NTS Amended Complaint

ACOM

G. Mark Albright, Esq.

Nevada Bar No. 1394

ALBRIGHT,
STODDARD,

   WARNICK & ALBRIGHT

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:       (702)
384-7111

Fax:      (702)
384-0605

Email:   gma@albrightstoddard.com

 

Attorneys for Plaintiff

(Additional Counsel on Signature Page)

 

DISTRICT COURT

CLARK COUNTY, NEVADA

MILESTONE VIMBA FUND LP, on behalf of itself and all others similarly situated,   Plaintiff,   v.   NTS, INC., GUY NISSENSON, SHEMER S. SCHWARZ, ARIE ROSENFELD, TIMOTHY M. FARRAR, ALAN L. BAZAAR, DON CARLOS BELL III, RICHARD K. COLEMAN, JR., JEFFREY E. EBERWEIN, ANDREW J. MACMILLAN, T3 NORTH INTERMEDIATE HOLDINGS, LLC, NORTH MERGER, SUB, INC., and TOWER THREE PARTNERS LLC,   Defendants.

Case No.         A-13-691562-B   Dept. No.:        XXIX

AMENDED CLASS ACTION
COMPLAINT

Plaintiff, MILESTONE VIMBA FUND LP, on behalf of itself and all other
similarly situated public stockholders of NTS, Inc. (“NTS” or the “Company”),
by and through its undersigned counsel, upon personal knowledge as to
themselves and upon information and belief as to all other matters, allege as
follows:

NATURE OF THE ACTION

1. Plaintiff brings this stockholder class action on behalf of
   themselves and all other public stockholders of NTS other than Defendants
   (defined herein) and certain affiliates (the “Class”) against the Company, its
   Board of Directors (the “Board” or the “Individual Defendants”), Tower Three
   Partners LLC (“Tower Three”), its affiliate, T3 North Intermediate Holdings,
   LLC (“T3”), and T3’s wholly owned subsidiary, North Merger Sub, Inc. (“Merger
   Sub”) to enjoin the proposed buyout of NTS by Tower Three for $2.00 per share
   in cash (the “Offer Price”) in a transaction valued at approximately $147 million
   (the “Take-Private Transaction”).
2. Following its acquisition of NTS Communications, Inc.
   (“NTSC”) on February 26, 2008, NTS has focused its efforts on the build out of
   its high-speed Fiber-To-The-Premises (“FTTP”) network.  The Company’s plan has been successful.  For the second quarter of 2013, the Company
   reported on August 15, 2013 that the FTTP business grew 25% compared to the
   same period in 2012.  Further, the
   Company increased its total number of FTTP customers 27%
   quarter-over-quarter.  Similarly, in its
   most recent quarter, the Company reported on November 14, 2013 that the FTTP
   business grew 28.2% compared to the same period in 2012 and increased its total
   number of FTTP customers 25% quarter-over-quarter.
3. Nevertheless, just as NTS is beginning to reap the dividends
   from its large investment in the FTTP business, the Individual Defendants have
   agreed to take the Company private for the insufficient price of $2.00 per
   share.  On October 20, 2013, NTS and
   Tower Three announced that they had entered into a definitive Agreement and
   Plan of Merger (the “Merger Agreement”) pursuant to which the Company will
   merge with and into Merger Sub, leaving the Company a wholly owned subsidiary
   of T3.
4. The Take-Private Transaction is the result of an unfair process
   through which NTS insiders are seeking to “cash in” their illiquid holdings of
   NTS stock.  NTS officers and directors
   are beneficial owners of an illiquid block of 16,232,204 shares of NTS stock,
   nearly 39% of the Company’s issued and outstanding stock, and stand to gain
   over $32 million from the Take-Private Transaction.  During the three months prior to the
   announcement of the Take-Private Transaction, between the July 20, 2013 and
   October, 20, 2013, the daily trading volume for NTS shares on the New York
   Stock Exchange (“NYSE”) averaged only 56,702 shares, or 0.14% of the Company’s
   issued and outstanding shares of stock, making it virtually impossible for the
   Company’s officers and directors to monetize their illiquid stock holdings.  Further, pursuant to the Merger Agreement,
   all outstanding stock options will be converted into the right to receive cash,
   regardless of whether currently vested or exercisable.
5. Defendant Guy Nissenson (“Nissenson”), Chairman, President
   and CEO of NTS, in addition to continuing to work for the post-Take-Private
   company, will receive an equity interest in the private company rather than
   cashing out his shares.  As of October
   22, 2013, Nissenson was the beneficial owner of 6,760,661 shares, or 16.2% of
   the Company.  In fact, Defendant
   Nissenson’s equity in the private company and continued employment was first
   discussed with Tower Three as early as July 2013 – before the Board was
   informed that discussions to take the Company private were even occurring.
6. In addition to “cashing in” their illiquid holdings, many of
   the Company’s senior management (in addition to Nissenson) will retain their
   positions following the Take-Private Transaction.  Consequently, the Take-Private Transaction
   allows NTS management the best of both worlds – cashing in their illiquid
   equity holdings while retaining their current, highly lucrative,
   positions.  Essentially, the Take-Private
   Transaction is a management buyout, backed by Tower Three.
7. Rather than undertake a full and fair auction to maximize stockholder
   value as their fiduciary duties require, the Individual Defendants engaged in a
   single-bidder process consisting of an exclusive[1] six-month period of
   negotiations and due diligence with Tower Three followed by a 30-day go-shop
   period, beginning on October 20, 2013, the day the Merger Agreement was
   executed, that appears to be illusory in light of the deal protection devices
   agreed to by the Individual Defendants.
   Those deal protection devices will preclude a fair sales process for the
   Company and lock out competing bidders, and include:  (i) a no-shop clause that currently precludes
   the Company from soliciting potential competing bidders; (ii) a notice
   provision requiring the Company to disclose to Tower Three all confidential
   information regarding any alternative proposal it may receive; (iii) a matching
   rights provision granting Tower Three four (4) business days to match any
   competing proposal made to the Company (making it much less likely a third
   party will submit a bid knowing that Tower Three can always easily top it); and
   (iv) a termination fee provision requiring the Company to pay $2.3 million if
   the Take-Private Transaction is terminated in favor of a superior proposal
   resulting from the go-shop period, or $4.1 million if the superior proposal
   occurs after the go-shop period (in either case, the Company is responsible for
   up to $2.25 million in expense reimbursements), a total of $4.55 million to
   $6.35 million, or 5.45% to 7.6% of the Company’s equity value at the $2.00 per
   share Offer Price.
8. Following the go-shop period, which unsurprisingly did not
   result in a competing bid, on November 22, 2013, the Company filed its Preliminary
   Proxy Statement with the United States Securities and Exchange Commission
   (“SEC”) on Form PREM14A (the “Preliminary Proxy”) and a Schedule 13E-3 (the “Schedule
   13E-3”) attaching as exhibits, among other things, financial presentations made
   to the Board on October 20, 2013 by the Board’s two financial advisors Oberon
   Securities, LLC (“Oberon”) and B. Riley & Co., LLC (“B. Riley”) (the
   Preliminary Proxy, the Form 13E-3 and exhibits thereto are referred to
   collectively herein as the “Buyout Filings”).
   The Buyout Filings are materially misleading to the Company’s public
   stockholders and omit crucial information that stockholders need to determine
   whether to vote their shares in favor of the Take-Private Transaction.  Critically, the Buyout Filings fail to
   disclose the management projections provided to Tower Three, the Board, Oberon
   and B. Riley on September 21 and 29, 2013 (the “September Projections”), even
   though the September Projections were subsequently deemed “optimistic” by
   Oberon and B. Riley and (seemingly at their request) revised by management only
   a few weeks later for use in their respective fairness opinions.
9. Despite the fact that the Board authorized a Special
   Committee in connection with the Take-Private Transaction, it is not
   independent or disinterested.
   Specifically, the Special Committee was not established until after Nissenson had executed a
   confidentiality agreement with Tower Three, discussed his future employment and
   equity roll-over, and received a preliminary indication of interest from Tower
   Three.  Further, all three members of the
   Special Committee were recently elected to the Board on December 20, 2012 (with
   the voting support of insiders who controlled 16,639,079 share, or more than
   68% of the votes cast).  Moreover,
   Defendant Jeffrey E. Eberwein (“Eberwein”), the Chairman of the Special
   Committee, is the beneficial owner of an illiquid block of 2,861,960 shares of
   NTS common stock, or 6.9% of the Company’s shares.
10. The Special Committee’s lack of independence was manifest in
    its failure to even negotiate with single-bidder Tower Three.  More specifically, Tower Three’s very first
    offer of just $2.00 per share, first communicated to Nissenson on May 29, 2013,
    was ultimately accepted without the Special Committee attempting a single value-maximizing
    counter offer or informing itself of the true market value of the Company.  In fact, the Board remained very much in the
    dark while Tower Three negotiated with Nissenson and locked up its quarry.  Despite entering into a confidentiality
    agreement with Tower Three on April 10, 2013 and an engagement letter with
    Oberon on June 17, 2013, the first time the Board apparently learned about the
    Company being for sale was on August 2, 2013, when Tower Three’s first formal
    indication of interest (complete with an exclusivity clause) was provided to
    the Board.
11. Plaintiff seeks to enjoin, preliminarily and permanently, the
    Take-Private Transaction, or alternatively, in the event the Take-Private
    Transaction is consummated, recover damages as a result of the violations of
    law alleged herein.

PARTIES

1. Plaintiff is, and at all relevant times have been, owners of
   NTS common stock.
2. Defendant NTS is incorporated under the laws of the State of
   Nevada and maintains its headquarters at 1220 Broadway, Lubbock, Texas
   79401.  NTS was incorporated in the State
   of Nevada in September 2000 as Xfone, Inc.
   Effective February 2, 2012, the Company changed its name from Xfone,
   Inc. to NTS.  NTS is a holding and
   managing company providing, through its subsidiaries, integrated communications
   services which include voice, video, and data over its FTTP and other
   networks.  The Company currently has
   operations in Texas, Mississippi and Louisiana and also serves customers in
   Arizona, Colorado, Kansas, New Mexico and Oklahoma.  NTS operates through two wholly owned subsidiaries,
   NTSC and Xfone USA, Inc. (“Xfone”).  As
   of October 22, 2013, NTS had 41,687,266 shares of stock issued and
   outstanding.  The Company’s stock trades
   on the NYSE and the Tel Aviv Stock Exchange under the symbol “NTS.”
3. Defendant Nissenson has been the President, CEO, and a
   Director of NTS since its inception and the Chairman of the Board since March
   12, 2012.  Since December 27, 2012,
   Nissenson has served as a non-voting member of the Nominating and Corporate
   Governance Committee.  Nissenson has been
   the Chairman of the board of directors of NTS wholly owned subsidiaries Xfone
   and NTS Communications, since March 2005 and February 2008, respectively, and
   President and CEO of Xfone and NTS Communications since October 19, 2012 and
   April 1, 2012, respectively.  Nissenson
   is also a director and/or officer of various subsidiaries of Xfone and NTS
   Communications.  As of October 22, 2013,
   Nissenson beneficially owned 6,760,661 shares of NTS common stock, or 16.2% of
   the Company’s issued and outstanding shares of stock.  Specifically, Nissenson holds 3,222,165
   shares of common stock, 3,142,379 shares of common stock issuable upon the
   exercise of options, and holds an irrevocable proxy giving him voting power for
   an additional 396,117 shares of common stock.
   Nissenson has agreed to rollover one-third of his shares of NTS stock in
   exchange for equity in the post-Take-Private company.  Nissenson has also entered into a Voting
   Agreement with Tower Three pursuant to which he will vote all of his shares in
   favor of the Take-Private Transaction.
4. Defendant Shemer S. Schwarz (“Schwarz”) has been a director
   of the Company since December 19, 2002.
   Since November 24, 2004, Schwarz has been a member of the Audit
   Committee and since December 27, 2012, a member of the Nominating and Corporate
   Governance Committee.  Schwarz was
   previously a member of the Compensation Committee from December 30, 2007 until
   December 27, 2012.  Schwarz was a
   director of Xfone 018, a former subsidiary, from April 2004 until August 2010
   and a director of Xfone from March 2005 until February 2008.  As of October 22, 2013, Schwarz beneficially
   owned 242,143 shares of NTS common stock.
   Specifically, Schwarz holds 75,562 shares of common stock and 166,581
   shares of common stock issuable upon the exercise of options.
5. Defendant Arie Rosenfeld (“Rosenfeld”) has been a director of
   the Company since January 16, 2009.
   Since December 27, 2012, Rosenfeld has been the Chairman of the
   Compensation Committee.  Rosenfeld was
   previously the Chairman of the Audit Committee from March 12, 2012 until
   December 27, 2012 and a member of the Nominating Committee from September 19,
   2010 until December 27, 2012.  As of
   October 22, 2013, Rosenfeld beneficially owned 166,581 shares of NTS common
   stock issuable upon the exercise of options.
6. Defendant Timothy M. Farrar (“Farrar”) has been a director
   and a member of the Compensation Committee of the Board since December 27,
   2010.  Farrar was previously Chairman of
   the Nominating Committee from March 12, 2012 until December 27, 2012.  As of October 22, 2013, Farrar beneficially
   owned 166,581 shares of NTS common stock issuable upon the exercise of options.
7. Defendant Alan L. Bazaar (“Bazaar”) has been a director of
   the Company since December 20, 2012.
   Since December 27, 2012, Bazaar has been Chairman of the Audit
   Committee.  As of October 22, 2013,
   Bazaar beneficially owned an illiquid block of 5,117,514 shares of NTS common
   stock, or 12.3% of the Company’s issued and outstanding shares of stock.  Specifically, Bazaar holds 55,548 shares of
   common stock, 50,000 shares of common stock issuable upon the exercise of
   options, and, as co-CEO of Hollow Brook Wealth Management LLC, has shared
   voting and dispositive power over an additional 5,011,966 shares of common
   stock.
8. Defendant Don Carlos Bell III (“Bell”) has been a director of
   the Company since December 20, 2012.
   Since December 27, 2012, Bell has been a member of the Audit Committee
   and, since August 6, 2013, a member of the Special Committee established in
   connection with the Take-Private Transaction.
   As of October 22, 2013, Bell beneficially owned 50,000 shares of NTS
   common stock issuable upon the exercise of options.
9. Defendant Andrew J. MacMillan (“MacMillan”) has been a
   director of the Company since December 20, 2012.  Since December 27, 2012, MacMillan has been
   Chairman of the Nominating and Corporate Governance Committee.  As of October 22, 2013, MacMillan
   beneficially owned 50,000 shares of NTS common stock issuable upon the exercise
   of options.
10. Defendant Eberwein has been a director of the Company since
    December 20, 2012.  Since December 27,
    2012, Eberwein has been a member of the Compensation Committee and Nominating
    and Corporate Governance Committee.  In
    addition, since August 6, 2013, Eberwein has been a member of the Special
    Committee established in connection with the Take-Private Transaction and,
    since September 17, 2013, Chairman of the Special Committee.  According to a Schedule 13D/A filed with the
    SEC on October 28, 2013, Lone Star Value Investors, LP directly owns 2,811,960
    shares of NTS common stock.  Lone Star
    Value Investors GP, LLC is the general partner of Lone Star Value Investors, LP
    and Lone Star Value Management, LLC is the investment manager of Lone Star
    Investors.  Eberwein is the manager of
    Lone Star Value Investors GP, LLC and the founder, CEO and sole member of Lone
    Star Value Management, LLC.  As of
    October 22, 2013, Eberwein also beneficially owned 50,000 shares of NTS common
    stock issuable upon the exercise of options.
    In sum, Eberwein is the beneficial owner of 2,861,960 shares of NTS
    common stock, or 6.9% of the Company’s issued and outstanding shares of stock.
11. Defendant Richard K. Coleman, Jr. (“Coleman”) has been a
    director of the Company since December 20, 2012.  Since August 6, 2013, Coleman has been a
    member of the Special Committee established in connection with the Take-Private
    Transaction.  As of October 22, 2013,
    Coleman beneficially owned 75,000 shares of NTS common stock.  Specifically, Coleman holds 25,000 shares of
    common stock and 50,000 shares of common stock issuable upon the exercise of
    options.
12. Defendants Nissenson, Schwarz, Rosenfeld, Farrar, Bazaar,
    Bell, MacMillan, Eberwein, and Coleman are referred to herein as the
    “Individual Defendants.”  By reason of
    their positions as officers and/or directors of the Company, the Individual
    Defendants are in a fiduciary relationship with Plaintiff and the other public
    stockholders of NTS, and owe Plaintiff and NTS’ other public stockholders the
    highest obligations of loyalty and care.
13. The Individual Defendants, along with Niv Krikov (“Krikov”),
    the Company’s Treasurer, CFO, and Principal Accounting Officer, are the
    beneficial owners of 16,232,204 shares of NTS common stock, or nearly 39% of
    the Company’s 41,687,266 issued and outstanding shares.
14. Defendant Tower Three is an operationally-oriented private
    equity firm that invests in a concentrated portfolio of U.S.-based middle
    market companies.  With long-term
    committed capital from major institutional investors, Tower Three targets
    equity investments of $50 million to $150 million.  Tower Three was founded in 2007 and is based
    in Greenwich, Connecticut.
15. Defendant T3 is a Nevada limited liability company and an
    affiliate of Tower Three.
16. Defendant Merger Sub is a Nevada corporation and a wholly owned
    subsidiary of T3 created to effectuate the Take-Private Transaction.
17. Collectively, NTS, the Individual Defendants, Tower Three,
    T3, and Merger Sub are referred to herein as “Defendants.”

JURISDICTION AND VENUE

1. This Court has jurisdiction over this action because the
   Company is incorporated in the State of Nevada.
   NTS has its principal executive offices at 1220 Broadway, Lubbock, Texas
   79401.
2. The claims asserted herein are governed by the laws of the
   State of Nevada.  The State of Nevada has
   a distinct nexus with the alleged harm and the Defendants.
3. This action is not removable under the Securities Litigation
   Uniform Standards Act (“SLUSA”), 15 U.S.C. § 78bb(f), because this action
   is based on the statutory or common law of the State of Nevada, in which NTS is
   incorporated.
4. Venue is proper in this Court pursuant to Nevada Revised
   Statutes § 13.040 because NTS is incorporated in the State of Nevada and
   the conduct at issue had effect in this County.

SUBSTANTIVE ALLEGATIONS

1. NTS was incorporated in the State of Nevada in September
   2000.  Through its subsidiaries, Xfone
   and NTSC, the Company provides an array of communications services.  Following its acquisition of NTSC in 2008,
   the Company’s focus has been on the build out of its high-speed FTTP network.

Build
Out Of The FTTP Network

1. The Individual Defendants have agreed to sell the Company at
   a time when it is just starting to monetize its investments in expanding its
   FTTP network.
2. In 2009, NTSC, through its wholly owned subsidiary, NTS
   Telephone Company, LLC, added approximately 6,000 FTTP passings.  An FTTP “passing” represents the number of
   households and businesses capable of being served.  The build out was funded, in part, by an
   $11.5 million debt facility provided by the Rural Utility Service (“RUS”), a
   division of the U.S. Department of Agriculture.
   The build out was complete on April 8, 2010 and NTSC is continuing to
   work to secure sales and complete installations.
3. In March 2010, the applications of NTS’ wholly owned
   subsidiary, PRIDE Network, Inc. (“PRIDE Network”), for RUS funding under the
   Broadband Initiative Program for its FTTP build out in Texas were
   approved.  PRIDE Network was selected to
   receive $63.7 million in RUS funding, split between loans of approximately
   $35.5 million and grants of approximately $28.1 million.
4. In September 2010, another PRIDE Network application for RUS
   funding for the build out of FTTP in Louisiana was approved.  PRIDE Network was selected to receive
   approximately $36.2 million in RUS funding, split between a loan of
   approximately $18.5 million and a grant of approximately $17.7 million.
5. According to the Company’s Form 10-K for the year ended
   December 31, 2012, filed with the SEC on March 21, 2013, “[t]his funding is a
   significant milestone in [NTS’] strategy to grow the FTTP business.”  When completed, the Company expects the PRIDE
   Network to add 30,000 FTTP passings to the NTSC network, bringing total
   passings to over 50,000.  The Company
   further expects revenue from these expansions to “increase during 2013.”

The Company Is Poised For
Growth and The Offer Price Is Unfair

1. Despite NTS’ investments in its FTTP business beginning to
   show results, the Board has agreed to sell NTS for the unfair price of $2.00
   per share in cash.
2. NTS has shown exceptional growth and success in its
   transition to the FTTP network during 2013.
   On May 14, 2013, NTS issued a press release announcing its first quarter
   2013 financial results.  The press
   release stated, in relevant part:

Revenues
from the [FTTP] business grew 31% to $5.3 million in the first quarter ended
March 31, 2013, as compared to $4.1 million for the same period 2012.  FTTP
revenues represented 35.8% of consolidated revenues for the first quarter of
2013, as compared to 27.3% of consolidated revenues for the first quarter of
2012.

*          *          *

The
Company’s total number of FTTP customers as of March 31, 2013 was 10,403
compared to 8,053 FTTP customers as of March 31, 2012, representing an increase
of 29%. . . .

Average Revenue Per User for all of the
Company’s fiber markets is approximately $390 per month for business customers
and approximately $102 per month for residential customers.

The FTTP network build out is now primarily
financed by $99.9 million in funds from the Federal Broadband Stimulus Program,
of which 45.9% is in the form of grants and 54.1% is in the form of low cost
long-term loans.

*          *          *

EBITDAS for the first quarter of 2013 was
$3.4 million, a 24.3% increase over EBITDAS of $2.7 million in the same quarter
last year.  EBITDAS margin in the quarter
ended March 31, 2013 was 22.5% compared to EBITDAS margin of 18.1% for the
quarter ended March 31, 2012.  This is
mainly attributed to the increase in higher margin FTTP revenues.

*          *          *

Mr. Guy Nissenson, Chairman, President and
CEO of NTS commented, “We believe NTS had a successful start to 2013 as
evidenced by improved EBITDAS and net income and the continued steady growth of
our fiber business.  We are particularly
pleased with our metro build sales and marketing efforts in Wichita Falls,
which have resulted in high demand for our fiber offering and we are currently
working on metro build projects in other markets.  Additionally, the build out of our fiber
network in Louisiana is progressing and we signed our first customer in Hammond,
Louisiana just after the close of the quarter.

“We are excited to have surpassed the 10,000
fiber customer benchmark during the first quarter.  We are realizing a high ‘take rate’ in the
new markets that we enter and continue to grow market share in our more mature
markets.  With our progress into new
markets, we expect to continue to achieve strong sequential FTTP revenue
growth.”

(Emphasis added.)

1. During the conference call discussing the Company’s first
   quarter 2013 results, held on May 14, 2013, Nissenson and Krikov reported, in
   part:

Nissenson:
We made steady progress this quarter. As a company, we are transferring
from being very focused on the network build out to being very focused on sales
and marketing to new customers. . . .

[F]iber revenue grew 31% and our EBITDA
reached $3.4 million.  Importantly, we
added more than 940 customers this quarter which is almost three times as many
customers than we added last quarter.

*          *          *

Krikov:
[A]s you know we are in a transitional period, as we invest in our fiber
network, factors as government financing, metro build, and marketing expenses
when rolling out new markets resulted in a working capital deficit as of March
31, 2013.  Over time, we expect this
deficit to become positive as we grow our customer base.

Furthermore, please note that $39 million of
our debt is in notes payable to the U.S. Department of Agriculture which is low
cost, non-recourse capital provided under favorable terms.

*          *          *

Nissenson:
We currently have a 23% penetration rate of our passings, up from 21% at
the end of the fourth quarter, with the big portion of the passings completed
recently.  Our target is to at least
double that penetration rate over time, and the primary focus of the company
right now is the marketing of our fiber services.

1. In response to a question from a private investor, Nissenson
   went on to discuss the Company’s promising future, stating:

[I]n two or three years I believe that the
company will have the majority of its revenues coming from the fiber network,
and we will cannibalize some of our copper markets and move to fiber, some
other copper customers will just obviously disconnect and go to other
competitors, but in general, we hope to see higher revenues and then much
higher percentage of fiber relative to the copper which means that also EBITDA
and net income will continue to increase during – while we get there and change
the percentage of our fiber network.

1. Nissenson also discussed the tremendous growth in consumer
   broadband usage and how NTS is well-positioned to profit from that growth, stating:  “[C]onsumers’ broadband needs are increasing
   at an incredible rate.  Bandwidth usage
   is expected to increase tenfold by 2020.
   We do not believe that any technology is faster or better quality than
   fiber.  So, NTS is well-positioned to
   fulfill the bandwidth needs in the markets it serves.”
2. On August 15, 2013, NTS issued a press release announcing its
   second quarter 2013 financial results.
   The press release stated, in relevant part:

Revenues
from the Company’s [FTTP] business grew 25% to $5.7 million in the second
quarter ended June 30, 2013, as compared to $4.5 million for the same period in
2012.  FTTP revenues represented 37.2% of
consolidated revenues for the second quarter of 2013, as compared to 29.9% of
consolidated revenues for the second quarter of 2012.

*          *          *

For the first six months of 2013, revenues
from the Company’s FTTP business grew 28.1% to $11 million from $8.6 million in
the first six months of 2012.
Consolidated revenues for the six months ended June 30, 2013 were $30.1
million, essentially flat as compared to consolidated revenues of $30 million
for the six months ended June 30, 2012.

The
Company’s total number of FTTP customers as of June 30, 2013 was 10,881, a 27%
increase compared to 8,516 FTTP customers as of June 30, 2012.  The
increase in the Company’s customer base is a result of its expansion into
additional communities and increased penetration.

Average Revenue Per User for all of the
Company’s fiber markets is approximately $389 per month for business customers
and approximately $100 per month for residential customers.

The FTTP network build out is primarily
financed by $99.9 million in funds from the Federal Broadband Stimulus Program,
of which 45.9% is in the form of grants and 54.1% is in the form of low cost
long-term loans.

*          *          *

Adjusted EBITDAS for the second quarter of
2013 was $3.7 million, a 29.8% increase over EBITDAS of $2.9 million in the
same quarter last year.  Adjusted EBITDAS
margin in the quarter ended June 30, 2013 was 24.5% compared to EBITDAS margin
of 19% for the quarter ended June 30, 2012.
This is mainly attributable to the increase in higher margin FTTP
revenues.

*          *          *

Mr. Guy Nissenson, Chairman, President and
CEO of NTS commented, “Demand for our fiber network continues to be strong,
contributing to steady growth in fiber revenues and Adjusted EBITDAS.  NTS now serves 18 communities in Texas and we
are making progress on the build out of our network in secondary markets in
Louisiana.  We are particularly excited
about the response we’ve seen from businesses in our ‘metro build’ markets of
Wichita Falls and Abilene, Texas as well as in Hammond, Louisiana, where our
focused sales and marketing initiatives are reaching their intended targets.

“We achieved strong sales across these
markets, during the quarter despite construction delays in Wichita Falls and
Hammond.  We believe the delays are
behind us and we expect to begin adding those customers affected by the delay
to our fiber network very shortly.  With
those additions, we expect to see strong fiber growth in the third and fourth
quarters.”’

(Emphasis added.)

1. During the conference call discussing the Company’s second
   quarter 2013 results, held on August 15, 2013, Nissenson and Krikov stated, in
   part:

Nissenson:
Our second quarter was another quarter of steady progress for our
company.  We have been focused on our
sales and marketing efforts and have seen strong results as demonstrated by [a]
25% [increase] in fiber revenues.

Adjusted EBITDA was $3.7 million and the net
addition of almost 500 fiber customers during the quarter.  We also continue to execute our metro build
strategy connecting our first business customers in Abilene, a market that we
have modeled after which Wichita Falls.

*          *          *

Nissenson:
[B]acklog is over 700 primarily high margin business customers which
represent revenues of over $150,000 per month or $450,000 per quarter.

1. The Company’s revenue from its rapidly expanding FTTP network
   continued to grow at double digit rates.
   On November 14, 2013, NTS issued a press release announcing its third
   quarter 2013 financial results.  The
   press release stated, in relevant part:

Revenues
from the Company’s [FTTP] business grew 28.2% to $6.1 million in the third
quarter ended September 30, 2013, as compared to $4.8 million for the same period
in 2012.  FTTP revenues represented 41.2% of
consolidated revenues for the third quarter of 2013, as compared to 31.9% of
consolidated revenues for the third quarter of 2012.

*          *          *

For the first nine months of 2013, revenues
from the Company’s FTTP business grew 28.1% to $17.1 million from $13.3 million
in the first nine months of 2012.  Consolidated
revenues for the nine months ended September 30, 2013 were $44.9 million,
essentially flat as compared to consolidated revenues for the nine months ended
September 30, 2012.

The
Company’s total number of FTTP customers as of September 30, 2013 was 11,409, a
25% increase compared to 9,104 FTTP customers as of September 30, 2012. The increase in the Company’s customer base
is a result of its expansion into additional communities and increased
penetration.

*          *          *

EBITDAS for the third quarter of 2013 was
$3.7 million, a 20.3% increase over EBITDAS of $3.1 million in the same quarter
last year. EBITDAS margin in the quarter ended September 30, 2013 was 25.1%
compared to EBITDAS margin of 20.7% for the quarter ended September 30, 2012.
This is mainly attributable to the increase in higher margin FTTP revenues.

For the nine months ended September 30, 2013
the Company reported Adjusted EBITDAS of $10.8 million, an increase of 24.7%
compared to EBITDAS of $8.6 million in the first nine months of 2012. Adjusted
EBITDAS margin for the first nine months of 2013 was 24% compared to EBITDAS
margin of 19.3% in the same prior year period.

(Emphasis added.)

1. Additionally, the Company reported that it added
   approximately 11,500 FTTP passings during the third quarter.
2. In short, the Company has increased its FTTP revenues and
   FTTP customers by 25% or more during each of the first three quarters of 2013
   and there is no indication that NTS’ phenomenal growth will not continue.

THE TAKE-PRIVATE TRANSACTION

1. On October 21, 2013, NTS and Tower Three announced that they
   had entered into the Merger Agreement whereby Tower Three will acquire NTS for
   $2.00 per share in cash.  The press release
   stated in part:

Lubbock, TX – October 21, 2013 –
NTS, Inc. (NYSE MKT/TASE: NTS)
(“NTS” or “the Company”), a leading regional provider of integrated
communications, announces that it has entered into a definitive merger
agreement with affiliates of private equity firm Tower Three Partners LLC
(“Tower Three”).  Upon completion of the
transaction, NTS will be a privately held company.

Under the terms of the merger
agreement, an affiliate of Tower Three will acquire all outstanding shares of
NTS common stock (other than certain shares held by Guy Nissenson, the
Company’s Chairman, President and CEO) for $2.00 per share in cash.

A Special Committee of the NTS
Board of Directors, comprised of three independent directors (Jeffrey E.
Eberwein, Don Carlos Bell III and Richard K. Coleman, Jr.), and advised by an
independent legal advisor, negotiated the transaction and recommended it to the
full NTS Board of Directors.  The full
NTS Board of Directors, other than Guy Nissenson, who abstained from voting,
unanimously approved the merger agreement. The purchase price represents a
premium of 27% over NTS’ closing share price on October 18, 2013 and a premium
of 24% over NTS’ average closing share price for the 30 trading days ending on
October 18, 2013.

Guy Nissenson, Chairman,
President and CEO of NTS commented, “This is great news for the Company, our
shareholders, and our customers.  For the
past five years, we have focused on the successful roll out of our
state-of-the-art fiber network in secondary markets in Texas and Louisiana.  This transaction is a testament to the hard
work and dedication of our employees.”

“We believe that Tower Three has
the financial resources and expertise to further accelerate NTS’ profitable
growth through network expansion and improved service offerings.”

Independent Director and Chairman
of the NTS Special Committee, Jeffrey Eberwein commented, “Throughout this
process, the Special Committee and the Board have been steadfastly committed to
maximizing shareholder value and we believe this transaction appropriately
recognizes the value of NTS’ business and provides our stockholders with a
meaningful cash premium based on the current stock price.”

Bill Forrest, Founder of Tower
Three, further stated, “NTS is positioned to be the market leader in the
geographies it serves, and it is at a transition point in its evolution.  Tower Three is well-suited and eager to help
accelerate this transition and further fuel NTS’ growth trajectory.”

Michael Nold, Managing Director
of Tower Three said, “Fiber-based, broadband communications is enabling the
highest-value convergence of voice, video, and data for all end-users. With its
differentiated fiber network in underserved markets, NTS has emerged as a
regional leader. Tower Three is committed to helping NTS accelerate growth
through network expansion and expanded capabilities to optimally serve its
customers.”

The transaction is subject to the
approval of a majority of NTS’ shareholders, regulatory approvals, and other
customary closing conditions, including the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act.  The merger agreement provides for a
“go-shop” period of 30 days, during which the Company and its representatives
may solicit alternative proposals. There can be no assurance that this process
will result in a superior alternative proposal.
In addition, Mr. Nissenson has entered into a voting agreement in which
he has agreed to vote all shares over which he has voting power in favor of the
merger. If there is no superior alternative proposal, the transaction is
expected to close in the first quarter of 2014.

Oberon Securities LLC is serving
as NTS’ financial advisor. Olshan Frome Wolosky LLP is acting as counsel for
the Special Committee and Sichenzia Ross Friedman Ference LLP as counsel for
the Company.  Weil, Gotshal & Manges
LLP is acting as Tower Three’s legal advisor.

1. The Take-Private Transaction is opportunistically timed just
   as NTS is experiencing the expected growth from its investment in FTTP, namely
   greater than 25% growth in each of the first three quarters of 2013 in the
   Company’s FTTP revenues and FTTP customers.

The Board Is Not Independent

1. The Take-Private Transaction is being driven by the
   Individual Defendants and Company executives who are seeking to cash in their
   illiquid holdings in NTS stock and stand to gain substantial payouts
   immediately upon the consummation of the Merger.  NTS officers and directors are beneficial
   owners of an illiquid block of 16,232,204 of NTS stock, nearly 39% of the
   Company’s issued and outstanding stock, and stand to gain over $32 million from
   the Take-Private Transaction.  During the
   three months before the announcement of the Take-Private Transaction, the daily
   trading volume for NTS shares on the NYSE has averaged only 56,702 shares, or
   only 0.14% of the Company’s issued and outstanding shares of stock, making it
   virtually impossible for the Company’s officers and directors to monetize their
   illiquid stock holdings.
2. Pursuant to the Merger Agreement each issued and outstanding
   option of NTS common stock (regardless of whether vested or exercisable) will
   be cashed out for $2.00 per share.  This
   acceleration of unvested options will result in substantial payouts, including
   to members of the Board, five of whom have held their position for less than
   one year.
3. In addition to “cashing in” their illiquid holdings,
   “selected” members of Company management are retaining their positions with the
   surviving company following the Take-Private Transaction.  Consequently, the Take-Private Transaction
   allows NTS management the best of both worlds – cashing in their illiquid
   equity holdings while retaining their current positions.  Essentially, the Take-Private Transaction is
   a management buyout, backed by Tower Three.
4. Nissenson, in addition to retaining his employment, will receive
   an equity interest in the private company rather than cashing out one-third of
   his shares of NTS stock.  As of October
   22, 2013, Nissenson was the beneficial owner of 6,760,661 shares, or 16.2% of
   the Company.

The Special Committee Is Not
Independent

1. Though the Special Committee was purportedly created to
   represent the best interests of the Company’s stockholders and provide
   “independent” oversight, in reality, the Take-Private Transaction was not
   subject to the scrutiny of independent and disinterested committee
   members.  The Chairman of the Special
   Committee, Eberwein, is the beneficial owner of more than 2.8 million NTS
   shares, nearly 7% of the Company’s outstanding stock, as the manager of Lone
   Star Value Investors GP, LLC and sole member of Lone Star Value Management,
   LLC.  Eberwein will receive approximately
   $5.7 million for his otherwise illiquid holdings of Company stock upon
   consummation of the Take-Private Transaction.
   Further, as described in more details below, all three of the Special
   Committee members were recently elected to the Board on December 20, 2012, with
   the majority of shares voting for their election being those of the Individual
   Defendants who will be profiting handsomely from the consummation of the
   Take-Private Transaction.  As illustrated
   by the Special Committee’s failure to even engage Tower Three on price, this
   creates a significant incentive to approve the Merger Agreement rather than
   recommend or pursue strategic alternatives that might be in the best interests
   of NTS stockholders who seek to gain long term benefits from the Company’s
   current and anticipated future success.

The
Filing of the 13E-3 Implies Control

1. Rule 13E-3 of the Securities and Exchange Act of 1934
   requires a Schedule 13E-3 to be filed in certain going private transactions
   where a person or entity who “controls, is controlled by, or is under common
   control” with the target company in the transaction takes the company
   private.  Thus, the fact that Defendants
   filed a Schedule 13E-3 regarding the Take-Private Transaction provides further
   support that Defendants and their own legal counsel believe that the Individual
   Defendants (including Nissenson) control the Company.

The
Individual Defendants Determine the Outcome of Director Elections

1. The Individual Defendants, along with Krikov, collectively
   own a total of 16,232,204 shares of NTS common stock, or nearly 39% of the
   issued and outstanding shares.  At the
   Company’s most recent stockholder meeting, on December 20, 2012, approximately
   24,150,000 votes were cast in favor of the director nominees; thus, the
   Individual Defendants collectively have well over a majority of de facto voting control in directorial
   elections, and hence can determine the entire composition of the Board.  The Individual Defendants thus dominate and
   control the Board.  Further, five of the
   current Individual Defendants, a majority of the Board that approved the
   Take-Private Transaction, were elected to the Board at the most recent annual
   meeting of shareholders, including all three members of the Special Committee.

THE PROCESS LEADING TO THE
TAKE-PRIVATE TRANSACTION

1. The Take-Private Transaction is the result of a flawed
   process that was controlled by Nissenson from the start.
2. On March 7, 2013, Tower Three met with representatives of
   Oberon and during the course of the meeting Tower Three expressed an interest
   in learning about NTS and meeting with management.  While the Preliminary Proxy provides no
   detail about what services Oberon has provided to Tower Three or the purpose of
   their meeting, the Schedule 13E-3, without providing any detail, states that
   Michael F. Nold (“Nold”), Managing Director of Tower Three, previously worked
   at the Gores Group, which through Oberon, had previous discussions regarding a
   transaction with NTS.
3. In response, on March 14, 2013, Oberon facilitated a
   telephone call between Tower Three and Nissenson.  During the call, Tower Three inquired whether
   NTS would consider a potential transaction.
4. Shortly thereafter, on April 10, 2013, NTS entered into a
   confidentiality agreement with Tower Three.
   According to the Preliminary Proxy, the full Board was not involved in
   this decision.  On April 24, 2013,
   following a meeting between Tower Three, Oberon, and Nissenson, Tower Three
   indicated that it might make an acquisition proposal.  Following the meeting, the Company provided
   diligence materials, including the April Projections to Tower Three.  Again, the Board (with the exception of
   Nissenson) does not appear to have been aware of the meeting or that Nissenson
   had provided Tower Three with diligence materials.
5. On May 29, 2013, Nissenson and another NTS executive, Oberon,
   and Tower Three met in person.  At this
   meeting, Tower Three indicated that it might be willing to pay $2.00 per share
   to acquire the Company.
6. On June 17, 2013, the Company entered into an engagement
   agreement with Oberon to act as the financial advisor in connection with the
   possible sale of the Company.  NTS agreed
   to pay Oberon $2.3 million if a transaction is consummated and $150,000 payable
   upon receipt of its fairness opinion.  If
   a transaction was not consummated, the Company would only pay Oberon
   $400,000.  According to the Preliminary
   Proxy, the entire Board had yet to be informed of any of these developments.
7. On July 2, 2013, Company A, a potential financial sponsor,
   approached the Company with regard to a potential transaction.  On July 7, 2013, Company A executed a
   confidentiality agreement and was provided with due diligence materials.  In the middle of July, Company A indicated
   that it would be interested in pursuing an at-the-market “private investment in
   public equity” (“PIPE”) transaction.
   According to the Preliminary Proxy, management never made a counter
   proposal, further explored a PIPE transaction with Party A, or otherwise
   responded to Company A’s proposal.  There
   is also no indication that NTS’ management informed the Board of this possible
   strategic alternative.
8. In late July 2013, Tower Three and Nissenson had discussions
   regarding Nissenson’s role at the Company following a transaction.  In addition to rolling over his equity, Tower
   Three indicated that Nissenson would be asked to serve on the board of
   directors and enter into a new employment agreement with the private
   company.  Nissenson indicated his
   willingness to roll over a portion of his NTS equity.
9. On August 2, 2013, the Company received a preliminary
   indication of interest from Tower Three for $2.00 per share.  The indication of interest required that
   Nissenson agree to roll over a portion of his equity and a 30-day exclusivity
   period wherein the Special Committee would be foreclosed from negotiating with
   any other party.  Further, the indication
   of interest provided that Tower Three “anticipated” retaining “select members”
   of NTS management.  The Preliminary Proxy
   states that the indication of interest was “circulated to the NTS board of
   directors shortly after its receipt by management.”
10. On August 6, 2013, the Preliminary Proxy states that the
    Board held a telephonic meeting, the first such Board meeting disclosed, to
    discuss the indication of interest.
    Despite Nissenson having already 1) entered into a confidentiality
    agreement on behalf of the Company, 2) discussed his future management role in
    a private NTS and roll over of equity, and 3) having retained Oberon to advise
    on a potential transaction, the Board agreed, for the first time on August 6,
    2013, to “explore the potential sale of the Company to Tower Three.”
11. While the Board appointed the Special Committee on August 6,
    2013, it also directed that Nissenson, Krikov, and Alon Reisser (“Reisser”),
    General Counsel and Corporate Secretary of the Company, “should participate at
    meetings of the Special Committee.”  The
    Preliminary Proxy does not (and cannot) explain the basis for permitting Nissenson,
    a conflicted insider, such intimate access to and potential influence over the
    Special Committee.
12. On August 23, 2013, without any further meetings of the Board
    or Special Committee, or meetings with its financial advisor, the Company
    agreed to enter into exclusivity with Tower Three.  From late August through October 2013, Tower
    Three conducted extensive due diligence.
13. On September 4, 2013, having not received a response
    regarding its PIPE proposal, Company A sent an email to the Company asking for
    an update.  Company A was advised of the
    exclusivity agreement with Tower Three and Oberon notified Tower Three of the
    correspondence from Company A.
14. On September 17, 2013, six weeks after its creation and
    several months after Nissenson executed a confidentiality agreement with Tower
    Three on behalf of the Company, and after the Company had entered into
    exclusivity with Tower Three paving the way for the Take-Private Transaction,
    Nissenson, Krikov, and Reisser stepped down from their “participatory” roles in
    the Special Committee.  The Special
    Committee then elected interested director Eberwein as Chairman of the Special
    Committee.
15. On September 21, 2013, management projections prepared by NTS
    were provided to Tower Three (the “September 21, 2013 Projections”).
16. On September 25, 2013, the Special Committee determined that
    it should retain a second financial advisor to evaluate the fairness of the
    proposed $2.00 per share consideration.
    As detailed above, the Special Committee never even attempted to negotiate
    upward the $2.00 per share consideration offered by Tower Three in April 2013
    and there is no indication in the Preliminary Proxy as to why the Special
    Committee felt a second financial advisor was necessary or advisable.
17. On September 29, 2013, NTS provided a revised set of
    financial projections to Tower Three (the “Revised September 21, 2013
    Projections”).  The Preliminary Proxy
    does not explain why the September 21, 2013 Projections needed revision only
    eight days after they were created and shared with Tower Three.
18. On October 4, 2013, at the direction of the Special
    Committee, the Company retained B. Riley to provide a second fairness opinion.
19. On October 11, 2013, less than two weeks after NTS provided
    the Revised September 21, 2013 Projections to Tower Three, the Company again
    revised its financial forecasts and provided Oberon and B. Riley these new
    financial projections (the “October 11, 2013 Projections”).  The Preliminary Proxy does not disclose
    whether these projections were given to Tower Three, or why the Company’s
    financial projections were revised three times in three weeks.  Further, the Preliminary Proxy does not
    explain the differences between the various projections or why Oberon or B.
    Riley apparently requested the creation of the October 11, 2013 Projections.
20. On October 14, 2013, after receiving the further revised
    October 11, 2013 Projections, both Oberon and B. Riley provided the Special
    Committee with their preliminary financial analyses of the Take-Private
    Transaction.  Then, on October 15, 2013,
    Oberon and B. Riley each made presentations to the Board.  Both investment banks explained that they did
    not rely on the September Projections in connection with the preparation of
    their fairness opinions because they were “optimistic.”  The Preliminary Proxy does not adequately
    disclose the differences between the various sets of projections or the impact
    the earlier projections would have had on the fairness opinions.
21. On October 20, 2013, Nissenson and the Special Committee
    provided the Board with a summary of the Merger Agreement.  Then B. Riley and Oberon presented their
    respective fairness opinions.  Following
    which the Board (other than Nissenson) approved the Merger Agreement.
22. Following execution of the Merger Agreement, Oberon contacted
    41 parties (including 18 strategic parties and 23 financial sponsors) and
    “certain” members of the Special Committee contacted two additional
    parties.  During the go-shop period,
    seven parties executed confidentiality agreements (the Preliminary Proxy does not
    disclose whether those parties are currently subject to standstill provisions)
    and none of the parties made competing bids for the Company.  In light of the Individual Defendants’ (along
    with Krikov’s) control of nearly 39% of the Company’s outstanding shares, the
    excessive termination fee, matching rights, and that “select” members of
    management were keeping their jobs and supported the Take-Private Transaction
    with Tower Three, it is unsurprising that none of the seven parties elected to
    submit a competing bid.

THE MATERIALLY MISLEADING
PRELIMINARY PROXY

1. The Preliminary Proxy omits certain material information
   necessary for the Company’s public stockholders to make an informed decision
   whether and how to vote regarding the Take-Private Transaction.  For example:
2. Nissenson’s Control of the
   Board.  The Preliminary Proxy fails to disclose why
   the Board was not informed of Nissenson’s discussions regarding selling the
   Company, beginning in March 2013, until August 2, 2013 when the Company
   received a preliminary indication of interest from Tower Three.  Similarly, the Preliminary Proxy fails to
   disclose why the Board and Special Committee allowed Nissenson to discuss a
   roll-over of his equity and his continuing employment following the proposed
   Take-Private Transaction.  Further, the
   Preliminary Proxy fails to adequately provide the Board’s rationale for
   directing that Nissenson take part in meetings of the Special Committee.
3. Engagement of B. Riley.  The Preliminary Proxy fails to disclose why
   the Special Committee believed a second financial advisor was advisable or
   whether there was a specific conflict with Oberon making a second financial
   advisor mandatory.
4. Adjustments to Management
   Projections.  The Preliminary Proxy fails to disclose 1)
   why Management and the Board believed it was necessary to create the October
   2011, 2013 Projections, which were provided to Oberon and B. Riley, 2) who
   requested the October 11, 2013 Projections, or 3) how the October 2011
   Projections differed from the September 21, 2013 Projections or the Revised
   September 21, 2013 Projections that were provided to Tower Three.  Further, the Preliminary Proxy fails to
   disclose either the September 21, 2013 Projections or Revised September 21,
   2013 Projections.
5. Defendant Nissenson’s Stock
   Ownership.  The Preliminary Proxy incorrectly states that
   Nissenson controls 15.1% of the Company’s outstanding stock.  However, dividing Nissenson’s beneficial
   ownership of 6,760,661 shares as detailed in the Preliminary Proxy by the
   41,687,266 issued and outstanding shares as of October 22, 2013, Nissenson
   controls 16.2% of the Company’s outstanding stock.[2]

Oberon Analysis

1. Public Comparables Trading
   Analysis.  The Preliminary Proxy fails to disclose the
   benchmarking analysis Oberon conducted for NTS in relation to the selected
   comparable public companies.  Further,
   the Preliminary Proxy fails to disclose why Oberon did not apply Enterprise
   Value / FY2013E EBITDA multiples and derive an implied equity value per share
   for NTS in this analysis.
2. Selected Transaction
   Analysis.  The Preliminary Proxy fails to disclose the
   benchmarking analysis Oberon performed in relation to the selected comparable
   precedent transactions.
3. Oberon’s Potential Conflicts.  The Preliminary Proxy fails to disclose the
   specific services, if any, Oberon has provided to NTS, or its affiliates, in
   the last two years and how much compensation was received for those
   services.  Similarly, the Preliminary
   Proxy fails to disclose what services Oberon has provided to Tower Three in the
   last two years and how much compensation was received for those services.  Further, it is not disclosed why the Board
   was not informed of Oberon’s and Nissenson’s discussions with Tower Three prior
   to August 2, 2013.

B. Riley Analysis

1. Discounted Cash Flow
   Analysis.  The Preliminary Proxy fails to disclose why
   B. Riley utilized a 14.0% to 18.0% weighted average cost of capital when it
   derived a 14.6% weighted average cost of capital for the Company.
2. B. Riley’s Potential
   Conflicts.  The Preliminary Proxy fails to disclose the
   specific services, if any, B. Riley has provided to NTS, or its affiliates, in
   the last two years and how much compensation was received for those
   services.  Similarly, the Preliminary
   Proxy fails to disclose what services, if any, B. Riley has provided to Tower
   Three in the last two years and how much compensation was received for those
   services.

THE UNREASONABLE DEAL
PROTECTION MEASURES

1. The terms of the Merger Agreement were designed to deter
   competing bids and prevent the Individual Defendants from exercising their
   fiduciary duty to obtain the best possible price for NTS public
   stockholders.  When viewed collectively,
   these provisions, detailed below, further the interests of Tower Three and its
   affiliates, the Individual Defendants and other NTS insiders to the detriment
   of NTS’ public stockholders and cannot represent a justified, appropriate or
   proportionate response to any threat posed by a potential third party
   bidder.  Rather than undertake a full and
   fair auction to maximize stockholder value as their fiduciary duties require,
   the Individual Defendants agreed to an illusory 30-day go-shop period which
   ended on November 19, 2013.  As designed,
   the go-shop period did not result in a competing bid being submitted by a third
   party.
2. In breach of their fiduciary duties, the Individual Defendants
   agreed to the following unreasonable deal protection devices:

• a no-shop clause, beginning on November 19, 2013, that
  prohibits the Company from soliciting alternative proposals and severely
  constrains the Individual Defendants’ ability to communicate and negotiate with
  potential bidders;
• a notice provision requiring the Company to promptly disclose
  all confidential information regarding any alternative proposal it receives to
  Tower Three;
• a matching rights provision granting Tower Three four business
  days to match any competing proposal;
• unreasonably restrictive definitions of “Takeover Proposal”
  and “Superior Proposal”; and
• a termination fee of $2.3 million if the termination had
  occurred during the go-shop period and $4.1 million thereafter, plus up to
  $2.25 million in expense reimbursement, or a total of $4.55 million to $6.35
  million (5.45% to 7.6% of the Company’s equity value at the $2.00 per share
  Offer Price).

1. These deal protection measures unfairly restrain the
   Individual Defendants’ ability to solicit or engage in negotiations with any
   third party regarding a proposal to acquire all or a significant interest in
   the Company.  The circumstances under
   which the Board may respond to a third party’s written bona fide proposal for
   an alternative acquisition that constitutes or would reasonably be expected to
   constitute a superior proposal are too narrowly circumscribed to provide an
   effective fiduciary out under the circumstances.
2. In addition, the Company’s officers and directors
   collectively control nearly 39% of the Company’s outstanding stock.  Nissenson has agreed to vote his 16.2%
   interest in favor of the Take-Private Transaction, and several NTS executives
   are retaining their jobs (including Nissenson).
   Because the Take-Private Transaction only requires approval of a
   majority of the outstanding shares of the Company’s common stock and the
   Defendants have 39% of that vote already locked up, stockholder approval is
   virtually assured, rendering the votes of Plaintiff and the Class virtually meaningless.  The Individual Defendants’ failure to include
   a provision in the Merger Agreement requiring a majority vote by the Company’s
   public stockholders, excluding the conflicted officers and directors’ 39%
   stake, makes the outcome almost entirely subject to Defendants’ will and
   provides further evidence of procedural unfairness.
3. Unless the Take-Private Transaction is preliminarily enjoined
   until such time as the Individual Defendants act in accordance with their
   fiduciary duty to maximize stockholder value, Plaintiff and the Class will be
   harmed and will lose the opportunity to receive full value for their shares of
   NTS stock.

THE INDIVIDUAL DEFENDANTS’ FIDUCIARY DUTIES

1. As directors and/or officers of NTS, the Individual
   Defendants stand in a fiduciary relationship to Plaintiff and the Class and owe
   them the highest fiduciary obligations of care, good faith, fair dealing,
   loyalty and full and candid disclosure.
2. By virtue of their positions as directors and/or officers of
   NTS, the Individual Defendants, at all relevant times, had the power to control
   and influence, and did control and influence and cause NTS to engage in the
   practices complained of herein.
3. Each of the Individual Defendants is required to act in good
   faith, in the best interests of the Company’s stockholders and with such care,
   including reasonable inquiry, as would be expected of an ordinarily prudent
   person.  In a situation where the
   directors of a publicly-traded corporation undertake a transaction that may
   result in a change in corporate control, the directors must take all steps
   reasonably required to maximize the value stockholders will receive rather than
   use a change of control to benefit themselves, and if such transaction will in
   fact result in a change of corporate control, the stockholders are entitled to
   receive a significant premium.  Moreover,
   the directors must take all steps reasonably required to disclose all material
   information concerning the proposed change of control to enable the stockholders
   to make an informed voting decision.  To
   diligently comply with these duties, the directors may not take any action
   that:
   1. adversely
      affects the value provided to the corporation’s stockholders;
   2. will
      discourage or inhibit alternative offers to purchase control of the corporation
      or its assets;
   3. contractually
      prohibits them from complying with or carrying out their fiduciary duties;
      and/or
   4. will
      otherwise adversely affect their duty to search for and secure the best value
      reasonably available under the circumstances for the corporation’s stockholders.
   5. Plaintiff alleges herein that the Individual Defendants,
      separately and together, in connection with the Take-Private Transaction,
      violated, and are violating, the fiduciary duties they owe to Plaintiff and the
      Class, including their fiduciary duty to maximize stockholder value in
      connection with a sale of the Company.
   6. As a result of these breaches of fiduciary duty, the
      Company’s public stockholders will not receive adequate or fair value for their
      NTS stock in the Take-Private Transaction.

CLASS ACTION ALLEGATIONS

1. Plaintiff brings this action on behalf of themselves and as a
   class action on behalf of all public holders of NTS stock (as previously
   defined, the “Class”).  Excluded from the
   Class are Defendants herein and any person, firm, trust, corporation or other
   entity related to or affiliated with Defendants.
2. This action is properly maintainable as a class action under
   Rule 23 of the Nevada Rules of Civil Procedure.
3. The members of the Class are so numerous that joinder of all
   of them would be impracticable.  As of
   October 22, 2013, the Company had 41,687,266 shares of common stock
   outstanding.  Moreover, it is reasonable
   to assume that there are thousands of beneficial holders of NTS common stock
   geographically dispersed throughout the United States.
4. Plaintiff’s claims are typical of the claims of the
   Class.  Plaintiff and the other members
   of the Class have and will sustain damages arising out of Defendants’ breaches
   of their fiduciary duties.  Plaintiff do
   not have any interests that are adverse or antagonistic to those of the
   Class.  Plaintiff will fairly and
   adequately protect the interests of the Class.
   Plaintiff is committed to the vigorous prosecution of this action and have
   retained counsel competent and experienced in this type of litigation.
5. There are numerous questions of law and fact common to the
   members of the Class and which predominate over questions affecting any
   individual Class member including, inter
   alia, whether (i) the Individual Defendants have and are breaching their fiduciary
   duties to the detriment of the Company’s shareholders; (ii) Tower Three, T3 and
   Merger Sub have aided and abetted such breaches; and (iii) the Class has been,
   or will be, irreparably damaged.
6. The prosecution of separate actions by individual members of
   the Class would create the risk of inconsistent or varying adjudications with
   respect to individual members of the Class that would establish incompatible
   standards of conduct for Defendants, or adjudications with respect to
   individual members of the Class that would as a practical matter be dispositive
   of the interests of the other members not parties to the adjudications or
   substantially impair or impede their ability to protect their interests.
7. Defendants have acted, or refused to act, on grounds generally
   applicable to, and causing injury to, the Class and, therefore, preliminary and
   final injunctive relief on behalf of the Class as a whole is appropriate.

FIRST CLAIM FOR RELIEF

Breach of Fiduciary Duties

(Against the Individual Defendants)

1. Plaintiff repeats and realleges each allegation set forth
   above as if fully set forth herein.
2. As officers and/or directors, the Individual Defendants stand
   in a fiduciary relationship to Plaintiff and the Class and owe them the highest
   fiduciary obligations of loyalty and care.
3. As demonstrated by the allegations above, the Individual
   Defendants are knowingly and recklessly failing to exercise the care required,
   and breaching their duties of loyalty, good faith, and independence owed to NTS
   stockholders because, among other reasons, they failed to (a) undertake an
   appropriate evaluation of NTS’ value as a merger/acquisition candidate; and (b)
   actively evaluate the Take-Private Transaction in an attempt to obtain the
   highest value reasonably available for the Company’s public stockholders.
4. Unless enjoined by this Court, the Individual Defendants will
   continue to breach their fiduciary duties owed to Plaintiff and the other
   members of the Class, and may consummate the Take-Private Transaction, which
   will deprive the Class of its fair proportionate share of the Company’s
   valuable assets and businesses, to the irreparable harm of the Class.
5. Plaintiff and the Class have no adequate remedy at law.  Only through the exercise of this Court’s
   equitable powers can Plaintiff and the Class be fully protected from the
   immediate and irreparable injury, which the Individual Defendants’ actions
   threaten to inflict.

SECOND CLAIM FOR RELIEF

Aiding and Abetting Breaches of Fiduciary
Duties

(Against Tower Three, T3, and Merger Sub)

1. Plaintiff  repeats and
   realleges each allegation set forth above as if fully set forth herein.
2. Defendants Tower Three, T3, and Merger Sub, by reason of
   their status as parties to the Merger Agreement, and their possession of
   nonpublic information, have aided and abetted the Individual Defendants in the
   aforesaid breaches of fiduciary duty.
3. Such breaches of fiduciary duty could not and would not have
   occurred but for the conduct of Tower Three, T3, and Merger Sub, who,
   therefore, have aided and abetted such breaches in the Take-Private
   Transaction.
4. As a result of the unlawful actions of Tower Three, T3, and
   Merger Sub, Plaintiff and the Class will be irreparably harmed in that they
   will not receive true value for the Company’s assets and business.  Unless the actions of Tower Three, T3 and
   Merger Sub are enjoined by the Court, they will continue to aid and abet the
   Individual Defendants’ breaches of their fiduciary duties owed to Plaintiff and
   the Class.
5. Plaintiff and the Class have no adequate remedy at law.

PRAYER FOR RELIEF

            WHEREFORE, Plaintiff demands
injunctive relief, in Plaintiff’s favor and in favor of the Class and against
Defendants, as follows:

A.        Declaring that this action is properly maintainable as a
class action and designating Plaintiff as Class representatives;

B.         Enjoining Defendants, their agents, counsel, employees and
all persons acting in concert with them from consummating the Take-Private
Transaction, unless and until the Company adopts and implements a procedure or
process to obtain the highest possible price for stockholders;

C.        Directing Defendants to account to Plaintiff and the Class
for all damages suffered by them as a result of Defendants’ wrongful conduct
alleged herein;

D.        In the event Defendants consummate the Take-Private Transaction,
rescinding it and setting it aside or awarding rescissory damages to Plaintiff
and the Class;

E.         Awarding Plaintiff the costs and disbursements of this
action, including reasonable attorneys’ and experts’ fees; and

F.         Granting such other and further equitable relief as this
Court may deem just and proper.

DATED:
December 19, 2013              Respectfully
submitted,

ALBRIGHT, STODDARD,

  WARNICK & ALBRIGHT

                                                                                   

G. MARK ALBRIGHT, ESQ.

Nevada Bar No. 1394

801 South Rancho Drive, Suite D-4

Las Vegas, Nevada  89106

Tel:       (702) 384-7111

Fax:      (702)
384-0605

Email:   gma@albrightstoddard.com

Liaison
Counsel for Plaintiff

 

KIRBY McINERNEY LLP

Ira M. Press

Randall K. Berger

J. Brandon Walker

825 Third Avenue, 16th Floor

New York, NY  10022

Tel:       (212) 371-6600

Fax:      (212)
751-2540

Email:   ipress@kmllp.com

rberger@kmllp.com

bwalker@kmllp.com

 

Robert
J. Gralewski, Jr.

600 B
Street, Suite 1900

San
Diego, CA  92101

Tel:       (619) 398-4340

Fax:      (212) 751-2540

Email:   bgralewski@kmllp.com

Lead Counsel for Plaintiff

 

LEVI & KORSINSKY LLP

Shane
T. Rowley

30
Broad Street, 24th Floor

New
York, NY  10004

Tel:       (212) 363-7500

Fax:      (212) 363-7171

Email: srowley@zlk.com

Attorneys for Plaintiff Courtney
Coward

WEISSLAW LLP

Richard
A. Acocelli

1500 Broadway,
16thFloor

New York,
NY  10036

Tel:       (212) 682-3025

Fax:      (212)
682-3010

Email:   racocelli@weisslawllp.com

Attorneys for Plaintiff Rina Brodt

POMERANTZ GROSSMAN HUFFORD

DAHLSTROM & GROSS LLP

Gustavo
F. Bruckner

600
Third Avenue

New York,
NY  10016

Tel:       (212) 661-1100

Fax:      (212) 661-8665

Email:   gfbruckner@pomlaw.com

Attorneys for Plaintiff David Wender

 

SAXENA WHITE P.A.

Jonathan
M. Stein

2424
North Federal Highway, Suite 257

Boca
Raton, FL 33431

Tel:       (561) 394-3399

Fax:      (561) 394-3382

Email:   jstein@saxenawhite.com

Attorneys for Plaintiff Tina
Albritton

 

MILBERG LLP

Kent
A. Bronson

One
Pennsylvania Plaza, 49th Floor

New
York, NY 10119

Tel:       (212) 594-5300

Fax:      (212) 504 8054

Email:   kbronson@milberg.com

Attorneys for Plaintiff Moshe
Billet

 

CERTIFICATE OF SERVICE

 

I certify that I am an employee of
ALBRIGHT, STODDARD, WARNICK & ALBRIGHT, and that on this _____ day of
December, 2013, I placed a true and correct copy of the AMENDED CLASS ACTION COMPLAINT, in the above-entitled matter, for mailing
in the U.S. Mail at Las Vegas, Nevada, in a sealed envelope upon which first
class postage was prepaid and addressed to:

 

Rew
R. Goodenow, Esq.

PARSONS
BEHLE & LATIMER

500
West Liberty Street #750

Reno,
Nevada  89501

 

Alex
L. Fugazzi, esq.

SNELL
& WILMER L.L.P

3883
Howard Hughes Parkway #1100

Las
Vegas, Nevada  89169

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

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