0000909012-01-500381.txt : 20011009
0000909012-01-500381.hdr.sgml : 20011009
ACCESSION NUMBER: 0000909012-01-500381
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 5
FILED AS OF DATE: 20010924
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: NTS INVESTORS LLC
CENTRAL INDEX KEY: 0001158724
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 954838401
FILING VALUES:
FORM TYPE: SC 13D
BUSINESS ADDRESS:
STREET 1: 2049 CENTURY PARK EAST
STREET 2: 4TH FLOOR
CITY: LOS ANGELES
STATE: CA
ZIP: 90067
BUSINESS PHONE: 3107124000
SUBJECT COMPANY:
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: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-35599
FILM NUMBER: 1743465
BUSINESS ADDRESS:
STREET 1: ONE RICHMOND SQ
CITY: PROVIDENCE
STATE: RI
ZIP: 02906
BUSINESS PHONE: 4013319640
MAIL ADDRESS:
STREET 1: 1 RICHMOND SQUARE
CITY: PROVIDENCE
STATE: RI
ZIP: 02906
SC 13D
1
t23199.txt
NTS INVESTORS / NESTOR INC.
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 13D*
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
Nestor, Inc.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
641074109
(CUSIP Number)
Jane Katz Crist
12400 Wilshire Blvd., Suite 400, Los Angeles, CA 90025
(310) 207-9818
(Name, address and telephone number of person
authorized to receive notices and communications)
September 13, 2001
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
(Continued on following pages)
-----------------
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP NO. 641074109 13D PAGE 2 OF 8 PAGES
-----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
NTS Investors, LLC 95-4838401
-----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [ ]
------------------------------------------------------------------------------
(3) SEC USE ONLY
------------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
PF
------------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
------------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
SHARES 16,757,368
--------------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY -0-
--------------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
REPORTING 17,757,368
--------------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
-0-
------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
17,757,368
------------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
34.6%
-------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
OO
-------------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP NO. 641074109 13D PAGE 3 OF 8 PAGES
-------------------------------------------------------------------------------
(1) NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS (ENTITIES ONLY)
David A. Polak
-------------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [ ]
-------------------------------------------------------------------------------
(3) SEC USE ONLY
-------------------------------------------------------------------------------
(4) SOURCE OF FUNDS **
PF
-------------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
-------------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
-------------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER
SHARES 16,757,368
---------------------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY -0-
---------------------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER
REPORTING 17,757,368
---------------------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER
-0-
-------------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
17,757,368
-------------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
-------------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
34.6%
-------------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON **
IN
-------------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP NO. 641074109 13D PAGE 4 OF 8 PAGES
Item 1. Security and Issuer.
This statement on Schedule 13D (this "Schedule 13D") relates to the
common stock, no par (the "Common Stock") and a non-qualified stock option (the
"Option") of Nestor, Inc. (the "Company"). The Company's principal executive
offices are located at One Richmond Square, Providence, Rhode Island 02906.
Item 2. Identity and Background.
(a) This statement is filed by:
(i) NTS Investors, LLC, a Delaware limited liability
company("NTS"), with respect to the shares of Common Stock
and Option directly owned by it; and
(ii) Mr. David A. Polak ("Mr. Polak") with respect to the shares
of Common Stock and Option directly owned by NTS. The
foregoing persons are hereinafter sometimes collectively
referred to as the "Reporting Persons." Any disclosures
herein with respect to persons other than the Reporting
Persons are made on information and belief after making
inquiry to the appropriate party.
(b) The address of the principal business and principal office of NTS is
2049 Century Park East, 4th Floor, Los Angeles, California 90067. The
business address of Mr. Polak is 2049 Century Park East, 4th Floor,
Los Angeles, California 90067.
(c) The principal business of NTS is to invest in the Company and/or its
subsidiaries. Mr. Polak serves as the Managing Member of NTS.
(d) None of the Reporting Persons has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations).
(e) None of the Reporting Persons has, during the last five years, been a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and, as a result of such proceeding, was, or is
subject to, a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violation with respect
to such laws.
(f) NTS is a limited liability company organized under the laws of the
State of Delaware. Mr. Polak is a United States citizen.
Item 3. Source and Amount of Funds and Other Consideration.
This Schedule 13D is being filed in accordance with Rule 13d-1(a)
because NTS now holds more than 5% of the Company's securities.
NTS acquired 16,757,368 shares of Common Stock of the Company as a
result of (a) the merger of the Company into the Company's subsidiary, Nestor
Traffic Systems, Inc. ("Nestor Traffic") on September 13, 2001 (the "Merger"),
(b) the cancellation on September 13, 2001 of a $4,000,000 secured note to
Nestor Traffic in exchange for Common Stock of the Company pursuant to the terms
of a Secured Note Agreement dated January 9, 2001 (the "Secured Note
Agreement")(1) between the Company, Nestor Traffic and NTS, and (c) an
additional investment of $4,000,000 by NTS on September 13, 2001. The sources of
funds for the secured note and the additional investment were the personal funds
of the members of NTS. Mr. Polak does not directly own any shares of Common
Stock.
CUSIP NO. 641074109 13D PAGE 5 OF 8 PAGES
(1) Pursuant to the terms of the Secured Note Agreement, the Company,
Nestor Traffic and NTS agreed to take all of the steps necessary to
effect a merger or other similar transaction between the Company and
Nestor Traffic. Upon consummation of the merger, the Secured Note
Agreement provided that NTS Investors would increase its investment in
Nestor Traffic to an aggregate amount of at least $7,500,000 or up to a
maximum of $8,000,000, and in exchange for such maximum additional
funding, NTS would acquire 33.34% of the issued and outstanding common
stock of Nestor.
At about the same time, NTS and the Company entered into an Investor's
Agreement whereby the Company granted a non-qualified stock option to NTS (the
"Option") to purchase up to an aggregate of one million shares of the Common
Stock at an exercise price of $1.28 per share. The Option expires three years
from September 13, 2001. The form of the Investor's Agreement is attached as
Exhibit 1 to this Schedule 13D. Mr. Polak does not directly own the Option.
The preceding summary of the Investor's Agreement does not purport to
be complete. Reference is made to the full text of the Investor's Agreement that
is filed as Exhibit 1 to this statement and is incorporated in this Schedule 13D
by this reference.
Item 4. Purpose of the Transaction.
The purpose of the acquisition of the shares of Common Stock and the Option
by the Reporting Persons is for investment. In connection with NTS' additional
investment of $4,000,000 into the Company and the Merger, NTS entered into a
Stockholders' Agreement with the Company, Alan Wiener, Alvin Siteman and Robert
Carroll, (the "Stockholders' Agreement") pursuant to which these stockholders
have the right to designate individuals to serve as the Company's directors.
Pursuant to the Stockholders' Agreement, NTS shall be entitled to
designate one-third of the members of the Company's board of directors as long
as NTS and its affiliates own at least 25% of the Company's outstanding common
stock; NTS shall be entitled to designate two-ninths of the members of the
Company's board of directors if NTS and its affiliates own less than 25% but
more than 15% of the Company's common stock; NTS shall be entitled to designate
one-ninth of the members of the Company's board of directors if NTS and its
affiliates own less than 15% but more than 5% of the Company's common stock. The
parties also agreed that if the Company's board of directors is enlarged beyond
nine members, each of NTS, Messrs. Wiener, Siteman and Carroll shall be given
the right to designate an additional number of directors proportionate to the
number of directors each of them had previously designated. The Stockholders'
Agreement shall terminate upon the earlier to occur of: (i) four years after the
effective date of the Merger; or (ii) the date on which NTS (and its affiliates)
own less than five percent of the Company's outstanding stock; provided that the
Stockholders' Agreement shall terminate with respect to any stockholder who is a
party when such stockholder and/or his affiliates no longer own any shares of
the Company's common stock.
The preceding summary of the Stockholders' Agreement does not purport
to be complete. Reference is made to the full text of the Stockholders'
Agreement that is filed as Exhibit 2 to this statement and is incorporated in
this Schedule 13D by this reference.
CUSIP NO. 641074109 13D PAGE 6 OF 8 PAGES
The Agreement and Plan of Merger by and between the Company, Nestor
Merger Sub Corp. and Nestor Traffic (the "Merger Agreement") provides NTS with
additional anti-dilutive rights. Specifically, with respect to options or
warrants issued to, or for the benefit of, non-employee members of the Company's
board of directors of either the Company or Nestor Traffic, Alan M. Wiener,
Herbert S. Meeker and Robert M. Carroll outstanding at the effective time of the
merger, and certain common stock purchase warrants issued to others, which in
the aggregate are equal to approximately 5,000,000 warrants (collectively, the
"Stock Rights"), NTS shall have the right: (i) to purchase for cash (or such
other consideration as is being paid for the exercise of such Stock Rights), at
the same exercise price at which such Stock Right has been exercised, such
number of additional shares of the Company's Common Stock, equal to one-half of
the number of shares of the Company's Common Stock into which such Stock Right
has been converted or exchanged, as the case may be.
The preceding summary of the Merger Agreement does not purport to be
complete. Reference is made to the full text of the Merger Agreement that is
filed as Exhibit 3 to this statement and is incorporated in this Schedule 13D by
this reference.
Each of the Reporting Persons may make further purchases of shares of
Common Stock from time to time and may dispose of any or all of the shares of
Common Stock held by him or it at any time. Except in Mr. Polak's capacity as a
director of the Company, or as set forth in this Item 4 or as provided in the
Stockholders' Agreement or the Investor's Agreement, or as otherwise referred to
or described in this Schedule 13D, neither NTS nor Mr. Polak have any present
plans or proposals which would relate to or result in any of the matters set
forth in subparagraphs (b) - (j) of Item 4 of Schedule 13D.
Each of the Reporting Persons may, at any time and from time to time,
review or reconsider his or its position and formulate plans or proposals with
respect thereto, but has no present intention of doing so.
Item 5. Interest in Securities of the Issuer.
A. NTS Investors, LLC
(a) Aggregate number of shares and Option beneficially owned: 17,757,368
Percentage: 34.6%
Aggregate number of shares beneficially owned: 16,757,368 Option to
acquire 1,000,000 shares The percentages used herein and in this
Schedule 13D are based upon the Company's pro-forma financial
statements in the Company's Form S-4 filed on August 6, 2001.
(b) 1. Sole power to vote or direct vote: 16,757,368
2. Shared power to vote or direct vote: -0-
3. Sole power to dispose or direct the disposition: 17,757,368
including Option to acquire 1,000,000 shares
4. Shared power to dispose or direct the disposition: -0-
(c) NTS did not enter into any transactions in the Common Stock of the
Company within the last sixty days.
(d) Apart from Mr. Polak, under the terms of the operating agreement of
NTS, other members of NTS who own approximately 62.5% of NTS would
share accordingly in dividends and any proceeds from the sale by NTS
of the Common Stock or the shares underlying the Option.
(e) Not applicable.
CUSIP NO. 641074109 13D PAGE 7 OF 8 PAGES
B. David A. Polak
(a) Aggregate number of shares and Option beneficially owned: 17,757,368
Percentage: 34.6%
Aggregate number of shares beneficially owned: 16,757,368
Option to acquire 1,000,000 shares
The percentages used herein and in this Schedule 13D
are based upon the Company's pro-forma financial
statements in the Company's Form S-4 filed on August
6, 2001.
(b) 1. Sole power to vote or direct vote: 16,757,368
2. Shared power to vote or direct vote: -0-
3. Sole power to dispose or direct the disposition: 17,757,368
including Option to acquire 1,000,000 shares
4. Shared power to dispose or direct the disposition: -0-
(c) Mr. Polak did not enter into any transactions in the Common Stock of
the Company within the last sixty days.
(d) Apart from Mr. Polak, under the terms of the operating agreement of
NTS, other members of NTS who own approximately 62.5% of NTS would
share accordingly in dividends and any proceeds from the sale by NTS
of the Common Stock or the shares underlying the Option.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Other than the Investor's Agreement attached as Exhibit 1 hereto, the
Stockholders' Agreement attached as Exhibit 2 hereto, the Merger Agreement
attached as Exhibit 3 hereto, and Joint Acquisition Statement attached as
Exhibit 4 hereto, there are no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons named in Item 2 hereof and
between such persons and any person with respect to any securities of the
Company, including but not limited to transfer or voting of any other
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, divisions of profits or loss, or the giving or
withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
There is filed herewith as Exhibit 1 the Investor's Agreement described
above, as Exhibit 2 the Stockholders' Agreement described above, as Exhibit 3
the Merger Agreement described above and as Exhibit 4, a written agreement
relating to the filing of joint acquisition statements as required by Rule
13d-1(k)(1) under the Securities Exchange Act of 1934, as amended.
CUSIP NO. 641074109 13D PAGE 8 OF 8 PAGES
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
DATED: September 21, 2001
/s/ David A. Polak
----------------------
David A. Polak, individually, and as
managing member of
NTS Investors, LLC
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1 Form of Investor's Agreement dated as of September 12, 2001,
by and among Nestor, Inc. and NTS Investors, LLC
2 Form of Stockholders' Agreement dated as of September 12,
2001, by and among Nestor, Inc., NTS Investors, LLC, Alan
Wiener, Alvin Siteman and Robert Carroll
3 Form of Agreement and Plan of Merger dated as of June 14,
2001 by and among Nestor, Inc., Nestor Merger Sub Corp. and
Nestor Traffic Systems, Inc.
4 Joint Acquisition Statement by and between David A. Polak
and NTS Investors, LLC dated September 21, 2001
EX-10.1
3
exh10-1.txt
FORM OF INVESTOR'S AGREEMENT
EXHIBIT 1
FORM OF INVESTOR'S AGREEMENT
THIS INVESTOR'S AGREEMENT dated as of the 12th day of
September, 2001 (the "Agreement") by and between NESTOR, INC., a Delaware
corporation having an address of One Richmond Square, Providence, Rhode Island
02906 (the "Company") and NTS INVESTORS, LLC, a Delaware limited liability
company having an address of 2049 Century Park East, 4th Floor, Los Angeles,
California 90067 (the "Investor").
W I T N E S S E T H:
WHEREAS, the Investor, pursuant to the terms of the Secured
Note Agreement dated January 9, 2001 (the "Note"), by and between the Investor
and Nestor Traffic Systems, Inc., a Delaware corporation ("NTS"), agreed to
invest up to $8,000,000 in NTS, subject to, among other things, the consummation
of a merger of NTS and the Company (the "Merger");
WHEREAS, the Merger is being consummated on the date hereof;
WHEREAS, the Investor and the Company desire to set forth
their agreement with respect to certain matters relating to the operations of
the Company; and
WHEREAS, capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the Note.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. GRANT OF NONQUALIFIED STOCK OPTION
(a) CONFIRMATION OF GRANT. The Company hereby evidences and confirms its
grant of a nonqualified stock option (the "Option") to purchase all or
any part of an aggregate of One Million (1,000,000) shares (the
"Shares") of the common stock of the Company, par value $.01 per share
(the "Common Stock") to the Investor as of the date of this Agreement.
The Option is a nonqualified stock option which is not intended to be an
"incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
1.2 Number of Shares. This Option shall be for an aggregate of One Million
(1,000,000) Shares.
1.3 Exercise Price. The exercise price shall be $1.28 per share (the
"Exercise Price"). The total exercise price for all Shares subject to
the Option is $1,280,000.
1.4 Term and Exercisability of the Option. The Option shall expire three (3)
years from the date of this Agreement, and may be exercised prior to its
expiration at such times and for such number of whole Shares as the
Investor may determine, up to 100% of the Shares subject to the Option.
Notwithstanding the foregoing, no exercise shall be effective to the
extent it would require the delivery of fractional Shares.
1.5 Exercise of Option. On or after the date hereof, but prior to the
expiration of the Option in accordance with Paragraph 1.4 above, the
Option may be exercised in whole or in part by the Investor upon
delivery of the following to the Company:
(a) a written notice of exercise which identifies this Agreement and states
the number of Shares then being purchased;
(b) cash (or other consideration acceptable to the Company, in its sole
discretion) in an amount (or, in the case of other consideration, having
a combined value) equal to the aggregate Exercise Price of the Shares
then being purchased;
(c) additional cash or, if acceptable to the Company, in its sole
discretion, shares of Common Stock previously owned by the Investor (or,
if acceptable to the Company, in a combination of both) in an amount or
having a combined value equal to the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal,
state or other applicable tax laws with respect to the taxable income,
if any, recognized by the Investor in connection with the exercise of
this Option (unless the Company and the Investor shall have made other
arrangements for deductions or withholding, including by the withholding
of Shares issuable upon exercise of this Option, provided such
arrangements satisfy the requirements of applicable law); and
(d) a letter, if requested by the Company, in such form and substance as the
Company may require, in its sole discretion, setting forth the
investment intent of the Investor.
Notwithstanding the foregoing, the Investor shall take
whatever additional actions, including, without limitation, the furnishing of an
opinion of counsel, and execute whatever additional documents the Company may,
in its sole discretion, deem necessary or advisable in order to carry out or
effect this Agreement or applicable law.
Upon satisfaction of the conditions and requirements of
Paragraph 1.5 hereof, the Company shall deliver to Investor a certificate or
certificates for the number of Shares in respect of which the Option shall have
been exercised (less any Shares withheld pursuant to clause (c) of this
Paragraph 1.5).
1.6 Restriction On Transfer. This Option and all rights granted hereunder
shall not be transferred by the Investor, shall not be assigned, pledged
or hypothecated in any way, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer this Option,
or to assign, pledge or hypothecate or otherwise dispose of this Option
or of any rights granted hereunder contrary to the provisions hereof, or
upon the levy of any attachment or similar process upon this Option or
such rights, this Option and such rights shall immediately become null
and void. The restrictions described in this Section 1.6 shall not apply
in the event of a distribution of Common Stock or securities convertible
into or exchangeable for Common Stock to members of the Investor,
provided that the distributees thereof agree in writing to be bound by
the terms of this Agreement.
1.7 No Limitation on Rights of the Company.
(a) The grant of this Option shall not in any way affect the right or power
of the Company to make adjustments, reclassifications, or changes in its
capital or business structure or to merge, consolidate, dissolve,
liquidate, sell, or transfer all or any part of its business or assets.
(b) (i) Upon changes in the outstanding Common Stock by reason of a stock
dividend, stock split, reverse stock split, subdivision,
recapitalization, reclassification, merger, consolidation (where the
Company is a surviving corporation), combination or exchange of shares
of Common Stock, separation, or reorganization, or in the event of an
extraordinary dividend, "spin-off," liquidation, other substantial
distribution of assets of the Company or acquisition of property or
stock or other change in capital of the Company, or the issuance by the
Company of shares of its capital stock without receipt of full
consideration therefor, or rights or securities exercisable, convertible
or exchangeable for shares of such capital stock, or any similar change
affecting the Company's capital structure, the aggregate number, class
and kind of shares of stock under this Option and the exercise price per
share applicable to this Option shall be appropriately adjusted by the
Company in its discretion to preserve the benefits or potential benefits
intended to be made available under the Option or otherwise necessary to
reflect any such change.
(ii) Fractional shares of Common Stock resulting from any adjustment in the
Option pursuant to Section 1.7(b)(i) shall be aggregated until, and
eliminated at, the time of exercise of the Option. Notice of any
adjustment shall be given by the Company to the Investor and such
adjustment (whether or not such notice is given) shall be effective and
binding.
(iii) In the event of (A) a stock sale, merger, consolidation, combination,
reorganization or other transaction (other than through a public
offering of Common Stock) resulting in less than fifty percent (50%) of
the combined voting power of the surviving or resulting entity being
owned by the stockholders of the Company immediately prior to such
transaction, or (B) the liquidation or dissolution of the Company in
connection with the sale or other disposition of all or substantially
all of the assets or business of the Company (other than in the case of
Section 1.7(b)(i) above) (in each case a "Change in Control"):
(1) In its discretion, and on such terms and conditions as it deems
appropriate, the Company may provide by resolution adopted prior to the
occurrence of the Change in Control, that the Option shall be adjusted
by substituting for Common Stock subject to the Option, stock or other
securities of the surviving corporation or any successor corporation to
the Company, or a parent or subsidiary thereof, or that may be issuable
by another corporation that is a party to the transaction resulting in
the Change in Control, whether or not such stock or other securities are
publicly traded, in which event the aggregate exercise price shall
remain the same and the amount of shares or other securities subject to
the Option shall be the amount of shares or other securities which could
have been purchased on the closing date or expiration date of such
transaction with the proceeds which would have been received by the
Investor if the Option had been exercised in full (or with respect to a
portion of such Option, as determined by the Committee, in its
discretion) prior to such transaction or expiration date and the
Investor exchanged all of such shares in the transaction.
(2) In its discretion, and on such terms and conditions as it deems
appropriate, the Company may provide by resolution adopted prior to the
occurrence of the Change in Control, that the Option shall be converted
into a right to receive cash on or following the closing date or
expiration date of the transaction resulting in the Change in Control in
an amount equal to the highest value of the consideration to be received
in connection with such transaction for one share of Common Stock, or,
if higher, the highest fair market value of the Common Stock during the
thirty (30) consecutive business days immediately prior to the closing
date or expiration date of such transaction, less the per share exercise
price of the Option, multiplied by the number of shares of Common Stock
subject to the Option, or a portion thereof.
(3) The Company may, in its discretion, provide that the Option cannot be
exercised after such a Change in Control.
1.8 Rights as a Shareholder. The Investor shall have the rights of a
shareholder with respect to the Shares covered by the Option only upon
becoming the holder of record of those Shares.
1.9 Compliance with Applicable Law. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for Shares pursuant to the exercise of the
Option, unless and until the Company is advised by its counsel that the
issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authority, and the
requirements of any exchange upon which Shares are traded. The Company
shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended)
(the "1933 Act") or to take any other action in order to cause the
issuance and delivery of such certificates to comply with any such law,
regulation or requirement. The Company may require, as a condition of
the issuance and delivery of such certificates and in order to ensure
compliance with such laws, regulations, and requirements, that the
Investor make such covenants, agreements, and representations as the
Company, in its sole discretion, considers necessary or desirable.
1.10 No Obligation to Exercise Option. The granting of the Option shall
impose no obligation upon the Investor to exercise the Option.
1.11 Investment Representation. The Investor is acquiring the Option for its
own account and not with a present intention to make any sale,
disposition, distribution or other transfer of the Option or the Common
Stock underlying the Option in a manner that will violate any applicable
securities laws and understands that neither the Option nor the Common
Stock underlying the Option has been registered under the 1933 Act or
under the securities laws of any state. The granting of the Option was
directly communicated to the Investor in such a manner that it had the
opportunity to ask questions and receive answers concerning the Company
that it has deemed necessary and advisable for purposes of determining
whether or not to acquire the Option which it is being granted
hereunder. The Investor is sophisticated in financial matters and is
able to evaluate the risks and benefits of its investment in the Company
and is able to bear the economic risk of its investment in the Company.
The Investor acknowledges that it has evaluated the risks and merits of
its investment in the Company solely with respect to its own interests.
2. INTERPRETATION OF THIS AGREEMENT
2.1 Governing Law. Except to the extent preempted by Federal law, this
Agreement shall be governed by and construed in accordance with the laws
of the State of California applicable to contracts made and to be
performed entirely within such State (without giving effect to the
principle of conflicts of laws).
2.2 Section Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
3. MISCELLANEOUS
3.1 Notices.
(a) All communications under this Agreement shall be in writing and shall be
delivered by hand or facsimile or mailed by overnight courier or by
registered or certified mail, postage prepaid:
(i) if to the Company, to:
Nestor, Inc.
One Richmond Square
Providence, Rhode Island 02906
Attention: Mr. David Fox
Facsimile: (401) 331-7309
With a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Joel M. Handel, Esq.
Facsimile: (212) 702-5941
or at such other address or facsimile number as it may have furnished in writing
to the Investor;
(ii) if to the Investor, to:
NTS Investors, LLC
2049 Century Park East
4th Floor
Los Angeles, California 90067
Attn.: David A. Polak
Facsimile: (___) __________
with a copy to:
Weinstein, Boldt, Halhide & Camel
1801 Century Park East
Suite 2200
Los Angeles, California 90067-2336
Attn: David J. Camel, Esq.
Facsimile: (310) 552-7938
or at such other address or facsimile number as may have been furnished to the
Company in writing;
(iii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile (with confirmation of
transmission), on the date of such delivery; if mailed by
courier, when received; and if mailed by registered or
certified mail, when received.
(iv) Reproduction of Documents. This Agreement and all documents
relating thereto, including, without limitation, any
consents, waivers and modifications which may hereafter be
executed may be reproduced by the Investor and the Company
by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and the
Investor may destroy any original document so reproduced.
The parties hereto agree and stipulate that any such
reproduction shall be admissible in evidence as the
original itself in any judicial or administrative
proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investor
in the regular course of business) and that any
enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
3.2 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of
each of the parties.
3.3 Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire understanding of the parties hereto and
supersedes all prior understanding among such parties with
respect to the subject matter herein. This Agreement may be
amended, and the observance of any term of this Agreement may be
waived, with (and only with) the written consent of each of the
parties hereto.
3.4 Severability. In the event that any part or parts of this
Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such
determination shall not effect the remaining provisions of this
Agreement which shall remain in full force and effect.
3.5 Counterparts; Facsimile Signatures. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original and all of which together shall be considered
one and the same agreement. Delivery of an executed counterpart
of this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart
thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
COMPANY: INVESTOR:
NESTOR, INC. NTS INVESTORS, LLC
By: _______________________ By: ________________________
Name: David A. Polak
Title: Manager
EX-10.2
4
exh10-2.txt
FORM OF STOCKHOLDER'S AGREEMENT
EXHIBIT 2
FORM OF STOCKHOLDERS AGREEMENT
This Stockholders' Agreement (this "Agreement") dated as of September
12, 2001, by and among NTS INVESTORS, LLC, a Delaware limited liability company
("NTSINV"), NESTOR, INC., a Delaware corporation (the "Company"), ALAN M.
WIENER, an individual, ALVIN SITEMAN, an individual, and ROBERT M. CARROLL, an
individual. Each of the parties hereto (other than the Company) and each other
person who shall hereafter become a party or agree to become a party or will be
bound by the terms of this Agreement is sometimes herein referred to
individually as a "Stockholder" and all of such parties are sometimes
collectively herein referred to as "Stockholders," and Alan M. Wiener, Alvin
Siteman and Robert M. Carroll shall sometimes be collectively referred to as the
"NTS Designees".
RECITALS:
WHEREAS, NTSINV, pursuant to the terms of a Secured Note Agreement (the
"Note") dated January 9, 2001 by and among NTSINV and Nestor Traffic Systems,
Inc., a Delaware corporation ("NTS"), agreed to invest up to $8,000,000 in NTS
subject to, among other things, the consummation of a merger between NTS and the
Company (the "Merger"); and
WHEREAS, in contemplation of the consummation of the Merger; and
WHEREAS, in accordance with paragraph 21(c) of the Note, the parties
hereto deem it to be in their best interests and in the best interests of the
Company to provide for consistent and uniform management and governance of the
Company and desire to enter into this Agreement in order to effectuate such
purposes.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
4.
DEFINITIONS
4.1 Defined Terms. As used herein, the terms below shall have the
following meanings:
"Affiliates" shall mean with respect to a Person, any other
Person controlling, controlled by or under common control with, or the members,
parents, spouse, lineal descendants or beneficiaries of, such Person.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Common Stock" shall mean the common stock of the Company.
"Control" shall mean, with respect to any Person, the power to
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise.
"Effective Date" shall mean the effective date of the Merger.
"Person" shall mean an individual, partnership, limited
liability company, joint venture, corporation, trust or unincorporated
organization.
5.
BOARD OF DIRECTORS
5.1 Designation.
(a) From and after the Effective Date, as long as NTSINV and its
Affiliates own at least 25% of the then outstanding Common Stock,
NTSINV shall be entitled to designate one-third (1/3) of the
members of the Board of Directors. For example, in the event the
Board of Directors shall consist of six (6) members, NTSINV shall
be entitled to designate two (2) directors, or in the event the
Board of Directors shall consist of nine (9) members, NTSINV shall
be entitled to designate three (3) directors.
(b) From and after the Effective Date, in the event that NTSINV and
its Affiliates own less than 25% of the then outstanding Common
Stock, but more than 15% of the then outstanding Common Stock,
NTSINV shall be entitled to designate two-ninths (2/9) of the
members of the Board of Directors. For example, in the event the
Board of Directors shall consist of six (6) members, NTSINV shall
be entitled to designate two (2) directors, or in the event the
Board of Directors shall consist of nine (9) members, NTSINV shall
be entitled to designate two (2) directors.
(c) From and after the Effective Date, in the event that NTSINV and
its Affiliates own less than 15% of the then outstanding Common
Stock, but more than 5% of the then outstanding Common Stock, it
shall have the power to designate one-ninth (1/9) of the members
of the Board of Directors. For example, in the event the Board of
Directors shall consist of six (6) members, NTSINV shall be
entitled to designate one (1) director, or in the event the Board
of Directors shall consist of nine (9) members, NTSINV shall be
entitled to designate one (1) director.
(d) From and after the Effective Date, as long as Alan M. Wiener and
his Affiliates own at least 90% of the aggregate number of shares
of Common Stock to be issued to Alan M. Wiener pursuant to the
Merger (after giving effect to any recapitalization,
reclassification, stock split or stock dividend that may occur
after the Effective Date), he shall be entitled to designate one
(1) of the members of the Board of Directors in the event that the
Board of Directors shall consist of nine (9) members.
(e) From and after the Effective Date, as long as Alvin Siteman and
his Affiliates own at least 90% of the aggregate number of shares
of Common Stock to be issued to Alvin Siteman pursuant to the
Merger (after giving effect to any recapitalization,
reclassification, stock split or stock dividend that may occur
after the Effective Date), he shall be entitled to designate one
(1) of the members of the Board of Directors in the event that the
Board of Directors shall consist of nine (9) members.
(f) From and after the Effective Date, as long as Robert M. Carroll
and his Affiliates own at least 90% of the aggregate number of
shares of Common Stock to be issued to Robert M. Carroll pursuant
to the Merger (after giving effect to any recapitalization,
reclassification, stock split or stock dividend that may occur
after the Effective Date), he shall be entitled to designate one
(1) of the members of the Board of Directors in the event that the
Board of Directors shall consist of nine (9) members.
(g) If the size of the Board of Directors is enlarged beyond nine (9)
members, the parties hereto agree that NTSINV and each of the NTS
Designees shall be given the right to designate an additional
number of directors proportionate to the number of directors
previously designated by NTSINV and each of the NTS Designees.
(h) The parties hereto hereby acknowledge the existence of the right
granted to Wand/Nestor Investments L.P. ("Wand") pursuant to the
Securities Purchase Agreement, dated as of March 7, 1996, to
propose two (2) candidates for election to the Board of Directors.
Notwithstanding the foregoing, on June 14, 2001, the Company
received a waiver from Wand of such right with respect to one (1)
candidate for 2001.
(i) The parties hereto hereby acknowledge the existence of the right
granted to Transaction Systems Architects, Inc. ("TSAI") pursuant
to the Securities Purchase Agreement, dated as of April 28, 1998,
to propose one (1) candidate for election to the Board of
Directors. Notwithstanding the foregoing, on May 29, 2001, the
Company received a waiver from TSAI of such right with respect to
2001.
5.2 Removal. Any director designated and elected pursuant to 2.1
hereof may only be removed by the Board of Directors for cause or
at the written request of the designating party (with or without
cause) received by the Board of Directors. In such event or in the
event that any Person for any reason ceases to serve as a member
of the Board of Directors during such director's term of office,
the resulting vacancy on the Board of Directors shall be filled by
an individual recommended by either NTSINV or by the applicable
NTS Designee, as applicable, subject to the approval of the Board
of Directors consistent with its fiduciary duties to the Company's
Stockholders.
5.3 Covenant to Vote. Each Stockholder hereby agrees to vote all
shares of Common Stock owned or held of record by such Stockholder
at all annual or special meetings in favor of, or to take all
actions by written consent in lieu of such a meeting, necessary to
ensure (i) the election as members of the Board of Directors of
those individuals so designated by NTSINV and each of the NTS
Designees in accordance with and to otherwise effect the intent
of, this Article II and (ii) that the Company maintains a nine (9)
member Board of Directors. In addition, each Stockholder agrees to
vote the shares of Common Stock owned or held of record by such
Stockholder or over which such Stockholder has voting control upon
any other matters arising under this Agreement submitted to the
vote of the Stockholders in a manner so as to implement the terms
of this Agreement.
5.4 Representation on the Nominating Committee. From and after the
Effective Date, as long as (a) NTSINV owns at least 25% of the
then outstanding Common Stock and (b) Alan M. Wiener shall remain
as a member of the Board of Directors, Alan M. Wiener in his
capacity as a member of the Board of Directors will recommend to
the Board of Directors that one of the directors designated by
NTSINV shall serve as the Chairman of the Nominating Committee of
the Company.
6.
MISCELLANEOUS
6.1 Notices. All communications under this Agreement shall be in
writing and shall be delivered by hand or fax mail or by overnight
courier or by registered or certified mail, postage prepaid:
(i) if to the Company, to:
Nestor, Inc.
One Richmond Square
Providence, Rhode Island 02906
Attention: Mr. David Fox
Facsimile: (401) 331-7309
With a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Joel M. Handel, Esq.
Facsimile: (212) 702-5941
or at such other address or facsimile number as it may have furnished
in writing to NTSINV;
(ii) if to NTSINV, to:
NTS Investors, LLC
2049 Century Park East
4th Floor
Los Angeles, California 90067
Attn.: David A. Polak
Facsimile: (___) __________
With a copy to:
Weinstein, Boldt, Halhide & Camel
1801 Century Park East
Suite 2200
Los Angeles, California 90067-2336
Attn: David J. Camel, Esq.
Facsimile: (310) 552-7938
(iii) if to a NTS Designee, to the address or facsimile
number set forth beneath such director's name on the signature page hereto.
or at such other address or facsimile number as may have been furnished to the
Company in writing.
(iv) Any notice so addressed shall be deemed to be given if delivered
by hand or fax mail (with confirmation of transmission) on the date of such
delivery or mailed by courier when received, if mailed by registered or
certified mail, when received.
6.2 Term.
(a) Unless terminated as provided in the applicable Article or Section
of this Agreement, this Agreement shall terminate upon the first
to occur:
(i) four (4) years after the Effective Date; or
(ii) the date upon which NTSINV and its Affiliates own less than 5% of
the then outstanding Common Stock.
(b) Notwithstanding the foregoing, this Agreement shall in any event
terminate with respect to any Stockholder when such Stockholder
and/or his Affiliates no longer own(s) any shares of the Common
Stock.
6.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the terms of the laws of the state of Delaware
without regard to principles of conflicts of laws.
6.4 Headings. Headings in this Agreement are inserted herein for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
6.5 Entire Agreement; Amendment and Waiver. This Agreement constitutes
the entire understanding of the parties hereto and supersedes all
prior understandings among such parties with respect to the
subject matter herein. This Agreement may be amended and the
observance of any term of this Agreement may be waived with (and
only with) the written consent of each of the parties hereto.
6.6 Severability. In the event any part or parts of this Agreement
shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination
shall not affect the remaining provisions of this Agreement which
shall remain in full force and effect.
6.7 Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which will be deemed an
original and all of which together shall be considered one and the
same Agreement. Delivery of an executed counterpart of this
Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart therein.
[Signature page follows.]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
NESTOR, INC.
By:
--------------------------------------
Name:
Title:
NTS INVESTORS, LLC
By:
--------------------------------------
Name: David Polak, Manager
--------------------------------------
Name: Alan M. Wiener
--------------------------------------
Address:
--------------------------------------
--------------------------------------
Name: Alvin Siteman
--------------------------------------
Address:
--------------------------------------
--------------------------------------
Name: Robert M. Carroll
--------------------------------------
Address:
--------------------------------------
EX-10.3
5
exh10-3.txt
FORM OF AGREEMENT AND PLAN OF MERGER
EXHIBIT 3
FORM OF AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 14, 2001
BY AND AMONG
NESTOR, INC.,
NESTOR MERGER SUB CORP.
AND
NESTOR TRAFFIC SYSTEMS, INC.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of
June 14, 2001 by and among Nestor, Inc., a Delaware corporation ("Nestor"),
Nestor Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of
Nestor ("Merger Sub"), and Nestor Traffic Systems, Inc., a Delaware corporation
("NTS").
w i t n e s s e t h:
WHEREAS, the Board of Directors of Nestor (the "Nestor
Board"), the Board of Directors of Merger Sub (the "Merger Sub Board"), and the
Board of Directors of NTS (the "NTS Board") have each determined that it is in
the best interests of their respective stockholders to effect a merger of Merger
Sub with and into NTS with the result that NTS shall be the surviving
corporation (the "Merger"), upon the terms and subject to the conditions set
forth herein and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"); and
WHEREAS, Nestor owns 900,000 shares of NTS's common stock,
$.01 par value per share (the "NTS Common Stock"), representing 34.62% of the
capital shares issued and outstanding and entitled to vote of NTS; and
WHEREAS, the Nestor Board, the Merger Sub Board and the NTS
Board have each approved the Merger in accordance with Delaware Law, upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and conditions contained
herein, and in order to set forth the terms and conditions of the acquisition
and the mode of carrying the same into effect, the parties hereby agree as
follows:
Article I
The Merger
1.1 The Merger. Upon the terms and subject to the conditions
set forth in Article VI, and in accordance with Delaware Law, at the Effective
Time (as defined in Section 1.2 hereof) Merger Sub shall be merged with and into
NTS. As a result of the Merger, the separate corporate existence of Merger Sub
shall cease, and NTS shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
1.2 Filing; Effective Time. Subject to Section 5.4, and as
soon as practicable after the satisfaction or waiver of the conditions set forth
in Article VI hereof, Merger Sub and NTS will cause the Merger to be consummated
by filing a Certificate of Merger (the "Certificate of Merger") with the
Secretary of State of the State of the Delaware in accordance with the relevant
provisions of Delaware Law. The date and time of such filing is herein sometimes
referred to as the "Effective Time." Prior to such filing, a closing shall be
held at the offices of Baer Marks & Upham LLP, 805 Third Avenue, New York, New
York 10022, or such other place as the parties shall agree (the "Closing"), for
the purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article VI. The parties agree that it is anticipated
that the Closing shall be held immediately (or as soon as practicable
thereafter) following the stockholders meeting at which NTS's stockholders are
to vote on the Merger (the "NTS Stockholders Meeting") and the stockholders
meeting at which Nestor's stockholders are to vote on the Merger (the "Nestor
Stockholders Meeting").
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of NTS and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of NTS and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of NTS as in effect immediately prior to the
Effective Time shall continue to be in full force and effect as the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided therein and Delaware Law.
1.5 Bylaws. At the Effective Time, the Bylaws of NTS as in
effect immediately prior to the Effective Time shall continue to be in full
force and effect as the Bylaws of the Surviving Corporation until thereafter
amended or repealed from time to time by the Board of Directors or the
shareholders of the Surviving Corporation.
1.6 Directors. At the Effective Time, the following
individuals shall be the members of the Board of Directors of the Surviving
Corporation: David Fox, Bruce W. Schnitzer, Alan M. Wiener and David Polak. Each
such person shall hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until their resignation
or their respective successors are duly elected or appointed and qualified.
1.7 Officers. At the Effective Time, the following individuals shall be the
officers of, and hold the following positions with, the Surviving Corporation,
until their resignation or their respective successors are duly elected or
appointed and qualified.
David Fox President and Chief Executive Officer
Nigel Hebborn Executive Vice President and Chief Financial Officer
Douglas Reilly Senior Vice President Strategic Analysis and Technology
Michael Glier Senior Vice President Operations and Engineering
Michael Laird Vice President System Engineering
Zev Fogel Vice President Business Development
Robert Kerr Vice President Administration
Herbert S. Meeker Secretary
Article II
Conversion Of And Surrender And Payment For NTS Common Stock
------------------------------------------------------------
2.1 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of NTS or the holders of NTS
Common Stock:
(a) Each share of NTS Common Stock issued and outstanding and
owned by Nestor shall be automatically cancelled without any consideration
therefor.
(b) Each share of NTS Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of, or rights to
convert into shares of, NTS Common Stock to be cancelled pursuant to Sections
2.1(a) and (c)) and any Dissenting Shares (as defined in and to the extent
provided in Section 2.3) shall be cancelled and extinguished and shall be
converted into and exchangeable for the right to receive, upon surrender of the
certificate or certificates representing such shares, 9.1655668 validly issued,
fully paid and nonassessable shares (the "Exchange Ratio") of common stock, $.01
par value per share, of Nestor (the "Nestor Common Stock"), with fractional
shares eliminated (the "Merger Consideration"). Such shares of Nestor Common
Stock shall be issued to the holder of such shares of NTS Common Stock in the
manner provided in Section 2.5.
(c) Each of the outstanding rights with respect to the shares
of NTS Common Stock into which that certain Secured Note Agreement dated as of
January 9, 2001 made by NTS in favor of NTS Investors, LLC are convertible into
or exchangeable for, when converted or exchanged and subject to the receipt by
NTS of $4,000,000 all in accordance with the terms of the Secured Note
Agreement, shall become the right (i) to receive 33.34% of Nestor Common Stock
on a basis fully diluted for the issuance of shares of Nestor Common Stock and
all shares of Nestor Common Stock underlying options, warrants or other claims
of ownership, except for the Common Stock Purchase Warrants issued to
Wand/Nestor Investments L.P., Transactions Systems Architects, Inc. and others,
which in the aggregate are equal to approximately 5,090,696 warrants
(collectively, the "Outstanding Warrants"), and for employee stock options
issued by Nestor and outstanding at the Effective Time; (ii) with respect to
options or warrants issued to, or for the benefit of, non-employee members of
the board of directors of either Nestor or NTS, Alan M. Wiener, Herbert S.
Meeker and Robert M. Carroll outstanding at the Effective Time, a true and
complete list of which are set forth on Schedule 2.1(ii) (such Schedule shall be
updated immediately prior to the Effective Time) and the Outstanding Warrants
(collectively, the "Stock Rights"), to purchase for cash (or such other
consideration as is being paid for the exercise of such Stock Rights), at the
same exercise price at which such Stock Right has been exercised, such number of
additional shares of Nestor Common Stock, equal to one half of the number of
shares of Nestor Common Stock into which such Stock Right has been converted or
exchanged, as the case may be; and (iii) to purchase, for a period terminating
on the third anniversary date of the Effective Time, one million shares of
Nestor Common Stock at a per share exercise price of $1.28.(1)
--------
(1) the references to 33.34% in subsection (i) and one third in subsection (ii)
will be proportionately reduced in the event that the Investors contribute less
than the full $4 million, as permitted by Section 21 of the Secured Note
Agreement.
(d) All shares of NTS Common Stock which are held by NTS as
treasury stock or which are owned of record or beneficially by any subsidiary of
NTS shall be cancelled and retired and cease to exist, without any conversion
thereof.
(e) Each share of Merger Sub issued and outstanding and owned
by Nestor shall be converted into and shall become one share of common stock of
the Surviving Corporation.
2.2 Stock Options and Warrants.
(a) Prior to the Effective Time, the NTS Board (or, if
appropriate, any committee thereof) and the Nestor Board (or, if appropriate,
any committee thereof) shall adopt appropriate resolutions and take all other
actions necessary to provide that:
(i) effective as of the date of this Agreement, all
outstanding stock options under the Nestor Traffic Systems, Inc. 1999 Incentive
Stock Option Plan (the "NTS Stock Option Plan") shall become fully exercisable
and shall remain fully exercisable until immediately prior to the Effective
Time; provided that such full exercisability shall be subject to the condition
subsequent that the Merger shall have occurred and no payment with respect to
options under the NTS Stock Option Plan that have become fully exercisable by
virtue of this Agreement shall be accepted by Nestor until immediately prior to
the Effective Time and any exercise of such options shall be effective
immediately prior to the Effective Time; and
(ii) effective as of the Effective Time, all the
outstanding stock options under the NTS Stock Option Plan which have not been
exercised (the "NTS Stock Options") shall be assumed by Nestor and converted
automatically into options to purchase Nestor Common Stock ("New Stock Options")
in an amount and, if applicable, at an exercise price determined as provided
below:
(A) The number of shares of Nestor Common Stock to be
subject to each New Stock Option shall be equal to the product of (x) the
number of shares of NTS Common Stock remaining subject (immediately before
the Effective Time) to the original NTS Stock Option and (y) the Exchange
Ratio, provided that any fractional shares of Nestor Common Stock
resulting from such multiplication shall be eliminated; and
(B) The exercise price per share of Nestor Common
Stock under each New Stock Option shall be equal to the exercise price per
share of NTS Common Stock under the original NTS Stock Option divided by
the Exchange Ratio, provided that such exercise price shall be rounded up
to the nearest tenth of a cent and provided, further, that where an
individual exercises New Stock Options and the aggregate consideration
required to exercise such options is not a whole number, the aggregate
consideration required to be paid to Nestor by such individual in order to
exercise such options shall be rounded up to the nearest cent.
On and after the Effective Time, each New Stock Option shall be exercisable and
shall vest upon, and will otherwise be subject to, the same terms and conditions
as were applicable to the related NTS Stock
Option immediately prior to the Effective Time, without regard to any
acceleration of the exercisability on account of Sections 15 or 16 of the NTS
Stock Option Plan and this Agreement (except that with regard to such New Stock
Option, any references to NTS shall be deemed, as appropriate, to include
Nestor) and each New Stock Option shall be intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or a nonqualified option, whichever was applicable to the related
NTS Stock Option.
(b) The Board of Directors of NTS shall take all actions
necessary to assure that all persons holding outstanding NTS Stock Options shall
be notified of the provisions of Section 2.2(a) hereof as soon as practicable
after the date of execution of this Agreement.
(c) NTS shall take all actions so that following the Effective
Time no holder of an NTS Stock Option or any participant in any stock option,
stock appreciation, performance unit or similar plan, agreement or arrangement
of NTS shall have any right thereunder to acquire capital stock of NTS or of the
Surviving Corporation. NTS will take all actions so that, as of the Effective
Time, neither NTS nor the Surviving Corporation is or will be bound by any NTS
Stock Options, or other options, warrants, rights or agreements which entitle
any person to own any capital stock of NTS or the Surviving Corporation or to
receive any payment in respect thereof.
(d) Unless at the Effective Time, the New Stock Options are
registered pursuant to an effective Nestor registration statement, as soon as
practicable following the Effective Time, Nestor shall prepare and file with the
SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of Nestor Common Stock equal to the number of shares
subject to the New Stock Options. Any such registration statement shall be kept
effective (and the current status of the initial offering prospectus or
prospectuses required thereby shall be maintained) for at least as long as any
New Stock Option remains outstanding.
(e) Prior to the Effective Time, the NTS Board and the Nestor
Board shall adopt appropriate resolutions and take all other actions necessary
to provide that all unexercised warrants of NTS which are outstanding at the
Effective Time shall be assumed by Nestor and converted automatically into
warrants to acquire Nestor Common Stock ("New Warrants") in an amount and at an
exercise price determined as provided below:
(i) The number of shares of Nestor Common Stock to be
subject to each New Warrant shall be equal to the product of (x) the number of
shares of NTS Common Stock subject to the outstanding NTS warrant and (y) the
Exchange Ratio, provided that any fractional share of Nestor Common Stock
resulting from such multiplication shall be eliminated; and
(ii) The per share exercise price of each New Warrant
shall be equal to the exercise price per share of NTS Common Stock under the
outstanding NTS warrant divided by the Exchange Ratio, provided that such
exercise price shall be rounded up to the nearest tenth of a cent.
(f) Nestor agrees that it shall take all action necessary,
on or prior to the Effective Time, to authorize and reserve a number of shares
of Nestor Common Stock sufficient for issuance upon exercise of options or
warrants as contemplated by this Section 2.2.
2.3 Dissenting Shares. Notwithstanding the provisions of Section 2.1 or
any other provisions of this Agreement to the contrary, any share of NTS Common
Stock with respect to which dissenters' rights shall be properly perfected in
accordance with Section 262 of Delaware Law (the "Dissenting Shares") shall not
be cancelled or converted into the right to receive the Merger Consideration at
or after the Effective Time (but shall be converted into the right to receive
such payment from NTS as may be determined to be due with respect to such
Dissenting Shares pursuant to the applicable provisions of Delaware Law) unless
and until the dissenters' rights of the holder of such shares terminates (in
accordance with Section 262 of Delaware Law) or such holder otherwise becomes
ineligible for such payment from NTS. If a holder of Dissenting Shares shall
withdraw (in accordance with Section 262 of Delaware Law) such holder's demand
for such payment from NTS or shall become ineligible for such payment from NTS,
then as of the Effective Time or the occurrence of such event, whichever last
occurs, such holder's Dissenting Shares shall cease to be Dissenting Shares and
shall either be cancelled as provided in Section 2.1(a) or converted into and
represent the right to receive the Merger Consideration as provided in Section
2.1(b), upon surrender of certificates representing such shares in accordance
with Section 2.5 hereof. The Surviving Corporation shall comply with all of the
provisions contained herein and in Section 262 of Delaware Law with respect to
any Dissenting Shares and shall be solely responsible for the payment, if any,
to be made to the holder of any such Dissenting Shares.
2.4 Closing of Transfer Books. At the Effective Time, the stock transfer
books of NTS shall be closed and thereafter there shall be no further
registration of transfers of shares of NTS Common Stock. From and after the
Effective Time, the holders of shares of NTS Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares except as otherwise provided herein or by applicable law.
If, after the Effective Time, certificates previously representing NTS Common
Stock (other than certificates issued to Nestor each of which were automatically
cancelled at the Effective Time pursuant to Section 2.1(a)) are, in accordance
with Section 2.5 hereof, presented to the Surviving Corporation, they shall be
exchanged for the Merger Consideration as provided in Section 2.1 hereof and
shall forthwith be cancelled.
2.5 Surrender of NTS Common Stock. NTS will deliver to Nestor all
certificates (the "Certificates") which immediately prior to the Effective Time
represented all outstanding shares of NTS Common Stock (other then Dissenting
Shares), whose shares were either (i) cancelled pursuant to Section 2.1(a), or
(ii) converted into the right to receive the Merger Consideration pursuant to
Section 2.1(b), with duly and validly executed stock powers transferring such
Certificates to Nestor. Except for shares of NTS Common Stock that were
automatically cancelled at the Effective Time in accordance with Section 2.1(a),
upon surrender of a Certificate for cancellation to Nestor, Nestor shall
promptly deliver to the holder thereof (other than a holder of Dissenting
Shares) the Merger Consideration which such holder is entitled hereunder, and
the Certificate so surrendered shall forthwith be cancelled. Until so
surrendered and exchanged, each Certificate that prior to the Effective Time
evidenced NTS Common Stock (other than shares of NTS Common Stock cancelled in
accordance with Section 2.1(a)) shall represent solely the right to receive the
Merger Consideration pursuant to Section 2.1(b) hereof.
2.6 No Fractional Shares. No certificates or scrip representing
fractional shares of Nestor Common Stock shall be issued by virtue of the
Merger.
2.7 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section
368(a)(1)(B) of the Code and will be reported as such by NTS, Nestor and the
Surviving Corporation for all purposes.
Article III
Representations And Warranties Of Nestor And Merger Sub
-------------------------------------------------------
As a material inducement to NTS to enter into this Agreement,
Nestor and Merger Sub, jointly and severally, represent and warrant to NTS as
follows:
3.1 Corporate Organization. Nestor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Merger Sub does not currently,
nor has it ever, conducted any material business operations. Each of Nestor and
Merger Sub has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted,
except for such failure which, when taken together with all other such failures,
would not have a Material Adverse Effect (as defined below) on Nestor. Each of
Nestor and Merger Sub is qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed could, individually or in the aggregate, have a Material Adverse
Effect. When used in connection with Nestor, the term "Material Adverse Effect"
means any change in or effect on the business of Nestor and its Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
results of operations or condition (financial or otherwise), liabilities or
regulatory status of Nestor and its Subsidiaries taken as a whole. For purposes
of this Agreement, a "Subsidiary" of Nestor means Merger Sub and any other
corporation or other legal entity of which Nestor (either alone or through or
together with any other Subsidiary of Nestor) owns, directly or indirectly, more
than fifty percent (50%) of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of, or otherwise control or direct, such corporation or
other legal entity.
3.2 Certificate of Incorporation and Bylaws. Complete and correct copies
of the Certificate of Incorporation and Bylaws, each as amended to the date
hereof, of Nestor and the Merger Sub have been furnished to NTS. Each such
Certificate of Incorporation and Bylaws are in full force and effect. Neither
Nestor nor any of its Subsidiaries is in violation of any of the provisions of
its Certificate of Incorporation or Bylaws.
3.3 Authority Relative to Agreement. Each of Nestor and Merger Sub has
full corporate power, capacity and authority to execute and deliver this
Agreement and to consummate the Merger or any other transactions contemplated
hereby (the "Transactions"). The execution, delivery and performance by Nestor
and Merger Sub of this Agreement and the consummation of the Transactions have
been duly authorized by all necessary corporate action on the part of Nestor and
Merger Sub, respectively, subject to obtaining the necessary approval of Merger
Sub's sole stockholder. This Agreement has been duly executed and delivered by
Nestor and Merger Sub and constitutes a legal, valid and binding agreement of
each of Nestor and Merger Sub, enforceable against each of Nestor and Merger Sub
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time in effect that
affect creditors' rights generally and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 No Violation; Required Filings and Consents. (a) The execution and
delivery of this Agreement by each of Nestor and Merger Sub, does not, and the
performance of this Agreement by each of Nestor and Merger Sub will not: (i)
subject to Section 3.4(b) hereof, conflict with or violate any law, regulation,
court order, judgment or decree applicable to either of Nestor or Merger Sub or
by which any of their respective property or assets is bound or affected; (ii)
violate or conflict with either the Certificate of Incorporation or Bylaws of
Nestor or Merger Sub; or (iii) result in any breach of or constitute a default
(or any event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or result
in the creation of any mortgage, pledge, lien, security interest, encumbrance,
charge or other claim of any kind on any of the property or assets of either of
Nestor or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, instrument, permit, license or franchise to which either of
Nestor or Merger Sub is a party or by which either of Nestor or Merger Sub or
any of their respective property is bound or affected, except in the case of (i)
or (iii) above, for conflicts, violations, breaches or defaults which, in the
aggregate, would not (x) have a Material Adverse Effect, or (y) prevent or
materially interfere with each of Nestor's or Merger Sub's performance of its
material obligations hereunder. No consent or waiver of any obligation under any
such documents is necessary to permit each of Nestor or Merger Sub to perform
its obligations under this Agreement, except for such consents and waivers as
may be required pursuant to any of Nestor's or Merger Sub's debt instruments,
and except for such consents and waivers which the failure to obtain would not
have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), "blue sky" laws of
various states, and filing and recordation of appropriate merger documents as
required by Delaware Law, neither Nestor nor Merger Sub is required to submit
any notice, report or other filing with, or obtain any waiver, consent, or
approval from, any governmental or regulatory authority, domestic or foreign, in
connection with the execution, delivery or performance of this Agreement or the
consummation of the Transactions contemplated by this Agreement, except where
the failure to take such action would not (i) prevent or materially interfere
with the consummation of the Merger and the Transactions, or (ii) have a
Material Adverse Effect.
3.5 Capitalization. The authorized capital stock of Nestor consists of
30,000,000 shares of common stock, par value, $.01 per share, of which
17,754,763 shares are issued and outstanding, and 10,000,000 shares of preferred
stock, par value $1.00 per share, of which 235,000 shares are issued and
outstanding and designated as shares of Series B Convertible Preferred Stock. As
of May 31, 2001, Nestor had reserved 1 million shares of Nestor Common Stock for
issuance pursuant to Nestor's 1997 Incentive Stock Option Plan (the "1997 Plan")
and 53,613 of which have been exercised. As of May 31, 2001, an aggregate of
721,666 shares were subject to outstanding options under the 1997 Plan, and
224,721 shares are available for issuance under the 1997 Plan. As of May 31,
2001, Nestor had reserved 2,450,000 shares of Nestor Common Stock for issuance
pursuant to Nestor's 1984 Incentive Stock Option Plan (the "1984 Plan") and
160,198 of which have been exercised. As of May 31, 2001, an aggregate of
951,484 were subject to outstanding options under the 1984 Plan, and 1,338,318
shares are available for issuance under the 1984 Plan. As of May 31, 2001, an
aggregate of 4,999,040 shares were subject to outstanding warrants. The
authorized capital of Merger Sub consists of 1,000 shares of common stock, $.01
par value per share, of which 100 shares are issued and outstanding, and all of
which are owned beneficially and of record by Nestor free and clear of all
liens, charges, pledges, encumbrances, restrictions, mortgages or other security
interests or preferential arrangements of whatever kind or nature (collectively,
"Liens"), options, agreements, voting trusts, proxies, rights of first refusal
or other encumbrances, arrangements or restrictions whatsoever. Merger Sub is
not a party to any agreements pursuant to which it may be required to issue
additional shares. All the outstanding capital shares of each of Nestor and
Merger Sub are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
3.6 Financial Statements and Reports. (a) Nestor heretofore has
delivered to NTS true and complete copies of (i) its audited financial
statements for the fiscal year ended December 31, 2000 (the "2000 Audit"), (ii)
its Form 10-K for the year ended December 31, 2000 (the "Form 10-K") as filed
with the Securities and Exchange Commission (the "SEC"), and (iii) its quarterly
report for the period ended March 31, 2001 (the "Form 10-Q") as filed with the
SEC. The 2000 Audit, Form 10-K and the Form 10-Q shall sometimes be collectively
referred to herein as the "SEC Filings". As of their respective dates, the SEC
Filings did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and there has not been any material adverse change in the
assets, business, financial condition or results of operations of Nestor, except
as set forth on Schedule 3.6.
(b) The financial statements of Nestor included in the SEC
Filings were prepared in accordance with generally accepted accounting
principles ("GAAP"), as in effect as of the date and for each of the periods of
such financial statements, applied on a consistent basis and present fairly the
financial position, results of operations and cash flows of Nestor, each as of
the dates and for the periods indicated, subject in the case of unaudited
interim financial statements to the absence of certain footnote disclosures and
normal year-end adjustments.
3.7 Litigation. Except as disclosed in the SEC Filings, there are no
actions, proceedings or investigations pending or, to the best knowledge of
Nestor, threatened against Nestor, or any of its Subsidiaries, before any court
or governmental or regulatory authority or body, which, if decided adversely
could, individually or in the aggregate, have a Material Adverse Effect. Neither
Nestor nor any of its Subsidiaries nor any of their respective property is
subject to any order, judgment, injunction or decree, having a Material Adverse
Effect.
3.8 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.8, since December 31, 2000 (a) there has been no event or occurrence
which has or could reasonably be expected to have a Material Adverse Effect; (b)
Nestor has not incurred any indebtedness for money borrowed; (c) Nestor has not
assumed, guaranteed, endorsed or otherwise become responsible for the
obligations of any other individual, firm or corporation; (d) there has been no
creation or assumption by Nestor of any Lien on any asset that has or could
reasonably be expected to have a Material Adverse Effect; (e) there has been no
loan, advance or capital contribution to or investment in any person by Nestor,
including to the affiliates thereof; (f) there has been no change in any method
of accounting or accounting practice by Nestor; (g) there has been no
repurchase, redemption or other acquisition by Nestor of any outstanding shares
of capital stock or other ownership interest of Nestor; (h) there has been no
declaration or payment of any dividend on, or other distribution with respect
to, any capital stock of Nestor; and (i) Nestor has not entered into any other
transaction other than in the ordinary course of business.
3.9 Material Contracts and other Agreements. Schedule 3.9 sets forth a
complete and accurate list of the following contracts and commitments to which
Nestor is a party or by which any of its properties are bound: (a) collective
bargaining agreements and contracts with any labor union; (b) employment or
consulting agreements or any agreements providing for severance, termination or
similar payments; (c) leases, whether as lessor or lessee, involving real or
personal property with annual rental payments in excess of $100,000; (d) loan
agreements, mortgages, indentures, instruments or other evidence of indebtedness
or commitments in each case involving indebtedness (or available credit) for
borrowed money or money lent to others; (e) guaranty or suretyship, performance
bond, indemnification or contribution agreements; (f) written contracts with
customers or suppliers that require aggregate payments to or from Nestor of more
than $100,000 in any one-year period, other than contracts issued in the
ordinary and usual course of business or terminable with 30 days or less notice
without premium or penalty; (g) joint venture, partnership, or other agreements
evidencing an ownership interest or a participation in or sharing of profits;
(h) agreements, contracts or commitments limiting the freedom of Nestor to
engage in any line of business or compete with any other corporation,
partnership, joint venture, company or individual; and (i) contracts that are
terminable, or under which payments by Nestor may be accelerated, upon a change
in control of Nestor. Nestor has furnished or made available accurate and
complete copies of the foregoing contracts and agreements to NTS. As to each
contract and commitment referred to above (i) there exists no breach or default,
and to the knowledge of Nestor, no event has occurred which with the giving of
notice or the passage of time or both would constitute such a breach, default or
permit termination, notification or acceleration, on the part of Nestor or, to
the knowledge of Nestor, on the part of any third party which, with or without
the giving of notice, lapse of time or the happening of any other event or
condition, would have a Material Adverse Effect and (ii) as of the Effective
Time, no material third party consent, approval or authorization shall be
required for the consummation of the Transactions.
3.10 Compliance with Laws. Nestor has complied and is in compliance with
applicable federal, state or local statutes, laws and regulations, except where
the failure to so comply would not have a Material Adverse Effect. Nestor has
not (a) failed to obtain any license, permit, franchise or other governmental
authorization which is material to the operations of the business of Nestor,
taken as a whole, or (b) received any notice of any alleged violation or breach
of any law or regulation or of any license, permit, franchise or authorization
which violation or breach would have a Material Adverse Effect.
3.11 Proprietary Property. Schedule 3.11 contains a complete and
accurate list of all material patents and patent applications, all trademarks,
service marks, trade dress, trade names and corporate names; all registered
copyrights; all registrations, applications and renewals for any of the
foregoing; and other material intellectual property rights (together with the
goodwill associated therewith, collectively the "Nestor Proprietary Property"),
including, without limitation, all contracts, agreements and licenses relating
to any of the foregoing, owned by Nestor or in which Nestor has any rights. The
Transactions will not have a Material Adverse Effect on the right, title and
interest of Nestor as of the Effective Time in and to Nestor Proprietary
Property. To Nestor's knowledge, Nestor has not interfered with, infringed or is
infringing on or otherwise come into conflict with any proprietary property
belonging to any other person, firm or corporation. Except as set forth on
Schedule 3.11, to the knowledge of Nestor, no third party is interfering with,
infringing on or otherwise coming into conflict with Nestor Proprietary
Property. Except as set forth on Schedule 3.11, Nestor has not received any
written notice of material invalidity, interference, infringement or
misappropriation from any third party with respect to any of Nestor Proprietary
Property.
3.12 No Undisclosed Liabilities. Except as set forth on Schedule 3.12,
there is no liability or obligation of Nestor of any nature, whether absolute,
accrued, contingent or otherwise other than: (i) the liabilities and obligations
reflected in the financial statements included in the SEC Filings; (ii)
liabilities and obligations of Nestor incurred since December 31, 2000 in the
ordinary and usual course of business; (iii) liabilities and obligations
relating to contracts not yet required to be performed; and (iv) liabilities and
obligations which individually or in the aggregate do not have a Material
Adverse Effect.
3.13 Title to Personal Property. Except as set forth on Schedule 3.13,
Nestor has good title to or a valid and enforceable leasehold interest in all
personal property material to the operation of its business, free and clear of
all Liens other than Liens which are not reasonably expected to have a Material
Adverse Effect.
3.14 Taxes and Tax Returns. Nestor: (a) has made or timely filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject or has obtained extensions
not yet expired with respect thereto; (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings; and (c) has set aside on its books, provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of Nestor know of no basis for any such
claim.
3.15 Employee Benefit Plans. Each employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), maintained by Nestor and/or any of its Subsidiaries or any
organization which, together with Nestor and/or any such Subsidiary, would be
treated as a "single employer" within the meaning of Section 414(b) or (c) of
the Code or to which Nestor or any such Subsidiary or organization contributes
(or has any obligation to contribute) or is a party (collectively, the "Nestor
Benefit Plans") is listed on Schedule 3.15 attached hereto. Except as set forth
on such Schedule 3.15, or to the extent that any breach of the representations
set forth in this sentence would not have a material adverse effect on Nestor:
(a) each Nestor Benefit Plan is in compliance with applicable law and has been
administered and operated in all respects in accordance with its terms; (b) each
Nestor Benefit Plan which is intended to be "qualified" within the meaning of
Section 401(a) of the Code, is a standardized prototype plan which has received
a favorable opinion letter from the Internal Revenue Service and, to the
knowledge of Nestor, no event has occurred and no condition exists which could
reasonably be expected to adversely affect such qualified status; (c) no Nestor
Benefit Plan is covered by Title IV of ERISA or subject to Section 412 of the
Code or Section 302 of ERISA; (d) neither Nestor nor any of its Subsidiaries,
nor, to Nestor's knowledge, any other "disqualified person" or "party in
interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transactions in connection with any
Nestor Benefit Plan that could reasonably be expected to result in the
imposition of a penalty pursuant to Section 502 of ERISA, damages pursuant to
Section 409 of ERISA or a tax pursuant to Section 4975 of the Code; (e) no
Nestor Benefit Plan provides for post-employment or retiree welfare benefits,
except to the extent required by Part 6 of Subtitle B of Title I of ERISA or
Section 4980B of the Code; (f) no liability, claim, action or litigation, has
been made, commenced or, to Nestor's knowledge, threatened with respect to any
Nestor Benefit Plan (other than routine claims for benefits payable in the
ordinary course, and appeals of denied such claims); and (g) none of the Nestor
Benefit Plans promise or provide severance benefits or benefits contingent upon
a change in ownership or control, within the meaning of Section 280G of the Code
nor create any entitlement to receive any payment benefit or amount which may
constitute "Excess Parachute Payments" under the Code.
3.16 Labor Matters. Except as set forth in Schedule 3.16, (i) there are
no controversies pending or, to the best knowledge of Nestor, threatened between
Nestor or any Subsidiary and any of their respective employees; (ii) neither
Nestor nor any Subsidiary is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by Nestor or any
Subsidiary, nor, to the best knowledge of Nestor are there any activities or
proceedings of any labor union to organize any such employees; (iii) there are
no unfair labor practice complaints pending against Nestor or any Subsidiary
before the National Labor Relations Board or other governmental or
administrative body involving employees of Nestor or any Subsidiary; and (iv)
there is no strike, slowdown, work stoppage or lockout, or, to the best
knowledge of Nestor, threat thereof, by or with respect to any employees of
Nestor or any Subsidiary.
3.17 Products Liability. Except as disclosed on Schedule 3.17, there is
no notice or claim involving any product manufactured, produced, distributed or
sold by or on behalf of Nestor or its Subsidiaries resulting from an alleged
defect in design, manufacture, materials or workmanship, failure to perform for
the use intended or any alleged failure to warn, or from any breach of express
or implied warranties or representations, which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Nestor and its Subsidiaries taken as a whole, without regard to any insurance
coverage. The product liability insurance policies maintained by Nestor are in
full force and effect and are adequate for the business conducted by Nestor.
Nestor has not received any notice from any insurance carrier declining coverage
of any claim or canceling or threatening to cancel any such policy.
3.18 Joint Proxy Statement-Prospectus. None of the information supplied
in writing by Nestor, its officers, directors, representatives, financial
advisors, agents or employees, for inclusion in the joint proxy
statement-prospectus (such joint proxy statement-prospectus, as amended or
supplemented, is herein referred to as the "Joint Proxy Statement-Prospectus")
will, on the date the Joint Proxy Statement-Prospectus is filed with the SEC,
first mailed to stockholders of NTS and Nestor, at the time of the Nestor
Stockholders Meeting to, among other things, consider the issuance of Nestor
Common Stock in the Merger, at the time of the NTS Stockholders Meeting or at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it will be made, will be false or misleading with
respect to any material fact, or will omit to state any material fact necessary
in order to make the statements therein not false or misleading. To the extent
it contains information or statements pertaining to Nestor or its Subsidiaries,
the Joint Proxy Statement-Prospectus will, when filed, comply as to form in all
material respects with the requirements of the Securities Act and the Exchange
Act. Notwithstanding the foregoing, Nestor does not make any representation or
warranty with respect to any information that has been supplied by NTS or its
accountants, counsel or other authorized representatives for use in the Joint
Proxy Statement-Prospectus.
3.19 Nestor Properties and Leases.
(a) Nestor and the Subsidiaries have sufficient title to all
their properties and assets and have been issued all related permits, consents
and permissions necessary or appropriate to enable them to conduct their
respective businesses as currently conducted or as contemplated to be conducted.
(b) Except as set forth on Schedule 3.19(b), each parcel of real
property owned or leased by Nestor or any Subsidiary (i) is owned or leased free
and clear of all Liens, other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of Nestor or such
Subsidiary consistent with past practice, and (D) all matters of record, Liens
and other imperfections of title and encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect (collectively, "Permitted
Liens"), and (ii) is neither subject to any governmental decree or order to be
sold nor is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the best
knowledge of Nestor, has any such condemnation, expropriation or taking been
proposed.
(c) All leases of real property leased for the use or benefit of
Nestor or any Subsidiary to which Nestor or any Subsidiary is a party requiring
rental payments in excess of $50,000 during the period of the lease and all
amendments and modifications thereto are in full force and effect and have not
been modified or amended, and there exists no default under any such lease by
Nestor or any Subsidiary, nor any event which with the giving of notice or the
lapse of time or both would constitute a default thereunder by Nestor or any
Subsidiary.
3.20 Environmental Matters. (a) Except as set forth on Schedule 3.20,
Nestor and each Subsidiary is in compliance in all material respects with all
applicable Environmental Laws and has been issued and currently maintains all
required federal, state and local permits, licenses, certificates and approvals
except to the extent such non-compliance or the absence of any such permit,
license, certificate or approval would not be, singly or in the aggregate,
reasonably expected to have a Material Adverse Effect. Neither Nestor nor any
Subsidiary has been notified of any pending or threatened action, suit,
proceeding or investigation and neither Nestor nor any Subsidiary is aware of
any facts, which (i) call into question, or would reasonably be expected to call
into question, compliance by Nestor or any Subsidiary with any Environmental
Laws, (ii) seeks, or would reasonably be expected to form the basis of a
meritorious proceeding to seek, to suspend, revoke or terminate any license,
permit or approval necessary for the operation of Nestor's or any Subsidiary's
business or facilities or for the generation, handling, storage, treatment or
disposal of any Hazardous Substances, or (iii) seeks to cause, or would
reasonably be expected to form the basis of a meritorious proceeding to cause,
any property of Nestor or any Subsidiary to be subject to any restrictions on
ownership, use, occupancy or transferability under any Environmental Law, any of
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 3.20 to the best knowledge of Nestor, neither Nestor nor
any of its Subsidiaries has caused or permitted its business or property
(whether real or personal, owned or leased and whether or not currently owned or
occupied by any such entity) to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce, or process
Hazardous Substances, except in material compliance with all applicable
Environmental Laws.
(b) Except as set forth on Schedule 3.20, neither Nestor nor any
Subsidiaries has received notice of any violation or notice of regulatory
requirements or has been notified of any threatened or pending action, suit,
proceeding or investigation which suggests that Nestor or any of the its
Subsidiaries is a potentially responsible party with regard to any release or
threatened release of Hazardous Substances.
(c) Except as set forth on Schedule 3.20, neither Nestor nor any of its
Subsidiaries has any liability of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under or
relating to any Environmental Law, which liability would have a Material Adverse
Effect.
(d) For purposes of this Agreement, the term "Environmental Laws" means
any federal, state or local statute, common law, ordinance, code, rule,
regulation, order, decree, injunction, agreement or permit regulating, relating
to, or imposing liability or standards of conduct concerning, human health or
the environment, including the emission, discharge or release of pollutants,
contaminants, Hazardous Substances or wastes into the environment (which
includes, without limitation, ambient air, surface water, ground water, or
land), or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the
Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Water Pollution Control Act,
33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2610 et seq.;
the Rivers and Harbors Act, 33 U.S.C. Section 401 et seq.; the Endangered
Species Act, 16 U.S.C. Section 1531 et seq.; the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq.; and the Federal Technical Standards and
Corrective Action Requirements for Owners and Operators of Underground Storage
Tanks.
(e) For purposes of this Agreement, the term "Hazardous Substances"
means any and all dangerous, toxic, radioactive, caustic or otherwise hazardous
material, pollutant, contaminant, chemical, waste or substance defined, listed
or described as any of such in or governed by any Environmental Law, including
but not limited to urea-formaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, radon, explosives, known carcinogens, petroleum
and its derivatives, petroleum products, or any substance which might cause any
injury to human health or safety or to the environment or might subject the
owner or operator of real property to any regulatory actions or claims.
"Hazardous Substances" shall include, without limitation, asbestos, airborne
asbestos, polychlorinated biphenyls (PCBs), petroleum products, lead-based paint
and urea-formaldehyde.
3.21 The Nestor Board and the Merger Sub Board. Each of the Nestor Board
and the Merger Sub Board has, as of the date of this Agreement, determined (i)
that the Merger is fair to, and in the best interests of Nestor, Merger Sub and
their respective stockholders, and (ii) to recommend that the sole stockholder
of Merger Sub approves and adopts this Agreement and approves the Merger.
3.22 Fairness Opinion. The Nestor Board has received a written opinion
from Aramar Capital Group, LLC to the effect that as of the date hereof, the
Exchange Ratio is fair to Nestor from a financial point of view and has
delivered to NTS a copy of such opinion.
Article IV
Representations And Warranties Of NTS
As a material inducement to Nestor and Merger Sub to enter
into this Agreement, NTS represents and warrants to Nestor and Merger Sub as
follows:
4.1 Corporate Organization. NTS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. NTS has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted, except for
such failure which, when taken together with all other such failures, would not
have a Material Adverse Effect (as defined below) on NTS. Except as set forth on
Schedule 4.1, NTS is qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed could, individually or in the aggregate, have a Material Adverse
Effect. NTS has no subsidiaries. When used in connection with NTS, the term
"Material Adverse Effect" means any change in or effect that is, or is
reasonably likely to be, materially adverse to the business, results of
operations or condition (financial or otherwise), liabilities or regulatory
status of NTS taken as a whole. NTS does not own, either directly or indirectly,
any equity investment or ownership interest in any corporation, partnership,
joint venture, business trust or other business entity.
4.2 Certificate of Incorporation and Bylaws. Complete and correct copies
of NTS's Certificate of Incorporation and Bylaws, each as amended to the date
hereof have been furnished to Nestor. Such Certificate of Incorporation and
Bylaws are in full force and effect. NTS is not in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
4.3 Authority Relative to Agreement. NTS has full corporate power,
capacity and authority to execute and deliver this Agreement and to consummate
the Transactions. The execution, delivery and performance by NTS of this
Agreement, and the consummation of the Transactions have been duly authorized by
the NTS Board and no other corporate proceedings on the part of NTS are
necessary to authorize the execution and delivery of this Agreement by NTS,
subject to obtaining all necessary approvals by NTS's stockholders. This
Agreement has been duly executed and delivered by NTS and constitutes a legal,
valid and binding obligation of NTS, enforceable against it in accordance with
the terms hereof, subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect that affect
creditors' rights generally and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.4 No Violation; Required Filings and Consents. (a) The execution and
delivery of this Agreement by NTS does not, and the performance of this
Agreement by NTS will not: (i) subject to Section 4.4(b) hereof, conflict with
or violate any law, regulation, court order, judgment or decree applicable to
NTS or by which any of its property or assets is bound or affected; (ii) violate
or conflict with either the Certificate of Incorporation or Bylaws of NTS; or
(iii) except as set forth on Schedule 4.4, result in any breach of or constitute
a default (or any event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination or cancellation
of, or result in the creation of any Lien on any of the property or assets of
NTS pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, instrument, permit, license or franchise to which NTS is a party or by
which NTS or any of its property is bound or affected, except in the case of (i)
or (iii) above, for conflicts, violations, breaches or defaults which, in the
aggregate, would not (x) have a Material Adverse Effect, or (y) prevent or
materially interfere with NTS's performance of its material obligations
hereunder. No consent or waiver of any obligation under any such documents is
necessary to permit NTS to perform its obligations under this Agreement, except
for such consents and waivers as may be required pursuant to any of NTS's debt
instruments, except as set forth on Schedule 4.4, and except for such consents
and waivers which the failure to obtain would not have a Material Adverse
Effect.
(b) Except for applicable requirements, if any, of the
Securities Act, the Exchange Act, "blue sky" laws of various states, and filing
and recordation of appropriate merger documents as required by Delaware Law, NTS
is not required to submit any notice, report or other filing with, or obtain any
waiver, consent, or approval from, any governmental or regulatory authority,
domestic or foreign, in connection with the execution, delivery or performance
of this Agreement or the consummation of the Transactions, except where the
failure to take such action would not (i) prevent or materially interfere with
the consummation of the Merger and the Transactions, or (ii) have a Material
Adverse Effect.
4.5 Capitalization. The authorized capital stock of NTS consists of
4,000,000 shares of common stock, of which 2,599,975 are issued and outstanding.
Subject to receipt of stockholder approval which is expected to be obtained
prior to the Effective Time, NTS has reserved 400,000 shares of NTS Common Stock
for issuance pursuant to the NTS Option Plan, none of which have been exercised.
As of May 31, 2001, an aggregate of 306,800 shares were subject to outstanding
options, and 93,200 shares were available for issuance under the NTS Option
Plan. As of May 31, 2001, an aggregate of 10,000 shares were subject to
outstanding warrants granted to First Albany Corporation on October 14, 1999.
Schedule 4.5 sets forth a complete and accurate list of (i) all stockholders of
NTS, indicating the number of shares of NTS Common Stock held by each
stockholder, and (ii) all holders of NTS Stock Options and the warrants,
indicating the number of shares of NTS Common Stock subject to NTS Stock Option
and warrant, and in the case of each NTS Stock Option, the date of grant,
exercise price per share, the date or dates upon which shares subject to the
option first become exercisable, whether the holder is an employee, director or
independent contractor of NTS and whether the option is an incentive stock
option under Section 422 of the Code or a nonqualified option. All of the
outstanding shares of capital stock of NTS are duly authorized, validly issued
and are fully paid and nonassessable and are not subject to preemptive rights.
Except as set forth on Schedule 4.5, there are no rights (including without,
limitation, statutory or contractual preemptive rights), subscriptions,
warrants, options, conversion rights or agreements or commitments of any kind
outstanding to purchase or otherwise acquire any shares of capital stock of NTS
or to acquire any securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of NTS to which NTS is a party or
any equity interest in NTS or its business or, to the best of NTS's knowledge,
to which any other person is a party. There are no agreements or other
obligations (contingent or otherwise) which may require NTS to repurchase or
otherwise acquire any shares of capital stock. There are no outstanding or
authorized stock appreciation or phantom stock or similar rights with respect to
NTS. Except as set forth on Schedule 4.5, there are no agreements or
arrangements among any shareholders of NTS with respect to voting or transfers.
4.6 Financial Statements. (a) Schedule 4.6(a) contains true and complete
copies of audited financial statements of NTS containing balance sheets,
statements of income and statements of cash flows as at and for the twelve
months ended December 31, 2000, (the "Balance Sheet"). The financial statements
referred to in this Section 4.6 present fairly and accurately the financial
position, results of operations and cash flows of NTS each as at and for the
period indicated, and were prepared in accordance with GAAP, as in effect as of
the date and for the period of such financial statements, applied on a
consistent basis.
(b) All of the accounts receivable reflected on the Balance
Sheet, and all accounts receivable of NTS that have arisen since December 31,
2000 (except accounts receivable that have been collected since such date) are
valid and enforceable claims, and constitute bona fide accounts receivable
resulting from the sale of goods and services in the ordinary course of business
and are collectible in the ordinary course of business. The accounts receivable
of NTS are not subject to any defenses, offsets, deductions, returns, allowances
or credits of any kind. NTS has no notice that any of the obligors thereunder is
refusing to pay the full amount or any portion thereof. Nestor acknowledges
receipt of a list setting out all accounts receivable as of the close of
business on December 31, 2000, marked Schedule 4.6(b). Schedule 4.6(b) sets
forth the dollar amount of all accounts receivable of NTS, which are outstanding
as of December 31, 2000 at 30, 60 and 90 days from the date of billing to which
any outstanding invoice relates.
(c) All financial, business and accounting books, ledgers,
accounts and official and other records relating to NTS have been properly and
accurately kept and completed, and there are no material inaccuracies or
discrepancies contained or reflected therein. There are no records, systems,
contracts, agreements and other instruments, data or information of NTS,
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which are not under NTS's exclusive
ownership and direct control.
4.7 Litigation. Except as set forth on Schedule 4.7, there are no
actions, proceedings or investigations pending or, to the best knowledge of NTS,
threatened against NTS before any court or governmental or regulatory authority
or body, which, if decided adversely could, individually or in the aggregate,
have a Material Adverse Effect. Neither NTS nor any of its assets is subject to
any order, judgment, injunction or decree which would have a Material Adverse
Effect.
4.8 Absence of Certain Changes or Events. Except as set forth in
Schedule 4.8, since December 31, 2000 (a) there has been no event or occurrence
which has or could reasonably be expected to have a Material Adverse Effect; (b)
NTS has not incurred any indebtedness for money borrowed; (c) NTS has not
assumed, guaranteed, endorsed or otherwise become responsible for the
obligations of any other individual, firm or corporation; (d) there has been no
creation or assumption by NTS of any Lien on any asset that has or could
reasonably be expected to have a Material Adverse Effect; (e) there has been no
loan, advance or capital contribution to or investment in any person by NTS,
including to the affiliates thereof; (f) there has been no change in any method
of accounting or accounting practice by NTS; (g) there has been no repurchase,
redemption or other acquisition by NTS of any outstanding shares of capital
stock or other ownership interest of NTS; (h) there has been no declaration or
payment of any dividend on, or other distribution with respect to, any capital
stock of NTS; and (i) NTS has not entered into any other transaction other than
in the ordinary course of business.
4.9 Material Contracts and other Agreements. Schedule 4.9 sets forth a
complete and accurate list of the following contracts and commitments to which
NTS is a party or by which any of its properties are bound: (a) collective
bargaining agreements and contracts with any labor union; (b) employment or
consulting agreements or any agreements providing for severance, termination or
similar payments; (c) leases, whether as lessor or lessee, involving real or
personal property with annual rental payments in excess of $100,000; (d) loan
agreements, mortgages, indentures, instruments or other evidence of indebtedness
or commitments in each case involving indebtedness (or available credit) for
borrowed money or money lent to others; (e) guaranty or suretyship, performance
bond, indemnification or contribution agreements; (f) written contracts with
customers or suppliers that require aggregate payments to or from NTS of more
than $100,000 in any one-year period, other than contracts issued in the
ordinary and usual course of business or terminable with 30 days or less notice
without premium or penalty; (g) joint venture, partnership, or other agreements
evidencing an ownership interest or a participation in or sharing of profits;
(h) agreements, contracts or commitments limiting the freedom of NTS to engage
in any line of business or compete with any other corporation, partnership,
joint venture, company or individual; and (i) contracts that are terminable, or
under which payments by NTS may be accelerated, upon a change in control of NTS.
NTS has furnished or made available accurate and complete copies of the
foregoing contracts and agreements to Nestor. As to each contract and commitment
referred to above (i) there exists no breach or default, and to the knowledge of
NTS, no event has occurred which with the giving of notice or the passage of
time or both would constitute such a breach, default or permit termination,
notification or acceleration, on the part of NTS or, to the knowledge of NTS, on
the part of any third party which, with or without the giving of notice, lapse
of time or the happening of any other event or condition, would have a Material
Adverse Effect and (ii) as of the Effective Time, no material third party
consent, approval or authorization shall be required for the consummation of the
Transactions.
4.10 Compliance with Laws. NTS has complied and is in compliance with
applicable federal, state or local statutes, laws and regulations, except where
the failure to so comply would not have a Material Adverse Effect. NTS has not
(a) failed to obtain any license, permit, franchise or other governmental
authorization which is material to the operations of the business of NTS, taken
as a whole, or (b) received any notice of any alleged violation or breach of any
law or regulation or of any license, permit, franchise or authorization which
violation or breach would have a Material Adverse Effect.
4.11 Proprietary Property. Schedule 4.11 contains a complete and
accurate list of all material patents and patent applications, all trademarks,
service marks, trade dress, trade names and corporate names; all registered
copyrights; all registrations, applications and renewals for any of the
foregoing; and other material intellectual property rights (together with the
goodwill associated therewith, collectively the "NTS Proprietary Property"),
including, without limitation, all contracts, agreements and licenses relating
to any of the foregoing, owned by NTS or in which NTS has any rights. The
Transactions will not have a Material Adverse Effect on the right, title and
interest of NTS as of the Effective Time in and to the NTS Proprietary Property.
Except as set forth on Schedule 4.11, to NTS's knowledge, NTS has not interfered
with, infringed or is infringing on or otherwise come into conflict with any
proprietary property belonging to any other person, firm or corporation. Except
as set forth on Schedule 4.11, to the knowledge of NTS, no third party is
interfering with, infringing on or otherwise coming into conflict with the NTS
Proprietary Property. Except as set forth on Schedule 4.11, NTS has not received
any written notice of material invalidity, interference, infringement or
misappropriation from any third party with respect to any of NTS Proprietary
Property.
4.12 No Undisclosed Liabilities. Except as set forth on Schedule 4.12,
there is no liability or obligation of NTS of any nature, whether absolute,
accrued, contingent or otherwise other than: (i) the liabilities and obligations
reflected on the Balance Sheet; (ii) liabilities and obligations of NTS incurred
since December 31, 2000 in the ordinary and usual course of business; (iii)
liabilities and obligations relating to contracts not yet required to be
performed; and (iv) liabilities and obligations which individually or in the
aggregate do not have a Material Adverse Effect.
4.13 Title to Personal Property. Except as set forth on Schedule 4.13,
NTS has good title to or a valid and enforceable leasehold interest in all
personal property material to the operation of its business, free and clear of
all Liens other than Liens which are not reasonably expected to have a Material
Adverse Effect.
4.14 Taxes and Tax Returns. NTS: (a) has made or timely filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject or has obtained extensions
not yet expired with respect thereto; (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings; and (c) has set aside on its books, provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of NTS know of no basis for any such claim.
4.15 Employee Benefit Plans. Each employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained by NTS or any organization which,
together with NTS, would be treated as a "single employer" within the meaning of
Section 414(b) or (c) of the Code or to which NTS or such organization
contributes (or has any obligation to contribute) or is a party (collectively,
the "NTS Benefit Plans") is listed on Schedule 4.15 attached hereto. Except as
set forth on such Schedule 4.15, or to the extent that any breach of the
representations set forth in this sentence would not have a material adverse
effect on NTS: (a) each NTS Benefit Plan is in compliance with applicable law
and has been administered and operated in all respects in accordance with its
terms; (b) each NTS Benefit Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code, is a standardized prototype plan which
has received a favorable opinion letter from the Internal Revenue Service and,
to the knowledge of the NTS, no event has occurred and no condition exists which
could reasonably be expected to adversely affect such qualified status; (c) no
NTS Benefit Plan is covered by Title IV of ERISA or subject to Section 412 of
the Code or Section 302 of ERISA; (d) neither NTS nor, to NTS's knowledge, any
other "disqualified person" or "party in interest" (as defined in Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in
any transactions in connection with any NTS Benefit Plan that could reasonably
be expected to result in the imposition of a penalty pursuant to Section 502 of
ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975 of the Code; (e) no NTS Benefit Plan provides for post-employment or
retiree welfare benefits, except to the extent required by Part 6 of Subtitle B
of Title I of ERISA or Section 4980B of the Code; (f) no liability, claim,
action or litigation, has been made, commenced or, to NTS's knowledge,
threatened with respect to any NTS Benefit Plan (other than routine claims for
benefits payable in the ordinary course, and appeals of denied such claims); and
(g) none of the NTS Benefit Plans promise or provide severance benefits or
benefits contingent upon a change in ownership or control, within the meaning of
Section 280G of the Code nor create any entitlement to receive any payment
benefit or amount which may constitute "Excess Parachute Payments" under the
Code.
4.16 Labor Matters. Except as set forth in Schedule 4.16, (i) there are
no controversies pending or, to the best knowledge of NTS, threatened between
NTS and any of its employees; (ii) NTS is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by NTS, nor, to the best knowledge of NTS are there any activities or
proceedings of any labor union to organize any such employees; (iii) there are
no unfair labor practice complaints pending against NTS before the National
Labor Relations Board or other governmental or administrative body involving
employees of NTS; and (iv) there is no strike, slowdown, work stoppage or
lockout, or, to the best knowledge of NTS, threat thereof, by or with respect to
any employees of NTS.
4.17 Products Liability. Except as disclosed on Schedule 4.17, there is
no notice or claim involving any product manufactured, produced, distributed or
sold by or on behalf of NTS resulting from an alleged defect in design,
manufacture, materials or workmanship, failure to perform for the use intended
or any alleged failure to warn, or from any breach of express or implied
warranties or representations, which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on NTS taken as a
whole, without regard to any insurance coverage. The product liability insurance
policies maintained by NTS are in full force and effect and are adequate for the
business conducted by NTS. NTS has not received any notice from any insurance
carrier declining coverage of any claim or canceling or threatening to cancel
any such policy.
4.18 Joint Proxy Statement-Prospectus. None of the information supplied
in writing by NTS, its officers, directors, representatives, financial advisors,
agents or employees, for inclusion in the Joint Proxy Statement Prospectus will,
on the date the Joint Proxy Statement-Prospectus is filed with the SEC, first
mailed to stockholders of NTS in connection with the NTS Stockholders Meeting,
at the time of the Nestor Stockholders Meeting to, among other things, consider
the issuance of Nestor Common Stock in the Merger, at the time of the NTS
Stockholders Meeting or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it will be made, will be
false or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading. To the extent it contains information or statements pertaining to
NTS, the Joint Proxy Statement-Prospectus will, when filed, comply as to form in
all material respects with the requirements of the Securities Act and the
Exchange Act. Notwithstanding the foregoing, NTS does not make any
representation or warranty with respect to any information that has been
supplied by Nestor or its accountants, counsel or other authorized
representatives for use in the Joint Proxy Statement-Prospectus.
4.19 NTS Properties and Leases.
(a) NTS has sufficient title to all its properties and assets
and has been issued all related permits, consents and permissions necessary or
appropriate to enable it to conduct its business as currently conducted or as
contemplated to be conducted.
(b) Except as set forth on Schedule 4.19(b), each parcel of real
property owned or leased by NTS (i) is owned or leased free and clear of all
Liens, other than Permitted Liens, and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of NTS, has any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of
NTS to which NTS is a party requiring rental payments in excess of $50,000
during the period of the lease and all amendments and modifications thereto are
in full force and effect and have not been modified or amended, and there exists
no default under any such lease by NTS, nor any event which with the giving of
notice or the lapse of time or both would constitute a default thereunder by
NTS.
4.20 Environmental Matters. (a) Except as set forth on Schedule 4.20,
NTS is in compliance in all material respects with all applicable Environmental
Laws and has been issued and currently maintains all required federal, state and
local permits, licenses, certificates and approvals except to the extent such
non-compliance or the absence of any such permit, license, certificate or
approval would not be, singly or in the aggregate, reasonably expected to have a
Material Adverse Effect. NTS has not been notified of any pending or threatened
action, suit, proceeding or investigation and NTS is not aware of any facts,
which (i) call into question, or would reasonably be expected to call into
question, compliance by NTS with any Environmental Laws, (ii) seeks, or would
reasonably be expected to form the basis of a meritorious proceeding to seek, to
suspend, revoke or terminate any license, permit or approval necessary for the
operation of NTS's business or facilities or for the generation, handling,
storage, treatment or disposal of any Hazardous Substances, or (iii) seeks to
cause, or would reasonably be expected to form the basis of a meritorious
proceeding to cause, any property of NTS to be subject to any restrictions on
ownership, use, occupancy or transferability under any Environmental Law, any of
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 4.20 to the best knowledge of NTS, NTS has not caused or
permitted its business or property (whether real or personal, owned or leased
and whether or not currently owned or occupied by any such entity) to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, or process Hazardous Substances, except in material
compliance with all applicable Environmental Laws.
(b) Except as set forth on Schedule 4.20, NTS has not received
notice of any violation or notice of regulatory requirements or has been
notified of any threatened or pending action, suit, proceeding or investigation
which suggests that NTS is a potentially responsible party with regard to any
release or threatened release of Hazardous Substances.
(c) Except as set forth on Schedule 4.20, NTS has no liability
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, arising under or relating to any Environmental Law,
which liability would have a Material Adverse Effect.
4.21 The NTS Board. The NTS Board has, as of the date of this Agreement,
determined (i) that the Merger is fair to, and in the best interests of NTS and
its stockholders, and (ii) to recommend that the stockholders of NTS approve and
adopt this Agreement and approve the Merger.
Article V
Covenants And Agreements
------------------------
5.1 Conduct of Business by NTS Pending the Merger. NTS covenants and
agrees that, between the date of this Agreement and the Effective Time, unless
Nestor shall otherwise consent, the business of NTS shall be conducted only in,
and NTS shall not take any action except in the ordinary course of business and
in a manner consistent with past practice; NTS will use its best efforts to
preserve substantially intact the business organization of NTS, to keep
available the services of the present officers, employees and consultants of NTS
and to preserve the present relationships of NTS with customers, suppliers and
other persons with which NTS has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement, NTS
shall not, between the date of this Agreement and the Effective Time, directly
or indirectly, do any of the following without the prior consent of Nestor:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or propose
the issuance, sale, pledge, disposition, encumbrance or authorization of any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
of any other ownership interest, of NTS, other than shares pursuant to options
granted prior to the date hereof or in the ordinary course of business and
exercised in accordance with their terms, as in effect prior to such date; (ii)
amend or propose to amend the Certificate of Incorporation or Bylaws of NTS;
(iii) split, combine or reclassify any outstanding shares of NTS Common Stock,
or declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to such shares; (iv) redeem, purchase
or otherwise acquire or offer to redeem, purchase or otherwise acquire any
shares of its capital stock, except in the performance of its obligations under
existing employee plans; or (v) authorize or propose or enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 5.1(a);
(b) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof, (ii) sell, pledge, dispose of, or encumber or authorize or
propose the sale, pledge, disposition, encumbrance, or authorization of any
material assets of NTS; (iii) incur any material indebtedness for borrowed money
other than in the ordinary course consistent with past practice; (iv) make or
commit to any capital expenditure or make or commit to make aggregate capital
expenditures other than in the ordinary course of the business of NTS or as
contemplated by the planned expansion of the business of NTS without first
notifying Nestor, or (v) enter into or amend any contract, agreement, commitment
or arrangement with respect to any of the matters set forth in this Section
5.1(b);
(c) take any action other than pursuant to existing contracts
(none of which actions shall be unreasonable or unusual) to grant any severance
or termination pay (otherwise than pursuant to policies of NTS in effect on the
date hereof) or to increase benefits payable under its severance or termination
pay policies in effect on the date hereof;
(d) make any payments (except in the ordinary course of business
and in amounts and in a manner consistent with past practice or pursuant to
disclosed contracts) to any employee of, or independent contractor or consultant
to, NTS, increase the compensation payable to NTS's officers or employees,
except for increases in the ordinary course of business, consistent with past
practice, in salaries or wages of employees of NTS who are not officers of NTS,
enter into any new employee plan, any new employment or consulting agreement,
grant or establish any new awards under such plan or agreement, or adopt or
otherwise amend any of the foregoing otherwise than in the ordinary course
consistent with past practice;
(e) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(f) settle or compromise any pending or threatened suit, action
or claim against NTS or any of its directors by any shareholder of NTS relating
to the Merger, the Transactions or this Agreement, or voluntarily cooperate with
any third party which has sought or may hereafter seek to restrain or prohibit
or otherwise oppose the Merger;
(g) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of NTS (other than the Merger); or
(h) take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Section 5.1(a) through
5.1(g) or any action which would make any of the representations or warranties
of NTS contained in this Agreement untrue or incorrect as of the date when made
if such action had then been taken, or would result in any of the conditions set
forth in Article VI not being satisfied.
5.2 Corporate Examinations and Investigations. Prior to the Effective
Time, each party hereto shall be entitled, through its directors, officers,
affiliates, employees, attorneys, accountants, representatives, financiers,
investors, lenders, consultants and other agents (collectively,
"Representatives") to make such investigation of the properties, assets, the
business and operations of the other party, and such examination of the books,
records and financial condition of the other party, as each party hereto
reasonably deems necessary. Any such investigation and examination shall be
conducted at reasonable times, under reasonable circumstances and upon
reasonable notice, and the parties hereto shall cooperate fully therein. In that
connection, each party hereto shall make available to Representatives of the
other party during such period, without however causing any unreasonable
interruption in the operations of such other party, (i) all such information and
copies of such documents and records concerning the affairs of such party as
such Representatives may reasonably request, (ii) shall permit Representatives
of such party access to the assets and all other parts thereof and to such
party's employees, customers, suppliers, contractors and others, and (iii) shall
cause such party's respective Representatives to cooperate fully in connection
with such review and examination. No investigation by any party hereto shall
diminish or obviate any of the representations, warranties, covenants or
agreements of either party contained in this Agreement.
5.3 Joint Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this
Agreement, NTS and Nestor will prepare, and file with the SEC, a Joint Proxy
Statement-Prospectus and Nestor will prepare and file with the SEC the
registration statement in which the Joint Proxy Statement-Prospectus will be
included as a prospectus (the "Registration Statement"). Each of NTS and Nestor
will cooperate in coordinating a response to any comments of the SEC, will use
its respective reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing and will cause the Joint Proxy Statement-Prospectus to be mailed to
their respective stockholders at the earliest practicable time. As promptly as
practicable after the date of this Agreement, NTS and Nestor will prepare and
file any other filings required under the Exchange Act, the Securities Act or
any other Federal, foreign or "blue sky" laws relating to the Merger and the
Transactions (the "Other Filings"). Each of NTS and Nestor will notify the other
promptly upon the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Registration Statement, the Joint Proxy
Statement-Prospectus or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government official, on the other hand, with respect to the Registration
Statement, the Joint Proxy Statement-Prospectus, the Merger or any Other Filing.
The Joint Proxy Statement-Prospectus, the Registration Statement and the Other
Filings will comply in all material respects with all applicable requirements of
law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Joint Proxy Statement-Prospectus, the Registration Statement or any Other
Filings, NTS or Nestor, as the case may be, will promptly inform the other of
such occurrence and cooperate in the filing with the SEC or its staff or any
other government officials, and/or mailing to stockholders of NTS or of Nestor,
such amendment or supplement.
(b) The Joint Proxy Statement-Prospectus will include the
recommendation of the NTS Board in favor of adoption and approval of this
Agreement and approval of the Merger; except that the NTS Board may withdraw,
modify or refrain from making such recommendation to the extent that the NTS
Board determined to accept an Acquisition Transaction (as defined in Section
5.6) or determined, in good faith, after consultation with outside legal
counsel, that compliance with the Board's fiduciary duties under applicable law
would require it to do so, each pursuant to and in accordance with Section 5.6.
In addition, the Joint Proxy Statement-Prospectus will include the
recommendations of the Nestor Board in favor of: (i) the approval of the
issuance of shares of Nestor Common Stock in connection with the Merger and the
appointment of a new Nestor Board; (ii) the amendment of Nestor's Certificate of
Incorporation to increase its authorized share capital; and (iii) the amendment
to the Nestor Option Plan to increase the number of shares available for
issuance thereunder (collectively, the "Nestor Stockholders' Proposals").
5.4 Meetings of Stockholders. Promptly after the date hereof, NTS will
take all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the NTS Stockholders Meeting to be held as
promptly as practicable, and in any event (to the extent permissible under
applicable law) within 45 days after the declaration of effectiveness of the
Registration Statement, for the purpose of voting upon this Agreement. NTS will
consult with Nestor and use its reasonable best efforts to hold the NTS
Stockholders Meeting on the same day as the Nestor Stockholders Meeting.
Promptly after the date hereof, Nestor will take all action necessary in
accordance with Delaware Law and its Certificate of Incorporation and Bylaws to
convene the Nestor Stockholders Meeting to be held as promptly as practicable,
and in any event (to the extent permissible under applicable law) within 45 days
after the declaration of effectiveness of the Registration Statement. Nestor
will consult with NTS and will use its best efforts to hold the Nestor
Stockholders Meeting on the same day as the NTS Stockholders Meeting. For so
long as the NTS Board continues to make the recommendation set forth in Section
5.3(b), NTS will use its reasonable best efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required by Delaware Law to
obtain such approvals. For so long as the Nestor Board continues to make the
recommendations set forth in Section 5.3, Nestor will use its best efforts to
solicit from its stockholders proxies in favor of each of the Nestor
Stockholders' Proposals.
5.5 Certain Filings and Consents. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to cooperate with one
another and to use all reasonable efforts to take or cause to be taken promptly
all action and to do, or cause to be done, promptly all things necessary, proper
or advisable to consummate and make effective, in the most expeditious manner
practicable, the Transactions and shall cooperate with one another and use all
reasonable efforts to obtain in a timely manner all waivers, permits, consents
and approvals and to effect all filings and notices with or to third parties or
governmental or public bodies or authorities that are in the opinion of NTS,
Nestor and Merger Sub necessary or desirable in connection with or with respect
to the Transactions, including, without limitation, filings or submissions to
the extent required under the Exchange Act, and any other filings or approvals
expressly contemplated by this Agreement.
5.6 Negotiations. As long as this Agreement is in effect, neither NTS
nor its directors, officers, employees, agents or other Representatives shall,
directly or indirectly, except to the extent required by the fiduciary duties of
the Board of Directors, participate in any discussions or negotiations
regarding, or provide information concerning NTS or this Agreement to any
corporation, partnership, person, or other entity or group (other than Nestor
and Merger Sub) in connection with, an acquisition of any capital stock, other
securities or assets of NTS, or its affiliates, including pursuant to any
merger, consolidation, liquidation, dissolution, reorganization, tender offer,
exchange offer, business combination, recapitalization or similar transaction
involving NTS (any of the foregoing, an "Acquisition Transaction"). Subject to
the exercise of applicable fiduciary duties as advised by counsel, NTS will
promptly communicate to Nestor and Merger Sub if any discussions or negotiations
are initiated, any inquiry or proposal is made or any information is requested
with respect to an Acquisition Transaction (including the nature and terms of
any of the foregoing).
5.7 Appraisal Rights; Stockholder Claims. NTS shall not, without the
prior written consent of Nestor, make any payment in respect of or settle or
compromise any claim brought by any stockholder of NTS in connection with the
Merger on or prior to the Effective Time (including but not limited to any claim
or demand for appraisal rights under Section 262 of Delaware Law).
5.8 Notification of Certain Matters. NTS shall give prompt notice to
Nestor and Merger Sub, and Nestor and Merger Sub shall give prompt notice to
NTS, of (i) the occurrence, or failure to occur, of any matter or event which
occurrence or failure to occur is likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, (ii) any material
failure of each of NTS, Nestor or Merger Sub to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, and (iii) any proposal or offer made to, or solicited by, any of
the parties to enter into an Acquisition Transaction (other than the Merger);
provided, however, that no such notification, shall affect the representations
or warranties of the parties or the conditions to the obligations of the parties
hereunder.
5.9 Indemnification.
(a) After the Effective Time, Nestor shall indemnify, defend and
hold harmless the present and former officers and directors of NTS (an
"Indemnified Party") against all losses, expenses, claims, damages or
liabilities (including attorney's fees, fines, judgments and amounts paid in
settlement) arising out of actions or omissions occurring on or prior to the
Effective Time (including without limitation, the Transactions) to the fullest
extent permitted or required under Delaware Law, the Certificate of
Incorporation and the Bylaws of NTS in effect at the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
action or suit. This Section 5.9(a) shall survive beyond the Effective Time and
is intended to benefit the Surviving Corporation and each of the Indemnified
Parties (each of whom shall be entitled, at the expense of the Surviving
Corporation, to enforce this Section 5.9(a) against the Surviving Corporation
and Nestor).
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provisions shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.9.
5.10 Increase in Authorized Shares. Subject to the terms hereof, at the
Nestor Stockholders Meeting, Nestor shall propose and recommend that its
Certificate of Incorporation be amended to increase the authorized number of
shares of Nestor Common Stock thereunder from 30,000,000 shares to 100,000,000
shares.
Article VI
Conditions Of Merger
--------------------
6.1 Conditions to the Parties' Obligations.
(a) Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time, of the following conditions;
provided, however, that no party shall refuse to consummate the Merger if a
condition is not satisfied as a result of a breach by such party of any
agreement, representation, warranty or covenant of such party under this
Agreement.
(i) Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the stockholders
of NTS in accordance with Delaware Law and the Certificate of Incorporation of
NTS and by the requisite vote of the sole stockholder of Merger Sub in
accordance with Delaware Law and the Certificate of Incorporation of Merger Sub;
and each of the Nestor Stockholders' Proposals shall have been approved and
adopted by the requisite vote of the stockholders of Nestor in accordance with
Delaware Law and the Certificate of Incorporation of Nestor; and
(ii) The Registration Statement and Joint Proxy
Statement-Prospectus. The Registration Statement of which the Joint Proxy
Statement-Prospectus is a part filed by Nestor with respect to the Nestor Common
Stock to be issued in the Merger shall have been declared effective by the SEC;
and no stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Joint Proxy Statement-Prospectus, shall
have been initiated or threatened by the SEC; and
(iii) No Material Adverse Effect. There shall have been no
event or events which have occurred which, individually or in the aggregate,
shall have had a Material Adverse Effect on NTS, Nestor or Merger Sub
respectively; and
(iv) No Orders or Injunctions. No (A) order issued by any
United States federal or state or foreign governmental or regulatory authority
or body and no statute, rule, regulation or executive order promulgated or
enacted by any United States' federal or state or foreign government or
governmental authority shall be in effect which, or (B) action, suit, or
proceeding shall be pending before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge which,
would (x) prevent consummation of any of the Transactions or (y) cause any of
the Transactions to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect).
(v) Fairness Opinion. The Nestor Board shall have received
a satisfactory opinion addressed to Nestor as to the fairness of the terms of
the Merger from a financial point of view and a copy of such opinion shall have
been delivered to NTS in accordance with Section 3.22 hereof.
(vi) Investment of NTS Investors, LLC. NTS Investors, LLC
shall have increased its investment in NTS, including the principal amount of
the Secured Note Agreement dated as of January 9, 2001, all accrued interest
thereon and additional cash in the aggregate amount of at least $7,500,000 or up
to $8,000,000.
(vii) Stockholders Agreement. Each of Nestor, NTS
Investors, LLC and the holders of at least 15.8% of the outstanding Nestor
Common Stock after giving effect to the Merger shall have executed and delivered
to Nestor a Stockholders Agreement substantially in the form annexed hereto as
Exhibit 1.
(b) Conditions to Nestor's and Merger Sub's Obligations to
Effect the Merger. The obligations of Nestor and Merger Sub to effect the Merger
shall also be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions, unless waived by Nestor:
(i) The representations and warranties of NTS contained in
this Agreement shall have been true and correct in all material respects as of
the date of this Agreement. In addition, the representations and warranties of
NTS contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time.
(ii) NTS shall have complied in all material respects with
each covenant, agreement and condition required by this Agreement to be
performed or complied with by it on or before the Effective Time.
(iii) NTS shall not have received appraisal demands
pursuant to Section 262 of the Delaware Law in respect of 5% or more of the
outstanding NTS Common Stock.
(iv) NTS Investors, LLC shall have delivered all such
documentation as may be reasonably requested by Nestor to evidence the
termination of the Secured Note Agreement dated as of January 9, 2001 and the
cancellation of all notes issued in connection therewith.
(c) Conditions to NTS's Obligation to Effect the Merger. The
obligations of NTS to effect the Merger also shall be subject to the fulfillment
of the following additional conditions, unless waived by Nestor:
(i) The representations and warranties of Nestor and
Merger Sub contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. In addition, the
representations and warranties of Nestor and Merger Sub contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time.
(ii) Each of Nestor and Merger Sub shall have complied in all material respects
with each covenant, agreement and condition required by this Agreement to be
performed or complied with by it hereunder on or before the Effective Time.
Article VII
Termination, Amendment And Waiver
---------------------------------
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of the Nestor Board and the NTS
Board;
(b) by Nestor or NTS if: (i) NTS's stockholders fail to approve
this Agreement; (ii) Nestor's stockholders fail to approve any of the Nestor
Stockholders' Proposals; or (iii) the Merger shall not have been consummated on
or before December 31, 2001 by reason of the failure of any condition precedent
under Section 6.1; provided, however, that no party may terminate this Agreement
pursuant to this Section 7.1(b) if such failure results primarily from that
party's breach of this Agreement;
(c) by Nestor or NTS if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the Transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable;
(d) by NTS, by giving written notice to Nestor and Merger Sub,
in the event of a material breach by Nestor and Merger Sub of any
representation, warranty or agreement of Nestor and Merger Sub contained in this
Agreement, in each case which has not been cured or is not curable by the
earlier of the satisfaction of the conditions to the Merger set forth in Article
VI of this Agreement or the fifteenth day after notice of such breach was given
by NTS;
(e) by NTS if the Nestor Board (a) withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner adverse
to NTS, (b) recommends to the holders of shares of Nestor Common Stock any
proposal with respect to a tender offer, merger, consolidation, share exchange
or similar transaction involving Nestor or any of its Subsidiaries, in lieu of
the Merger and the Transactions contemplated by this Agreement, or (c) resolves
to do any of the foregoing;
(f) by Nestor, by giving written notice to NTS, in the event of
a material breach by NTS of any representation, warranty or agreement of NTS
contained in this Agreement which has not been cured or is not curable by the
earlier of the satisfaction of the conditions to the Merger set forth in Article
VI of this Agreement or the fifteenth day after notice of such breach was given
by Nestor; and
(g) by Nestor if the NTS Board (a) withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner adverse
to Nestor, (b) recommends to the holders of shares of NTS Common Stock any
proposal with respect to a tender offer, merger, consolidation, share exchange
or similar transaction involving NTS, other than the Merger and the
Transactions, or (c) resolves to do any of the foregoing.
7.2 Effect of Termination. Except as set forth in Section 8.2 below and
as otherwise expressly set forth in this Agreement, in the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability on the part of NTS, Nestor
or Merger Sub or their respective officers, directors, stockholders or
affiliates, and this Section 7.2 shall remain in full force and effect and
survive any termination of this Agreement.
7.3 Amendment; Waiver. By action taken by their respective Boards of
Directors or a duly authorized committee thereof (including after such time as
the stockholders of NTS, Nestor and Merger Sub approve the Merger) this
Agreement may be amended by an instrument in writing signed on behalf of each of
the parties hereto. At any time prior to the Effective Time, the parties hereto,
by action taken by their respective Boards of Directors or duly authorized
committees thereof, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements of the other parties hereto or conditions
to its own obligations herein; provided, however, that any such waiver of or
failure to insist on strict compliance with any such representation, warranty,
agreement or condition shall not (x) operate as a waiver of, or estoppel with
respect to, any subsequent or other failure, or (y) be deemed, or constitute, a
waiver of any other provision, whether or not similar. Any agreement on the part
of a party hereto to any such amendment, extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of all the parties. No
course of dealing between or among the parties will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any party under or by reason of this Agreement.
Article VIII
Miscellaneous
-------------
8.1 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement shall not survive beyond the Effective
Time.
8.2 Remedies, Expenses and Fees.
(a) Each of the parties hereto shall have and shall retain all
other rights and remedies existing in its favor at law or equity for breaches of
this Agreement.
(b) If the Merger is consummated, all fees and expenses incurred
in connection with the Merger and the Transactions will be paid by the Surviving
Corporation, including, without limitation, the reasonable attorneys' fees and
expenses of counsel to NTS Investors, LLC up to a maximum of $25,000, which
amount shall be paid promptly after the Effective Time. If the Merger is not
consummated, each party hereto shall bear its respective fees and expenses.
8.3 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed given if delivered personally, by
commercial carrier, or registered or certified mail (postage prepaid, return
receipt requested) or transmitted by facsimile (with confirmation of receipt) to
the parties at the following addresses and numbers:
(a) If to Nestor or Merger Sub, c/o:
Nestor, Inc.
One Richmond Square
Providence, RI 02906
Attention: Mr. Nigel Hebborn
Facsimile No.: (401) 331-7319
(b) If to NTS, to:
Nestor Traffic Systems, Inc.
One Richmond Square
Providence, RI 02906
Attention: Mr. David Fox
Facsimile No.: (401) 331-7319
with a copy to:
R.W. Loeb Prof. Corp.
865 South Figueroa Street
Suite 2300
Los Angeles, California 90017-2567
Attention: R.W. Loeb, Esq.
Facsimile No.: (213) 892-1066
(c) in each case, with copies to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Herbert S. Meeker, Esq.
Facsimile No.: (212) 702-5941
or at such other addresses or facsimile numbers as shall be furnished by the
parties by like notice.
8.4 Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.5 Publicity. So long as this Agreement is in effect and except as
otherwise agreed to by the parties hereto, all press releases and other public
announcements relating to the Transactions will be made by NTS, Nestor or Merger
Sub as required by law and only after consultation with and review thereof by
the other parties hereto.
8.6 Entire Agreement. This Agreement (including all Schedules hereto)
and the other agreements specifically referred to herein or delivered pursuant
hereto, constitute the entire agreement among the parties and supersede all
other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
8.7 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties.
8.8 Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original. Delivery of an executed
counterpart of this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart thereof.
8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware, or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Delaware.
8.10 Severability. In the event that any provision, or any part of any
provision, of this Agreement, or the application thereof, becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of such provision and of this Agreement will continue in full force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
8.11 No Strict Construction. The parties hereto jointly participated in
the negotiation and drafting of this Agreement and the other agreements
contemplated hereby. The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their collective mutual
intent, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no rule of strict construction will be applied against any person.
The term, "including" as used herein shall be by way of example, and shall not
be deemed to constitute a limitation of any term or provision contained herein.
8.12 No Third Party Contract Rights. This Agreement is intended solely
for the benefit of the parties hereto and, in respect of the matters described
in Section 5.9(a) hereof, the Indemnified Parties. Nothing herein shall be
construed or deemed to create any rights or benefits to any other third parties
or third party beneficiaries.
8.13 Further Assurances. If at any time after the Effective Date, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary, desirable or
proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, the title to any property or right of NTS or to be acquired by
reason or as a result of the Merger, or (b) otherwise to carry out the purposes
of this Agreement, the parties agree that the Surviving Corporation and its
proper officers and directors shall and will execute and deliver all such
property, deeds, assignments and assurances in law and do all acts necessary,
desirable or proper to vest, perfect or confirm title to such property or right
in the Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and that the proper officers and directors of NTS and the proper
officers and directors of the Surviving Corporation are fully authorized in the
name of the parties or otherwise to take any and all such action.
IN WITNESS WHEREOF, Nestor, Merger Sub and NTS have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
NESTOR, INC.
By: ______________________-
Name:
Title:
NESTOR MERGER SUB CORP.
By: ______________________-
Name:
Title:
NESTOR TRAFFIC SYSTEMS, INC.
By: ______________________-
Name:
Title:
[Note Schedules and Exhibits are not included.]
EX-10.4
6
exh10-4.txt
JOINT ACQUISITION STATEMENT
EXHIBIT 4
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(k)1
The undersigned acknowledge and agree that the foregoing statement on Schedule
13D is filed on behalf of each of the undersigned and that all subsequent
amendments to this statement on Schedule 13D shall be filed on behalf of each of
the undersigned without the necessity of filing additional joint acquisition
statements. The undersigned acknowledge that each shall be responsible for the
timely filing of such amendments and for the completeness and accuracy of the
information concerning him or it contained therein, but shall not be responsible
for the completeness and accuracy of the information concerning the others,
except to the extent that he or it knows or has reason to believe that such
information is inaccurate.
Dated: September 21, 2001
/s/ David A. Polak
----------------------
David A. Polak, individually, and as
managing member of
NTS Investors, LLC