Exhibit 10.8


    EXHIBIT
      10.8

    
 

    Execution
      Copy

    


    GUARANTY
      AND SURETYSHIP AGREEMENT

    


    THIS
      GUARANTY AND SURETYSHIP AGREEMENT (this “Agreement”)
      made
      as of the 25th day of May, 2006, by and among Nestor, Inc., a Delaware
      corporation (together with its successors and permitted assigns, the
“Borrower”)
      and
      the subsidiaries of the Borrower designated as “Guarantors” on the signature
      lines hereto (together with their successors and permitted assigns and any
      other
      person or entity that becomes a Guarantor hereunder pursuant to Section 5 below,
      jointly and severally, the “Guarantors”
or,
      individually, a “Guarantor”),
      in
      favor of U.S. Bank National Association, as collateral agent for the Purchasers
      (as that term is defined in the Securities Purchase Agreement referred to below)
      (together with its successors and assigns in such capacity, the “Agent”).

    


    Background

    


    The
      Agent, the Borrower and the Purchasers entered into a certain Securities
      Purchase Agreement, dated as of May 24, 2006 (as the same may be amended,
      restated, modified and/or supplemented from time to time, the “Securities
      Purchase Agreement”;
      terms
      used herein and not otherwise defined herein are used as defined in the
      Securities Purchase Agreement). Nestor Traffic Systems, Inc. is a Subsidiary
      of
      the Borrower; CrossingGuard, Inc. is a Subsidiary of Nestor Traffic Systems,
      Inc. Pursuant to the Securities Purchase Agreement, the Purchasers agreed to
      purchase the Notes from the Borrower on the terms and conditions described
      therein. The Borrower may, among other things, use the proceeds of the issuance
      of the Notes to extend credit to, and make capital contributions in, the
      Guarantors. Therefore, as a result of the Securities Purchase Agreement, the
      Guarantors can obtain capital on terms more favorable to them as part of this
      borrowing group than they could acting alone. One of the conditions to the
      extension of credit under the Securities Purchase Agreement is that the
      Guarantors guaranty payment of and act as surety for the obligations of the
      Borrower arising out of the Securities Purchase Agreement and related agreements
      and instruments.

    


    Accordingly,
      each Guarantor and the Borrower, intending to be legally bound, hereby agrees
      with the Agent as follows.

    


    NOW
      THEREFORE, in consideration of the foregoing and other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

    


    1. Guaranty
      and Suretyship.

    


    1.1 Guaranty
      of Payment.
      The
      Guarantors hereby jointly and severally agree to act as surety for the
      Guaranteed Obligations (as defined in Section 1.2 below), and irrevocably and
      unconditionally guaranty to the Agent and the Purchasers that the Guaranteed
      Obligations shall be paid in full when due and payable, whether at the stated
      or
      accelerated maturity thereof or upon any mandatory or voluntary prepayment
      or
      otherwise.

    


    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    1.2 Definition
      of “Guaranteed Obligations”.
      For
      purposes of this Agreement, the term “Guaranteed
      Obligations”
shall
      mean (a) any obligations of the Borrower pursuant to the Securities Purchase
      Agreement and the Transaction Documents including, without limitation, any
      amounts due from time to time in respect of (i) principal and interest thereon
      under the Notes, (ii) conversion, exercise or redemption of the Notes and the
      Warrants, as applicable, (iii) fees payable under the Securities Purchase
      Agreement and (iv) indemnifications provided for, and other amounts payable,
      under the Securities Purchase Agreement or other Transaction Documents.
      Notwithstanding the definition of “Guaranteed Obligations” herein, the liability
      of each Guarantor hereunder is limited to an amount equal to (x) the amount
      that
      would render this guaranty void, voidable or unenforceable against such
      Guarantor’s creditors or creditors’ representatives under any applicable
      fraudulent conveyance, fraudulent transfer or similar act or under Section
      544
      or 548 of the Bankruptcy Code of 1978, as amended, minus (y) $1.00 (one U.S.
      Dollar).

    


    1.3 Obligations
      of Guarantors Absolute, Etc.
      The
      obligations of the Guarantors hereunder shall be absolute and unconditional.
      Each Guarantor, jointly and severally, guarantees that the Guaranteed
      Obligations will be paid strictly in accordance with the terms of the agreement,
      instrument or document giving rise to such Guaranteed Obligations, regardless
      of
      any law, regulation or order now or hereafter in effect in any jurisdiction
      affecting any such terms or the rights of the Agent and the Purchasers with
      respect thereto. The liability of the Guarantors hereunder shall be absolute
      and
      unconditional irrespective of:

    


    (a) any
      lack
      of validity or enforceability of any Transaction Document;

    


    (b) any
      change in the time, manner or place of payment of the Guaranteed
      Obligations;

    


    (c) any
      amendment or modification of or supplement to the Transaction Documents
      (including, without limitation, any amendment which would increase the amount
      of
      the Guaranteed Obligations), or any furnishing or acceptance of any security,
      or
      any release of any security or the release of any Person’s obligations
      (including without limitation, any Guarantor, the Borrower or any pledgor),
      with
      respect to the Guaranteed Obligations; 

    


    (d) any
      waiver, consent, extension, indulgence or other action or inaction under or
      in
      respect of any such instrument, document or agreement or any exercise or
      nonexercise of any right, remedy, power or privilege under or in respect of
      any
      such instrument; 

    


    (e) any
      counterclaim, setoff, recoupment or defense based upon any claim any Guarantor,
      the Borrower or any pledgor may have against the Agent or any
      Purchaser;

    


    (f) any
      bankruptcy, insolvency, reorganization, arrangement, readjustment, composition,
      liquidation or similar proceeding with respect to the Borrower, any Affiliate
      of
      the Borrower or any Guarantor or their respective properties or
      creditors;

    


    (g) any
      invalidity or unenforceability, in whole or in part, of any term hereof or
      of
      the Transaction Documents;

    


    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    (h) any
      failure on the part of the Borrower or any Affiliate or any Person that may
      have
      been an Affiliate for any reason to perform or comply with any term of the
      Transaction Documents; or

    


    (i) any
      other
      occurrence whatsoever, whether similar or dissimilar to the
      foregoing.

    


    1.4 Continuing
      Guaranty.
      This
      guaranty and suretyship is an absolute, unconditional, present and continuing
      guaranty and suretyship of payment and is in no way conditional or contingent;
      it shall remain in full force and effect until terminated pursuant to Section
      7
      below.

    


    1.5 Joint
      and Several Liability.
      Each
      and every representation, warranty, covenant and agreement made by the
      Guarantors, or any of them, under this Agreement shall be and constitute joint
      and several obligations of all of the Guarantors, whether or not so expressly
      stated herein.

    


    1.6 Waivers.
      Each
      Guarantor hereby waives, to the fullest extent permitted by applicable law,
      (a)
      all presentments, demands for performance, notice of non-performance, protests,
      notices of protests and notices of dishonor in connection with the Guaranteed
      Obligations or any agreement relating thereto; (b) notice of acceptance of
      this
      Agreement; (c) any requirement of diligence or promptness on the part of the
      Agent or any Purchaser in the enforcement of its rights hereunder or under
      the
      Transaction Documents; (d) any enforcement of any present or future agreement
      or
      instrument relating directly or indirectly to the Guaranteed Obligations; (e)
      notice of any of the matters referred to in subsection 1.3 hereof; (f) notices
      of every kind and description which may be required to be given by any statute
      or rule of law; and (g) any defense of any kind which it may now or hereafter
      have with respect to its liability under this Agreement to the fullest extent
      permitted by law. Without limiting the foregoing, the Agent and the Purchasers
      shall not be required to make any demand upon, or to pursue or exhaust any
      rights or remedies against the Borrower, any other Guarantor or any other
      Person, or against the collateral security, for the Guaranteed Obligations.
      No
      failure on the part of the Agent or the Purchasers to exercise, and no delay
      in
      exercising, any right hereunder shall operate as a waiver thereof; nor shall
      any
      single or partial exercise of any right hereunder preclude any other or further
      exercise thereof or the exercise of any other right. The remedies herein
      provided are cumulative and not exclusive of any remedies provided by law.
      Each
      Guarantor hereby agrees that it will not enforce or otherwise exercise or claim
      or assert any rights of subrogation or contribution against any Person with
      respect to the Guaranteed Obligations or any security therefor unless and until
      all the Guaranteed Obligations are paid in full. EACH
      GUARANTOR’S WAIVERS UNDER THIS SECTION 1.6 HAVE BEEN MADE VOLUNTARILY,
      INTELLIGENTLY AND KNOWINGLY AND AFTER SUCH GUARANTOR HAS BEEN APPRISED AND
      COUNSELED BY ITS ATTORNEY AS TO THE NATURE THEREOF AND ITS POSSIBLE ALTERNATIVE
      RIGHTS.

    


    2. Expenses.

    


    Whether
      or not the transactions contemplated by this Agreement are fully consummated,
      each Guarantor and the Borrower shall promptly pay (or reimburse, as the Agent
      may elect) all costs and expenses which the Agent has incurred or may incur
      in
      connection with the negotiation, preparation, reproduction, interpretation,
      administration and enforcement of this Agreement and all amendments, waivers,
      modifications and supplements hereto and the collection of all amounts due
      hereunder, including, without limitation, reasonable fees of counsel to the
      Agent.

    


    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    3. Representations
      and Warranties.

    


    The
      Guarantors hereby jointly and severally represent and warrant that each of
      the
      representations and warranties relating to them set forth in any Transaction
      Document is incorporated herein by reference and is true and correct on and
      as
      of the date hereof.

    


    4. Covenants.

    


    Each
      of
      the covenants and agreements of the Borrower which are set forth or incorporated
      in any of the Transaction Documents and which are expressly applicable or refer
      to the “Subsidiaries” of Borrower or otherwise refer to any Guarantors are
      hereby incorporated by reference as though set forth herein in their entirety,
      and each Guarantor hereby agrees to perform and abide by each such covenant
      and
      agreement which purports to be applicable to it.

    


    5. Additional
      Parties.

    


    Except
      as
      otherwise provided in the Transaction Documents, the Guarantors shall at all
      times constitute all of the direct and indirect Subsidiaries of Borrower (other
      than Nestor Interactive, Inc. (“NII”),
      but
      only so long as NII is inactive and has no significant assets other than net
      operating losses). If any Person becomes such a Subsidiary after the date hereof
      or, in the case of NII, if it ceases to be inactive or has significant assets
      other than net operating losses, such Person shall become a Guarantor hereunder,
      and the Borrower shall cause such Person to signify its acceptance of the terms
      hereof by execution and delivery to the Agent of one or more counterparts of
      the
      Joinder hereto, appropriately dated.

    


    6. Right
      of Set-off.

    


    Each
      Guarantor hereby pledges and gives to each Purchaser a lien and security
      interest for the amount of the Guaranteed Obligations upon and in the balance
      of
      any account maintained by such Guarantor with such Purchaser or any other
      liability of such Purchaser to such Guarantor. Upon the occurrence of and
      throughout the period in which the Purchasers reasonably believe there is
      continuing an Event of Default under the Notes, each Guarantor hereby authorizes
      each Purchaser to apply any such deposit balances now or hereafter in the
      possession of such Purchaser to the payment of the Guaranteed Obligations.
      The
      provisions hereof shall not be deemed or construed to limit rights of set-off
      or
      liens or similar rights which any Purchaser may otherwise have by reason of
      applicable Law or other agreement.

    


    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    7. Termination
      of Guaranty.

    


    7.1 Termination
      of Guaranty Obligations of All Guarantors.
      At such
      time as (a) no Purchaser has any Commitment to make further fundings to the
      Borrower under the terms of the Securities Purchase Agreement and (b) all the
      Guaranteed Obligations in respect of the Notes have been indefeasibly paid
      and/or performed in full (including the conversion in full of the Notes), then
      the guaranty provided for herein and this Agreement shall terminate,
provided,
      however,
      that
      (i) all indemnities of the Guarantors or the Borrower contained in this
      Agreement or any Transaction Document shall survive and remain operative and
      in
      full force and effect regardless of the termination of this Agreement, and
      (ii)
      the guaranty provided for herein shall be reinstated if at any time any payment
      of any of the Guaranteed Obligations is rescinded or must otherwise be returned
      by the Agent or any Purchaser upon the insolvency, bankruptcy or reorganization
      of the Borrower or any Guarantor or otherwise, all as though such payment had
      not been made.

    


    7.2 Termination
      of Guaranty Obligations of Sold Guarantors.
      Effective upon the closing of a sale or other disposition by the Borrower or
      any
      Subsidiary of the Borrower of all the outstanding capital stock of, or all
      partnership interests or all other equity interests in, any of the Guarantors
      hereunder (any Guarantor being so sold is hereinafter the “Sold
      Guarantor”)
      in
      conformity with the provisions of the Securities Purchase Agreement and the
      Notes, and receipt by the Agent of a certification to such effect from the
      chief
      financial officer of the Borrower, the obligations of that Sold Guarantor
      hereunder (including, without limitation, obligations under Section 9 below)
      shall terminate. However, all the obligations of the other Guarantors hereunder
      shall remain in full force and effect.

    


    8. Miscellaneous.

    


    8.1 Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York (without giving effect to the choice of law provisions
      thereof).

    


    8.2 Specific
      Performance.
      The
      Borrower and each Guarantor hereby authorizes the Agent and the Purchasers
      to
      demand specific performance of this Agreement at any time when the Borrower
      or
      such Guarantor shall have failed to comply with any provision hereof, and the
      Borrower and each Guarantor hereby irrevocably waives any defense based on
      the
      adequacy of a remedy at law which might be asserted as a bar to the remedy
      of
      specific performance hereof in any action brought therefor.

    


    8.3 Acknowledgement
      of Terms of Securities Purchase Agreement and the Notes; Relationship to
      Securities Purchase Agreement and the Notes.
      Each
      Guarantor hereby acknowledges receipt from the Borrower of a correct and
      complete copy of the Securities Purchase Agreement and the Notes and consents
      to
      all of the provisions of the Securities Purchase Agreement and the Notes as
      in
      effect on the date of this Agreement and agrees that
      its consent is not required for any amendments, modifications, restatements
      or
      waivers of the Securities Purchase Agreement or the Notes or any of the
      provisions thereof.
      If any
      of the terms hereof are inconsistent with those of the Securities Purchase
      Agreement or the Notes (including, without limitation, any amendments,
      restatements, supplements and waivers that the Guarantors have been made aware
      of), those of the Securities Purchase Agreement or the Notes, as applicable,
      shall control.

    


    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    8.4 Non-Exclusive
      Remedies. No
      remedy
      or right herein conferred upon, or reserved to the Agent or the Purchasers
      is
      intended to be to the exclusion of any other remedy or right, but each and
      every
      such remedy or right shall be cumulative and shall be in addition to every
      other
      remedy or right given hereunder or under any other contract or under
      law.

    


    8.5 Delay
      and Non-Waiver.
      No
      delay or omission by the Agent or any Purchaser to exercise any remedy or right
      hereunder shall impair any such remedy or right or shall be construed to be
      a
      waiver of any Event of Default, or an acquiescence therein, nor shall it affect
      any subsequent Event of Default of the same or of a different
      nature.

    


    8.6 Successors
      and Assigns.
      Except
      as
      otherwise provided in the Securities Purchase Agreement, the Agent may assign
      or
      transfer this Agreement and any or all rights or obligations hereunder without
      the consent of the Borrower or any Guarantor and without prior notice. Neither
      the Borrower nor any Guarantor shall assign or transfer this Agreement or any
      rights or obligations hereunder without the prior written consent of the Agent.
      The rights and privileges of the Agent and the Purchasers under this Agreement
      shall inure to the benefit of their respective successors, assigns and
      participants. All promises, covenants and agreements of the Borrower and each
      Guarantor contained in this Agreement shall be binding upon personal
      representatives, heirs, successors and assigns of such Person.
      Notwithstanding the foregoing, if there shall become additional “Guarantors” or
      if there should be any assignment of any guaranty obligations by operation
      of
      law or in contravention of the terms of this Agreement or otherwise, then all
      covenants, agreements, representations and warranties made herein or pursuant
      hereto by or on behalf of the Guarantors shall bind the successors and assigns
      of the Guarantors and any such additional Guarantors, jointly and severally,
      together with the preexisting Guarantors whether or not such new or additional
      Guarantors execute the Joinder as set forth in Section 5.

    


    8.7 Amendments
      and Waivers.
      This
      Agreement represents the entire agreement between the parties with respect
      to
      the transactions contemplated herein and, except as expressly provided herein,
      shall not be affected by reference to any other documents. The Purchasers
      holding 75% of the total outstanding principal balance of the Notes (the
“Required
      Holders”)
      shall
      have the right to direct the Agent, from time to time, to consent to any
      amendment, modification or supplement to or waiver of any provision of this
      Agreement and to release any Collateral from any lien or security interest
      held
      by the Agent; provided,
      however,
      that
      (i) no such direction shall require the Agent to consent to the modification
      of
      any provision or portion thereof which (in the sole judgment of the Agent)
      is
      intended to benefit the Agent, (ii) the Agent shall have the right to decline
      to
      follow any such direction if the Agent shall determine in good faith that the
      directed action is not permitted by the terms of this Agreement or may not
      lawfully be taken and (iii) no such direction shall waive or modify any
      provision of this Agreement the waiver or modification of which requires the
      consent of all Purchasers unless all Purchasers consent thereto. The Agent
      may
      rely on any such direction given to it by the Required Holders and shall be
      fully protected in relying thereon, and shall under no circumstances be liable,
      except in circumstances involving the Agent's gross negligence or willful
      misconduct as shall have been determined in a final nonappealable judgment
      of a
      court of competent jurisdiction, to any holder of the Notes or any other person
      or entity for taking or refraining from taking action in accordance with any
      direction or otherwise in accordance with this Agreement.

    


    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    8.8 Notices
      and Communications.
      Any
      notice contemplated herein or required or permitted to be given hereunder shall
      be made in the manner set forth in the Securities Purchase Agreement and
      delivered at the addresses set forth on the signature pages to this Agreement,
      or to such other address as any party hereto may have last specified by written
      notice to the other party or parties.

    


    8.9 Headings;
      Counterparts. Headings
      to this Agreement are for purposes of reference only and shall not limit or
      otherwise affect the meaning hereof. This Agreement may be executed in any
      number of counterparts, each of which shall be an original, and all of which,
      taken together, shall constitute one instrument. Delivery
      of a photocopy or telecopy of an executed counterpart of a signature page to
      this Agreement shall be as effective as delivery of a manually executed
      counterpart of such signature page.

    


    8.10 Severability.
      If
      any of
      the provisions or terms of this Agreement shall for any reason be held to be
      invalid or unenforceable such invalidity or unenforceability shall not affect
      any of the other terms hereof, but this Agreement shall be construed as if
      such
      invalid or unenforceable term had never been contained herein. Any such
      invalidity or unenforceability in a particular jurisdiction shall not be deemed
      to render a provision invalid or unenforceable in any other jurisdiction.
Without
      limiting the generality of the foregoing, any invalidity, illegality or
      unenforceability of any term or provision of this Agreement in any jurisdiction
      or as against any Guarantor shall not affect the validity, legality or
      enforceability of any other terms hereof or in any other jurisdiction or against
      any other Guarantor.

    


    9. Indemnification.

    


    Each
      Guarantor, jointly and severally, shall indemnify, reimburse and hold harmless
      all Indemnitees from and against any and all losses, claims, liabilities,
      damages, penalties, suits, costs and expenses, of any kind or nature, (including
      fees relating to the cost of investigating and defending any of the foregoing)
      imposed on, incurred by or asserted against such Indemnitee in any way related
      to or arising from or alleged to arise from this Agreement or the guarantees
      provided herein except any such losses, claims, liabilities, damages, penalties,
      suits, costs and expenses which result from the gross negligence or willful
      misconduct of the Indemnitee as determined by a final nonappealable decision
      of
      a court of competent jurisdiction. This indemnification provision is in addition
      to, and not in limitation of, any other indemnification provision in any other
      Transaction Document.

    


    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    10. Jurisdiction;
      Waiver of Jury Trial.

    


    For
      the
      purpose of any action that may be brought in connection with this Agreement,
      the
      Borrower and each Guarantor hereby consents to the jurisdiction and venue of
      the
      courts of the State of New York or of any federal court located in such state
      and waives personal service of any and all process upon it and consents that
      all
      such service of process be made by certified or registered mail directed to
      the
      Borrower or Guarantor at the address provided for in Section 8.8. Service so
      made shall be deemed to be completed upon actual receipt at the address
      specified in said section. The Borrower and each Guarantor waives the right
      to
      contest the jurisdiction and venue of the courts located in the county of New
      York, State of New York on the ground of inconvenience or otherwise and,
      further, waives any right to bring any action or proceeding against (a) the
      Agent in any court outside the county of New York, State of New York, or (b)
      any
      other Purchaser other than in a state within the United States designated by
      such Purchaser. The provisions of this Section shall not limit or otherwise
      affect the right of the Agent or any Purchaser to institute and conduct an
      action in any other appropriate manner, jurisdiction or court.

    


    NO
      PARTY
      TO THIS AGREEMENT, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE
      OF THE FOREGOING SHALL SEEK A JURY TRIAL IN ANY PROCEEDING BASED UPON OR ARISING
      OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT RELATING TO SUCH
      INDEBTEDNESS OR THE RELATIONSHIP BETWEEN OR AMONG SUCH PERSONS OR ANY OF THEM.
      NO SUCH PERSON WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION
      IN
      WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.

    


    EXCEPT
      AS PROHIBITED BY LAW, EACH PARTY HERETO WAIVES ANY RIGHTS IT MAY HAVE TO CLAIM
      OR RECOVER IN ANY LITIGATION REFERRED TO IN THIS SECTION, ANY SPECIAL,
      EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
      EACH
      PARTY TO THIS AGREEMENT (i) CERTIFIES THAT NEITHER THE AGENT NOR ANY
      REPRESENTATIVE, OR ATTORNEY OF THE AGENT NOR ANY PURCHASER HAS REPRESENTED,
      EXPRESSLY OR OTHERWISE, THAT THE AGENT OR SUCH PURCHASER WOULD NOT, IN THE
      EVENT
      OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES
      THAT
      IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND EACH OTHER TRANSACTION
      DOCUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
      THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCLOSED TO THE PARTIES AND
      THE
      PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED
      WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION
      WILL
      NOT BE FULLY ENFORCED IN ALL INSTANCES.

    


    



    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

        
        

      

    



    IN
      WITNESS WHEREOF, the undersigned have executed this Guaranty and Suretyship
      Agreement on the date and year first above written.

    


    
      	 	
              Borrower:

            
	 	 
	 	
              NESTOR,
                INC.

            
	 	 
	 	
              By:
                /s/Nigel P. Hebborn

            
	 	
              Name: 
                Nigel P. Hebborn

            
	 	
              Title: 
                CFO

            
	 	
              Address:  42
                Oriental Street

            
	 	
              Providence,
                RI 02908

            
	 	
              Phone
                No.:  401-274-5658x738 

            
	 	
              Fax
                No.:  401-274-5707

            
	 	
              Attention: Benjamin
                M. Alexander, Esq.

            
	 	 
	 	
              Guarantors:

            
	 	 
	 	
              NESTOR
                TRAFFIC SYSTEMS, INC.

            
	 	 
	 	
              By:
                /s/Nigel P. Hebborn

            
	 	
              Name:
                Nigel P. Hebborn

            
	 	
              Title:
                CFO

            
	 	
              Address: 42
                Oriental Street

            
	 	
              Providence,
                RI 02908

            
	 	
              Phone
                No.: 401-274-5658x738 

            
	 	
              Fax
                No.:  401-274-5707

            
	 	
              Attention: Benjamin
                M. Alexander, Esq.

            
	 	 
	 	
              CROSSINGGUARD,
                INC.

            
	 	 
	 	
              By:/s/Nigel
                P. Hebborn

            
	 	
              Name:
                Nigel P. Hebborn

            
	 	
              Title:
                CFO

            
	 	
              Address: 42
                Oriental Street

            
	 	
              Providence,
                RI 02908

            
	 	
              Phone
                No.: 401-274-5658x738 

            
	 	
              Fax
                No.:  401-274-5707

            
	 	
              Attention: Benjamin
                M. Alexander, Esq.

            


    

    


    


    


    [Signature
      Page to Guaranty and Suretyship Agreement]


    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    


    


    
      	
              Agent:

            	 
	 	 
	 	
              U.S.
                BANK NATIONAL ASSOCIATION

            
	 	 
	 	
              By:/s/Arthur
                L. Blakeslee

            
	 	
              Name:
                Arthur L. Blakeslee

            
	 	
              Title:
                Vice President

            
	 	 
	 	
              U.S.
                Bank National Association

            
	 	
              Corporate
                Trust Services

            
	 	
              225
                Asylum Street, 23rd
                Floor 

            
	 	
              Hartford,
                CT 06103

            
	 	
              Telephone:
                (860) 241-6859

            
	 	
              Facsimile:
                (860) 241-6881

            
	 	
              Attention:
                Arthur Blakeslee

            
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    [Signature
      Page to Guaranty and Suretyship Agreement]


    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    


    JOINDER

    


    


    The
      undersigned acknowledges that it is a Guarantor under the Guaranty and
      Suretyship Agreement, dated May [___], 2006 made by and among Nestor, Inc.
      (the
“Borrower”) and the subsidiaries of the Borrower designated as “Guarantors” on
      the signature lines thereto in favor of [_____________] as collateral agent
      for
      the Purchasers (as defined in the Securities Purchase Agreement referred to
      therein), and hereby agrees to be bound by the foregoing Guaranty and Suretyship
      Agreement and to perform the covenants applicable to Guarantors contained or
      incorporated therein, and hereby confirms the accuracy of the representations
      and warranties made or incorporated therein insofar as such representation
      and
      warranties purportedly relate to the undersigned.

    


    
      	 	
              [                                                                                                                                                                                                          
                ]

            
	 	 
	 	 
	 	
              By:

            
	 	
              Name:

            
	 	
              Title:

            
	 	
              Phone
                No.:

            
	 	
              Fax
                No.:

            
	 	
              Attention:

            


    

    


    
      
        
        

      

      
        -11-