-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JRQUOdz/zXTREC1lrwVMD0G2Vg+2vXsrDMBO4TiM8Kzd90e0fqRGkwy2o6cdVQAr 3hyHi1XfQCQCTwDD06l7wA== 0000720851-03-000033.txt : 20031017 0000720851-03-000033.hdr.sgml : 20031017 20031017161306 ACCESSION NUMBER: 0000720851-03-000033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20031016 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NESTOR INC CENTRAL INDEX KEY: 0000720851 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 133163744 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12965 FILM NUMBER: 03946346 BUSINESS ADDRESS: STREET 1: 400 MASSASOIT AVE STREET 2: STE 200 CITY: PROVIDENCE STATE: RI ZIP: 02914 BUSINESS PHONE: 4014345522 MAIL ADDRESS: STREET 1: 400 MASSASOIT AVE STREET 2: STE 200 CITY: PROVIDENCE STATE: RI ZIP: 02914 8-K 1 form8k.txt SILVER STAR INVESTMENT AND NEW DIRECTORS SECURITIES AND EXCHANGE COMMISSION Washington D.C. FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 September 23, 2003 - -------------------------------------------------------------------------------- Date of Report (Date of earliest event reported) NESTOR, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 0-12965 13-3163744 -------------------------- -------------------------------------- (Commission file number) (IRS employer identification number) 400 MASSASOIT AVENUE, SUITE 200 EAST PROVIDENCE, RHODE ISLAND 02914 - -------------------------------------------------------------------------------- (Address of principal executive offices) (401) 434-5522 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 1 ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE. ACTION BY BOARD OF DIRECTORS. ----------------------------- On September 23, 2003, the Board of Directors (the "Board") of Nestor, Inc. (the "Company") voted at a meeting to amend the By-laws of the Company to provide that the number of directors of the Company shall be determined by resolution of the Board, but not more than seven nor less than three. At that meeting the Board also set the number of directors at seven and elected Dr. Albert H. Cox, Jr., Terry Fields and Susan A. Keller to the Board, to serve until their successors have been elected and qualified. A copy of the press release relating to the election described above is attached as Exhibit 99.1 and incorporated herein by reference. NEW DIRECTORS. -------------- DR. ALBERT H. COX, JR. Dr. Cox, 71, has been a private investor for the last five years. Dr Cox. was the founder and President of Merrill Lynch Economics. He also served as an economic advisor to President Richard Nixon. TERRY FIELDS. Mr. Fields, 56, has been the Chief Financial Officer of Community Loans of America, Inc. since 1995. He previously served as Chief Financial Officer and interim Chief Executive Officer of Seibels Bruce Group. SUSAN A. KELLER. Ms. Keller, 42, a Partner at Edwards & Angell, LLP, has been practicing law since 1986, with an emphasis on mergers and acquisitions, private equity financing, senior and subordinated debt transactions and general corporate work. ADDITIONAL INVESTMENT BY SILVER STAR. ------------------------------------- On October 15, 2003, the Company sold a $2,000,000 principal amount convertible note (the "Note")to Silver Star Partners I, LLC ("Silver Star"). The note is due on January 15, 2004 and bears interest at the rate of 7% per year. The Company's obligations under the note may, at the Company's option, be satisfied, in whole or part, by issuing shares of the Company's common stock, par value $.01 ("Common Stock") to Silver Star. If the Company chooses to satisfy any of its obligations under the note by issuing shares of Common Stock, the conversion price will be the price to broker-dealers acting as underwriters or placement agents in the first registered public offering of such shares made after October 15, 2003 or, if no such offering is made before the maturity date of the Note, then the 20 day moving average closing price of the Common Stock during the first thirty day period starting on or after November 1, 2003 during which, in the Company's reasonable judgement, all material information about the Company has been publicly available less a 20% discount. The conversion price is subject to adjustment for stock splits, reverse stock splits or stock dividends. Silver Star owns 64.9% of the outstanding shares of Common Stock. Silver Star has the right to require the Company to register with the SEC Silver Star's resale of all shares of Common Stock that it owns, including any Common Stock issued in satisfaction of the Company's obligations under the Note as soon as practicable after Silver Star requests that registration. The Company is obligated to pay all expenses associated with that registration. The Company has other obligations in connection with that registration, including causing the registration statement filed to remain continuously effective until the distribution of shares covered by the registration statement is complete and indemnifying Silver Star from liabilities it may incur resulting from any untrue statement or omission of a material fact in the registration statement and related documents and from other liabilities related to the registration. 2 Danzell Investment Management, Ltd. ("Danzell Investment Management") will receive a 3% finders fee, to be paid by the Company, in connection with the sale of the Note by the Company. William B. Danzell is the Chief Executive Officer of Nestor, Inc., the President of Danzell Investment Management and the Managing Director of Silver Star. Each of Robert M. Krasne, Stephen H. Marbut and David M. Jordan is a director of Nestor, and each is also an affiliate of Silver Star. The sale of the Note by the Company to Silver Star was approved unanimously by the directors of Nestor not affiliated with Silver Star. A copy of the press release relating to the transaction described above is attached as Exhibit 99.2 and incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (c) Exhibits: The following exhibits are filed as part of this report: Exhibit Number Description ------- ----------- 3.1 Amended By-laws of Nestor, Inc. 10.1 Convertible Note dated October 15, 2003 made by Nestor, Inc. to Silver Star Partners I, LLC. 99.1 Press Release dated October 15, 2003 relating to the election of directors. 99.2 Press Release dated October 15, 2003 relating to the Silver Star Note. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NESTOR, INC. (Registrant) By: /s/ Nigel P. Hebborn -------------------------------------- Nigel P. Hebborn Treasurer and Chief Financial Officer Dated: October 17, 2003 3 EXHIBIT INDEX ------------- Exhibit Number Description -------------- ----------- 10.1 Security Purchase Agreement dated July 31, 2003 between Nestor, Inc. and Laurus Master Fund, Ltd. 10.2 Convertible Note dated July 31, 2003 made by Nestor, Inc. to Laurus Master Fund, Ltd. 10.3 Registration Rights Agreement dated July 31, 2003 between Nestor, Inc. and Laurus Master Fund, Ltd. 10.4 Common Stock Purchase Warrant dated July 31, 2003 issued by Nestor, Inc. to Laurus Master Fund, Ltd. 10.5 Stock Pledge Agreement dated July 31, 2003 between Nestor Traffic Systems, Inc. and Laurus Master Fund, Ltd. 10.6 Pledge and Security Agreement dated July 31, 2003 between CrossingGuard, Inc. and Laurus Master Fund, Ltd. 10.7 Guaranty dated July 31, 2003 by CrossingGuard, Inc. to Laurus Master Fund, Ltd. 99.1 Press Release dated August 4, 2003. 4 EX-3 3 bylaws.txt AMENDED BYLAWS EXHIBIT 3.1 ----------- AMENDED BY-LAWS OF NESTOR, INC. --------------------------------- ARTICLE I OFFICES SECTION 1.1 REGISTERED OFFICE. The registered office shall be established and maintained at the office of the United States Corporation Company, in the City of Dover, in the County of Kent, in the State of Delaware, and said corporation shall be the registered agent of this corporation in charge thereof. SECTION 1.2 OTHER OFFICES. The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1 ANNUAL MEETINGS. Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. In the event the Board of Directors fails to so determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the registered office of the corporation in Delaware on If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting. SECTION 2.2 OTHER MEETINGS. Meetings of stockholders for any purpose other than the election of directors may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting. SECTION 2.3 VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be elected by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware. A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.4 QUORUM. Except as otherwise required by Law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at 1 the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 2.5 SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes may be called by the President or Secretary, or by resolution of the directors. SECTION 2.6 NOTICE OF MEETINGS. Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than sixty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat. SECTION 2.7 ACTION WITHOUT MEETING. Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS SECTION 3.1 NUMBER AND TERM. The number of directors which shall constitute the whole Board of Directors shall be determined from time to time by resolution of the Board of Directors, but in no event shall be less than three (3) nor more than seven (7). The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. SECTION 3.2 RESIGNATIONS. Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. SECTION 3.3 VACANCIES. Subject to any agreement in writing between the stockholders and the corporation, if the office of any director, member of a committee or other officer becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen. SECTION 3.4 REMOVAL. Except as herein provided and subject to any agreement between the stockholders and the corporation, any director or directors may be removed for cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote. SECTION 3.5 INCREASE OF NUMBER. The number of directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify. SECTION 3.6 POWERS. The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders. 2 SECTION 3.7 COMMITTEES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 3.8 MEETINGS. The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors. Regular meetings of the directors may be held without notice at such places and times as shall be determined from time to time by resolution of the directors. Special meetings of the board may be called by the President or by the Secretary on the written request of any two directors on at least two day's notice to each director and shall be held at such place or places as may be determined by the directors, or as shall be stated in the call of the meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. SECTION 3.9 QUORUM. A majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. SECTION 3.10 COMPENSATION. Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. SECTION 3.11 ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 4.1 OFFICERS. The officers of the corporation shall be a President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman, one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they 3 may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. SECTION 4.2 OTHER OFFICERS AND AGENTS. The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 4.3 CHAIRMAN. The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. SECTION 4.4 VICE CHAIRMAN. The Vice Chairman shall have and perform such duties as shall be assigned to him by the Board of Directors. SECTION 4.5 PRESIDENT. The President shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer or an Assistant Secretary, or an Assistant Treasurer. SECTION 4.6 VICE-PRESIDENT. Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors. SECTION 4.7 TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe. SECTION 4.8 SECRETARY. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the President, and attest the same. SECTION 4.9 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors. ARTICLE V MISCELLANEOUS SECTION 5.1 CERTIFICATES OF STOCK. Certificate of stock, signed by the Chairman or Vice Chairman of the Board of Directors, if they be elected, President or Vice-President, and the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. Any of or all the signatures may be facsimiles. 4 SECTION 5.2 LOST CERTIFICATES. A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate. SECTION 5.3 TRANSFER OF SHARES. The shares of stock of the corporation shall he transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A full record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer. SECTION 5.4 STOCKHOLDERS RECORD DATE. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5.5 DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or such other purposes as the directors shall deem conducive to the interests of the corporation. SECTION 5.6 SEAL. The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 5.7 FISCAL YEAR. The fiscal year of the corporation shall be determined by resolution of the Board of Directors. SECTION 5.8 CHECKS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors. SECTION 5.9 NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as if appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute. Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. 5 ARTICLE VI AMENDMENTS These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal or By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock issued and outstanding and entitled to vote thereat, or by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or any special meeting of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting. ARTICLE VII INDEMNIFICATION The Corporation shall (a) indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, and (b) indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was a director or officer of the Corporation, or served at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any such action, suit or proceeding, in each case to the fullest extent permissible under subsections (a) through (e) of Section 145 of the General Corporation Law of the State of Delaware or the indemnification provisions of any successor statute. The foregoing right of indemnification shall in no way be exclusive of any other rights of indemnification to which any such person may be entitled, under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, and shall inure to the benefit of the heirs, executors and administrators of such a person. 6 EX-10 4 conv_note.txt CONVERTIBLE NOTE EXHIBIT 10.1 ------------ Execution Copy -------------- THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NESTOR, INC., THAT SUCH REGISTRATION IS NOT REQUIRED. CONVERTIBLE NOTE ---------------- FOR VALUE RECEIVED, NESTOR, INC., 400 Massasoit Avenue Suite 200, Providence, Rhode Island 02914, a Delaware corporation (hereinafter called the "Borrower"), hereby promises to pay to SILVER STAR PARTNERS I, LLC, Suite 300, The Professional Building, 2 Corpus Christi, Hilton Head Island, South Carolina 29938, a Delaware limited liability company (the "Holder"), or its registered assigns or successors in interest, on order, without demand, the sum of Two Million Dollars ($2,000,000), together with any accrued and unpaid interest and fees on January 15, 2004 (the "Maturity Date"). The following terms shall apply to this Note: ARTICLE I INTEREST & AMORTIZATION 1.1 Interest Rate. Interest payable on unpaid principal amount of this Note shall accrue at a rate of seven percent (7.00%) per annum (the "Contract Rate") until the Note is paid in full, commencing on the date hereof and shall be due and payable on the earlier of the Maturity Date, accelerated or otherwise, or the date of the prepayment in full hereof. 1.2 Principal. The Borrower shall repay the principal on the Note in full on the Maturity Date. Borrower may prepay this Note, in whole or part, at any time prior to the Maturity Date. ARTICLE II BORROWER PAYMENT OPTIONS 2.1 Payment in Cash or Common Stock. Subject to the terms hereof, the Borrower has the sole option to elect whether to satisfy its payment obligations hereunder in either in cash or in shares of the common stock of Borrower, par value $.01 ("Common Stock"), or a combination of both. Upon any repayment of 1 obligations hereunder, in whole or part, Borrower shall deliver to the Holder written notice of such election and the specified payment in either cash or Common Stock, or a combination of both. If the Corporation repays all or a portion of its obligations hereunder in shares of Common Stock, the number of such shares to be issued for such repayment shall be the number determined by dividing (x) the portion of the repayment to be paid in shares of Common Stock, by (y) the Conversion Price, as hereinafter defined. 2.2 Registration. Common Stock issued by Borrower in satisfaction of its obligations hereunder shall be "Registerable Securities" as that term is defined in that certain Investor Rights Agreement by and between Borrower and Holder dated as of January 15, 2003. 2.3 Conversion Price. With respect to any repayment of Borrower's obligations hereunder in shares of Common Stock, the "Conversion Price" with respect to such repayment shall be equal to the price of the Common Shares issued to broker/dealers acting as underwriters or placement agents in the first registered public offering of such shares made by Borrowers after the date hereof or, if no such offering occurs before the Maturity Date, then the 20 day moving average closing price of the Common Stock during the Determination Period less a 20% discount; provided, however, that if after the date hereof and before the date of such repayment, the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. As used in the foregoing sentence, the "Determination Period" shall mean the month of November 2003, if in the reasonable judgement of the Borrower, all material information relating to the Borrower has been publicly available during such period, and otherwise, the earliest 30 day period after November 1, 2003 during which, in the reasonable judgement of the Borrower, all material information about the Borrower has been publicly available. 2.4 Due Issuance. The Borrower represents that upon issuance, any shares of Common Stock issued in satisfaction of Borrower's obligations hereunder shall be duly and validly issued, fully paid and non-assessable. 2 ARTICLE III EVENTS OF DEFAULT Upon the occurrence and continuance of an Event of Default beyond any applicable grace period, the Holder may make all sums of principal, interest and other fees then remaining unpaid hereon and all other amounts payable hereunder due and payable within five (5) days of written notice from Holder to Borrower (each period being a "Default Notice Period") of an Event of Default (as defined below). If during the Default Notice Period, Borrower cures the Event of Default (other than a payment default described in Section 3.1 below), the Event of Default will no longer exist and any rights Holder had pertaining to or arising from the Event of Default will no longer exist. The occurrence of any of the following events is an Event of Default ("Event of Default"): 3.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails to pay any installment of principal, interest or other fees hereon, when due and such failure continues for a period of fourteen (14) business days after the due date. 3.2 Breach of Covenant. The Borrower breaches any material covenant or other term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of twenty (20) days after written notice to the Borrower from the Holder. 3.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein shall be false or misleading and shall not be cured for a period of twenty (20) business days after written notice thereof is received by the Borrower from the Holder. 3.4 Bankruptcy, Receiver or Trustee. Borrower shall (i) apply for, consent to, or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or other fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within ninety (90) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the foregoing. 3 3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its property or other assets for more than $500,000, and shall remain unvacated, unbonded or unstayed for a period of ninety (90) days. DEFAULT RELATED PROVISIONS 3.6 Payment Grace Period. The Borrower shall have a three (3) business day grace period to pay any monetary amounts due under this Note, after which grace period a default interest rate of five percent (5%) per annum above the then applicable interest rate hereunder shall apply to the monetary amounts due. 3.7 Conversion Privileges. The conversion right set forth in Article II shall remain in full force and effect immediately from the date hereof and until the Note is paid in full. ARTICLE IV MISCELLANEOUS 4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 4.2 Notices. Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by telephonically confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Borrower at its address as set forth on the first hereof, with a copy to Benjamin M. Alexander, Esq., Partridge Snow & Hahn, LLP, 180 South Main Street, Providence, RI, 02903, facsimile number (401) 861-8292 and to the Holder at its address set forth on the first page hereof, with a copy to David Levenson, Esq., 7947 Turncrest Drive, Potomac, Maryland 20854, facsimile number (301) 299-8093, or at such other addresses as the Borrower or the Holder may designate by ten days advance written notice to the other parties hereto. 4 4.3 Amendment Provision. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder after written notice to Borrower. 4.5 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Rhode Island, without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Rhode Island or in the federal courts located in the state of Rhode Island. Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. 4.6 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 4.7 Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other. [The remainder of this page intentionally left blank.] 5 IN WITNESS WHEREOF, Borrower has caused this Convertible Note to be signed in its name effective as of this 15 day of October, 2003. NESTOR, INC. By: /S/ Nigel P. Hebborn -------------------------------- Nigel P. Hebborn, EVP & CFO WITNESS: /s/ Mary Ann Branin - ------------------------------------ Mary Ann Branin, Executive Assistant 6 EX-99 5 bd_press.txt NEW DIRECTORS PRESS RELEASE Nestor, Inc. 400 Massasoit Avenue, Suite 200 East Providence, RI 02914 Ph: (401) 434-5522 Fax: (401) 434-5809 www.nestor.com FOR IMMEDIATE RELEASE CONTACT: Nigel P. Hebborn, Executive Vice President (401) 434-5522 ext. 714 www.nestor.com NESTOR ELECTS THREE NEW MEMBERS TO ITS BOARD OF DIRECTORS PROVIDENCE, RI - October 16, 2003 - Nestor, Inc. (OTC: NESO) is pleased to announce the election of three new members to its Board of Directors. Joining the Board are Susan A. Keller, Dr. Albert H. Cox and Terry E. Fields. Nestor's CEO, William Danzell, states that, "through CrossingGuard, Nestor's patented technology, we can save lives and reduce the number of traffic violations at intersections. As traffic volumes continue to increase and municipalities and state governments begin to realize the positive impact of Automated Red-Light Enforcement, we expect the demand for Nestor's CrossingGuard product to grow. The potential size and scope of the market for red light enforcement has caused us to seek out the best people to assist Nestor in its anticipated growth. The new Board members understand the needs of a growth company, and we look forward to their contributions." Susan Keller, Partner at Edwards & Angell, LLP, Rhode Island's largest law firm, specializes in corporate financings. Ms. Keller's legal career has focused on mergers and acquisitions, private equity financing, senior and subordinated debt transactions and general corporate work. Several of the largest financial institutions have relied on her expertise in their corporate restructurings. Dr. Albert Cox, presently a private investor, was the founder and President of Merrill Lynch Economics. He also served as an economic advisor to President Richard Nixon. Dr. Cox has provided economic and financial market advice to many of the world's leading financial institutions and has served on numerous corporate Boards. Terry Fields is presently the Chief Financial Officer of Community Loans of American, Inc., headquartered in Atlanta, Georgia. Mr. Fields served as the Chief Financial Officer and interim CEO of Seibels Bruce, a publicly traded insurance company. Nestor Traffic Systems is a provider of innovative, video-based Red-Light Enforcement solutions and services. Nestor's patented video technology provides solutions that help reduce red-light violations and improve traffic safety at intersections. In addition, CrossingGuard is the only automated red-light system in the industry that offers Collision Avoidance, an optional safety feature that actually helps prevent intersection collisions. The CrossingGuard product offers municipalities an opportunity to significantly reduce red light running violations and demonstrate a commitment to safety. Nestor brings intelligence to intersections. -MORE- NESTOR ELECTS THREE NEW MEMBERS TO ITS BOARD OF DIRECTORS Page 2 Any statements in this press release about future expectations, plans and prospects for Nestor, including statements about new customers and other statements containing the words "expects," "will," "anticipates," and similar expressions, constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: market acceptance of our products, competition and other factors discussed in Exhibit 99.1 to our most recent annual report filed with the SEC. In addition, the forward-looking statements included in this press release represent our views as of October 15, 2003 and we specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to October 15, 2003. CrossingGuard is a registered trademark of Nestor, Inc. # # # EX-99 6 conv_pr.txt CONV. NOTE PRESS RELEASE Nestor, Inc. 400 Massasoit Avenue, Suite 200 East Providence, RI 02914 Ph: (401) 434-5522 Fax: (401) 434-5809 www.nestor.com FOR IMMEDIATE RELEASE CONTACT: Nigel P. Hebborn, Executive Vice President (401) 434-5522 ext. 714 www.nestor.com NESTOR RAISES AN ADDITIONAL $2 MILLION PROVIDENCE, RI - October 17, 2003 - Nestor, Inc. (OTC: NESO) is pleased to announce that it has received $2 million for a convertible note issued to Silver Star Partners I, LLC. Nestor and its subsidiary, Nestor Traffic Systems, Inc. will use the proceeds as operating capital to continue delivery of the company's core safety product, CrossingGuard(R). William B. Danzell, CEO of Nestor stated, "The last several months represent significant progress for Nestor. Since August, we have completed installation of fourteen new approaches, continuing to meet both our Company objectives and our clients' expectations. This addition of capital strengthens our position and enables us to maintain our current installation schedule while working to deliver CrossingGuard to new clients". CrossingGuard uses patented digital imaging technology to deliver the most advanced Automated Red-light Enforcement available. Through the use of multiple videos and 24/7 real-time monitoring, CrossingGuard ensures system integrity and system reliability. These features, coupled with the unique Collision Avoidance safety feature, are helping to make standard intersections intelligent. Statements in this press release about future expectations, plans and prospects for Nestor, including statements containing the words "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements and investors should not place undue reliance on our forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various factors, including: market acceptance of our products, competition and other factors discussed in Exhibit 99.1 to our most recent annual report filed with the SEC. The forward-looking statements included in this press release represent our current views and we specifically disclaim any obligation to update these forward-looking statements in the future. CrossingGuard is a registered trademark of Nestor Traffic Systems, Inc. For more information, call (401) 434-5522 or visit www.nestor.com. # # # -----END PRIVACY-ENHANCED MESSAGE-----