Document:

EXHIBIT 10.25

 

EXECUTION COPY

 

SUBSCRIPTION AGREEMENT
ENTERED INTO AT MONTRÉAL, QUÉBEC, AS OF March 29, 2007.

 

	
  AMONG:

  	
   

  	
  NEXSAN CORPORATION, a Delaware corporation, represented
  herein by Philip Black, acting as Chief Executive Officer, duly authorized
  for the purposes hereof as he so declares and having its head office in
  California;  

   

  (hereinafter referred to
  as the “Corporation”)

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  FONDS DE SOLIDARITÉ DES
  DU QUÉBEC (F.T.Q.),
  a public legal person duly constituted under the Act to establish the Fonds
  de solidarité des travailleurs du (F.T.Q.), represented herein by Jacques
  Bernier acting as Senior Vice-President, Information Technologies,
  Telecommunications and Industrial Innovations, duly authorized for the
  purposes hereof as they so declare and having its head office at 545 Crémazie
  Boulevard East, Suite 200, Montreal, Québec, H2M 2W4; (hereinafter referred to as “Fonds” or the “Investor”)

  

 

RECITALS:

 

WHEREAS the Corporation wishes to issue and sell
15,000,000 Series C Preferred Shares to the Investor and the Investor has
agreed to subscribe for the Subscribed Shares, the whole subject to the
provisions of this Agreement; and

 

WHEREAS it is the intention of the Parties that the
Investor holds, immediately following the purchase of the Subscribed Shares
herein contemplated, 11.93% of the shares of Common Stock of the Corporation on
an as-converted basis assuming the exercise or conversion of the Convertible
Securities set forth on the closing date capitalization table annexed hereto as
Schedule 1.1 (the “Closing Date
Capitalization Table”).

 

NOW
THEREFORE in
consideration of the mutual covenants and agreements contained in this
Agreement and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the Parties hereto agree as
follows:

 

 

ARTICLE 1

INTERPRETATION

 

1.1                                 Definitions

 

In this Agreement, unless
something in the subject matter or context is inconsistent therewith:

 

“Affiliate”
means with respect to any specified Person, any other Person who or which,
directly or indirectly, Controls, is Controlled by, or is under common Control
with such specified Persons;

 

“Agreement”
means this subscription agreement, including all Schedules hereto;

 

“Applicable
Legislation” means all applicable federal, state, provincial,
municipal or regional laws, statutes, rules, regulations, by-laws, orders,
judgements, decisions, policies, directives, standards, requirements,
injunctions, awards or decrees which are applicable to the Corporation or a
Subsidiary, as the case may be, their respective property, activities or
operations, including, the Environmental Legislation;

 

“Assureon
Product” refers to storage and/or software systems that incorporate
any of the products, software, technology, know-how, or invention technology,
know-how or inventions conceived or developed by or for, or licensed to, Nexsan
Technologies Canada, Inc., formerly known as, AESign Evertrust Inc., including
products marketed as Assureon Systems, Assureon Appliances or under any other
name, and including software that may be licensed with or without accompanying
hardware.

 

“August 2006 Promissory Notes” means each
of the 8% secured convertible subordinated bridge notes dated August 8, 2006
and issued by the Corporation to Beechtree Capital LLC, First Gen-E de
Consultoria SA, Ledgewood Properties, Inc. Profit Sharing Plan, RRE Ventures
Fund III, L.P., RRE Ventures III, L.P., RRE Ventures III-A, L.P., Sanders
Opportunity Fund, LP, Sanders Opportunity Fund (Inst) LP, Don A. Sanders,
Katherine U. Sanders, VantagePoint Venture Partners IV (Q), L.P., VantagePoint
Venture Partners IV Principals Fund, L.P., VantagePoint Venture Partners IV,
L.P., Wayne Kauth, and Don Weir & Julie Ellen Weir JT Ten;

 

“Board”
means the board of directors of the Corporation;

 

“Business Day”
means a day other than a Saturday, Sunday or other days that are statutory
holidays in the State of New York or in the Province of Quebec;

 

“Code”
means the Internal Revenue Code of 1986, as amended;

 

“Closing”
means the closing of the subscription, conversion, purchase and issuance of the
Subscribed Shares, as contemplated in Article 2 hereof and the concurrent
execution and delivery of the applicable Transactions Documents;

 

“Closing Date”
means March 29, 2007, or such other date as the parties hereto may agree upon;

 

“Closing Date
Capitalization Table” has the meaning ascribed thereto in the
recital hereto;

 

2

 

“Common Stock”
means the Corporation’s Common Stock, the rights, privileges, restrictions and
conditions of which are set out in the Restated Certificate;

 

“Company IP”
means Intellectual Property that is used in and material to the business of the
Corporation as currently conducted, excluding Mass Market Software;

 

“Control”
means with respect to any Person, (a) any other Person who has power, directly
or indirectly, either to (i) vote 50% or more of the securities having ordinary
voting power for the election of directors or managers of such Person, or (ii)
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise, or (b) any other Person who is a director,
officer, shareholder, member or partner who has 50% or more of the securities
having ordinary voting power for the election of directors or managers (i) of
such Person, (ii) of any subsidiary of such Person, or (iii) of any Person
described in the preceding clause (a).

 

“Convertible
Securities” means any right, unit, option, warrant or any other security
including, without limitation, any debenture, note or any other instrument or
agreement evidencing indebtedness of the Corporation including without limiting
the generality of the foregoing, the Terrapin Loan, which may be converted or
exchanged into or exercisable for shares of the Corporation or which carries a
right to acquire shares in the share capital of the Corporation;

 

“Default”
means:

 

(a)                                  the occurrence of an Insolvency Event; and

 

(b)                                 a material breach of any obligation of the
Corporation provided in any Transaction Document, including a material breach
or material inaccuracy of material representations and warranties provided
therein;

 

A breach referred to in
paragraph (ii) above shall not constitute a “Default” hereunder (unless such
breach is not curable) if the Corporation remedies such breach within 30 days
of knowledge of such breach.

 

“Employee”
means any individual who renders services to the Corporation under its
supervision and control, whether at full or part time, including, without
limitation, any officer, manager, employee, agent, trainee or student;

 

“Employee
Promissory Notes” means the Promissory Note, dated January 4, 2001,
issued by Diamond Lauffin, the Promissory Note, dated January 4, 2001, issued
by James Molenda, and the Promissory Note, dated January 4, 2001, issued by
Mohan Vachani, as amended, and the restricted stock purchase agreements, pledge
agreements and other instruments executed and delivered in connection
therewith.

 

“Encumbrances”
means a mortgage, a deed of trust, lien, loan, charge, an assignment in
guarantee, a security interest, a lien, a pledge, a security, a hypothec or any
other charge or encumbrance;

 

3

 

“Environmental
Legislation” means all applicable federal, state, provincial,
municipal, regional or foreign laws, statutes, rules, regulations, by-laws,
judgements, decisions, decrees, directives, standards, requirements,
injunctions, awards, orders, policies, permits, notices, approvals, licences,
certificates or other authorisations of any governmental authority in effect
relating to (a) the releases or threatened release of any pollutant,
contaminant or toxic or hazardous material, substance or waste, or petroleum,
or any fraction thereof (“Hazardous Substance”),
(b) pollution or protection of employee health or safety, public health or the
environment; or (c) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substance;

 

“ERISA”
has the meaning ascribed thereto in Section 4.9.7;

 

“Existing
Noteholders” means Beechtree Capital LLC, First Gen-E de Consultoria
SA, Ronald Greenberg, Wayne Kauth, Ed Klimerman & Janet Walden, Ledgewood
Properties, Inc. Profit Sharing Plan, Alfred Mandel, Brian Potiker, RRE
Ventures III L.P., RRE Ventures III-A, L.P., RRE Ventures Fund III L.P.,
Giovanni Saladino, Sanders Opportunity Fund, LP, Sanders Opportunity Fund
(Inst) LP, Don A. Sanders, Katherine U. Sanders, VantagePoint Venture Partners
IV, L.P., VantagePoint Venture Partners IV Principals Fund, L.P., VantagePoint
Venture Partners IV (Q), L.P., and Don Weir & Julie Ellen Weir JT Ten;

 

“Financial
Statements” has the meaning ascribed thereto in Section 4.5.1;

 

“GAAP”
means generally accepted accounting principles in the United States, as in
effect from time to time;

 

“Insolvency
Event” means the institution by the Corporation or a Subsidiary of
any proceeding to be adjudicated bankrupt or insolvent or to be dissolved or
wound up, or the consent of the Corporation or Subsidiary to the institution of
bankruptcy, insolvency, dissolution or winding-up proceedings against it, or
the filing of a petition, answer or consent seeking dissolution or winding-up
under any bankruptcy, insolvency or analogous laws and the failure by the
Corporation or Subsidiary to contest in good faith any such proceedings
commenced in respect of the Corporation or Subsidiary within forty-five days of
becoming aware thereof, or the consent by the Corporation or Subsidiary to the
filing of any such petition or to the appointment of a receiver, or the making
by the Corporation or Subsidiary of a general assignment for the benefit of
creditors, or the cessation by the Corporation or Subsidiary to carry on
business in its ordinary course;

 

“Intellectual
Property” or “IP” means, in
any jurisdiction: (i) patents and patent rights, and the subject matter
thereof; (ii) trademarks, trade names, service marks, brand names,
certification marks, trade dress and other indications of origin, whether
registered or not and the goodwill associated therewith; (iii) copyrights, whether
registered or not, and the subject matter thereof, including computer programs,
source codes, databases and the documentation therefor; (iv) trade secrets and
other confidential or non-public information including inventions, formulae,
compositions, inventor’s notes, discoveries and improvements, know-how,
manufacturing and production processes and techniques, research and development
information, drawings, schematics, specifications, plans, proposals and
technical data; (v) domain names, whether or not used or currently in service;
(vi) industrial designs; and (vii) registrations of, and applications to
register any of the foregoing, and any renewal, extension, reissue, division,
continuation, continuation in part, patent of addition, re-examination,
derivation or modification thereof;

 

4

 

“Investor”
has the meaning ascribed thereto in the recital hereto;

 

“IP
Assignment Agreements” has the meaning ascribed thereto in Section
4.9.10;

 

“January 2006 Promissory Notes” means each
of the 8% secured convertible subordinated promissory notes dated January 27,
2006 and issued by the Corporation to means Beechtree Capital LLC, First Gen-E
de Consultoria SA, Ronald Greenberg, Wayne Kauth, Ed Klimerman & Janet Walden,
Ledgewood Properties, Inc. Profit Sharing Plan, Alfred Mandel, Brian Potiker,
RRE Ventures III L.P., RRE Ventures III-A, L.P., RRE Ventures Fund III L.P.,
Giovanni Saladino, Sanders Opportunity Fund, LP, Sanders Opportunity Fund (Inst)
LP, Don A. Sanders, Katherine Sanders, VantagePoint Venture Partners IV, L.P.,
VantagePoint Venture Partners IV Principals Fund, VantagePoint Venture Partners
(Q), L.P., and Don Weir & Julie Ellen Weir JT Ten;

 

“Key
Employees” means Thomas Gosnell and the Corporation’s CEO and CFO
from time to time;

 

“Knowledge”
where any representation or warranty contained in this Agreement is expressly
qualified by reference to “knowledge”, it
shall be deemed to refer to the actual knowledge of the Person making the
representation or warranty and, to the extent that such Person does not possess
sufficient knowledge of the facts or matters relating to any such
representation or warranty, such Person has obtained and/or confirmed the truth
of the same through reasonable inquiries of other Employees of the Corporation
who, having regard to their positions, job descriptions and responsibilities,
should reasonably be expected to have and disclose knowledge and information
relevant to the representation and warranty in question. The knowledge of the
Corporation shall only include the knowledge of the officers, directors and
managers of the Corporation;

 

“Mass Market
Software” means software available at retail, the loss of use of
which would not have a material adverse effect upon the business of the
Corporation;

 

“Material
Contract” means any contract, agreement, lease, commitment or other
instrument, whether written or oral, to which the Corporation is a party or by
which it is bound and (a) which is related to the Company IP that is owned by or
exclusively licensed to the Corporation or (b) which requires the provision by
the Corporation to any Person of goods or services having a fair value in
excess of $100,000;

 

“Nexsan
Canada” means Nexsan Technologies Canada Inc.;

 

“Parties”
means collectively the Investor and the Corporation;

 

“Person”
means any individual, company or corporation with or without share capital,
partnership, limited liability company, joint venture, association, trust,
unincorporated organisation, trustee, executor, administrator or other legal
personal representative, regulatory body or agency, government or governmental
agency, authority or entity however designated or constituted;

 

5

 

“Preferred
Stock” means the Series A Preferred the Series B Preferred Stock and
the Series C Preferred Stock;

 

“Product”
means the products which are listed on Schedule 4.4.20;

 

“Registration
Rights Agreement” means the Third Amended and Restated Registration
Rights Agreement dated as of the date hereof between Fonds, VantagePoint
Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P.,
VantagePoint Venture Partners IV Principals Fund, L.P., Ventures LLC, RRE Ventures
III L.P., RRE Ventures III-A, L.P., First Gen-e-Servicios de Consultoria SA and
the Corporation and the other parties named therein, if any;

 

“Restated
Certificate” means the second amended and restated certificate of
incorporation dated on or about the date hereof and attached hereto as Schedule
1.2;

 

“Securities
Act” means the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder;

 

“Series A
Preferred Stock” means the Corporation’s Series A Convertible
Preferred Stock, $0.001 par value, the rights, privileges, restrictions and
conditions of which are set out in the Restated Certificate;

 

“Series B
Preferred Stock” means the Corporation’s Series B Convertible
Preferred Stock, $0.001 par value, the rights, privileges, restrictions and
conditions of which are set out in the Restated Certificate;

 

“Series C
Preferred Stock” means the Corporation’s Series C Convertible
Preferred Stock, $0.00001 par value, the rights, privileges, restrictions and
conditions of which are set out in the Restated Certificate;

 

“Series C
QIPO” has the meaning ascribed to such terms in the Restated
Certificate;

 

“Shareholders’
Agreement” means the second amended and restated stockholders
agreement executed as of the date hereof among the Corporation, Fonds,
VantagePoint Ventures Partners IV (Q), L.P., VantagePoint Venture Partners IV,
L.P., Vantage Point Ventures Partners IV Principals Fund, L.P. and RRE Ventures
III LP, RRE Ventures Fund III L.P., RRE Ventures III-A, L.P., and the other
parties, thereto, if any.

 

“Stock Option
Plan” means the Nexsan Corporation 2001 Stock Plan, as amended from
time to time;

 

“Subscribed
Shares” has the meaning ascribed thereto in Section 2.1

 

“Subscription
Price” has the meaning ascribed thereto in Section 2.1

 

“Subsidiary”
means any legal entity presently or in the future Controlled by the
Corporation;

 

“Terrapin
Conversion” has the meaning ascribed to such term in Section 3.6;

 

6

 

“Terrapin
Loan” has the meaning ascribed to such term in Section 7.2.1(c); and

 

“Transaction
Documents” means:

 

(a)                                  this Agreement;

 

(b)                                 the Shareholders’ Agreement;

 

(c)                                  the Registration Rights Agreement; and

 

(d)                                 Share Subscription.

 

1.2                                 Recital
And Schedules

 

The
recitals and following Schedules form an integral part of this Agreement:

 

Schedule
1.1                                                                             Closing Date Capitalization Table

 

Schedule
1.2                                                                             Restated Certificate

 

Schedule
3.3.4                                                                    Form of Declaration

 

Schedule
4.1.2                                                                    List of Subsidiaries

 

Schedule
4.1.3                                                                    By-laws

 

Schedule
4.1.5                                                                    Post Closing Capitalization Table

 

Schedule
4.1.6                                                                    Company Plans

 

Schedule
4.1.8                                                                    Business Locations

 

Schedule
4.1.11                                                              Consents

 

Schedule
4.4.1                                                                    Company IP

 

Schedule
4.4.2                                                                    Third Party IP Rights

 

Schedule
4.4.4                                                                    Employee IP Rights

 

Schedule
4.4.6                                                                    Restrictions on Company IP

 

Schedule
4.4.7                                                                    Infringement

 

Schedule
4.4.8                                                                    Infringement of Company IP

 

Schedule
4.4.10                                                              Non-Compliance

 

Schedule
4.4.11                                                              Royalties

 

7

 

Schedule
4.4.12                                                              No Conflict

 

Schedule
4.4.13                                                              Government Rights to Company IP

 

Schedule
4.4.18                                                              Warranties

 

Schedule
4.4.19                                                              Non-Competition Agreement

 

Schedule
4.4.20                                                              Products

 

Schedule
4.5.1                                                                    Financial Statements

 

Schedule
4.5.2                                                                    Encumbrances

 

Schedule
4.5.3                                                                    Indebtedness

 

Schedule
4.5.4                                                                    Other Indebtedness

 

Schedule
4.5.7                                                                    Conduct of the Business

 

Schedule
4.5.8                                                                    List of accounts with financial institutions

 

Schedule
4.6.1                                                                    Material Contracts

 

Schedule
4.8                                                                             Proceedings

 

Schedule
4.9.1                                                                    Employee Contracts

 

Schedule
7.2.4                                                                    Form of CFO Confirmation

 

1.3                                 Headings

 

The inclusion of headings in
this Agreement is for convenience of reference only and shall not affect the
construction or interpretation hereof.

 

1.4                                 Gender
and Number

 

In this Agreement, unless
the context otherwise requires, words importing the singular include the plural
and vice versa and words importing gender include all genders.

 

1.5                                 Time
Periods

 

Unless otherwise specified,
time periods within or following which any payment is to be made or act is to
be done shall be calculated by excluding the day on which the period commences
and including the day on which the period ends and by extending the period to
the next Business Day following if the last day of the period is not a Business
Day

 

8

 

1.6                                 Business
Days

 

If any payment is required
to be made or other action is required to be taken pursuant to this Agreement
on a day which is not a Business Day, then such payment or action shall be
required to be made or taken on the next Business Day.

 

1.7                                 Including

 

Where the word “including”
or “includes” is used in this Agreement, it means “including (or includes)
without limitation”.

 

1.8                                 Currency

 

Except where otherwise
expressly provided, all amounts in this Agreement are stated and shall be paid
in the currency of the United States.

 

1.9                                 Invalidity
of Provisions

 

Each of the provisions contained
in this Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof.

 

1.10                           Entire
Agreement

 

This Agreement constitutes
the entire agreement between the Parties pertaining to the subject matter
hereof and replaces all prior contracts, agreements, commitments and
undertakings relating to the subject matter hereof, including the letter of
offer dated December 22, 2006.

 

ARTICLE 2

SUBSCRIPTION

 

2.1                                 In
consideration of the covenants, representations, warranties and undertakings
set out herein, Fonds hereby subscribes on the Closing Date for 15,000,000
shares of Series C Preferred Stock (the “Subscribed Shares”)
at a price of $0.50 per share, for a total consideration of $7,500,000 (the “Subscription Price”).

 

2.2                                 The
Corporation accepts the subscription for the Subscribed Shares referred to in
Section 2.1, and agrees, subject to the terms and conditions of this Agreement,
to issue 15,000,000 shares of Series C Preferred Stock for the Subscription
Price.

 

2.3                                 The
subscription contemplated by this Article 2 shall be subject the conditions
precedent set forth in Section 7.2 and any other conditions set forth in this
Agreement and the Transaction Documents.

 

9

 

ARTICLE 3

OBLIGATIONS OF THE CORPORATION

 

3.1                                 As
of the date hereof, for so long as the Investor holds at least twenty percent
(20%) of the Series C Preferred Shares originally issued to it (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
capitalization changes and like events), the Corporation covenants, represents
and warrants that the Corporation and its Subsidiaries will comply with the
following obligations and acknowledges that the Investor is relying on these
covenants for the purpose of its subscription:

 

3.1.1                      The
Corporation shall make a capital contribution to Nexsan Canada in an amount not
less than $2,000,000 to be used by Nexsan Canada only for its ongoing
operations.

 

3.1.2                      The
Corporation shall use the balance of the Subscription Price to (i) fund the
development of the Assureon Product and (ii) fund the global commercialisation
of the Assureon Product.

 

3.1.3                      The
Corporation shall obtain adequate insurance policies within 30 days from the
date hereof covering directors’ civil liability, including a proper error and
omission coverage and a proper coverage in case of insolvency of the
Corporation, for a minimum coverage of $2 millions to the entire satisfaction
of the Fonds and shall maintain such insurance policies.

 

3.1.4                      The
Corporation shall maintain adequate insurance policies of the following types:

 

(a)                                  covering
its assets as well as any loss of income in the event of business interruption
and regarding the Corporation’s civil liability; and

 

(b)                                 to the extent
available or at commercially reasonable terms and at reasonable rates as
determined by the Board, life insurance policy on the life of each of Thomas
Gosnell and Philip Black in the minimum amount of US$1,000,000 per person, the owner and beneficiary of
which shall be the Corporation, free of all Encumbrances.

 

3.1.5                      The
Corporation and any subsidiary shall maintain adequate general insurance
coverage and liability insurance on their assets and shall make such amendments
to their insurance coverage as the Board may deem necessary from time to time;

 

3.1.6                      The
Corporation shall adopt and maintain in full force and effect an
indemnification by-law for its directors providing the maximum indemnification
permitted by the Applicable Legislation;

 

3.1.7                      The Corporation
shall reflect in its financial statements any and all of its transactions,
agreements and undertakings as required by and in accordance with GAAP,
consistently applied;

 

10

 

3.1.8      The
Corporation shall comply with the obligations set forth in the Shareholders’
Agreement as amended from time to time;

 

3.1.9      The
Corporation shall comply with the Applicable Legislation in all material
respects and obtain and renew all material permits, certificates, licenses,
patents, trademarks and other authorisations required to conduct its business;

 

3.1.10    The
Corporation shall use commercially reasonable efforts to ensure that each
person, the services of which are to be retained after the date of this
Agreement by the Corporation, or by any Subsidiary thereof, either as an
Employee, consultant or independent contractor, and who will have access to any
of trade secrets or other confidential information that is used in and material
to the business of the Corporation or Subsidiary (as the case may be) as then
conducted, executes a non-disclosure and confidentiality undertaking with
respect to such trade secrets or confidential information and that each such
Employee located in Canada executes a non competition clause and that each such
Employee regardless of location executes a non-solicitation clause in
accordance with the guidelines adopted from time to time by the Board;

 

3.1.11    The
Corporation shall use commercially reasonable efforts to ensure that each
Person, the services of which are to be retained after the date of this
Agreement by the Corporation, or by any Subsidiary thereof, either as an
Employee, consultant or independent contractor, and who will be responsible for
or participate in the development of any of the Intellectual Property (other
than Intellectual Property that is licensed to the Corporation) that is used in
and material to the business of the corporation or the Subsidiary (as the case
may be) as then conducted, executes an IP Assignment Agreement; and

 

3.1.12    The
Corporation shall send to the Fonds a written notice of the Terrapin Conversion
within ten (10) days of such conversion.

 

3.2                               Representatives
of the Investor will have the right during normal business hours to examine the
books and records of the Corporation, to make copies, notes, and abstracts therefrom, to discuss the Corporation’s
affairs with the officers, directors, Key Employees, and accountants of the
Corporation, and to make or cause to be made an independent examination and/or
audit (at such investor’s expense) of the books and records of the Corporation.

 

3.3                               The Corporation shall provide to the Fonds, at no charge, on behalf of itself and each
of its Subsidiaries, the following documentation:

 

3.3.1                      Within 180
days following the end of each fiscal year, the annual audited consolidated
financial statements of the Corporation, as well as the auditor’s report with
respect to any non arm’s length transaction, if any, thereon. “Financial Statements” mean financial statements of the
Corporation and its Subsidiaries, on a consolidated basis or in a non
consolidated basis, if any, prepared in accordance with GAAP;

 

11

 

3.3.2                      Within 30 days following the end of each month, the unaudited
monthly financial statements;

 

3.3.3                      No later than 30 days before
the end of each fiscal year, an annual operations and capital expenditures
budget which must be approved by the Board;

 

3.3.4                      At each meeting of the Board, a declaration of the CEO or CFO regarding
directors’ statutory liabilities true to the form submitted by the Fonds in the
form annexed hereto as Schedule 3.3.4;

 

3.3.5                      Within 20 days following each meeting of
the Board, a copy of the minutes of said meeting;

 

3.3.6                      Promptly following receipt thereof, a copy of any notice, letter or
other document informing the Corporation of the institution of any material
legal proceedings or contestation against the Corporation or any legal
proceedings or contestation against the Corporation involving individually or
in the aggregate amount $100,000;

 

3.3.7                      Promptly following receipt thereof, confirmation of renewal or
non-renewal, as the case may be, of any insurance policy of which the
Corporation is beneficiary;

 

3.3.8                      Promptly upon receipt, a copy of any notice, letter or other document
advising the Corporation of any material violation of any law, regulation,
policy or other requirement of any authority, or the occurrence of any event of
default pursuant to a Material Contract to which the Corporation is a party;
and

 

3.3.9                      Within a reasonable delay, depending on the circumstances, any other
document or information reasonably required by the Fonds.

 

3.4         The
Corporation shall comply with the Applicable Legislation in all material
respects and obtain and renew all permits, certificates, licenses, patents,
trademarks and other authorisations required to conduct its business.

 

3.5         For
so long as the Fonds is a shareholder of the Corporation, the Corporation
agrees, for the benefit of all Employees residing in Quebec, to:

 

3.5.1                      Contribute,
from the date of this Agreement, to the purchase of shares of the Fonds at the
rate of one dollar ($1.00) for each dollar invested by each such Employee, up
to a maximum amount of two hundred fifty dollars ($250.00) per employee, per
year;

 

3.5.2                      Establish a
payroll deduction mechanism enabling such Employees to purchase shares in the
Fonds through direct payroll deductions;

 

3.5.3                      Establish a
system to enable such Employees of the Corporation to benefit from provincial
and federal tax advantages with respect to such Employees’ subscription for
shares of the Fonds;

 

12

 

3.5.4                      From
the date of this Agreement, contribute to the “Fondation de la formation
économique du Fond de solidarité FTQ” (Economic Training Foundation), in the
amount of forty dollars ($40.00) (plus taxes), per each such Employee, per
year, said amount being payable each year within thirty (30) days of the
Corporation’s financial year end; and

 

3.5.5                      Collaborate
with the Fonds in order to furnish to the Fonds all necessary information
required to determine (i) the number of jobs created or maintained in the
Province of Québec and (ii) the economic impact both resulting from the purchase
of the Subscribed Shares by the Fonds.

 

3.6                                 In addition to and not
in limitation of any other rights of the Investor under the Restated
Certificate or the Shareholders’ Agreement, if (i) the Terrapin Loan is
converted in accordance with its terms to shares of Common Stock or Convertible
Securities (the “Terrapin Conversion”) or (ii)
there shall have existed on the Closing Date, immediately prior to the Closing,
any issued and outstanding shares of Common Stock or Convertible Securities
other than those referred to or identified in the Closing Date Capitalization
Table (“Undisclosed Shares”), then, in either
such event, the Corporation shall so notify the Investor (the “Adjustment Notice”). The Adjustment Notice shall include (A)
in case of the Terrapin Conversion, the
number of shares of Common Stock or Convertible Securities issued upon such
conversion and (B) in the case of Undisclosed Shares, the number and type of
Undisclosed Shares, as well as a calculation by the Corporation of the
percentage of the voting and participating shares of the Corporation the
Investor would have owned as of the Closing Date (calculated in the manner used
in determining the percentage ownership of the Investor as set forth in Section
4.1.12) if the Terrapin Conversion or the issuance of the Undisclosed Shares
had occurred immediately prior to the Closing and had been reflected on the
capitalization table attached hereto as Schedule 4.1.5 (the “Adjusted Percentage”). In the event the Adjusted Percentage
(calculated in the manner set forth on Schedule 4.1.5) is less than
11.93% (the ”Agreed Percentage”),
then the Corporation shall forthwith (and in no event later than ten (10)
Business Days following delivery of the Adjustment Notice) issue to the
Investor an additional number of Series C Preferred Shares (which shall for all
purposes of this Agreement be deemed “Subscribed Shares”
and which shall be deemed to have been paid for upon payment of the
Subscription Price) such that, giving effect to the issuance of such additional
Series C Preferred Shares immediately after the Closing as of the Closing Date,
the Investor would have held 11.93% of the voting and participating shares of
the Corporation on an as-converted basis assuming the exercise or conversion of
the Convertible Securities reflected on the capitalization table annexed hereto
as Schedule 4.1.5 (calculated in the same manner used in Schedule
4.1.5 but for the addition of the Undisclosed Shares or the shares issued
upon the Terrapin Conversion, as the case may be).

 

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE CORPORATION

 

The Corporation represents
and warrants to the Investor the following representations and warranties. It
is acknowledged that the Investor is relying upon said representations and
warranties for the purpose of the transactions herein contemplated, and that
each of them constitutes an essential condition to the subscription by the
Investor. For the purposes of this Article 4, “Corporation” shall include any
Subsidiary, unless the context requires otherwise.

 

13

 

4.1                                 As
to the Legal Status

 

4.1.1                      The
Corporation is duly constituted, organized and validly subsisting and in good
standing under the laws of the State of Delaware and has the capacity, the power
and is duly qualified to own or lease its assets and to carry on its business
as it presently does and each of its Subsidiaries is duly constituted,
organized and validly subsisting and in good standing under the laws of its
jurisdiction and has the capacity, the power and is duly qualified to own or
lease its assets and to carry on its business as it currently does.

 

4.1.2                      The Subsidiaries listed in Schedule
4.1.2 are all the Subsidiaries. Except for the Exchangeable Shares held by
Thomas Gosnell in 6360319 Canada Inc., the Corporation is the sole registered
and beneficial owner of all of the issued and outstanding shares in the capital
of each of the Subsidiaries, except as set forth on Schedule 4.1.2 free
and clear of all Encumbrances. The Corporation does not own, or have any
interest in any share or have an ownership interest in any other Person other
than its shareholdings in the Subsidiaries.

 

4.1.3                      Schedule
1.2 and Schedule 4.1.3 contain a complete and certified copy of the
Restated Certificate and by-laws of the Corporation, as amended, in force as
of the date hereof and there are no undertakings to amend such certificate
or by-laws.

 

4.1.4                      The Corporation has reserved
13,083,878 shares of Common Stock for issuance to officers, directors, Employees
and consultants of the Corporation, and each of its Subsidiaries, pursuant to
the Stock Option Plan duly adopted by the Board and approved by the Corporation’s
stockholders. Of such reserved shares of Common Stock, 4,237,500 shares have
been issued pursuant to restricted stock purchase agreements and 4,076,176
shares are issuable upon the exercise or have been granted and are currently
outstanding, and 4,770,202 shares of Common Stock remain available for issuance
to officers, directors, Employees and consultants pursuant to the Stock Option
Plan. The Corporation has furnished to the Investor complete and accurate
copies of the Stock Option Plan and forms of agreements used thereunder. The
Corporation has no stock option plan other than the Stock Option Plan.

 

4.1.5                      Schedule
4.1.5 sets forth the capitalization of the Corporation, excluding its
Subsidiaries, immediately following the Closing, including the number of shares
of the following: (i) issued and outstanding shares of Common Stock, including,
with respect to restricted shares of Common Stock, vesting schedule and
repurchase price; (ii) issued stock options, including vesting schedule and
exercise price; (iii) issued and outstanding shares of each series of Preferred
Stock; and (iv) each Convertible Securities, including exercise period and 

 

14

 

exercise price, if any. Except
for (A) the conversion privileges of the Subscribed Shares to be issued under
this Agreement, (B) the rights provided in the Shareholders’ Agreement, (C) the
conversion privileges of the Series A Preferred Stock and Series C Preferred
Stock and (D) the securities and rights described in Section 4.1.4 and Schedule
4.1.5, there are no outstanding options, units, warrants, rights (including
conversion or preemptive rights and rights of first refusal or similar rights)
or agreements, orally or in writing, to purchase or acquire from the
Corporation any shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, or any securities convertible into
or exchangeable for shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock. All of the Subsidiaries of the
Corporation are wholly-owned by the Corporation directly or indirectly, except
as set forth on Schedule 4.1.2.

 

4.1.6                      Except as
set forth on Schedule 4.1.6., (i) none of the Corporation’s stock option
agreements contain a provision for acceleration of vesting or other changes in
the vesting provisions or other terms of such agreement or understanding upon
the occurrence of any event or combination of events; (ii) the Corporation has
never adjusted or amended the exercise price of any stock options previously
awarded, whether through amendment, cancellation, replacement grant, repricing,
or any other means; and (iii) the Corporation has no obligation (contingent or
otherwise) to purchase or redeem any of its capital stock.

 

4.1.7                      No stock options, stock
appreciation rights or other equity-based awards issued or granted by the
Corporation are subject to the requirements of Section 409A of the Code. Each “nonqualified
deferred compensation plan” (as such term is defined under Section 409(A)(d)(1)
of the Code and the guidance thereunder) under which the Corporation makes, is
obligated to make or promises to make, payments (each, a “409A Plan”) complies in all material respects, in both form and operation, with the
requirements of Section 409A of the Code based on a reasonable, good-faith
interpretation of Section 409A of the Code and the guidance thereunder. No
payment to be made under any 409A Plan is, or to the knowledge of the
Corporation will be, subject to the penalties of Section 409A(a)(1) of the Code.

 

4.1.8                      The Corporation’s principal establishment is presently situated in Los
Angeles County, California and the Corporation and its Subsidiaries have places
of business in the locations set forth on Schedule 4.1.8.

 

4.1.9                      The Corporation has the capacity, the power and is duly qualified to
enter into this Agreement and the other Transaction Documents and to perform
its obligations hereunder and thereunder. These agreements have been duly
signed by an authorized representative of the Corporation and they do not
contravene any Applicable Legislation and each of these agreements is a valid
and binding obligation of the Corporation, enforceable in accordance with its
respective terms subject to usual reservations relating to solvency and
unenforceable rights.

 

15

 

4.1.10                Neither
of the execution or delivery of the Transaction Documents, the issuance of the
Subscribed Shares nor the performance by the Corporation of any of its
obligations under the Transaction Documents will be in conflict, contravene,
breach or result in any default under the Restated Certificate, by-laws,
constating documents or other organizational documents of the Corporation or,
upon receipt of the consents referred to in Schedule 4.1.11, under any
mortgage, lease, agreement, other legally binding instrument, license, permit,
statute, regulation, order, judgment, decree or law to which the Corporation is
a party or by which the Corporation may be bound or be subject.

 

4.1.11                No authorization,
consent or approval of, or filing with or notice to, any governmental agency,
regulatory body, court or any other Person is required of the Corporation in
connection with the execution, delivery or performance of the Transaction
Documents by the Corporation or the issuance of any of the Subscribed Shares,
except for the consents set forth on Schedule 4.1.11.

 

4.1.12    Upon
the issuance of the Subscribed Shares, the Investor will own shares which
represent 11.93% of the voting and participating shares of the Corporation
calculated in the manner set forth on Schedule 4.1.5.

 

4.1.13    The Corporation is not
aware of nor has taken any action, directly or indirectly, that would result in
a violation by the Corporation of the Foreign Corrupt Practices Act (the “FCPA”), including, without limitation, making use of the mails or any
means or instrumentality of interstate commerce corruptly in furtherance of an
offer, payment, promise to pay or authorization of the payment of any money, or
other property, gift, promise to give, or authorization of the giving of
anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA. No action, suit or
proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Corporation with respect to the financial
recordkeeping and reporting requirements and money laundering statutes and the
rules and regulations thereunder applicable to the Corporation, and any related
or similar rules, regulations or guidelines applicable to the Corporation,
issued, administered or enforced by any governmental agency, is pending or, to
the best knowledge of the Corporation, threatened. The Corporation is not
currently subject to any sanctions administered by the Office of Foreign
Control of the U.S. Department of the Treasury.

 

4.2         As
to the Operations

 

4.2.1                      The
corporate minute books of the Corporation record accurately, in all material
respects, all material decisions of the Board and of the shareholders of the
Corporation taken at a meeting of the Board or by written consent thereof. All
transactions reflected therein have been duly approved in accordance with any
shareholders’ agreement then in force. To the Knowledge of the Corporation, the
copy of the minute books of the Corporation provided to the Investor contains
minutes of all regular and special meetings of the directors and shareholders
since the date of incorporation.

 

16

 

4.2.2                      The accounting books and records of the Corporation and its
Subsidiaries, are true and correct in all material respects and present
accurately the financial situation of the Corporation and its Subsidiaries and their operating results for the relevant
financial periods, in accordance with GAAP, and, to the Knowledge of the
Corporation, all the material transactions of the Corporation (including any
transaction not effected in the ordinary course of business) have been duly
reflected in such books and records.

 

4.2.3                      Except where the Corporation’s failure or any Subsidiary’s to be so
qualified would not have a material adverse effect, the Corporation and each of
its Subsidiaries is duly qualified to carry on business in all jurisdictions in
which it possesses assets or conducts and carries on business, and the
Corporation complies and has complied with Applicable Legislation and owns or
has the right to use all permits, licenses, and all other authorisations
required to conduct its business as it is now being conducted and complies with
said permits, licenses, and authorisations.

 

4.2.4                      The operations, equipment, buildings, immovables and the property that
the Corporation and each of its Subsidiaries owns, leases or occupies are in
compliance in all material respects with Applicable Legislation, including,
without limitation, applicable Environmental Legislation and to the Corporation’s
Knowledge, there are no facts known by the Corporation that would be reasonably
likely to give rise to a notice of material non-compliance with Applicable
Legislation.

 

4.2.5                      The Corporation has never received a notice of infraction, been found
guilty of an offence, been subjected to any judgment, injunction or other
proceeding, been imposed a fine or otherwise sentenced for non-compliance with
Environmental Legislation or settled prosecution or other proceeding short of
conviction in connection therewith for which any outstanding or unresolved
damages exist. The Corporation is in compliance in all material respects with
Environmental Legislation.

 

4.2.6                      The Corporation has never received any written notice or request for
information in the context of any federal, state, provincial, regional or
municipal enquiry or inspection in environmental matters and the Corporation
has no Knowledge of any facts that would be likely to give rise to any notice
that the Corporation is potentially responsible for any remedial action under
Environmental Legislation.

 

4.2.7                      There is no action, claim, suit or proceeding, pending or, to the
Knowledge of the Corporation, threatened against the Corporation, its
Employees, agents, shareholders and directors, or involving the Corporation or
its assets relating to environmental matters before any court, tribunal,
commission, agency or other governmental entity and, to the best of the
Knowledge of the Corporation, there is no event or fact based on which such
action, suit or proceedings may be instituted.

 

17

 

4.2.8                      To the best of its Knowledge and except as disclosed in any Schedule to
this Agreement, there is no event related specifically to the operations of the
Corporation which is reasonably likely to have a material negative impact on
the business or income of the corporation other than economic events affecting
businesses in general.

 

4.3         Assets

 

4.3.1                      The
Corporation does not own any immovable property.

 

4.3.2                      The Corporation or a Subsidiary
presently leases premises at 21700 Oxnard Street, Suite 1850, Woodland Hills,
California and the locations listed on  Schedule
4.1.8. Except as set forth on Schedule 4.1.8 the Corporation has not
received any notice, nor is it aware of any information which would reasonably
lead it to conclude that the Corporation or such Subsidiary may not use said
premises.

 

4.3.3                      All leased premises,
machinery, equipment, rolling stock, office furniture and improvements to
leased premises, whether owned or used by the Corporation or a Subsidiary, are
in good repair and in good working order for the purposes of ongoing operation,
subject to ordinary wear and tear for machinery and equipment of comparable age.
Such assets are used in compliance in all material respects with all Applicable
Legislation and are free and clear of all Encumbrances.

 

4.3.4                      The inventory of the Corporation is in good condition and is not
obsolete other than to the extent reserves have been established in accordance
with GAAP and reflected in the Financial Statements.

 

4.4         As
to the Intellectual Property

 

4.4.1                      Schedule 4.4.1 hereto sets
forth a complete and accurate description of all issued patents, pending patent
applications and registrations and pending applications for other Intellectual
Property owned or filed by the Corporation. Except as set out in Schedule 4.4.1, the Corporation is the sole
and exclusive and record owner of such patents, registrations and applications,
and such patents, registrations and applications are held by the Corporation
free and clear of any and all Encumbrances whatsoever and have not expired,
been cancelled, or lapsed for failure to be renewed or maintained or maintain
fees paid. To the Knowledge of the Corporation, all the true authorship or
inventorship were correctly named in the applications or registration for the
Company IP filed by the Corporation.

 

4.4.2                      Schedule 4.4.2
hereto sets forth a complete and accurate list of the agreements pursuant to
which Company IP is owned by Persons other than the Corporation and is licensed
to the Corporation.

 

18

 

4.4.3                      The Corporation owns or has a right to use the Company IP as it is
currently being in the business of the Corporation and the Company IP
constitutes all of the Intellectual Property necessary for the proper carrying
on of the Corporation’s business as currently conducted.

 

4.4.4                      Except as set forth in Schedule 4.4.4, to the Knowledge of the
Corporation no director, shareholder, Employee, consultant or independent
contractor of the Corporation or any other Person holds any rights in the Company
IP that is owned by or exclusively licensed to the Corporation.

 

4.4.5                      All Persons, including current and former Employees (including Key
Employees), consultants and independent contractors of the Corporation, that
created or developed Company IP (other than IP that is licensed to the
Corporation by third parties) have executed a valid agreement assigning to the
Corporation all rights, titles and interests in such Company IP, and the
Corporation has recorded each such assignment with the relevant governmental
authority in accordance with applicable laws and regulations to the extent that
such Company includes patents, patent applications or registrations or
applications for other IP.

 

4.4.6                      Except as set forth in Schedule 4.4.6, the Corporation has the exclusive
right to use, license and otherwise exploit the Company IP that is owned by or
exclusively licensed to the Corporation, and the Corporation has not conveyed,
assigned or licensed (excluding licenses no longer in effect) to any Person any
of its rights in and to such Company IP, and the Corporation’s rights in such
Company IP are transferable, and the Corporation is not a party to any
agreement nor is it bound by any order or judgment restricting the Corporation’s
rights to use or otherwise exploit such Company IP.

 

4.4.7                      Except as set forth in Schedule 4.4.7, the conduct of the
business of the Corporation as currently conducted, to the Knowledge of the
Corporation, does not infringe upon the Intellectual Property of any Person and
the Corporation has not received any notice from any Person alleging or making
any such claims of infringement. Except as set forth in Schedule 4.4.7,
the Corporation has not received any notice from any Person challenging the
Corporation’s ownership of or right to use the Company IP owned by the
Corporation or challenging the right to use the Company IP that is licensed to
the Corporation or challenging the validity of any of the Company IP that is
owned by or exclusively licensed to the Corporation and, to the Knowledge of
the Corporation, there is no threatened suit against the Corporation relating
to the use of such Company IP or relating to the conduct of the business of the
Corporation as currently conducted.

 

4.4.8                      To the Knowledge of the Corporation, no Person is presently infringing
or otherwise violating any of the Company IP that is owned by or exclusively
licensed to the Corporation, and the Corporation has not taken any action
charging any Person with infringement or violation of any Company IP.

 

19

 

4.4.9                      To the Knowledge of the Corporation, the Corporation has not used or
enforced nor attempted to use or enforce the Company IP in a manner that has,
or would, result in the abandonment, cancellation or unenforceability of the
Company IP.

 

4.4.10    The Corporation is in
compliance, in all material respects, with the agreements pursuant to which the
Company IP is licensed to the Corporation, and the Corporation has not received
any notice that the Corporation is in breach of any such agreement or that such
agreement has been or will be terminated by reason of such breach.

 

4.4.11                Except
as set forth in Schedule 4.4.11, the Corporation is not a party to nor
bound by any contract or commitment under which it is required to pay any
royalty, license fee or other payment to any Person in relation to the Company
IP.

 

4.4.12                The
execution, delivery and performance of this Agreement and the consummation by
the Corporation of the transactions contemplated hereby will not constitute a
breach of any agreement to which the Corporation is bound that governs the
Corporation’s rights to the Company IP.

 

4.4.13                No
federal, state, provincial or other regulatory agency or body has provided any
funding to the Corporation which would give such federal, state, provincial or
other regulatory agency or body any rights, titles or interest in or to the
Company IP and, to the Knowledge of the Corporation, no university, academic
institution or similar type of entity has any rights, titles or interests in or
to the Company IP.

 

4.4.14                With
respect to all applications for registration of Company IP applied for by the
Corporation, to the Knowledge of the Corporation, all obligations of candour,
good faith and material information disclosure with respect to the relevant
intellectual property office have been met.

 

4.4.15                With
respect to the white paper entitled “Enabling Information Lifecycle Management
Today” describing the Assureon Product, the date of publication was after
August 9, 2005 and the publication date of such paper is supported by adequate
written evidence.

 

4.4.16                The
Corporation has no Knowledge, of any act or fact that invalidates any of the
Company IP or any claim thereof.

 

4.4.17                Subject
to the requirements of law, the Corporation has taken reasonable steps to
maintain the confidentiality of trade secrets and other confidential
information included in the Company IP that is owned by or exclusively licensed
to the Corporation, including, requiring all Employees, consultants,
independent contractors or other Persons with access to such Company IP to
execute appropriate non disclosure agreements with respect to such Company IP.

 

4.4.18                Except
as set forth in Schedule 4.4.18 or as set forth in the product
warranties and indemnification obligations provided to customers or users of
its Products or as implied by law, the Corporation has not entered into any
agreement to indemnify any other Person against any charge of infringement,
misappropriation or misuse of any Intellectual Property owned by any third
party.

 

20

 

4.4.19                Except
as set forth in Schedule 4.4.19, the Corporation is a party to any non
competition covenant that specifically limits the Corporation’s right to use
Company IP owned by or exclusively licensed to the Corporation to compete with
another entity.

 

4.4.20                The
only products currently licensed, distributed, used in or being developed by
the Corporation are those listed in Schedule 4.4.20 (the “Products”).

 

4.5         As
to the Financial Condition

 

4.5.1                      The audited
and consolidated financial statements of the Corporation for the fiscal year
ended June 30, 2006 and the unaudited consolidated financial statements for the
six months ended December 31, 2006 (collectively, the “Financial Statements”), attached hereto at Schedule 4.5.1,
present fairly in all material respects the consolidated financial position of
the Corporation and its Subsidiaries as of and for the periods then ended and
have been prepared in accordance with GAAP, consistently applied.

 

4.5.2                      Except as set forth in Schedule 4.5.2 or in any other Schedule
to this Agreement, the Corporation has good and valid title to all its assets,
free and clear of all Encumbrances and such assets are fully paid.

 

4.5.3                      The Corporation has no outstanding indebtedness, liabilities,
contingent or otherwise and is not a party to or bound by any suretyship,
guarantee, indemnification or assumption agreement, or endorsement of, or any
other similar commitment with respect to the obligations, liabilities
(contingent or otherwise) or indebtedness of any Person, other than those
identified and quantified in (i) the Financial Statements, (ii) Schedule
4.5.3, or (iii) (a) liabilities incurred in connection with the completion
of the transactions herein contemplated, none of which, to the Knowledge of the
Corporation, may result in a material adverse change regarding the business,
assets, liabilities, financial condition property, prospects or results of
operations of the Corporation; (b) the fees provided in Article 9 hereof payable
by the Corporation in connection with the transactions contemplated hereby; and
(c) liabilities incurred in the ordinary course of business of the types and in
amounts consistent with past practice.

 

4.5.4                      Except as disclosed in Schedule 4.5.4 or identified and
quantified in the Financial Statements, the Corporation does not have
outstanding any bonds, debentures, notes, mortgages or other indebtedness which
mature more than one year after the date of their original creation or issuance
and the Corporation has not agreed to create or issue any bonds, debentures,
notes, mortgages or other indebtedness which will mature more than one year
after the date of their creation or issuance.

 

21

 

4.5.5                      Other than liabilities contemplated in Section 4.5.3, as of the Closing
Date, the Corporation shall not have liabilities, actual or contingent, which
exceed in the aggregate $100,000.

 

4.5.6                      The accounts
receivable set out in the Financial Statements were generated in the ordinary
course of business, are bona fide transactions, subject only to reasonable
reserves for bad debts that have been determined in accordance with GAAP
consistent with past practices of the Corporation. The Corporation has no
obligation to grant discounts to its clients.

 

4.5.7                      Except as set forth on Schedule 4.5.7 or in any other Schedule
to this Agreement, since December 31, 2006, the Corporation:

 

(a)                                 has
conducted its business in its usual and ordinary course in compliance, in all
material respects, with the Applicable Legislation;

 

(b)                                has
not transferred or otherwise disposed of any material assets other than in the
ordinary course of business;

 

(c)                                 has
not, outside the ordinary course of business, incurred or authorized the
Corporation to incur debts or entered into any transaction, has not authorized
any capital expenditures and has not made any advance;

 

(d)                                has
not paid and has not authorized the payment of any dividends or any other forms
of remuneration or reimbursement with respect to its issued capital and has not
made any distribution of assets of any nature whatsoever to its shareholders;

 

(e)                                 has
not authorized or paid to its Employees any amount, by way of salaries or
otherwise, except in the ordinary course of business;

 

(f)                                   has
not been the subject of any material adverse change which could affect its
business, assets, liabilities, financial condition property, prospects or
results of operations; and

 

(g)                                has
not incurred expense and has not negotiated any transaction outside the ordinary
course of business except as provided in this Agreement.

 

4.5.8                      Schedule
4.5.8 is a complete and correct list (including addresses and account
numbers) of each bank, financial institution, trust company or similar
institution in which the Corporation has an account or a safety deposit box and
the names of all Persons, including any individual or firm holding a power of
attorney, authorized to draw thereon or to have access thereto and details as
their respective signing authority thereunder.

 

4.5.9                      All vacation pay, bonuses, commissions and other Employee benefit
payments for which the Corporation has any continuing obligation are reflected
and have been accrued in the books and records of the Corporation.

 

22

 

4.5.10     The Corporation has not made any payment or
loan to, or borrowed any moneys from nor is otherwise indebted to, any
director, Employee, shareholder or any Person not dealing at arm’s length or
any Affiliate of any of the foregoing, except for the January Notes and the
August Notes, as identified and quantified in the Financial Statements or in Schedule
4.5.3 or any other Schedule to this Agreement and except for usual
compensation paid in the ordinary course the Business, as reflected in Schedule
4.9.1.

 

4.5.11     Except
for the Shareholders’ Agreement, the employment contracts enumerated in Schedule
4.9.1 and except as disclosed in Schedule 4.5.3 or any other
Schedule to this Agreement, the Corporation is not a party to any contract or
agreement with any director, Employee, shareholder or any Person not dealing at
arm’s length or any Affiliate of any of the foregoing.

 

4.6         As
to the Contracts

 

4.6.1                      Except as
set out in the agreements listed in Schedule 4.6.1 or in any other
Schedule to this Agreement, the Corporation is not a party to or bound by any:

 

(a)                                 contract,
agreement or commitment which expires or may expire more than one year after
the date hereof other than any contract, agreement or commitment terminable by
the Corporation without penalty on less than 90 days prior written notice;

 

(b)                                contract,
agreement or commitment for the purchase of materials, supplies or services,
including the manufacture of the products designed by the Corporation, which
requires payment of more than $50,000 in the case of any single contract,
agreement or commitment except for purchases of inventories in the ordinary
course of the business of the Corporation, consistent with past practice;

 

(c)                                 contract,
agreement or commitment for the purchase or sale of any equipment or fixed or
capital assets having a fair value in excess of $100,000;

 

(d)                                management,
consulting or similar contract, agreement or commitment;

 

(e)                                 contract,
agreement or commitment for the development, supply or manufacturing of components,
of any nature, useful or necessary for the development or manufacture of the
Corporation’s products;

 

(f)                                   license
or royalty agreement relating to Company IP except those software licenses for
Mass Market Software and except those licenses granted by the Corporation in
the course of the business and the consulting services agreements relating
thereto;

 

23

 

(g)                                contract,
agreement or commitment to make any gift of any of its property, other than
donations made in the ordinary course of the business, consistent with past
practice;

 

(h)                                contract,
agreement or commitment which materially adversely affects or could materially
adversely affect the Corporation’s business, assets, liabilities, condition
property or results of operations or is or is reasonably likely to be
materially burdensome to it;

 

(i)                                    Material
Contract;

 

(j)                                    any
lease, agreement in the nature of a lease or agreement to lease whether as
lessor or lessee, and whether in respect of immovable or movable property,
except for any lease or agreement in the nature of a lease relating to movable
property where the aggregate annual payments under such lease or agreement and
under any related service or maintenance or similar contract do not exceed
$50,000; or

 

(k)                                 material
contract, agreement or commitment which was not made in the ordinary course of
the Corporation’s business, consistent with past practice.

 

All such contracts,
agreements and commitments represent valid and binding obligations of the parties
thereto, enforceable against them pursuant to the terms and provisions of such
contracts, agreements and commitments.

 

A complete executed copy of
such material contracts, agreements and commitments and their respective
amendments, as the case may be, have been provided to the Investor.

 

The Corporation is not in
default or breach in any material respect of any such contract, agreement and
commitments (including the contracts, agreements, commitments and other
instruments referred to in any Schedule to this Agreement) and, to the
Knowledge of the Corporation, there exists no state of facts which after notice
or the passage of time, or both, would constitute such a default or breach, and
all such contracts, agreements and commitments are in good standing and the
Corporation is entitled to all benefits, rights and privileges thereunder.

 

4.6.2                      The
Corporation has granted no irrevocable mandate, proxy or power of attorney to
anyone for any reason whatsoever that remains outstanding.

 

4.6.3                      The Corporation is not bound and does not
have any obligation to pay, in cash or otherwise, a commission, fee,
bonus or any other consideration in relation with the subscription by the
Investor of the Subscribed Shares.

 

4.6.4                      Neither the Corporation nor, any
of its Key Employees, is bound by any non-competition undertaking or agreement restricting the activities each may carry on
for the Corporation.

 

24

 

4.6.5                      The Corporation has and
will maintain adequate insurance policies on its assets, and with respect to
operations of the Corporation. Each of the policies covers risks normally
covered by companies operating businesses similar to that of the Corporation
and for amounts which would be maintained by a prudent administrator; such
insurance policies are in full force and effect and the Corporation is not in
default thereunder, including in respect of the payment of any premium.

 

4.7         As
to the Tax Matters

 

4.7.1                      All reports,
filings and returns of the Corporation in respect of income or other taxes,
whether federal, state, provincial, county, local, municipal or foreign,
including investment tax credits and credits for scientific research and
experimental development (collectively, the “Taxes”), have been
duly prepared and filed in good faith, and to the Corporation’s Knowledge, the
Corporation has paid all taxes which are due and payable as shown on such
returns and has made adequate provision for the payment of all taxes not due
and payable or for any prior taxation year and the current taxation year, and
has paid all assessments and reassessments and all sales taxes, customs or
excise duties, governmental charges or assessments, penalties, interest and
fines due and payable by the Corporation and, without limiting the generality
of the foregoing, to the Corporation’s Knowledge, no proceeding or other action
has been taken or threatened against the Corporation for the reassessment or
collection of additional Taxes and the Corporation has no knowledge that it
will become the object of an audit, investigation, notice or assessment
with respect thereto, except in the ordinary course.

 

4.7.2                      The Corporation has not
been audited nor has there been any investigation of the Corporation by a Tax
authority other than in the ordinary course.

 

4.8         As
to Legal Matters

 

Except as set out in Schedule
4.8, there is no claim, action, suit or other similar proceeding (whether
civil, administrative, regulatory, quasi-criminal, criminal or other); no
arbitration or other dispute settlement procedure; no investigation or inquiry
by any governmental, administrative, regulatory or other similar body; or any
similar matter or proceeding (collectively “proceedings”) against
or involving the Corporation (whether in progress or threatened); there is no
judgment, decree, injunction, rule, award or order of any court, government
department, board, commission, agency, arbitrator or similar body outstanding
against the Corporation and to Corporation’s Knowledge, no event has occurred
which is reasonably likely to give rise to any proceedings.

 

4.9         As
to the Employees

 

4.9.1                      Except as
set out in Schedule 4.9.1, the Corporation is not a party to or bound by
any written or oral contract or commitment for the employment of any Employee
or hiring of any consultant or independent contract.

 

25

 

4.9.2                      To the
Corporation’s Knowledge, none of its Employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such employee’s
ability to promote the interest of the Corporation or that would conflict with
the Corporation’s business. Neither the execution or delivery of the
Transaction Documents, nor the carrying on of the Corporation’s business by the
Employees, nor the conduct of the Corporation’s business as now conducted,
will, to the Corporation’s Knowledge, conflict with or result in a breach of
the terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such Employee is now
obligated.

 

4.9.3                      The
Corporation is not delinquent in payments to any of its Employees, consultants,
or independent contractors for any wages, salaries, commissions, bonuses, or
other direct compensation for any service performed for it to the date hereof
or amounts required to be reimbursed to such Employees, consultants, or
independent contractors. The Corporation has complied in all material respects
with all applicable federal, state and provincial equal employment opportunity
laws and with other laws related to employment, including those related to
wages, hours, worker classification, and collective bargaining. The Corporation
has withheld and paid to the appropriate governmental entity or is holding for
payment not yet due to such governmental entity all amounts required to be
withheld from Employees of the Corporation and is not liable for any arrears of
wages, taxes, penalties, or other sums for failure to comply with any of
the foregoing.

 

4.9.4                      To the Corporation’s knowledge,
no Key Employee intends to terminate employment with the Corporation or is
otherwise likely to become unavailable to continue as a Key Employee, nor does
the Corporation have a present intention to terminate the employment of any of
the foregoing. Except as set forth in Schedule 4.9.1, the
employment of each Employee of the Corporation is terminable at the will of the
Corporation. Except as set forth in Schedule 4.9.1 or as required by law, upon termination of
the employment of any such Employees, no severance or other payments will
become due. Except as set forth in Schedule 4.9.1, the Corporation
has no policy, practice, plan, or program of paying severance pay or any form
of severance compensation in connection with the termination of employment
services.

 

4.9.5                      The
Corporation has not made any representations regarding equity incentives to any
officer, Employees, director, consultant or independent contractor that are
inconsistent with the share amounts and terms set forth in the minutes of
meetings of the Board.

 

4.9.6                      Each former CEO, CFO or CTO of the Corporation whose employment was
terminated by the Corporation
has entered into an agreement with the Corporation providing for the full
release of any claims against the Corporation or any related party arising out
of such employment.

 

26

 

4.9.7                      Schedule 4.9.1 sets
forth each employee benefit plan maintained, established or sponsored by the
Corporation, or which the Corporation participates in or contributes to, which
is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Corporation has made all required contributions
and has no liability to any such employee benefit plan, other than liability
for health plan continuation coverage described in Part 6 of Title I(B) of
ERISA, and has complied in all material respects with all Applicable
Legislation for any such employee benefit plan.

 

4.9.8                      The Corporation is not bound by or subject to (and none of its assets
or properties is bound by or subject to) any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Corporation, has sought to
represent any of the Employees. There is no strike or other labor dispute
involving the Corporation pending, or to the Corporation’s Knowledge,
threatened, which could have a material adverse effect in the business, assets,
liabilities, financial condition property of the Corporation, nor is the
Corporation aware of any labor organization activity involving its Employees.

 

4.9.9                      To the Corporation’s Knowledge,
none of the Key Employees or directors of the Corporation (a) is subject to
voluntary or involuntary petition under the federal bankruptcy laws or any
state insolvency law or the appointment of a receiver, fiscal agent or similar
officer by a court for his business or property; (b) has been convicted of, or
is currently under indictment for, any felony; (c) has been subject to any order, judgment, or decree (not
subsequently reversed, suspended, or vacated) of any court of competent
jurisdiction permanently or temporarily enjoining him from engaging, or
otherwise imposing limits or conditions on his engagement in any securities,
investment advisory, banking, insurance, or other type of business or acting as
an officer or director of a public company; or (d) found by a court of
competent jurisdiction in a civil action or by the Securities and Exchange
Commission or the Commodity Futures Trading Commission to have violated any
federal, provincial or state securities, commodities, or unfair trade practices
law, which such judgment or finding has not been subsequently reversed,
suspended, or vacated.

 

4.9.10                Every Employee,
consultant and independent contractor of the Corporation that has been
responsible for or participated in the development of any of the Company IP
(other than Intellectual Property that is licensed to the Corporation) has
executed an agreement (an “IP Assignment Agreement”),
which includes the transfer by the Employee, consultant or independent
contractor to the Corporation or Subsidiary, as the case may be, of all rights
held by the Employee, consultant or independent contractor to such Company IP.

 

4.9.11                (i) Every
Employee, consultant and independent contractor of the Corporation who has had
access to any of the trade secrets or confidential information that relates to
the Assureon Product, including such trade secrets and confidential information
included with the Company IP, and (ii) to the Knowledge of the 

 

27

 

Corporation, every
Employee, consultant and independent contractor of the Corporation who has had
access to any of the other trade secrets or confidential information of the
Corporation that is material to the business of the Corporation as currently
conducted, has executed a non-disclosure and confidentiality undertaking with
respect to such trade secrets or confidential information.

 

4.10                           As to
the Disclosure of all Material Facts

 

No representation or
warranty by the Corporation in this Agreement or the Schedules attached hereto,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein not materially
misleading. Except as otherwise provided or disclosed herein or in disclosure
schedules, the Corporation is not aware of any fact about the Corporation which
might adversely affect the business, assets, liabilities, financial condition,
property, or results of operations of the Corporation which, if known to the
Investor, might reasonably have affected its decision to subscribe for the
Subscribed Shares. The Corporation has made available to the Investor all the
information reasonably available to the Corporation that the Investor has
requested for dealing to acquire the Subscribed Shares, including certain of the
Corporation’s projections and such projections were prepared in good faith.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

5.1         The
Investor hereby represents and warrants to the Corporation, that:

 

5.1.1                      The Investor
is a public legal person duly constituted under the Act to establish the Fonds
de solidarité des travailleurs du Québec. The Investor has full power and
authority to enter into all of the Transaction Documents. The Transaction
Documents to which the Investor is a party, when executed and delivered by the
Investor, will constitute valid and legally binding obligations of the
Investor, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors’ rights generally, and as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.

 

5.1.2                      The Investor
understands that no public market now exists for the Subscribed Shares, and
that the Corporation has made no assurances that a public market will ever
exist for the Subscribed Shares.

 

5.1.3                      The Investor is an accredited investor as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act and an accredited investor as
defined in Regulation 45-106 of the Securities Act (Québec).

 

5.1.4                      Neither the Investor, nor any of its officers, directors, employees,
agents, stockholders or partners has either directly or indirectly, including
through a broker or finder (a) engaged in any general solicitation, or (b)
published any advertisement in connection with the offer and sale of the
Subscribed Shares.

 

28

 

5.1.5       The Investor has the capacity, the power and
is duly qualified to enter into this Agreement and the other Transaction
Documents and to perform its obligations hereunder and thereunder. These
agreements have been duly signed by an authorized representative of the
Investor and they do not contravene any Applicable Legislation and each of
these agreements is a valid and binding obligation of the Investor, enforceable
in accordance with their terms subject to usual reservations relating to
solvency and unenforceable rights.

 

5.1.6       The Investor acknowledges that it is not
relying upon any Person, other than the Corporation and its officers and
directors, in making its investment or decision to invest in the Corporation.

 

5.1.7       The Investor further represents that it has
had an opportunity to ask questions and receive answers from the Corporation
regarding the business, properties, prospects and financial conditions of the
Corporation.

 

ARTICLE 6

SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS

 

All of the representations
and warranties of the Corporation, on the one hand, and the Investor, on the
other hand, contained herein shall survive the Closing hereunder and continue
in full force and effect, even if the damaged party knew or had reason to know
of any misrepresentation or breach of warranty at the time of the Closing.

 

ARTICLE 7

CLOSING AND CONDITIONS OF CLOSING

 

7.1                                Time
and Place of Closing

 

Subject to the terms and
conditions herein, the Closing shall take place at 10:00 a.m. (Montréal time) on
the Closing Date at the offices of Osler, Hoskin & Harcourt LLP, 1000 de La
Gauchetière Street, Suite 2100, Montréal, Québec, H3B 4W5.

 

7.2                                Conditions Precedent to Closing

 

The conditions precedent to
the Investor’s obligations to close the subscription and purchase of its
Subscribed Shares under Article 2 and contemplated herein are as follows:

 

7.2.1                      As of the
Closing Date the Corporation shall have:

 

(a)                                 obtained
from all Persons such approvals, waivers, consents or releases as are required
under Applicable Legislation or agreements to permit the execution and delivery
of this Agreement and each of the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, including
with respect to the business of the Corporation and the filing of certificate
of amendment to amend the Preferred Stock to the satisfaction of the Investor;

 

29

 

(b)                                submitted
to the Investor the most recent Financial Statements, which shall be to the
satisfaction of the Investor;

 

(c)                                 submitted
to the Investor evidence of the disbursement, in form satisfactory to the
Investor, by Terrapin Partners LLC of US$3,000,000 pursuant to the subscription
of Terrapin Partners LLC to an 8% secured convertible subordinated bridge note
issued by the Corporation on November 2, 2006 (the “Terrapin
Loan”).

 

(d)                                submitted
to the Investor, copy of employment agreements with the Key Employees.

 

7.2.2                      As of the
Closing Date, the Existing Noteholders shall have:

 

(a)           converted
the January 2006 Promissory Notes into Series C Preferred Stock at a conversion
price of $0.39667 per share); and

 

(b)           converted
the August 2006 Promissory Notes into Series C Preferred Stock at a conversion
price of $0.50 per share).

 

7.2.3                      Concurrently
with the Closing, the Corporation shall make a capital contribution to or for
the benefit of Nexsan Canada, in an amount of at least $2,000,000.

 

7.2.4                      At the Closing Date, the Investor is satisfied that the following have
been executed and delivered:

 

(a)                                 the
Transaction Documents in a form acceptable to the Investor;

 

(b)                                the
Restated Certificate is in form acceptable to the Investor;

 

(c)                                 to
the Investor, a share certificate representing the Subscribed Shares, duly and
validly registered in its name;

 

(d)                                an
opinion of legal counsel for the Corporation in a form acceptable to the
Investor and its legal counsel;

 

(e)                                 a
written confirmation in the form annexed as Schedule 7.2.4 from the
Chief Financial Officer of the Corporation that all deductions at source and
other remittances and payments required by relevant governmental authorities to
have been paid prior to Closing have been paid or are being contested in good
faith by appropriate proceedings and where failure to comply would result in personal
liability to the director’s of the Corporation;

 

(f)                                   a
certified copy of the resolutions of the directors of the Corporation approving
the allotment and issuance of the Subscribed Shares contemplated in Article 2;

 

30

 

(g)           a
Corporation cheque or wire transfer payable to Osler, Hoskin & Harcourt for
services rendered to the Investor on or prior to the Closing Date or as
otherwise related to the Closing;

 

(h)           all
other documents as the Investor may reasonably requests pursuant to the terms
and conditions contained in this Agreement and the other Transaction Documents;

 

7.2.5       At
the Closing Date, no action or proceeding at law or in equity shall be pending
or threatened by any Person, including any government, governmental authority,
regulatory body or agency to enjoin, restrict or prohibit the purchase and
issuance of the securities contemplated hereby.

 

7.2.6       At the Closing Date, the issuance of the Subscribed Shares to the Investor shall be
exempted from the prospectus and registration requirements of all Canadian
securities legislation and exempt from or not subject to the registration
requirements of the Securities Act.

 

7.2.7       As at the Closing Date the Corporation shall
not be in Default.

 

7.2.8       On or before the Closing Date, the Investor
shall have obtained a favorable opinion from Fonds’ fiscal department with
respect to the structure of the financing.

 

7.2.9       On or before the Closing Date, the Investor
shall have obtained a favorable opinion by the Fonds with respect to the
eligibility of the investment pursuant to the act constituting the Fonds.

 

7.2.10     On or before the Closing Date, the Investor
shall have completed its business, affairs, financial, legal, environmental,
technical, management and its employee relations due diligence inquiries to its
sole satisfaction.

 

ARTICLE 8

INDEMNIFICATION

 

The Corporation shall
indemnify and hold harmless the Investor, and the Persons designated by such
Investor to act as members or observers of the Board or of any committee
established by the Board (collectively, the “Indemnified
Parties”) from all damages, losses, obligations, liabilities,
claims, charges, costs and expenses (including, without limiting the generality
of the foregoing, any reduction in value of the Subscribed Shares, and together
with all reasonable costs and expenses related thereto
(including reasonable legal fees and expenses) in connection with each and
all of the following:

 

(a)                                 any
material untruth, inaccuracy or breach of any representation or warranty made
by the Corporation in this Agreement or any other Transaction Document; and

 

31

 

(b)                                the
material breach of any covenant, agreement or obligation of the Corporation or
any Subsidiary of the Corporation in this Agreement or any other Transaction
Document.

 

Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the Indemnified Parties shall promptly notify the
Corporation in writing in accordance with Article 10 hereof, of the claim and,
when known, the facts constituting the basis for such claim. In the event of
any claim by a third party, the notice to the Corporation shall specify, if
known, a reasonable estimate of the amount of the liability arising therefrom.

 

ARTICLE 9

FEES

 

Legal fees and expenses of
the Investor in connection with this Agreement and the other transactions
contemplated herein, including post-closing matters related therewith, shall be
paid by the Corporation to Osler, Hoskin & Harcourt LLP at Closing. The
Corporation also agrees to pay at Closing all external fees and expenses
incurred by the Investor in connection with its due diligence review, including
legal, accounting, and other professional fees and expenses in an amount not to
exceed $89,000 plus applicable taxes and disbursements.

 

ARTICLE 10

NOTICE

 

10.1                          Any
notice or other communication required herein shall be given in writing and
(i) transmitted by telecopier (provided that a copy is subsequently sent
by messenger and its receipt confirmed) (ii) sent by recognized overnight
delivery services such as Federal Express or (iii) delivered by hand:

 

To
the Corporation:

 

Nexsan
Corporation

21700 Oxnard Street

Suite 1850

Woodland Hills,
California  91367

 

Attention:  Chief Executive Officer

Telecopier:  (818) 936-0159

 

If
after May 1, 2007:

 

Nexsan
Corporation

555
St. Charles Drive

Suite 202

Thousand Oaks,
California  91360

 

Attention:  Chief Executive Officer

Telecopier:  (818) 936-0159

 

32

 

With
a copy to:

 

Sonnenschein Nath & Rosenthal
LLP

1221
Avenue of the Americas

New York, New York  10020

 

Attention:  Denise M. Tormey

Telecopier:  (212) 768-6800

 

To
Fonds:

 

Fonds de solidarité des
Travailleurs (F.T.Q.)

545
Crémazie Boulevard East, Suite 200

Montréal, QC H2M 2W4

 

Attention:  Vice-President, Legal Affairs

Telecopier:  (514) 383-2500

 

With
a copy to:

 

Osler, Hoskins & Harcourt LLP

1000
de La Gauchetière Street West, Suite 2100

Montréal, QC H3B 4W5

 

Attention:  Shahir Guindi

Telecopier:  (514) 904-8101

 

or, for each Party, to any
other address or any other telecopier number which may be designated by such
Party in a written notice transmitted to the other Parties.

 

10.2                          The
notices or communications provided in Section 10.1 shall be presumed to have
been received (i) the next Business Day after delivery to a recognized
overnight delivery service or (ii) the day they are sent, if delivered by hand
or transmitted by telecopier during normal business hours; failing this, the
telecopy transmission shall be deemed to have been received the next Business
Day.

 

10.3                          All
notices must specify the delay in which a decision or an act must be made and
must set forth all of the material elements on which a decision or an act is to
be made.

 

ARTICLE 11

 

11.1                          Public
Notices

 

All public notices to third
parties and all other publicity concerning the transactions contemplated by
this Subscription Agreement shall be jointly planned and co-ordinated by the
Investor and the Corporation, and no party shall act unilaterally in this
regard without the prior approval of the other parties (such approval not to be
unreasonably withheld), except in the case of the Corporation for
communications made in confidence to employees, directors, investors and
lenders of the Corporation affected by such transaction. The transaction herein
described are confidential and the Corporation agrees not to disclose same to
any third party other than its professional advisers or as required by law or
legal process, except as herein provided or with prior approval.

 

33

 

11.2                          Assignment

 

This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Corporation may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
Party.

 

11.3                          Further Assurances

 

Each of the Parties shall
promptly do, make, execute, deliver, or cause to be done, made, executed or
delivered, all such further acts, documents and things as the other Parties
hereto may reasonably require from time to time for the purpose of giving
effect to this Agreement and shall use reasonable efforts and take all such
steps as may be reasonably within its power to implement to their full extent
the provisions of this Agreement.

 

11.4                          Successors and Assigns

 

This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

 

11.5                          Governing Law and Jurisdiction

 

This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to any conflicts of law principles that would result in the
application of the law of any other jurisdiction. Any action, suit or
proceeding arising out of or relating to this Agreement shall be brought in the
United States federal or state courts located in the State of New York and each
of the Parties hereby irrevocably submits to the exclusive jurisdiction of such
courts.

 

11.6                          Amendments

 

No modification or
amendments to this Agreement shall be valid or binding unless set forth in
writing and duly executed by the Parties hereto and no waiver of any breach of
any term or provision of this Agreement shall be effective or binding unless
made in writing and signed by the Party purporting to give the same and, unless
otherwise provided, shall be limited to the specific breach waived.

 

11.7                          Waivers

 

No waiver by any of the
Parties hereto of the conditions, or of the breach of any term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as
a further or continuing waiver of any such condition or breach or as a waiver
of any condition nor of the breach of any other term, covenant, representation
or warranty contained in this Agreement.

 

34

 

11.8                          Time of the Essence

 

Subject to any applicable
cure period, time is of the essence in this Agreement. Following notice of
default and a reasonable opportunity to cure, each Party shall be in default by
the mere lapse of time for the performance of any of its obligations hereunder
without the necessity of any further notice to that effect.

 

11.9                          No Finder’s Fee

 

Each of the Party represents
that it neither is or will be obligated to any finder’s fee or commission in
connection with this transaction.

 

11.10                    Injunctive Relief

 

Any breach of any provisions
of this Agreement, without prejudice to any other recourse or remedy provided
by this Agreement or by law, shall give rise to a recourse for injunctive
relief or to any other recourse intended to stop the breach which the Parties
recognize to be an appropriate recourse and to which they expressly and
irrevocably consent, if the conditions required for such recourse are met.

 

11.11                    Counterparts

 

This Agreement may be signed
in counterparts and each such counterpart shall constitute an original document
and such counterparts, taken together, shall constitute one and the same
instrument.

 

11.12                    Language

 

The Parties hereto confirm
that they have agreed that this Agreement and all documents relating hereto be
drafted in English. Les Parties aux présentes confirment qu’elles ont accepté
que la présente convention de même que tous les documents s’y rattachant soient
rédigés en anglais.

 

[Remainder
Left Intentionally Blank]

 

35

 

IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement at the place and on the date referred to above.

 

	
  NEXSAN
  CORPORATION

  	
  FONDS DE SOLIDARITÉ DES

  
	
   

  	
  TRAVAILLEURS DU QUÉBEC
  (F.T.Q.)

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Philip Black

  	
   

  	
  By:

  	
  /s/ Jacques Bernier

  
	
   

  	
  Name: Philip Black

  	
   

  	
  Jacques Bernier

  
	
   

  	
  Title: Chief Executive Officer

  	
   

  	
  Senior Vice-President Information

  
	
   

  	
   

  	
  Technologies, Telecommunications and

  
	
   

  	
   

  	
  Industrial Innovations

  
					

 

36EXHIBIT 10.26

 

NEXSAN CORPORATION

 

RESTRICTED STOCK PURCHASE AGREEMENT

 

Unless otherwise defined herein, capitalized terms
defined in the 2001 Stock Plan (the “Plan”) of Nexsan Corporation (the “Company”)
shall have the same meanings when used in this Restricted Stock Purchase
Agreement (the “Agreement”).

 

I.                                         NOTICE
OF GRANT OF STOCK PURCHASE RIGHT

 

James Molenda (the “Purchaser”)

 

You have been granted the right to purchase Common
Stock of the Company, subject to the terms and conditions of this Agreement
(the “Agreement”), as follows:

 

	
  Grant Number

  	
   

  	
  2

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exercise Price Per Share

  	
   

  	
  $0.66

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Number of Shares Subject to This Stock
  Purchase Right (“Shares”)

  	
   

  	
  1,200,000

  	
   

  

 

Non-Transferability of Stock Purchase Right.

 

This Stock Purchase Right may not be transferred in
any manner other than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Purchaser only by Purchaser. The terms of
the Plan and this Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Purchaser.

 

II.                                     AGREEMENT

 

1.                                       Sale
of Stock. The Company hereby agrees to sell to the Purchaser, and the
Purchaser hereby agrees to purchase the number of Shares set forth above in the
Notice of Grant of Stock Purchase Right, at the exercise price per share set
forth in the Notice of Grant of Stock Purchase Right (the “Exercise Price”),
and subject to the terms and conditions of the Plan, which is incorporated herein
by reference. Subject to Section 14(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and this Agreement, the
terms and conditions of the Plan shall prevail.

 

2.                                       Payment
of Purchase Price. Purchaser herewith (i) delivers to the Company the
aggregate Exercise Price for the Shares by promissory note (“Note”) in
the form of Exhibit A hereto, (ii) pledges the Shares to the
Company to secure the Note pursuant to a Pledge Agreement in the form of Exhibit B
attached hereto and (iii) assigns the Shares pursuant to an Assignment
Separate From Certificate in the form of Exhibit B-1.

 

 

3.                                       Purchaser’s
Representations. In the event the Shares have not been registered under the
Securities Act of 1933, as amended, at the time this Stock Purchase Right is
exercised, the Purchaser shall, if required by the Company, concurrently with
the exercise of all or any portion of this Stock Purchase Right, deliver to the
Company his or her Investment Representation Statement in the form attached
hereto as Exhibit C.

 

4.                                       Repurchase
Option.

 

(a)                                  In
the event the Purchaser’s continuous status as an employee and/or independent
contractor (collectively “Service Provider”) terminates for any or no
reason (including death or Disability), the Company shall, upon the date of
such termination (as reasonably fixed and determined by the Company), have an
irrevocable, exclusive option (the “Repurchase Option”) for a period of
sixty (60) days from such date to repurchase up to that number of shares which
constitute the Unvested Shares (as defined in Section 5) at the Exercise
Price per share, plus interest at the rate of interest set forth in the Note
(the “Repurchase Price”).

 

(b)                                 The
Repurchase Option shall be exercised by the Company by delivering written
notice to the Purchaser or the Purchaser’s executor (with a copy to the Escrow
Holder (as defined in Section 8)) and, at the Company’s option, (i) by
delivering to the Purchaser or the Purchaser’s executor a check in the amount
of the aggregate Repurchase Price, or (ii) by the Company canceling an
amount of the Purchaser’s indebtedness to the Company equal to the aggregate
Repurchase Price, or (iii) by a combination of (i) and (ii) so
that the combined payment and cancellation of indebtedness equals such aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price in any of the ways described above, the Company shall become
the legal and beneficial owner of the Unvested Shares being repurchased and all
rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Unvested Shares
being repurchased by the Company.

 

(c)                                  Whenever
the Company shall have the right to repurchase the Unvested Shares hereunder,
the Company may designate and assign one or more employees, officers, directors
or shareholders of the Company or other persons or organizations to exercise
all or a part of the Company’s Repurchase Option to purchase all or a part of
the Unvested Shares. If the Fair Market Value of the Unvested Shares to be
repurchased on the date of such designation or assignment (the “Repurchase
FMV”) exceeds the aggregate Repurchase Price of the Unvested Shares, then
each such designee or assignee shall pay the Company cash equal to the
difference between the Repurchase FMV and the aggregate Repurchase Price of
Unvested Shares to be purchased.

 

(d)                                 If
the Company or its assignee does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within sixty (60) days following
Purchaser’s termination as a Service Provider, the Repurchase Option shall
terminate.

 

2

 

5.                                       Release
of Shares From Repurchase Option (Vesting).

 

(a)                                  Shares
purchased pursuant to this Agreement shall be released from the Repurchase
Option (sometimes hereafter referred to as “vest” or “vesting”) not earlier
than the second anniversary of the Date of Grant. Notwithstanding anything to
the contrary in this Agreement, Shares not vested before December 31, 2005
shall never thereafter vest and shall, subject to Section 4(d) above,
always remain subject to the Repurchase Option. The determination of whether
any Shares shall vest shall be made as of the last day of each month ending on
or after the second anniversary of the Date of Grant and on or before the fifth
anniversary of the Date of Grant based upon on the respective amounts (the “Target”)
of Sales (defined below) achieved by the Company during the Rolling Period
(defined below) ended on such day. In the event that the term of the Employment
Agreement, dated as of the date hereof, between the Purchaser and the Company
(the “Employment Agreement”) is extended beyond the initial five-year
term, then the determination of whether any Shares vest shall be made as of the
last day of each month during such extended term or terms. The number of Shares
(expressed in one-sixteenth (1116) denominations of the total number of Shares
subject to this Agreement) in which Purchaser shall vest is set forth
immediately to the left of the corresponding Target. The Company shall be
considered to have achieved a Target if Sales of the Company for any Rolling
Period equal or exceed the amount thereof set forth in the same row as the
Target in the table below. The Purchaser shall be entitled to vest in the
number of Shares set forth to the left of the highest Target achieved. Once
vested, Shares shall not cease to be vested even if the Company fails to
achieve a Target that was achieved in a prior Rolling Period. For purposes of
this Section 5, the Date of Grant shall be deemed to be the January 1,
2001.

 

Illustration: upon the Company
achieving Sales of $70,000,000 (i.e., Target 1) for a Rolling Period,
the Purchaser will vest in two-sixteenths (2/16) of the total number of Shares
subject to this Agreement, at the close of such Rolling Period (provided,
however, that the close of such Rolling Period is after the second anniversary
of the Agreement). Should the Company achieve Sales of $150,000,000 (i.e.,
Target 4) for a subsequent Rolling Period, the Purchaser will vest in an
additional four-sixteenths (4/16) of the total number of Shares subject to this
Agreement, so as to be vested on a cumulative basis in six-sixteenths (6/16) of
the total number of Shares subject to this Agreement, at the close of the
subsequent Rolling Period (provided, however, that the close of such subsequent
Rolling Period is after the second anniversary of this Agreement).

 

	
  Stock to Vest

  	
   

  	
  Target

  	
   

  	
  Sales (‘000s)

  	
   

  	
  Cumulative

  Vested Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2/16

  	
   

  	
  Target 1

  	
   

  	
  $

  	
  70,000

  	
   

  	
  2/16

  	
   

  
	
  1/16

  	
   

  	
  Target 2

  	
   

  	
  $

  	
  110,000

  	
   

  	
  3/16

  	
   

  
	
  1/16

  	
   

  	
  Target 3

  	
   

  	
  $

  	
  130,000

  	
   

  	
  4/16

  	
   

  
	
  2/16

  	
   

  	
  Target 4

  	
   

  	
  $

  	
  150,000

  	
   

  	
  6/16

  	
   

  
	
  1/16

  	
   

  	
  Target 5

  	
   

  	
  $

  	
  170,000

  	
   

  	
  7/16

  	
   

  
	
  1/16

  	
   

  	
  Target 6

  	
   

  	
  $

  	
  180,000

  	
   

  	
  8/16

  	
   

  
	
  1/16

  	
   

  	
  Target 7

  	
   

  	
  $

  	
  190,000

  	
   

  	
  9/16

  	
   

  
	
  3/16

  	
   

  	
  Target 8

  	
   

  	
  $

  	
  200,000

  	
   

  	
  12/16

  	
   

  
	
  1/16

  	
   

  	
  Target 9

  	
   

  	
  $

  	
  225,000

  	
   

  	
  13/16

  	
   

  
	
  1/16

  	
   

  	
  Target 10

  	
   

  	
  $

  	
  250,000

  	
   

  	
  14/16

  	
   

  
	
  1/16

  	
   

  	
  Target 11

  	
   

  	
  $

  	
  275,000

  	
   

  	
  15/16

  	
   

  
	
  1/16

  	
   

  	
  Target 12

  	
   

  	
  $

  	
  300,000

  	
   

  	
  16/16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Stock to Vest

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  100%

  	
   

  

 

3

 

“Rolling Period” means, as of the last day of
any month beginning on the second anniversary of the Date of Grant and ending
before the later of the (i) fifth anniversary of the Date of Grant, or (ii) the
extended term of the Employment Agreement, the immediately preceding twelve
(12) month period ending on such day.

 

“Sales” means the total amount of sales, net of
returns, discounts and allowances, of the Company.

 

All determinations of Sales shall be based on the
regularly prepared financial statements of the Company, which need not be
audited; provided, that if an audit of the Company’s financial statements
results in a change to any unaudited statements, the audited statements shall
control for purposes of this Agreement.

 

(b)                                 Any
of the Shares which have not yet been released from the Company’s Repurchase
Option are referred to herein as “Unvested Shares.”

 

(c)                                  The
Shares which have been released from the Company’s Repurchase Option shall be
delivered to the Purchaser at the Purchaser’s request (see Section 8).

 

(d)                                 In
the event that Purchaser’s relationship as a Service Provider with the Company,
and/or any of its Parent or Subsidiary companies, shall terminate prior to the
vesting of all Shares purchased under this Agreement all Unvested Shares shall
cease to vest pursuant to this Agreement.

 

(e)                                  Notwithstanding
section (a) above, should the Purchaser’s death or Disability occur while
he or she is a Service Provider,

 

(i)                                     prior
to the first anniversary of the Date of Grant, and the product of (x) the
aggregate Sales as shown in the Company’s financial statements for the three
full calendar months ended immediately prior to the date of death or
Disability, multiplied by (y) four (4), is equal to or is in excess of $20
million US Dollars, then and only then, the Company shall, at its sole option,
either cause the Purchaser to vest in one-sixteenth (1/16) of the total number
of Shares subject to this Agreement, or pay to the Purchaser, or to his
personal representatives, $187,500 US Dollars in cash;

 

(ii)                                  at
any time between the first and second anniversaries of the Date of Grant, and
Target 1 has been reached, then and only then, the Purchaser will vest in
two-sixteenths (2/16) of the total number of Shares subject to this Agreement;
the Company shall have the option, exercisable upon written notice within sixty
(60) days after the date of death or Disability, to purchase one-sixteenth
(1/16) of the total number of Shares subject to this Agreement, for an amount
equal to the Fair Market Value at the date of death or Disability; payable to
the Purchaser, or his or her lawful representatives, in three consecutive equal
annual installments beginning on the first anniversary of the date of death or
Disability, together with interest at the rate of seven percent (7%) per annum
on the unpaid balance;

 

4

 

(iii)                               at
any time between the second and fifth anniversaries of the Date of Grant, the
Company shall have the option, exercisable upon written notice within sixty
(60) days after the date of death or Disability the Company, to repurchase all
vested Shares vested for an amount equal to the Fair Market Value at the date
of death or Disability, payable in four consecutive equal annual installments
beginning on the first anniversary of the date of death or Disability, together
with interest at the rate of seven percent (7%) per annum on the unpaid
balance.

 

6.                                       Put
Option.

 

(a)                                  Grant
of Option. The Company irrevocably grants to the Purchaser the right (the “Put
Option”) to require the Company, upon a Change of Control, to purchase all of
the vested and unvested Shares then held by the Purchaser. The Put Option may
be exercised by the Purchaser in respect of all, and only all, of the vested
and unvested Shares, and by delivery of written notice of exercise of the Put
Option, within the later of (i) fifteen (15) days before the consummation
of the Change of Control and (ii) fifteen (15) days after the Company has
given the Purchaser notice of the principal terms of the Change of Control (the
“Option Notice”).

 

“Change of Control” means a sale of all or
substantially all of the Company’s assets or a merger, consolidation,
reorganization or similar event or sale or exchange of all of the Company’s
outstanding capital stock if after such transaction stockholders of the Company
immediately before the transaction own less than 50% of the voting securities
of the purchaser or surviving or continuing entity.

 

(b)                                 Expiration.
The Put Option shall be exercisable only if the Change of Control is
consummated prior to the fifth anniversary of the Date of Grant, provided, that
if the Employment Agreement is extended beyond its initial five-year term, then
the Put Option shall be exercisable during the extended term or terms.

 

(c)                                  Determination
of Put Price. The consideration to be paid to the Purchaser upon exercise
of the Put Option (the “Put Price”) shall be equal to:

 

(i)                                     the
product of five percent (5%) of the Excess Value, at the time of Change of
Control, should such Change of Control occur prior to the second anniversary of
the Date of Grant, multiplied by six-sixteenths (6/16);

 

(ii)                                  the
product of ten percent (10%) of the Excess Value, at the time of Change of
Control, should such Change of Control occur subsequent to the second and prior
to the third anniversary of the Date of Grant, multiplied by six-sixteenths
(6/16);

 

(iii)                               the
product of sixteen percent (16%) of the Excess Value, at the time of Change of
Control, should such Change of Control occur subsequent to the third
anniversary of the Date of Grant, multiplied by multiplied by six-sixteenths
(6/16).

 

“Excess Value” means the excess over
$30,000,000 (thirty million) US Dollars of the Fair Market Value of all equity
interests in the Company.

 

5

 

(d)                                 Put
Closing. At the closing of the transaction contemplated by the exercise of
the Put Option, (i) the Purchaser shall deliver to the Company his or her
certificates, representing all his or her vested and unvested Shares, free and
clear from all liens, claims and encumbrances, with duly executed instruments
of assignment attached, and (ii) Purchaser shall make such customary
representations and warranties, as the Company may reasonably request; and (iii) the
Company shall deliver to the Purchaser in cash or by wire transfer the purchase
price of the vested and unvested Shares, provided that if the consideration
received by the stockholders of the Company, with respect to the Change of
Control, is other than cash, the Company shall be entitled to pay the Purchaser
the Put Price by delivery to the Purchaser of the Fair Market Value of such
other consideration, and the Purchaser shall become a party to, and bound by,
any restriction imposed upon the Company’s stockholders with respect to the
consideration received in connection with the Change of Control. The Put
Closing shall occur within thirty (30) days of the later of (x) Change of
Control or (y) delivery of the Put Notice to the Company, at the offices
of the Company, or at such other place the Company and the Purchaser mutually
agree.

 

7.                                       Restriction
on Transfer. Except for the escrow described in Section 8 of this
Agreement or transfer of the Shares to the Company or its assignees
contemplated by this Agreement or the Pledge Agreement (in the form attached
hereto as Exhibit B), none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until the release of such Shares from the Company’s Repurchase Option in
accordance with the provisions of this Agreement, other than by will or the
laws of descent and distribution; provided, however, that Purchaser may
transfer shares in conformance with Section 9(f) of this Agreement.

 

8.                                       Escrow
of Shares.

 

(a)                                  To
ensure the availability for delivery of the Purchaser’s Unvested Shares upon
exercise of the Repurchase Option by the Company, the Purchaser shall, upon
execution of this Agreement, deliver and deposit with an escrow holder
designated by the Company (the “Escrow Holder”) and reasonably
acceptable to the Purchaser the share certificates representing the Unvested
Shares, together with the Assignment Separate from Certificate (the “Stock
Assignment”) duly endorsed in blank, in the form attached hereto as Exhibit D.
The Unvested Shares and Stock Assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser in the
form attached as Exhibit E hereto, until such time as the Company’s
Repurchase Option expires.

 

(b)                                 The
Escrow Holder shall not be liable for any act it may do or omit to do with
respect to holding the Unvested Shares in escrow and while acting in good faith
and in the exercise of its judgment.

 

(c)                                  If
the Company or any assignee exercises its Repurchase Option hereunder, the
Escrow Holder, upon receipt of written notice of such option exercise from the
proposed transferee, shall take all steps necessary to accomplish such
transfer.

 

(d)                                 When
the Repurchase Option has been exercised or expires unexercised, and a portion
of the Shares has been released from such Repurchase Option, the Escrow Holder
shall promptly upon request, but not more frequently than once each year, cause
a new certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Purchaser, as the case may be.

 

6

 

(e)                                  Subject
to the terms hereof, the Purchaser shall have all the rights of a shareholder
with respect to such Shares while they are held in escrow, including without
limitation, the right to vote the Shares and receive any cash dividends
declared thereon. If, from time to time during the term of the Company’s
Repurchase Option, there is (i) any stock dividend, stock split or other
change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser’s ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as “Shares”
for purposes of this Agreement and the Company’s Repurchase Option.

 

9.                                       Company’s
Right of First Refusal. Before any Shares held by Purchaser or any
transferee (either being sometimes referred to herein as the “Holder”)
may be sold or otherwise transferred (including transfer by gift or operation
of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this Section (the
“Right of First Refusal”).

 

(a)                                  Notice
of Proposed Transfer. The Holder of the Shares shall deliver to the Company
a written notice (the “Notice”) stating: (i) the Holder’s bona fide
intention to sell or otherwise transfer such Shares; (ii) the name of each
proposed purchaser or other transferee (“Proposed Transferee”); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the “Offered Price”), and the Holder shall offer
the Shares at the Offered Price to the Company or its assignee(s).

 

(b)                                 Exercise
of Right of First Refusal. At any time within thirty (30) days after
receipt of the Notice, the Company and/or its assignee(s) may, by giving
written notice to the Holder, elect to purchase all or part of the Shares
proposed to be transferred to anyone or more of the Proposed Transferees, at
the purchase price determined in accordance with subsection (c) below.

 

(c)                                  Purchase
Price. The purchase price (“Purchase Price”) for the Shares purchased
by the Company or its assignee(s) under this Section shall be (i) the
Offered Price in the case of Shares that are vested or (ii) in the case of
Shares that are Unvested Shares, the lower of the Offered Price or the
Repurchase Price as defined in Section 4(a) hereof. If the Offered
Price includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.

 

(d)                                 Payment.
Payment of the Purchase Price shall be made, at the option of the Company or
its assignee(s), (i) by cash or check, (ii) by cancellation of all or
a portion of any outstanding indebtedness of the Holder to the Company (or, in
the case of repurchase by an assignee, to the assignee), or (iii) by any
combination thereof within thirty (30) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.

 

7

 

(e)                                  Holder’s
Right to Transfer. If Shares proposed in the Notice to be transferred to a
given Proposed Transferee are not purchased by the Company and/or its assignee(s) as
provided in this Section, then the Holder may sell or otherwise transfer such
Shares, that are not repurchased by the Company, to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within one hundred twenty (120) days after the date of
the Notice and provided further that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section shall
continue to apply to the Shares in the hands of such Proposed Transferee. If
the Shares described in the Notice are not transferred to the Proposed
Transferee within such period, a new Notice shall be given to the Company, and
the Company and/or its assignees shall again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise transferred.

 

(f)                                    Exception
for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding,
the transfer of any or all of the Shares during the Purchaser’s lifetime or on
the Purchaser’s death by will or intestacy to the Purchaser’s Immediate Family
or a trust for the benefit of one or more members of the Purchaser’s Immediate
Family or to a trust, partnership, limited liability company, custodianship or
other fiduciary account for the benefit of the Purchaser or one or more members
of the Purchaser’s Immediate Family, or the disbursement therefrom to Purchaser
or one or more members of his Immediate Family, shall be exempt from the
provisions of this Section, provided that the Purchaser notifies the Company in
writing within thirty (30) days of said transfer. “Immediate Family” as
used herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall
receive and hold the Shares so transferred subject to the provisions of this
Agreement, including but not limited to this Section and Section 4,
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section.

 

(g)                                 Termination
of Right of First Refusal. The Right of First Refusal shall terminate as to
any Shares upon the date of the first sale of Common Stock of the Company to
the general public pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission under the 1933 Act.

 

10.                                 Restrictive
Legends; Stop-Transfer Orders; Refusal to Transfer.

 

(a)                                  Purchaser
understands and agrees that the Company shall cause the legends set forth below
or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing
ownership of the Shares together with any other legends that may be required by
the Company or by applicable state or federal securities laws:

 

THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWlTH.

 

8

 

THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER, A RIGHT OF FIRST REFUSAL, AND A REPURCHASE OPTION HELD BY THE ISSUER
OR ITS ASSIGNEE(S) AS SET FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS,
RIGHT OF FIRST REFUSAL AND REPURCHASE OPTION ARE BINDING ON TRANSFEREES OF
THESE SHARES.

 

(b)                                 Stop-Transfer
Notices. Purchaser agrees that, in order to ensure compliance with the
restrictions referred to herein, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.

 

(c)                                  Refusal
to Transfer. The Company shall not be required (i)to transfer on its books
any Shares that have been sold or otherwise transferred in violation of any of
the provisions of this Agreement or (ii) to treat as owner of such Shares
or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Shares shall have been so transferred.

 

11.                                 Lock-Up
Period. Purchaser hereby agrees that, if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in
connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchaser (or any transferee under Section 8
of this Agreement) shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period (or such shorter period as
may be requested in writing by the Managing Underwriter and agreed to in
writing by the Company) (the “Market Standoff Period”) following the
effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.

 

12.                                 Tax
Consequences. Set forth below is a brief summary as of the date of grant of
this Stock Purchase Right of some of the federal tax consequences of exercise
of this Stock Purchase Right and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.

 

(a)                                  Exercise
of Stock Purchase Right. Generally, no income will be recognized by Purchaser
in connection with the exercise of the stock purchase right for shares subject
to the Repurchase Option, unless an election under Section 83(b) of
the Code is filed with the Internal Revenue Service within 30 days of the date
of exercise of the right to purchase stock. The form for making this election
is attached as Exhibit F hereto. Otherwise, as the 

 

9

 

Company’s repurchase
right lapses, Purchaser will recognize compensation income in an amount equal
to the difference between the Fair Market Value of the stock at the time the
Company’s repurchase right lapses and the amount paid for the stock, if any
(the “Spread”). If Purchaser is a Service Provider or former Service
Provider, the Spread will be subject to tax withholding by the Company, and the
Company will be entitled to a tax deduction in the amount at the time the
Purchaser recognizes ordinary income with respect to a Stock Purchase Right.

 

(b)                                 Disposition
of Shares. Upon disposition of the Shares, any gain or loss is treated as
capital gain or loss. If the Shares are held for more than one year, any gain
realized on disposition of the shares will be treated as long-term capital gain
for federal income tax purposes. Long-term capital gains are grouped and netted
by holding periods. Net capital gains on assets held for more than 12 months is
capped at 20%. Capital losses are allowed in full against capital gains, and up
to $3,000 against other income.

 

THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER’S
SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b),
EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS
FILING ON THE PURCHASER’S BEHALF.

 

13.                                 No
Guarantee of Continued Service. PURCHASER ACKNOWLEDGES AND AGREES THAT THE
RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO
PARAGRAPH 5 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AND
THE COMPANY ACHIEVING CERTAIN TARGETS (AS DEFINED) (NOT THROUGH THE ACT OF
BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL.

 

14.                                 Notices.
Any notice, demand or request required or permitted to be given by either the
Company or the Purchaser pursuant to the terms of this Agreement shall be in writing
and may be delivered by hand, by nationally recognized private courier, or by
certified mail. Notices delivered by hand or by nationally recognized private
courier shall be deemed given when delivered personally to the addressee or to
the courier, or if given by certified mail when deposited in the U.S. mail,
certified and with postage prepaid, and addressed to the parties at the
addresses of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.

 

Any notice to the Escrow Holder shall be sent to the
Company’s address with a copy to the other party not sending the notice.

 

15.                                 No
Waiver. Either party’s failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party’s right
to assert all other legal remedies available to it under the circumstances.

 

10

 

16.                                 Successors
and Assigns. The Company may assign any of its rights under this Agreement
to single or multiple assignees, and this Agreement shall inure to the benefit
of the successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, this Agreement shall be binding upon Purchaser and
his or her heirs, executors, administrators, successors and assigns.

 

17.                                 Interpretation.
Any dispute regarding the interpretation of this Agreement shall be submitted
by Purchaser or by the Company forthwith to the Administrator which shall
review such dispute at its next regular meeting. The resolution of such a
dispute by the Administrator shall be final and binding on all parties.

 

18.                                 Governing
Law; Severability. This Agreement is governed by the internal substantive
laws, but not the choice of law rules, of New York.

 

19.                                 Entire
Agreement. The Plan is incorporated herein by reference. This Agreement
(including the exhibits referenced herein), the Plan and the Investment
Representation Statement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the
subject matter hereof, and may not be modified adversely to the Purchaser’s
interest except by means of a writing signed by the Company and Purchaser.

 

By Purchaser’s signature
below, Purchaser represents that he or she is familiar with the terms and
provisions of the Plan, and hereby accepts this Agreement subject to all of the
terms and provisions thereof. Purchaser has reviewed the Plan and this
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all provisions
of this Agreement. Purchaser agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
arising under the Plan or this Agreement. Purchaser further agrees to notify
the Company upon any change in the residence indicated in the Notice of Grant
of Stock Purchase Right.

 

	
  James
  Molenda

  	
   

  	
  Nexsan Corporation

  
	
  Address:

  	
   

  	
  Address:

  
	
   

  	
   

  	
  c/o Beechtree Capital, Ltd.

  
	
   

  	
   

  	
  1 Rockefeller Plaza

  
	
   

  	
   

  	
  Suite 1600

  
	
   

  	
   

  	
  New York, NY 10020

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Martin Boddy

  
	
  /s/ James Molenda

  	
   

  	
   

  	
   Name Printed: Martin Boddy

  
	
  Signature

  	
   

  	
   

  	
   Title: CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  James Molenda

  	
   

  	
   

  
	
  Print Name

  	
   

  	
   

  

 

11

 

Exhibit A — F as per Diamond Lauffin                                                                                                                                                                                                                                                                                    Tab
17

 

 

NEXSAN CORPORATION

 

Amendment
No. 1 to Restricted Stock Purchase Agreement

 

AMENDMENT NO. 1,
dated as of April 1, 2003, to the Restricted Stock Purchase Agreement,
dated January 4, 2001 (“RSPA”) between Nexsan Corporation (“Company”) and
Jim Molenda (“Purchaser”).

 

WHEREAS, the Company and
Purchaser wish to amend the RSPA and certain of the agreements entered into in
connection therewith (terms defined in the RSPA being used herein as therein
defined);

 

NOW, THEREFORE, in
consideration of the premises, the Company and Purchaser hereby agree as
follows:

 

1.                                       Restructuring of Restricted Stock. Under separate
instruments, the Company is granting you options to purchase up to 1,200,000
shares of the Company shares of the Company’s common stock at $.28 per share,
and you are granting to the Company an option to purchase up to 1,200,000
shares of the Company’s common stock at $.66 per share.

 

2.                                       Modification of Vesting. Section 5 of the RSPA (Release
of Shares From Repurchase Option (Vesting)) is amended to read in its entirety
as follows:

 

5. Release of Shares From Repurchase Option (Vesting).

 

(a) One-half of the Shares purchased pursuant to this Agreement
shall be released from the Repurchase Option (sometimes hereafter referred to
as “vest” or “vesting’) as follows:  20%
of the shares will be released on December 31,2002, 10% of the Shares
shall be released on December 31, 2003, 10% of the Shares shall be
released on December 31, 2004 and 10% of the Shares shall be released on December 31,
2005, provided, in each case, that Purchaser is a Service Provider to the
Company on such date.

 

(b) One-half of the Shares purchased pursuant to this Agreement
shall vest based upon on the respective amounts of Annualized Sales (defined
below) achieved by the Company during a particular fiscal quarter, as follows:
One-eighth of the Shares shall vest on the last day of the first fiscal quarter
in which Annualized Sales equal or exceed $30 million; one-eighth of the Shares
shall vest on the last day of the first fiscal quarter in which Annualized
Sales equal or exceed $40 million; one-eighth of the Shares shall vest on the
last day of the first fiscal quarter in which Annualized Sales equal or exceed
$50 million; and one-eighth of the Shares shall vest on the last day of the
first fiscal quarter in which Anualized Sales equal or exceed $60 million.

 

 

“Annualized Sales” means the total amount of sales, net of
returns, discounts and allowances, of the Company for the fiscal quarter,
multiplied by four (4).

 

All determinations of Sales shall be based on the regularly prepared
financial statements of the Company, which need not be audited; provided, that
if an audit of the Company’s financial statements results in a change to any
unaudited statements, the audited statements shall control for purposes of this
Agreement.

 

(c) Any of the Shares which have not yet been released from the
Company’s Repurchase Option are referred to herein as “Unvested Shares.”

 

(d) The Shares which have been released from the Company’s
Repurchase Option shall be delivered to the Purchaser at the Purchaser’s
request (see Section 8).

 

(e) Notwithstanding anything to the contrary in this Agreement,
all Unvested Shares shall vest upon the occurrence of a Change of Control to
the extent, and only to the extent, that the value of the equity of the Company
at the time of the Change of Control exceeds $30,000,000. Accordingly upon a
Change of Control there shall vest a number of Unvested Shares that have a
value at the time of the Change of Control that is equal to the Excess Value
available to the common stock multiplied by a fraction, the numerator of which
is the number of Unvested Shares immediately before the Change of Control and
the denominator of which is the total number of shares of common stock or
common stock equivalents then outstanding. “Change of Control” means a
sale of all or substantially all of the Company’s assets or a merger,
consolidation, reorganization or similar event or sale or exchange of all of
the Company’s outstanding capital stock if after such transaction stockholders
of the Company immediately before the transaction own less than 50% of the
voting securities of the purchaser or surviving or continuing entity. “Excess
Value” means the excess over $30,000,000 (thirty million) US Dollars of the
Fair Market Value of all equity interests in the Company.

 

(f) In the event that Purchaser’s relationship as a Service
Provider with the Company, and/or any of its Parent or Subsidiary companies,
shall terminate prior to the vesting of all Shares purchased under this
Agreement all Unvested Shares shall cease to vest pursuant to this Agreement.

 

3.                                       Put Option. Section 6 of the RSPA (Put Option) is
deleted.

 

2

 

4.                                       Full Force and Effect. The RSPA and the agreements entered
into in connection therewith are ratified and confirmed and, as amended hereby,
shall remain in full force and effect.

 

IN WITNESS WHEREOF, this
Amendment No. 1 has been executed as of the day and year first above
written.

 

	
   

  	
  NEXSAN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mohan Vachani

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jim Molenda

  
	
   

  	
   

  	
  Jim Molenda

  

 

3

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