EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made effective as of the ___ day
of _____________, 1999, by and between nSTOR CORPORATION, a Delaware corporation
(the "Company"), and W. XXXXX XXXXX, an individual ("Xxxxx," and with the
Company, each a "Party" and together, the "Parties").
RECITALS
The Company's parent, nStor Technologies, Inc., a Delaware corporation ("nSTI"),
and Xxxxx are parties to a Purchase Agreement dated as of March 2, 1999, as
amended (the "Purchase Agreement"), whereby, among other things (a) nSTI has
purchased all of the shares of common stock of Andataco, Inc., a Massachusetts
corporation ("Andataco") owned by certain Xxxxx family trusts, and a promissory
note of Andataco payable to Xxxxx, and (b) Xxxxx has covenanted and agreed,
subject to certain limitations, not to compete with nSTI, the Company and
Andataco.
In furtherance of Section 3 of the Purchase Agreement, the Company and Xxxxx
wish to enter into this Agreement to provide for the employment of Xxxxx as the
Executive Vice President of Marketing and Sales of the Company, upon the terms
and subject to the conditions provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Company and Xxxxx agree as follows:
1. Employment and Term
-------------------
(a) The Company hereby employs Xxxxx as the Executive Vice President of
Marketing and Sales of the Company, for a term of three years commencing on the
date hereof (the "term of this Agreement"), and Xxxxx agrees to be so employed,
upon the terms and subject to conditions provided herein. Each period of 365
days during the term of this Agreement, the first such period commencing at
12:01 A.M. on the date hereof and ending at midnight on the 364th day following
the date hereof, shall be referred to herein as an "Annual Period."
(b) It is understood and agreed that Xxxxx is now and will continue to
be employed by Andataco during the term of this Agreement as President of
Andataco pursuant to the Employment Agreement between Andataco and Xxxxx dated
as of May 1, 1997 (the "Andataco Employment Agreement") and that: (i) Xxxxx'
employment by Andataco shall run concurrently with Xxxxx' employment under this
Agreement and be upon the same terms and subject to the same conditions as
provided herein, (ii) Xxxxx shall render services to the Company and Andataco
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for the same aggregate base salary, bonus compensation and other benefits as
provided in Section 3 hereof, without duplication (collectively, the
"Compensation"), except that the payment of the Compensation shall be allocated
between the Company and Andataco as the respective boards of directors of nSTI
and Andataco may from time to time agree, and (iii) Andataco and Xxxxx have
entered into an Amended and Restated Andataco Employment Agreement on the date
hereof to reflect the foregoing.
2. Authority and Limitations. Xxxxx shall have the authority and be
responsible for all marketing and sales of the Company's products and services,
including the responsibility to develop and implement plans for the marketing
and sales of such products and services and the authority to hire and fire
(subject to the Company's rules, policies and procedures) employees of the
Company who provide services related to the marketing and sales of such products
and services. Xxxxx shall receive the same notice of meetings and written
consent actions of the Boards of Directors of nSTI and the Company as are
required to be given to the Directors thereof and be entitled to attend all such
meetings as a non-voting participant, and shall attend such meetings if
requested by either Board of Directors for the purpose of reporting and making
presentations to the Directors. Xxxxx shall have such other authority,
responsibilities and duties, and be subject to such limitations, as the Board of
Directors of the Company (the "Board") and Xxxxx may mutually agree. Xxxxx
agrees that throughout his employment hereunder, he will (a) faithfully
discharge such authority, responsibilities and duties in accordance with this
Agreement, (b) devote his entire time, good faith, best efforts, ability, skill
and attention to the business of the Company, and (c) follow and act in
accordance with all of the Company's rules, policies and procedures.
3. Compensation. Xxxxx shall receive the following salary and other
compensation and benefits for his services under this Agreement:
(a) A base salary at the rate of $325,000 per annum, payable in 26
bi-weekly installments commencing approximately two weeks following the date of
this Agreement for the two week period beginning on the date of this Agreement,
less appropriate withholding of federal income, social security, Medicare and
other required and appropriate federal and state taxes and other amounts.
(b) In addition to the base salary, an annual bonus in an amount equal
to 1 1/2% of the first $15,000,000 of sales in excess of $65,000,000, during
each of: (i) the period from the Closing Date under the Purchase Agreement (as
defined therein) to December 31, 1999, (ii) the calendar year periods ended
December 31, 2000 and December 31, 2001, and (iii) the period from January 1,
2002 to the last day of the term of this Agreement, not including sales to
original equipment manufacturers ("OEM's") and returned goods; plus an amount
equal to 1 3/4% of the first $10,000,000 of such sales in excess of $80,000,000;
plus an amount equal to 2% of such sales in excess of $90,000,000; plus an
amount equal to 1% of all sales to OEM's, not including returned goods, other
than sales to the OEM's listed on Exhibit A attached hereto. Such bonus shall be
paid within 30 days following the end of each such period and be subsequently
adjusted, if necessary, upon the determination of such sales by the independent
accountants for the Company in connection with its annual audit. Any adjustment
in favor of Xxxxx shall be paid by the Company immediately upon such
determination and any adjustment in favor of the Company shall be paid by Xxxxx,
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at the option of the Company, immediately upon such determination or by
deductions from Xxxxx' base salary and/or future bonus compensation.
Notwithstanding the bonus calculation set forth above, in no event shall Xxxxx'
bonus be less than $175,000 per year, on an annualized basis, which minimum
bonus shall be paid to Xxxxx in equal monthly increments.
(c) In addition to the base salary and bonus compensation, Xxxxx shall
receive the following additional benefits:
(i) Xxxxx shall be entitled to participate in the Company's
health, life and disability insurance plans, and the Company's 401(k) retirement
benefit plan, on the same basis as all other senior officers of the Company.
(ii) Paid vacation time of up to four weeks per Annual Period,
which vacation time may not be accrued for use during subsequent Annual Periods.
(iii) The Company shall lease a new four door Mercedes-Benz
automobile (either E55 of E420 model, at Xxxxx' option) for Xxxxx' exclusive use
during the term of this Agreement.
(iv) Payment or reimbursement, upon presentation of reasonable
documentation, for travel, gasoline, entertainment, cellular telephone, travel
club dues (United Airlines, Alaska Airlines, Delta Airlines and USAir) and other
expenses incident to the performance of his duties under this Agreement.
4. Stock Option.
(a) The Company grants to Xxxxx an option (the "Option"), effective the
Closing Date under the Purchase Agreement, to purchase 1,100,000 shares of
nSTI's common stock (the "Option Shares") at an option price of $2.00 per Option
Share (the "Purchase Price"), which the Parties agree was the market price of
publicly traded stock of the Company on the day that Xxxxx, nSTI and the Company
reached conditional oral agreement as to Xxxxx' employment by the Company and
the grant of the Option. The Option Shares shall vest and the Option shall be
exercisable as to such vested Option Shares, in whole or in part, as follows:
266,667 options on the last day of the first Annual Period; and 416,667 options
on the last day of each of the second and third Annual Periods. After any
portion of the Option Shares have vested, they shall be exercisable for a period
of five years, regardless of Xxxxx' termination of employment hereunder for any
reason. Any Option Shares that are not vested shall fully vest if (a) Xxxxx'
employment under this Agreement is terminated by the Company other than for
"cause" (as defined in Section 5(b)), or (b) Xxxxx resigns for "good reason" (as
defined in Section 5(c)), effective upon the date of such termination or
resignation. Any Option Shares that are not vested shall be forfeited and the
Option shall terminate if (y) Xxxxx' employment under this Agreement is
terminated by the Company for "cause", or (z) Xxxxx resigns other than for "good
reason", effective upon the date of such termination or resignation.
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(b) Notwithstanding any vesting provisions set forth in Section 4(a) or
anything else in this Agreement to the contrary, all Option Shares shall vest
and become exercisable immediately prior to any Change in Control during the
term of this Agreement. For purposes hereof, "Change in Control" shall have the
meaning set forth in Exhibit B attached hereto.
(c) If there shall be an increase in the number of issued shares of
common stock of nSTI entitled to vote by reason of any share dividend, share
split-up, recapitalization or reorganization, or decrease thereof by reason of a
combination of shares, so-called reverse split, recapitalization or
reorganization, the number of Option Shares shall be adjusted accordingly so
that the number of Option Shares shall represent the same percentage of the
aggregate of the Option Shares and the issued common stock of nSTI following any
such share dividend, share split-up, combination of shares, reverse split,
recapitalization or reorganization as they did prior to any such share dividend,
share split-up, combination of shares, reverse split, recapitalization or
reorganization. Nothing in this Section 4(c) shall result in any adjustment of
the Option Shares because of the issuance by nSTI of its capital stock for any
other reason, including, without limitation, in connection with any public or
private offering of stock or any merger or consolidation of nSTI with or into
any other entity, or the exchange of such capital stock for the stock or assets
of any other entity.
(d) The Option, or any portion thereof, may be exercised only in
accordance with the terms of this Section 4 and solely by delivery to the
Secretary of nSTI of all of the following items prior to the time when the
Option or such portion becomes unexercisable under the terms of this Section 4:
(i) Notice in writing signed by Xxxxx, stating that the Option
or portion thereof is thereby exercised;
(ii) Full payment (in cash or by cashiers' or certified check)
for the Option Shares with respect to which the Option or portion
thereof is exercised;
(iii) Full payment (in cash or by cashiers' or certified
check) upon demand of an amount sufficient to satisfy any federal
(including FICA and FUTA amounts), state, and/or local withholding tax
requirements at the time Xxxxx or his beneficiary recognizes income for
federal, state, and/or local tax purposes as the result of the receipt
of Option Shares pursuant to the exercise of the Option or portion
thereof;
(e) Notwithstanding the provisions of Section 4(d)(ii), upon receipt by
nSTI of Xxxxx' notice to exercise as provided in Section 4(d)(i), nSTI, in its
sole discretion, may elect to waive the payment of the exercise price by Xxxxx
under Section 4(d)(ii) and, instead, effect a "cashless net exercise" of the
portion of the Option Xxxxx desires to exercise, in which event nSTI shall issue
to Xxxxx either:
(i) the number of Option Shares computed using the following
formula:
X = Y(A-B)
A
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where: X = the number of Option Shares to be issued to Xxxxx
Y = the gross number of Option Shares underlying the portion of the
Option to be exercised
A = the Current Market Price on the day prior to exercise
B = the exercise price of the Option; or
(ii) cash in the amount computed according to the following
formula:
Z = Y(A-B)
where: Z = the cash to be paid to Xxxxx and the definitions of Y, A and B
are as set forth above; or
(iii) any combination of cash and stock (as calculated in (i)
or (ii) above).
For purposes of this Section 4(e), the "Current Market Price" shall be
determined as follows:
(i) if the security at issue is listed on a national
securities exchange or admitted to unlisted trading privileges on such
an exchange or quoted on either the National Market System or the Small
Cap Market of the automated quotation service operated by Nasdaq, Inc.
("NASDAQ"), the Current Market Price shall be the last reported sale
price of that security on such exchange or system on the day for which
the Current Market Price is to be determined or, if no such sale is
made on such day, the average of the highest closing bid and lowest
asked price for such day on such exchange or system; or
(ii) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked prices are
not reported, the Current Market Price shall be calculated using the
following formula:
L = M/ N
where: L = the Current Market Price
M = the revenue for the Company in
the most recently completed
fiscal year
N = the total outstanding shares of
common stock of the Company as
of the date of exercise
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(f) The Option Shares deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued shares or
issued shares which have been reacquired by nSTI. Such Option Shares shall be
fully paid and nonassessable.
(g) Xxxxx shall not be, nor have any of the rights or privileges of, a
shareholder of nSTI in respect of any Option Shares purchasable upon the
exercise of any part of the Option unless and until certificates representing
such shares shall have been issued by nSTI to Xxxxx.
(h) The Company represents to Xxxxx that there will be sufficient
shares of common stock of nSTI reserved for issuance at all times to permit the
Company to fulfill its obligations under this Section 4. The Company further
represents to Xxxxx that the Option Shares, upon vesting, shall be registered
under the Securities Act of 1933, as amended (the "Act"), and shall be freely
tradable without legend, and that nSTI shall register sufficient shares of its
common stock to comply with this Section 4(h) when it next registers any of its
common stock under a Form S-8, but in no event effective later than the first
date on which any of the Option Shares shall vest pursuant to Section 4(a)
hereof.
5. Termination.
(a) Xxxxx may be removed as an officer and employee of the Company and this
Agreement may be terminated by the Company at any time prior to the end of the
term of this Agreement, and Xxxxx may resign as an officer and employee of the
Company and terminate this Agreement at any time prior to the end of the term of
this Agreement upon 90 days prior notice to the Company. If Xxxxx is removed
other than for "cause," he shall be entitled to (i) continuation of his base
salary and minimum annual bonus (but not the benefits provided in Section 3(c)
hereof) for the remaining term of this Agreement, and (ii) the amount of
$275,000 in full settlement of any then unpaid additional bonus compensation,
and all outstanding unvested Option Shares shall immediately vest and be
exercisable for a period of five years. If Xxxxx resigns for "good reason" in
compliance with the first sentence of this Section 5(a), he shall be entitled to
(i) continuation of his base salary (but not the benefits provided in Section
3(c) hereof) for the remaining term of this Agreement, and (ii) an amount equal
to the product of (A) a fraction, the numerator of which is the number of days
for which he was employed by the Company during the Annual Period in which such
removal or resignation occurred and the denominator of which is 365 and (B) the
bonus compensation to which he would have been entitled pursuant to Section 3(b)
hereof if he had been employed for the full term of such Annual Period, which
amount shall be paid as soon as the independent accountants for the Company are
able to determine the sales upon which such amount is based, and all outstanding
unvested Option Shares shall immediately vest and be exercisable for a period of
five years. If Xxxxx is removed because of his death or disability (as
hereinafter defined), he shall be entitled to (i) continuation of his base
salary and the benefits provided in Section 3(c)(i) hereof for a period of six
months following such removal, and (ii) an amount determined pursuant to clause
(ii) of the immediately preceding sentence. If Xxxxx is removed for "cause," or
resigns other than for "good reason," his base salary and all other compensation
and benefits under this Agreement, including any unpaid bonus under Section 3(b)
and all benefits provided in Section 3(c), shall terminate immediately upon such
removal or resignation. Notwithstanding Xxxxx' obligation to give the Company 90
6
days prior notice of his resignation for any reason, the Board may accelerate
the effective date of his resignation to any earlier date determined by the
Board upon notice to Xxxxx.
(b) For purposes of this Agreement "cause" shall, at the Company's
option, consist of any of the following occurrences or acts:
(i) Engaging or participating in any activity which is
directly competitive with or intentionally injurious to the Company.
(ii) The commission by Xxxxx of any fraud against the Company
or use or appropriation for his personal use and benefit of any funds,
assets or properties of the Company not authorized by the Company to be
so used or appropriated.
(iii) Xxxxx' knowing violation of law, conviction for
commission of a felony or conviction for a crime involving dishonesty
or moral turpitude.
(c) For purposes of this Agreement "good reason" shall, at Xxxxx'
option, consist of any of the following occurrences or acts:
(i) The Company's requirement or direction that Xxxxx relocate
from the greater San Diego metropolitan area.
(ii) Any attempt by the Company to substantially reduce Xxxxx'
compensation or benefits or materially change his responsibilities or
duties.
(d) Upon any such removal or resignation, Xxxxx may be immediately
denied access to the Company's offices, facilities, files, information and data,
except that upon any resignation and during any notice period that Xxxxx may
continue to be employed by the Company, the Board may either (i) deny Xxxxx
access, to the extent that the Board may determine, to the Company's offices,
facilities, files, information and data, or (ii) reassign the title and/or
responsibilities and duties of Xxxxx and impose reasonable restrictions on
Xxxxx' access to the Company's files, information and data.
(e) This Agreement and Xxxxx' employment hereunder shall terminate
immediately and without the necessity of any notice or any other action by any
Party upon the death or disability of Xxxxx. For the purpose of this Agreement,
"disability" shall be defined as his physical or mental inability to perform his
responsibilities and duties under this Agreement for a continuous period of 90
days or more as reasonably determined by Board upon consultation with an
independent, reputable health care professional specializing in the appropriate
discipline.
6. Confidentiality; Company Property.
(a) Xxxxx acknowledges that financial statements, trade secrets,
customer lists, methods of doing business and other matters involving the
Company's and nSTI's business, activities, prospects, operations and functions,
7
including any systems, computer programs, know how and other confidential
information obtained by Xxxxx during his employment by the Company or his prior
employment by Andataco, or provided to Xxxxx by the Company or nSTI, are
confidential business information and proprietary to the Company ("Confidential
Information"), and shall be maintained as confidential by Xxxxx during and after
his employment by the Company. Xxxxx will take all reasonable measures to avoid
disclosure, dissemination or unauthorized use of Confidential Information. Xxxxx
will not, except as expressly provided in this Agreement, disclose Confidential
Information to anyone other than another employee of Company with a need to know
and who is likewise bound by confidentiality requirements without Company's
prior written consent, and will not use, or permit others to use, Confidential
Information for any purpose other than the purpose for which it was disclosed.
Notwithstanding the foregoing, the provisions hereof will not apply to any
information that (i) is or becomes publicly available without breach of this
Agreement, (ii) is rightfully received from a third party who did not acquire or
disclose such information by a wrongful or tortious act, or (iii) is required by
law to be disclosed by Xxxxx.
(b) Xxxxx acknowledges that any and all notes, records, computer disks,
training materials and other documents and material relating to the Company and
nSTI and their businesses and obtained by or provided to Xxxxx, or otherwise
made, produced or compiled during the term of this Agreement or during Xxxxx
prior employment by Andataco, regardless of the type of medium in which they are
preserved, are the sole and exclusive property of the Company and nSTI and shall
be surrendered to the Company upon termination of Xxxxx' employment hereunder
and on demand by the Company at any time. Xxxxx shall not retain copies of any
property so surrendered.
(c) Xxxxx agrees that if he violates any of the provisions of this
Section 6, the Company and nSTI would sustain irreparable harm and, therefore,
in addition to any other remedies that might be available to it, the Company and
nSTI shall be entitled to an injunction restraining Xxxxx from committing or
continuing any such violation of this Agreement without the requirement to post
a bond or other security. The Company and Xxxxx agree that in the event any of
the provisions of this Section 6 shall be held to be in any way an unreasonable
restriction on Xxxxx, the court so holding may modify or eliminate any such
restriction to the extent necessary to render such provisions enforceable.
7. Acquisition of Other Businesses. In the event that nSTI, the Company or
Andataco acquire additional companies or the assets and businesses of other
companies that are engaged in substantially the same business as conducted by
nSTI, the Company or Andataco, and if nSTI, the Company or Andataco give Xxxxx
notice that he is expected to perform any services for such acquired companies
or businesses, Xxxxx, nSTI and the Company shall negotiate, reasonably and in
good faith, and enter into separate agreements or amendments to this Agreement,
regarding the compensation and duties of Xxxxx in regard to such acquired
companies or businesses. Nothing in this Section 7 shall effect Xxxxx' right to
terminate this Agreement for "good reason" under Section 5(c) hereof.
8. Notices. Any notice, request or other communication to either Party by the
other hereunder shall be deemed given on the earlier of the date (i) actually
received and acknowledged; (ii) three (3) days after its mailing by certified or
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registered mail, return receipt requested, postage prepaid; or, (iii) on the
business day immediately following its delivery (evidenced by receipt) to any
reputable overnight carrier or transmission via facsimile in each case addressed
to the Party for which it is intended at the address (or facsimile transmission
number) set forth in this Agreement. The place to which notices are to be given
to any Party may be changed from time to time by such Party by like notice to
the other. Notices shall be addressed as follows:
If to the Company:
-----------------
Xxxxxxxx Xxxxxxxx, President
nStor Corporation
000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxx Xxxx, XX 00000
Fax: (000) 000-0000
If to Xxxxx:
-----------
W. Xxxxx Xxxxx
C/o Andataco, Inc.
00000 Xxxx Xxx Xxxx
Xxx Xxxxx, XX 00000
Fax: (000) 000-0000
(or, following any termination of this employment, to his home
address and facsimile number as then known to the Company or
identified by Xxxxx pursuant to notice)
9. Complete Agreement. This Agreement constitutes the complete and exclusive
statement of the agreement between the Parties with respect to the subject
matter of this Agreement. This Agreement replaces and supersedes all prior
agreements and negotiations by and between the Parties and each of the Parties
acknowledges and agrees that no agreements, representations, warranties or
collateral promises or inducements have been made by or to it or him except as
expressly set forth in this Agreement. These acknowledgments and agreements are
contractual and not mere recitals.
10. Assignment. This Agreement and the rights, obligations and duties of either
Party may not be assigned by such Party without the prior written consent of the
other Party, except that the Company may assign this Agreement to any successor
entity upon the merger or consolidation of the Company or the sale of
substantially all of the Company's assets, or to any parent or subsidiary of the
Company that succeeds to the Company's business. All of the terms and conditions
of this Agreement shall be binding upon and inure to the benefit of Xxxxx and
his personal representatives, heirs, executors and administrators, and the
permitted successors and assigns of the Parties.
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11. Waiver. The waiver by either Party, or the failure by either Party to claim
a breach, of any provision of this Agreement will not constitute a waiver of any
subsequent breach or affect in any way the effectiveness of such provision.
12. Governing Law. This Agreement has been executed and delivered by the Parties
in the State of Florida and will be governed by and construed and enforced in
accordance with the laws of the State of Florida, without regard to conflict of
laws principles.
13. Partial Invalidity. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, such provision will be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, or unenforceable provision; and
there shall be added automatically, as a part of this Agreement, a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid and enforceable.
14. Jurisdiction. The parties hereto agree and consent to the exclusive
jurisdiction of the Circuit Courts of the State of Florida and the United States
District Courts in the State of Florida in connection with all actions or
proceedings arising out of or in connection with this Agreement and the subject
matter hereof.
16. Legal Fees. Should either Party institute a legal action or proceeding to
enforce the terms, conditions and provisions of this Agreement, or to recover
damages or obtain any other relief, including equitable relief, in connection
with any matters arising out of or in connection with this Agreement, the
substantially prevailing Party will be entitled to all court costs and
reasonable attorney, paralegal and accountant fees and expenses, including in
any pre-trial, appellate, post-award or post-judgment and related bankruptcy
proceedings.
17. Amendments. To be effective, any amendment to this Agreement must be in
writing and signed by the Company and Xxxxx.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date first above written.
nSTOR CORPORATION
By: /s/ Xxxx Xxxx
------------------------------
Xxxx Xxxx, Vice President
/s/ W. Xxxxx Xxxxx
------------------------------
W. Xxxxx Xxxxx, Individually
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The undersigned, nStor Technologies, Inc., the owner of all of the issued and
outstanding stock of nStor Corporation, hereby unconditionally and irrevocably
guarantees to W. Xxxxx Xxxxx and his heirs, distributees, personal
representatives, executors and administrators, the full and complete performance
of all obligations of nStor Corporation under and pursuant to the above
Employment Agreement, including, without limitation, the payment of all amounts
as and when due.
nSTOR TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxx
--------------------------
Xxxx Xxxx, Vice President
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Exhibit A
Original Equipment Manufacturers Not Subject to Bonus Compensation
------------------------------------------------------------------
Silicon Graphics
Discrete Graphics
Intergraph
12
Exhibit B
A "Change in Control" means the following and shall be deemed to occur
if any of the following events occurs:
(a) Any person, entity or group, within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), but
excluding nSTI and its subsidiaries and any employee benefit or stock ownership
plan of nSTI or its subsidiaries and also excluding an underwriter or
underwriting syndicate that has acquired nSTI's securities solely in connection
with a public offering thereof (such person, entity or group being referred to
herein as a "Person") becomes the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 30% or more of either the then
outstanding shares of Common Stock or combined voting power of nSTI's then
securities entitled to vote generally in the election of directors; or
(b) Individuals who, as of the effective date hereof, constitute the
Board of Directors of nSTI (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of nSTI, provided that
any individual who becomes a director after the effective date hereof whose
election, or nomination for election by nSTI's shareholders, is approved by a
vote of at least a majority of the directors then comprising the Incumbent Board
shall be considered to be a member of the Incumbent Board unless that individual
was nominated or elected by any Person having the power to exercise, through
beneficial ownership, voting agreement and/or proxy, 20% or more of either the
outstanding shares of Common Stock or the combined voting power of nSTI's then
outstanding voting securities entitled to vote generally in the election of
directors, in which case that individual shall not be considered to be a member
of the Incumbent Board unless such individual's election or nomination for
election by nSTI's shareholders is approved by a vote of at least two-thirds of
the directors then comprising the Incumbent Board; or
(c) Consummation by nSTI of the sale or other disposition by nSTI of
all or substantially all of nSTI's assets or a reorganization or merger or
consolidations of nSTI with any other person, entity or corporation, other than
(i) a reorganization or merger or consolidation that would result
in the voting securities of nSTI outstanding immediately prior thereto (or, in
the case of a reorganization or merger or consolidation that is preceded or
accomplished by an acquisition or series of related acquisitions by any Person,
by tender or exchange offer or otherwise, of voting securities representing 5%
or more of the combined voting power of all securities of nSTI, immediately
prior to such acquisition or the first acquisition in such series of
acquisitions) continuing to represent, either by remaining outstanding or by
being converted into voting securities of another entity, more than 50% of the
combined voting power of the voting securities of nSTI or such other entity
outstanding immediately after such reorganization or merger or consolidation (or
series of related transactions involving such a reorganization or merger or
consolidation), or
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(ii) a reorganization or merger or consolidation effected to
implement a recapitalization or reincorporation of nSTI (or similar transaction)
that does not result in a material change in beneficial ownership of the voting
securities of nSTI or its successor; or
(d) Approval by the shareholders of nSTI or an order by a court of
competent jurisdiction of a plan of liquidation of nSTI.
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