NESTOR, INC.
One Richmond Square
Providence, Rhode Island 02906
(401) 331-9640
April 7, 1998
To Our Stockholders:
You are cordially invited to attend the annual meeting
of stockholders of Nestor, Inc. (the "Company") to be held at the
DAYS HOTEL, located at 220 INDIA STREET, PROVIDENCE, RI, on
Tuesday, May 5, 1998, at 1:00 p.m., local time. The accompanying
Notice of Annual Meeting of Stockholders and Proxy Statement
describe the matters to be acted upon at the annual meeting.
A proxy card is also enclosed. Whether or not you plan
to attend the annual meeting, it is important that your shares be
represented and voted at the annual meeting. Accordingly, after
reading the enclosed proxy statement, you are urged to complete,
date, sign and return the enclosed proxy in the envelope
provided, which requires no postage if mailed in the United
States. If you attend the annual meeting, you may then revoke
your proxy by voting in person.
We look forward to greeting personally as many of our
stockholders as possible at the annual meeting.
Sincerely yours,
/S/David Fox
President and
Chief Executive Officer
Directions to Days Hotel:
Function Room: Bayview
South (from New York)
95 North
195 East (Cape Cod)
Exit 3 (Gano Street)
Left off exit ramp
Second right into hotel parking lot
North (from Boston)
95 South
195 East (Cape Cod)
Exit 3 (Gano Street)
Left off exit ramp
Second right into hotel parking lot
East (from Cape Cod)
195 West
Exit 3 (Gano Street)
Left off exit ramp
Second right into hotel parking lot
NESTOR, INC.
One Richmond Square
Providence, Rhode Island 02906
(401) 331-9640
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 5, 1998
To the Stockholders of Nestor, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of the
stockholders of Nestor, Inc., a Delaware corporation (the
"Company"), will be held at the DAYS HOTEL located at 220 India
Street, Providence, Rhode Island, on May 5, 1998, at 1:00 p.m.
local time, to act upon the following:
1. To consider and vote upon the election of eight
directors, each to hold office until the next annual meeting and
until their successors are elected and qualified;
2. To approve the selection of independent auditors
for the Company for the year ending December 31, 1998; and
3. To transact such other business as may properly
come before the meeting or any adjournments or postponements
thereof.
Only stockholders of record as of the close of business
on March 6, 1998, will be entitled to vote at the meeting.
By Order of the Board of Directors,
/S/Herbert S. Meeker, Secretary
Providence, Rhode Island
April 7, 1998
IMPORTANT: THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK AND SERIES B, D, E, F, G and H CONVERTIBLE
PREFERRED STOCK, VOTING AS A GROUP, MUST BE REPRESENTED AT THE
ANNUAL MEETING IN PERSON OR BY PROXY IN ORDER TO HAVE A QUORUM.
THEREFORE, WE URGE YOU TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON. IF YOU ATTEND THE MEETING,
YOU MAY THEN REVOKE YOUR PROXY BY VOTING IN PERSON.
PROXY STATEMENT
NESTOR, INC.
One Richmond Square
Providence, Rhode Island 02906
(401) 331-9640
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 5, 1998
This proxy statement is being furnished to holders of
shares of (i) common stock, par value $.01 per share (the "Common
Stock") and (ii) the Series B, D, E, F, G and H Convertible
Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), of Nestor, Inc., a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Company's
Board of Directors for use at the annual meeting of stockholders
to be held May 5, 1998, at 1:00 p.m. local time at the DAYS HOTEL
located at 220 India Street, Providence, Rhode Island. This
proxy statement and the enclosed form of proxy are first being
mailed on or about April 7, 1998 to stockholders of the Company
entitled to vote.
PROXIES
The shares represented by each properly executed and
dated proxy which is not revoked as set forth below will be voted
at the annual meeting in accordance with the instructions given.
If no instructions are given on the proxy, the proxy will be
voted FOR each of the nominees for director listed herein FOR the
approval of the selection of independent auditors and, in the
discretion of the proxy holders, on such other business as may
properly come before the annual meeting or any adjournments or
postponements thereof, as further described herein.
REVOCABILITY OF PROXIES
A proxy executed in the form enclosed may be revoked at
any time prior to its exercise by notifying in writing the
Secretary of the Company of such revocation at the Company's
principal executive offices, by delivering a duly executed proxy
bearing a later date or by attending the annual meeting and
voting in person.
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited on behalf of
the Company's Board of Directors. In addition to mailing the
proxy materials, solicitation may be made in person or by
telephone or telegraph by directors, officers or regular
employees of the Company, none of whom will receive additional
compensation in connection with such solicitation. The expense
of the solicitation of proxies for the annual meeting will be
borne by the Company. The Company will request banks, brokers
and other nominees to forward proxy materials to beneficial
owners of the Common Stock and Preferred Stock held by them and
will reimburse such banks, brokers and other nominees for their
reasonable out-of-pocket expenses in doing so.
VOTING SECURITIES
The Common Stock and the Preferred Stock are the only
outstanding classes of securities of the Company entitled to vote
at the meeting. Holders of record of the Common Stock and the
Preferred Stock at the close of business on March 6, 1998, (the
"Record Date") will be entitled to vote on the matters to be
voted upon at the annual meeting. At the close of business on
the Record Date, the Common Stock and Series B, D, E, F G and H
Convertible Preferred Stock are entitled to vote as a group the
equivalent of an aggregate of 14,082,449 shares of Common Stock
on the basis of one vote per share of Common Stock. See
"Security Ownership of Certain Beneficial Owners and Management."
The presence, in person or by proxy, of the holders of
a majority of the outstanding shares of the Common Stock and
Preferred Stock voting as a group will constitute a quorum for
the transaction of business at the annual meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 6, 1998,
the beneficial ownership of shares of the Common Stock and
Preferred Stock of (i) any person who is known by the Company to
own more than 5% of the voting securities of the Company, (ii)
the Chief Executive Officer and each of the Company's other four
most highly compensated executive officers whose salary and bonus
exceed $100,000 for the calendar year ended December 31, 1996
(collectively, the "Names of Executive Officers"), (iii) each
director, and (iv) all directors and Executive Officers of the
Company as a group. Except as otherwise herein indicated, the
Company believes, based on information furnished by such owners,
that the beneficial owners of shares of the Company's Common and
Preferred Stock described below have sole investment voting power
with respect to such shares, subject to any applicable community
property laws:
Name and address Amount and nature of Percent
of beneficial owner beneficial ownership of class
Leon Cooper 920,320 (1) 6.2
49 Intervale Road
Providence, RI
Charles Elbaum 1,033,819 (1) 7
85 Lorraine Avenue
Providence, RI
David Fox 798,074 (2) 5.2
265 West Trail
Stamford, CT
Herbert S. Meeker 303,113 (3) 2
233 Reeder Street
Easton, PA
Reliance Group 872,708 5.9
Holdings, Inc.
Park Avenue Plaza
New York, NY
Jeffrey B. Harvey 135,633 (4) *
114 Woodbury Drive
Amherst, NY
Bruce W. Schnitzer 6,303,458 (5) 39.2
471 Broadway
New York, NY
Thomas F. Hill 135,000 (6) *
320 East 57th Street
New York, NY
Douglas L. Reilly 206,261 (7) 1.4
9 Island View Road
Narragansett, RI
Christopher L. Scofield 268,513 (7) 1.8
38 Meadow Lane
Barrington, RI
Michael T. Glier 106,250 (7) *
74 Southwest Avenue
Jamestown, RI
Sushmito Ghosh 83,533 (7) *
25 Brookway Road
Providence, RI
Sam Albert 12,500 (8) *
27 Kingwood Road
Scarsdale, NY 10583
All executive officers 10,722,174 (9) 58.3
and directors as a group
(15 persons)
________________
(1)Includes 60,000 shares of Series B Convertible Preferred
Stock and 5,000 vested stock options.
(2)Includes 403,000 shares of Common Stock which he may acquire
on a fully vested basis upon the exercise of options granted
under the Company's incentive stock option plan and 20,000
shares of Series B Convertible Preferred Stock.
(3)Includes 60,000 shares of Common Stock which Mr. Meeker may
acquire on a fully vested basis upon the exercise of options
granted by the Company
(4)Includes 100,000 and 10,000 shares of Series B and Series D
Convertible Preferred Stock, and 15,000 shares of common
stock which may be acquired on a fully vested basis.
(5)Bruce W. Schnitzer is the Chairman and owns 66% of the
outstanding common stock of Wand (Nestor) Inc., a Delaware
corporation, which, as a general partner, controls
Wand/Nestor Investments L. P., Wand/Nestor Investments II L.
P. and Wand/Nestor Investments III L.P., Delaware limited
partnerships, which purchased an aggregate of 20,000 shares
of Series D Convertible Preferred Stock (convertible into
shares of Common Stock on a share-for-share basis after
January 1, 1996), an aggregate of 1,444 shares of Series E
Convertible Preferred Stock (convertible, subject to
adjustment into 1,166,385 shares of Common Stock), an
aggregate of 599 shares of Series F Convertible Preferred
Stock (convertible, subject to adjustment into 555,857 shares
of Common Stock), an aggregate of 777 shares of Series G
Convertible Preferred Stock (convertible, subject to
adjustment into 714,920 shares of Common Stock), an aggregate
of 2,026 shares of Series H Convertible Preferred Stock
(convertible, subject to adjustment into 1,636,493 shares of
Common Stock), 179,863 shares of Common Stock, and Common
Stock Purchase Warrants to acquire 2,109,040 shares of
Common Stock of the Company in several private placement
transactions. Bruce W. Schnitzer disclaims beneficial
ownership of these securities except to the extent of his
"pecuniary interest," as such term is defined in Rule 16a-1
of the Securities Exchange Act, therein as owner of a
10.7103% limited partnership interest in Wand/Nestor
Investments L.P. and as the owner of 66% of Wand (Nestor)
Inc.'s 1% general partnership interest in Wand/Nestor
Investments L. P. 291,597 of the Series E Convertible
Preferred Stock is held by holders subject to the Bank
Holding Company Act of 1958, as amended, and have no voting
rights.
Bruce W. Schnitzer holds 5,000 vested stock options, and is
the Chairman and owns 66% of the outstanding Common Stock of
Wand Partners Inc., a Delaware corporation, which, as
general partner controls Wand Partners L. P., a Delaware
limited partnership, which has been granted by the Company a
Common Stock Fee Purchase Warrant to acquire 207,500 shares
of Common Stock of the Company at a price of $2.00 per share.
Bruce W. Schnitzer disclaims beneficial ownership of this
Warrant except to the extent of his "pecuniary interest," as
defined in Rule 16a-1, therein, as the indirect owner of a
33% partnership interest in Wand Partners L. P.
(6)Includes 5,000 vested stock options and a Common Stock Fee
Purchase Warrant to acquire 130,000 shares of the Common
Stock of the Company exercisable until August 1, 2004, at a
price of $2.00 per share issued to Thomas F. Hill, Inc. of
which Mr. Hill is President and sole owner.
(7)Includes 136,250, 167,500, 106,250 and 83,250 shares of
Common Stock which Messrs. Reilly, Scofield, Glier and Ghosh,
respectively, may acquire on a fully vested basis upon the
exercise of options granted under the Company's Incentive
Stock Option Plan.
(8)Includes 12,500 shares of Common Stock which Mr. Albert may
acquire on a fully vested basis upon exercise of options
granted by the Company.
(9)Includes 3,579,040 vested options and warrants owned or
controlled by officers and directors of the Company,
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors will be elected
to hold office until their successors have been duly elected and
qualified as provided in the Company's Certificate of
Incorporation and By-Laws. The following persons have consented
to be nominated and, if elected, to serve as directors of the
Company: Sam Albert, Leon N Cooper, Charles Elbaum, David Fox,
Jeffrey B. Harvey, Thomas F. Hill, Herbert S. Meeker and Bruce W.
Schnitzer. None of the nominees is related by blood, marriage or
adoption to any other director, executive officer or nominee.
Directors and Executive Officers
The following table sets forth information, regarding
the directors, nominees and executive officers of the Company:
Director/ Capacities
Officer in which
Name Age Since Served
Sam Albert 64 1991 Director*
Leon N Cooper 68 1983 Co-Chairman and
Director*
Charles Elbaum 71 1983 Co-Chairman and
Director*
David Fox 62 1983 President, Chief
Executive Officer
and Director*
Jeffrey B. Harvey 48 1993 Director*
Thomas F. Hill 52 1994 Director*
Herbert S. Meeker 72 1983 Secretary and Director*
Bruce W. Schnitzer 53 1994 Director*
Nigel P. Hebborn 39 1996 Chief Financial Officer
Sushmito Ghosh 39 1995 Vice President
Financial Solutions
Michael T. Glier 49 1992 Vice President
Intelligent Sensors
Thomas Halket 49 1993 Assistant Secretary
Kevin C. Hughes 45 1991 Vice President Finance
and Administration
Douglas L. Reilly 45 1983 Senior Vice President
Strategic Analysis &
Technology
Christopher Scofield 41 1989 Vice President
Nestor Interactive
* Nominee
Sam Albert became a Director of the Company as of April
1991. Mr. Albert is currently President of Sam Albert
Associates, an independent management consulting firm
specializing in developing marketing strategies and facilitating
strategic relationships for the information technology industry.
Mr. Albert is a former IBM Corporation executive who retired
after thirty years in 1989, as IBM Director of Business and
Management Services Industries. These segments included the CPA,
legal and consulting professions and the software and services
industries. Mr. Albert also serves on the Boards of the
Outsourcing Institute, the Information Technology Services
Division of the Information Technology Association of America
(ITAA), the Computer Museum (Boston) as well as the Advisory
Board of Cross Access Corporation. He is also a member of the
Executive Committee of the New York Venture Group and a member of
the Independent Computer Consultants Association (ICCA). Mr.
Albert also writes Albert's Analysis for Midrange Systems and is
the creator, producer and on-air talent for CompuTips carried on
the CBS radio New York affiliate, 1010 WINS.
Leon N Cooper is the Thomas J. Watson Senior Professor
of Science at Brown University, his principal occupation. He
specializes in theoretical physics including low-temperature
physics, and has also done theoretical work in modeling neural
networks, which are networks of nerve cells. Dr. Cooper is the
Director of the Brown University Institute for Brain and Neural
Systems which consists of a group of scientists applying various
disciplines to the study of the brain as well as Professor in the
Departments of Physics and Neuroscience. He was awarded the
Comstock Prize by the National Academy of Science in 1968 and the
Nobel Prize in Physics in 1972 for his contributions to the
theory of superconductivity. He is a Fellow of the American
Physical Society and the American Academy of Arts and Sciences, a
member of the American Philosophical Society and the National
Academy of Sciences, and is the author of many publications. He
is also chairman of the Scientific Advisory Board of Spectra
Science, a company that commercializes innovative laser products.
Professor Cooper was a general partner of Nestor Associates
("Nestor"), the predecessor of the Company, from its inception
until May 1983, and is currently a part-time consultant to the
Company.
Charles Elbaum has been a Professor of Physics at Brown
University since 1963, specializing in experimental solid-state
physics, including the design of circuits and information-
processing systems, which represents his principal occupation.
He was also Chairman of the Physics Department at Brown. He is a
Fellow of the American Physical Society, a member of several
scientific and professional societies and is the author of many
publications, and is the Hazard Professor of Physics at Brown
University. Professor Elbaum was a general partner of Nestor
Associates ("Nestor"), the predecessor of the Company from its
inception until May 1983, and is currently a part-time consultant
to the Company.
David Fox was President of Container Transport
International, a container leasing concern, from 1971 to 1982.
Mr. Fox was President of Cognitive Systems, Inc. ("CSI"), a
computer software company, from 1983 until 1986 and a director of
CSI from 1983 until 1987. On July 17, 1989, Mr. Fox was
appointed President and Chief Executive Officer of the Company.
Nigel P. Hebborn, Chief Financial Officer, joined the
Company in October 1996. He is responsible for the Company's
financial and corporate development activities, including working
with the Company's management in the development and roll-out of
commercial applications. He was most recently President of
Wolffish Consulting Services, Inc., a consulting and background
reporting firm. Prior to forming Wolffish Consulting Services,
Inc., Mr. Hebborn served as Vice President Finance of Nova
American Group, Inc., in Buffalo, New York and as President of
various subsidiaries of this insurance and banking holding
company. Earlier in his career, Mr. Hebborn, a CPA, was
associated with Price Waterhouse.
Jeffrey B. Harvey joined the Company's Board of
Directors in September 1993. Mr. Harvey has been in the
brokerage business since 1976 and is currently Division Vice
President of Paine Webber. He is a graduate of the Massachusetts
Institute of Technology where he received his Master of Science
Degree in Nuclear Engineering. Mr. Harvey is also a director of
Nova American Group an insurance underwriter in Buffalo, NY.
Thomas F. Hill joined the Company's Board of Directors
in August 1994. He is President of Thomas F. Hill, Inc., a
consulting firm with broad experience in marketing, sales and
business planning. Thomas F. Hill, Inc. is an operating
affiliate of Wand Partners. Mr. Hill's clients during his
twenty-five year career have included Marsh & McLennan, Bristol
Meyers, Royal Dutch Shell, CBS, Nestle, Procter & Gamble, Toyota
and Unilever. Mr. Hill serves as a director of Diagraph
Corporation, a manufacturer of automated product identification
systems; Old American Insurance Services, a specialty insurance
provider; Information Management Associates, a customer
interaction software provider; and Yankelovich Partners, a
marketing and social research company.
Herbert S. Meeker is an attorney and partner in the law
firm of Baer Marks & Upham, which is general counsel to the
Company. Mr. Meeker was a general partner of Nestor from its
inception until May 1983, and is a director and Secretary of the
Company.
Bruce W. Schnitzer joined the Company's Board of
Directors in August 1994 and has been Chairman of the Executive
Committee of the Board of the Company since December 1996. Mr.
Schnitzer is Chairman of Wand Partners, a private investment
firm, engaged in management buy-outs and growth capital
investments, with a portfolio weighted in favor of information
service and financial service companies. Mr. Schnitzer's
experience prior to establishing Wand in 1987 includes having
served as President and CEO of Marsh & McLennan, Inc. and head of
the Merger and Acquisition Advisory Department of J. P. Morgan.
Mr. Schnitzer presently serves as director of the following U. S.
companies with publicly quoted securities: Penn Corp. Financial
Group (a life insurance holding company); and AMRESCO Inc. (real
estate investment manager).
Sushmito Ghosh has been with Nestor since 1986 when he
joined the Company as a software engineer and was named an
officer of the company in 1995. As a principal designer of
Nestor's internal R&D software environment, Mr. Ghosh has an in-
depth knowledge of Nestor's technology and has developed neural-
network models for machine vision, on-line character recognition,
mortgage portfolio analysis and securities trading. As Vice
President of Financial Solutions, Mr. Ghosh is responsible for
the execution of the divisional marketing and sales plan, and
supervising the delivery of Nestor's proactive risk management
system PRISM. Mr. Ghosh holds a Masters Degree in Engineering
from the University of Rhode Island and has completed the Neural
Networks and Machine Learning Program offered at the
Massachusetts Institute of Technology. He has co-authored a
number of technical publications.
Michael T. Glier joined the Company in December 1990 to
provide architectural direction and manage the implementation of
a DARPA funded project to develop the Ni1000 Recognition
Accelerator neural network chip with Intel. He was named an
officer of the Company in December 1992, and currently serves as
Vice President of Intelligent Sensors. He is responsible for
managing the development and marketing of transportation software
which includes the TrafficVision family of integrated products..
Mr. Glier was a co-recipient of the 1994 Discover Award for
Computer Hardware and Electronics. Mr. Glier's experience spans
28 years in the electronics industry, from space-based systems to
multiprocessor design. He has authored three patents, two
technical papers and has co-authored several technical articles.
Thomas D. Halket became Assistant Secretary of the
Company in 1993. Mr. Halket is an outside counsel for the
Company. For the last two years, he has been a partner of the
firm of Halket & Pitegoff in Larchmont, New York. Prior to
that, he was in solo practice, affiliated with law firms in New
York City and Boston, Massachusetts and was Assistant General
Counsel to Engelhard Corporation. Mr. Halket holds a law degree
from Columbia University and a Bachelors Degree and a Masters
Degree in Physics from the Massachusetts Institute of Technology.
Kevin C. Hughes became Controller and Assistant
Secretary of the Company during 1991, and was appointed Vice
President, Finance and Administration in February 1995. He
joined the Company in 1987 and was responsible for the
development of all accounting and information systems as the
Company transitioned from the R&D stage to the commercial stage.
Prior to that he was Controller of Comco, Inc., a national
retailer of compact disks, tapes and records, and prior to that
he was Controller of IIRI International, Inc., a designer,
wholesaler, and retailer of women's clothing with locations
throughout the world. He received a Bachelor of Science degree
from Northeastern University and an M.B.A. degree from the
University of Rhode Island.
Douglas L. Reilly is Senior Vice President Strategic
Analysis & Technology. From 1989 to 1994, he served as Vice
President for Product Development and Financial Applications for
the Company and served as its Vice President for Research and
Development from 1983 until 1989. Dr. Reilly received his
Doctoral Degree in Physics from Brown University in 1980, working
with Leon Cooper and Charles Elbaum to design neural network
systems for pattern recognition. Dr. Reilly continued this work
as a Research Associate until 1982 and as Assistant Professor for
Research at Brown from 1982 to 1983, and co-authored a patent
with Dr. Cooper and Dr. Elbaum on the RCE neural network
paradigm. Dr. Reilly became the Company's first full time
employee in 1983, with responsibility for the hiring, development
and day-to-day management of the Company's technical
organization. He developed the first prototype systems of the
Company's technology in character recognition, and led all
research and development of the Company from 1983 until 1989,
producing prototypes and products for character recognition,
machine vision, and applications of the technology to decision
making and risk assessment in financial services. He is a co-
author on four of the Company's patents and has written numerous
articles in the field of neural network design and application.
Christopher Scofield became an officer of the Company
during December 1989, when he was named Vice President of the
Applied Systems Division of the Company. He earned a Doctoral
Degree in Physics at Brown University in 1984 and has served as
Adjunct Associate Professor at the University's Center for Neural
Sciences since 1987. He has been actively employed by the
Company since 1984 when he became Manager of System Design,
working to design/code the Company's proprietary neural network
system. In 1986 he was named Director of Research and managed
all research and development of new applications in the
industrial vision and financial risk assessment fields. He has
co-authored four of the Company's patents and together with David
Morgan has co-authored the text "Neural Networks and Speech
Processing".
Committees and Meetings of the Board of Directors
The Company's Board of Directors held five meetings
during the twelve month period ended December 31, 1997. The
incumbent directors attended all of these meetings. Directors
did not, during the last fiscal year, receive fees for attending
meetings of the Board, but certain directors were granted an
aggregate of 20,000 options under the Company's 1997 Option Plan
during such fiscal year. The Company does not have a Nominating
Committee.
The Company has an Audit and Finance Committee. This
committee generally selects and reviews recommendations made by
the Company's independent public accountants. The Audit and
Finance Committee met once during the twelve month period ended
December 31, 1997. The Company also has a Management
Compensation Committee consisting of Jeffrey B. Harvey, Sam
Albert and Herbert S. Meeker. The Committee meets periodically
to review and consider compensation matters relating to employees
of the Company.
Compensation of Executive Officers
The following table sets forth information for the calendar
years ended December 31, 1997 and 1996, and for the fiscal years
ended June 30, 1996 and 1995 compensation paid by the Company to
the chief executive officer and to each of the four most highly
compensated officers of the Company whose total annual salary and
bonus exceed $100,000.
<TABLE>
<CAPTION>
Long-Term Compensation Awards
All
Other Restricted Other
Name & Annual Stock Options/ Pay-Comp.
Position Period Salary($) Bonus($) Comp. Awards SARs outs ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Fox Calendar Yr. 1997 150,000 0 1,193 (1) 0 40,000 0 0
President Calendar Yr. 1996 127,084 64,316 1,193 (1) 0 250,000 0 0
and CEO Fiscal Yr. 6/96 99,325 30,316 675 (1) 0 318,000 0 0
Fiscal Yr. 6/95 100,000 0 30,675 (1) (2) 0 0 0 0
Christopher Calendar Yr. 1997 105,000 0 112(1) 0 0 0 0
Scofield Calendar Yr. 1996 120,144 17,000 73 (1) 0 100,000 0 0
Vice President Fiscal Yr. 6/96 106,956 0 54 (1) 0 140,000 0 0
Sushmito Ghosh Calendar Yr. 1997 105,000 67,876 73 (1) 0 60,000 0 0
Vice President Calendar Yr. 1996 97,217 20,870 73 (1) 0 60,000 0 0
Fiscal Yr. 6/96 98,629 4,227 33 (1) 0 64,500 0 0
Douglas Reilly Calendar Yr. 1997 100,000 0 102 (1) 0 30,000 0 0
Vice President Calendar Yr. 1996 96,789 7,500 88 (1) 0 20,000 0 0
Michael Glier Calendar Yr. 1997 104,461 0 164 (1) 0 30,000 0 0
Vice President Calendar Yr. 1996 96,305 7,500 139 (1) 0 20,000 0 0
(1) Payment of group term life insurance premiums.
(2) Payment of salary deferred in prior period.
</TABLE>
Options and Warrants
The shareholders of the Company approved on May 6,
1997, the 1997 Stock Option Plan ("1997 Plan") of the Company
authorizing the granting to employees, officers, directors, and
others options to acquire up to a maximum of 1,000,000 shares of
Common Stock of the Company. The shares issued by the Company
upon the exercise of the options granted under the 1997 Plan were
registered on June 6, 1997 on Form S-8 (Registration No. 333-
27271) under the Securities Act of 1933 as amended. During the
fiscal year ended December 31, 1997, 504,000 options were granted
under the 1997 Plan. None of these were exercised and there was
an aggregate of 504,000 options outstanding on December 31, 1997
of which 168,000 were vested as of that date. There were, in
addition, 1,699,000 options of which 1,308,250 were vested and
outstanding as at December 31, 1997 granted to employees under an
option plan previously adopted by the Company. The shares issued
under such previously adopted plan were registered on Form S-8
under the Securities Act of 1933 as amended pursuant to
Registration No. 01-12965. No options have been issued under
such plan since the adoption of the 1997 Plan.
PROPOSAL TO APPROVE THE SELECTION
OF INDEPENDENT AUDITORS
The accounting firm of Ernst & Young LLP is recommended
for election to serve as the Company's independent auditors for
the fiscal year ending December 31, 1998.
Representatives of Ernst & Young LLP are expected to
be present at the annual meeting.
ANNUAL REPORT
THE ANNUAL REPORT TO STOCKHOLDERS CONCERNING THE
OPERATIONS OF THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997, INCLUDING FINANCIAL STATEMENTS FOR THE PERIOD, ACCOMPANIES
THIS PROXY STATEMENT.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals for consideration at the 1998
annual meeting, expected to be held in May 1999, must be received
by the Company no later than December 31, 1998 and must comply
with the Rules and Regulations of the Securities and Exchange
Commission in order to be included in the proxy statement for the
1998 annual meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF
1933
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten-percent shareholders are required
by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on review of the copies of such forms
furnished to the Company, or written representations that no
Forms 5 were required, the Company believes that during the
period from January 1, 1997 through December 31, 1997, all
Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were
complied with.
OTHER MATTERS
The Board of Directors is not aware of any other
matters to be presented at the annual meeting. However, if any
other matter should properly come before the annual meeting, the
persons entitled to vote on that matter will be given the
opportunity to do so.
The above notice and proxy statement are sent by order
of the Board of Directors.
/S/Herbert S. Meeker
Secretary
Providence, Rhode Island
April 7, 1998
NESTOR, INC.
PROXY: This proxy is solicited on behalf of the
Board of Directors
The undersigned hereby appoints David Fox and Charles Elbaum, and
each of them (with the full power of substitution), proxies for
the undersigned to represent and to vote, as designated on this
proxy card, all shares of common stock, par value $.01 per share,
and all shares of Series B, D, E, F, G and H Convertible
Preferred Stock, par value $1.00 per share of Nestor, Inc. (the
"Company") which the undersigned would be entitled to vote if
personally present at the annual meeting of the Company's
stockholders to be held on May 5, 1998, and at any and all
adjournment of postponement thereof.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1.ELECTION OF DIRECTORS TO SERVE FOR A TERM EXPIRING AT THE NEXT
ANNUAL MEETING OF STOCKHOLDERS
NOMINEES: Sam Albert, Leon N Cooper, Charles Elbaum,
David Fox, Jeffrey B. Harvey, Thomas F. Hill, Herbert S.
Meeker, Bruce W. Schnitzer
FOR all nominees listed except as noted to the contrary below
______________________________________________________________
WITHHOLD AUTHORITY to vote for all nominees listed.
2.PROPOSAL TO APPROVE THE SELECTION OF ACCOUNTANTS
____FOR ____AGAINST ____ABSTAIN
3 In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the annual
meeting.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
The undersigned hereby acknowledges receipt of a copy of the
notice of the meeting of stockholders and of the related proxy
statement
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURE:__________________________________________________
PRINT NAME/TITLE:___________________________________________
DATE:_______________________________________________________
IMPORTANT: Please date and sign as your name appears above and
return in the enclosed envelope. When signing as executor,
administrator, trustee, guardian, etc., please give full title as
such. If the stockholder is a corporation, the proxy should be
signed in full corporate name by a duly authorized officer whose
title is stated.
