Document:

Exhibit 10.4

    EXHIBIT
      10.4

    

    Schedule
      Prepared in Accordance with Instruction 2 to Item 601 of Regulation
      S-K

    

    The
      Senior Convertible Notes dated May 25, 2006 are substantially identical in
      all
      material respects except as to the noteholder and the principal
      amount.

    

    
      	
              Holder

            	 	 	
              Principal
                Amount

            	 
	
              Dolphin
                Offshore Partners, L.P.

            	 	
              $

            	
              300,000

            	 
	
              Radcliffe
                SPC, Ltd. for and on behalf of the Class A Convertible Crossover
                Segregated Portfolio

            	 	
              $

            	
              7,000,000

            	 
	
              LBI
                Group, Inc.

            	 	
              $

            	
              5,000,000

            	 
	
              Kamunting
                Street Master Fund, Ltd.

            	 	
              $

            	
              3,500,000

            	 
	
              Tribeca
                Global Convertible Investments Limited

            	 	
              $

            	
              2,500,000

            	 
	
              Capital
                Ventures International

            	 	
              $

            	
              3,000,000

            	 
	
              Evolution
                Master Fund Ltd. SPC, Segregated Portfolio M

            	 	
              $

            	
              3,500,000

            	 
	
              Highbridge
                International, LLC

            	 	
              $

            	
              3,750,000

            	 

    

    

    

    The
      text
      of the Senior Convertible Notes is incorporated by reference from Exhibit 10.1
      to Nestor’s Current Report on Form 8-K filed May 26, 2006 (at Exhibit A thereto)Exhibit 10.5

    EXHIBIT
      10.5

     

    Schedule
      Prepared in Accordance with Instruction 2 to Item 601 of Regulation
      S-K

    

    The
      Warrants dated May 25, 2006 are substantially identical in all material respects
      except as to the warrantholder and the number of shares for which warrant can
      be
      exercised.

    

    
      	
              Holder

            	 	 	
              Shares
                for which Warrant can be Exercised

            	 
	
              Dolphin
                Offshore Partners, L.P.

            	 	 	
              20,833

            	 
	
              Radcliffe
                SPC, Ltd. for and on behalf of the Class A Convertible Crossover
                Segregated Portfolio

            	 	 	
              486,111

            	 
	
              LBI
                Group, Inc.

            	 	 	
              347,222

            	 
	
              Kamunting
                Street Master Fund, Ltd.

            	 	 	
              243,056

            	 
	
              Tribeca
                Global Convertible Investments Limited

            	 	 	
              173,611

            	 
	
              Capital
                Ventures International

            	 	 	
              208,333

            	 
	
              Evolution
                Master Fund Ltd. SPC, Segregated Portfolio M

            	 	 	
              243,056

            	 
	
              Highbridge
                International, LLC

            	 	 	
              260,417

            	 

    

    

    

    The
      text
      of the Warrants is incorporated by reference from Exhibit 10.1 to Nestor’s
      Current Report on Form 8-K filed May 26, 2006 (at Exhibit B thereto)Exhibit 10.6

    EXHIBIT
      10.6

    
 

       

       

      Schedule
        Prepared in Accordance with Instruction 2 to Item 601 of Regulation
        S-K

      

      The
        Warrants in favor of Cowen & Co., LLC dated May 25, 2006 are substantially
        identical in all material respects except as to the exercise price and the
        number of shares for which warrant can be exercised.

      

      
        	
                Exercise
                  Price

              	 	 	
                Shares
                  for which Warrant can be Exercised

              	 
	
                $3.60

              	 	 	
                198,
                  264

              	 
	
                $4.35

              	 	 	
                49,566

              	 

      

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
      FORM,
      THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
      TO
      RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
      BE
      PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
      ARRANGEMENT SECURED BY THE SECURITIES.

    

    NESTOR,
      INC.

    

    Warrant
      To Purchase Common Stock

    

    Warrant
      No.: 2006B-1

    Number
      of
      Shares of Common Stock: 198,264

    Date
      of
      Issuance: May 25, 2006 ("Issuance
      Date")

    

    Nestor,
      Inc., a Delaware corporation (the "Company"),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Cowen & Co., LLC, the
      registered holder hereof or its permitted assigns (the "Holder"),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Warrant to Purchase Common Stock (including any Warrants to Purchase Common
      Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
      at
      any time or times on or after the date of the Company’s receipt of the Issuance
      Approval (as defined in the Securities Purchase Agreement) (the "Initial
      Exercisability Date"),
      but
      not after 11:59 p.m., New York Time, on the Expiration Date (as defined below),
      198,264 fully paid nonassessable shares of Common Stock (as defined
      below) (the
      "Warrant
      Shares").
      This
      Warrant is being issued to the Holder together with Warrant No. 2006B-2 dated
      as
      of the Issuance Date (the “2006B-2
      Warrant”).
      For
      purposes hereof, this Warrant, together with the 2006B-2 Warrant, shall be
      referred to collectively herein as the “Warrants”.
      Except
      as otherwise defined herein, capitalized terms in this Warrant shall have the
      meanings set forth in Section 16. 

     

    1. EXERCISE
      OF WARRANT.

    

    (a) Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Sections 1(f) and (g)), this Warrant may be exercised
      by the Holder from time to time on or after the Initial Exercisability Date,
      in
      whole or in part, by (i) delivery of a written notice, in the form attached
      hereto as Exhibit
      A
      (the
      "Exercise
      Notice"),
      of
      the Holder's election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the applicable Exercise Price multiplied by the
      number of Warrant Shares as to which this Warrant is being exercised (the
      "Aggregate
      Exercise Price")
      in
      cash or wire transfer of immediately available funds or (B) by notifying the
      Company that this Warrant is being exercised pursuant to a Cashless Exercise
      (as
      defined in Section 1(d)). The Holder shall not be required to deliver the
      original Warrant in order to effect an exercise hereunder. Execution and
      delivery of the Exercise Notice with respect to less than all of the Warrant
      Shares shall have the same effect as cancellation of the original Warrant and
      issuance of a new Warrant evidencing the right to purchase the remaining number
      of Warrant Shares. On or before the first Business Day following the date on
      which the Company has received each of the Exercise Notice and the Aggregate
      Exercise Price (or notice of a Cashless Exercise) (the "Exercise
      Delivery Documents"),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company's transfer
      agent (the "Transfer
      Agent").
      On or
      before the third Business Day following the date on which the Company has
      received all of the Exercise Delivery Documents (the "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company ("DTC")
      Fast
      Automated Securities Transfer Program and so long as the certificates therefor
      are not required to bear a legend pursuant to Section 5(c) of the Securities
      Purchase Agreement, credit such aggregate number of shares of Common Stock
      to
      which the Holder is entitled pursuant to such exercise to the Holder's or its
      designee's balance account with DTC through its Deposit Withdrawal Agent
      Commission System, or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and dispatch by overnight
      courier to the address as specified in the Exercise Notice, a certificate,
      registered in the Company's share register in the name of the Holder or its
      designee, for the number of shares of Common Stock to which the Holder is
      entitled pursuant to such exercise, which certificate shall not bear any
      restrictive legend unless the certificate is required to bear such a legend
      pursuant to Section 5(c) of the Securities Purchase Agreement. Upon delivery
      of
      the Exercise Notice and Aggregate Exercise Price referred to in clause (ii)(A)
      above or notification to the Company of a Cashless Exercise referred to in
      Section 1(d), the Holder shall be deemed for all corporate purposes to have
      become the holder of record of the Warrant Shares with respect to which this
      Warrant has been exercised, irrespective of the date such Warrant Shares are
      credited to the Holder’s DTC account, or the date of delivery of the
      certificates evidencing such Warrant Shares. If this Warrant is submitted in
      connection with any exercise pursuant to this Section 1(a) and the number of
      Warrant Shares represented by this Warrant submitted for exercise is greater
      than the number of Warrant Shares being acquired upon an exercise, then the
      Company shall as soon as practicable and in no event later than three Business
      Days after any exercise and at its own expense, issue a new Warrant (in
      accordance with Section 8(d)) representing the right to purchase the number
      of
      Warrant Shares purchasable immediately prior to such exercise under this
      Warrant, less the number of Warrant Shares with respect to which this Warrant
      is
      exercised. No fractional shares of Common Stock are to be issued upon the
      exercise of this Warrant, but rather the number of shares of Common Stock to
      be
      issued shall be rounded up to the nearest whole number. The Company shall pay
      any and all taxes which may be payable with respect to the issuance and delivery
      of Warrant Shares upon exercise of this Warrant. 

    

    
      
        
        

      

      
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    (b) Exercise
      Price.
      For
      purposes of this Warrant, "Exercise
      Price"
      means
      $3.60, subject to adjustment as provided herein.

     

    (c) Company's
      Failure to Timely Deliver Securities. If, at any time, the Holder of this
      Warrant submits the Exercise Delivery Documents, and the Company fails for
      any
      reason or for no reason to deliver, on or prior to the Share Delivery Date,
      the
      number of shares of Common Stock to which the Holder is entitled upon such
      exercise (an "Exercise Default"), then the Company shall pay to the Holder
      payments ("Exercise Default Payments") for an Exercise Default in the amount
      of
      (i) (N/365), multiplied by (ii) the amount by which the Closing Sale Price
      of
      the Common Stock on the date the Exercise Notice giving rise to the Exercise
      Default is transmitted in accordance with this Section 1 (the "Exercise Default
      Date") exceeds the Exercise Price in respect of such Warrant Shares, multiplied
      by (iii) the number of shares of Common Stock the Company failed to so deliver
      in such Exercise Default, multiplied by (iv) .18, where N equals the number
      of
      days from the Exercise Default Date which gave rise to the Exercise Default
      to
      the date that the Company effects the full exercise of this Warrant. The accrued
      Exercise Default Payment for each calendar month shall be paid in cash to the
      Holder by the fifth day of the month following the month in which it has
      accrued. In addition to the foregoing, if within three Trading Days after the
      Company's receipt of the facsimile copy of an Exercise Notice the Company shall
      fail to issue and deliver a certificate to the Holder and register such shares
      of Common Stock on the Company's share register or credit the Holder's balance
      account with DTC for the number of shares of Common Stock to which the Holder
      is
      entitled upon the Holder's exercise hereunder, and if on or after such Trading
      Day the Holder purchases (in an open market transaction or otherwise) shares
      of
      Common Stock to deliver in satisfaction of a sale by the Holder of shares of
      Common Stock issuable upon such exercise that the Holder anticipated receiving
      from the Company (a "Buy-In"), then the Company shall, within three Business
      Days after the Holder's request and in the Holder's discretion, either (i)
      pay
      cash to the Holder in an amount equal to the Holder's total purchase price
      (including brokerage commissions, if any) for the shares of Common Stock so
      purchased (the "Buy-In Price"), at which point the Company's obligation to
      deliver such certificate (and to issue such Warrant Shares) shall terminate,
      or
      (ii) promptly honor its obligation to deliver to the Holder a certificate or
      certificates representing such Warrant Shares and pay cash to the Holder in
      an
      amount equal to the excess (if any) of the Buy-In Price over the product of
      (A)
      such number of shares of Common Stock, times (B) the Closing Sale Price on
      the
      date of exercise. Nothing herein shall limit the Holder's right to pursue actual
      damages for the Company's failure to maintain a sufficient number of authorized
      shares of Common Stock or to otherwise issue shares of Common Stock upon
      exercise of this Warrant in accordance with the terms hereof, and the Holder
      shall have the right to pursue all remedies available at law or in equity
      (including a decree of specific performance and/or injunctive
      relief).

    

    (d) Cashless
      Exercise.
       Notwithstanding
      anything contained herein to the contrary, the Holder may, in its sole
      discretion, exercise this Warrant in whole or from time to time in part and,
      in
      lieu of making the cash payment otherwise contemplated to be made to the Company
      upon such exercise in payment of the Aggregate Exercise Price, elect instead
      to
      receive upon such exercise the "Net Number" of shares of Common Stock determined
      according to the following formula (a "Cashless
      Exercise"):

     

    Net
      Number = (A
      x
      B) - (A x C)

    B

    

    For
      purposes of the foregoing formula:

    

    A=
      the
      total number of shares with respect to which this Warrant is then being
      exercised.

    

    B=
      the
      Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
      on
      the date immediately preceding the date of the Exercise Notice.

    

    C=
      the
      Exercise Price then in effect for the applicable Warrant Shares at the time
      of
      such exercise.

    

    (e) Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall promptly issue
      to the Holder the number of Warrant Shares that are not disputed and resolve
      such dispute in accordance with Section 13.

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    (f) Limitations
      on Exercises; Beneficial Ownership.
      The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, such Holder (together with such Holder's affiliates) would
      beneficially own in excess of 4.99% (the "Maximum Percentage")
      of the
      shares of Common Stock outstanding immediately after giving effect to such
      exercise. For purposes of the preceding sentence, the aggregate number of shares
      of Common Stock beneficially owned by such Holder and its affiliates shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude shares of Common Stock which would be issuable upon (i)
      exercise of the remaining, unexercised portion of this Warrant beneficially
      owned by such Holder and its affiliates and (ii) exercise or conversion of
      the
      unexercised or unconverted portion of any other securities of the Company
      beneficially owned by such Holder and its affiliates (including, without
      limitation, any convertible notes or warrants) subject to a limitation on
      conversion or exercise analogous to the limitation contained herein. Except
      as
      set forth in the preceding sentence, for purposes of this paragraph, beneficial
      ownership shall be calculated in accordance with Section 13(d) of the Securities
      Exchange Act of 1934, as amended (the "Exchange
      Act").
      For
      purposes of this Warrant, in determining the number of outstanding shares of
      Common Stock, the Holder may rely on the number of outstanding shares of Common
      Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-Q,
      Current Report on Form 8-K or other public filing with the Securities and
      Exchange Commission, as the case may be, (2) a more recent public announcement
      by the Company or (3) any other notice by the Company or the Transfer Agent
      setting forth the number of shares of Common Stock outstanding. For any reason
      at any time, upon the written or oral request of the Holder, the Company shall
      within one Business Day confirm orally and in writing to the Holder the number
      of shares of Common Stock then outstanding. In any case, the number of
      outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Warrant
      by the Holder and its affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported. The limitations contained
      in
      this Section 1(f) shall apply to a successor Holder of this Warrant. By written
      notice to the Company, the Holder may from time to time increase or decrease
      the
      Maximum Percentage to any other percentage not in excess of 9.99% specified
      in
      such notice; provided that any such increase will not be effective until the
      61st
      day
      after such notice is delivered to the Company.

    

    (g)  Insufficient
      Authorized Shares.
      If at
      any time after the earlier of (i) the Company's receipt of stockholder approval
      of the Amendment (as defined in the Securities Purchase Agreement) and (ii)
      July
      15, 2006, and while any of the Warrants remain outstanding, the Company does
      not
      have a sufficient number of authorized and unreserved shares of Common Stock
      to
      satisfy its obligation to reserve for issuance upon exercise of the Warrants
      at
      least a number of shares of Common Stock equal to 120% of the number of shares
      of Common Stock as shall from time to time be necessary to effect the exercise
      of all of the Warrants then outstanding (the "Required
      Reserve Amount")
      (an
      "Authorized
      Share Failure"),
      then
      the Company shall immediately take all action necessary to increase the
      Company's authorized shares of Common Stock to an amount sufficient to allow
      the
      Company to reserve the Required Reserve Amount for the Warrants then
      outstanding. Without limiting the generality of the foregoing sentence, as
      soon
      as practicable after the date of the occurrence of an Authorized Share Failure,
      but in no event later than 60 days after the occurrence of such Authorized
      Share
      Failure, the Company shall hold a meeting of its stockholders for the approval
      of an increase in the number of authorized shares of Common Stock. In connection
      with such meeting, the Company shall provide each stockholder with a proxy
      statement and shall use its best efforts to solicit its stockholders' approval
      of such increase in authorized shares of Common Stock and to cause its board
      of
      directors to recommend to the stockholders that they approve such proposal.
      If
      the Company fails to remedy any Authorized Share Failure within 60 days after
      the date on which such Authorized Share Failure occurs, then the Company shall
      immediately notify the holders of the Warrants of such occurrence and each
      holder of Warrants shall thereafter have the option, exercisable in whole or
      in
      part at any time and from time to time, by delivery of a Redemption Notice
      (as defined in Section 4(c) below) to the Company, to require the Company to
      redeem for cash, at an amount per share equal to the Redemption Price (as
      defined in Section 4(c) below), a portion of this Warrant such that, after
      giving effect to such redemption, the then unissued portion of the holder's
      Reserved Amount (as defined below) allocable to the Warrants then held by such
      holder is at least equal to the Required Reserved Amount with respect to the
      remaining Warrants held by such holder; provided
      that,
      notwithstanding the foregoing, in the event the Company does not receive
      stockholder approval of the Amendment on or before July 15, 2006, each holder
      shall have the right to deliver a Redemption Notice pursuant to this Section
      1(g) at any time after such date. If the Company fails to redeem such portion
      of
      this Warrant within five business days after its receipt of such Redemption
      Notice, then the holder hereof shall be entitled to interest on the Redemption
      Price at a per annum rate equal to 13.5% from the date on which such Redemption
      Price is required to be paid hereunder until the actual date of payment of
      the
      Redemption Price hereunder. 

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    (h) Listing.
      The Company shall promptly secure the listing or quotation of the shares of
      Common Stock issuable upon the exercise of this Warrant upon the Principal
      Market or upon such other Eligible Market, if any, upon which shares of Common
      Stock are then listed or quoted (subject to official notice of issuance upon
      exercise of this Warrant) and shall maintain, so long as any other shares of
      Common Stock shall be so listed or quoted, such listing or quotation of all
      shares of Common Stock from time to time issuable upon the exercise of this
      Warrant; and the Company shall so list or apply for quotation on each Eligible
      Market, and shall maintain such listing or quotation of, any other shares of
      capital stock of the Company issuable upon the exercise of this Warrant if
      and
      so long as any shares of the same class shall be listed or quoted on such
      Eligible Market. In the event that the Common Stock is suspended from trading
      on, or is not listed (and authorized) for trading on, any Eligible Market for
      an
      aggregate of 10 or more Trading
      Days
      in any
      12 month period after the date on which the Common Stock is first approved
      for
      trading on such Eligible Market, the holder of this Warrant shall have the
      right
      to deliver a Redemption Notice (as defined in Section 4(c) below) and require
      the Company to pay such holder in cash an amount equal to the Redemption Price
      (as defined in Section 4(c) below), plus any interest or penalties accruing
      thereon, all pursuant to the procedures set forth in Section 4(c) below.

    

    (i) Blue
      Sky Laws.
      The
      Company shall, on or before the date of issuance of any Warrant Shares, take
      such actions as the Company shall reasonably determine are necessary to qualify
      the Warrant Shares for, or obtain exemption for the Warrant Shares for, sale
      to
      the holder of this Warrant upon the exercise hereof under applicable securities
      or "blue sky" laws of the states of the United States, and shall provide
      evidence of any such action so taken to the holder of this Warrant prior to
      such
      date; provided,
      however,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (i) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section 1(i), (ii) subject itself
      to general taxation in any such jurisdiction or (iii) file a general consent
      to
      service of process in any such jurisdiction. 

    

    2. ADJUSTMENT
      OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
      The
      Exercise Price and the number of Warrant Shares shall be adjusted from time
      to
      time as follows:

    

    (a) Adjustment
      upon Issuance of shares of Common Stock.
      If and
      whenever on or after May 25, 2006 (the “Subscription
      Date”)
      the
      Company issues or sells, or in accordance with this Section 2 is deemed to
      have
      issued or sold, any shares of Common Stock (including, without limitation,
      the
      issuance or sale of shares of Common Stock owned or held by or for the account
      of the Company and the issuance of any shares of Common Stock, Options or
      Convertible Securities in exchange for any non-convertible security such as
      a
      non-convertible note, but excluding shares of Common Stock deemed to have been
      issued by the Company in connection with any Excluded Issuance (as defined
      in
      Section 16 below)) for a consideration per share (the "New
      Issuance Price")
      less
      than a price (the "Applicable
      Price")
      equal
      to the Exercise Price in effect immediately prior to such issue or sale or
      deemed issuance or sale (the foregoing a "Dilutive
      Issuance"),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the product of (A) the Exercise Price
      in
      effect immediately prior to such Dilutive Issuance and (B) the quotient
      determined by dividing (1) the sum of (I) the product derived by multiplying
      the
      Exercise Price in effect immediately prior to such Dilutive Issuance and the
      number of shares of Common Stock Deemed Outstanding immediately prior to such
      Dilutive Issuance plus (II) the consideration, if any, received by the Company
      upon such Dilutive Issuance, by (2) the product derived by multiplying (I)
      the
      Exercise Price in effect immediately prior to such Dilutive Issuance by (II)
      the
      number of shares of Common Stock Deemed Outstanding immediately after such
      Dilutive Issuance. Upon each such adjustment of the Exercise Price hereunder,
      the number of Warrant Shares shall be adjusted to the number of shares of Common
      Stock determined by multiplying the Exercise Price in effect immediately prior
      to such adjustment by the number of Warrant Shares acquirable upon exercise
      of
      this Warrant immediately prior to such adjustment and dividing the product
      thereof by the Exercise Price resulting from such adjustment. For purposes
      of
      determining the adjusted Exercise Price under this Section 2(a), the following
      shall be applicable:

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    (i) Issuance
      of Options.
      If the
      Company in any manner grants any Options, whether or not immediately
      exercisable, and the lowest price per share for which one share of Common Stock
      is issuable upon the exercise of any such Option or upon conversion, exercise
      or
      exchange of any Convertible Securities issuable upon exercise of any such Option
      is less than the Applicable Price, then such share of Common Stock shall be
      deemed to be outstanding and to have been issued and sold by the Company at
      the
      time of the granting or sale of such Option for such price per share. For
      purposes of this Section 2(a)(i), the "lowest price per share for which one
      share of Common Stock is issuable upon the exercise of any such Option or upon
      conversion, exercise or exchange of any Convertible Securities issuable upon
      exercise of any such Option" shall be equal to the sum of the lowest amounts
      of
      consideration (if any) received or receivable (but excluding any contingent
      amounts) by the Company with respect to any one share of Common Stock upon
      the
      granting or sale of the Option, upon exercise of the Option and upon conversion,
      exercise or exchange of any Convertible Security issuable upon exercise of
      such
      Option. No further adjustment of the Exercise Price or number of Warrant Shares
      shall be made upon the actual issuance of such shares of Common Stock or of
      such
      Convertible Securities upon the exercise of such Options or upon the actual
      issuance of such shares of Common Stock upon conversion, exercise or exchange
      of
      such Convertible Securities. 

    

    (ii)  Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities, whether or
      not
      immediately convertible, and the lowest price per share for which one share
      of
      Common Stock is issuable upon the conversion, exercise or exchange thereof
      is
      less than the Applicable Price, then such share of Common Stock shall be deemed
      to be outstanding and to have been issued and sold by the Company at the time
      of
      the issuance or sale of such Convertible Securities for such price per share.
      For the purposes of this Section 2(a)(ii), the "lowest price per share for
      which
      one share of Common Stock is issuable upon the conversion, exercise or exchange"
      shall be equal to the sum of the lowest amounts of consideration (if any)
      received or receivable (but excluding any contingent amounts) by the Company
      with respect to one share of Common Stock upon the issuance or sale of the
      Convertible Security and upon conversion, exercise or exchange of such
      Convertible Security. No further adjustment of the Exercise Price or number
      of
      Warrant Shares shall be made upon the actual issuance of such shares of Common
      Stock upon conversion, exercise or exchange of such Convertible Securities,
      and
      if any such issue or sale of such Convertible Securities is made upon exercise
      of any Options for which adjustment of this Warrant has been or is to be made
      pursuant to other provisions of this Section 2(a), no further adjustment of
      the
      Exercise Price or number of Warrant Shares shall be made by reason of such
      issue
      or sale. 

    

    
      
        
        

      

      
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    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion, exercise or exchange of any Convertible
      Securities, or the rate at which any Convertible Securities are convertible
      into
      or exercisable or exchangeable for shares of Common Stock increases or decreases
      at any time, the Exercise Price and the number of Warrant Shares in effect
      at
      the time of such increase or decrease shall be adjusted to the Exercise Price
      and the number of Warrant Shares which would have been in effect at such time
      had such Options or Convertible Securities provided for such increased or
      decreased purchase price, additional consideration or increased or decreased
      conversion rate, as the case may be, at the time initially granted, issued
      or
      sold. For purposes of this Section 2(a)(iii), if the terms of any Option or
      Convertible Security that was outstanding as of the date of issuance of this
      Warrant are increased or decreased in the manner described in the immediately
      preceding sentence, then such Option or Convertible Security and the shares
      of
      Common Stock deemed issuable upon exercise, conversion or exchange thereof
      shall
      be deemed to have been issued as of the date of such increase or decrease.
      No
      adjustment pursuant to this Section 2(a) shall be made if such adjustment would
      result in an increase of the Exercise Price then in effect or a decrease in
      the
      number of Warrant Shares.

    

    (iv) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for no consideration. If any shares of Common
      Stock, Options or Convertible Securities are issued or sold or deemed to have
      been issued or sold for cash, the consideration received therefor will be deemed
      to be the net amount received by the Company therefor, after deduction of all
      underwriting discounts or allowances in connection with such issuance or sale.
      If any shares of Common Stock, Options or Convertible Securities are issued
      or
      sold for a consideration other than cash, the amount of the consideration
      received therefor will be deemed to be the fair value of such consideration,
      except where such consideration consists of securities, in which case the amount
      of consideration received by the Company will be the Closing Sale Price of
      such
      security on the date of receipt. If any shares of Common Stock, Options or
      Convertible Securities are issued to the owners of the non-surviving entity
      in
      connection with any merger in which the Company is the surviving entity, the
      amount of consideration therefor will be deemed to be the fair value of such
      portion of the net assets and business of the non-surviving entity as is
      attributable to such shares of Common Stock, Options or Convertible Securities,
      as the case may be. The fair value of any consideration other than cash or
      securities will be determined in good faith by the Board of Directors of the
      Company (subject to the right of the Holder to dispute such valuation as
      described below). If the Holder disagrees with the Board of Directors’
determination of fair value, the Holder may submit a notice of disagreement
      to
      the Company. During the 10 days immediately following the Company’s receipt of
      such notice (the “Notice
      Date”),
      the
      Holder and the Company shall negotiate in good faith to determine a mutually
      agreeable fair value. If the parties are unable to reach agreement within such
      10-day period, the fair value of such consideration will be determined within
      five Business Days after the 10th day following the Notice Date by an
      independent, reputable appraiser jointly selected by the Company and the Holder.
      The determination of such appraiser shall be final and binding upon all parties
      absent manifest error and the fees and expenses of such appraiser shall be
      borne
      by the Company. If the Company issues (or becomes obligated to issue) shares
      of
      Common Stock pursuant to any antidilution or similar adjustments (other than
      as
      a result of stock splits, stock dividends and the like) contained in any
      Convertible Securities or Options outstanding as of the Subscription Date but
      not included in Schedule
      3(c)
      to the
      Securities Purchase Agreement, then all shares of Common Stock so issued shall
      be deemed to have been issued for no consideration. If the Company issues (or
      becomes obligated to issue) shares of Common Stock pursuant to any antidilution
      or similar adjustments contained in any Convertible Securities or Options
      included in Schedule
      3(c)
      to the
      Securities Purchase Agreement as a result of the issuance of the securities
      under the Stock Purchase Agreement and the number of shares that the Company
      issues (or is obligated to issue) as a result of such issuance exceeds the
      amount specified in Schedule
      3(c)
      to the
      Securities Purchase Agreement, such excess shares shall be deemed to have been
      issued for no consideration. Notwithstanding anything else herein to the
      contrary, if Common Stock, Options or Convertible Securities are issued or
      sold
      in conjunction with each other as part of a single transaction or in a series
      of
      related transactions, the Holder may elect to determine the amount of
      consideration deemed to be received by the Company therefor by deducting the
      fair value of any type of securities (the "Disregarded
      Securities")
      issued
      or sold in such transaction or series of transactions. If the Holder makes
      an
      election pursuant to the immediately preceding sentence, no adjustment to the
      Exercise Price shall be made pursuant to this Section 2(a) for the issuance
      of
      the Disregarded Securities or upon any conversion, exercise or exchange
      thereof.

    

    
      
        
        

      

      
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    (v) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable
      in shares of Common Stock, Options or in Convertible Securities or (B) to
      subscribe for or purchase shares of Common Stock, Options or Convertible
      Securities, then such record date will be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase, as the case
      may
      be.

    

    (b) Adjustment
      upon Subdivision or Combination of Common Stock.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding shares of Common Stock into a greater number of shares, the Exercise
      Price in effect immediately prior to such subdivision will be proportionately
      reduced and the number of Warrant Shares will be proportionately increased.
      If
      the Company at any time on or after the Subscription Date combines (by
      combination, reverse stock split or otherwise) one or more classes of its
      outstanding shares of Common Stock into a smaller number of shares, the Exercise
      Price in effect immediately prior to such combination will be proportionately
      increased and the number of Warrant Shares will be proportionately decreased.
      Any adjustment under this Section 2(b) shall become effective at the close
      of
      business on the date the subdivision or combination becomes
      effective.

    

    (c) Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 2 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features, other than an Excluded Issuance), then the Company's
      Board
      of Directors will make in good faith an appropriate adjustment in the Exercise
      Price and the number of Warrant Shares so as to protect the rights of the
      Holder; provided that no such adjustment pursuant to this Section 2(c) will
      increase the Exercise Price or decrease the number of Warrant Shares as
      otherwise determined pursuant to this Section 2. 

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    (d) De
      Minimis Adjustment.
      No
      adjustment in the Exercise Price shall be required unless such adjustment would
      require an increase or decrease of at least $0.01 in such price; provided,
      however, that any adjustment which by reason of this Section 2(d) is not
      required to be made shall be carried forward and taken into account in any
      subsequent adjustment. All calculations under this Section 2 shall be made
      by
      the Company in good faith and shall be made to the nearest cent or to the
      nearest one hundredth of a share, as applicable. No adjustment need be made
      for
      a change in the par value or no par value of the Company’s Common
      Stock.

    

    (e) Notice
      of Adjustment.
      Upon
      the occurrence of any event which requires any adjustment or readjustment of
      the
      Exercise Price or change in number or type of stock, securities and/or other
      property issuable upon exercise of this Warrant, then, and in each such case,
      the Company shall
      promptly make a public announcement of such adjustment or readjustment and
      shall
      give notice thereof to the Holder, which notice shall state the Exercise Price
      resulting from such adjustment or readjustment and any change in the number
      or
      type of stock, securities and/or other property issuable upon exercise of this
      Warrant, setting forth in reasonable detail the method of calculation and the
      facts upon which such calculation is based. Such calculation shall be certified
      by the chief financial officer of the Company.

     

    3. RIGHTS
      UPON DISTRIBUTION OF ASSETS.
      

    

    (a) Except
      as
      set forth in Section 3(b), if the Company shall declare or make any dividend
      or
      other distribution of its assets (or rights to acquire its assets) to holders
      of
      shares of Common Stock, by way of return of capital or otherwise (including,
      without limitation, any distribution of cash, stock or other securities,
      property or options by way of a dividend, spin off, reclassification, corporate
      rearrangement, scheme of arrangement or other similar transaction (a
      "Distribution"),
      at
      any time after the issuance of this Warrant, then, in each such
      case:

    

    (i) any
      Exercise Price in effect immediately prior to the close of business on the
      record date fixed for the determination of holders of shares of Common Stock
      entitled to receive the Distribution shall be reduced, effective as of the
      close
      of business on such record date, to a price determined by multiplying such
      Exercise Price by a fraction of which (A) the numerator shall be the Closing
      Bid
      Price of the shares of Common Stock on the Trading
      Day
      immediately preceding such record date minus the value of the Distribution
      (as
      determined in good faith by the Company's Board of Directors) applicable to
      one
      share of Common Stock, and (B) the denominator shall be the Closing Bid Price
      of
      the shares of Common Stock on the Trading
      Day
      immediately preceding such record date; and 

    

    (ii) the
      number of Warrant Shares shall be increased to a number of shares equal to
      the
      number of shares of Common Stock obtainable immediately prior to the close
      of
      business on the record date fixed for the determination of holders of shares
      of
      Common Stock entitled to receive the Distribution multiplied by the reciprocal
      of the fraction set forth in the immediately preceding paragraph (i); provided
      that in the event that the Distribution is of shares of common stock (or common
      equity) ("Other
      Shares of Common Equity")
      of a
      company whose shares of common equity are traded on a national securities
      exchange or a national automated quotation system, then the Holder may elect
      to
      receive a warrant to purchase Other Shares of Common Equity in lieu of an
      increase in the number of Warrant Shares, the terms of which shall be identical
      to those of this Warrant, except that such warrant shall be exercisable into
      the
      number of shares of Other Shares of Common Equity that would have been payable
      to the Holder pursuant to the Distribution had the Holder exercised this Warrant
      immediately prior to such record date and with an aggregate exercise price
      equal
      to the product of the amount by which the exercise price of this Warrant was
      decreased with respect to the Distribution pursuant to the terms of the
      immediately preceding paragraph (i) and the number of Warrant Shares calculated
      in accordance with the first part of this paragraph (ii).

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    (b) Notwithstanding
      anything to the contrary set forth in Section 3(a) hereof, no adjustment under
      Section 3(a) shall be made with respect to any cash Distribution declared on
      the
      Common Stock unless (i) the sum of (A) the per share amount of such contemplated
      Distribution plus (B) the sum of all other cash Distributions declared and
      paid
      on the Common Stock during the 360 consecutive calendar day period ending on
      the
      date immediately preceding the payment of the contemplated Distribution equals
      or exceeds (ii) 5% of the Closing Sale Price on the date immediately preceding
      the payment of the contemplated Distribution.

    

    4. PURCHASE
      RIGHTS; FUNDAMENTAL TRANSACTIONS.

    

    Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 2 above, if at any time the
      Company grants, issues or sells any Options, Convertible Securities or rights
      to
      purchase stock, warrants, securities or other property pro rata to the record
      holders of any class of shares of Common Stock (collectively, "Purchase
      Rights"),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete exercise of this Warrant (without regard to any limitations on
      the
      exercise of this Warrant, but after the calculation of such number of shares,
      the provisions of Section 1(f) shall continue to apply) immediately before
      the
      date on which a record is taken for the grant, issuance or sale of such Purchase
      Rights, or, if no such record is taken, the date as of which the record holders
      of shares of Common Stock are to be determined for the grant, issue or sale
      of
      such Purchase Rights. If the right to exercise or convert any such Purchase
      Rights would expire in accordance with their terms prior to the exercise of
      this
      Warrant, then the terms of such Purchase Rights shall provide that such exercise
      or convertibility right shall remain in effect until 30 days after the date
      the
      Holder receives such Purchase Rights pursuant to the exercise
      hereof.

    

    (a) Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i) the Successor Entity and, if an entity other than the Successor Entity
      is the entity whose capital stock or assets the holders of the Common Stock
      are
      entitled to receive as a result of such Fundamental Transaction, such other
      entity (the "Other
      Entity"),
      assumes in writing all of the obligations of the Company under this Warrant
      and
      the other Transaction, including executing an agreement to deliver to the Holder
      in exchange for this Warrant a security of the Successor Entity or the Other
      Entity, as applicable, evidenced by a written instrument substantially similar
      in form and substance to this Warrant and with appropriate provisions such
      that
      the rights and interests of the Holder and the economic value of this Warrant
      are in no way diminished by such Fundamental Transaction (including, without
      limitation, in the case of any such Fundamental Transaction in which the
      Successor Entity or Other Entity, as applicable, is not the Company, an
      immediate adjustment of the Exercise Price and Warrant Shares so that the
      Exercise Price and Warrant Shares immediately after the Fundamental Transaction
      reflect the same relative value as compared to the value of the surviving
      entity's common stock that existed between the Exercise Price and the Warrant
      Shares and the value of the Company's Common Stock immediately prior to such
      Fundamental Transaction (without regard to any limitations on the exercise
      of
      this Warrant)), and (ii) the Successor Entity or the Other Entity, if
      applicable, is a publicly traded corporation whose common stock is quoted on
      or
      listed for trading on an Eligible Market (a "Public
      Successor").
      Upon
      the occurrence of any Fundamental Transaction, the Successor Entity or the
      Other
      Entity, as applicable, shall succeed to, and be substituted for (so that from
      and after the date of such Fundamental Transaction, the provisions of this
      Warrant referring to the "Company" shall refer instead to the Successor Entity
      or the Other Entity, as applicable), and may exercise every right and power
      of
      the Company and shall assume all of the obligations of the Company under this
      Warrant with the same effect as if such Successor Entity or such Other Entity,
      as applicable, had been named as the Company herein. Upon consummation of the
      Fundamental Transaction, the Successor Entity or the Other Entity, as
      applicable, shall deliver to the Holder confirmation that there shall be issued
      upon exercise of this Warrant at any time after the consummation of the
      Fundamental Transaction, in lieu of the shares of the Common Stock (or other
      securities, cash, assets or other property) purchasable upon the exercise of
      the
      Warrant prior to such Fundamental Transaction, such shares of publicly traded
      common stock (or their equivalent) of the Successor Entity or the Other Entity,
      as applicable, as adjusted in accordance with the provisions of this Warrant.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon an exercise of this Warrant at any
      time after the consummation of
      the
      Fundamental Transaction but prior to the Expiration Date, in lieu of the shares
      of the Common Stock (or
      other
      securities, cash, assets or other property) purchasable
      upon the exercise of the Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Warrant been exercised immediately prior to such Fundamental
      Transaction. The provisions of this Section shall apply similarly and equally
      to
      successive Fundamental Transactions and Corporate Events and shall be applied
      without regard to any limitations on the exercise of this Warrant. 

    

    (b) Notwithstanding
      the provisions of Section 4(b) above, at least 45 days before the consummation
      of a Change of Control (as defined herein), but in no event later than 15 days
      prior to the record date for the determination of stockholders entitled to
      vote
      with respect thereto (or, with respect to a tender offer, or a change in the
      Board of Directors, if the Company is unable to comply with this time
      requirement because of the nature of the Change of Control, as soon as the
      Company reasonably believes that the Change of Control is to be consummated),
      but not prior to the public announcement of such Change of Control, the Company
      shall deliver written notice thereof via facsimile and overnight courier to
      the
      Holder (a "Change
      of Control Notice").
      If
      the terms of a Change of Control change materially from those set forth in
      a
      Change of Control Notice, the Company shall deliver a new Change of Control
      Notice and the time periods in this clause (b) shall be calculated based upon
      the Holder's receipt of the later Change of Control Notice. At any time during
      the period (the "Change
      of Control Period")
      beginning after the Holder's receipt of a Change of Control Notice and ending
      on
      the date that is 15 Trading Days after the later of the consummation of such
      Change of Control or delivery of the Change of Control Notice, the Holder may
      require the Company to purchase all or any portion of this Warrant by delivering
      written notice thereof ("Redemption
      Notice")
      to the
      Company, which Redemption Notice shall indicate the portion of this Warrant
      that
      the Holder is electing to have the Company purchase;
      provided, however, that if the Closing Sale Price of the Common Stock on the
      first Trading Day immediately following the public
      announcement of the Change of Control described in the Change of Control
      Notice
      exceeds
      $6.00 per share, then the Holder shall not have the right to deliver a
      Redemption Notice or require the redemption of its Warrants pursuant to this
      Section 4(c) with respect to such Change of Control.
      The
      portion of this Warrant to be purchased pursuant to this Section 4(c) (the
      "Redemption
      Portion")
      shall
      be purchased by the Company for cash at a price equal to the value of the
Redemption
      Portion
      on the
      date of such purchase, which value shall be determined by use of the Black
      Scholes Option Pricing Model utilizing (i) a risk-free interest rate
      corresponding to the U.S. Treasury rate for a period equal to the remaining
      term
      of this Warrant as of such date of request and (ii) an expected volatility
      equal
      to the greater of (A) 60% and (B) the 100 day volatility for the Company
as
      of the
      date of the public announcement of the Change of Control described in the Change
      of Control Notice
      obtained
      from the HVT function on Bloomberg (the "Redemption
      Price").
      Notwithstanding anything to the contrary in this Section 4(c), until the
      Redemption Price (together with any interest thereon) is paid in full, the
      unexercised portion of the Warrant submitted for purchase under this Section
      4(c) (together with any interest thereon) may be exercised, in whole or in
      part,
      by the Holder for Common Stock, or in the event the exercise date is after
      the
      consummation of the Change of Control, shares of stock or equity interests
      of
      the Successor Entity or Other Entity, as applicable, substantially equivalent
      to
      the Company's Common Stock pursuant to Section 4(b). Any amount due under this
      Warrant that is not paid when due shall result in a late charge being incurred
      and payable by the Company in an amount equal to interest on such amount at
      the
      rate of 13.5% per annum from the date such amount was due until the same is
      paid
      in full. 

     

    
      
        
        

      

      
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    5. REGISTRATION
      RIGHTS.
      The
      Warrant Shares are deemed to be “Registrable Securities” within the meaning of
      the Company’s Registration Rights Agreement (as defined in Section 16(r)
      hereof).

    

    6. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any shares of Common Stock receivable upon the exercise of this Warrant
      above the Exercise Price then in effect, (ii) shall take all such actions
      as may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable shares of Common Stock upon the
      exercise of this Warrant, and (iii) shall, from and after the Company's receipt
      of stockholder approval of the Amendment (as defined in the Securities Purchase
      Agreement) and so long as this Warrant is outstanding, take all action necessary
      to reserve and keep available out of its authorized and unissued shares of
      Common Stock, solely for the purpose of effecting the exercise of this Warrant,
      120% of the number of shares of Common Stock as shall from time to time be
      necessary to effect the exercise of this Warrant (without regard to any
      limitations on exercise), including, without limitation, those actions called
      for by Section 1(g) hereof.

    

    7. WARRANT
      HOLDER NOT DEEMED A STOCKHOLDER; NOTICES OF CORPORATE
      ACTION.
      i)
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person's
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
      any of the rights of a stockholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a stockholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the
      Company.

    

    (b) Notwithstanding
      this Section 7, the Company shall provide the Holder with copies of the same
      notices and other information given to the stockholders of the Company
      generally, contemporaneously with the giving thereof to the stockholders. In
      addition, in case at any time:

    

    (i) the
      Company shall declare any dividend or distribution upon the Common
      Stock;

    

    (ii) the
      Company shall offer to grant, issue or sell to the holders of the Common Stock
      any additional shares of stock of any class or any Options, Convertible
      Securities or rights to purchase stock, warrants, securities or other
      property;

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (iii) there
      shall be any Fundamental Transaction or other capital reorganization of the
      Company, or reclassification of the Common Stock, or consolidation or merger
      of
      the Company with or into, or sale of all or substantially all of its assets
      to,
      another corporation or entity; or

    

    (iv) there
      shall be a voluntary or involuntary dissolution, liquidation or winding up
      of
      the Company;

    

    then,
      in
      each such case, the Company shall give to the Holder (A) notice of the date
      or
      estimated date on which the books of the Company shall close or a record shall
      be taken for determining the holders of Common Stock entitled to receive any
      such dividend, distribution, or subscription rights or for determining the
      holders of Common Stock entitled to vote in respect of any such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation or
      winding-up and (B) in the case of any such reorganization, reclassification,
      consolidation, merger, sale, dissolution, liquidation or winding-up, notice
      of
      the date (or, if not then known, a reasonable estimate thereof by the Company)
      when the same shall take place. Such notice shall also specify the date on
      which
      the holders of Common Stock shall be entitled to receive such dividend,
      distribution, or subscription rights or to exchange their Common Stock for
      stock
      or other securities or property deliverable upon such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation, or
      winding-up, as the case may be. Such notice shall be given at least 10 days
      prior to the record date for events described in clause (i) and 30 days prior
      to
      the record date or the date on which the Company's books are closed in respect
      of events described in clauses (ii), (iii) and (iv). Failure to give any such
      notice or any defect therein shall not affect the validity of the proceedings
      referred to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the
      foregoing, the Company shall publicly disclose the substance of any notice
      delivered hereunder prior to delivery of such notice to the Holder.

    

    8. REISSUANCE
      OF WARRANTS.

    

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 8(d)), registered as
      the
      Holder may request, representing the right to purchase the number of Warrant
      Shares being transferred by the Holder and, if less then the total number of
      Warrant Shares then underlying this Warrant is being transferred, a new Warrant
      (in accordance with Section 8(d)) to the Holder representing the right to
      purchase the number of Warrant Shares not being transferred.

    

    (b) Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant, and, in the case of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Warrant, the Company shall execute and deliver to the
      Holder a new Warrant (in accordance with Section 8(d)) representing the right
      to
      purchase the Warrant Shares then underlying this Warrant.

    

    (c) Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 8(d)) representing in the aggregate the right to purchase the
      number of Warrant Shares then underlying this Warrant, and each such new Warrant
      will represent the right to purchase such portion of such Warrant Shares as
      is
      designated by the Holder at the time of such surrender; provided, however,
      that
      no Warrants for fractional shares of Common Stock shall be given.

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (d) Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 8(a) or Section 8(c), the Warrant
      Shares designated by the Holder which, when added to the number of shares of
      Common Stock underlying the other new Warrants issued in connection with such
      issuance, does not exceed the number of Warrant Shares then underlying this
      Warrant), (iii) shall have an issuance date, as indicated on the face of such
      new Warrant which is the same as the Issuance Date, and (iv) shall have the
      same
      rights and conditions as this Warrant.

    

    9. NOTICES.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Warrant, including
      in reasonable detail a description of such action and the reason therefore.
      Without limiting the generality of the foregoing, the Company will give written
      notice to the Holder immediately upon any adjustment of the Exercise Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment.

    

    10. AMENDMENT
      AND WAIVER.
      Except
      as otherwise provided herein, the provisions of this Warrant may be amended
      and
      the Company may take any action herein prohibited, or omit to perform any act
      herein required to be performed by it, only if the Company has obtained the
      written consent of the Holder.

    

    11. GOVERNING
      LAW; JURISDICTION; JURY TRIAL.
      This
      Warrant shall be governed by and construed and enforced in accordance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant shall be governed by, the internal laws of the
      State
      of New York, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of New York or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of New York. The
      Company and the Holder irrevocably consent to the exclusive jurisdiction of
      the
      United States federal courts and the state courts located in the City of New
      York, Borough of Manhattan, in any suit or proceeding based on or arising under
      this Warrant and irrevocably agree that all claims in respect of such suit
      or
      proceeding may be determined in such courts. The Company irrevocably waives
      the
      defense of an inconvenient forum to the maintenance of such suit or proceeding
      in such forum. The Company further agrees that service of process upon the
      Company mailed by first class mail shall be deemed in every respect effective
      service of process upon the Company in any such suit or proceeding. Nothing
      herein shall affect the right of the Holder to serve process in any other manner
      permitted by law. The Company agrees that a final non-appealable judgment in
      any
      such suit or proceeding shall be conclusive and may be enforced in other
      jurisdictions by suit on such judgment or in any other lawful manner. EACH
      PARTY
      HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST,
      A
      JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
      OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

    

    12. CONSTRUCTION;
      HEADINGS.
      This
      Warrant shall be deemed to be jointly drafted by the Company and all the Buyers
      and shall not be construed against any person as the drafter hereof. The
      headings of this Warrant are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Warrant.

    

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    13.
       DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall submit the
      disputed determinations or arithmetic calculations via facsimile within one
      Business Day of receipt, or deemed receipt, of the Exercise Notice giving rise
      to such dispute, as the case may be, to the Holder. If the Holder and the
      Company are unable to agree upon such determination or calculation of the
      Exercise Price or the Warrant Shares within one Business Day of such disputed
      determination or arithmetic calculation being submitted to the Holder, then
      the
      Company shall, within one Business Day submit via facsimile (a) the disputed
      determination of the Exercise Price to an independent, reputable investment
      bank
      selected by the Company and approved by the Holder or (b) the disputed
      arithmetic calculation of the Warrant Shares to the Company's independent,
      outside accountant. The Company, at the Company's expense, shall cause the
      investment bank or the accountant, as the case may be, to perform the
      determinations or calculations and notify the Company and the Holder of the
      results no later than five Business Days from the time it receives the disputed
      determinations or calculations. Such investment bank's or accountant's
      determination or calculation, as the case may be, shall be binding upon all
      parties absent demonstrable error.

    

    14. REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      to
      pursue actual damages for any failure by the Company to comply with the terms
      of
      this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

    

    15. TRANSFER.
      This
      Warrant is subject to certain restrictions on transfer set forth in Section
      5 of
      the Securities Purchase Agreement; provided, however, that this Warrant and
      any
      shares of Common Stock issued upon exercise of this Warrant may be offered
      for
      sale, sold, assigned or transferred by the Holder without the consent of the
      Company, subject to applicable securities law restrictions.

    

    16. CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

    

    (a) "5% Senior
      Convertible Notes"
      means
      the principal of (and premium, if any), interest on, and all fees and other
      amounts (including, without limitation, any reasonable out-of-pocket costs,
      enforcement expenses (including reasonable out-of-pocket legal fees and
      disbursements and other reimbursement or indemnity obligations relating thereto)
      payable by Company under or in connection with those certain 5% Senior
      Convertible Notes of the Company, due October 31, 2007, outstanding as of the
      Subscription Date and upon the terms and conditions of such notes as in effect
      as of the Subscription Date (as modified pursuant to the express terms of the
      Securities Purchase Agreement).

    

    (b) "5%
      Warrants"
      means
      the warrants to purchase Common Stock issued to the holders of the 5% Senior
      Convertible Notes on the Issuance Date pursuant to the terms of a Noteholder
      Agreement (as defined in the Securities Purchase Agreement).

    

    (c) "Bloomberg"
      means
      Bloomberg Financial Markets.

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    (d) "Business
      Day"
      means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

    

    (e) "Change
      of Control"
      means
      any Fundamental Transaction other than (i) any reorganization, recapitalization
      or reclassification of the Common Stock in which holders of the Company's voting
      power immediately prior to such reorganization, recapitalization or
      reclassification continue after such reorganization, recapitalization or
      reclassification to hold publicly traded securities and, directly or indirectly,
      the voting power of the surviving entity or entities necessary to elect a
      majority of the members of the board of directors (or their equivalent if other
      than a corporation) of such entity or entities or (ii) pursuant
      to a migratory merger effected solely for the purpose of changing the
      jurisdiction of incorporation of the Company.

    

    (f) "Closing
      Bid Price"
      and
      "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the "pink
      sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
      If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 12. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

    

    (g) "Common
      Stock"
      means
      (i) the Company's shares of Common Stock, par value $.01 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock. 

    

    (h) "Common
      Stock Deemed Outstanding"
      means,
      at any given time, the number of shares of Common Stock actually outstanding
      at
      such time, plus the number of shares of Common Stock deemed to be outstanding
      pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the
      Options or Convertible Securities are actually exercisable at such time, but
      excluding any shares of Common Stock owned or held by or for the account of
      the
      Company.

    

    (i) "Convertible
      Securities"
      means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

    

    (j) "Eligible
      Market"
      means
      the Principal Market, The Nasdaq Capital Market, The New York Stock Exchange,
      Inc. or the American Stock Exchange.

    

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    (k) "Excluded
      Issuance"
      means
      (i) the issuance of Common Stock upon the exercise or conversion of any Options
      or Convertible Securities which are outstanding on the day immediately preceding
      the Subscription Date and disclosed in Schedule
      3(c)
      to the
      Securities Purchase Agreement in accordance with the terms of such Options
      or
      Convertible Securities as of such date, provided that the terms of such Options
      or Convertible Securities are not amended, modified or changed on or after
      the
      Subscription Date without the consent of the Required Holders
      (except
      as expressly provided for in the Securities Purchase Agreement with respect
      to
      the 5% Senior Convertible Notes);
      (ii)
      the grant of options to purchase Common Stock or other stock-based awards or
      sales, with exercise or purchase prices not less than the market price of the
      Common Stock on the date of grant or issuance, which are issued or sold to
      employees, officers or directors of the Company for the primary purpose of
      soliciting or retaining their employment or service pursuant to an equity
      compensation plan approved by the Company's Board of Directors, and the issuance
      of Common Stock upon the exercise thereof; (iii) the issuance of Common Stock
      upon the exercise of the Warrants, the SPA Warrants or the 5% Warrants or the
      conversion of the SPA Securities; and (iv) the issuance of securities in
      connection with mergers, acquisitions, strategic business partnerships or joint
      ventures, in each case with non-affiliated third parties and otherwise on an
      arm's length basis, the primary purpose of which, in the reasonable judgment
      of
      the Board of Directors, is not to raise additional capital.

    

    (l) "Expiration
      Date"
      means
      the date 60 months after the Issuance Date or, if such date falls on a day
      other
      than a Business Day or on which trading does not take place on the Principal
      Market (a "Holiday"),
      the
      next date that is not a Holiday.

    

    (m) "Fundamental
      Transaction"
      means:
      (i) a transaction or series of related transactions pursuant to which the
      Company:
      (A)
sells,
      conveys or disposes of all or substantially all of its assets (or the stock
      or
      assets of one or more of its Subsidiaries which, on a consolidated basis,
      constitute all or substantially all of the Company’s assets), determined on
      either a quantitative or qualitative basis (the presentation of any such
      transaction for stockholder approval being conclusive evidence that such
      transaction involves the sale of all or substantially all of the assets of
      the
      Company on a consolidated basis); (B) merges or consolidates with or into,
      or
      engages in any other business combination with, any other person or entity,
      in
      any case that results in the holders of the voting securities of the Company
      immediately prior to such transaction holding or having the right to direct
      the
      voting of 50% or less of the total outstanding voting securities of the Company
      or such other surviving or acquiring person or entity immediately following
      such
      transaction, as the case may be;
      or (C)
      sells or issues, or any of its stockholders sells or transfers, any securities
      to any person or entity, or the acquisition or right to acquire securities
      by
      any person or entity, in either case acting individually or in concert with
      others, such that, following the consummation of such transaction(s), such
      person(s) or entity(ies) (together with their respective affiliates, as such
      term is used under Section 13(d) of the Exchange Act) would own or have the
      right to acquire greater than 50% of the outstanding shares of Common Stock
      (other
      than Silver Star Partners I, LLC (“Silver
      Star”),
      provided that Silver Star or its affiliates or agents do not acquire beneficial
      ownership of more than (x) 50% of the outstanding shares of Common Stock through
      a tender offer, exchange offer or similar transaction for any security of the
      Company or (y) 60% of the outstanding shares of Common Stock by any
      means);
      (ii)
      any reclassification or change of the outstanding shares of Common Stock (other
      than a change in par value, or from par value to no par value, or from no par
      value to par value, or as a result of a subdivision or combination); or (iii)
      any event, transaction or series of related transactions that results in
      individuals serving on the Board of Directors on the date hereof (the
      "Incumbent
      Board")
      ceasing
      for any reason to constitute at least a majority of the Board of Directors;
      provided, however, that any individual becoming a director subsequent to the
      date hereof whose appointment, election, or nomination for election by the
      Company's stockholders was approved by a vote of at least a two-thirds of the
      directors then comprising the Incumbent Board, after giving effect to this
      proviso (other than an appointment, election, or nomination of an individual
      whose initial assumption of office is in connection with an actual or threatened
      election contest relating to the election of the directors of the Company),
      shall be considered as though such person were a member of the Incumbent
      Board. 

    

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    (n) "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

    

    (o) "Parent
      Entity"
      of a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

    

    (p) "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

    

    (q) "Principal
      Market"
      means
      the Nasdaq National Market.

    

    (r) "Registration
      Rights Agreement"
      means
      the Registration Rights Agreement dated as of May 25, 2006 by and among the
      Company and the buyers (the “Buyers”)
      party
      thereto.

    

    (s) "Required
      Holders"
      means
      the holders of SPA Warrants representing at least 75% of the shares of Common
      Stock underlying the SPA Warrants then outstanding. 

    

    (t) "Securities
      Purchase Agreement"
      means
      the Securities
      Purchase Agreement dated as of May 25, 2006 among the Company and certain
      purchasers named therein.

    

    (u) "SPA
      Securities"
      means
      the Company's 7.0% Senior Secured Convertible Notes issued pursuant to the
      Securities Purchase Agreement.

    

    (v) "SPA
      Warrants"
      means
      the warrants to purchase the Company's common stock issued pursuant to the
      Securities Purchase Agreement.

    

    (w) "Successor
      Entity"
      means
      the Person (or, if so elected by the Required Holders, the Parent Entity) formed
      by, resulting from or surviving any Fundamental Transaction or the Person (or,
      if so elected by the Required Holders, the Parent Entity) with which such
      Fundamental Transaction shall have been entered into.

    

    (x) "Trading
      Day"
      means
      any day on which trading the Common Stock is reported on the Principal Market,
      or, if the Principal Market is not the principal trading market for the Common
      Stock, then on the Eligible Market that is the principal securities exchange
      or
      securities market on which the Common Stock is then traded; provided that
      "Trading Day" shall not include any day on which the Common Stock is scheduled
      to trade on such exchange or market for less than 4.5 hours or any day that
      the
      Common Stock is suspended from trading during the final hour of trading on
      such
      exchange or market (or if such exchange or market does not designate in advance
      the closing time of trading on such exchange or market, then during the hour
      ending at 4:00:00 p.m., New York Time).

    

    (y) "Transaction
      Documents"
      is
      defined in the Securities Purchase Agreement.

    

    
      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

          
          

        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to Purchase Common Stock to be duly executed
      as
      of the Issuance Date set out above.

    

    
      	 	
              NESTOR,
                INC.

            
	 	 
	 	 
	 	
              By:
                /s/ Nigel P. Hebborn

            
	 	
              Nigel
                P. Hebborn

            
	 	
              Chief
                Financial Officer

            

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    [Signature
      Page to Warrant to Purchase Common Stock]

    

    

    
      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

          
          

        

      

    

    

    EXHIBIT
      A

    

    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

    

    NESTOR,
      INC.

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock ("Warrant
      Shares")
      of
      Nestor, Inc., a Delaware corporation (the "Company"),
      evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    

    1.
      Form
      of Exercise Price. The Holder intends that payment of the Exercise Price shall
      be made as:

    

    ____________ a
      "Cash
      Exercise"
      with
      respect to _________________ Warrant Shares; and/or

    

    ____________ a
      "Cashless
      Exercise"
      with
      respect to _______________ Warrant Shares.

    

    2.
      Payment of Exercise Price. In the event that the holder has elected a Cash
      Exercise with respect to some or all of the Warrant Shares to be issued pursuant
      hereto, the holder shall pay the Aggregate Exercise Price in the sum of
      $___________________ to the Company in accordance with the terms of the
      Warrant.

    

    3.
      Delivery of Warrant Shares. The Company shall deliver to the holder __________
      Warrant Shares in accordance with the terms of the Warrant.

    

    
      	
              Date:
                ___________, 20____

            	 
	 	 
	 	 
	 	 
	
              Name
                of Registered Holder

            	 
	 	 
	 	 
	 	 
	
              By:

            	 
	
              Name:

            	 
	
              Title:

            	 

    

    

    

    

    

    
      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

    

    

    ACKNOWLEDGMENT

    

    

    The
      Company hereby acknowledges this Exercise Notice and hereby directs [Insert
      Name of Transfer Agent]
      to issue
      the above indicated number of shares of Common Stock in accordance with the
      Transfer Agent Instructions dated _______ __, 2006 from the Company and
      acknowledged and agreed to by [Insert
      Name of Transfer Agent].

    

    
      	 	
              NESTOR,
                INC.

            
	 	 
	 	 
	 	
              By:
                

            
	 	
              Name:

            
	 	
              Title:

            

    

    

    
      
        
        

      

      
        -19-

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