the
number of issued and outstanding shares of Optionee by reason of any stock
dividend, stock split, recapitalization, merger, rights offering, share exchange
or other change in the corporate or capital structure of Optionee, Optionee
shall receive, upon exercise of this Option, the number of PTG Option Shares and
Halco Option Shares to which Optionee would have been entitled if Optionee had
exercised the Option and had been a holder of record of the PTG Option Shares
and Halco Option Shares on the record date fixed for determination of holders of
shares of Common Stock entitled to receive such Common Stock and the Option
Price shall be adjusted appropriately.
9. Notices. All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given (two business days after) if
it is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to PTG: Copy to:
Pacific Technology Group, Inc. Pacific Holdings Group
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇▇ ▇▇▇
General Counsel General Manager
If to Halco:
c/o ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
Penthouse #01 ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Optionee: Copy to:
nStor Technologies, Inc. ▇▇▇▇▇▇▇▇▇ Traurig
▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇: H. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
10. Miscellaneous.
(a) In the event of any litigation arising out of this Agreement,
the prevailing party shall be entitled to recover all costs incurred in
connection therewith, including, but not limited to, all court costs and
reasonable attorneys' fees and paralegal fees and costs, whether incurred in a
court of original or appellate jurisdiction, or in any bankruptcy proceeding.
(b) This Agreement shall be binding on the parties hereto and
their respective successors and assigns; provided, however, that neither PTG nor
Halco shall have any right whatsoever to assign this Agreement, and any
attempted transfer by PTG or Halco shall be void ab initio.
(c) If any provision hereof shall for any reason be held to be
invalid, illegal, or unenforceable, in whole or in part or in any respect, then
and in either of those events, such provision only shall be held for naught and
shall not affect any other provision of this Agreement or the validity of the
remaining obligations and the remaining provisions of this Agreement shall
remain operative and in full force and effect and shall in no way be affected,
prejudiced, or disturbed thereby.
(d) This Agreement constitutes the entire agreement among the
parties regarding the conveyance of the PTG Option Shares and Halco Option
Shares described herein. None of the terms or provisions of this Agreement may
be changed, waived, modified, discharged, or terminated except by instrument in
writing executed by the party or parties against which enforcement of the
change, waiver, modification, discharge, or termination is asserted.
(e) Each of the parties acknowledges and agrees that the other
parties would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the parties agrees that the other parties
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the matter
(subject to the provisions set forth in Section 10(f) below), in addition to any
other remedy to which they may be entitled, at law or in equity.
(f) This Agreement shall be construed and enforced in accordance
with the laws of the State of Florida, without reference to choice of law
principles. Any suit, action or proceeding against any Party arising out of, or
with respect to, this Agreement or any judgment entered by any court in respect
thereof shall be brought in the courts of Palm Beach County, Florida or in the
U.S. District Court for the Southern District of Florida and each Party hereby
irrevocably (a) accepts and consents to the exclusive personal jurisdiction of
such courts for the purpose of any such suit, action or proceeding, (b) waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding
brought in such courts, and (c) waives any claim that any such suit, action or
proceedings brought in such courts has been brought in an inconvenient forum.
(g) This Agreement may be executed in any number of counterparts,
each of which, when executed, shall be deemed an original and all of which when
taken together shall be deemed one and the same instrument.
11. Jury Trial Waiver. PTG, HALCO AND OPTIONEE DO HEREBY KNOWINGLY, VOLUNTARILY,
IRREVOCABLY, UNCONDITIONALLY, AND INTENTIONALLY WAIVE THE RIGHT TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON. THIS
IRREVOCABLE WAIVER OF THE RIGHT TO A JURY TRIAL IS A MATERIAL INDUCEMENT FOR THE
PARTIES TO ENTER INTO THIS AGREEMENT.
IN WITNESS WHEREOF, PTG, Halco and Optionee have executed this Agreement
as of the day and year first above written.
PACIFIC TECHNOLOGY GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇
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Title: President
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HALCO Investments, L.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Manager
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nSTOR TECHNOLOGIES, INC.
By: /s/ H. ▇▇▇▇▇ ▇▇▇▇
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Name: H. ▇▇▇▇▇ ▇▇▇▇
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Title: Chairman of the Board
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