THIS NOTE AND THE SHARES OF COMMON STOCK OF nSTOR TECHNOLOGIES,  INC. INTO WHICH
THIS NOTE IS  CONVERTIBLE  (THE  "SHARES")  HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"),  NOR UNDER ANY STATE  SECURITIES
LAW  AND  MAY  NOT  BE  PLEDGED,  SOLD,  ASSIGNED  OR  TRANSFERRED  UNTIL  (i) A
REGISTRATION  STATEMENT WITH RESPECT  THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE  STATE  SECURITIES  LAW OR (ii) THE  COMPANY  RECEIVES  AN OPINION OF
COUNSEL  TO THE  HOLDER OF THIS  NOTE,  WHICH  COUNSEL  IS  SATISFACTORY  TO THE
COMPANY,  THAT  THE  NOTE  OR THE  SHARES  MAY BE  PLEDGED,  SOLD,  ASSIGNED  OR
TRANSFERRED  WITHOUT  AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER  THE  ACT OR
APPLICABLE STATE SECURITIES LAW.

THIS NOTE IS NEGOTIABLE AND  SUBORDINATED TO ANY AND ALL DEBTS OF THE COMPANY AS
PROVIDED BELOW.


                            nSTOR TECHNOLOGIES, INC.
                            (a Delaware corporation)

               Form of 8% Convertible Subordinated Promissory Note


Amount: $__________                         Dated:  March __, 2001



        nSTOR TECHNOLOGIES,  INC., a Delaware corporation ("Company"), for value
received,          hereby          promises          to          pay          to
______________________________________________  or  to  its  order  or  to  such
persons as it may designate from time to time  ("Holder") in lawful money of the
United States of America:  (i) upon Holder's ___  presentation  and surrender of
this 8%  Convertible  Subordinated  Promissory  Note  ("Note") at the  principal
office of the Company, the principal sum of _______________________  ($________)
on March 31, 2003, 10:00 a.m., local time ("Maturity"), and (ii) interest on the
unpaid  principal  of this  Note at the rate of eight  percent  (8%) per  annum,
payable  semi-annually  with the first interest  payment due on October 1, 2001.
Payment  shall be subject to  conversion  as provided in Section 1 hereof and to
the terms and conditions of this Note.

        At the  option of the  Company,  any  payment  by the  Company  required
hereunder  may be made by check mailed to the Holder at the last address for the
Holder  appearing  on the records of the Company.  This Note may be prepaid,  in
whole or part without penalty, at any time after the date hereof.

        1.     Conversion by the Holder.

               a. Right to Convert.  The Holder shall be entitled,  at any
time  prior to  Maturity,  to convert  all or a portion of the then  outstanding
principal  amount of this Note,  and/or any  accrued and unpaid  interest,  into
shares  of common  stock,  $.05 par value per  share,  of the  Company  ("Common
Stock"),  at a per share conversion  price of $1.00  ("Conversion  Price").  The
number of shares to be issued upon such  conversion  (the "Shares")  shall equal
(x) the principal amount of this Note to be converted pursuant to this Section 1
plus  any  accrued  and  unpaid  interest  on such  amount  through  the Date of
Conversion  (as  defined  below)  divided  by  (y)  the  Conversion  Price.  Any
conversion  of all or part of the  principal  amount  of this  Note  and/or  any
accrued but unpaid  interest shall not extinguish the Holder's  otherwise  valid
contractual  right to any  remaining  principal  and any unpaid  interest not so
converted.

               b. Stock Reclassifications;  Stock Splits, Combinations and
Dividends.  If the Common Stock  issuable upon the conversion of this Note shall
be changed into the same or  different  number of shares of any class or classes
of stock, whether by reclassification,  stock split, stock dividend,  or similar
event,  then and in each such event,  the Holder shall have the right thereafter
to convert all or any portion of this Note into the kind and amount of shares of
stock  and  other   securities  and  property   receivable   upon  such  capital
reorganization,  reclassification  or other  change  which the Holder would have
received  had  this  Note  been  converted  immediately  prior  to such  capital
reorganization, reclassification or other change.

               c. 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  1b.  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 Holder  shall  thereafter  be entitled to receive upon
conversion  of this Note,  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 the Holder would have been  entitled if the Holder had
converted such portion of this Note immediately prior to such Reorganization. In
any such case,  appropriate  adjustment  shall be made in the application of the
provisions of this subsection with respect to the rights of the Holder after the
Reorganization,  to the end that the  provisions of this  subsection  (including
adjustment of the number of shares  issuable upon conversion of this Note) shall
be  applicable  after  that  event in as  nearly  equivalent  a manner as may be
practicable.

               d. Exercise of Conversion  Right. In order to exercise the
conversion privilege, the Holder shall deliver the attached Notice of Conversion
(which must be fully  completed and executed)  during regular  business hours to
the Company at the office of the Company. Promptly upon receipt of the Notice of
Conversion,  the Holder shall surrender for conversion this Note, accompanied by
the  attached  Assignment  Form,  unless the Shares are to be issued in the same
name as the Holder. As promptly as practicable after the surrender of this Note,
the Company shall deliver or cause to be delivered to the Holder, at the address
indicated in the Notice of Conversion,  a certificate(s) for the number of fully
paid and non-assessable  shares of Common Stock issuable upon conversion of this
Note.

               e. Date of Conversion.  Conversion  shall be deemed to have
been  effected  immediately  prior to the close of business on the date on which
the Notice of Conversion  is received by the Company along with this  originally
executed Note (the "Date of Conversion").  On the Date of Conversion, the rights
of the Holder  hereunder  shall  cease and the  person(s)  in whose  name(s) any
certificate(s) for shares of Common Stock shall have been issued upon conversion
("Certificate  Holders")  shall be deemed to have become the holder(s) of record
of the shares represented thereby. Notwithstanding,  if the stock transfer books
of the Company shall be closed on the Date of  Conversion,  Certificate  Holders
shall be deemed to have become  shareholder(s)  of record on the next succeeding
day on which the Company's stock transfer books are open.

               f. Legend.  Certificates  evidencing the Shares shall bear a
legend  (to the  extent  applicable)  similar  to the legend on the face of this
Note.

               g. Fractional  Shares. No fractional shares of Common Stock
shall be issued upon  conversion  of this Note.  In the event that the principal
amount and interest to be converted would result in the issuance of a fractional
share of Common Stock, such fractional  shares, on an aggregate basis,  shall be
disregarded  and the number of shares of Common Stock  issuable upon  conversion
shall be, on an aggregate basis, the next higher number of whole shares.

               h. Taxes.  The  issuance of a  certificate(s)  for the Shares
shall be made without charge to the Holder for any  documentary  tax (other than
Federal or state taxes, if  appropriate),  expense or related cost in respect to
the issuance of such certificate(s).

               i. Partial  Conversion. Upon partial conversion of this Note, the
Company shall execute and deliver to the Holder a substitute  Note  representing
the  outstanding  principal  amount of this Note not  converted  and  containing
substantially the same terms as this Note.

               j. 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 this Note,
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 the  outstanding
principal  amount of this Note,  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 of the then outstanding  principal amount of this Note, the Company shall
use its best  efforts to take such 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 purposes.

        2. No  Avoidance.  The  Company  shall not,  by  amendment  of its
Certificate of Incorporation or through any reorganization,  transfer of assets,
consolidation,  merger, dissolution, issuance or sale of securities or any other
voluntary action, nor shall the Holder by any action, avoid or seek to avoid the
performance of any of the provisions of this Note.

        3. Application of Payments. All payments received shall be applied
first to charges other than interest and  principal,  if any,  owing  hereunder,
then to accrued  interest then due, then to  principal,  except that,  after the
occurrence  and during the  continuation  of any  default  under this Note,  all
amounts  received  shall  be  applied  in such  order  as  Holder,  in its  sole
discretion, may elect.

        4. No Waiver.  The  acceptance by Holder of any payment under this
Note after the date that such  payment is due shall not  constitute  a waiver of
the right to require prompt payment when due of future or succeeding payments or
to  declare  a  default  as  herein  provided  for any  failure  to so pay.  The
acceptance by Holder of the payment of a portion of any  installment at any time
that such  installment is due and payable in its entirety shall neither cure nor
excuse the default  caused by the  failure to pay the whole of such  installment
and shall not constitute a waiver of Holder's right to require full payment when
due of all future or succeeding installments.

        5. Subordination.  Indebtedness  evidenced  by this Note shall be
subordinate  in interest,  and in right of payment as to  principal  and accrued
interest,  to  the  payment  of  any  and  all  "Senior  Indebtedness."  "Senior
Indebtedness" shall mean: (i) all indebtedness owed to Wells Fargo Credit, Inc.,
or any  successor  thereof  (the  "Senior  Lender"),  whether  or  not  secured,
including,  without  limitation all indebtedness under revolving lines of credit
and term loans;  (ii) all  obligations to reimburse the Senior Lender in respect
of  amounts  paid  under   letters  of  credit,   acceptance  or  other  similar
instruments;  and (iii) all deferrals,  renewals,  extensions and refundings of,
and amendments,  modifications and supplements to any of the Senior Indebtedness
described above.

        6. Default.  In the event that the Company:  (i) fails to make any
payment of  principal  or interest  hereunder  when due and such  default  shall
continue for thirty (30) days after written notice thereof has been delivered to
the Company;  (ii) files a petition or is subject to proceedings  for protection
under any bankruptcy,  receivership,  reorganization  or insolvency  laws; (iii)
makes a general  assignment  of all or  substantially  all of its assets for the
benefit of its  creditors;  (iv) has a trustee  or  receiver  appointed  for the
Company,  its assets or a substantial  portion of its assets; (v) is adjudicated
by a court of competent  jurisdiction to be insolvent or bankrupt; or (vi) fails
to  observe  any of the  covenants  or  agreements  on the  part of the  Company
contained in this Note  continuing  (without being waived or cured) for a period
of thirty (30) days after receipt from Holder of written  notice of such failure
(unless the issue of whether such  failure has been cured is being  contested in
good faith by the  Company);  then the  Holder  may,  by  written  notice to the
Company, declare the outstanding principal amount of this Note to be immediately
due and payable,  whereupon the outstanding principal amount hereof shall become
and be immediately due and payable, along with any accrued but unpaid interest.

        7. Negotiability. This Note is negotiable. It may be sold,
assigned or transferred by the Holder upon without the prior written  consent of
the  Board of  Directors  of the  Company  upon  surrender  of this Note with an
Assignment  Form attached  hereto duly  completed and executed  (with  signature
guaranteed),   whereupon  the  Company,  if  it  determines  that  the  proposed
assignment is permitted  pursuant to the provisions  hereof,  shall register the
assignment of this Note in  accordance  with the  information  contained in such
Assignment  Form and  shall  execute  and  deliver a new note in the name of the
assignee or assignees named in such  Assignment Form (and, if applicable,  a new
note in the name of the Holder  evidencing any remaining portion of the Note not
theretofore  transferred  or assigned) and this Note shall promptly be canceled.
Upon the death of the Holder,  the  Holder's  administrator,  executor,  heir or
legatee shall have, upon written notice to the Company, all rights and interests
of the Holder in this Note. Any sale, assignment, transfer or succession (due to
death of the Holder) shall be made in compliance with all applicable Federal and
state securities laws.

        8. Registration.

               a. The Holder, by his acceptance of this Note, acknowledges
that neither this Note nor the Shares have been registered  under the Securities
Act of 1933, as amended  ("Act"),  or the securities  laws of any state or other
jurisdiction.

               b. The Holder  warrants and  represents to the Company that
he has acquired this Note, and upon  conversion of this Note,  will be acquiring
the Shares, for investment and not with a view to or for sale in connection with
any  distribution  of  this  Note  or the  Shares,  or  with  any  intention  of
distributing or selling this Note or the Shares.

               c. The  Holder  has no right to demand  that the  Company
register  this  Note  or  the  Shares  except  as  expressly   provided  in  the
Registration Rights Agreement between the Company and the Holder, dated the date
hereof.

        9.  Severability. In case any provision of this Note is held invalid,
illegal or  unenforceable  by a court of competent  jurisdiction,  the validity,
legality and enforceability of the remaining  provisions shall not in any way be
effected or impaired thereby.

        10. Choice of Law; Venue and Jurisdiction;  Legal Proceedings. This
Note shall be governed by and construed in accordance with the laws of the State
of  Florida,  without  reference  to  choice  of law  principles,  and the  sole
jurisdiction and venue for any claim,  suit, or proceeding brought in connection
with this Note  shall be Palm  Beach  County,  Florida.  In any suit,  action or
proceeding  arising out of or in connection with this Note, the prevailing party
shall  be  entitled  to  an  award  of  the  reasonable   attorneys'   fees  and
disbursements incurred by such party in connection therewith.

        11. Business Day. If any interest payment date or the Maturity date
under this Note shall not be a business day in the State of Florida, payment may
be made on the  next  succeeding  day  that is a  business  day in the  State of
Florida,  and shall be deemed hereunder as made on such interest payment date or
Maturity date, notwithstanding any other provisions contained in this Note.

        12. Notices.  Unless  otherwise  provided  herein,  all  demands,
notices,  consents,  requests  and other  communications  hereunder  shall be in
writing  and  shall be deemed to have been  given  when  delivered  in person or
mailed  first  class,  postage-paid,  addressed  (i) if to the  Company,  to the
Company's business office in the State of Florida, and (ii) if to the Holder, at
the last address for the Holder listed on the records of the Company.

        13. Modification.  This Note, the  Subscription  Agreement of even
date  herewith  between the Company and the Holder and the  Registration  Rights
Agreement referred to in Section 8c. above represent the entire understanding of
the parties hereto relating to the subject matter hereof, and supersedes any and
all other prior agreements between the parties. The terms and provisions of this
Note cannot be modified or amended orally or by course of dealing or conduct, or
in any  other  manner,  except in a writing  signed  by the party  against  whom
enforcement is sought.

        14. Binding  Effect. This Note shall be binding on and inure to the
benefit of the respective parties hereto and their successors and assigns.

        15. Captions.  Section  captions are provided  for the  convenience  of
the parties and are not intended to affect the  interpretation,  performance  or
enforcement of this Note.

        16. Compliance  With Law. It is the  responsibility  of the Holder
ensure that all payments received by the Holder comply with all tax,  securities
and other applicable laws, rules, and regulations of all applicable authorities,
and to  provide  the  Company  with any  written  consents  or  other  documents
necessary for compliance with such laws, rules and regulations.

                            [Signature Page Follows]


        IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
authorized  officer and its corporate seal to be affixed hereto, as of this __th
day of March, 2001.




                                            NSTOR TECHNOLOGIES, INC.,
                                            a Delaware corporation



                                            By:_______________________________
                                            Its:______________________________


                              NOTICE OF CONVERSION

To:


        The   undersigned,   the  Holder  of  the   attached   Note   issued  to
______________,  hereby  exercises the option to convert the principal amount of
this Note, or portion thereof,  and/or any accrued and unpaid interest  thereon,
below  designated,  for shares of the Common Stock of the Company in  accordance
with the terms of the attached Note. The shares deliverable upon this conversion
(and any Note representing any nonconverted amount hereof),  shall be issued and
delivered to ________________.


Dated: __________, 2001
                                     HOLDER


                                            -----------------------------



                                            Principal amount to be converted
                                            $------------


                                            Accrued but unpaid interest to
                                            be converted $____________



                                   ASSIGNMENT

        To be executed by the registered  holder to effect a permitted  transfer
of the within Note. Capitalized terms have the same meanings ascribed to them in
the within Note.


FOR VALUE RECEIVED _________________________________ ("Assignor") hereby sells,
assigns and transfers this Note unto

                                            ("Assignee")
-------------------------------------------
(Name)


(Address)



, and does  irrevocably  constitute  and  appoint  _____________________________
attorney to transfer the said right on the books of said  corporation  with full
power of substitution in the premises.



Date:                                              Assignor:
       -----------------------


                                       By:
                                      Its:


                                      Signature:
                                                ----------------------------