Document:

Exhibit 10.2 Haskell Employment Agreement

    EXHIBIT
      10.2

     

    

      EMPLOYMENT
        AGREEMENT

       

      THIS
        EMPLOYMENT AGREEMENT (the “Agreement”), made as of this 7th
        day of
        February 2007, is entered into by Nestor, Inc. a Delaware corporation (the
        “Company”), and Brian R. Haskell (the “Employee”).

       

      The
        Company desires to employ the Employee, and the Employee desires to be employed
        by the Company. In consideration of the mutual covenants and promises contained
        in this Agreement, and other good and valuable consideration, the receipt
        and
        sufficiency of which are hereby acknowledged by the parties to this Agreement,
        the parties agree as follows:

       

      1. Term
        of Employment.
        The
        Company hereby agrees to employ the Employee, and the Employee hereby accepts
        employment with the Company, upon the terms set forth in this Agreement,
        for the
        period commencing on the date hereof (the “Commencement Date”) and ending on
        December 31, 2008 (such period, the “Initial Employment Period” and as it may be
        extended, the “Employment Period”), unless sooner terminated in accordance with
        the provisions of Section 4. On December 31, 2008, if not previously
        terminated, this Agreement shall automatically renew and the Employment Period
        be extended until December 31, 2009 unless the Company shall elect not to
        so
        extend the Employment Period and shall have given written notice to the Employee
        of such election on or before October 1, 2008.

       

      2. Title;
        Capacity.
        The
        Employee shall serve as Vice President and General Counsel or in such other
        position as the Company’s Board of Directors (the “Board”) or its Chief
        Executive Officer may determine from time to time. The Employee shall be
        based
        at the Company’s headquarters in Rhode Island or at such place or places in the
        continental United States as the Board and the Employee shall mutually
        determine. The Employee shall be subject to the supervision of, and shall
        have
        such authority as is delegated to the Employee by, the Board or the Chief
        Executive Officer of the Company.

       

      The
        Employee hereby accepts such employment and agrees to undertake the duties
        and
        responsibilities inherent in such position and such other duties and
        responsibilities as the Board or the Chief Executive Officer shall from time
        to
        time reasonably assign to the Employee. The Employee agrees to devote his
        entire
        business time, attention and energies to the business and interests of the
        Company during the Employment Period. The Employee agrees to abide by the
        rules,
        regulations, instructions, personnel practices and policies of the Company
        and
        any changes therein which may be adopted from time to time by the
        Company.

       

      3. Compensation
        and Benefits.

       

      3.1 Salary.
        The
        Company shall pay the Employee, in periodic installments in accordance with
        the
        Company’s customary payroll practices, an annual base salary $148,500. Such
        salary shall be subject to increase but not decrease thereafter as determined
        by
        the Board and shall be reviewed at least annually by the Board.. 

       

      3.2 Bonus.
        The
        Compensation Committee, in its sole discretion, may award the Employee a
        bonus
        or bonuses during the term hereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

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      3.3 Equity
        Incentive.
        

       

      (a) The
        Company shall, upon the execution hereof, grant to the Employee an option
        to
        purchase 135,000 shares of the common stock of the Company (“Common Stock”). To
        the extent permitted by the Internal Revenue Code, said options shall be
        incentive stock options. Said options shall be granted at the fair market
        value
        and expire on the eighth anniversary of their grant. Said options shall vest
        as
        follows:

       

      
        	
                Number
                  of Shares 

              	
                Vesting
                  Date

              
	
                25,000

              	
                February
                  1, 2008

              
	
                20,000

              	
                February
                  1, 2009

              
	
                25,000

              	
                February
                  1, 20010

              
	
                30,000

              	
                February
                  1, 2011

              
	
                35,000

              	
                February
                  1, 2012

              

      

      

       

      Such
        grants shall provide that after a Change in Control Event (as defined
in
        Schedule A
        hereto),
        all restrictions on the exercise thereof shall lift and such options shall
        vest
        upon (a) the termination by the Company of the Employee’s employment, unless
        such termination is for Cause (as defined in Section 4.2) or (b) the resignation
        of Employee for Good Reason (as defined in Section 4.3).

       

      3.4 Fringe
        Benefits.
        The
        Employee shall be entitled to participate in all bonus and benefit programs
        that
        the Company establishes and makes available to its employees, if any, to
        the
        extent that Employee’s position, tenure, salary, age, health and other
        qualifications make him eligible to participate. 

       

      3.5 Reimbursement
        of Expenses.
        The
        Company shall reimburse the Employee for all reasonable travel, entertainment
        and other expenses incurred or paid by the Employee in connection with, or
        related to, the performance of his duties, responsibilities or services under
        this Agreement, in accordance with policies and procedures, and subject to
        limitations, adopted by the Company from time to time.

       

      3.6 Withholding.
        All
        salary, bonus and other compensation payable to the Employee shall be subject
        to
        applicable withholding taxes.

       

      3.7 Professional
        Liability Coverage.
        During
        the Employment Period, Company shall maintain professional liability coverage
        covering employed lawyers’ professional liability reasonable satisfactory to
        Employee in an amount not less than $1,000,000.

       

      
        
          
          

        

        
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      4. Termination
        of Employment Period.
        The
        employment of the Employee by the Company pursuant to this Agreement shall
        terminate upon the occurrence of any of the following:

       

      4.1 Expiration
        of the Employment Period;

       

      4.2 At
        the
        election of the Company, for Cause (as defined below), immediately upon written
        notice by the Company to the Employee, which notice shall identify the Cause
        upon which the termination is based. For the purposes of this Section 4.2,
“Cause” shall mean (a) a good faith finding by the Company that
        (i) the Employee has failed in any material respect to perform his
        reasonably assigned duties for the Company and has failed to remedy such
        failure
        within 10 days following written notice from the Company to the Employee
        notifying him of such failure, or (ii) the Employee has engaged in
        dishonesty, gross negligence or misconduct with respect to the Company, or
        (b) the conviction of the Employee of, or the entry of a pleading of guilty
        or nolo contendere by the Employee to, any crime involving moral turpitude
        or
        any felony;

       

      4.3 At
        the
        election of the Employee, for Good Reason (as defined below), immediately
        upon
        written notice by the Employee to the Company, which notice shall identify
        the
        Good Reason upon which the termination is based. For the purposes of this
        Section 4.3, “Good Reason” for termination shall mean (i) a material adverse
        change in the Employee’s authority, duties or compensation without the prior
        consent of the Employee, (ii) a material breach by the Company of the terms
        of
        this Agreement (other than of Section 3.7), which breach is not remedied
        by the
        Company within 10 days following written notice from the Employee to the
        Company
        notifying it of such breach or (iii) any requirement imposed by Section 307
        of
        the Sarbanes-Oxley Act or any rule promulgated thereunder.

       

      4.4 Upon
        the
        death or disability of the Employee. As used in this Agreement, the term
        “disability” shall mean the inability of the Employee, due to a physical or
        mental disability, for a period of 90 days, whether or not consecutive, during
        any 360-day period to perform the services contemplated under this Agreement,
        with or without reasonable accommodation as that term is defined under state
        or
        federal law. A determination of disability shall be made by a physician
        satisfactory to both the Employee and the Company, provided that
        if the
        Employee and the Company do not agree on a physician, the Employee and the
        Company shall each select a physician and these two together shall select
        a
        third physician, whose determination as to disability shall be binding on
        all
        parties;

       

      4.5 At
        the
        election of either party, upon not less than 30 days’ prior written notice of
        termination.

       

      
        
          
          

        

        
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      5. Effect
        of Termination.

       

      5.1 At-Will
        Employment.
        If the
        Employment Period expires pursuant to Section 1 hereof, then, unless the
        Company
        notifies the Employee to the contrary, the Employee shall continue his
        employment on an at-will basis following the expiration of the Employment
        Period. Such at-will employment relationship may be terminated by either
        party
        at any time and shall not be governed by the terms of this
        Agreement.

       

      5.2 Payments
        Upon Termination.
        

       

      (a) In
        the
        event the Employee’s employment is terminated pursuant to Section 4.1, Section
        4.2 or by the Employee pursuant to Section 4.5, the Company shall pay to
        the
        Employee the compensation and benefits otherwise payable to him under Section
        3
        through the last day of his actual employment by the Company.

       

      (b) In
        the
        event the Employee’s employment is terminated by the Employee pursuant to
        Section 4.3 or by the Company pursuant to Section 4.5, the Company shall
        continue to pay to the Employee his salary as in effect on the date of
        termination and continue to provide to the Employee the other benefits owed
        to
        him under Section 3.4 (to the extent such benefits can be provided to
        non-employees, or to the extent such benefits cannot be provided to
        non-employees, then the cash equivalent thereof) until the date one year
        after
        the date of termination and for the purposes of the vesting of options to
        purchase common stock granted to the Employee pursuant to Section 3.3, the
        Employee shall be deemed to be employed by the Company until the date three
        years after the date of termination. The payment to the Employee of the amounts
        payable under this Section 5.2(b) (i) shall be contingent upon the execution
        by
        the Employee of a release in a form reasonably acceptable to the Company
        and
        (ii) shall constitute the sole remedy of the Employee in the event of a
        termination of the Employee’s employment in the circumstances set forth in this
        Section 5.2(b). 

       

      (c) In
        the
        event the Employee’s employment is terminated pursuant to Section 4.4, the
        Company shall continue to pay to the Employee (or his estate) his salary
        as in
        effect on the date of termination and the amount of the annual bonus paid
        to him
        for the fiscal year immediately preceding the date of termination (payable
        in
        annualized monthly installments) and, if such termination was on account
        of
        disability, continue to provide to the Employee the other benefits owed to
        him
        under Section 3.4 (to the extent such benefits can be provided to non-employees,
        or to the extent such benefits cannot be provided to non-employees, then
        the
        cash equivalent thereof) until the date one year after the date of termination
        and for the purposes of the vesting of options to purchase common stock granted
        to the Employee pursuant to Section 3.3, the Employee shall be deemed to
        be
        employed by the Company until the date one year after the date of termination.
        The amounts payable to the Employee under this Section 5.2(c) shall be reduced
        by the aggregate amount of all insurance proceeds paid to the Employee or
        his
        beneficiaries pursuant to insurance policies paid for by the
        Company.

       

      5.3 Survival.
        The
        provisions of Sections 5.2, 6 and 7 shall survive the termination of this
        Agreement.

       

      
        
          
          

        

        
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      6. Non-Competition
        and Non-Solicitation.

       

      6.1 Restricted
        Activities.
        While
        the Employee is employed by the Company and for a period of one year after
        the
        termination or cessation of such employment for any reason, the Employee
        will
        not directly or indirectly:

       

      (a) Engage
        in
        any business or enterprise (whether as owner, partner, officer, director,
        employee, consultant, investor, lender or otherwise, except as the holder
        of not
        more than 1% of the outstanding stock of a publicly-held company) that develops,
        manufactures, markets, licenses, sells or provides any product or service
        that
        competes with any product or service developed, manufactured, marketed,
        licensed, sold or provided, or planned to be developed, manufactured, marketed,
        licensed, sold or provided, by the Company while the Employee was employed
        by
        the Company; or

       

      (b) Either
        alone or in association with others (i) solicit, or permit any organization
        directly or indirectly controlled by the Employee to solicit, any employee
        of
        the Company to leave the employ of the Company, or (ii) solicit for
        employment or permit any organization directly or indirectly controlled by
        the
        Employee to solicit for any person who was employed by the Company at any
        time
        during the term the Employee’s employment with the Company; provided,
        that
        this clause (ii) shall not apply to the solicitation, hiring or engagement
        of
        any individual whose employment with the Company has been terminated for
        a
        period of six months or longer.

       

      6.2 Extension.
        If the
        Employee violates the provisions of Section 6.1, the Employee shall continue
        to
        be bound by the restrictions set forth in Section 6.1 until a period of two
        years has expired without any violation of such provisions.

       

      6.3 Interpretation.
        If any
        restriction set forth in Section 6.1 is found by any court of competent
        jurisdiction to be unenforceable because it extends for too long a period
        of
        time or over too great a range of activities or in too broad a geographic
        area,
        it shall be interpreted to extend only over the maximum period of time, range
        of
        activities or geographic area as to which it may be enforceable.

       

      6.4 Equitable
        Remedies.
        The
        restrictions contained in this Section 6 are necessary for the protection
        of the business and goodwill of the Company and are considered by the Employee
        to be reasonable for such purpose. The Employee agrees that any breach of
        this
        Section 6 is likely to cause the Company substantial and irrevocable damage
        which is difficult to measure. Therefore, in the event of any such breach
        or
        threatened breach, the Employee agrees that the Company, in addition to such
        other remedies which may be available, shall have the right to obtain an
        injunction from a court restraining such a breach or threatened breach and
        the
        right to specific performance of the provisions of this Section 6 and the
        Employee hereby waives the adequacy of a remedy at law as a defense to such
        relief.

       

      
        
          
          

        

        
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      7. Proprietary
        Information and Developments.

       

      7.1 Proprietary
        Information.

       

      (a) The
        Employee agrees that all information, whether or not in writing, of a private,
        secret or confidential nature concerning the Company’s business, business
        relationships or financial affairs (collectively, “Proprietary Information”) is
        and shall be the exclusive property of the Company. By way of illustration,
        but
        not limitation, Proprietary Information may include inventions, products,
        processes, methods, techniques, formulas, compositions, compounds, projects,
        developments, plans, research data, clinical data, financial data, personnel
        data, computer programs, customer and supplier lists, and contacts at or
        knowledge of customers or prospective customers of the Company. The Employee
        will not disclose any Proprietary Information to any person or entity other
        than
        employees of the Company or use the same for any purposes (other than in
        the
        performance of his duties as an employee of the Company) without written
        approval by an officer of the Company, either during or after his employment
        with the Company, unless and until such Proprietary Information has become
        public knowledge without fault by the Employee.

       

      (b) The
        Employee agrees that all files, letters, memoranda, reports, records, data,
        sketches, drawings, laboratory notebooks, program listings, or other written,
        photographic, or other tangible material containing Proprietary Information,
        whether created by the Employee or others, which shall come into his custody
        or
        possession, shall be and are the exclusive property of the Company to be
        used by
        the Employee only in the performance of his duties for the Company. All such
        materials or copies thereof and all tangible property of the Company in the
        custody or possession of the Employee shall be delivered to the Company,
        upon
        the earlier of (i) a request by the Company or (ii) termination of his
        employment. After such delivery, the Employee shall not retain any such
        materials or copies thereof or any such tangible property.

       

      (c) The
        Employee agrees that his obligation not to disclose or to use information
        and
        materials of the types set forth in paragraphs (a) and (b) above, and his
        obligation to return materials and tangible property, set forth in
        paragraph (b) above, also extends to such types of information, materials
        and tangible property of customers of the Company or suppliers to the Company
        or
        other third parties who may have disclosed or entrusted the same to the Company
        or to the Employee.

       

      7.2 Developments.

       

      (a) The
        Employee will make full and prompt disclosure to the Company of all inventions,
        improvements, discoveries, methods, developments, software, and works of
        authorship, whether patentable or not, which are created, made, conceived
        or
        reduced to practice by him or under his direction or jointly with others
        during
        his employment by the Company, whether or not during normal working hours
        or on
        the premises of the Company (all of which are collectively referred to in
        this
        Agreement as “Developments”). Notwithstanding the foregoing, the term
“Developments” does
        not
        include
        any written works and any software concepts that are unrelated to the Company’s
        business and are not created during Company time.

       

      
        
          
          

        

        
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      (b) The
        Employee agrees to assign and does hereby assign to the Company (or any person
        or entity designated by the Company) all his right, title and interest in
        and to
        all Developments and all related patents, patent applications, copyrights
        and
        copyright applications. However, this paragraph (b) shall not apply to
        Developments which do not relate to the business or research and development
        conducted or planned to be conducted by the Company at the time such Development
        is created, made, conceived or reduced to practice and which are made and
        conceived by the Employee not during normal working hours, not on the Company’s
        premises and not using the Company’s tools, devices, equipment or Proprietary
        Information. The Employee understands that, to the extent this Agreement
        shall
        be construed in accordance with the laws of any state which precludes a
        requirement in an employee agreement to assign certain classes of inventions
        made by an employee, this paragraph (b) shall be interpreted not to apply
        to any invention which a court rules and/or the Company agrees falls within
        such
        classes. The Employee also hereby waives all claims to moral rights in any
        Developments.

       

      (c) The
        Employee agrees to cooperate fully with the Company, both during and after
        his
        employment with the Company, with respect to the procurement, maintenance
        and
        enforcement of copyrights, patents and other intellectual property rights
        (both
        in the United States and foreign countries) relating to Developments. The
        Employee shall sign all papers, including, without limitation, copyright
        applications, patent applications, declarations, oaths, formal assignments,
        assignments of priority rights, and powers of attorney, which the Company
        may
        deem necessary or desirable in order to protect its rights and interests
        in any
        Development. The Employee further agrees that if the Company is unable, after
        reasonable effort, to secure the signature of the Employee on any such papers,
        any executive officer of the Company shall be entitled to execute any such
        papers as the agent and the attorney-in-fact of the Employee, and the Employee
        hereby irrevocably designates and appoints each executive officer of the
        Company
        as his agent and attorney-in-fact to execute any such papers on his behalf,
        and
        to take any and all actions as the Company may deem necessary or desirable
        in
        order to protect its rights and interests in any Development, under the
        conditions described in this sentence.

       

      7.3 United
        States Government Obligations.
        The
        Employee acknowledges that the Company from time to time may have agreements
        with other parties or with the United States Government, or agencies thereof,
        which impose obligations or restrictions on the Company regarding inventions
        made during the course of work under such agreements or regarding the
        confidential nature of such work. The Employee agrees to be bound by all
        such
        obligations and restrictions which are made known to the Employee and to
        take
        all appropriate action necessary to discharge the obligations of the Company
        under such agreements.

       

      7.4 Equitable
        Remedies.
        The
        restrictions contained in this Section 7 are necessary for the protection
        of the business and goodwill of the Company and are considered by the Employee
        to be reasonable for such purpose. The Employee agrees that any breach of
        this
        Section 7 is likely to cause the Company substantial and irrevocable damage
        which is difficult to measure. Therefore, in the event of any such breach
        or
        threatened breach, the Employee agrees that the Company, in addition to such
        other remedies which may be available, shall have the right to obtain an
        injunction from a court restraining such a breach or threatened breach and
        the
        right to specific performance of the provisions of this Section 7 and the
        Employee hereby waives the adequacy of a remedy at law as a defense to such
        relief.

       

      
        
          
          

        

        
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      8. Other
        Agreements.
        The
        Employee represents that his performance of all the terms of this Agreement
        and
        the performance of his duties as an employee of the Company do not and will
        not
        breach any agreement with any prior employer or other party to which the
        Employee is a party (including without limitation any nondisclosure or
        non-competition agreement). Any agreement to which the Employee is a party
        relating to nondisclosure, non-competition or non-solicitation of employees
        or
        customers is listed on Schedule
        B
        attached
        hereto.

       

      9. Miscellaneous.

       

      9.1 Notices.
        Any
        notices delivered under this Agreement shall be deemed duly delivered four
        business days after it is sent by registered or certified mail, return receipt
        requested, postage prepaid, or one business day after it is sent for
        next-business day delivery via a reputable nationwide overnight courier service,
        in each case to the address of the recipient set forth in the introductory
        paragraph hereto. Either party may change the address to which notices are
        to be
        delivered by giving notice of such change to the other party in the manner
        set
        forth in this Section 9.1.

       

      9.2 Pronouns.
        Whenever the context may require, any pronouns used in this Agreement shall
        include the corresponding masculine, feminine or neuter forms, and the singular
        forms of nouns and pronouns shall include the plural, and vice
        versa.

       

      9.3 Entire
        Agreement.
        This
        Agreement constitutes the entire agreement between the parties and supersedes
        all prior agreements and understandings, whether written or oral, relating
        to
        the subject matter of this Agreement; provided, however, that it is acknowledged
        and agreed by the Company and the Employee that stock option grants made
        by the
        Company to the Employee prior to the date hereof are not superseded hereby
        and
        each such grant remains in full force and effect in accordance with its
        terms.

       

      9.4 Amendment.
        This
        Agreement may be amended or modified only by a written instrument executed
        by
        both the Company and the Employee.

       

      9.5 Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Rhode Island (without reference to the conflicts of laws provisions
        thereof). Any action, suit or other legal proceeding arising under or relating
        to any provision of this Agreement shall be commenced only in a court of
        the
        State of Rhode Island (or, if appropriate, a federal court located within
        Rhode
        Island), and the Company and the Employee each consents to the jurisdiction
        of
        such a court. The Company and the Employee each hereby irrevocably waive
        any
        right to a trial by jury in any action, suit or other legal proceeding arising
        under or relating to any provision of this Agreement.

       

      
        
          
          

        

        
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      9.6 Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of both parties
        and
        their respective successors and assigns, including any corporation with which,
        or into which, the Company may be merged or which may succeed to the Company’s
        assets or business, provided, however, that the obligations of the Employee
        are
        personal and shall not be assigned by him. Notwithstanding the foregoing,
        if the
        Company is merged with or into a third party which is engaged in multiple
        lines
        of business, or if a third party engaged in multiple lines of business succeeds
        to the Company’s assets or business, then for purposes of Section 6.1(a), the
        term “Company” shall mean and refer to the business of the Company as it existed
        immediately prior to such event and as it subsequently develops and not to
        the
        third party’s other businesses.

       

      9.7 Waivers.
        No
        delay or omission by the Company in exercising any right under this Agreement
        shall operate as a waiver of that or any other right. A waiver or consent
        given
        by the Company on any one occasion shall be effective only in that instance
        and
        shall not be construed as a bar or waiver of any right on any other
        occasion.

       

      9.8 Captions.
        The
        captions of the sections of this Agreement are for convenience of reference
        only
        and in no way define, limit or affect the scope or substance of any section
        of
        this Agreement.

       

      9.9 Severability.
        In case
        any provision of this Agreement shall be invalid, illegal or otherwise
        unenforceable, the validity, legality and enforceability of the remaining
        provisions shall in no way be affected or impaired thereby.

       

      THE
        EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND
        UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

       

      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
        day
        and year set forth above. 

       

      

      
        	 	
                NESTOR,
                  INC.

              
	 	 
	 	
                By:
                  /s/ Nigel P. Hebborn

              
	 	
                Chief
                  Financial Officer

              
	 	 
	 	 
	 	
                EMPLOYEE

              
	 	 
	 	
                By:
                  /s/ Brian R. Haskell

              
	 	
                Brian
                  R. Haskell

              

      

      

      

       

      
        
          
          

        

        
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      SCHEDULE
        A

       

      Change
        in
        Control Definition

       

      A
“Change
        in Control Event” shall mean:

       

      
        	 	
                (i)

              	
                the
                  acquisition by an individual, entity or group (within the meaning
                  of
                  Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of
                  beneficial ownership of any capital stock of the Company if, after
                  such
                  acquisition, such Person beneficially owns (within the meaning
                  of Rule
                  13d-3 promulgated under the Exchange Act) 30% or more of either
                  (x) the
                  then-outstanding shares of common stock of the Company (the “Outstanding
                  Company Common Stock”) or (y) the combined voting power of the
                  then-outstanding securities of the Company entitled to vote generally
                  in
                  the election of directors (the “Outstanding Company Voting Securities”);
                  provided,
                  however,
                  that for purposes of this subsection (i), the following acquisitions
                  shall
                  not constitute a Change in Control Event: (A) any acquisition directly
                  from the Company (excluding an acquisition pursuant to the exercise,
                  conversion or exchange of any security exercisable for, convertible
                  into
                  or exchangeable for common stock or voting securities of the Company,
                  unless the Person exercising, converting or exchanging such security
                  acquired such security directly from the Company or an underwriter
                  or
                  agent of the Company), (B) any acquisition by any employee benefit
                  plan
                  (or related trust) sponsored or maintained by the Company or any
                  corporation controlled by the Company, (C) any acquisition by any
                  corporation pursuant to a Business Combination (as defined below)
                  which
                  complies with clauses (x) and (y) of subsection (iii) of this definition,
                  or (D) any acquisition by Silver Star Partners I, LLC or its affiliates
                  (each such party is referred to herein as an “Exempt Person”) of any
                  shares of capital stock of the Company;
                  or

              

      

       

      
        	 	
                (ii)

              	
                such
                  time as the Continuing Directors (as defined below) do not constitute
                  a
                  majority of the Board (or, if applicable, the Board of Directors
                  of a
                  successor corporation to the Company), where the term “Continuing
                  Director” means at any date a member of the Board (x) who was a member of
                  the Board on the date hereof or (y) who was nominated or elected
                  subsequent to such date by at least a majority of the directors
                  who were
                  Continuing Directors at the time of such nomination or election
                  or whose
                  election to the Board was recommended or endorsed by at least a
                  majority
                  of the directors who were Continuing Directors at the time of such
                  nomination or election; provided,
                  however,
                  that there shall be excluded from this clause (y) any individual
                  whose
                  initial assumption of office occurred as a result of an actual
                  or
                  threatened election contest with respect to the election or removal
                  of
                  directors or other actual or threatened solicitation of proxies
                  or
                  consents, by or on behalf of a person other than the Board;
                  or

              

      

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

          brh
            employment agreement

        

      

      

       

      
        	 	
                (iii)

              	
                the
                  consummation of a merger, consolidation, reorganization, recapitalization
                  or share exchange involving the Company or a sale or other disposition
                  of
                  all or substantially all of the assets of the Company (a “Business
                  Combination”), unless, immediately following such Business Combination,
                  each of the following two conditions is satisfied: (x) all or
                  substantially all of the individuals and entities who were the beneficial
                  owners of the Outstanding Company Common Stock and Outstanding
                  Company
                  Voting Securities immediately prior to such Business Combination
                  beneficially own, directly or indirectly, more than 50% of the
                  then-outstanding shares of common stock and the combined voting
                  power of
                  the then-outstanding securities entitled to vote generally in the
                  election
                  of directors, respectively, of the resulting or acquiring corporation
                  in
                  such Business Combination (which shall include, without limitation,
                  a
                  corporation which as a result of such transaction owns the Company
                  or
                  substantially all of the Company’s assets either directly or through one
                  or more subsidiaries) (such resulting or acquiring corporation
                  is referred
                  to herein as the “Acquiring Corporation”) in substantially the same
                  proportions as their ownership of the Outstanding Company Common
                  Stock and
                  Outstanding Company Voting Securities, respectively, immediately
                  prior to
                  such Business Combination and (y) no Person (excluding Exempt Persons,
                  the
                  Acquiring Corporation or any employee benefit plan (or related
                  trust)
                  maintained or sponsored by the Company or by the Acquiring Corporation)
                  beneficially owns, directly or indirectly, 30% or more of the
                  then-outstanding shares of common stock of the Acquiring Corporation,
                  or
                  of the combined voting power of the then-outstanding securities
                  of such
                  corporation entitled to vote generally in the election of directors
                  (except to the extent that such ownership existed prior to the
                  Business
                  Combination).

              

      

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

          brh
            employment agreement

        

      

      

      

      SCHEDULE
        B

       

      Prior
        Agreements

       

      

       

      None.

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

          brh
            employment agreementExhibit 10.3 Davis Consulting Agreement

    EXHIBIT
      10.3

    
 

    

    February
      7, 2007

    

    

    

    

    Mr.
      Clarence A. Davis

    c/o
      Nestor, Inc.

    42
      Oriental Street

    Third
      Floor

    Providence
      RI 02908

     

    

    Re:
      Consulting Agreement

    

    Dear
      Mr.
      Davis:

    

    This
      will
      confirm our engagement of you as an independent consultant to Nestor, Inc.
      (“Nestor”),
      on
      the following terms and conditions:

    

    Services
      and Reporting

    

    You
      will
      assist the management team in determining, articulating and executing its
      strategic plan. In this connection, you will you will exercise your professional
      business judgment and devote such time as you deem necessary to the fulfillment
      of your task. In connection with the services you will provide pursuant to
      this
      letter agreement, you will serve at the pleasure of Nestor’s
      Board of
      Directors and will report to such Board of Directors or any committee of the
      Board of Directors established or designated for that purpose.

    

    Term

    

    It
      is
      anticipated that you will provide services to Nestor
      under
      this letter agreement for a period of between 2 and 4 months, though this letter
      agreement may be extended by mutual agreement or terminated by either party
      at
      any time for any reason.

    

    Remuneration

    

    For
      your
      services, you will be paid a flat fee of $25,000 per month, which amount shall
      be prorated for any partial month in which you provide services. For avoidance
      of doubt, you will be paid a prorated amount only if you or Nestor terminates
      this agreement other than at the end of a month. You will be paid by
Nestor
      on the
      first business day of each month following the month in which you provide
      services pursuant to this letter agreement.

    

    Expenses

    

    You
      will
      be reimbursed by Nestor
      for all
      of your reasonable expenses incurred by you in connection with the services
      you
      provide under this letter agreement, including travel, transportation and meal
      expenses. You will be required to comply with Nestor’s
      current
      expense reimbursement policy.

    

    Independent
      Contractor

    

    In
      acting
      as a consultant to Nestor
      under
      this letter greement, you will be acting at all times as an independent
      contractor and not as an agent or employee of Nestor.
      You
      agree not to hold yourself out as an agent or employee of Nestor
      except
      and to the extent specifically authorized in a prior writing by Nestor.
      As an
      independent contractor, you will have discretion over the means and method
      of
      the performance of the consulting services, which you provide. You agree to
      comply with and abide by all applicable laws and regulations in the performance
      of your services.

    

    Taxes
      and Withholding

    

    Unless
      otherwise required by applicable law, you will be solely and exclusively liable
      for all Federal, State and local taxes levied against amounts earned by you
      hereunder. Nestor
      will not
      withhold any portion of amounts due to you pursuant to this letter agreement
      for
      payment of any taxes. You are solely responsible for the payment of any such
      taxes and the filing of any returns or other required documents with the proper
      taxing authorities.

    

    Indemnification

    

    In
      connection with the performance of your services hereunder, Nestor
      will
      indemnify you in accordance with and in the manner provided Exhibit
      A attached
      to this letter agreement.

    

    Resignation
      from Audit Committee

    

    You
      and
NESTOR
      recognize that your retention by the Nestor
      as a
      consultant impairs your ability to meet the independence requirements for
      members of Nestor’s
      Audit
      Committee. Accordingly, upon acceptance of this letter agreement by you, you
      automatically, and without any further action on your part, resign from the
      Audit Committee. By executing a counterpart to this letter agreement,
Nestor
      accepts
      your resignation from the Audit Committee. You and Nestor
      acknowledge that you remain a member of Nestor’s
      Board of
      Directors and will continue to do so until the expiration or earlier termination
      in accordance with Nestor’s
      governing
      documents and applicable law.

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

        Nestor,
          Inc. Consulting Agreement 2/7/2007

      

    

    

    

    Miscellaneous

    

    This
      letter agreement contains the complete agreement concerning the arrangement
      between the parties and supersedes all other prior agreements between the
      parties.

    

    No
      waiver
      or modification of this letter agreement may be made except in writing duly
      executed by the party against whom enforcement of such waiver or modification
      is
      sought.

    

    This
      letter agreement has been entered into, delivered and is to be governed by,
      construed, interpreted and enforced in accordance with the laws of the State
      of
      Rhode Island (without giving reference to choice-of-law provisions) from time
      to
      time in effect. 

    

    Kindly
      sign and return the enclosed copy of this letter confirming the Consultant's
      acceptance of the foregoing Agreement.

    

    

    
      	 	
              Very
                truly yours,

            
	 	
              NESTOR,
                INC.

            
	 	 
	 	
              By:
                /s/ Nigel P. Hebborn

            
	 	
              Nigel
                P. Hebborn

            
	 	
              Executive
                Vice President and CFO

            
	 	 
	 	 
	
              ACCEPTED
                AND AGREED TO THIS

            	 
	
              7th
                Day of February 2007

            	 
	 	 
	 	 
	
              By:
                /s/ Clarence A. Davis

            	 
	
              Clarence
                A. Davis

            	 
	 	 

    

    

    

     

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

        Nestor,
          Inc. Consulting Agreement 2/7/2007

      

    

    EXHIBIT
      A

    

    INDEMNIFICATION

    

    Nestor
      shall
      (a) indemnify you if you were or are a party or are threatened to be made a
      party to any threatened, pending or completed action or suit by or in the right
      of Nestor
      to
      procure a judgment in its favor by reason of the fact that you are or were
      a
      consultant of Nestor
      against
      expenses (including attorneys’ fees) actually and reasonably incurred by you in
      connection with the defense or settlement of such action or suit, and (b)
      indemnify you if you were or are a party or are threatened to be made a party
      to
      any threatened, pending or completed action, suit or proceeding, whether civil,
      criminal, administrative or investigative (other than an action by or in the
      right of Nestor),
      by
      reason of the fact that you are or were a consultant of Nestor
      expenses
      (including attorneys' fees), judgments, fines and amounts paid in settlement
      actually and reasonably incurred by him in connection with any such action,
      suit
      or proceeding, in each case to the fullest extent permissible under subsections
      (a) through (e) of Section 145 of the General Corporation Law of the State
      of
      Delaware or the indemnification provisions of any successor statute. The
      foregoing right of indemnification shall in no way be exclusive of any other
      rights of indemnification to which you may be entitled, under any bylaw,
      agreement, vote of shareholders or disinterested directors or otherwise, and
      shall inure to the benefit of your, executors and administrators.

     

     

    
      
        
        

      

      
        -4-

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