EXHIBIT 2



                         FORM OF STOCKHOLDERS AGREEMENT


         This Stockholders' Agreement (this "Agreement") dated as of September
12, 2001, by and among NTS INVESTORS, LLC, a Delaware limited liability company
("NTSINV"), NESTOR, INC., a Delaware corporation (the "Company"), ALAN M.
WIENER, an individual, ALVIN SITEMAN, an individual, and ROBERT M. CARROLL, an
individual. Each of the parties hereto (other than the Company) and each other
person who shall hereafter become a party or agree to become a party or will be
bound by the terms of this Agreement is sometimes herein referred to
individually as a "Stockholder" and all of such parties are sometimes
collectively herein referred to as "Stockholders," and Alan M. Wiener, Alvin
Siteman and Robert M. Carroll shall sometimes be collectively referred to as the
"NTS Designees".

                                    RECITALS:


         WHEREAS, NTSINV, pursuant to the terms of a Secured Note Agreement (the
"Note") dated January 9, 2001 by and among NTSINV and Nestor Traffic Systems,
Inc., a Delaware corporation ("NTS"), agreed to invest up to $8,000,000 in NTS
subject to, among other things, the consummation of a merger between NTS and the
Company (the "Merger"); and

         WHEREAS, in contemplation of the consummation of the Merger; and

         WHEREAS, in accordance with paragraph 21(c) of the Note, the parties
hereto deem it to be in their best interests and in the best interests of the
Company to provide for consistent and uniform management and governance of the
Company and desire to enter into this Agreement in order to effectuate such
purposes.

         NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

        4.

DEFINITIONS

      4.1      Defined Terms.  As used herein, the terms below shall have the
          following meanings:

                  "Affiliates" shall mean with respect to a Person, any other
Person controlling, controlled by or under common control with, or the members,
parents, spouse, lineal descendants or beneficiaries of, such Person.

                  "Board of Directors" shall mean the Board of Directors of the
Company.


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                  "Common Stock" shall mean the common stock of the Company.

                  "Control" shall mean, with respect to any Person, the power to
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise.

                  "Effective Date" shall mean the effective date of the Merger.

                  "Person" shall mean an individual, partnership, limited
liability company, joint venture, corporation, trust or unincorporated
organization.

        5.

BOARD OF DIRECTORS

        5.1      Designation.

        (a)   From and after the Effective Date, as long as NTSINV and its
              Affiliates own at least 25% of the then outstanding Common Stock,
              NTSINV shall be entitled to designate one-third (1/3) of the
              members of the Board of Directors. For example, in the event the
              Board of Directors shall consist of six (6) members, NTSINV shall
              be entitled to designate two (2) directors, or in the event the
              Board of Directors shall consist of nine (9) members, NTSINV shall
              be entitled to designate three (3) directors.

        (b)   From and after the Effective Date, in the event that NTSINV and
              its Affiliates own less than 25% of the then outstanding Common
              Stock, but more than 15% of the then outstanding Common Stock,
              NTSINV shall be entitled to designate two-ninths (2/9) of the
              members of the Board of Directors. For example, in the event the
              Board of Directors shall consist of six (6) members, NTSINV shall
              be entitled to designate two (2) directors, or in the event the
              Board of Directors shall consist of nine (9) members, NTSINV shall
              be entitled to designate two (2) directors.

        (c)   From and after the Effective Date, in the event that NTSINV and
              its Affiliates own less than 15% of the then outstanding Common
              Stock, but more than 5% of the then outstanding Common Stock, it
              shall have the power to designate one-ninth (1/9) of the members
              of the Board of Directors. For example, in the event the Board of
              Directors shall consist of six (6) members, NTSINV shall be
              entitled to designate one (1) director, or in the event the Board
              of Directors shall consist of nine (9) members, NTSINV shall be
              entitled to designate one (1) director.

        (d)   From and after the Effective Date, as long as Alan M. Wiener and
              his Affiliates own at least 90% of the aggregate number of shares


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              of Common Stock to be issued to Alan M. Wiener pursuant to the
              Merger (after giving effect to any recapitalization,
              reclassification, stock split or stock dividend that may occur
              after the Effective Date), he shall be entitled to designate one
              (1) of the members of the Board of Directors in the event that the
              Board of Directors shall consist of nine (9) members.

        (e)   From and after the Effective Date, as long as Alvin Siteman and
              his Affiliates own at least 90% of the aggregate number of shares
              of Common Stock to be issued to Alvin Siteman pursuant to the
              Merger (after giving effect to any recapitalization,
              reclassification, stock split or stock dividend that may occur
              after the Effective Date), he shall be entitled to designate one
              (1) of the members of the Board of Directors in the event that the
              Board of Directors shall consist of nine (9) members.

        (f)   From and after the Effective Date, as long as Robert M. Carroll
              and his Affiliates own at least 90% of the aggregate number of
              shares of Common Stock to be issued to Robert M. Carroll pursuant
              to the Merger (after giving effect to any recapitalization,
              reclassification, stock split or stock dividend that may occur
              after the Effective Date), he shall be entitled to designate one
              (1) of the members of the Board of Directors in the event that the
              Board of Directors shall consist of nine (9) members.

        (g)   If the size of the Board of Directors is enlarged beyond nine (9)
              members, the parties hereto agree that NTSINV and each of the NTS
              Designees shall be given the right to designate an additional
              number of directors proportionate to the number of directors
              previously designated by NTSINV and each of the NTS Designees.

        (h)   The parties hereto hereby acknowledge the existence of the right
              granted to Wand/Nestor Investments L.P. ("Wand") pursuant to the
              Securities Purchase Agreement, dated as of March 7, 1996, to
              propose two (2) candidates for election to the Board of Directors.
              Notwithstanding the foregoing, on June 14, 2001, the Company
              received a waiver from Wand of such right with respect to one (1)
              candidate for 2001.

        (i)   The parties hereto hereby acknowledge the existence of the right
              granted to Transaction Systems Architects, Inc. ("TSAI") pursuant
              to the Securities Purchase Agreement, dated as of April 28, 1998,
              to propose one (1) candidate for election to the Board of
              Directors. Notwithstanding the foregoing, on May 29, 2001, the
              Company received a waiver from TSAI of such right with respect to
              2001.

        5.2   Removal. Any director designated and elected pursuant to 2.1
              hereof may only be removed by the Board of Directors for cause or
              at the written request of the designating party (with or without
              cause) received by the Board of Directors. In such event or in the
              event that any Person for any reason ceases to serve as a member
              of the Board of Directors during such director's term of office,
              the resulting vacancy on the Board of Directors shall be filled by
              an individual recommended by either NTSINV or by the applicable


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              NTS Designee, as applicable, subject to the approval of the Board
              of Directors consistent with its fiduciary duties to the Company's
              Stockholders.

        5.3   Covenant to Vote. Each Stockholder hereby agrees to vote all
              shares of Common Stock owned or held of record by such Stockholder
              at all annual or special meetings in favor of, or to take all
              actions by written consent in lieu of such a meeting, necessary to
              ensure (i) the election as members of the Board of Directors of
              those individuals so designated by NTSINV and each of the NTS
              Designees in accordance with and to otherwise effect the intent
              of, this Article II and (ii) that the Company maintains a nine (9)
              member Board of Directors. In addition, each Stockholder agrees to
              vote the shares of Common Stock owned or held of record by such
              Stockholder or over which such Stockholder has voting control upon
              any other matters arising under this Agreement submitted to the
              vote of the Stockholders in a manner so as to implement the terms
              of this Agreement.

        5.4   Representation on the Nominating Committee. From and after the
              Effective Date, as long as (a) NTSINV owns at least 25% of the
              then outstanding Common Stock and (b) Alan M. Wiener shall remain
              as a member of the Board of Directors, Alan M. Wiener in his
              capacity as a member of the Board of Directors will recommend to
              the Board of Directors that one of the directors designated by
              NTSINV shall serve as the Chairman of the Nominating Committee of
              the Company.

        6.

MISCELLANEOUS

        6.1   Notices. All communications under this Agreement shall be in
              writing and shall be delivered by hand or fax mail or by overnight
              courier or by registered or certified mail, postage prepaid:


        (i)      if to the Company, to:

                     Nestor, Inc.
                     One Richmond Square
                     Providence, Rhode Island 02906
                     Attention: Mr. David Fox
                     Facsimile: (401) 331-7309


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                     With a copy to:
                     Baer Marks & Upham LLP
                     805 Third Avenue
                     New York, New York 10022
                     Attn:  Joel M. Handel, Esq.
                     Facsimile: (212) 702-5941

         or at such other address or facsimile number as it may have furnished
in writing to NTSINV;

                     (ii)     if to NTSINV, to:

                              NTS Investors, LLC
                              2049 Century Park East
                              4th Floor
                              Los Angeles, California 90067
                              Attn.:  David A. Polak
                              Facsimile:  (___) __________

                              With a copy to:

                              Weinstein, Boldt, Halhide & Camel
                              1801 Century Park East
                              Suite 2200
                              Los Angeles, California 90067-2336
                              Attn:  David J. Camel, Esq.
                              Facsimile:  (310) 552-7938

                     (iii)    if to a NTS Designee, to the address or facsimile
number set forth beneath such director's name on the signature page hereto.

or at such other address or facsimile number as may have been furnished to the
Company in writing.

         (iv) Any notice so addressed shall be deemed to be given if delivered
by hand or fax mail (with confirmation of transmission) on the date of such
delivery or mailed by courier when received, if mailed by registered or
certified mail, when received.

        6.2      Term.

        (a)   Unless terminated as provided in the applicable Article or Section
              of this Agreement, this Agreement shall terminate upon the first
              to occur:

        (i)   four (4) years after the Effective Date; or

        (ii)  the date upon which NTSINV and its Affiliates own less than 5% of
              the then outstanding Common Stock.

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        (b)   Notwithstanding the foregoing, this Agreement shall in any event
              terminate with respect to any Stockholder when such Stockholder
              and/or his Affiliates no longer own(s) any shares of the Common
              Stock.

        6.3   Governing Law. This Agreement shall be governed by and construed
              in accordance with the terms of the laws of the state of Delaware
              without regard to principles of conflicts of laws.

        6.4   Headings. Headings in this Agreement are inserted herein for
              convenience of reference only and shall not limit or otherwise
              affect the meaning hereof.

        6.5   Entire Agreement; Amendment and Waiver. This Agreement constitutes
              the entire understanding of the parties hereto and supersedes all
              prior understandings among such parties with respect to the
              subject matter herein. This Agreement may be amended and the
              observance of any term of this Agreement may be waived with (and
              only with) the written consent of each of the parties hereto.

        6.6   Severability. In the event any part or parts of this Agreement
              shall be held illegal or unenforceable by any court or
              administrative body of competent jurisdiction, such determination
              shall not affect the remaining provisions of this Agreement which
              shall remain in full force and effect.

        6.7   Counterparts; Facsimile Signatures. This Agreement may be executed
              in one or more counterparts, each of which will be deemed an
              original and all of which together shall be considered one and the
              same Agreement. Delivery of an executed counterpart of this
              Agreement by facsimile transmission shall be as effective as
              delivery of a manually executed counterpart therein.

                            [Signature page follows.]



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         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.

                             NESTOR, INC.



                                    By:
                                        --------------------------------------
                                        Name:
                                        Title:



                             NTS INVESTORS, LLC



                                     By:
                                        --------------------------------------
                                        Name:  David Polak, Manager




                                        --------------------------------------
                                        Name: Alan M. Wiener

                                        --------------------------------------
                                        Address:

                                        --------------------------------------




                                        --------------------------------------
                                        Name: Alvin Siteman

                                        --------------------------------------
                                        Address:

                                        --------------------------------------




                                        --------------------------------------
                                        Name:  Robert M. Carroll

                                        --------------------------------------
                                        Address:

                                        --------------------------------------