EX-4 3 ex4-2.txt EXHIBIT 4.2 FORM OF SUBSCRIPTION AGREEMENT FORM OF SUBSCRIPTION AGREEMENT This Agreement is entered into as of the __th day of March, 2001 by and between nStor Technologies, Inc., a Delaware corporation ("nStor") and __________________________ (the "Noteholder"). WHEREAS, the Noteholder made a loan (the "Loan") to nStor in the amount of $________, which Loan is evidenced by an 8% convertible subordinated promissory note issued by nStor to the Noteholder dated as of the date hereof in the original principal amount of $________ (the "Note") which Note is convertible into _________ shares of common stock, par value $.05 per share, of nStor (the "nStor Common Stock") at a conversion price of $1.00; and WHEREAS, in consideration for the Loan, nStor desires to issue to the Noteholder a warrant (the "Warrant") to purchase _________ shares of nStor Common Stock at a price of $1.20 (which represents 120% of the closing market price for one share of nStor Common Stock on March 9, 2001), upon the terms and conditions described to the Board. NOW THEREFORE, the parties hereto agree as follows: 1. Delivery of Warrants. On the date hereof, nStor shall deliver the Warrant to the Noteholder. The Warrant, the Note, the shares of nStor Common Stock issuable upon the exercise of the Warrants (the "Warrant Shares") and the shares of nStor Common Stock issuable upon conversion of the Note (the "Note 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 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. c. The Note Shares, when delivered to the Noteholder in accordance with the terms of the Note, 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 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. b. 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. c. 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 Securities, 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 10140 Mesa Rim Road, San Diego, California, 92121. 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 Warrant Shares and the Note Shares become registered with the Securities and Exchange Commission (the "Commission"), each certificate representing a Warrant Share or a Note Share shall bear a legend in substantially the following form: THE SHARE(S) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND THE CORPORATION HAS RELIED UPON AN EXEMPTION TO THE REGISTRATION REQUIREMENT UNDER THE ACT FOR THE SALE OF THE SHARE(S) REPRESENTED BY THIS CERTIFICATE TO ITS HOLDER. THEREFORE, THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED STOCK AND MAY NOT BE SOLD OR TRANSFERRED TO ANY THIRD PARTY WITHOUT EITHER BEING REGISTERED UNDER THE ACT OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT. 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. Investor Acknowledgment of Certain Risk Factors. The Investor understands that in addition to the various risks ordinarily attendant upon investments in entities in the technology industry, certain other material risk factors relating to the Company and its business make an investment in the Company subject to a particularly high degree of risk. THE INVESTOR HAS BEEN CAUTIONED THAT AN INVESTMENT IN THE SECURITIES IS HIGHLY SPECULATIVE AND INVOLVES SIGNIFICANT RISKS INCLUDING THE RISK OF LOSS OF THE ENTIRE INVESTMENT AND THAT IT IS NOT POSSIBLE TO FORESEE AND DESCRIBE ALL OF THE BUSINESS, ECONOMIC AND FINANCIAL RISK FACTORS WHICH MAY AFFECT THE COMPANY. THE INVESTOR UNDERSTANDS THAT ADDITIONAL INFORMATION REGARDING THE COMPANY IS AVAILABLE FROM THE COMPANY'S PUBLIC FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE "COMPANY FILINGS"). SUCH COMPANY FILINGS CONTAIN, AMONG OTHER INFORMATION, A DISCUSSION OF CERTAIN RISKS INVOLVED IN AN INVESTMENT IN THE SECURITIES. 8. 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., 100 Century Blvd., West Palm Beach, FL 33417, attn: Jack Jaiven, with a copy to Larry Hemmerich, President of nStor, 10140 Mesa Rim Road, San Diego, California, 92121, and if to the Noteholder, at ____________________, 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, fits 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:________________________________________ Name: Title: -------------------------------------- Name: Title: