danzell

The ousted chief executive officer of Nestor Inc. said he would no longer pursue his quest to control the Providence-based company, effectively ending a two-month internal power struggle.

William B. Danzell, a former Cumberland resident who was Nestor’s CEO from 2003 until May, yesterday said it was in the company’s best interest for him to give up his fight against the board members who voted two months ago to fire him.

“Burying the hatchet is probably a good way to put it,” Danzell said by phone from his investment company in South Carolina. “I think it’s in everybody’s best interest to do so. We don’t have to have a Jerry Springer show.”

Nestor makes cameras and technology designed to catch drivers who violate traffic signals and speed limits. Its customers are municipalities and local governments that use the systems to ticket motorists.

The power play, reported in yesterday’s Providence Journal, erupted in May, when Nestor’s board of directors voted to fire Danzell. The dismissal followed a precipitous drop in Nestor’s stock price over the previous 18 months, as well as a lender’s unexpected decision in December to call in $5.7 million of an outstanding $28.6-million loan, leaving the company in a precarious financial position.

Last week, Nestor announced it had found a permanent replacement for Danzell — Clarence A. Davis, a Nestor board member who was tapped as interim CEO in May, would stay on in that role.

The company also announced it had raised $4.95 million in a private stock offering, giving it the cash it needed to install about half the pending orders customers have placed for the red-light camera technology.

In doing so, the company also diluted Danzell’s voting power. Nestor issued 8.5 million new shares, which meant that Danzell’s 10.2 million shares represented only 35.2 percent of those outstanding.

Danzell said he came to Nestor after reading an article about one of the company founders, Leon Cooper. Danzell said he was impressed, so he contacted Cooper and offered to raise capital for Nestor as well as provide new management. Cooper didn’t take him up on the offer at first, Danzell said, but added that in 2002, Cooper contacted him again and asked whether he was still interested.

Danzell, who had his own investment business, said that since the 9/11 terrorist attacks, he no longer had access to Saudi investors because they chose to shift their money into European ventures. So in 2003, he said he persuaded 98 people he knew to invest in Silver Star Partners, a company formed to take control of Nestor. Danzell himself was also an investor, borrowing money against his house.

“It doesn’t get any more personal, it doesn’t get any more committed than that,” he said. He became chief executive officer.

During his four-year tenure, Danzell said Nestor grew from a company with a market capitalization of about $5 million to one of nearly $50 million. And it moved from a company with a product in test phase to a real product that customers were buying.

“The company, as I left it, was in pretty darn good shape.”

He said he decided to leave Nestor at the end of this year in order to spend more time with his family. He has six children, four of them at home, living in Hilton Head, S.C., he said.

He said he had hoped to leave on his own terms, but some of the company directors apparently disagreed with his plan to reshape the board.

Danzell said he initially tried to seize control of the board only after some of the board members reneged on an agreement made by handshake earlier in the year to allow two people of Danzell’s choosing to replace two directors.

“I had nominated a couple people for the board in March,” he said. When they stood up in April [at the annual shareholder’s meeting], two of the people who agreed to step off said no, we’re staying.”

“I said that’s not going to work. That’s different from what everybody agreed to.”

In May, the board said it had decided, by a 6-to-0 vote, that Danzell had been “relieved … of his duties and responsibilities,” without further explanation.

The move was unusual, given that Danzell and his investment partnership owned nearly 50 percent of the company.

After his departure, Danzell acquired 160,000 additional shares, pushing his voting power to 50.3 percent, according to a regulatory filing.

In June, Danzell notified the board in two separate letters that he was using his voting power to replace two board members, and to name himself chairman. In both cases, the board decided that Danzell’s notifications were not valid.

“What it came down to was you have some members on the board that really wanted to wrest away the voting control of Silver Star for whatever reason,” he said. He said he could only speculate as to why.

But Danzell’s disagreements with the board extend at least two years. In 2005, four Nestor directors chose not to seek reelection because of “fundamental disagreements with the chief executive officer concerning his management of the company,” according to documents the company filed with the SEC.

But now, Danzell said, the fight is over.

“You have a very capable management team, a very driven board,” he said. “When you look at who these people are — very talented, strong individuals — they may have disagreed with me … but they are very capable people.”

He said he was also pleased with the deal that company officials made last week, which brought in new investment money that Nestor badly needed to follow through on orders for its technology.

“The group that has seized control has evolved to a point where … they are now rowing in the same boat as the rest of the stakeholders — they’re united as a team. Hopefully, that same teamwork can be used to execute on the company’s business plan.”

Danzell remains a major shareholder, but he said his next major challenge would be to decide whether he would sell those shares. His original purpose for investing in Nestor, to take control of the company and turn it around — no longer exists, he said.

“We’ve now lost that voting control, and when you lose that reason for making the investment, that’s a good sign you need to think about what your exit strategy will be.”

tbarmann@projo.com