-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JsyBYoiYmJ18PoH7W/EeDzD2zew7ArpjjmYGsEzfvaJwWFJWmJ8DYvDJJ7dA+nmI 2qAdsgkgjJ7veY5ZKTv5oQ== 0000075448-98-000005.txt : 19980504 0000075448-98-000005.hdr.sgml : 19980504 ACCESSION NUMBER: 0000075448-98-000005 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980430 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NSTOR TECHNOLOGIES INC CENTRAL INDEX KEY: 0000075448 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 952094565 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-12895 FILM NUMBER: 98605771 BUSINESS ADDRESS: STREET 1: 100 CESNTURY BLVD STREET 2: 19146 LYONS ROAD CITY: WEST PALM BEACH STATE: FL ZIP: 33417 BUSINESS PHONE: 5614871059 MAIL ADDRESS: STREET 1: 19146 LYONS RD CITY: BOCA RATON STATE: FL ZIP: 33434 FORMER COMPANY: FORMER CONFORMED NAME: IMGE INC DATE OF NAME CHANGE: 19960627 FORMER COMPANY: FORMER CONFORMED NAME: IMNET INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: COMMUNICATIONS & CABLE INC DATE OF NAME CHANGE: 19890413 10-K/A 1 FORM 10K/A FOR 12/31/97 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------- FORM 10-K/A X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR _______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 08354 nStor Technologies, Inc. (exact name of registrant as specified in its charter) Delaware 95-2094565 (State of Incorporation) (I.R.S. Employer ID No.) 100 Century Blvd., West Palm Beach, Florida 33417 (Address of principal executive offices) Registrant's telephone number, including area code: 561-640-3103 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.05 per share (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE REGISTRANT Common Stock, par value $.05 per share ("Common Stock"), was the only class of voting stock of the Registrant outstanding on December 31, 1997. Based on the last sales price of the Common Stock on the American Stock Exchange ("AMEX") on March 31, 1998 (1-3/16), the aggregate market value of the approximately 12,564,000 shares of the Common Stock held by persons other than officers, directors and persons known to the Registrant to be the beneficial owners (as that term is defined under the rules of the Securities and Exchange Commission) of more than five percent of the Common Stock on that date was approximately $14.9 million. By the foregoing statements, the Registrant does not intend to imply that any of these officers, directors or beneficial owners are affiliates of the Registrant or that the aggregate market value, as computed pursuant to rules of the Securities and Exchange Commission, is in any way indicative of the amount which could be obtained for such shares of Common Stock. APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 14(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ____ No __X__ (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 18,670,477 shares of Common Stock, par value $.05 per share, were outstanding as of March 31, 1998. DOCUMENTS INCORPORATED BY REFERENCE Definitive Proxy Statement of nStor Technologies, Inc. for the 1998 Annual Meeting of Stockholders (incorporated in Part III) 2 PART I AND II Registrant incorporates by reference, Parts I and II of Registrants Form 10-K for the year ended December 31, 1997, filed with the Securities and Exchange Commission on April 15, 1998. PART III Item 10. Directors and Executive Officers of the Registrant MANAGEMENT Directors and Executive Officers of the Company - Set forth below is the name, age, position with the Company, the year in which each was first appointed or elected an officer or director, and certain other information with respect to each director and executive officer: Director Officer Name Age Position Since Since Michael L. Wise 54 Chairman of the Board 1989 - (1) Larry J. Calise 40 Chief Financial Officer - April 1998 Bernard R. Green 79 Director 1997 - H. Irwin Levy 71 Director 1995 (2) - Mark F. Levy 42 Director and President 1992 (3) 1995 (3) Richard Reiss, Jr. 54 Director 1997 - R. Daniel Smith 45 Director and Executive 1997 1996 Vice President Joseph D. Weingard 52 Director 1995 (4) - (4) _________ (1) Mr. Wise previously served as President of the Company from March 1989 until December 1990 and from October 1992 until July 1996. (2) Mr. H. Irwin Levy previously served as Chairman of the Board of Directors of the Company from 1987 until July 1991. 3 (3) Mr. Mark Levy previously served as Vice President, Secretary, and a director of the Company from 1985 to 1990. (4) Mr. Weingard previously served as a director and in various executive capacities of the Company, including Chief Executive Officer and Vice Chairman, from 1981 until January 1992 and Vice President and Secretary from 1995 until April 1997. Michael L. Wise has been associated with the Company in various positions since 1986. Mr. Wise was the founder of IMNET Corporation of Delaware and served as its President and Chairman of the Board from July 1986 to June 1990. IMNET Corporation of Delaware became a subsidiary of the Company in 1988. Mr. Wise has a PhD in physics. Larry J. Calise, a Certified Public Accountant, was appointed Chief Financial Officer of the Company in April 1998. Prior to joining the Company in December 1997, Mr. Calise served as Chief Financial Officer of American Executive Centers, Inc., a provider of business support services, from 1996 to 1997 and from 1986 until 1996, held various positions, including Vice President-Finance and Administration for a division of Alexander Proudfoot, Plc, an international management consulting firm. Bernard R. Green is consultant to, and previously for more than forty years, managing or senior partner of, the accounting firm of Friedman, Alpren & Green of New York, New York and West Palm Beach, Florida. Mr. Green previously served as a director of Hilcoast Development Corp. ("Hilcoast"), a real estate developer, from July 1992 until February 1997 and has been a private investor for more than twenty years. H. Irwin Levy is Chairman of the Board and Chief Executive Officer of Hilcoast, which position he has held since August 1992. Since December 1997, Mr. Levy has served as Chairman of the Board of CV Reit, Inc., a New York Stock Exchange listed Real Estate Investment Trust ("CV Reit") and was Chairman of the Board and Chief Executive Officer of CV Reit from 1985 until July 1992. He is currently of counsel to the West Palm Beach law firm of Levy Kneen Mariani Curtin Wiener Kornfeld and del Russo which provides legal services to the Company. 4 Mark F. Levy is President of Cenvill Recreation, Inc. and certain affiliated companies, all of which are privately held businesses. Mr. Levy is the son of H. Irwin Levy and is licensed to practice law in the State of Florida. Richard Reiss, Jr. is President of Georgica Advisors, a private investment firm located in New York, New York. Mr. Reiss was managing partner of Cumberland Associates, a private money management firm from January 1978 until December 1996. R. Daniel Smith was President and Chief Executive Officer of Intelligent Manufacturing Systems, Inc. ("IMS"), a company engaged in the development and sale of software technologies, from October 1991 through June 1996. The Company acquired certain assets of IMS in June 1997 (see "Certain Transactions - IMS"). Mr. Smith is President of the Company's operating subsidiary. Joseph D. Weingard has been a financial consultant in an individual capacity since 1987 and is currently president of Century Financial Advisors, Inc. Mr. Weingard was a director of Hilcoast from August 1992 to February 1997, and a director of CV Reit from May 1992 to July 1992. Mr. Weingard is a Certified Public Accountant and holds real estate broker and mortgage broker licenses. Meetings and Committees of the Board of Directors During the fiscal year ended December 31, 1997 and the two month transition period ended December 31, 1996 (see "Executive Compensation") the Board of Directors held seven meetings. No director attended fewer than 75 percent of the aggregate number of meetings of the Board of Directors held during the period he served on the Board. An Audit Committee, which met twice during fiscal 1997, was established in March 1997 and currently consists of Michael L. Wise, Joseph D. Weingard and Bernard R. Green. The Audit Committee's responsibilities include overseeing the financial reporting process and the effectiveness of the Company's internal, accounting and financial controls, and making recommendations to the Board, including the designation of independent auditors on an annual basis. 5 A Compensation Committee, which did not meet during fiscal 1997, was also established in March 1997 consisting of Michael L. Wise, H. Irwin Levy and R. Daniel Smith. The Compensation Committee's responsibilities include reviewing and approving executive compensation, including benefits, and stock options granted under the Company's 1996 Stock Option Plan. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who own more than ten percent of the Company's outstanding Common Stock, to file with the Securities and Exchange Commission (the "SEC") initial reports of ownership and reports of changes in ownership of Common Stock. Such persons are required by SEC regulation to furnish the Company with copies of all such reports they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, the officers, directors and greater than ten percent beneficial owners of the Company have complied with all applicable Section 16(a) filing requirements. Item 11. Executive Compensation In November 1996, the Company changed its fiscal year end from October 31 to December 31. Accordingly, compensation for 1997 includes the two month transition period ended December 31, 1996 resulting in a fourteen month reporting period for 1997 (hereinafter referred to as the "1997 Period"). The following table sets forth for the 1997 Period and the fiscal years ended October 31, 1996 and 1995, the compensation awarded to, earned by or paid to those persons who were, during the 1997 Period, (i) the Chief Executive Officer of the Company and (ii) the other executive officer of the Company whose compensation is required to be disclosed pursuant to the rules of the SEC (collectively, the "Named Officers"). No compensation was earned by the Named Officers during the year ended October 31, 1995. 6 Summary Compensation Table Name and All Other Annual Principal Position Year Salary Bonus Compensation Mark F. Levy, 1997 - - $39,500(1) President and Chief 1996 - - $34,000(1) Executive Officer R. Daniel Smith, 1997 $296,500 - - Executive Vice President 1996 $ 65,400(2) - - __________ (1) Consists of Board meeting fees and monthly management/consulting fees for services rendered by Mr. Levy in his capacity as a director and officer of the Company. (2) Represents salary received by Mr. Smith commencing June 3, 1996, the first date Mr. Smith became employed by the Company. Option/Stock Appreciation Rights ("SAR") Grants The following table sets forth information regarding options to purchase the Company's Common Stock granted pursuant to the 1996 Stock Option Plan during the 1997 Period to the Named Officers. No SARs were granted. Individual Grants Potential ------------------- Realizable Percent Value Number of of Total at Assumed Securities Options/ Annual Rates Underlying SARs of Stock Price Options/ Granted to Exercise Appreciation SARs Employees or Base Expira- for Option Term Granted in Fiscal Price tion --------------------- (#) (1) Year (2) ($/sh) Date 5%($) 10%($) ---------- ---------- -------- ------- ---------- ---------- Mark F. Levy 50,000 -0- $2.38 10/06/07 $193,431 $308,007 40,000 -0- $2.10 12/23/06 $136,827 $217,874 40,000 -0- $4.00 12/23/06 $260,623 $414,999 __________ (1) The Company granted an option to purchase 50,000 shares of the Company's Common Stock on November 6, 1997 for services provided to the Company during fiscal 1997, of which 30,000 shares became exercisable upon the date of grant and 20,000 shares become exercisable on the first anniversary of the grant date. The Company granted an option to purchase 80,000 shares of the Company's Common Stock on December 23, 1996 for prior services provided to the Company which became exercisable upon the date of grant. 7 (2) Mr. Levy is not a salaried employee of the Company (see discussion under "Directors Compensation"). Aggregated Fiscal Year-End Option Value Table The following table sets forth certain information concerning unexercised stock options held by the Named Officers as of December 31, 1997. No options were exercised by any of the Named Officers during the 1997 Period. No SAR's have been granted or are outstanding. OPTION EXERCISES DURING 1997 AND YEAR-END OPTION VALUES Number of Value of Unexercised Shares Unexercised Options at In-the-Money Options at Acquired December 31, 1997 (#) December 31, 1997 ($)(1) on Value ------------------------- --------------------------- Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable - ---- -------- -------- ----------- ------------- ----------- ------------- Mark F. Levy -0- -0- 110,000 20,000 -0- -0- R. Daniel Smith -0- -0- 200,000 800,000 -0- -0- __________ (1) The closing price for the Company's Common Stock, as reported by the American Stock Exchange ("Amex") on December 31, 1997, was $2.00. None of the options held by the Named Officers were "in-the-money" as of December 31, 1997. Compensation Committee Interlocks and Insider Participation Since the Compensation Committee did not meet during the 1997 Period, the entire Board of Directors participated in deliberations concerning compensation paid to the Company's executive officers (see "Certain Transactions"). R. Daniel Smith, an employee of the Company, is also a member of the Board of Directors. 8 Item 12. Security Ownership of Management and Certain Certain Beneficial Owners The following table sets forth, as of March 31, 1998, information with respect to the beneficial ownership of the Company's Common Stock by (i) each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each director and executive officer of the Company, including executive officers named in the Summary Compensation Table under "Executive Compensation" and (iii) all directors and executive officers of the Company as a group. Amount and Nature of Percent of Name and Address of Beneficial Outstanding Beneficial Owner Ownership (1) Shares H. Irwin Levy 3,722,099 19.4% 100 Century Blvd. West Palm Beach, FL 33417 R. Daniel Smith 1,205,000 6.4% 450 Technology Park Lake Mary, FL 32746 Michael L. Wise 976,312 (2) 5.2% 285 Tanglewood Crossing Lawrence, NY 11559 Joseph D. Weingard 841,280 (3) 4.5% 185 NW Spanish River Blvd. Boca Raton, FL 33431 Mark F. Levy 722,500 (4) 3.8% 100 Century Blvd. West Palm Beach, FL 33417 Bernard R. Green 270,000 (5) 1.4% 583 North Lake Way Palm Beach, FL 33480 Richard Reiss, Jr. 70,000 (6) 1114 Avenue of the Americas New York, NY 10036 Larry J. Calise - (6) 450 Technology Park Lake Mary, FL 32746 9 All executive officers, 7,807,191 39.4% directors and director nominees as a group (8 persons) __________ (1) Unless otherwise indicated, each stockholder listed has the sole power to vote and direct disposition of the shares of Common Stock shown as beneficially owned by such stockholder. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of the following shares which such person or group has the right to acquire pursuant to options exercisable within 60 days: Mr. H. Irwin Levy - 558,332 shares; Mr. Smith - 200,000 shares; Mr. Wise - 160,000 shares; Mr. Weingard - 80,000 shares; Mr. Mark F. Levy - 110,000 shares; Mr. Green and Mr. Reiss - 20,000 shares each; and all executive officers and directors as a group - 1,148,332 shares. See "Executive Compensation". (2) Includes 84,000 shares owned directly by Mr. Wise and 227,410 shares owned by a retirement trust controlled by Mr. Wise. The balance, as to which Mr. Wise disclaims beneficial ownership, consists of 389,502 shares owned by Mr. Wise's wife, 65,000 shares owned by Mr. Wise's child and 50,400 shares owned jointly by Mr. Wise's wife and his mother. (3) Includes 562,002 shares owned jointly with Mr. Weingard's wife. Also includes 3,000 shares as to which Mr. Weingard disclaims beneficial ownership, owned by Mr. Weingard's wife. (4) Includes 5,000 shares owned by Mr. Levy's wife and 7,500 shares owned by Mr. Levy as guardian for his children. Mr. Levy disclaims beneficial ownership as to these shares. (5) Includes 20,000 shares owned by Mr. Green's wife and 10,000 shares owned by a trust in which Mr. Green's wife is a trustee. Mr. Green disclaims beneficial ownership as to these shares. (6) Less than 1%. Item 13. Certain Relationships and Related Transactions Consulting and Advisory Agreement with Hilcoast Advisory Services, Inc. ("Advisor") Since July 1, 1996, Advisor has provided certain financial consulting and administrative services to the Company under an agreement which expires June 30, 1998, as extended, provides for 10 the payment of $6,000 per month, plus reimbursement for all out-of-pocket expenses, and which may be terminated by the Company upon 60 days notice and by Advisor upon 180 days notice. H. Irwin Levy is the Chairman of the Board, Chief Executive Officer and a majority shareholder of Hilcoast, the parent of Advisor. Management believes that the terms of this agreement are no less favorable to the Company than those that would be received from other sources. IMS In June 1997, the Company purchased substantially all of the assets of IMS, a company for which R. Daniel Smith was the Chief Executive Officer and sole shareholder, consisting of computer hardware and software, furniture and other equipment. The purchase price amounted to approximately $135,000, which was based on the net book value of the assets acquired. Management believes that the terms of this transaction were no less favorable to the Company than those that would be received from other sources. Loan Made to Director by the Company In May 1997, the Company loaned Richard Reiss, Jr. $130,000 which approximated the purchase price of 50,000 shares of the Company's Common Stock that Mr. Reiss purchased on the open market. The promissory note bears interest at prime which accrues until maturity (approximately $6,900 at December 31, 1997) and matures in May 1999. Loans Made by a Director to the Company In September 1997, H. Irwin Levy agreed to loan up to $1,000,000 to the Company (the "Director Loan"). Through its March 1998 maturity date, the Director Loan bore interest, payable monthly, at prime plus one and one-half percent (1.5%) per annum, was subordinated to borrowings of the Company under an asset based revolving credit facility, and was collateralized by substantially all assets of the Company. As of December 31, 1997, the outstanding balance under the Director Loan was $950,000 and a total of $26,800 in interest expense had accrued, of which $11,300 had been paid by the Company. In connection with the Director Loan, as of December 31, 1997, the Company issued warrants to Mr. Levy to purchase 55,000 shares of Common Stock of the Company at a purchase price of $2.35 per share, exercisable on the date of grant, expiring on September 16, 2000. In addition, from January 14, 1998 through February 13, 1998, the Company issued warrants to Mr. Levy to purchase up to 10,000 shares of Common Stock of the Company under similar terms. 11 During the first quarter of 1998, Mr. Levy advanced an additional net amount of $1,050,000 (consisting of $1,460,000 advanced, less $410,000 repaid) of which $500,000 was loaned by MLL Corp., a private company for which Mr. Levy is the majority shareholder. The Director Loan was amended and restated in March 1998, bringing the total amount loaned to the Company to $2,000,000 (the "Amended Director Loan"). The Amended Director Loan is subordinated to borrowings of the Company under an asset based revolving bank credit facility, is collateralized by substantially all assets of the Company, bears interest, payable monthly, at ten percent (10%) per annum and matures on September 5, 1999. In connection with the Amended Director Loan, the Company issued warrants to Mr. Levy to purchase 666,666 shares of Common Stock of the Company at a purchase price of $1.50 per share, exercisable on the date of grant, expiring on March 5, 2001. In April 1998, in connection with the Company's private placement of equity securities, Mr. Levy sold $1,000,000 of participation interests in the Amended Director Loan to private investors, including $250,000 to members of his family, and invested $1,000,000 in the Company's Preferred Stock (see Note 14 to Consolidated Financial Statements). In April 1998, Mr. Levy advanced an additional $735,000 to the Company which was repaid on April 16, 1998 from the proceeds of the Company's private placement of equity securities (see Note 14 to Consolidated Financial Statements). PART IV Registrant incorporates by reference, Part IV of Registrant's Form 10-K for the year ended December 31, 1997, filed with the Securities and Exchange Commission on April 15, 1998. In addition, pursuant to Item 14.(a)(3)-Exhibits, the following exhibits are being filed by Registrant herewith. 12 Exhibit Number - ------- 4.1 8% Convertible Preferred Stock Series A Subscription Agreement between Registrant, CPR (USA) Inc, Libertyview Fund, LLC, Libertyview Plus Fund and H. Irwin Levy (collectively, the "Subscribers") (See Schedule A of document for list of subscribers) 4.2 Form of Stock Purchase Warrant issued in connection with 8% Convertible Preferred Stock Series A (see Schedule A of document at 4.1 for list of warrants issued) 4.3 Registration Rights Agreement dated April 14, 1998 between Registrant and Subscribers 4.4 Stock Purchase Warrant between Registrant and H. Irwin Levy, issued in connection with 8% Convertible Preferred Stock 10.1 Escrow Agreement between Registrant, Subscribers and Holland & Knight LLP as escrow agent, made in connection with 8% Convertible Preferred Stock Series A 10.2 Agreement Among Optionholders with optionholders being all directors of Registrant, made in connection with 8% Convertible Preferred Stock Series A 10.3 Agreement Among Stockholders who collectively own more than 50% of the issued and outstanding Common Stock of Registrant, made in connection with 8% Convertible Preferred Stock Series A 13 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. nSTOR TECHNOLOGIES, INC. /s/ Mark F. Levy By:_____________________________________ Mark F. Levy, President Dated: April 28, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Mark F. Levy April 28, 1998 ______________________________________ Mark F. Levy, President and Director /s/ R. Daniel Smith April 28, 1998 _____________________________________ R. Daniel Smith, Executive Vice President and Director /s/ Michael L. Wise April 28, 1998 ____________________________________ Michael L. Wise, Director /s/ Larry J. Calise April 28, 1998 ______________________________________ Larry J. Calise, Principal Financial Officer and Principal Accounting Officer /s/ Bernard R. Green April 28, 1998 ______________________________________ Bernard R. Green, Director April , 1998 ______________________________________ H. Irwin Levy, Director April , 1998 _____________________________________ Richard Reiss, Jr., Director /s/ Joseph D. Weingard April 29, 1998 ______________________________________ Joseph D. Weingard, Director 14 EX-4 2 EXHIBITS 4 EXHIBIT 4.1 THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS. 8% CONVERTIBLE PREFERRED STOCK SERIES A SUBSCRIPTION AGREEMENT nSTOR TECHNOLOGIES, INC. THIS AGREEMENT is executed in reliance upon the transaction exemption afforded by Regulation D as promulgated by the Securities and Exchange Commission ("SEC"), under the Securities Act of 1933, as amended (the "Act"). This Agreement has been executed by the undersigned in connection with the private placement of the 8% Convertible Preferred Stock Series A (hereinafter referred to as the "Preferred Stock") of nSTOR TECHNOLOGIES, INC. (Amex symbol "NSO"), located at 100 Century Blvd., West Palm Beach, FL 33417, a corporation organized under the laws of Delaware, USA (hereinafter referred to as the "Company"). The terms on which the Preferred Stock may be converted into the common shares of the Company (the "Common Stock") and the other terms of the Preferred Stock are set forth in the Certificate of Designation of the 8% Convertible Preferred Stock Series A (Exhibit A annexed hereto). In addition, the Company will sell to the Subscribers listed on Schedule A annexed hereto ("A Subscribers"), a warrant (the "Warrant") to purchase Two Hundred Thousand (200,000) shares of Common Stock of the Company (such number of shares of Common Stock underlying the Warrants shall be pro rated as per each subscription amount) for a period of three (3) years from the Closing Date (as defined herein), as per the terms of a separate Stock Purchase Warrant (Exhibit B annexed hereto). This Subscription and, if accepted by the Company, the offer and sale of the Preferred Stock, Warrants and the Common Stock underlying the Warrant and Preferred Stock (collectively the "Securities"), are being made in reliance upon the provisions of Regulation D under the Act. The Closing Date shall be determined in accordance with Sections 1.1 and 15 herein. The Entities, and/or Individuals listed on Schedule A and Schedule B annexed hereto (hereinafter referred to as "A Subscribers" and "B Subscribers," respectively, or collectively referred to as the "Purchasers" or "Subscribers"), hereby represent and warrant to, and agree with the Company as follows: Section 1. Agreement to Subscribe; Purchase Price. 1.1 Closing. The Company will sell and the Subscribers will buy Securities in reliance upon the representations and warranties of the Company and Subscribers contained in this Agreement, upon the terms and conditions hereinafter set forth that number of shares of Preferred Stock set forth next to their names on Schedule A and Schedule B for an aggregate purchase price of Three Million Five Hundred Thousand ($3,500,000) U.S. Dollars based on U.S. $1,000 per share (the "Purchase Price"). Dividends will accrue and be paid at the rate of eight (8%) percent on the outstanding principal amount of the Preferred Stock until the Preferred Stock has been completely converted, provided, however, all interest thereon shall be payable in common stock of the Company or in cash as determined in the sole discretion of the Company at the time of conversion. Dividends shall be calculated at the Conversion Price as per the Certificate of Stock Designation on the Conversion Date when converted. 1.2 Form of Payment. The A Subscribers shall pay the Purchase Price by delivering good funds in United States Dollars by wire transfer to Goldstein, Goldstein & Reis, LLP, the Escrow Agent, against delivery of the original Preferred Stock and Warrants as per a separate Escrow Agreement, annexed hereto as Exhibit C (the A Subscribers Escrow Agreement), as payment in full for their portion of the Securities. 1.3 Wire Instructions. Wire instructions for Goldstein, Goldstein & Reis, LLP are as follows: Chase Manhattan Bank, N.A. ABA No. 021000021 For the Account of: United States Trust Company of New York Account No. 920-1-073195 In favor of: Goldstein, Goldstein & Reis, LLP Attorney Escrow Account Account No. 59-01383 1.4 The B Subscribers shall deposit the Purchase Price by delivering good funds in United States Dollars by wire transfer to Holland and Knight, the B Subscribers' Escrow Agent, against delivery of the original Preferred Stock as per a separate Escrow Agreement, annexed hereto as Exhibit F (the B Subscribers Escrow Agreement), as payment in full for their portion of the Securities. Section 2. Representations and Warranties of the Subscribers. Subscribers acknowledge, represent, warrant and agree as follows: 2.1 Organization and Authorization. The entity Subscribers are duly incorporated or organized and validly existing in the state or country of their incorporation or organization and have all requisite power and authority to purchase and hold the Securities. The decision to invest and the execution and delivery of this Agreement by the Subscribers, the performance by the Subscribers of their obligations hereunder and the consummation by the Subscribers of the transactions contemplated hereby have been duly authorized and requires no other proceedings on the part of the Subscribers. The undersigned's signatory has all right, power and authority to execute and deliver this Agreement on behalf of the Subscribers. This Agreement has been duly executed and delivered by the Subscribers and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Subscribers, enforceable against the Subscribers in accordance with its terms and the Subscribers can afford the complete loss of their investment. 2.2 Evaluation of Risks. Subscribers have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with this transaction. They recognize that their investment in the Company involves a high degree of risk and the Subscribers can afford the complete loss of their investment. 2.3 Independent Counsel. Subscribers acknowledge that they have been advised to consult with their own attorney regarding legal matters concerning the Company and to consult with their tax advisor regarding the tax consequences of acquiring the Securities. 2.4 Disclosure Documentation. Subscribers have each received and reviewed copies of the Company's reports filed under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the Act, including its 10-Ks, 10-Qs, 8-K's, and registration statements, filed by the Company since April 1, 1997 (collectively, the "Reports"). Except for the Reports, Subscribers are not relying on any other information relating to the offer and sale of the Securities. Subscribers acknowledge that the Company has offered to make available any additional public information that the Subscribers may reasonably request, including technical information, and other material information about the Company and Subscribers have been offered Company's full and unconditional cooperation in making such information available to Subscribers and acknowledges that the Company has recommended that the Subscribers request and review such information prior to making an investment decision. No oral or written representations have been made, or oral or written information furnished to the undersigned or its advisors, if any, in connection with the offering of the Securities which were or are in any way inconsistent with the Reports. 2.5 Opportunity to Ask Questions. Subscribers have had a reasonable opportunity to ask questions of and receive answers from the Company concerning the Company and the offering, and all such questions, if any, have been answered to the full satisfaction of each of the Subscribers. 2.6 Reports Constitute Sole Representations. Except as set forth in the Reports, no representations or warranties have been made to Subscribers by (a) the Company or any agent, employee or affiliate of the Company or (b) any other person, and in entering into this transaction Subscribers are not relying upon any information, other than that contained in the Reports and the results of independent investigation by Subscribers. 2.7 Each of the Subscribers is Accredited Investor. The undersigned is an "Accredited Investor" as defined below who represents and warrants it is included within one or more of the following categories of "Accredited Investors." (i) Any bank as defined in Section 3(a)(2) of the Act, or any savings and loan associated or other institution as defined in Section 3(a)(5)A of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the 1934 Act; any insurance company as defined in Section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivision, for the benefits of its employees if such plan has total assets in excess of $5,000,000; and employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; (ii) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (iii) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (iv) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; (v) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000; (vi) Any natural person who had an individual income in excess of $200,000 in each of the two (2) most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching that same income level in the current year; (vii) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Section 230.506(b)(2)(ii) of Regulation D under the Act; (viii) Any entity in which all of the equity owners are accredited investors; and (ix) Any self-directed employee benefit plan with investment decisions made solely by persons that are accredited investors within the meaning of Rule 501 of Regulation D promulgated under the Act. 2.8 No Registration, Review or Approval. Subscribers acknowledge and understand that the limited private offering and sale of Securities pursuant to this Agreement has not been reviewed or approved by the SEC or by any state securities commission, authority or agency, and is not registered under the Act or under the securities or "blue sky" laws, rules or regulations of any state. Subscribers acknowledge, understand and agree that the Securities are being offered and sold hereunder pursuant to (i) a private placement exemption to the registration provisions of the Act pursuant to Section 3(b) or Section 4(2) of such Act and Regulation D promulgated under such Act, and (ii) a similar exemption to the registration provisions of applicable state securities laws. Subscribers understand that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Subscribers set forth herein in order to determine the applicability of such exemptions and the suitability of the Subscribers to acquire the Securities. Subscribers will advise Company of the state of its residence prior to executing this or any other agreement to enable the Company to comply with applicable "blue sky" laws. 2.9 Investment Intent. Without limiting their ability to resell the Securities pursuant to an effective registration statement, Subscribers are acquiring the Securities solely for their own account and not with a view to the distribution, assignment or resale to others. Subscribers understand and agree that they may bear the economic risk of its investment in the Securities for an indefinite period of time. Subscribers does not now have any short position or hedge position in the Company's Common Stock nor will the Subscribers make any promissory notes and/or pledges to that effect on the Company's Common Stock. 2.10 No Advertisements. The Subscribers are not subscribing for the Securities as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio, or presented at any seminar or meeting. 2.11 Registration Rights. The parties have entered into a Registration Rights Agreement (Exhibit E). 2.12 B Subscribers; Disclosure. The B Subscriber hereby represents that he is a director of the Company, and agree to purchase that number of shares of Preferred Stock set forth beside their names in Schedule B under the same terms and condition as the other Subscribers, except as provided in Sections 1.4 and 13(b) hereof. 2.13 Conversion Limitations. For purposes of compliance with Rule 713(a) of the American Stock Exchange, Inc., the Subscribers hereby represent that they will not convert Preferred Stock that will result in the issuance of more than 3,734,095 Shares of Common Stock (which number of shares is equal to twenty (20%) percent of the issued and outstanding common stock of the Company) without shareholders approval as required in Section 3.21 herein. The Subscribers acknowledge that there are now approximately 3,602,855 shares of Common Stock available for issuance upon exercise of the Warrants and the conversion of the Preferred Stock taking into account the number of shares of Common Stock made available pursuant to the terms of that certain Agreement Among Optionholders dated as of even date herewith (the "Optionholders Agreement"). In the event that the Company does not obtain Shareholders approval, the Subscribers may convert the remainder of the Convertible Preferred Stock at market price and the dividend paid shall be increased to Fifteen (15%) percent. In the event that there are not enough Common Shares authorized for the conversion, the Company shall offer redemption in accordance with Section 10 herein. Section 3. Representations and Warranties of the Company. For so long as any Securities held by any of the Subscribers remain outstanding, the Company acknowledges, represents, warrants and agrees as follows: 3.1 Organization/Qualification. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and is in good standing under such laws. The Company has all requisite corporate power and authority to own, lease and operate its properties and assets, and to carry on its business as presently conducted. The Company is qualified to do business as a foreign corporation in each jurisdiction in which the ownership of its property or the nature of its business requires such qualification, except where failure to so qualify would not have a material adverse effect on the Company. 3.2 Accuracy of Reports and Information. To the best knowledge of the Company, the Company is in material compliance, to the extent applicable, with all reporting obligations under either Section 12(b), 12(g) or 15(d) of the 1934 Act, and shall maintain such status on a timely basis. The Company has registered its Common Stock pursuant to Section 12 of the 1934 Act and the Common Stock is listed and trades on the American Stock Exchange, Inc. To the best knowledge of the Company, the Company has filed all material documentation required to be filed pursuant to all reporting obligations, under either Section 13(a) or 15(d) of the 1934 Act for a period of at least twelve (12) months immediately preceding the offer and sale of the Securities (or for such shorter period that the Company has been required to file such material). 3.3 SEC Filings/Full Disclosure. For a period of at least twelve (12) months immediately preceding this offer and sale, or such shorter period that the Company has been required to file such Reports as defined herein, to the best of the Company's knowledge (i) none of the Company's filings with the Securities and Exchange Commission contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading, and (ii) the Company has timely filed all requisite forms, reports and exhibits thereto with the Securities and Exchange Commission. To the best of the Company's knowledge, there is no fact known to the Company (other than general economic conditions known to the public generally) that has not been publicly disclosed by the Company or disclosed in writing to the Subscribers which (i) could reasonably be expected to have a material adverse effect on the condition (financial or otherwise) or on earnings, business affairs, properties or assets of the Company, or (ii) could reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to this Agreement. The Company shall make available to Subscribers any and all documentation regarding the FINOVA asset based revolving credit facility which is indexed to LIBOR upon request. 3.4 Authorization. The Company has all requisite corporate right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company, the authorization, sale, issuance and delivery of the Securities and the performance of the Company's obligations hereunder has been taken except for the actions to be taken at the next annual shareholders meeting as discussed in Section 3.2. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy as they may apply to the indemnification provisions set forth in this Agreement. Upon their issuance and delivery pursuant to this Agreement, the Securities will be validly issued, fully paid and nonassessable and will be free of any liens or encumbrances; provided, however, that the Securities are subject to restrictions on transfer under state and/or federal securities laws. The issuance and sale of the Securities will not give rise to any preemptive right or right of first refusal or right of participation on behalf of any person. 3.5 No Conflict. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default, or give rise to a right of termination, cancellation or acceleration of any material obligation or to a loss of a material benefit, under, any provision of the Articles of Incorporation, and any amendments thereto, Bylaws, Stockholders Agreements and any amendments thereto of the Company or any material mortgage, indenture, lease or other agreement or instrument, or to the best of the Company's knowledge, any permit, concession, franchise, license, judgment, order, decree statute, law, ordinance, rule or regulation applicable to the Company, its properties or assets and which would have a material adverse effect on the Company's business and financial condition. 3.6 No Undisclosed Liabilities or Events. To the best of the Company's knowledge, the Company has no material liabilities or obligations other than those disclosed in the Reports, this Agreement or those incurred in the ordinary course of the Company's business since April 1, 1997, and which individually or in the aggregate, do not or would not have a material adverse effect on the properties, business, condition (financial or otherwise), results of operations or prospects of the Company. To the best of the Company's knowledge, no event or circumstances has occurred or exists with respect to the Company or its properties, business, condition (financial or otherwise), results of operations or prospects, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed. 3.7 No Default. To the Company's knowledge, the Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it is or its property is bound, and neither the execution, nor the delivery by the Company, nor the performance by the Company of its obligations under this Agreement, including the conversion or exercise provision of the Securities, will conflict with or result in the breach or violation of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any lien or charge on any assets or properties of the Company under, any material indenture, mortgage, deed of trust or other material agreement applicable to the Company or instrument to which the Company is a party or by which it is bound or the Certificate of Incorporation or by-laws of the Company, or any decree, judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or its properties, or the Company's listing agreement for its Common Stock. 3.8 Absence of Events of Default. Except as set forth in the Reports and this Agreement, to the Company's knowledge, no default, as defined in the respective agreement to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become a default, has occurred and is continuing, which would have a material adverse effect on the Company's business, properties, prospects, condition (financial or otherwise) or results of operations (as "Event of Default"). 3.9 Governmental Consent, etc. To the best knowledge of the Company, no material consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement, or the offer, sale or issuance of the Securities, or the consummation of any other transaction contemplated hereby, except as may be required by applicable securities laws, except as provided in Section 3.21 hereof. 3.10 Intellectual Property Rights. Except as disclosed in the Reports, to the best knowledge of the Company, the Company has sufficient trademarks, trade names, patent rights, copyrights and licenses to conduct its business as presently conducted in the Reports. To the Company's knowledge, neither the Company nor its products is infringing or will infringe any trademark, trade name, patent right, copyright, license, trade secret or other similar right of others currently in existence; and there is no claim being made against the Company regarding any trademark, trade name, patent, copyright, license, trade secret or other intellectual property right which could have a material adverse effect on the business or financial condition of the Company. 3.11 Material Contracts. Except as set forth in the Reports, to the best knowledge of the Company, the agreements to which the Company is a party described in the Reports are valid agreements, in full force and effect, and the Company is not in material breach or material default under any of such agreements. 3.12 Litigation. Except as disclosed in the Reports, to the Company's knowledge, there is no action, proceeding or investigation pending, or threatened, against the Company which might result, either individually or in the aggregate, in any material adverse change in the business, prospects, conditions, affairs or operations of the Company. To the Company's knowledge, the Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. 3.13 Title to Assets. Except as set forth in Reports, the Company has good and marketable title to all properties and material assets described in the Reports as owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company. 3.14 Subsidiaries. Except as disclosed in the Reports, the Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, association or other business entity. 3.15 Required Governmental Permits. To the Company's knowledge, the Company is in possession of and operating in material compliance with all authorizations, licenses, certificates, consents, orders and permits from state, federal and other regulatory authorities which are material to the conduct of its business, all of which are valid and in full force and effect. 3.16 Listing. The Company will use its best efforts to maintain the listing of its Common Stock on the American Stock Exchange, Inc. or other organized United States market or quotation system. The Company has not received any notice, oral or written, regarding continued listing and, as long as the Preferred Stock and Warrants are outstanding, the Company will take no action which would materially or adversely impact their continued listing or eligibility of the Company for such listing. 3.17 Other Outstanding Securities/Financing Restrictions. Except as disclosed in the Reports, the Company has no outstanding restricted shares, or shares of Common Stock sold under Regulation S, Regulation D or outstanding under any other exemption from registration, which are available for sale as unrestricted ("free trading") stock. 3.18 Registration Alternative. The Company covenants and agrees that for so long as any of the shares remain outstanding and continue to be "restricted securities" within the meaning of Rule 144 under the Act, the Company shall permit resales of the underlying Common Stock pursuant to Rule 144 under the Act. The Company and the Subscriber shall provide the Transfer Agent any and all papers necessary to complete the transfer under Rule 144, including, but not limited to, opinions of counsel to the Transfer Agent, and the Company shall continue to file all material required to be filed pursuant to Sections 13(a) or 15(d) of the 1934 Act. 3.19 Capitalization. The outstanding capital stock of the Company consists of 18,670,477 shares of Common Stock, $.05 par value per share, of which 24,000,000 are authorized; 1,000,000 shares of voting Preferred Stock, $.01 par value per share, of which 3,500 shares have been designated Series A Convertible Preferred Stock, simultaneously with the execution of this Agreement. All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable. 3.20 Dilution. The Company is aware and acknowledges that conversion of the Preferred Stock, and/or exercise of the Warrant, would cause dilution to existing Shareholders and could significantly increase the outstanding number of shares of Common Stock. 3.21 Shareholders Approval. The Company covenants and agrees that it will promptly, after the Closing Date, initiate proxy solicitations to all Shareholders of the Company and call a meeting of shareholders, within ninety (90) days after the Closing Date for the purpose of having the shareholders approve and vote an increase in the authorized shares of the Company to 40,000,000 shares and the approval by the shareholders permitting the issuance of over twenty (20%) percent of the Company's outstanding Common Stock at below market prices in accordance with American Stock Exchange Rule 713(a) (the "Shareholder Approvals"). 3.22 The Company has no reason to believe that the FINOVA financing will not be closed. 3.23 The Company will receive an unqualified opinion from their auditors and will send a copy of same upon receive to the Subscribers. Section 4. Further Representations and Warranties of the Company. For so long as any Securities held by any of the Subscribers remain outstanding, the Company acknowledges, represents, warrants and agrees as follows: (i) Upon approval of the increase of authorized shares of common stock as provided in Section 3.21 above, it will reserve from its authorized but unissued shares of Common Stock a sufficient number of shares of Common Stock to permit the conversion in full of all of the outstanding Securities. (ii) It will use its best efforts maintain the listing of its Common Stock on the American Stock Exchange, Inc. (iii) It will permit the Subscribers to exercise their right to convert the Preferred Stock and/or exercise the Warrants by telecopying an executed and completed Notice of Conversion and/or Notice of Exercise to the Company and delivering the original Notice of Conversion and/or original Notice of Exercise and the certificate representing the Preferred Stock and/or the original Warrant to the Company by express courier. Each business date on which a Notice of Conversion and/or Notice of Exercise is telecopied to and received by the Company along with an copy of the originally executed Preferred Stock Certificates and Warrants in accordance with the provisions hereof shall be deemed a "Conversion Date" and/or "Exercise Date". The Company will transmit, or instruct the Transfer Agent to transmit, the certificates representing shares of Common Stock issuable upon conversion of any Preferred Stock and/or exercise of any Warrants (together with the certificates representing the Preferred Stock not so converted and/or Warrants not so exercised) to the Subscriber via express courier, by electronic transfer or otherwise within three business days after the Conversion Date and/or Exercise Date provided the Company has received the original Notice of Conversion and Preferred Stock certificate being so converted and/or the original Notice of Exercise and Warrant being exercised on the Conversion Date. In addition to any other remedies which may be available to the Subscribers, in the event that the Company fails to deliver, or has failed to contact its Transfer Agent to deliver, such shares of Common Stock within such five (5) business day period, the Subscribers will be entitled to revoke the relevant Notice of Conversion and/or Notice of Exercise by delivering a notice to such effect to the Company whereupon the Company and the Subscribers shall each be restored to their respective positions immediately prior to delivery of such Notice of Conversion and/or Notice of Exercise. The Notice of Conversion and Preferred Stock and/or the Notice of Exercise and Warrant representing the portion of the Preferred Stock converted and/or Warrant exercised shall be delivered as follows: To the Company: nSTOR TECHNOLOGIES, INC. 100 Century Blvd. West Palm Beach, FL 33417 Fax: (561) 640-3160 In the event that the Common Stock issuable upon conversion of the Preferred Stock and/or exercise of the Warrants is not delivered by the Company, within three (3) business days of receipt by the Company of a valid Notice of Conversion and the Preferred Stock to be converted and/or Notice of Exercise and Warrant to be exercised, the Company shall pay to the Subscriber(s), in immediately available funds, upon demand, as liquidated damages for such failure and not as a penalty, for each $100,000 of Preferred Stock sought to be converted, $500 for each of the first ten (10) days and $1,000 per day thereafter that the Conversion Shares are not delivered, and for each thousand (1,000) shares of Common Stock sought to be exercised under the Warrant, $7.50 for each of the first ten (10) days and $15 per day thereafter that the shares of Common Stock underlying the Warrant are not delivered, which liquidated damages shall run from the fourth business day after the Conversion Date and/or Exercise Date. Any and all payments required pursuant to this paragraph shall be payable only in shares of Common Stock and not in cash. The number of such shares shall be determined by dividing the total sum payable by the Conversion Price and/or Exercise Price. Section 5. Opinion of Counsel. Subscribers shall, upon the Closing, receive an opinion letter from counsel to the Company subject to reasonable and customary limitations and qualifications and reliance on the certificates of the officers of the Company, to the effect that: (i) The Company is duly incorporated and validly existing under the laws and jurisdiction of its incorporation. The Company and/or its subsidiaries are duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions where the Company and/or its subsidiaries owns or leases properties, maintains employees or conducts business, except for jurisdictions in which the failure to so qualify would not have a material adverse effect on the Company, and has all requisite corporate power and authority to own its properties and conduct its business. (ii) Except as set forth in the Reports there is no action, and to counsel's knowledge, proceeding or investigation pending, or threatened against the Company which might result, either individually or in the aggregate, in any material adverse change in the business or financial condition of the Company. (iii) Except as set forth in the Reports, without an independent investigation, the Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. (iv) Except as set forth in the Reports and to counsel's knowledge, there is no action, suit, proceeding or investigation by the Company currently pending. (v) The Preferred Stock, which shall be issued at the Closing, will be duly authorized and validly issued under the laws of the Company's State of Incorporation, except for the Shareholder Approvals referred to in Section 3.21 hereof. (vi) This Subscription Agreement, the issuance of the Preferred Stock and Warrants, and the issuance of Common Stock, upon conversion of the Preferred Stock and/or exercise of the Warrants, have been duly approved by all required corporate action and that all such securities, upon delivery, shall be validly issued and outstanding, fully paid and nonassessable, except for the approvals referenced in Section 3.21 hereof. (vii) The issuance of the Securities will not violate the applicable listing agreement between the Company and any securities exchange or market on which the Company's securities are listed. (viii) Assuming the accuracy of the representation and warranties of the Company and the Subscribers set forth in this Subscription Agreement, the offer, issuance and sale of the Preferred Stock, Warrants and shares of Common Stock to be issued upon exercise and/or conversion to the Subscriber pursuant to this Agreement are exempt from the registration requirements of the Act. (ix) As more specifically described in the Reports, the authorized capital stock of the Company consists of 24,000,000 shares of Common Stock, $.05 par value per share ("Common Stock") and 1,000,000 shares of Preferred Stock, par value $.01 per shares. (x) The Common Stock is registered pursuant to Section 12(b) or Section 12(g) of the 1934 Act and to the best of Counsel's knowledge without an independent investigation, the Company has timely filed all the material required to be filed pursuant to Sections 13(a) or 15(d) of such Act for a period of at least twelve months preceding the date hereof. (xi) Except as provided in Section 3.21 hereof, the Company has the requisite corporate power and authority to enter into the Agreements and to sell and deliver the Securities and the Common Stock to be issued upon the conversion of the Securities as described in this Agreement; the Agreement has been duly and validly authorized by all necessary corporate action by the Company, to the best of our knowledge, no approval of any governmental or other body is required for the execution and delivery of each of the Agreements by the Company or the consummation of the transactions contemplated thereby; the Agreement has been duly and validly executed and delivered by and on behalf of the Company, and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as enforceability may be limited by general equitable principles, bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors rights generally, and except as to compliance with federal, state and foreign securities laws, as to which no opinion is expressed. (xii) To the knowledge of counsel, the execution, delivery and performance of the Agreements by the Company and the performance of its obligations thereunder do not and will not constitute a breach or violation of any of the terms and provisions of, or constitute a default under or conflict with or violate any provision of (i) the Company's Certificate of Incorporation or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or other instrument to which the Company is a party or by which it or any of its property is bound, (iii) any applicable statute or regulation, (iv) or any judgment, decree or other of any court or governmental body having jurisdiction over the Company or any of its property. (xiii) The issuance of the Preferred Stock and Warrants, to A Subscribers and the issuance of the Preferred Stock to H. Irwin Levy (Subscriber), a director of the Company, pursuant to the terms and conditions set forth in this Agreement does not violate any federal, state or foreign law. Section 6. Opinion of Counsel Upon Conversion. The Company will obtain for each Subscriber, at the Company's expense, any and all opinions of counsel which may be reasonably required in order to convert the Preferred Stock, including, but not limited to, obtaining for each Subscriber an opinion of counsel, subject only to receipt of a Notice of Conversion in the form of Exhibit D and receipt by Counsel of such representations, warranties, and documents as are determined to be necessary to comply with applicable securities laws, duly executed by the Subscriber which shall be satisfactory to the Transfer Agent, directing the Transfer Agent to remove the legend from the certificate. Section 7. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC which may at any time permit the sale of the Securities to the public without registration, the Company agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Act, at all times after the effective date on which the Company becomes subject to the reporting requirements of the Act or the 1934 Act; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; (iii) furnish to each Subscriber forthwith, upon request, a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Act and the 1934 Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as each Subscriber may reasonably request in availing itself of any rule or regulation of the SEC allowing any Subscriber to sell any such Securities without registration. Section 8. Representations and Warranties of the Subscribers. Each of the Subscribers represent to the other Subscribers and the Company the following with respect to itself: 8.1 Subscription Agreement. The Subscription Agreement has been duly authorized, validly executed and delivered on behalf of each of the Subscribers and is a valid and binding agreement in accordance with its terms, subject to general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors' rights generally. 8.2 No-Conflict. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit, under, any provision of the Certificate of Incorporation, and any amendments thereto, Bylaws and any amendments thereto of Subscribers or any material mortgage, indenture, lease or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree statute, law, ordinance, rule or regulation applicable to Subscribers, its properties or assets. 8.3 Approvals. No Subscriber is aware of any authorization, approval or consent of any governmental body which is legally required for the issuance and sale of the Securities. 8.4 Indemnification. Each of the Company, and all key operating subsidiaries, and each of the Subscribers agrees to indemnify the other and to hold the other harmless from and against any and all losses, damages, liabilities, costs and expenses (including reasonable attorneys' fees) which the other may sustain or incur in connection with the breach by the indemnifying party of any representation, warranty or covenant made by it in this Agreement. 8.5 Transfer Restrictions/Conversion Holding Period. Refer to Certificate of Stock Designation (Exhibit A). 8.6 Right of First Refusal. The Company agrees that should it elect to seek funds from an investor or investors for a private placement that would involve providing an equity position or a right to acquire an equity position that could be exercised on or before April 14, 1999, then the Investor will be notified of the intention of the Company together with a written outline of the proposed terms. The Investor shall have fifteen (15) days to commit to provide the funds pursuant to the terms as outlined. Should the Investor fail to do so within the time specified, then the Company shall have the right to conclude a transaction with another Investor or investors provided the transaction is not materially different from that outlined to the Investor as provided hereinabove. This provision shall not be construed as a limitation on the Company's ability or right without the consent of the Investor to enter into strategic relationship agreements with other companies that may involve investment of funds in the Company or public offerings, mergers or acquisitions. Section 9. Restrictions on Conversion of Preferred Stock. Each Subscriber or any subsequent holder of the Preferred Stock (the "Holder") shall be prohibited from converting any portion of the Preferred Stock which would result in any Subscriber or Holder being deemed the beneficial owner, in accordance with the provisions of Rule 13d-3 of the 1934 Act, as amended, of 4.99% or more of the then issued and outstanding Common Stock of the Company. Section 10. Mandatory Redemption. The Company and the Subscribers acknowledge that pursuant to the B Subscribers' Escrow Agreement, in the event, for any reason, a shareholders meeting does not take place within ninety (90) days of the Closing Date or a shareholders meeting takes place and the shareholders do not approve both an increase in the authorized shares to 40,000,000 shares and approval permitting the issuance of over twenty (20%) percent of the Company's outstanding Common Stock at below market prices in accordance with American Stock Exchange Rule 713(a), the Company shall give the A Subscribers the option to redeem One Million ($1,000,000) Dollars of the A Subscribers' Preferred Stock immediately at the Redemption Price as set forth in Section 10.1, plus accrued interest out of the Escrow Account of Holland and Knight. In the event that, for any reason, A Subscribers cannot convert any portion of their Preferred Stock, the Company shall be required to offer redemption of the A Subscribers' Preferred Stock at the Redemption Price as set forth in Section 10.1. 10.1 Redemption Price. The Redemption Price shall be the face amount of the Preferred Stock plus 23% or 28% as per this Agreement, plus accrued interest as set forth in the Certificate of Designation (Exhibit A annexed hereto). Section 11. Mandatory Conversion. In the event the Preferred Stock has not been converted two (2) years from the Closing Date, the Preferred Stock shall automatically be converted, which conversion shall be limited to the number of authorized shares of Common Stock. In the event that there are not enough Common Shares authorized for the conversion, the Company shall offer redemption to the Subscribers in accordance with Section 10 herein (and all interest owed thereon shall be paid by the Company) as if the Subscribers voluntarily elected such conversion in accordance with the procedure, terms and conditions set forth in this Agreement and the Certificate of Stock Designation. Section 12. Registration or Exemption Requirements. Subscribers acknowledge and understand that the Securities may not be resold or otherwise transferred except in a transaction registered under the Act and any applicable state securities laws or unless an exemption from such registration is available. Subscribers understand that the Securities will be imprinted with a legend that prohibits the transfer of the Securities unless (i) they are registered or such registration is not required, and (ii) if the transfer is pursuant to an exemption from registration other than Rule 144 under the Act and, if the Company shall so request in writing, an opinion of counsel reasonably satisfactory to the Company is obtained to the effect that the transaction is so exempt. Section 13. Legend. (a) The certificates representing the Securities shall be subject to a legend restricting transfer under the Act, such legend to be substantially as follows: "THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY." The certificates representing these Securities, and each certificate issued in transfer thereof, will also bear any legend required under any applicable state securities law. (b) The certificates representing the Securities (for the B Subscribers listed on Schedule A) shall be subject to a legend restricting transfer under the Act, such legend to be substantially as follows: "THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY. THESE SECURITIES ARE SUBJECT TO A LOCKUP PERIOD AND CANNOT BE OFFERED OR SOLD OR TRANSFERRED BEFORE ONE HUNDRED AND EIGHTY (180) DAYS AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT TO BE FILED IN ACCORDANCE WITH THE 8% CONVERTIBLE PREFERRED STOCK SERIES A SUBSCRIPTION AGREEMENT AND ALL EXHIBITS AND ATTACHMENTS DATED APRIL 14, 1998 SPECIFICALLY, BUT NOT LIMITED TO, THE REGISTRATION RIGHTS AGREEMENT DATED APRIL 14, 1998." Section 14. Stock Delivery Instructions. The Preferred Stock Certificate shall be delivered to Subscriber on a delivery versus payment basis as set forth in the Escrow Agreement. Section 15. Closing Date. The date the Escrow Agent receives the Securities and the Purchase Price, and both the conditions set forth in Sections 16 and 17 and the terms and conditions of the Escrow Agreement (Exhibit C) herein are satisfied or waived shall be the Closing (the "Closing Date"), and all acts, deliveries and confirmations comprising the Closing Date regardless of chronological sequence, shall be deemed to occur contemporaneously and simultaneously upon the occurrence of the last act, delivery, or confirmation of the Closing Date, and such acts, deliveries, or confirmations shall not be effective unless and until the last of same shall have occurred, and as shall be mutually agreed upon as to time and place. Section 16. Conditions to the Company's Obligation to Sell. Subscribers understand that the Company's obligation to sell the Preferred Stock, Warrants are conditioned upon: (i) The receipt and acceptance by the Company of a duly executed copy of this Subscription Agreement and all duly executed Exhibits thereto by an authorized officer of the Company; (ii) Delivery into the Company's account by Subscribers or Escrow Agent of good cleared funds as payment in full for the purchase of the Securities; (iii) All representations and warranties of the Subscribers contain herein shall remain true and correct as of the Closing Date; (iv) The Company shall have obtained all permits and qualifications required by any state for the offer and sale of the Preferred Stock and Warrants, or shall have the availability of exemptions therefrom. At the Closing Date, the sale and issuance of the Preferred Stock, Warrants, and the proposed issuance of the Common Stock underlying the Preferred Stock, and Warrants shall be legally permitted by all laws and regulations to which the Subscribers and the Company are subject, except for the approvals referred to in Section 3.21 hereof; (v) The Certificate of Designation for the Preferred Stock shall have been filed with the Delaware Secretary of State; (vi) The receipt and acceptance by the Company of that certain Agreement of Shareholders dated as of even date herewith (as referred to in Section 3.21 hereof) and that certain Agreement among Optionholders, dated as of even date herewith, each duly executed by the parties thereto; and (vii) The receipt and acceptance of a duly executed copy of the A Subscribers Escrow Agreement. Section 17. Conditions to Subscriber's Obligation to Purchase. The Company understands that Subscriber's obligation to purchase the Preferred Stock, and Warrant is conditioned upon: (i) Acceptance by each of the Subscribers of a duly executed Subscription Agreement and all duly executed Exhibits hereto for the sale of the Securities; (ii) Delivery of the original Securities as described herein; (iii) All representations and warranties of the Company contained herein shall remain true and correct as of the Closing Date; (iv) Receipt of opinion of counsel and proof of a filed Certificate of Designation; (v) The Company shall have obtained all permits and qualifications required by any state for the offer and sale of the Preferred Stock, and Warrants, or shall have the availability of exemptions therefrom. At the Closing Date, the sale and issuance of the Preferred Stock, and Warrants shall be legally permitted by all laws and regulations to which the Company and Subscribers are subject; (vi) Receipt of a copy of that certain Agreement Among Shareholders signed by shareholders representing over fifty (50%) percent of the outstanding issued and outstanding Common Stock agreeing to raise the authorized number of shares from 24,000,000 to 40,000,000 at the next annual meeting of the Shareholders and approval permitting the issuance of over twenty (20%) percent of the Company's outstanding securities at below market prices; (vii) Receipt of a copy of that certain Agreement Among Optionholders that postpones the exercise date of options and/or Warrants to purchase the Company's Common Stock , which will postpone the exercise date of the options and/or Warrants until after the A Subscribers convert their Preferred Stock, or until the number of issued and authorized shares have been increased to 40,000,000; and (viii) Delivery of a letter from Holland & Knight LLP representing that they are holding as Escrow Agent for the Company One Million ($1,000,000) Dollars in an interest bearing Escrow Account. Section 18. Miscellaneous. 18.1 Governing Law/Jurisdiction. This Agreement will be construed and enforced in accordance with and governed by the laws of the State of Delaware, except for matters arising under the Act, without reference to principles of conflicts of law. Each party hereby agrees that if another party to this Agreement obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in the courts of any state or country having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. 18.2 Facsimile/Counterparts/Entire Agreement. Except as otherwise stated herein, in lieu of the original, a facsimile transmission or copy of the original shall be as effective and enforceable as the original. This Agreement may be executed in counterparts which shall be considered an original document and which together shall be considered a complete document. This Agreement and Exhibits hereto constitute the entire agreement between the Subscriber and the Company with respect to the subject matter hereof. This Agreement may be amended only by a writing executed by all parties. 18.3 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 18.4 Entire Agreement. This Agreement and Exhibits hereto constitute the entire agreement between the Subscribers and the Company with respect to the subject matter hereof. This Agreement may be amended only by a writing executed by all parties. 18.5 Reliance by Company. The Subscribers represent to the Company that the representations and warranties of the Subscriber contained herein are complete and accurate and may be relied upon by the Company in determining the availability of an exemption from registration under federal and state securities laws in connection with a private offering of securities. 18.6 Confidentiality. Each of the Company and each of the Subscriber agrees to keep confidential and not to disclose to or use for the benefit of any third party the terms of this Agreement or any other information which at any time is communicated by or obtained from the other party as being confidential without the prior written approval of the other party; provided, however, that this provision shall not apply to information which, at the time of disclosure, is already part of the public domain (except by breach of this Agreement) and information which is required to be disclosed by law. 18.7 Legal Fees and Expenses. Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby. If for any reason the transactions contemplated by this Agreement are not consummated, each of the parties hereto shall promptly return to the other parties all schedules, documents, instruments, work papers or other written information, without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herewith. 18.8 Authorization. Each of the parties hereto represents that the individual executing this Agreement on its behalf has been duly and appropriately authorized to execute the Agreement. IN WITNESS WHEREOF, this Agreement was duly executed on the date first written below. Agreed to and Accepted on this 14th day of April 1998 nSTOR TECHNOLOGIES, INC. /s/ Mark Levy By____________________________ Mark Levy, President CPR (USA) INC. /s/ Steven S. Rogers By_____________________________ "A" Subscriber LIBERTYVIEW FUND, LLC /s/ Steven S. Rogers By_____________________________ "A" Subscriber LIBERTYVIEW PLUS FUND /s/ Steven S. Rogers By_____________________________ "A" Subscriber /s/ H. Irwin Levy _____________________________ H. IRWIN LEVY, "B" Subscriber SCHEDULE A Subscriber Number of Number of State of Name and Address Purchase Price Preferred Shares Warrant Shares Origination CPR (USA) Inc. $1,500,000 1,500 120,000 Delaware Corp. 101 Hudson St., 37th Fl. Jersey City, NJ 07302 LibertyView Plus Fund 800,000 800 64,000 Bermuda Corp. Hemisphere House 9 Church Street Hamilton, Bermuda HMDX LibertyView Fund, LLC 200,000 200 16,000 Delaware LLC 101 Hudson St., 37th Fl. Jersey City, NJ 07302 SCHEDULE B Subscriber Number of Name and Address Purchase Price Preferred Shares H. Irwin Levy $1,000,000 1,000 Shares c/o nStor Technologies, Inc. 100 Century Blvd. West Palm Beach, FL 33417 EXHIBIT A Certificate of Designation of Series A Convertible Preferred Stock of nStor Technologies, Inc. It is certified that: A. The name of the company is nStor Technologies, Inc., a Delaware corporation (hereinafter the "Company"). B. The certificate of the incorporation of the Company, as amended, authorizes the issuance of one million (1,000,000) shares of Preferred Stock, $.01 par value per share, and expressly vests in the Board of Directors of the Company the authority provided therein to issue all of said shares in one or more series and by resolution or resolutions to establish the designation and number and to fix the relative rights and preferences of each series to be issued. C. The Board of Directors of the Company, pursuant to the authority expressly vested in it, has adopted the following resolutions creating a class of Series A Preferred Stock: RESOLVED, that a portion of the one million (1,000,000) authorized shares of Preferred Stock of the Company shall be designated as a separate series possessing the rights and preferences set forth below: 1. Designation and Amount. The shares of such series shall have a par value of $.01 per share and shall be designated as Series A Preferred Stock (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be Three Thousand Five Hundred (3,500). The Series A Preferred Stock shall be offered for sale at a purchase price of One Thousand Dollars ($1,000) per share (the "Purchase Price"). 2. Dividends. The holders of the outstanding shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available therefor, dividends at an annual rate of eight percent (8%) of the Purchase Price. Such dividends shall be deemed to accrue on the Series A Preferred Stock and be cumulative, whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. If there shall not have been a sum sufficient for the payment therefor set apart, the deficiency shall first be paid before any dividend or other distribution shall be paid or declared and set apart with respect to any other class of the Company's capital stock, now or hereafter outstanding. All accrued dividends shall be immediately due and payable on the outstanding shares of Series A Preferred Stock on the date such shares of Series A Preferred Stock are converted into shares of common stock par value $.05 per share ("Common Stock") in accordance with Section 5 hereof, which date shall be the "Conversion Date". Dividends may be paid in cash or additional shares of Common Stock of the Company, as may be determined, from time to time, in the sole discretion of the Board of Directors. The Company shall not be required to pay any dividend on any outstanding shares of the Series A Preferred Stock prior to the Conversion Date for such shares. 3. Liquidation, Dissolution or Winding Up (a) Treatment at Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any distribution may be made with respect to the Common Stock or any other series of capital stock, holders of each share of Series A Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to holders of the Company's capital stock of all classes, whether such assets are capital, surplus, or capital earnings, such amount per share of Series A Preferred Stock as would have been payable had each such share been converted into Common Stock immediately prior to such event of liquidation, dissolution or winding up pursuant to the provisions of Section 5 (collectively, the "Liquidation Amount"). (b) If the assets of the Company available for distribution to its shareholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount of the Liquidation Amount to which they shall be entitled, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of assets according to the amounts which would be payable with respect to the shares of Series A Preferred Stock held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. (c) After the payment of the Liquidation Amount shall have been made in full to the holders of the Series A Preferred Stock or funds necessary for such payment shall have been set aside by the Company in trust for the account of holders of the Series A Preferred Stock so as to be available for such payments, the holders of the Series A Preferred Stock shall be entitled to no further participation in the distribution of the assets of the Company, and the remaining assets of the Company legally available for distribution to its shareholders shall be distributed among the holders of other classes of securities of the Company in accordance with their respective terms. 4. Voting Power. Except as otherwise expressly provided in Section 7 hereof, or as required by law, each holder of Series A Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the largest number of shares of Common Stock into which such holder's shares of Series A Preferred Stock could be converted, pursuant to the provisions of Section 5 hereof, at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited. Except as otherwise expressly provided herein or as required by law, the holders of shares of Series A Preferred Stock and Common Stock shall vote together as a single class on all matters. The holders of the Common Stock shall not take any action by written consent without the prior written consent of the holders of a majority of the Series A Preferred Stock. 5. Conversion Rights for the Series A Preferred Stock. The holders of Series A Preferred Stock shall have conversion rights as follows ("Conversion Rights"): (a) Right to Convert. Each holder of Series A Preferred Stock shall be entitled (at the times and in the amounts set forth below) to convert, in whole or in part, in multiples of one hundred (100) shares, shares of Series A Preferred Stock, at their option, as follows: (i) Provided a registration statement (the "Registration Statement") covering the shares of Commmon Stock issuable upon the conversion of such shares of Series A Preferred Stock has been declared effective by the Securities and Exchange Commission: (A) up to one-third (1/3) of the shares of Series A Preferred Stock initially issued to such holder at any time after the effective date of the Registration Statement (the "Registration Date") and any time thereafter; (B) up to an additional one-third (1/3) of the shares of Series A Preferred Stock initially issued to such holder at any time beginning sixty (60) days following the Registration Date, and at any time thereafter; and (C) up to an additional one-third (1/3) of the shares of Series A Preferred Stock initially issued to such holder at any time beginning ninety (90) days following the Registration Date, and any time thereafter. (ii) In the event no Registration Statement has been declared effective within ninety (90) days from the date hereof, one hundred percent (100%) of the shares of Series A Preferred Stock initially issued to such holder ninety (90) days after the date hereof. (b) Conversion Rate. Each share of Series A Preferred Stock may be converted into the number of fully-paid and non-assessable shares of Common Stock of the Company calculated in accordance with the following formula ("Conversion Rate"): The number of shares issuable upon conversion of one (1) share of Series A Preferred Stock shall equal: Purchase Price Conversion Price where, (i) the Purchase Price is defined in Section 1 hereof; (ii) the Conversion Price equals the lesser of (x) .77 times the average Closing Bid Price as that term is defined below, of the Common Stock for the three (3) trading days immediately preceding the date of conversion, as defined below, or (y) $1.44; (iii) for purposes hereof the term "Closing Bid Price" shall mean the Closing Bid Price for the Common Stock on the American Stock Exchange, or if the Common Stock is no longer traded on the American Stock Exchange, the Closing Bid Price on the principle national securities exchange on which the Common Stock is traded, or the Nasdaq National Market System, and, if not available, the mean of the high and low prices on such principle national securities exchange or the Nasdaq National Market System. (iv) In the event the Common Stock is involuntarily delisted from the American Stock Exchange and continues to be so delisted on the Conversion Date, or the Company receives a delisting letter and cannot certify to the satisfaction of the holders of the Series A Preferred Stock that the Company is in fact in compliance with the listing requirements of the American Stock Exchange, the Conversion Price shall be equal to .72 times the average Closing Bid Price for the last three (3) trading days prior to the termination of trading, or $1.44, whichever is less . (v) Notwithstanding anything herein to the contrary, no holder of Series A Preferred Stock who is an offficer, director or key employee (an "Affiliate") of the Company may, prior to the approval by the holders of a majority of the outstanding Common Stock of the sale of Series A Preferred Stock to such Affiliate, convert any shares of Series A Preferred Stock if such conversion would result in the issuance to all Affiliates in the aggregate of more than 5% of shares of the outstanding Common Stock in any one year, or the issuance to all Affiliates in the aggregate of more than 10% of shares of the outstanding Common Stock in any five-year period. (c) Automatic Conversion. Each share of Series A Preferred Stock outstanding two (2) years from the Registration Date shall automatically convert into Common Stock on such date at the applicable Conversion Rate above and such date shall be deemed the Conversion Date with respect to such shares. (d) Capital Reorganization or Reclassification. If the Common Stock issuable upon the conversion of the Series A Preferred Stock shall be changed into the same or different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, stock split, stock dividend, or similar event, then and in each such event, the holder of each share of Series A Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such capital reorganization, reclassification or other change which such holder would have received had its shares of Series A Preferred Stock been converted immediately prior to such capital reorganization, reclassification or other change. (e) Capital Reorganization, Merger or Sale of Assets. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for in Section 5(d) above or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company's properties and assets to any other person, or any transaction or series of related transactions in which more than fifty percent (50%) of the outstanding voting securities of the Company (on an as converted basis) is sold or assigned (any of which events is herein referred to as a "Reorganization"), then as a part of such Reorganization, provision shall be made so that the holders of the Series A Preferred Stock shall thereafter be entitled to receive upon conversion of the Series A Preferred Stock, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such Reorganization, to which such holder would have been entitled if such holder had converted its shares of Series A Preferred Stock immediately prior to such Reorganization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of the Series A Preferred Stock after the Reorganization, to the end that the provisions of this Section 5 (including adjustment of the number of shares issuable upon conversion of the Series A Preferred Stock) shall be applicable after that event in as nearly equivalent a manner as may be practicable. (f) Certificate as to Adjustments; Notice by Company. Upon the occurrence of each adjustment or readjustment of the Conversion Price of the Series A Preferred Stock, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of such Series A Preferred Stock a certificate executed by the president and chief financial officer (or in the absence of a person designated as the chief financial officer, by the treasurer) setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment are based. The Company shall, upon written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a certificate setting forth (A) the Conversion Price at the time in effect, and (B) the number or shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series A Preferred Stock. (g) Exercise of Conversion Rights. Holders of Series A Preferred Stock may exercise their right to convert the Series A Preferred Stock by telecopying an executed and completed Notice of Conversion to the Company and delivering the original Notice of Conversion and the certificate representing the Series A Preferred Stock by express courier. Each business date on which a Notice of Conversion is telecopied to and received by the Company along with a copy of the originally executed Series A Preferred Stock certificates in accordance with the provisions hereof shall be deemed a "Conversion Date." The Company will transmit, or instruct its transfer agent to transmit, the certificates representing shares of Common Stock issuable upon conversion of any share of Series A Preferred Stock (together with the certificates representing the Series A Preferred Stock not so converted) to the holder thereof via express courier, by electronic transfer or otherwise within three (3) business days after the Conversion Date provided the Company has received the original Notice of Conversion and Series A Preferred Stock certificate being so converted on the Conversion Date. In addition to any other remedies which may be available to the holders of shares of Series A Preferred Stock, in the event that the Company fails to deliver, or has failed to contact its transfer agent to deliver, such shares of Common Stock within such three (3) business day period, the holder will be entitled to revoke the relevant Notice of Conversion by delivering a notice to such effect to the Company whereupon the Company and the holder shall each be restored to their respective positions immediately prior to delivery of such Notice of Conversion. The Notice of Conversion and Series A Preferred Stock certificates representing the portion of the Series A Preferred Stock converted shall be delivered as follows: To the Company: nSTOR TECHNOLOGIES, INC. 100 Century Blvd. West Palm Beach, FL 33417 Fax: (561) 640-3160 In the event that shares representing the Common Stock issuable upon conversion of the Series A Preferred Stock (the "Conversion Shares") are not delivered by the Company, within three (3) business days of receipt by the Company of a valid Notice of Conversion and the Series A Preferred Stock certificates to be converted, the Company shall pay to the holders thereof, in immediately available funds, upon demand, as liquidated damages for such failure and not as a penalty, for each $100,000 of Series A Preferred Stock sought to be converted, $500 for each of the first ten (10) days and $1,000 per day thereafter that the Conversion Shares are not delivered, which liquidated damages shall run from the fourth business day after the Conversion Date. Any and all payments required pursuant to this paragraph shall be payable only in shares of Common Stock and not in cash. (h) Lost or Stolen Certificates. Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of any Series A Preferred Stock certificate(s), and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon the cancellation of the Series A Preferred Stock certificate(s), if mutilated, the Company shall execute and deliver new certificates for Series A Preferred Stock of like tenure and date. However, the Company shall not be obligated to reissue such lost or stolen certificates for shares of Series A Preferred Stock if the holder contemporaneously requests the Company to convert such Series A Preferred Stock into Common Stock. (i) Fractional Shares. The Company may, if it so elects, issue fractional shares of Common Stock upon the conversion of shares of Series A Preferred Stock. If the Company does not elect to issue fractional shares, the Company shall pay to the holder of the shares of Series A Preferred Stock which were converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the market price per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) as of the close of business on the Conversion Date. The determination as to whether any fractional shares are issuable shall be based upon the total number of shares of Series A Preferred Stock being converted at any one time by any holder thereof, not upon each share of Series A Preferred Stock being converted. (j) Partial Conversion. In the event some but not all of the shares of Series A Preferred Stock represented by a certificate or certificates surrendered by a holder are converted, the Company shall execute and deliver to or to the order of the holder, at the expense of the Company, a new certificate representing the number of shares of Series A Preferred Stock which were not converted. (k) Reservation of Common Stock. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient or as may be available to effect the conversion of all outstanding shares of the Series A Preferred Stock, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all the then outstanding shares of the Series A Preferred Stock, the Company shall use its best efforts to take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 6. No Reissuance of Series A Preferred Stock. Any share or shares of Series A Preferred Stock acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be cancelled, shall return to the status of authorized but unissued preferred stock of no designated series, and shall not be reissuable by the Company as Series A Perferred Stock. 7. Restrictions and Limitations. (a) Corporate Securities Action. Except as expressly provided herein or as required by law, so long as any shares of Series A Preferred Stock remain outstanding, the Company shall not, and shall not permit any subsidiary (which shall mean any corporation, association or other business entity for which the Company and/or any of its other subsidiaries directly or indirectly owns at the time more than fifty percent (50%) of the outstanding voting shares, or more than 50% of the combined voting power of the outstanding voting shares, of such corporation or trust), without the approval by vote or written consent by the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class, to take any action, or fail to take any action, which would adversely affect the rights of the holders of Series A Preferred Stock. (b) Amendments to Charter. Without limiting the generality of the preceding paragraph, the Company shall not amend its articles of incorporation without the approval by the holders of at least a majority of the then outstanding shares of Series A Preferred Stock if such amendment would: (i) change the relative seniority rights of the holders of Series A Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the Company, or create any other class or series of capital stock entitled to seniority as to the payment of dividends in relation to the holders of Series A Preferred Stock; (ii) reduce the amount payable to the holders of Series A Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding up of the Company, or change the relative seniority of the liquidation preferences of the holders of Series A Preferred Stock to the rights upon liquidation of the holders of other capital stock of the Company, or change the dividend rights of the holders of Series A Preferred Stock; (iii) cancel or modify the conversion rights of the holders of Series A Preferred Stock provided for in Section 5 herein; (iv) cancel or modify the rights of the holders of the Series A Preferred Stock provided for in this Section 7. 8. No Dilution or Impairment. The Company shall not, by amendment of its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Series A Preferred Stock set forth herein, but shall at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Series A Preferred Stock against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) shall not increase the par value of any shares of stock receivable on the conversion of the Series A Preferred Stock above the amount payable therefor on such conversion, (b) shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully-paid and non-assessable shares of stock on the conversion of all Series A Preferred Stock from time to time outstanding, and (c) shall not consolidate with or merge into any other person or permit any such person to consolidate with or merge into the Company (if the Company is not the surviving person), unless such other person shall expressly assume in writing and will be bound by all of the terms of the Series A Preferred Stock set forth herein. 9. Notices of Record Date. In the event of: (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger of the Company, or any transfer of all or substantially all of the assets of the Company to any other corporation, or any other entity or person, or (c) any voluntary or involuntary dissolution, liquidation or winding up of the Company. Then and in each such event the Company shall mail or cause to be mailed to each holder of Series A Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, merger, dissolution, liquidation or winding up is expected to become effective and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, merger, dissolution, liquidation or winding up. Such notice shall be mailed at least ten (10) business days prior to the date specified in such notice on which such action is to be taken. Signed on __________________, 1998. /s/ Mark Levy ______________________________________ Mark Levy, President EXHIBIT 4.2 THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY. STOCK PURCHASE WARRANT To Purchase _____ Shares of Common Stock of nSTOR TECHNOLOGIES, INC. THIS CERTIFIES that, for value received, _________ (the "Investor"), is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time after the date hereof and on or prior to April 15, 2001 (the "Termination Date") but not thereafter, to subscribe for and purchase from nSTOR TECHNOLOGIES, INC., a Delaware corporation (the "Company"), ____________________ (_________) shares of Common Stock (the "Warrant Shares"). The purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be One Dollar and 50/100 ($1.50). The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. This Warrant is being issued in connection with the 8% Convertible Preferred Stock Series A Subscription Agreement dated on or about April 14, 1998, in the amount of Three Million Five Hundred Thousand ($3,500,000) Dollars (the "Agreement") between the Company and Investor and certain other investors and is subject to its terms. In the event of any conflict between the terms of this Warrant and the Agreement, the Agreement shall control. 1. Title of Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. 2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made at any time or times one day after the date hereof, in whole or in part, before the close of business on the Termination Date, or such earlier date on which this Warrant may terminate as provided in paragraph 12 below, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed, at the office of the Company located at 100 Century Blvd., West Palm Beach, FL 33417 (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company) or its Transfer Agent and upon payment of the Exercise Price of the shares thereby purchased; whereupon the holder of this Warrant shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered by the Company, or the Company shall have instructed its Transfer Agent to deliver to the holder hereof within five business days after the date on which this Warrant shall have been exercised as aforesaid. Payment of the Exercise Price of the shares may be by certified check or cashier's check or by wire transfer to an account designated by the Company in an amount equal to the Exercise Price multiplied by the number of shares being purchased. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. 5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that upon any transfer involved in the issuance or delivery of any certificates for shares of Common Stock, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. 6. Restrictions on Transfer. (a) This Warrant and any Warrant Shares may not be sold, transferred, pledged, hypothecated or otherwise disposed of except as follows: (i) to a person who, in the opinion of counsel to the Company, is a person to whom this Warrant or the Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto, and then only against receipt of an agreement of such person to comply with the provisions of this Section 6(a) with respect to any resale or other disposition of such securities; or (ii) to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition, and thereafter to all successive assignees. (b) Unless the Warrant Shares have been registered under the Act, or exempt from registration, upon exercise of any of the Warrant and the issuance of any of the Warrant Shares, all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend: "THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY." The holder of the Warrant agrees and acknowledges that the Warrant is being purchased for the holder's own account, for investment purposes only, and not for the account of any other person, and not with a view to distribution, assignment, pledge or resale to others or to fractionalization in whole or in part. The holder further represents, warrants and agrees as follows: no other person has or will have a direct or indirect beneficial interest in this Warrant and the holder will not sell, hypothecate or otherwise transfer the Warrant except in accordance with the Act thereunder and applicable state securities laws or unless, in the opinion of counsel for the holder acceptable to the Company, an exemption from the registration requirements of the Act and such laws is available. 7. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. 8. No Rights as Shareholder until Exercise. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise thereof. If, however, at the time of the surrender of this Warrant and purchase the holder hereof shall be entitled to exercise this Warrant, the shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised. 9. Assignment and Transfer of Warrant. This Warrant may be assigned by the surrender of this Warrant and the Assignment Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); provided, however, that this Warrant may not be resold or otherwise transferred except (i) in a transaction registered under the Act, or (ii) in a transaction pursuant to an exemption, if available, from such registration and whereby, if requested by the Company, an opinion of counsel reasonably satisfactory to the Company is obtained by the holder of this Warrant to the effect that the transaction is so exempt. 10. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and warrants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate. 11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 12. Effect of Certain Events. (a) If at any time the Company proposes to sell or otherwise convey all or substantially all of its assets, a sale in which the consideration to be received by the Company or its shareholders consists solely of cash, the Company shall give the holder of this Warrant thirty (30) days' notice of the proposed effective date of the transaction specifying that the Warrant shall terminate if the Warrant has not been exercised by the effective date of the transaction. (b) In case the Company shall at any time effect a Sale or Merger Transaction in which the consideration to be received by the Company or its shareholders consists in part of consideration other than cash, the holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto. 13. Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) declare or pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 14. Voluntary Adjustment by the Company. The Company may at its discretion, at any time during the term of this Warrant, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 15. Notice of Adjustment. Whenever the number of Warrant shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Warrant notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth computation by which such adjustment was made. Such notice, in absence of manifest error, shall be conclusive evidence of the correctness of such adjustment. 16. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of the Company's Common Stock upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the American Stock Exchange, Inc. or any domestic securities exchange upon which the Common Stock may be listed. 17. Miscellaneous. (a) Issue Date; Jurisdiction. The provisions of this Warrant shall be construed and shall be given effect in all respects as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws and jurisdictions of Delaware and for all purposes shall be construed in accordance with and governed by the laws of said state without regard to its conflict of law, principles or rules. (b) Restrictions. The holder hereof acknowledges that the Common Stock acquired upon the exercise of this Warrant, if not registered, may have restrictions upon its resale imposed by state and federal securities laws. (c) Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. (d) Notices. Any notice, request or other document required or permitted to be given or delivered to the holders hereof of the Company shall be delivered or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address set forth in the Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: April 14, 1998 nSTOR TECHNOLOGIES, INC. By: /s/ Mark F. Levy Title: President NOTICE OF EXERCISE To: nSTOR TECHNOLOGIES, INC. (1) The undersigned hereby elects to purchase _____ shares of Common Stock of nSTOR TECHNOLOGIES, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: _______________________________ (Name) _______________________________ (Address) _______________________________ Dated: ______________________________ Signature NOTE: Signature must conform in all respects to holder's name as specified on the face of the attached warrant. ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is _____________________________________________________________. _____________________________________________________________ Dated: ______________, 1998 Holder's Signature: _____________________________ Holder's Address: _____________________________ _____________________________ Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EXHIBIT 4.3 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated the 14th day of April, 1998, between the entities listed on Schedules A and B (the "A Subscribers" and "B Subscribers" or collectively, the "Holders"), issued pursuant to the 8% Convertible Preferred Stock Series A Subscription Agreement of even date herewith (the "Subscription Agreement"), and nSTOR TECHNOLOGIES, INC., a Delaware corporation having its principal place of business at 100 Century Blvd., West Palm Beach, FL 33417 (the "Company"). WHEREAS, simultaneously with the execution and delivery of this Agreement, the Holders are purchasing from the Company, pursuant to the Subscription Agreement an aggregate of Three Thousand Five Hundred (3,500) shares of Preferred Stock, and a Warrant to purchase an aggregate of Two Hundred Thousand (200,000) shares of Common Stock. The Common Stock of the Company underlying the Preferred Stock is referred to as the "Conversion Shares", and the Common Stock of the Company underlying the Warrants is referred to as the "Warrant Shares" (capitalized terms defined in the Subscription Agreement and not otherwise defined herein have the meanings specified in the Subscription Agreement); and WHEREAS, the Company desires to grant to the Holders the registration rights set forth herein. NOW, THEREFORE, the parties hereto mutually agree as follows: Section 1. Registrable Securities. As used herein the term Registrable Securities means the Conversion Shares, and the Warrant Shares; provided, however, that with respect to any particular Registrable Security, such security shall cease to be a Registrable Security when, as of the date of determination, (i) it has been effectively registered under the Securities Act of 1933, as amended (the Securities Act) and disposed of pursuant thereto, (ii) registration under the Securities Act is no longer required for the immediate public distribution of such security as a result of the provisions of Rule 144, or (iii) it has ceased to be outstanding. In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be made in the definition of Registrable Security as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Section 1. Section 2. Restrictions on Transfer. The Holders acknowledge and understand that prior to the registration of the Securities as provided herein, the Securities are "restricted securities" as defined in Rule 144 promulgated under the Securities Act. The Holders understand that no disposition or transfer of the Securities may be made by Holder in the absence of (i) an opinion of counsel reasonably satisfactory to the Company that such transfer may be made or (ii) a registration statement under the Securities Act is then in effect with respect thereto. Section 3. Registration Rights. The Company agrees that it will prepare and file with the Securities and Exchange Commission ("SEC"), within thirty (30) days after the Closing Date, a registration statement which shall include any and all amendments thereto (the "Registration Statement"), or in the event more than one Registration Statement is required to be filed to include such items as newly authorized shares, such further Registration Statement shall be filed thirty (30) days after the issuance of such newly authorized shares or other event, as the case may be. In the event that such Registration Statement is not effective in ninety (90) days, then Section 3(e) liquidated damages shall apply, at the sole expense of the Company (except as provided in Section 3(c) hereof), in respect of all holders of Registrable Securities, so as to permit resale of the Registrable Securities under the Securities Act, provided, the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 3(a) in any jurisdiction in which the Company would be required to qualify as a dealer in securities, under the securities or blue sky laws of such jurisdiction. The Company agrees that it will cause the Registration Statement to become effective within ninety (90) days after the Closing Date. The number of Registrable Securities to be registered shall be two hundred (200%) percent of the number of shares that would be required if all of the Registrable Securities were converted in accordance with the Certificate of Designation, on a date which is five (5) business days prior to the filing of the Registration Statement. (b) The Company will maintain the Registration Statement or post-effective amendment filed under this Section 3 hereof current under the Securities Act until the earlier of (i) the date that all of the Registrable Securities have been sold pursuant to the Registration Statement, (ii) the date that the Registrable Securities may be sold under the provisions of Rule 144 or (iii) three (3) years after the effective date of the Registration Statement. (c) All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under Section 3(a) and in complying with applicable securities and Blue Sky laws (including, without limitation, all attorneys' fees) shall be borne by the Company. The Holders shall bear the cost of underwriting discounts and commissions, if any, applicable to the Registrable Securities being registered and all of other the fees and expenses of such registration, including of its counsel and such other expenses as are necessary to qualify the sale of Securities in compliance with any state Blue Sky laws. The Company shall use its best efforts to qualify any of the securities for sale in such states as such Holders reasonably designate and shall furnish indemnification in the manner provided in Section 9 hereof. However, the Company shall not be required to qualify in any state which will require an escrow or other restriction relating to the Company and/or the sellers. The Company at its expense will supply the Holders with copies of such Registration Statement and the prospectus or offering circular included therein and other related documents in such quantities as may be reasonably requested by the Holders. (d) The Company shall not be required by this Section 3 to include Holder's Registrable Securities in the Amended Registration Statement which is to be filed if, in the opinion of counsel for both the Holders and the Company (or, should they not agree, in the opinion of another counsel experienced in securities law matters acceptable to counsel for the Holder and the Company) the proposed offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities laws and would result in all purchasers or transferees obtaining securities which are not restricted securities, as defined in Rule 144 under the Securities Act. (e) In the event the Registration Statement to be filed by the Company pursuant to Section 3(a) above is not filed by the Company by the thirtieth (30th) day after the Closing Date, or if the Registration Statement is not declared effective by the SEC by the ninetieth (90th) day after the Closing Date (the Effective Date), then the Company will pay, in cash, to the Holders on a pro-rata basis by wire transfer, as liquidated damages for such failure and not as a penalty, two (2%) percent of the principal amount of the Securities each month thereafter until the Registration Statement has been filed and/or declared effective. The liquidated damages shall be payable within seven (7) calendar days of written demand by the Holder. If the Company does not remit the damages to the Holder as set forth above, the Company will pay the to the Holders the reasonable costs of collection, including attorneys fees, in addition to the liquidated damages. Such payment shall be made to the Holders in cash immediately if the registration of the Securities are not effected; provided, however, that the payment of such liquidated damages shall not relieve the Company from its obligations to register the Securities pursuant to this Section. The registration of the Securities pursuant to this provision shall not affect or limit Holder's other rights or remedies as set forth in this Agreement. (f) No provision contained herein shall preclude the Company from selling securities pursuant to any registration statement in which it is required to include Registrable Securities pursuant to this Section 3. Section 4. Cooperation with Company. Holders will cooperate with the Company in all respects in connection with this Agreement, including, timely supplying all information reasonably requested by the Company and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities. Section 5. Registration Procedures. Whenever the Company is required by the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible: (a) prepare and file with the Commission such amendments and supplements to such registration statement and the Prospectus used in connection therewith as may be necessary to keep such registration statement effective as per Section 3(b) herein and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement when the Holder or Holders of such securities shall desire to sell or otherwise dispose of the same (including prospectus supplements with respect to the sales of securities from time to time in connection with a registration statement pursuant to Rule 415 under the Securities Act); (b) furnish to each Holder such numbers of copies of a summary prospectus or other prospectus, including a preliminary prospectus or any amendment or supplement to any prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such Holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such Holder; (c) use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as the Holder, shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable each Holder to consummate the public sale or other disposition in such jurisdiction of the securities owned by such Holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process; (d) list such securities on the American Stock Exchange, Inc. or any securities exchange on which any securities of the Company is then listed, if the listing of such securities is then permitted under the rules of such exchange; (e) enter into and perform its obligations under an underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering; (f) notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the Securities Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Section 6. Assignment. The rights granted the Holders under this Agreement shall not be assigned without the written consent of the Company, which consent shall not be unnecessarily withheld. In the event of a transfer of the rights granted under this Agreement, the Holders agree that the Company may require that the transferee comply with reasonable conditions as determined in the discretion of the Company. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Section 7. Termination of Registration Rights. The rights granted pursuant to this Agreement shall terminate as to each Holder (and permitted transferees or assignees ) upon the occurrence of any of the following: (a) all of that particular Holder's securities subject to this Agreement have been registered; (b) such Holder's securities subject to this Agreement may be sold without such registration pursuant to Rule 144 promulgated by the SEC pursuant to the Securities Act; (c) such Holder's securities subject to this Agreement can be sold pursuant to Rule 144(k). Section 8. Indemnification. (a) The Company and all key operating subsidiaries agree to indemnify and hold harmless the Holders and each person, if any, who controls each Holder within the meaning of the Securities Act (Distributing Holders) against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Distributing Holders may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that neither the Company nor all key operating subsidiaries will be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment, or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Distributing Holders, specifically for use in the preparation thereof. This Section shall not inure to the benefit of any Distributing Holder with respect to any person asserting such loss, claim, damage or liability who purchased the Registrable Securities which are the subject thereof if the Distributing Holder failed to send or give (in violation of the Securities Act or the rules and regulations promulgated thereunder) a copy of the prospectus contained in the Amended Registration Statement to such person at or prior to the written confirmation to such person of the sale of such Registrable Securities, where the Distributing Holder was obligated to do so under the Securities Act or the rules and regulations promulgated hereunder. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Distributing Holder agrees that it will indemnify and hold harmless the Company and all key operating subsidiaries, and each officer, director of the Company or person, if any, who controls the Company and all key operating subsidiaries within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees) to which the Company and all key operating subsidiaries or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses claims, damages or liabilities (or actions in respect thereof); arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Amended Registration Statement prepared by the Company and all key operating subsidiaries, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company and all key operating subsidiaries by such Distributing Holder, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the distributing Holders may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than as to the particular item as to which indemnification is then being sought solely pursuant to this Section. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided that if the indemnified party is the Distributing Holder, the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both the Distributing Holder and the indemnifying party and the Distributing Holder shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the Distributing Holder (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the Distributing Holder, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the Distributing Holder, which firm shall be designated in writing by the Distributing Holder). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld. Section 9. Contribution. In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the Distributing Holder, or the Company or all key operating subsidiaries, makes a claim for indemnification, but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of this Agreement provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any Distributing Holder, or the Company or all key operating subsidiaries, then the Company and all key operating subsidiaries and the applicable Distributing Holder shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and all key operating subsidiaries on the one hand or the applicable Distributing Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and all key operating subsidiaries and the Distributing Holder agree that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Section 10. "Piggy-Back" Registration. The Holders of this Registration Rights Agreement shall have the right to include all of the shares of Common Stock underlying this Warrant (the "Registrable Securities") as part of any registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8) and must be notified in writing of such filing; provided, however, that the holder of this Warrant agrees it shall not have any piggy-back registration rights pursuant to this Agreement if the shares of Common Stock underlying this Warrant may be sold in the United States pursuant to the provisions of Rule 144. Holder shall have five (5) business days to notify the Company in writing as to whether the Company is to include Holder or not include Holder as part of the registration; provided, however, that if any registration pursuant to this Section shall be underwritten, in whole or in part, the Company may require that the Registrable Securities requested for inclusion pursuant to this Section be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If in the good faith judgment of the underwriter evidenced in writing of such offering only a limited number of Registrable Securities should be included in such offering, or no such shares should be included, the Holder, and all other selling stockholders, shall be limited to registering such proportion of their respective shares as shall equal the proportion that the number of shares of selling stockholders permitted to be registered by the underwriter in such offering bears to the total number of all shares then held by all selling stockholders desiring to participate in such offering. Those Registrable Securities which are excluded from an underwritten offering pursuant to the foregoing provisions of this Section (and all other Registrable Securities held by the selling stockholders) shall be withheld from the market by the Holders thereof for a period, not to exceed one hundred eighty (180) days, which the underwriter may reasonably determine is necessary in order to effect such underwritten offering. The Company shall have the right to terminate or withdraw any registration initiated by it under this Agreement prior to the effectiveness of such registration whether or not any Warrant holder elected to include securities in such registration. All registration expenses incurred by the Company in complying with this Agreement shall be paid by the Company, exclusive of underwriting discounts, commissions and legal fees and expenses for counsel to the holders of the Warrants. Section 11. Notices. Any notice pursuant to this Agreement by the Company or by the Holder shall be in writing and shall be deemed to have been duly given if delivered by (i) hand, (ii) by facsimile and followed by mail delivery or (iii) if mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: (a) If to the Holders, to its, his or her address set forth on Schedule A attached to this Agreement. (b) If to the Company, at the address set forth herein, or to such other address as any such party may designate by notice to the other party. Notices shall be deemed given at the time they are delivered personally or five (5) days after they are mailed in the manner set forth above. If notice is delivered by facsimile to the Company and followed by mail, delivery shall be deemed given two (2) days after such facsimile is sent. Section 12. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 13. Headings. The headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 14. Governing Law, Venue. This Agreement will be construed and enforced in accordance with and governed by the laws of the State of Delaware, except for matters arising under the Securities Act, without reference to principles of conflicts of law. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the State of Delaware or the state courts of the State of Delaware in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each party hereby agrees that if another party to this Agreement obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in the courts of any state or country having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. Section 14. Severability/Defined Terms. If any provision of this Agreement shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. Terms not otherwise defined herein shall be defined in accordance with the 8% Convertible Preferred Stock Series A Subscription Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, on the day and year first above written. nSTOR TECHNOLOGIES, INC. Attest: /s/ Orilla F. Floyd /s/ Mark Levy By:______________________ By:_________________________ Name:Orilla F. Floyd Name: Mark Levy Title: Secretary Title: President CPR (USA) INC. /s/ Steven S. Rogers By_____________________________ "A" Subscriber LIBERTYVIEW FUND, LLC /s/ Steven S. Rogers By_____________________________ "A" Subscriber LIBERTYVIEW PLUS FUND /s/ Steven S. Rogers By_____________________________ "A" Subscriber /s/ H. Irwin Levy _____________________________ H. IRWIN LEVY, "B" Subscriber EXHIBIT 4.4 THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY. STOCK PURCHASE WARRANT To Purchase 80,000 Shares of Common Stock of nSTOR TECHNOLOGIES, INC. THIS CERTIFIES that, for value received, H. IRWIN LEVY (the "Investor"), is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time after the date hereof and on or prior to April 14, 2001 (the "Termination Date") but not thereafter, to subscribe for and purchase from nSTOR TECHNOLOGIES, INC., a Delaware corporation (the "Company"), Eighty Thousand (80,000) shares of Common Stock (the "Warrant Shares"). The purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be One Dollar and 50/100 ($1.50). The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. This Warrant is being issued in connection with the 8% Convertible Preferred Stock Series A Subscription Agreement dated on or about April 14, 1998, in the amount of Three Million Five Hundred Thousand ($3,500,000) Dollars (the "Agreement") between the Company and Investor and certain other investors and is subject to its terms. In the event of any conflict between the terms of this Warrant and the Agreement, the Agreement shall control. 1. Title of Warrant. Prior to the expiration hereof and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. 2. Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 3. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made at any time or times one day after the date hereof, in whole or in part, before the close of business on the Termination Date, or such earlier date on which this Warrant may terminate as provided in paragraph 12 below, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly executed, at the office of the Company located at 100 Century Blvd., West Palm Beach, FL 33417 (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company) or its Transfer Agent and upon payment of the Exercise Price of the shares thereby purchased; whereupon the holder of this Warrant shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered by the Company, or the Company shall have instructed its Transfer Agent to deliver to the holder hereof within five business days after the date on which this Warrant shall have been exercised as aforesaid. Payment of the Exercise Price of the shares may be by certified check or cashier's check or by wire transfer to an account designated by the Company in an amount equal to the Exercise Price multiplied by the number of shares being purchased. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. 5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the holder of this Warrant or in such name or names as may be directed by the holder of this Warrant; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the holder of this Warrant, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the holder hereof; and provided further, that upon any transfer involved in the issuance or delivery of any certificates for shares of Common Stock, the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. Restrictions on Transfer. (a) This Warrant and any Warrant Shares may not be sold, transferred, pledged, hypothecated or otherwise disposed of except as follows: (i) to a person who, in the opinion of counsel to the Company, is a person to whom this Warrant or the Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Act with respect thereto, and then only against receipt of an agreement of such person to comply with the provisions of this Section 6(a) with respect to any resale or other disposition of such securities; or (ii) to any person upon delivery of a prospectus then meeting the requirements of the Act relating to such securities and the offering thereof for such sale or disposition, and thereafter to all successive assignees. (b) Unless the Warrant Shares have been registered under the Act, or exempt from registration, upon exercise of any of the Warrant and the issuance of any of the Warrant Shares, all certificates representing Warrant Shares shall bear on the face thereof substantially the following legend: "THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE OFFERED OR SOLD OR TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY." The holder of the Warrant agrees and acknowledges that the Warrant is being purchased for the holder's own account, for investment purposes only, and not for the account of any other person, and not with a view to distribution, assignment, pledge or resale to others or to fractionalization in whole or in part. The holder further represents, warrants and agrees as follows: no other person has or will have a direct or indirect beneficial interest in this Warrant and the holder will not sell, hypothecate or otherwise transfer the Warrant except in accordance with the Act thereunder and applicable state securities laws or unless, in the opinion of counsel for the holder acceptable to the Company, an exemption from the registration requirements of the Act and such laws is available. 7. Closing of Books. The Company will at no time close its shareholder books or records in any manner which interferes with the timely exercise of this Warrant. 8. No Rights as Shareholder until Exercise. This Warrant does not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company prior to the exercise thereof. If, however, at the time of the surrender of this Warrant and purchase the holder hereof shall be entitled to exercise this Warrant, the shares so purchased shall be and be deemed to be issued to such holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been exercised. 9. Assignment and Transfer of Warrant. This Warrant may be assigned by the surrender of this Warrant and the Assignment Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered holder hereof at the address of such holder appearing on the books of the Company); provided, however, that this Warrant may not be resold or otherwise transferred except (i) in a transaction registered under the Act, or (ii) in a transaction pursuant to an exemption, if available, from such registration and whereby, if requested by the Company, an opinion of counsel reasonably satisfactory to the Company is obtained by the holder of this Warrant to the effect that the transaction is so exempt. 10. Loss, Theft, Destruction or Mutilation of Warrant. The Company represents and warrants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock certificate, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate. 11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday. 12. Effect of Certain Events. (a) If at any time the Company proposes to sell or otherwise convey all or substantially all of its assets, a sale in which the consideration to be received by the Company or its shareholders consists solely of cash, the Company shall give the holder of this Warrant thirty (30) days' notice of the proposed effective date of the transaction specifying that the Warrant shall terminate if the Warrant has not been exercised by the effective date of the transaction. (b) In case the Company shall at any time effect a Sale or Merger Transaction in which the consideration to be received by the Company or its shareholders consists in part of consideration other than cash, the holder of this Warrant shall have the right thereafter to purchase, by exercise of this Warrant and payment of the aggregate Exercise Price in effect immediately prior to such action, the kind and amount of shares and other securities and property which it would have owned or have been entitled to receive after the happening of such transaction had this Warrant been exercised immediately prior thereto. 13. Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) declare or pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the holder of this Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 14. Voluntary Adjustment by the Company. The Company may at its discretion, at any time during the term of this Warrant, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 15. Notice of Adjustment. Whenever the number of Warrant shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the holder of this Warrant notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth computation by which such adjustment was made. Such notice, in absence of manifest error, shall be conclusive evidence of the correctness of such adjustment. 16. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of the Company's Common Stock upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the American Stock Exchange, Inc. or any domestic securities exchange upon which the Common Stock may be listed. 17. Miscellaneous. (a) Issue Date; Jurisdiction. The provisions of this Warrant shall be construed and shall be given effect in all respects as if it had been issued and delivered by the Company on the date hereof. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws and jurisdictions of Delaware and for all purposes shall be construed in accordance with and governed by the laws of said state without regard to its conflict of law, principles or rules. (b) Restrictions. The holder hereof acknowledges that the Common Stock acquired upon the exercise of this Warrant, if not registered, may have restrictions upon its resale imposed by state and federal securities laws. (c) Modification and Waiver. This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. (d) Notices. Any notice, request or other document required or permitted to be given or delivered to the holders hereof of the Company shall be delivered or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address set forth in the Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: April 14, 1998 nSTOR TECHNOLOGIES, NC. By: /s/ Mark F. Levy President Title:_________________ NOTICE OF EXERCISE To: nSTOR TECHNOLOGIES, INC. (1) The undersigned hereby elects to purchase __________ shares of Common Stock of nSTOR TECHNOLOGIES, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price in full, together with all applicable transfer taxes, if any. (2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: _______________________________ (Name) _______________________________ (Address) _______________________________ Dated: ______________________________ Signature NOTE: Signature must conform in all respects to holder's name as specified on the face of the attached warrant. ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to ____________________________ _______________________________________________ whose address is _______________________________________________________________. _______________________________________________________________ Dated: ______________, 1998 Holder's Signature: _____________________________ Holder's Address: _____________________________ _____________________________ Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-10 3 EXHIBITS 10 EXHIIT 10.1 ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of April , 1998, by and between nSTOR TECHNOLOGIES, INC., a Delaware corporation, CPR (USA) INC., a Delaware corporation, LIBERTYVIEW PLUS FUND, a Bermuda corporation, LIBERTYVIEW FUND, LLC, a Delaware limited liability company, and H. IRWIN LEVY, an individual resident of the state of Florida ("Levy") (collectively referred to as the "Investors") and HOLLAND & KNIGHT LLP, a Florida limited liability partnership (the "Escrow Agent"). R E C I T A L S: WHEREAS, The Investors have subscribed for 3.5 million dollars of convertible preferred stock (the "Preferred Stock") pursuant to that certain eight percent (8%) Convertible Preferred Stock Series A Subscription Agreement dated April 14, 1998 (the "Subscription Agreement"); WHEREAS, In order to convert the Preferred Stock into shares of Common Stock of the Company as provided under the Subscription Agreement, it is necessary for the shareholders of the Company, at the next annual meeting of the Company, to approve an increase the number of authorized shares from 24,000,000 to 40,000,000, and to approve the issuance of more than twenty percent (20%) of the Company's Common Stock at below market prices as required by Rule 713(a) of the American Stock Exchange; and WHEREAS, in the event the shareholders fail to approve the increase in authorized stock or fail to approve the sale of twenty percent (20%) of the Company's Common Stock at below market price, or there is no shareholders meeting 90 days from the date hereof, the Investors shall have the option of requiring the Company to redeem $1 million of Preferred Stock initially purchased by the Investors upon the terms and conditions provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, each intending to be legally bound, hereby agree as follows: 4. Recitals. The recitals stated above are true and correct and are hereby incorporated by reference herein. 5. Appointment. The Company hereby appoints the Escrow Agent and the Escrow Agent hereby accepts appointment as the Escrow Agent under the terms and subject to the conditions of this Agreement. 6. Term. The term (the "Term") of this Agreement commences on the date of its execution and continues until the earlier of: (a) the business day after the Corporation has concluded its next annual meeting or (b) the close of business on such date ninety (90) days from the date hereof. 7. Deposit of Escrow Funds. Corporation shall deposit with the Escrow Agent an amount of $1,000,000 which shall be the purchase price for the number of shares of Preferred Stock to be purchased by H. Irwin Levy pursuant to the Subscription Agreement (the "Escrow Funds"). The Escrow Agent shall promptly deposit the Escrow Funds in an interest bearing account insured by the Federal Deposit Insurance Corporation (the "Escrow Account") in accordance with the terms and subject to the conditions set forth herein. Disbursements. The Escrow Agent shall disburse the Escrow Funds as follows: In the event an annual or special meeting of the shareholders of the Corporation ("Meeting") is held within 90 days of the date hereof, and Escrow Agent receives a copy of the minutes of the Meeting, signed by the Secretary of the Corporation, indicating that the shareholders of the Corporation approved (i) an amendment to the Articles of Incorporation of the Company to increase the Company's authorized Common Stock from 24 million to 40 million shares, and (ii) the issuance of over twenty percent (20%) of the Company's outstanding Common Stock at below market price, as required by American Stock Exchange Rule 713(a), then the Escrow Funds shall be immediately disbursed to the Company and this Escrow Agreement shall terminate. 5.2 In the event no Meeting is held within 90 days of the date hereof, or in the event such Meeting is held and the Escrow Agent receives a copy of the minutes of the Meeting, signed by the Secretary of the Corporation, indicating that the shareholders of the Corporation did not approve either (i) an amendment to the Articles of Incorporation of the Company to increase the Company's authorized Common Stock from 24 million to 40 million shares, or (ii) the issuance of over twenty percent (20%) of the Company's outstanding Common Stock at below market price, as required by American Stock Exchange Rule 713(a), then Investors shall have the option, any time within 30 days after the Meeting, to redeem such of the Series A Preferred Stock purchased by the Investors in accordance with the Subscription Agreement. The Investors shall exercise their option by providing the Company with (i) written notice of their intent to exercise their options to require the Company to redeem such shares at the redemption price set forth in Section 10.1 of the Subscription Agreement, and (ii) upon original share certificate representing such shares to be redeemed. Upon receipt, Escrow Agent shall release the Escrow Funds, including any interest thereon, to the Investors in full redemption of the Series A Preferred Stock, and Escrow Agent shall return such stock certificates to the Company. Escrow Agent. Duties. The Escrow Agent shall be required to act in respect of the Escrow Funds only as specifically provided hereunder. This Agreement sets forth all of the duties and obligations of the Escrow Agent with respect to any and all matters relating to the Escrow Funds as contemplated hereunder, and no additional obligations of the Escrow Agent shall be implied from the terms of this Agreement or any other agreements. Resolution of Doubt. If the Escrow Agent is in doubt as to its duties and liabilities under this Agreement, then the Escrow Agent may continue to hold the Escrow Funds until all parties concerned mutually agree to the release thereof, or until a judgment of a court of competent jurisdiction determines the rights of the parties hereto, or may deposit all monies then held under this Agreement with a court of competent jurisdiction having jurisdiction over the dispute. Reliance on Documents. The Escrow Agent may act in good faith reasonable reliance upon (a) any document, instrument or signature, including any statement or assertion made in any such document or instrument and (b) any notice or instructions that the Escrow Agent reasonably believes to be authorized under this Agreement. In the event that the Escrow Agent acts in good faith reasonable reliance upon any document, instrument, signature, statement or assertion made in any such document or instrument, or any notice or instructions that it reasonably believes to be authorized under this Agreement, the Escrow Agent shall not be liable for the sufficiency, accuracy or authenticity of such document or instrument and its duties shall be limited to those set forth in this Agreement. Resignation. The Escrow Agent and any successor escrow agent may resign at any time upon giving the Company forty-five (45) days' prior written notice. After the expiration of such notice period, the Escrow Agent shall deliver the Escrow Funds and any and all documents relating thereto then in its possession to a successor escrow agent which shall be selected by the Company. Such resignation shall not be effective until a successor escrow agent agrees to act hereunder; provided, however, that if no successor is appointed and acting hereunder within this forty-five day period, the Escrow Agent may deliver the Escrow Funds to a court of competent jurisdiction. Fees and Expenses. The Escrow Agent shall receive no fees of any kind for its service hereunder, and the Company shall not be obligated to pay or reimburse any expenses incurred by the Escrow Agent in connection with its service hereunder. No Warranties. The Escrow Agent shall not be liable in any manner for the sufficiency or correctness as to form, manner and execution, or validity of any instrument deposited with the Escrow Agent, nor as to the identity, authority, or right of any person executing the same. Delivery of Instruments or Documents. The Escrow Agent shall, if requested by the Company, issue written notices acknowledging receipt of the Escrow Funds. Notices. All notices, requests, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given if hand delivered or sent by recognized overnight delivery service to the parties at the following addresses: The Company: nStor Technologies, Inc. 100 Century Boulevard West Palm Beach, Florida 33417 Attention: Mark F. Levy The Escrow Agent: Holland & Knight LLP One East Broward Boulevard Fort Lauderdale, Florida 33301 Attention: Donn A. Beloff, Esq. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, including attorneys' fees for any appeal and costs incurred in bringing such action or proceeding, in addition to any other available remedy. Such party shall be deemed to have been successful if such action or claim is concluded pursuant to (a) a court order or final judgment which is not subject to appeal, (b) a settlement agreement or (c) a dismissal of the principal claims. Entire Agreement; Amendment. This Agreement and the other agreements contemplated herein constitute the entire agreement among the parties hereto regarding the subject matter hereof, and supersede all prior agreements, understandings and arrangements, expressed or implied, both oral and written, among the parties hereto with respect to the subject matters hereof. This Agreement may only be amended or modified by a written amendment signed by both of the parties hereto. Governing Law; Venue. The Agreement shall be construed, governed and enforced in accordance with the laws of the State of Florida without regard to its principles of conflicts of laws. Any action or proceeding which is brought by any party hereto for any dispute, claim, disagreement or controversy arising directly or indirectly out of or in connection with this Agreement shall be brought in the state or federal courts in Broward County, Florida. The parties hereto covenant and agree that they will not challenge the selection of such venue in any such action or proceeding for any reason, including, without limitation, on the grounds that such venue is an inconvenient forum. Successors; Permitted Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Severability. The provisions of this Agreement are severable, and the invalidity of any provision shall not affect the validity of any other provision. If any court of competent jurisdiction determines that any provision of this Agreement or the application thereof is unenforceable because of the duration or scope thereof, the parties hereto acknowledge and agree that such court shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable and that this Agreement in its reduced form shall be valid and enforceable to the full extent permitted by applicable law. No Waiver. No waivers of any of the terms and conditions hereof extended by any party hereto to any party shall be construed as a waiver of any breach on the part of such other party, nor shall any waiver by any party hereto of any of the terms and conditions hereof be construed as a general or continuing waiver by such party. Captions. The captions of this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision hereof. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow Agreement as of the date first above written. nSTOR TECHNOLOGIES, INC. /s/ H. Irwin Levy /s/ Mark F. Levy _________________________ By:_______________________ H. IRWIN LEVY Mark F. Levy, President LIBERTVIEW FUND, LLC HOLLAND & KNIGHT LLP /s/ Steven R. Rogers /s/ Donn Beloff By: ____________________ By:_______________________ Steven R. Rogers Donn Beloff Name:___________________ Name:_____________________ Authorized Signatory Its: ___________________ LIBERTYVIEW PLUS FUND CPR (USA) INC. /s/ Steven S. Rogers /s/ Steven S. Rogers By:_____________________ By:_____________________ Steven S. Rogers Steven S.Rogers Name:___________________ Name:___________________ Authorized Signatory Chief Administrative Officer Its: ___________________ Its:____________________ EXHIBIT 10.2 AGREEMENT AMONG OPTIONHOLDERS THIS AGREEMENT AMONG OPTIONHOLDERS (this "Agreement") is made and entered into as of this day of April, 1998, by and among the undersigned holders of options to purchase shares in nStor Technologies, Inc. (the "Corporation"). WHEREAS, the Directors of the Corporation have determined that there is an immediate need to raise additional working capital for the Corporation, and that it is in the best interest of the Corporation to raise such additional capital through a private placement of convertible preferred stock (the "Private Placement"); WHEREAS, prior to issuing such Private Placement it is necessary for the Corporation to have sufficient authorized Common Stock available for conversion of the Private Placement shares; WHEREAS, there are currently options outstanding to the undersigned for the purchase of Common Stock of the Corporation in an amount which would cause there to be insufficient shares of Common Stock to be issued pursuant to conversion of the Private Placement shares; WHEREAS, the undersigned constitute substantially all of the holders of currently vested options to purchase shares of Common Stock in the Corporation; NOW THEREFORE, in consideration of the above, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned, hereby agree as follows: 1. Agreement Not to Exercise Options for a Limited Period of Time: In consideration of the need to raise additional capital through the issuance of preferred shares that are convertible into Common Stock of the Corporation in connection with the Private Placement, the undersigned holders of all of the outstanding options to purchase shares of Common Stock of the Corporation, hereby agree not to take any action to exercise their options, in whole or in part, until such time as the Corporation has amended its Articles of Incorporation to provide for additional shares of authorized but unissued Common Stock of the Corporation in an amount sufficient to cover (i) the conversion of any amount of convertible preferred stock issued pursuant to the Private Placement, and (ii) any amount of Common Stock issued pursuant to all outstanding options. 2. Action to Amend the Articles of Incorporation: The undersigned hereby further agree to take all necessary action to cause the Corporation to prepare and file all papers required to amend the Articles of Incorporation of the Corporation to increase the number of authorized shares of Common Stock at the next Annual Meeting of the Shareholders and Directors of the Corporation. IN WITNESS WHEREOF, the undersigned parties have duly executed this Agreement as of the date first written above. nSTOR TECHNOLOGIES, INC. /s/ Mark F. Levy By: ___________________________________ Mark F. Levy, President Option Optionholder Name: Shares /s/ Mark F. Levy 130,000 ________________________________ Mark F. Levy, Director /s/ H. Irwin Levy 100,000 ________________________________ H. Irwin Levy, Director /s/ R. Daniel Smith 1,000,000 ________________________________ R. Daniel Smith, Director /s/ Michael L. Wise 200,000 ________________________________ Michael L. Wise, Director /s/ Joseph D. Weingard 100,000 ________________________________ Joseph D. Weingard, Director /s/ Bernard Green 20,000 ________________________________ Bernard Green, Director /s/ Richard Reiss 20,000 ________________________________ Richard Reiss, Director EXHIBIT 10.3 AGREEMENT AMONG STOCKHOLDERS THIS AGREEMENT AMONG STOCKHOLDERS (this "Agreement") is made as of the day of April, 1998, by and among the undersigned Stockholders who collectively own more than 50% of the issued and outstanding Common Stock of nSTOR TECHNOLOGIES, INC., a Delaware corporation ("Corporation"). WHEREAS, the Directors of the Corporation have determined that there is an immediate need to raise additional working capital for the Corporation, and that it is in the best interest of the Corporation to raise such additional capital through a private placement of convertible preferred stock (the "Private Placement"); WHEREAS, prior to issuing such Private Placement it is necessary (i) for the Shareholders to approve the issuance of any preferred stock that may be convertible into Common Stock equal to 20% or more of the current issued and outstanding Common Stock, as required by the American Stock Exchange Company Guide ("ASECG") Section 713(a); and (ii) for the Corporation to amend its Articles of Incorporation to increase the number of authorized shares of Common Stock from 24,000,000 shares to 40,000,000 shares in order to have sufficient authorized Common Stock available for conversion of the Private Placement shares; and WHEREAS, the approval of the sale of stock under ASECG Section 713(a), and the amendment of the Corporation's Articles of Incorporation requires the approval of the holders of a majority of the issued and outstanding Common Stock of the Corporation at a meeting duly called and held for such purpose, or the written consent of a majority of the Stockholders in lieu of such meeting. NOW THEREFORE, in consideration of the above, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned, constituting the holder's of a majority of the issued and outstanding Common Stock of the Corporation, hereby agree as follows: 1. Agreement to Approve Amendment to Articles of Incorporation and Sale of Stock: At the next Annual Meeting of the Stockholders of the Corporation, which shall be held no later than 60 days from the date hereof, the undersigned Stockholders agree to vote their shares, in person, or by proxy, to approve (i) the issuance of preferred stock convertible into Common Stock equal to 20% or more of the current issued and outstanding Common Stock, in accordance with ASECG Section 713(a); and (ii) an amendment to the Articles of Incorporation of the Corporation to increase the number of authorized shares of Common Stock from 24,000,000 to 40,000,000 shares, effective upon the date of filing of such amendment. 2. All Other Actions: The undersigned hereby further agree to authorize the officers of the Corporation, or any of them, to take all other actions, and to incur such costs as may be necessary to prepare and file all papers required to amend the Articles of Incorporation of the Corporation to increase the number of authorized shares of Common Stock as described above. IN WITNESS WHEREOF, the undersigned parties have duly executed this Agreement as of the date first written above. Shares Shares Stockholder Name: Owned Stockholder Name: Owned Lynn Peseckis 600,000 Mark F. Levy 612,500 H. Irwin Levy 3,163,767 Bernard R. Green 250,000 Mark F. Levy, President of Jeanne & Irwin Levy Trust 20,000 Joseph D. Weingard 750,000 Richard Reiss, Jr. 50,000 R. Daniel Smith 1,005,000 Brenda Reiss 91,000 Brenda Reiss as Custodian 90,300 Joseph Reiss 575,660 Joseph Reiss as Trusteee 175,560 Michael Reiss 90,000 Jennifer Reiss 83,000 Marshall Wise 97,000 Michael L. Wise 311,400 Batya Wise 504,902 Gordon Wise 72,500 Daniel Wise 125,500 Lynn & Gary Guttenberg 350,425 Reuven Meidan 425,017 Miriam Gotlieb 79,000 -----END PRIVACY-ENHANCED MESSAGE-----