SCHEDULE 14 C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[X] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
nSTOR TECHNOLOGIES, INC.
_________________________________________________________________
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14c-5(g) and 0-11:
(1) Title of each class of securities to which transaction applies:
_____________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
__________________________________________________
(4) Proposed maximum aggregate value of transaction:
__________________________________________________
(5) Total fee paid:
__________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
__________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________
(3) Filing Party:
__________________________________________________
(4) Date Filed:
__________________________________________________
<PAGE>
nSTOR TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1997
________________________________________
To the Stockholders of
nStor Technologies, Inc.
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
nStor Technologies, Inc., a Delaware corporation (the "Company"), will be
held at 9:30 a.m., local time, on Monday, May 5, 1997, at The Sky Club;
200 Park Avenue; Met Life Building, 56th floor (Vert-Pre Room), New York,
New York, 10166, for the following purposes:
1. To elect six (6) persons to the Company's Board of Directors to hold
office until the Company's next Annual Meeting of Stockholders or until
their successors are duly elected and qualified;
2. To approve and ratify the adoption of the Company's 1996 Stock Option
Plan;
3. To ratify the reappointment of BDO Seidman, LLP, certified public
accountants, as the Company's independent auditors for fiscal 1997; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 3, 1997 as
the record date for determining those stockholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please promptly mark, sign and date
the enclosed proxy and return it in the enclosed pre-addressed envelope. No
postage is required if mailed in the United States.
By Order of the Board of Directors
Joseph D. Weingard,
Secretary
West Palm Beach, Florida
April 8, 1997
<PAGE>
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO
ATTEND THE MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO
ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
nSTOR TECHNOLOGIES, INC.
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of nStor Technologies, Inc.,
a Delaware corporation (the "Company"), of proxies from the holders
of the Company's Common Stock, par value $.05 per share (the
"Common Stock"), for use at the 1997 Annual Meeting of Stockholders
of the Company to be held on Monday, May 5, 1997, or at any
adjournment(s) or postponement(s) thereof (the "Annual Meeting"),
pursuant to the enclosed Notice of Annual Meeting.
The approximate date that this Proxy Statement and the
enclosed proxy are first being sent to stockholders is April 8,
1997. Stockholders should review the information provided herein
in conjunction with the Company's Annual Report to Stockholders for
the fiscal year ended October 31, 1996, a copy of which accompanies
this Proxy Statement. The Company's principal executive offices
are located at 100 Century Boulevard, West Palm Beach, Florida
33417, and its telephone number is (561) 640-3103.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's
Board of Directors. The giving of a proxy does not preclude the
right to vote in person should any stockholder giving the proxy so
desire. Stockholders have an unconditional right to revoke their
proxy at any time prior to the exercise thereof, either in person
at the Annual Meeting or by filing with the Company's Secretary at
the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be
effective until written notice of the revocation is received by the
Company at or prior to the Annual Meeting.
<PAGE>
The cost of preparing, assembling and mailing this Proxy
Statement, the Notice of Annual Meeting of Stockholders and the
enclosed proxy is to be borne by the Company. In addition to the
use of mail, employees of the Company may solicit proxies
personally and by telephone. The Company's employees will receive
no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other
custodians, nominees and fiduciaries to forward copies of the proxy
material to their principals and to request authority for the
execution of proxies. The Company may reimburse such persons for
their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will
consider and vote upon the following matters:
(1) The election of six (6) persons to the Company's Board of
Directors to hold office until the Company's next Annual
Meeting of Stockholders or until their successors are duly
elected and qualified;
(2) A proposal to approve and ratify the adoption of the Company's
1996 Stock Option Plan;
(3) The ratification of the reappointment of BDO Seidman, LLP,
certified public accountants, as the Company's independent
auditors for fiscal 1997; and
(4) Such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed
proxy, all shares represented by valid proxies received pursuant to
this solicitation (and which have not been revoked in accordance
with the procedures set forth above) will be voted (a) for the
election of the six nominees for director named below and (b) in
favor of all other proposals described in the accompanying Notice
of Annual Meeting. In the event a stockholder specifies a
different choice by means of the enclosed proxy, his shares will be
voted in accordance with the specification so made.
<PAGE>
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April
3, 1997 as the record date (the "Record Date") for determining
stockholders of the Company entitled to notice of and to vote at
the Annual Meeting. As of the Record Date, there were 18,670,477
shares of Common Stock issued and outstanding, all of which are
entitled to be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote on each matter submitted to
stockholders for approval at the Annual Meeting.
The attendance, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting is necessary to constitute a quorum.
Directors are elected by a plurality vote of the shares of Common
Stock represented in person or by proxy at the Annual Meeting. The
affirmative vote of the majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting will be
required for approval of the proposal to approve and ratify the
adoption of the Company's 1996 Stock Option Plan and any other
matter that may be submitted to a vote of the stockholders, unless
the matter is one for which a greater vote is required by law or by
the Company's Certificate of Incorporation or By-laws. Under the
Company's Certificate of Incorporation, By-Laws and applicable
Delaware law, abstentions and broker non-votes will not have the
effect of votes in opposition to the election of a director, but on
all other matters, abstentions will be treated as votes against the
proposal.
<PAGE>
SECURITY OWNERSHIP
The following table sets forth, as of February 28, 1997,
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, director nominee and executive officer
of the Company, (iii) each of the five most highly compensated
executive officers of the Company, and (iv) all directors, director
nominees 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 3,243,767 17.3%
100 Century Blvd.
West Palm Beach, FL 33417
Michael L. Wise 1,041,312 (2) 5.5%
285 Tanglewood Crossing
Lawrence, NY 11559
R. Daniel Smith 1,000,000 5.4%
450 Technology Park
Lake Mary, FL 32746
Joseph D. Weingard 921,780 (3) 4.9%
185 NW Spanish River Blvd.
Boca Raton, FL 33431
Mark F. Levy 687,500 (4) 3.7%
100 Century Blvd.
West Palm Beach, FL 33417
Bernard R. Green 250,000 (5) 1.3%
583 North Lake Way
Palm Beach, FL 33480
Jack Jaiven 63,000 (6) (7)
19146 Lyons Road
Boca Raton, FL 33434
All executive officers, 7,207,359 37.7%
directors and director
nominees as a group
<PAGE>
__________
(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 -
80,000 shares; Mr. Wise - 160,000 shares; Mr. Weingard -
80,000 shares; Mr. Mark F. Levy - 80,000 shares; Mr. Jaiven
- 25,000 shares; and all executive officers and directors as
a group - 425,000 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, 130,000 shares owned by Mr. Wise's children and 50,400
owned jointly by Mr. Wise's wife and his mother.
(3) Includes 645,002 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 7,500 shares as to which Mr. Levy disclaims
beneficial ownership, owned by Mr. Levy as guardian for his
children.
(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 those
shares.
(6) Includes 34,500 shares owned by Mr. Jaiven's wife. Also
includes 3,500 shares as to which Mr. Jaiven disclaims
beneficial ownership, owned by Mr. Jaiven's adult children.
(7) Less than 1%.
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), 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.
ELECTION OF DIRECTORS: NOMINEES
The Company's Certificate of Incorporation provides that the
number of directors constituting the Company's Board of Directors
shall be not less than three, the exact number of which shall be
fixed from time to time by the Company's Board of Directors. The
Board of Directors has fixed at six the number of directors that
will constitute the Board for the ensuing year.
Messrs. Michael L. Wise, H. Irwin Levy, Mark L. Levy, Joseph
D. Weingard, R. Daniel Smith and Bernard R. Green have been
nominated for election as a director of the Company. With the
exception of Mr. Green, each of such nominees for election as a
director is a current member of the Board of Directors.
The Board of Directors has no reason to believe that any of
the nominees will refuse to act or be unable to accept election;
however, in the event that one or more of the nominees is unable to
accept election or if any other unforeseen contingencies should
arise, each proxy that does not direct otherwise will be voted for
the remaining nominees, if any, and for such other person(s) as may
be designated by the Board of Directors.
<PAGE>
MANAGEMENT
Directors, Director Nominees 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, director nominee and executive officer:
Director Officer
Name Age Position Since Since
Michael L. Wise 53 Chairman of the Board 1989 - (1)
H. Irwin Levy 70 Director 1995 (2) -
Joseph D. Weingard 51 Director, Vice President 1995 (3) 1995 (3)
and Secretary
Mark F. Levy 41 Director and President 1992 (4) 1995 (4)
R. Daniel Smith 44 Director, President of January June 1996
nStor Corporation, Inc., 1997
("nStor") the Company's
operating subsidiary
Bernard R. Green 78 Director Nominee - -
Jack Jaiven 50 Vice President and Chief - January
Financial Officer 1997 (5)
________
(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) 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.
(4) Mr. Mark Levy previously served as Vice President, Secretary,
and a director of the Company from 1985 to 1990.
(5) Mr. Jaiven previously served as Vice President and Chief
Financial Officer of the Company from July 1989 until June
1991.
<PAGE>
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.
H. Irwin Levy is presently Chairman of the Board and Chief
Executive Officer of Hilcoast Development Corp. ("Hilcoast"), a
real estate developer, which position he has held since August
1992. Mr. Levy was Chairman of the Board and Chief Executive
Officer of CV Reit, Inc. ("CV Reit") from 1985 to July 1992. He is
currently of counsel to the West Palm Beach law firm of Levy Kneen
Mariani Curtin Wiener Kornfeld and del Russo.
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.
Mark F. Levy is presently President of Cenvill Recreation,
Inc. and certain affiliated companies, all of which are privately
held businesses. Mr. Levy is licensed to practice law in the State
of Florida.
R. Daniel Smith was President and Chief Executive Officer of
Intelligent Manufacturing Systems, Inc. ("IMS"), a company engaged
in the development and sales of software technologies, from
September 1991 through October 1996. Effective November 1, 1996,
the Company acquired certain assets of IMS (see Certain
Transactions - Intelligent Manufacturing Systems, Inc.).
Bernard R. Green is currently 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 from July 1992 until February 1997 and has
been a private investor for more than twenty years.
Jack Jaiven, a Certified Public Accountant, has been a
director, Executive Vice President and Chief Financial Officer of
Hilcoast and/or its subsidiaries since August 1992. Mr. Jaiven was
Vice President and Treasurer of CV Reit from December 1988 to July
1992.
<PAGE>
Meetings and Committees of the Board of Directors
During the fiscal year ended October 31, 1996, the Board of
Directors held five 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.
There were no committees of the Board of Directors during the
fiscal year ended October 31, 1996.
Effective March 3, 1997, the Board established an Audit
Committee, consisting of Michael L. Wise, Joseph D. Weingard and
Jack Jaiven. The Audit Committee responsibilities will 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.
Effective March 3, 1997, the Board also established a
Compensation Committee, composed of Michael L. Wise, H. Irwin Levy
and R. Daniel Smith. The Compensation Committee's responsibilities
will include reviewing and approving executive compensation,
including benefits, and stock options granted under the 1996 Stock
Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended
October 31, 1996, 1995 and 1994, the compensation awarded to,
earned by or paid to those persons who were, during fiscal 1996,
(i) the Chief Executive Officer of the Company and (ii) the other
executive officers of the Company whose compensation is required to
be disclosed pursuant to the rules of the Securities and Exchange
Commission (collectively, the "Named Officers"). Michael L. Wise
served as Chief Executive Officer during the fiscal years ended
October 31, 1994 and 1995 and from November 1995 until July 1996,
at which time Mark F. Levy was appointed as the Company's Chief
Executive Officer.
<PAGE>
Summary Compensation Table
Name and All Other Annual
Principal Position Year Salary Bonus Compensation (1)
Mark F. Levy, 1996 - - $36,000
President and Chief 1995 - - -
Executive Officer 1994 - - -
Michael L. Wise, 1996 - - $51,000
Chairman of the 1995 - - $48,000
Board 1994 - - $36,000
R. Daniel Smith, 1996 $65,400(2) - -
President, nStor 1995 - - -
1994 - - -
__________
(1) Generally consists of monthly management/consulting fees for services
rendered in the Named Officer's respective capacities as directors or
officers of the Company, including evaluating potential acquisitions
and/or investments and services provided to the Company for previous
years, primarily monitoring the Company's investment in IMNET Systems,
Inc. and providing necessary corporate and public company functions.
Mr. Wise's compensation was paid to Yadgim Partners, of which Mr.
Wise's wife is a general partner.
(2) Represents salary received by Mr. Smith commencing June 3, 1996, the
date nStor acquired certain net assets from Seagate Peripherals, Inc.
(See Report on Executive Compensation).
Option/SAR Grants
The following table sets forth information regarding options to
purchase the Company's Common Stock granted pursuant to the 1996
Stock Option Plan during the fiscal year ended October 31, 1996 to
the Named Officers. No SARs were granted.
Individual Grants Potential
------------------- Realizable
Percent Value
Number of of Total at Assumed
Securities Options/ Annual Rates
Underlying SARs of Stock Price
Options/ Granted to Exercise Appreciation
SARs Employees or Base Expira- for Option Term
Granted in Fiscal Price tion ---------------------
(#) (1) Year ($/sh) Date 5%($) 10%($)
---------- ---------- -------- ------- ---------- ----------
R. Daniel Smith 1,000,000 100% $2.10 10/05/06 $3,420,679 $5,446,859
__________
(1) Option awards reported for fiscal 1996 were granted October 5, 1996.
Options become exercisable in equal annual installments of 200,000 shares
commencing October 5, 1997.
<PAGE>
Aggregated Fiscal Year-End Option Value Table
The following table sets forth certain information concerning
unexercised stock options held by the Named Officers as of the end
of the 1996 fiscal year. No stock options were exercised by any of
the Named Officers during the 1996 fiscal year. No stock
appreciation rights have been granted or are outstanding.
OPTION EXERCISES DURING 1996 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired 1996 Fiscal Year End (#) 1996 Fiscal Year End ($)(1)
on Value ------------------------- --------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
R. Daniel
Smith -0- -0- -0- 1,000,000 -0- $210,000
__________
(1) The closing price for the Company's Common Stock, as reported by the
National Association of Securities Dealers Automated Quotation System on
October 31, 1996, was $2.31. Value is calculated by multiplying (a) the
difference between $2.31 and the option exercise price by (b) the number
of shares of Common Stock underlying the option.
Compensation Committee Interlocks and Insider Participation
Since the Company did not have a Compensation Committee during
the fiscal year ended October 31, 1996, the entire Board of
Directors participated in deliberations concerning compensation
paid to the Company's executive officers. Accordingly, the
following executive officers or former executive officers
participated in the Board of Directors, deliberations concerning
executive officer compensation: Michael L. Wise, Joseph D.
Weingard and Mark F. Levy.
<PAGE>
Directors Compensation
Non-salaried directors of the Company receive $1,500 for each
directors' meeting attended. With the exception of R. Daniel
Smith, none of the current directors or executive officers are
salaried employees of the Company. In addition to the above-described
compensation received by the Named Officers, during fiscal 1996 other
non-salaried directors received management/consulting fees for services
rendered to the Company in their respective capacities as directors or
officers as follows: Joseph D. Weingard - $4,000 and H. Irwin Levy - $12,000.
Pursuant to the 1996 Stock Option Plan, each non-employee
director shall automatically be granted, effective each anniversary
of said director's appointment to the Board, an option to purchase
20,000 shares of Common Stock at the then fair market value of the
Common Stock.
REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended October 31, 1996, the Board of
Directors of the Company administered the compensation program for
executive officers.
The Company's executive compensation program for fiscal 1996
generally consisted of three components: (i) monthly
consulting/management fees for non-salaried officer/directors (ii)
an annual salary for R. Daniel Smith, president of the Company's
nStor operating subsidiary and a director of the Company and (iii)
a long-term component consisting of grants of stock options to both
salaried and non-salaried director/officers.
Non-salaried directors are generally compensated monthly in
the form of management/consulting fees for services rendered to the
Company, including evaluating potential acquisitions and/or
investments, monitoring the Company's nStor operating subsidiary
and providing necessary corporate and public company functions.
These fees generally range from $1,000 to $3,000 per month. During
fiscal 1996, Michael L. Wise and Mark F. Levy received additional
compensation of $45,000 and $30,000, respectively, for services
provided to the Company in previous years when the Company's
primary operations were monitoring its investment in IMNET Systems,
Inc. and/or for services regarding evaluating potential
acquisitions and/or investments. Mr. Wise's compensation was paid
to Yadgim Partners, of which Mr. Wise's wife is a general partner.
<PAGE>
For the one salaried officer/director, R. Daniel Smith, the
entire Board deliberated upon the determination of his salary and
considered factors such as level of responsibilities, previous work
experience and executive compensation paid by other companies in
the same industry. In October 1996, the Board of Directors
determined that it was in the best interest of the Company for Mr.
Smith to receive incentive compensation based on the performance of
the Company instead of solely based on the performance of the
Company's nStor operating subsidiary. Consequently, the Company
eliminated an automatic bonus based on 20% of nStor's
profitability, increased Mr. Smith's annual cash salary from
$150,000 to $250,000 and granted Mr. Smith the option to purchase
one million shares of the Company's Common Stock (see Option/SAR
Grants). The Board believes that the market value of the Company
is the best objective measure of the Company's performance and that
the Company's grant of the stock options to Mr. Smith is the best
means for basing Mr. Smith's potential compensation on the
Company's performance.
Michael L. Wise
Mark F. Levy
H. Irwin Levy
Joseph D. Weingard
PERFORMANCE GRAPH
The following graph compares the five-year cumulative return
on the Company's Common Stock to total returns on the Standard and
Poor's Smallcap 600 Index ("S&P Smallcap 600") and a component peer
group of Standard and Poor's Technology-500 ("S&P Technology 500").
The graph assumes that the value of the investment in the
Company's Common Stock, the S&P Smallcap 600 and the S&P
Technology-500 peer group was $100 on October 31, 1991, and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
Base INDEXED RETURNS
Date Years Ending October
Oct.31, --------------------------------------
Company/Index 1991 1992 1993 1994 1995 1996
- ------------- ---- ------ ------ ------ ------ ------
$ $ $ $ $ $
nStor Technologies, Inc. 100 11.58 15.39 13.42 53.82 284.73
S&P Smallcap 600 100 111.62 149.24 144.13 174.64 210.37
S&P Technology-500 100 100.95 125.42 152.24 230.55 278.94
<PAGE>
CERTAIN 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 a one-year
agreement which provides for 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 principal shareholder of Hilcoast, the
parent of Advisor. Mr. Jaiven is a vice president and director 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.
R. Daniel Smith
Effective June 3, 1996, nStor acquired certain net assets of
Seagate Peripherals, Inc. ("Seagate") for $592,000 in cash,
including acquisition costs, and a royalty to Seagate, estimated at
$800,000. At closing, the Company acquired 80% of the outstanding
stock of nStor for $500,000 in cash (the remaining 20% being owned
by R. Daniel Smith). Effective October 31, 1996, the Company
acquired Mr. Smith's 20% interest, in exchange for one million
shares of the Company's Common Stock.
Intelligent Manufacturing Systems, Inc. ("IMS")
R. Daniel Smith was the Chief Executive Officer and sole
shareholder of IMS, which, until November 1, 1996, specialized in
providing software solutions. In July 1996, nStor purchased an
integrated software package from IMS, including installation,
consulting and training support, at a cost of approximately
$172,000. The software package was purchased to facilitate the
internal operations of nStor and includes finance, planning and
production, sales and marketing, service and engineering modules.
Management believes that the terms of this transaction were no less
favorable to nStor than those that would be received from other
vendors.
Effective November 1, 1996, nStor purchased substantially all
of the assets of IMS, consisting of computer hardware and software,
furniture and other equipment. The purchase price amounted to
approximately $135,000, which amount has been agreed to be paid to
IMS during 1997. Management believes that the terms of this
transaction were no less favorable to the Company than those that
would be received from other sources.
<PAGE>
PROPOSAL TO
APPROVE AND RATIFY THE ADOPTION OF
THE COMPANY'S 1996 STOCK OPTION PLAN
The Company's Board of Directors believes that the future
growth and success of the Company depends, in large part, upon its
ability to attract, motivate and retain competitively superior
employees, and that stock option grants have been and will continue
to be an important element in achieving this goal by furthering an
alignment of participating employees' interests with those of the
Company's stockholders, thereby promoting the Company's long-term
growth and profitability. Accordingly, effective October 5, 1996,
the Company's Board of Directors adopted, subject to approval by
the Company's stockholders, the Company's 1996 Stock Option Plan
(the "Plan"). The purpose of the Plan is to provide an additional
incentive to attract, motivate and retain persons with outstanding
abilities and skills who provide important services to the Company
and upon whose efforts and judgment the success of the Company
importantly depends, by affording such persons the opportunity to
benefit from rising values of the Company's Common Stock. A
complete copy of the Plan is provided herewith as Exhibit "A" to
this Proxy Statement. Certain material features of the Plan are
described below; however, such descriptions are subject to, and are
qualified in their entirety by, reference to the full text of the
Plan attached as Exhibit "A" hereto.
In furtherance of its purpose, the Plan authorizes, among
other things, (a) the granting of incentive or nonqualified stock
options to purchase Common Stock to persons selected by the
administrators of the Plan from a class of key employees,
directors, officers and consultants of the Company, including non-employees
who render valuable contributions to the Company (presently approximately
20 persons), (b) initial grants of stock options to purchase 20,000 shares
of Common Stock, to non-employee directors serving on the Board at October
5, 1996, (c) initial grants of stock options to purchase such number of
shares of Common Stock as the Board may determine, to non-employee directors
elected to the Board by the shareholders or appointed to the Board by the
Board, subsequent to October 5, 1996, and (d) annual grants to
non-employee directors, effective each anniversary of said
directors appointment to the Board, of stock options to purchase
20,000 shares of Common Stock (the "Annual Grants").
<PAGE>
Approval of the Plan by the Company's stockholders is one of
the conditions of Rule 16b-3, a rule promulgated by the SEC that
provides certain exemptions from the operation of the "short-swing
profit" recovery provisions of Section 16(b) of the Exchange Act,
for the acquisition of options and certain other transactions by
officers and directors under the Plan. Stockholder approval of the
Plan is also required (i) for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and (ii) in
order for the Plan to be eligible under the "plan lender" exemption
from the margin requirements of Regulation G promulgated under the
Exchange Act.
The Plan provides that it will be administered by a committee
consisting of not less than two non-employee directors designated
by the Board of Directors (the "Committee") or, if the Committee is
not designated, then by the Board of Directors (in either event,
the "Plan Administrators").
Except for the Annual Grants, the Plan Administrators in their
sole discretion determine the persons to be awarded options, the
number of shares subject thereto and the exercise price and other
terms thereof. In addition, the Plan Administrators have full
power and authority to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the Plan, to
prescribe the form of any agreement or instrument executed in
connection thereof, and to make all other determinations necessary
or advisable for the administration of the Plan. The acts of the
Plan Administrators are final, conclusive and binding upon all
interested parties, including the Company, its stockholders, its
officers and employees, recipients of grants under the Plan, and
all persons or entities claiming by or through such persons. The
Plan Administrators, however, shall have no discretion with respect
to options granted pursuant to the Annual Grants to non-employee
directors.
An aggregate of 2,500,000 shares of Common Stock are reserved
for issuance upon exercise of options granted under the Plan. The
shares acquired upon exercise of options granted under the Plan
will be authorized and issued shares of Common Stock. The
Company's stockholders will not have any preemptive rights to
purchase or subscribe for any Common Stock by reason of the
reservation and issuance of Common Stock under the Plan. If any
option granted under the Plan should expire or terminate for any
reason other than having been exercised in full, the unpurchased
shares subject to that option will again be available for issuance
under the Plan.
<PAGE>
Certain Terms and Conditions
All grants of options under the Plan must be evidenced by a
written agreement between the Company and the grantee. Such
agreement must contain such terms and conditions as the Plan
Administrators prescribe, consistent with the Plan, including,
without limitation, the number of shares, the exercise price, term
and any restrictions on the exercisability of the options granted.
Under the Plan, the option price per share of Common Stock may
be any price determined by the Plan Administrators at the time of
grant; provided, however, that in no event will the option price of
any incentive stock option be less than the fair market value per
share of Common Stock on the date of grant (or less than 110% of
the fair market value for stockholders who own more than 10% of the
Company's stock). For purposes of the Plan, the term "fair market
value" means the average high and low sale prices of the Common
Stock as reported by the National Association of Securities Dealers
Automated Quotations ("NASDAQ") on the date of grant, or, if the
Common Stock is listed on a stock exchange, the average of the high
and low sale price of the Common Stock on that date, as reported by
the Wall Street Journal. The closing price per share of Common
Stock on February 28, 1997 as reported by NASDAQ was $1.92. The
exercise price of an option may be paid in cash, by certified or
official bank check, by money order, by delivery of already owned
shares of Common Stock having a fair market value equal to the
exercise price, or by a combination of the foregoing. Cash
payments will be used by the Company for general corporate
purposes. Payments made in Common Stock must be made by delivery
of stock certificates in negotiable form.
The use of already owned shares of Common Stock applies to
payment for the exercise of an option in a single transaction and
to the "pyramiding" of already owned shares in successive,
simultaneous option exercises. In general, pyramiding permits an
option holder to start with as little as one share of Common Stock
and exercise an entire option to the extent then exercisable (no
matter what the number of shares subject thereto). By utilizing
already owned shares of Common Stock, no cash (except for
fractional share adjustments) is needed to exercise an option.
Consequently, the optionee would receive Common Stock equal in
value to the spread between the fair market value of the shares
subject to the option and the exercise price of the option.
<PAGE>
No option granted under the Plan is assignable or
transferable, other than by will or by the laws of descent and
distribution. During the lifetime of an optionee, an option is
exercisable only by the optionee. The expiration date of an option
will be determined by the Plan Administrators at the time of the
grant, but in no event will an option be exercisable after the
expiration of 10 years from the date of grant. Unless otherwise
provided for by the Plan Administrators, options will vest at a
rate of 20% per year, based upon the anniversary of the date of
grant, commencing upon the first year anniversary of the grant of
the option. Accordingly upon the 5th anniversary of the grant, the
option will become 100% vested. The Plan Administrators may in
their sole discretion accelerate the date on which any option may
be exercised. Each outstanding option will automatically become
exercisable in the event of certain transactions, including certain
changes in control of the Company, certain mergers and
reorganizations, and certain dispositions of substantially all the
Company's assets.
Unless otherwise provided for by the Plan Administrators, one
year after the date of which the optionee's employment is
terminated by reason of retirement, death, or permanent and total
disability (the "Events") as defined in the Plan, the unexercised
portion of any vested options granted under the Plan, together with
all options which would have otherwise vested and become exercised
in the one year period following the Events, will automatically be
terminated. Unless otherwise provided by the Plan Administrators,
the unexercised portion of any vested options granted under the
Plan will automatically be terminated three months after the date
on which the optionee's employment is terminated for any reason
other than the Events. The unexercised portion of any vested
options will automatically be terminated immediately on the date on
which the optionee's employment is terminated for cause, as defined
in the Plan.
To prevent certain types of dilution of the rights of a holder
of an option, the Plan provides for appropriate adjustment of the
number of shares for which options may be granted, the number of
shares subject to outstanding options and the exercise price of
outstanding options in the event of any increase or decrease in the
number of issued and outstanding shares of the Company's capital
stock resulting from a stock dividend, recapitalization, merger,
reorganization or other capital adjustment of the Company. The
Board has discretion to make appropriate antidilution adjustments
to outstanding options in the event of a merger, consolidation or
other reorganization of the Company.
<PAGE>
The Plan will expire on October 5, 2006, and any option
outstanding on such date will remain outstanding until it expires
or is exercised. The Board may amend or terminate the Plan or any
option at any time, without the approval of the stockholders,
provided that any amendment may not adversely affect the rights of
an optionee under an outstanding option without the optionee's
consent. In addition, no such amendment may, without approval of
the Company's stockholders (a) increase the number of shares of
Common Stock reserved for issuance under the Plan, or (b)
materially modify the requirements for eligibility to receive
options under the Plan.
Federal Income Tax Consequences
The Plan is not qualified under the provisions of Section
401(a) of the Code, nor is it subject to any of the provisions of
the Employee Retirement Income Security Act of 1974, as amended.
Nonqualified Stock Options. An optionee granted a
nonqualified stock option under the Plan will generally recognize,
at the date of exercise of such option, ordinary income equal to
the difference between the exercise price and the fair market value
of the shares of Common Stock subject to the nonqualified stock
option. This taxable ordinary income will be subject to Federal
income tax withholding requirements, and the Company will be
entitled to a deduction for Federal income tax purposes equal to
the amount of ordinary income recognized by the optionee, provided
that such amount constitutes an ordinary and necessary business
expense to the Company and is reasonable and either the employee
includes that amount in his income or the Company timely satisfies
its reporting requirements with respect to that amount.
If an optionee exercises a nonqualified stock option by
delivering shares of the Company's Common Stock, the optionee will
not recognize gain or loss with respect to the exchange of such
shares, even if their then fair market value is different from the
optionee's tax basis. The optionee, however, will be taxed as
described above with respect to the exercise of the nonqualified
stock option as if he had paid the exercise price in cash, and the
Company likewise generally will be entitled to an equivalent tax
deduction. Provided a separate identifiable stock certificate is
issued therefor, the optionee's tax basis in that number of shares
received on such exercise which is equal to the number of shares
surrendered on such exercise will be equal to his tax basis in the
shares surrendered, and his holding period for such number of
shares received will include his holding period for the shares
surrendered. The optionee's tax basis and holding period for the
additional shares received on exercise of a nonqualified stock
option paid for, in whole or in part, with shares will be the same
as if the optionee had exercised the nonqualified stock option
solely for cash.
<PAGE>
Incentive Stock Options. The Plan provides for the grant of
stock options that qualify as "incentive stock options" as defined
in section 422 of the Code. Under the Code, an optionee generally
is not subject to ordinary income tax upon the grant or exercise of
an incentive stock option. However, an employee who exercises an
incentive stock option by delivering shares of common stock
previously acquired pursuant to the exercise of an incentive stock
option is treated as making a "Disqualifying Disposition" (as
defined below) of such shares if the employee delivers such shares
before the expiration of the holding period applicable to such
shares. The applicable holding period is the longer of two years
from the date of grant or one year from the date of exercise. The
effect of this provision is to prevent "pyramiding" the exercise of
an incentive stock option (i.e., the exercise of the incentive
stock option for one share and the use of that share to make
successive exercises of the incentive stock option until it is
completely exercised) without the imposition of current income tax.
If, subsequent to the exercise of an incentive stock option
(whether paid for in cash or in shares), the optionee holds the
shares received upon exercise for a period that exceeds (a) two
years from the date such incentive stock option was granted or, if
later, (b) one year from the date of exercise (the "Required
Holding Period"), the difference (if any) between the amount
realized from the sale of such shares and their tax basis to the
holder will be taxed as long-term capital gain or loss.
In general, if, after exercising an incentive stock option, an
employee disposes of the shares so acquired before the end of the
Required Holding Period (a "Disqualifying Disposition"), such
optionee would be deemed to receive ordinary income in the year of
the Disqualifying Disposition in an amount equal to the excess of
the fair market value of the shares as of the date the incentive
stock option was exercised over the exercise price. If the
Disqualifying Disposition is a sale or exchange that would permit
a loss to be recognized under the Code (were a loss in fact to be
sustained), and the sales proceeds are less than the fair market
value of the shares on the date of exercise, the optionee's
ordinary income would be limited to the gain (if any) from the
sale. If the amount realized upon disposition exceeds the fair
market value of the shares on the date of exercise, the excess
would be treated as short-term or long-term capital gain, depending
on whether the holding period for such shares exceeded one year.
The amount by which the fair market value of the shares of Common
Stock acquired pursuant to the exercise of an incentive stock
option exceeds the exercise price of such shares under such option
generally will be treated as an item of adjustment included in the
optionee's alternative minimum taxable income for purposes of the
alternative minimum tax for the year in which the option is
exercised. If, however, there is a Disqualifying Disposition of
the shares in the year in which the option is exercised, there will
be no item of adjustment for purposes of the alternative minimum
tax as a result of the exercise of the option with respect to those
shares. If there is a Disqualifying Disposition in a year after
the year of exercise, the income on the Disqualifying Disposition
will not be considered income for purposes of the alternative
minimum tax in that subsequent year. The optionee's tax basis for
shares acquired pursuant to the exercise of an incentive stock
option will be increased for purposes of determining his
alternative minimum tax by the amount of the item of adjustment
recognized with respect to such shares in the year the option was
exercised.
<PAGE>
An income tax deduction is not allowed to the Company with
respect to the grant or exercise of an incentive stock option or
the disposition, after the Required Holding Period, of shares
acquired upon exercise. In the event of a Disqualifying
Disposition, a Federal income tax deduction will be allowed to the
Company in an amount equal to the ordinary income to be recognized
by the optionee, provided that such amount constitutes an ordinary
and necessary business expense to the Company and is reasonable,
and either the employee includes that amount in his income or the
Company timely satisfies its reporting requirements with respect to
that amount.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE AND RATIFY THE ADOPTION OF THE COMPANY'S 1996 STOCK OPTION
PLAN.
PROPOSAL TO RATIFY THE
REAPPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS
The firm of BDO Seidman, LLP, certified public accountants,
served as the Company's independent auditors for the fiscal year
ended October 31, 1996. BDO Seidman has advised the Company that
the firm does not have any direct or indirect financial interest in
the Company or any of its subsidiaries, nor has such firm had any
such interest in connection with the Company or its subsidiaries
during the past year, other than in its capacity as the Company's
independent auditors. The Board of Directors has selected BDO
Seidman as the Company's independent auditors for the fiscal year
ending December 31, 1997. Although the Board is not required to do
so, it is submitting its selection of the Company's independent
auditors for ratification at the Annual Meeting, in order to
ascertain the views of its stockholders. The Board will not be
bound by the vote of the stockholders; however, if the selection is
not ratified, the Board would reconsider its selection. One or
more representatives of BDO Seidman may be present at the Annual
meeting, will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate
questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR RATIFICATION OF THE REAPPOINTMENT OF BDO
SEIDMAN AS THE COMPANY'S INDEPENDENT AUDITORS.
<PAGE>
OTHER BUSINESS
The Board knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly
come before the Annual Meeting, the persons named in the
accompanying proxy will vote proxies as in their discretion they
may deem appropriate, unless they are directed by a proxy to do
otherwise.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and
Exchange Commission, a stockholder intending to present a proposal
to be included in the Company's proxy statement for the Company's
1998 Annual Meeting of Stockholders must deliver a proposal in
writing to the Company's principal executive offices no later than
December 9, 1997.
By Order Of The Board of Directors
Joseph D. Weingard, Secretary
West Palm Beach, Florida
April 8, 1997
<PAGE>
PROXY CARD
nSTOR TECHNOLOGIES, INC.
100 Century Blvd.
West Palm Beach, FL 33417
THIS PROXY IS SOLICITED ON BEHALF OF THE
COMPANY'S BOARD OF DIRECTORS
The undersigned holder of Common Stock of nStor Technologies, Inc.,
a Delaware corporation (the "Company"), hereby appoints Mark F.
Levy and Jack Jaiven, and each of them, as proxies for the
undersigned, each with full power of substitution, for and in the
name of the undersigned to act for the undersigned and to vote, as
designated below, all of the shares of Common Stock of the Company
that the undersigned is entitled to vote at the 1997 Annual Meeting
of Stockholders of the Company, to be held on Monday, May 5, 1997,
at 9:30 a.m., local time, at The Sky Club; 200 Park Avenue; Met
Life Building, 56th floor (Vert-Pre room), New York, New York
10166, and at any adjournment(s) or postponement(s) thereof.
(1) Election of H. Irwin Levy, Michael L. Wise, R. Daniel Smith, Mark F.
Levy, Joseph D. Weingard and Bernard R. Green as directors.
[ ] VOTE FOR all nominees listed above, except vote withheld
from the following nominees (if any).
______________________________________________________
[ ] VOTE WITHHELD from all nominees.
The Board of Directors unanimously recommends a vote for the election
of all the nominees for election as directors.
(2) To approve and ratify the adoption of the Company's 1996 Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors unanimously recommends a vote for this
proposal.
(3) To ratify the reappointment of BDO Seidman, certified public
accountants, as the Company's independent auditors for fiscal 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors unanimously recommends a vote for this
proposal.
<PAGE>
(4) Upon such other matters as may properly come before the Annual
Meeting and any adjournments thereof. In their discretion, the
proxies are authorized to vote upon such other business as may
properly come before the Annual Meeting, and any adjournments or
postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION
OF ALL NOMINEES LISTED ABOVE, IN FAVOR OF THE APPROVAL AND
RATIFICATION OF THE COMPANY'S 1996 STOCK OPTION PLAN AND IN
FAVOR OF THE RATIFICATION OF BDO SEIDMAN.
The undersigned hereby acknowledges receipt of (i) the Notice
of Annual Meeting, (ii) the Proxy Statement, and (iii) the
Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996.
Dated_________________________, 1997
____________________________________
(Signature)
____________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name
appears hereon and mail it promptly even though you
now plan to attend the meeting. When shares are
held by joint tenants, both should sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by president or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD
AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
EXHIBIT A
nSTOR TECHNOLOGIES, INC.
1996 STOCK OPTION PLAN
1. Purpose. The nStor Technologies, Inc. 1996 Stock
Option Plan (the "Plan") is intended to further the interest of
nStor Technologies, Inc., a Delaware corporation (the "Company"),
its subsidiaries and its shareholders by providing incentives in
the form of stock option grants to certain key employees who
contribute materially to the success and profitability of the
Company. The grants shall recognize and reward outstanding
individual performances and contributions and shall give such
persons a proprietary interest in the Company, thus enhancing
their personal interest in the Company's continued success and
progress. The Plan shall also assist the Company and any
subsidiaries it may have in attracting and retaining key
personnel. The Plan is also intended to provide the Company
flexibility and the means to reward directors and other non-employees who
render valuable contributions to the Company.
2. Definitions. The following definitions shall apply to
this Plan:
(a) "Agreement" means a written agreement entered into
between the Company and a Recipient that embodies the terms and
restrictions of the Option granted to the Recipient.
(b) "Board" means the board of directors of the
Company.
(c) "Change in Control" occurs if (i) there occurs any
transaction (which shall include a series of transactions
occurring within sixty (60) days) that has the result that
shareholders of the Company immediately before such transaction
cease to own at least fifty-one percent (51%) of the voting stock
of the Company or any entity that results from the participation
of the Company in a merger, reorganization, consolidation,
liquidation or any other form of corporate transaction; (ii) the
shareholders of the Company approve a plan of merger,
consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger,
consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); (iii) the Company disposes of all or
substantially all of its assets; or (iv) a majority or more of
the directors nominated by the Board to serve as directors, each
having agreed to serve in such capacity, fail to be elected in a
contested election of directors.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
<PAGE>
(e) "Committee" means a committee appointed by the
Board, in accordance with Section 3 hereof, to administer the
Plan.
(f) "Common Stock" means the common stock, par value
$.05 per share, of the Company or such other class of shares or
securities to which the Plan may apply pursuant to Section 13 of
the Plan.
(g) "Company" means nStor Technologies, Inc.
(h) "Date of Grant" means the date on which the Option
is granted.
(i) "Dispose Of" means pledge, hypothecate, give,
assign, encumber, sell, grant an option with respect to, or
otherwise transfer, to any party, whether or not such party is a
shareholder of the Company.
(j) "Effective Date" means October 5, 1996.
(k) "Eligible Person" means any person who performs or
has in the past performed services for the Company or any
Subsidiary, whether as a director, officer, employee, consultant
or other independent contractor, and any person who performs
services relating to the Company in his or her capacity as an
employee or independent contractor of a corporation or other
entity that provides services for the Company.
(l) "Employee" means any person employed on an hourly
or salaried basis by the Company or any parent or Subsidiary of
the Company that now exists or hereafter is organized or acquired
by or acquires the Company.
(m) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(n) "Fair Market Value" means the fair market value of
the Common Stock. If the Common Stock is not publicly traded on
the date as of which fair market value is being determined, the
Board shall determine the fair market value of the Shares using
such factors as the Board considers relevant, such as the price
at which recent sales have been made, the book value of the
Common Stock, and the Company's current and projected earnings.
In determining the fair market value of the Shares, the Board
may, but is not required to, utilize information from or opinions
of outside advisors. If the Common Stock is publicly traded on
the date as of which fair market value is being determined, the
fair market value shall be the average of the high and low sale
prices of the Common Stock as reported by the National
Association of Securities Dealer Automated Quotations ("Nasdaq")
on that date, or, if the Common Stock is listed on a stock
exchange, the average of the high and low sale prices of the
Common Stock on that date, as reported in The Wall Street
Journal. If trading in the Common Stock or a price quotation
does not occur on the date as of which fair market value is being
determined, the next preceding date on which the Common Stock was
traded or a price was quoted shall determine the fair market
value.
<PAGE>
(o) "Incentive Stock Option" means a stock option
granted pursuant to either this Plan or any other plan of the
Company that satisfies the requirements of Section 422 of the
Code and Section 14 hereof and that entitles the Recipient to
purchase stock of the Company or in a corporation that at the
time of grant of the option was a parent or Subsidiary of the
Company or a predecessor corporation of any such corporation. If
the requirements of Section 14 of the Plan are in conflict with
any other provision of the Plan with respect to an Incentive
Stock Option, the provisions of Section 14 of the Plan shall
control.
(p) "Non-Employee Director" shall have the meaning
ascribed to such term in Rule 16b-3 promulgated under the
Exchange Act.
(q) "Nonqualified Stock Option" means an Option which
is not an Incentive Stock Option.
(r) "Option" means a stock option granted pursuant to
the Plan. Each Option shall be a Nonqualified Stock Option
unless expressly designated as an Incentive Stock Option by the
Plan Administrators in establishing the terms of the Option at
grant.
(s) "Option Shareholder" shall mean a Recipient who
has exercised his or her Option.
(t) "Option Shares" means Shares issued upon exercise
of an Option.
(u) "Permanent and Total Disability" shall have the
meaning ascribed to such term in Section 22(e)(3) of the Code.
(v) "Plan" means this nStor Technologies, Inc. 1996
Stock Option Plan.
(w) "Plan Administrators" shall have the meaning
ascribed to the term in Section 3 hereof.
(x) "Recipient" means a person who receives an Option.
(y) "Shares" means shares of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(z) "Shareholder Approval" means a vote of the
shareholders of the Company to approve, or to ratify the approval
by the Company's Board of, this Plan in accordance with the laws
of the Company's state of incorporation and other laws or rules
applicable to the Company (including rules of any stock exchange
on which the Company's securities are listed or admitted for
trading).
<PAGE>
(aa) "Subsidiary" means any corporation fifty percent
or more of the voting securities of which are owned directly or
indirectly by the Company at any time during the existence of
this Plan.
3. Administration. This Plan shall be administered by the
Board or the Committee (in either event, the "Plan
Administrators"). The Committee shall be comprised solely of two
or more members of the Board who shall be Non-Employee Directors.
The Plan Administrators shall have authority to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to prescribe the form of any agreement or
instrument executed in connection herewith, and to make all other
determinations necessary or advisable for the administration of
the Plan. All such interpretations, rules, regulations and
determinations shall be conclusive and binding on all persons and
for all purposes. A majority of the Plan Administrators
constitutes a quorum for purposes of administering the Plan, and
all determinations of the Plan Administrators shall be made by a
majority of the members present at a meeting at which a quorum is
present or by the unanimous, written consent of the Plan
Administrators. Notwithstanding the foregoing, the Plan
Administrators shall not have any discretion with respect to
Options granted to Non-Employee Directors pursuant to Subsection
5(b)(2) of the Plan.
4. Shares Subject to Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares
that may be subject to Options under the Plan shall be 2,500,000.
If an Option should expire or become unexercisable for any reason
without having been exercised, the unpurchased Shares that were
subject to the Option shall, unless the Plan has then terminated,
be available for other Options under the Plan.
5. Option Grants.
(a) Discretionary Grants. Any Eligible Person that
the Plan Administrators in their sole and absolute discretion
designate is eligible to receive an Option under this Plan. The
award by the Plan Administrators of an Option to a Recipient in
any year does not require the Plan Administrators to award an
Option to that Recipient in any other year. Furthermore, the
Plan Administrators may award different Options to different
Recipients and has full discretion to choose whether to grant
Options to any eligible person. The Plan Administrators may
consider such factors as it deems pertinent in selecting
Recipients and in determining the amount of their Options,
including, without limitation, (i) the financial condition of the
Company or its Subsidiaries; (ii) expected profits for the
current or future years; (iii) the contributions of a prospective
Recipient to the profitability and success of the Company or its
Subsidiaries; and (iv) the adequacy of the prospective
Recipient's other compensation. Recipients may include persons
to whom stock, stock options, stock appreciation rights, or other
benefits previously were granted under this or another plan of
the Company or any Subsidiary, whether or not the previously
granted benefits have been fully exercised or vested.
<PAGE>
(b) Non-Employee Director Grants.
(1) Initial Grants. Each category of Non-Employee
Director of the Company described below shall be automatically
granted an Option to purchase shares of Common Stock of the
Company in the amounts, and effective as of the dates, set forth
below:
a. for any Non-Employee serving on the Board at the
Effective Date, the number of shares of Common Stock set forth on
Schedule A hereto, to be effective as of the Effective Date;
b. for any Non-Employee Director elected by the
shareholders of the Company subsequent to the Effective Date,
such number of shares of Common Stock as the Board may determine,
to be effective as of the date of such Non-Employee Director's
election to the Board; and
c. for any Non-Employee Director appointed by the
Board subsequent to the Effective Date, such number of shares of
Common Stock as the Board may determine, to be effective at the
time such Non-Employee Director's appointment to the Board
becomes effective.
(2) Annual Grants. Each Non-Employee Director shall
automatically be granted, effective each anniversary of his
appointment to the Board, an Option to purchase 20,000 shares of
Common Stock.
(3) Exercise Price. The exercise price of each Share
subject to an Option granted to an Non-Employee Director shall be
the Fair Market Value of the Common Stock on the date the Option
is granted.
(4) Exercise of Options. All Options granted to a Non-Employee Director
shall become exercisable on the first anniversary of the Date of Grant
provided, however, that such Non-Employee Director continues to serve as a
member of the Company's Board as of such date. Options may be exercised by
the Non-Employee Director for a period of ten years from the Date of
Grant provided, however, that in the event of the death of a Non-Employee
Director, the Option shall be exercisable only within the twelve months next
succeeding the date of death, and then only (i) by the executor or
administrator of the Non-Employee Director's estate or by the person or
persons to whom the Non-Employee Director's rights under the Option shall
pass by the Non-Employee Director's will or the laws of descent and
distribution, and (ii) if and to the extent that the Non-Employee
Director was entitled to exercise the Option at the date of the
Non-Employee Director's death, provided that in no event shall
the Option be exercisable more than ten years after the Date of
Grant.
<PAGE>
(c) No Right of Employment. A Recipient's right, if any,
to continue to serve the Company and its Subsidiaries as an
officer, Employee, or otherwise shall not be enlarged or
otherwise affected by his designation as a Recipient under this
Plan, and such designation shall not in any way restrict the
right of the Company or any Subsidiary, as the case may be, to
terminate at any time the employment or affiliation of any
Recipient.
6. Option Requirements. Each Option granted to a
Recipient under Section 5 of the Plan shall contain such
provisions as the Plan Administrators at the Date of Grant shall
deem appropriate. Each Option granted to a Recipient shall
satisfy the following requirements:
(a) Written Agreement. Each Option granted to a
Recipient shall be evidenced by an Agreement. The terms of the
Agreement need not be identical for different Recipients. The
Agreement shall include a description of the substance of each of
the requirements in this Section 6 with respect to that
particular Option.
(b) Number of Shares. Each Agreement shall specify
the number of Shares that may be purchased by exercise of the
Option.
(c) Exercise Price. Unless provided otherwise by the
Plan Administrators in establishing the terms of the Option at
grant, the exercise price of each Share subject to an Option
shall not be less than the Fair Market Value of the Share on the
Option's Date of Grant.
(d) Duration of Option. Each Option granted to a
Recipient shall expire on the tenth anniversary of its Date of
Grant, or at such earlier or later date as is set by the Plan
Administrators in establishing the terms of the Option at grant,
or at such later date as is set by the Plan Administrators
subsequent to the Date of Grant but prior to the tenth
anniversary of the Date of Grant. If the Recipient's employment
or affiliation with the Company terminates before the expiration
date of an Option, the Options owned by the Recipient shall
expire on the earlier of the date stated in this Subsection 6(d)
or the date stated in following Subsections of this Section 6.
Furthermore, expiration of an Option may be accelerated under
Subsection 6(g) of the Plan.
<PAGE>
(e) Vesting of Option and Exercisability. Unless
otherwise provided for by the Plan Administrators in establishing
the terms of the Option at grant, a Recipient's interest in an
Option shall vest according to the schedule described in this
Subsection 6(e) and shall be exercisable as to not more than the
vested percentage of the Shares subject to the Option at any
point in time. To the extent an Option is either unexercisable
or unexercised, the unexercised portion shall accumulate until
the Option both becomes exercisable and is exercised, subject to
the provisions of Subsection 6(d) of the Plan.
Anniversary of Date of Grant Percent Vested
Prior to 1st anniversary 0%
1st 20%
2nd 40%
3rd 60%
4th 80%
5th 100%
The Plan Administrators, in their sole and absolute discretion,
may accelerate the vesting of any Option at any time.
(f) Death, Disability or Termination of Service or
Affiliation.
(1) In the case of the retirement at or
after age 65, death or Permanent and Total Disability of the
Recipient, then all Options which would have otherwise vested and
become exercisable in the one (1) year period following such
event shall continue to so vest and become exercisable as so
scheduled and, together with any previously exercisable Options
held by the Recipient, shall expire on the one year anniversary
of the Recipient's retirement, death, or if earlier, the date
specified in Subsection 6(d), unless the Plan Administrators set
an earlier or later expiration date in establishing the terms of
the Options at grant or a later expiration date subsequent to the
Date of Grant but prior to the one year anniversary of the
Recipient's retirement or death.
<PAGE>
(2) If the Recipient ceases employment or affiliation
with the Company for any reason other than retirement, death or
Permanent and Total Disability, all Options held by the Recipient
shall expire three months following the last day that the
Recipient is employed by or affiliated with the Company, or at
such earlier or later date as is set by the Plan Administrators
in establishing the terms of the Option at grant, or at such
later date as is set by the Plan Administrators subsequent to the
date of grant but prior to the thirtieth day following the last
day the Recipient is employed by or affiliated with the Company.
The Option may be exercised only for the number of Shares for
which it could have been exercised on such termination date
pursuant to Subsection 6(e), subject to any adjustment under
Section 13 of the Plan. Notwithstanding any provisions set forth
herein, if the Recipient shall (i) commit any act of malfeasance
or wrongdoing affecting the Company or any parent or any
Subsidiary, (ii) breach any covenant not to compete or employment
agreement with the Company or any parent or Subsidiary, or (iii)
engage in conduct that would warrant the Recipient's discharge
for cause, any unexercised part of the Option shall lapse
immediately upon the earlier of the occurrence of such event or
the last day the Recipient is employed by or affiliated with the
Company.
(g) Change in Control. Contingent upon the occurrence of
a Change in Control, the Board may, but is not required to, take
one or more of the following actions:
(1) accelerate the vesting of any Option;
(2) terminate all Options outstanding under the Plan
effective upon the date of the Change in Control and make, within
ninety days after the date of the Change in Control, a cash
payment to the Recipient equal to the difference between the
Exercise Price and the Fair Market Value of the vested but
unexercised Shares subject to the terminated Option on the date
of the Change in Control; or
(3) accelerate the expiration of the Options to a
date not earlier than the fifteenth day after the date of the
Change in Control.
(h) Conditions Required for Exercise. Options granted to
Recipients under the Plan shall be exercisable only to the extent
they are vested according to Subsection 6(e) hereof.
Furthermore, each Option granted under the Plan is exercisable
only if the issuance of Shares pursuant to the exercise would be
in compliance with applicable securities laws, as contemplated by
Section 9 hereof. The Plan Administrators may provide for
additional conditions for the exercise of any Option in
establishing the terms of the Option at grant.
<PAGE>
7. Method of Exercise. Subject to the requirements of
Subsections 6(e) and 6(f) hereof, an Option granted under this
Plan may be exercised in whole or in part. An Option granted
under this Plan shall be deemed exercised when the person
entitled to exercise the Option (a) delivers written notice to
the Chief Executive Officer of the Company (or his designee) of
the decision to exercise, (b) concurrently tenders to the Company
full payment for the Shares to be purchased pursuant to the
exercise, (c) remits to the Company in cash upon demand an amount
sufficient to satisfy any federal (including FICA and FUTA
amounts), state, and/or local withholding tax requirements at the
time the Recipient or his beneficiary recognizes income for
federal, state, and/or local tax purposes as the result of the
receipt of Shares pursuant to the Plan and (d) complies with such
other reasonable requirements as the Plan Administrators
establish pursuant to Sections 9 and 10 hereof. Payment for
Shares with respect to which an Option is exercised may be made
in cash, or by certified check or wholly or partially in the form
of Common Stock having a Fair Market Value on the date of
exercise equal to the exercise price. No person shall have the
rights of a shareholder with respect to Shares subject to an
Option granted under this Plan until a certificate or
certificates for the Shares have been delivered to him. An
Option granted under this Plan may not be exercised in increments
of less than one hundred Shares, or, if less, one hundred percent
of the full number of Shares as to which it can be exercised. A
partial exercise of an Option shall not affect the holder's right
to exercise the Option from time to time in accordance with this
Plan as to the remaining Shares subject to the Option.
8. Option Share Transfer Restrictions and Repurchase
Rights. The Plan Administrators may, in establishing the terms
of an Option at grant, restrict the ability of the Recipient to
transfer Option Shares to any person other than the Company and
may grant to the Company the right to repurchase Option Shares.
9. Compliance with Law.
(a) Securities Laws. No Option granted hereunder
shall be exercisable, in whole or in part, and the Company shall
not be obligated to sell any Option Shares if such exercise and
sale would, in the opinion of counsel for the Company, violate
the applicable requirements of Federal or state securities laws.
Each Option shall be subject to the further requirement, that, if
at any time the Company shall determine in its sole discretion
that the listing or qualification of the Option Shares under any
securities exchange or market requirements or under any
applicable law, or the consent or approval of any governmental
body, is necessary or desirable as a condition of, or in
connection with, the issuance of Option Shares, such Option may
not be exercised unless such listing, qualification, consent or
approval shall have been effected or obtained free of any
conditions not acceptable to the Company.
<PAGE>
(b) Delivery of Certificates. If any law or
regulation of any state of Federal commission or agency shall
require the Company or the Recipient to take any action with
respect to the Option Shares, then the date upon which the
Company shall deliver or cause to be delivered the certificate or
certificates for the Option Shares shall be postponed until full
compliance shall have been made with all such requirements. Any
certificate issued to evidence Option Shares may bear such
legends and statements, and shall be subject to such transfer
restrictions, as the Plan Administrators deem advisable to assure
compliance with federal and state laws and regulations and with
the requirements of this Section 9 and to reflect the provisions
of Section 8 hereof.
(c) Section 16 of the Exchange Act. With respect to
persons subject to Section 16 of the Exchange Act, transactions
under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the Exchange Act or its successor
under the Exchange Act. To the extent any provision of the Plan
or action by the Plan Administrators fails to so comply, it shall
be deemed null and void, to the extent permitted by law and
deemed advisable by the Plan Administrators.
10. Taxes. The Company shall have the right to withhold
from payments otherwise due and owing to the Recipient (or his
beneficiary) or to require the Recipient (or his beneficiary) to
remit to the Company in cash upon demand an amount sufficient to
satisfy any federal (including FICA and FUTA amounts), state,
and/or local withholding tax requirements at the time the
Recipient (or his beneficiary) recognizes income for federal,
state, and/or local tax purposes as the result of the receipt of
Shares pursuant to the Plan as a condition to the issuance of
Shares upon Option exercise (whether to the Recipient or to his
beneficiary). Each person who acquires the right to exercise an
Option or to ownership of Shares by bequest or inheritance may be
required by the Plan Administrators to furnish reasonable
evidence of ownership of the Option as a condition to his
exercise of the Option. In addition, the Plan Administrators may
require such consents and releases of taxing authorities as the
Plan Administrators deem advisable.
11. Designation of Beneficiary. Each Recipient shall
designate in the Agreement a beneficiary to receive Options
awarded hereunder in the event of his death prior to full
exercise of such Options; provided, that if no such beneficiary
is designated or if the beneficiary so designated does not
survive the Recipient, the estate of such Recipient shall be
deemed to be the Recipient's beneficiary. Recipients may, by
written notice to the Plan Administrators, change the beneficiary
designated in any outstanding Agreement.
12. Assignability. An Option granted under this Plan is
not transferable except by will or the laws of descent and
distribution. During the lifetime of a Recipient, all rights of
the Options are exercisable only by the Recipient.
<PAGE>
13. Adjustment Upon Change of Shares. If a merger,
reorganization, consolidation, reclassification,
recapitalization, combination or exchange of shares, stock split,
stock dividend, rights offering, or other expansion or
contraction of the Common Stock of the Company occurs, the number
and class of Shares for which Options are authorized to be
granted under this Plan, the number and class of Shares then
subject to Options previously granted to Recipients under this
Plan, and the price per Share payable upon exercise of each
Option outstanding under this Plan shall be equitably adjusted by
the Board to reflect such changes. To the extent deemed
equitable and appropriate by the Board, subject to any required
action by shareholders, in any merger, consolidation,
reorganization, liquidation or dissolution, any Option granted
under the Plan shall pertain to the securities and other property
to which a holder of the number of Shares of stock covered by the
Option would have been entitled to receive in connection with
such event.
14. Incentive Stock Option Requirements. Notwithstanding
any other provision of the Plan, the following requirements apply
to each Incentive Stock Option granted pursuant to the Plan.
(a) Only Employees of the Company shall be eligible
to receive grants of Incentive Stock Options.
(b) The written agreement that evidences an Option
grant shall state that the Option is an Incentive Stock Option.
(c) The exercise price of each Share subject to an
Incentive Stock Option shall equal the Fair Market Value of the
Share on the Option's Date of Grant.
(d) Each Incentive Stock Option shall expire no later
than the earliest of:
(1) the tenth anniversary of the Option's Date of
Grant;
(2) the one year anniversary of the Recipient's
death; or
(3) ninety days following the termination of the
Recipient's employment or affiliation with the Company.
<PAGE>
(e) An Incentive Stock Option granted to an
individual who, on the Date of Grant, owns stock possessing more
than ten percent of the total combined voting power of all
classes of stock of either the Company or any parent or
Subsidiary, shall be granted at an exercise price of 110 percent
of Fair Market Value on the Date of Grant and shall be
exercisable only during the five-year period immediately
following the Date of Grant. In calculating stock ownership of
any person, the attribution rules of Section 424(d) of the Code
shall apply. Furthermore, in calculating stock ownership, any
stock that the individual may purchase under outstanding options
shall not be considered.
(f) The aggregate Fair Market Value determined on the
Date of Grant, of stock in the Company with respect to which any
Incentive Stock Options under the Plan and all other plans of the
Company or its Subsidiaries (within the meaning of Section 422(b)
of the Code) may become exercisable by any individual for the
first time in any calendar year shall not exceed $100,000.
15. Liability of the Company. The Company, its parent and
any Subsidiary that is in existence or hereafter comes into
existence shall not be liable to any person for any tax
consequences expected but not realized by a Recipient or other
person due to the exercise of an Option.
16. Termination and Amendment of Plan. This Plan shall
automatically terminate at such time as the Company shall submit
a proposal to the Company's shareholders for Shareholder Approval
and such proposal fails to achieve the requisite number of votes.
Notwithstanding Shareholder Approval, the Board may amend or
terminate this Plan at any time or from time to time without the
approval of the shareholders of the Company as to such amendment
or termination; provided, however, that without the approval of
the shareholders to the extent provided in Section 422 of the
Code, no amendment shall be effective that:
(a) increases the aggregate number of Shares that may
be delivered upon the exercise of Options granted under the Plan;
(b) materially modifies the eligibility requirements
for participation in the Plan; or
(c) amends the requirements of Subsections 16(a) or
16(b) hereof.
Any amendment, whether with or without the approval of share-
holders, that alters the terms or provisions of an Option granted
before the amendment (unless the alteration is expressly
permitted under this Plan) shall be effective only with the
consent of the Recipient to whom the Option was granted or the
holder currently entitled to exercise it.
<PAGE>
17. Expenses of Plan. The Company shall bear the expenses
of administering the Plan.
18. Duration of Plan. Options may be granted under this
Plan only during the ten years immediately following the
Effective Date.
19. Applicable Law. The validity, interpretation, and
enforcement of this Plan are governed in all respects by the laws
of Florida and the United States of America.
