SUBSCRIPTION AGREEMENT
This Agreement is entered into as of the 29th day of December, 2000 by and
between nStor Technologies, Inc., a Delaware corporation ("nStor") and H. Xxxxx
Xxxx (the "Noteholder").
WHEREAS, during calendar year 2000, the Noteholder and a company
controlled by him made loans (the "Loans") to nStor, which Loans are evidenced
by two promissory notes issued by nStor (the "Notes"); and
WHEREAS, the principal balance of the Notes on the date hereof is
3,600,000; and
WHEREAS, in consideration for the Loans, nStor desires to issue to the
Noteholder a warrant to purchase 200,000 shares of common stock, par value $.05
per share, of nStor (the "nStor Common Stock") upon the terms and conditions
described to the Board; and
WHEREAS, nStor and the Noteholder desire that, effective as of the date
hereof, the principal amount of the Notes be reduced to $1,600,000 plus any
accrued interest on the Notes, in exchange for the issuance by nStor to the
Noteholder of (i) 2,000 shares of Series G Preferred Stock, par value $.01 per
share of the Company (the "Series G Preferred Stock") and (ii) a warrant to
purchase 500,000 shares of nStor Common Stock, upon the terms and conditions
described to the Board.
NOW THEREFORE, the parties hereto agree as follows:
1. Exchange of Notes for Shares.
a. On the date hereof, (i) the Noteholder shall deliver the
Note, duly endorsed to nStor; and (ii) nStor shall deliver to the
Noteholder (A) a warrant to purchase 500,000 shares of nStor Common
Stock ("Warrant A"), (B) a warrant to purchase 200,000 shares of nStor
Common Stock ("Warrant B" and together with Warrant A, the "Warrants"),
and (C) a new promissory note issued by nStor to the Noteholder in the
principal amount of $650,000.
b. The Company agrees that it shall amend its certificate
of incorporation as soon as reasonable practicable after the date hereof
to create the Series G Preferred Stock having the rights, preferences
and privileges set forth in the Certificate of Designation for the
Series G Preferred Stock, a form of which is attached hereto as Exhibit
A and, immediately after the filing of such amendment, shall issue
certificates representing 2,000 shares of Series G Preferred Stock (the
"Preferred Shares") to the Noteholder. The Preferred Shares, the Warrant
and the shares of nStor Common Stock issuable upon the exercise of the
Warrants (the "Warrant Shares") are collectively referred to herein as
the "Securities".
2. Representations of nStor. nStor hereby represents and warrants to the
Noteholder the following:
a. nStor is a corporation validly existing under the laws
of the State of Delaware.
b. The Preferred Shares, when delivered to the Noteholder
in accordance with the terms hereof and the Certificate of Designation
of the Series G Preferred Stock, will be duly authorized, validly
issued, fully paid, and nonassessable.
c. The Warrant Shares, when delivered to the Noteholder in
accordance with the terms of the Warrants, will be duly authorized,
validly issued, fully paid, and nonassessable.
3. Representations of the Noteholder. The Noteholder hereby represents
and warrants to nStor the following:
a. The Noteholder is the sole lawful holder of the Note,
possesses all right, title and interest therein, has the requisite legal
capacity and authority to transfer the Note, and has not transferred,
pledged, or hypothecated the Note or any interest therein to any third
party. The Note delivered to nStor pursuant to Section 1 hereof is the
original Note.
b. The Noteholder understands and represents that: (i) he
must bear the economic risk of this investment for an indefinite period
of time because none of the Securities have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any
state securities laws and, therefore, cannot be resold unless they are
subsequently registered under the Securities Act and the pertinent state
securities laws or unless an exemption from such registration is
available; and (ii) he is acquiring the Securities for investment for
his own account and not for the account of any other person, and not
with any present view toward resale or other "distribution" thereof
within that meaning of the Securities Act.
c. The Noteholder has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of an investment in the Securities. The Noteholder is
aware that an investment in the Securities is highly speculative and
subject to substantial risks. The Noteholder is capable of bearing the
high degree of economic risk and burdens of this investment, including
the possibility of a complete loss of his investment. The financial
condition of the Noteholder is such that he is under no present or
contemplated future need to dispose of any of the Securities to satisfy
any existing or contemplated undertaking, need or indebtedness.
d. nStor has made available to the Noteholder, or
his designated representative, during the course of this transaction and
prior to the issuance of any of the Preferred Shares and the Warrants,
the opportunity to ask questions of and receive answers from the
officers and directors of nStor concerning the terms and conditions of
the offering or otherwise relating to the financial data and business of
nStor, to the extent that nStor or its officers and directors possess
such information or can acquire it without unreasonable effort or
expense. nStor has also made available to the Noteholder for inspection,
documents, records, books and other written information about nStor, its
business and this investment at nStor's principal executive office at
00000 Xxxx Xxx Xxxx, Xxx Xxxxx, Xxxxxxxxxx, 00000.
4. Restricted Stock and Legend. The Noteholder acknowledges that the
Securities offered hereunder are being offered pursuant to a private placement
exemption under the Securities Act, and that the Securities are deemed
"restricted securities" as defined in the Securities Act. Until the Preferred
Shares or Warrant Shares become registered with the Securities and Exchange
Commission (the "Commission"), each certificate representing a share of Common
Stock or Series G Preferred Stock shall bear a legend in substantially the
following form:
THE SHARE(S) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS, AND THE CORPORATION HAS RELIED UPON AN
EXEMPTION TO THE REGISTRATION REQUIREMENT UNDER THE ACT FOR THE SALE
OF THE SHARE(S) REPRESENTED BY THIS CERTIFICATE TO ITS HOLDER.
THEREFORE, THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED
STOCK AND MAY NOT BE SOLD OR TRANSFERRED TO ANY THIRD PARTY WITHOUT
EITHER BEING REGISTERED UNDER THE ACT OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT.
5. Resales. The Noteholder agrees not to resell or otherwise dispose of
all or any part of the Securities, except as permitted by law, including,
without limitation, any and all applicable provisions of this Agreement and any
regulations under the Securities Act. Prior to any transfer or attempted
transfer of any of the Securities issued hereunder, or any interest therein, the
Noteholder shall give nStor written notice of his intention to make such
transfer, describing the manner of the intended transfer and the proposed
transferee. Promptly after receiving such written notice, nStor shall present
copies thereof to its counsel or to any special counsel designated by the
Noteholder or by such transferee which shall be reasonably acceptable to nStor.
If in the opinion of such counsel the proposed transfer may be effected without
registration of the Securities under the applicable federal or state securities
laws, as promptly as practicable, the Securities proposed to be transferred
shall be transferred in accordance with the terms of said notice. nStor shall
not be required to effect any such transfer prior to the receipt of such
favorable opinion(s); provided, however, nStor may waive the requirement that
the Noteholder obtain an opinion of counsel, in its sole and absolute
discretion. As a condition to such favorable opinion, counsel for nStor may
require an investment letter to be executed by the proposed transferee.
6. Indemnification. Each party hereto shall indemnify, defend and hold
the other harmless from and against all claims, losses, liabilities, costs,
expenses, obligations, damages, including, without limitation, litigation costs
and reasonable attorneys' fees , sustained, incurred or required to be paid by
the other that would not have been sustained, incurred or paid is all the
representations, warranties, agreements or covenants of the other party
hereunder had been true, correct and duly performed.
7. Miscellaneous.
a. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered or when sent by registered mail, return receipt requested,
addressed if to nStor, at nStor Technologies, Inc., 000 Xxxxxxx
Xxxx., Xxxx Xxxx Xxxxx, XX 00000, attn: Xxxx Xxxxxx, with a copy to
Xxxxx Xxxxxxxxx, President of nStor, 00000 Xxxx Xxx Xxxx, Xxx Xxxxx,
Xxxxxxxxxx, 00000, and if to the Noteholder, at 000 Xxxxxxx Xxxx., Xxxx
Xxxx Xxxxx, XX 00000, or at such other address as each such party
furnishes by notice given in accordance with this Section 7.a., and
shall be effective, when personally delivered, upon receipt, and when so
sent by certified mail, four business days after deposit with the United
States Postal Service.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Florida applicable to the
agreements made and to be performed entirely within such state, without
giving effect to rules governing the conflict of laws. In the event that
any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision
hereof.
d. This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to
the subject matter hereof.
e. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties hereto.
f. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
g. The headings in the Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by
a party, may be delivered to the other party hereto by telephone line
facsimile transmission of a copy of this Agreement bearing the signature
of the party so delivering this Agreement.
[Signatures Appear on Following Page]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
nSTOR TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Vice President
NOTEHOLDER:
/s/ H. Xxxxx Xxxx
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H. Xxxxx Xxxx
