Exhibit 10
OPTION AGREEMENT
THIS OPTION AGREEMENT
(the "Agreement") is
made and entered into as of
the 31st day of December, 2004 by and among
PACIFIC TECHNOLOGY GROUP, INC., a
Nevada corporation ("PTG"), HALCO
INVESTMENTS, L.C., a Florida limited liability
company ("Halco") and nSTOR TECHNOLOGIES, INC., a Delaware corporation
("Optionee").
R E C I T A L S
WHEREAS, Optionee
has reached an agreement with H. Irwin Levy and
certain of his affiliates to convert
approximately
$9.1 million of debt
of the
Optionee held by Mr. Levy and his
affiliates
(the "Levy Debt") to
9,100 shares
of convertible preferred stock of the
Optionee with a stated value of $1,000 per
share of preferred stock (the "Stated
Value"), which convertible preferred stock
shall (i) accrue dividends at 5% per annum, (ii) be convertible into common
stock of the Optionee at a conversion
price of $0.25 per
share beginning on the
one year anniversary of the date of issuance
and (iii) be
redeemable
by the
Optionee at a price per share equal to the
Stated Value plus
accrued and unpaid
dividends (the "Debt Conversion"); and
WHEREAS, the
conversion of the Levy Debt is subject to the execution by
PTG and Halco of this Option Agreement;
and
WHEREAS, PTG is the
current record holder
of 24,784,727 shares
of the
issued and outstanding common stock, par value $0.01 per share (the
"Common
Stock"), of Optionee; and
WHEREAS, PTG has
agreed to grant to Optionee an irrevocable, exclusive
option to purchase 20,000,000 shares of the Common Stock (the "PTG Option
Shares") from PTG as contemplated
by this Agreement,
subject to the
conversion
of the Levy Debt; and
WHEREAS, Halco is the
current beneficial holder of 50,015,048 shares of
the issued and outstanding Common Stock of
Optionee; and
WHEREAS, Halco has agreed to grant to Optionee an irrevocable,
exclusive
option to purchase 48,000,000 shares of the Common Stock (the "Halco Option
Shares") from Halco as contemplated by this
Agreement, subject to the conversion
of the Levy Debt;
NOW, THEREFORE,
in consideration of the premises set
forth herein and
for other good and valuable consideration,
the receipt and
sufficiency of which
are hereby acknowledged, the parties hereto
agree as follows:
1. Incorporation of Recitals. The above recitals are true and
correct and are
incorporated herein as if set forth in
full.
2. Options. Subject to the terms and conditions of this Agreement and the
conversion of the Levy Debt:
(a) PTG hereby
grants to Optionee an irrevocable, exclusive
right, privilege, and option (the "PTG Option") to purchase the PTG Option
Shares for a purchase price of Twenty-Two Cents ($0.22) per share (the
"Option
Price"); and
(b) Halco hereby
grants to Optionee an
irrevocable,
exclusive
right, privilege, and option (the "Halco Option") to
purchase the Halco Option
Shares for the Option Price.
3. Option Period. The PTG Option and the Halco
Option shall be
exercisable at
any time, or from time to time, on or prior to November 30, 2005 and shall
terminate on November 30, 2005 (the "Option
Period").
4. Exercise
(a) Optionee may
exercise the PTG Option and the Halco Option in
whole or in part. If exercised in part, the
Optionee shall purchase Halco Option
Shares and PTG Option Shares pro rata,
based on the total
number of such shares
purchased by Optionee.
(b) This Option may be exercised by delivery of written notice
of
exercise (the "Exercise Notice") to PTG and Halco on any
business day, at their
principal offices, addressed to the attention of the person designated in
Section 8 hereof. The Exercise Notice shall specify the number of PTG
Option
Shares and Halco Option Shares with respect to which this Option is being
exercised. If Optionee provides the Exercise Notice to PTG and Halco,
the
parties agree to consummate the transaction at a closing ("Closing"), which
shall take place at such time and place as
the parties
may agree,
but in any
event no less than three (3) nor more than
thirty (30) days after
the giving of
the Exercise Notice.
5. Payment for and Delivery of Shares.
At closing,
PTG and Halco shall
cause a
certificate or certificates representing the PTG Option Shares
and Halco Option
Shares to be delivered to Optionee,
together with stock powers executed in favor
of Optionee and such other documentation as may be necessary to transfer
title
to the PTG Option Shares and Halco Option Shares to Optionee, in form and
substance reasonably satisfactory to Optionee.
In exchange for
delivery of the
PTG Option Shares and Halco Option
Shares, Optionee shall pay the Option
Price
by wire transfer of immediately
available funds to the accounts designated by
PTG and Halco.
6. Covenants and Representations of
PTG.
(a) PTG is a corporation duly organized, validly existing and in
good standing under the laws of its
jurisdiction of
incorporation
and has the
requisite power and authority to enter into
and perform its
obligations under
this Agreement.
(b) The execution and delivery of this Agreement and the
consummation of the transaction
contemplated
hereby have been duly
and validly
authorized by the Board of Directors of PTG
and no other corporate
proceedings
on the part of PTG are necessary to authorize
this Agreement or to consummate
the transactions contemplated hereby.
(c) This Agreement has been duly and validly executed and
delivered by PTG and constitutes a
legal, valid and binding obligation of PTG,
enforceable against PTG and in
accordance with its terms.
(d) The execution,
delivery and performance of this Agreement by
PTG and the consummation by it of
the transactions
contemplated hereby do not
require the consent, waiver,
approval, license or
authorization of, or result
in the acceleration of any obligation under, or constitute a default
under,
any term, condition or provision of PTG's
organizational
documents,
or any
indenture, mortgage, lien, lease, agreement,
contract, instrument, order,
judgment, ordinance, regulation or decree or any
restriction to which PTG or
any property of PTG or its
subsidiaries is bound.
(e) PTG holds of record and owns directly all of the PTG Option
Shares, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act of 1933, as amended, and state
securities laws), taxes,
security interests,
claims, liens, charges
or other
encumbrances, options, warrants, purchase rights, contracts, commitments,
equities and demands. PTG is not a party to any option,
warrant, purchase
right, or other contract or commitment that could require PTG to sell,
transfer, or otherwise dispose of the PTG Option
Shares (other than this
Agreement). PTG is not a party to any voting trust, proxy, shareholders
agreement, or other agreement or
understanding with
respect to the voting of
the PTG Option Shares. Upon Closing, any PTG Option Shares delivered to
Optionee pursuant to this Agreement
shall be delivered
free and clear of all
security interests, claims, liens,
charges or other encumbrances.
(f) Until the termination of the Option Period, PTG covenants
and
agrees that it shall not,
directly or
indirectly,
without the prior
written
consent of Optionee (which consent shall be in Optionee's
sole and absolute
discretion) sell, transfer,
pledge, hypothecate or convey in any manne
