Document:

Exhibit 10.1

    Exhibit
      10.1

    

    Confidential
      materials omitted and filed

    separately
      with the Securities and Exchange

    Commission.
      Asterisks denote such omission

     

    [CBI
      Logo]

     

    

    CONSTELLATION
      BRANDS, INC.

     

    ANNUAL
      MANAGEMENT INCENTIVE PLAN

     

    2007
      FISCAL YEAR AWARD PROGRAM

     

    FOR
      EXECUTIVE OFFICERS

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

    
      	
               

              CONSTELLATION
                BRANDS, INC.

               

              
                EXECUTIVE
                  ANNUAL MANAGEMENT INCENTIVE PLAN

                2007
                  FISCAL YEAR AWARD PROGRAM

                FOR
                  EXECUTIVE OFFICERS

                 

                TABLE
                  OF CONTENTS

              

              Page     
                

            
	 	 	
               

            
	 1.	 PROGRAM OBJECTIVES
              .....................................................................................................................................................	
              1

            
	 	 	
               

            
	 2.	 PROGRAM ADMINISTRATION
              ..........................................................................................................................................	
               1

            
	 	 	
               

            
	 3.	 PROGRAM PARTICIPATION
              ..............................................................................................................................................	
               1

            
	 	 	 
	 4.	 TERMINATION OF EMPLOYMENT
              ...................................................................................................................................	
               2

            
	 	 	 
	 5.	 AWARD LEVELS
              ...................................................................................................................................................................	
               2

            
	 	 	 
	 6.	 PERFORMANCE TARGETS
              .................................................................................................................................................	
               3

            
	 	 	 
	 7.	 AWARD ADJUSTMENTS
              .....................................................................................................................................................	
               3

            
	 	 	 
	 8.	 EFFECT OF MERGER, ACQUISITION, REORGANIZATION, ETC.
              .................................................................................	
               4

            
	 	 	 
	 9.	 PAYMENT OF AWARDS
              .....................................................................................................................................................	
               4

            
	 	 	 
	 10.	 ASSIGNMENT
              ......................................................................................................................................................................	
               4

            
	 	 	 
	 11.	 EMPLOYMENT RIGHT
              ........................................................................................................................................................	
               5

            
	 	 	 
	 12.	 WITHHOLDING FOR TAXES
              ..............................................................................................................................................	
               5

            
	 	 	 
	 13.	 SPECIAL RULES FOR CERTAIN EXECUTIVES
              ................................................................................................................	
               5

            
	 	 	 
	 14.	 DEFINITIONS
              .......................................................................................................................................................................	
               6

            

    

     

     

    
      
        ii

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      CONSTELLATION
        BRANDS, INC.

      EXECUTIVE
        ANNUAL MANAGEMENT INCENTIVE PLAN

      2007
        FISCAL YEAR AWARD PROGRAM

      FOR
        EXECUTIVE OFFICERS

      

      Purpose:        
        This
        document is intended to describe parameters for making incentive awards for
        the
        period commencing March 1, 2006 and ending February 28, 2007 during the
        Company’s 2007 fiscal year (the “Program”). The Company has adopted the Annual
        Management Incentive Plan (the “Plan”) which authorizes the Company to grant
        incentive compensation to certain employees. All awards granted under Section
        13
        of the Program will be granted pursuant and subject to the terms of the
        Plan.

      

      	1.  	
              PROGRAM
                OBJECTIVES

            

       

      The
        objectives of the Program are to:

       

      	A.  	
              Support
                the Company’s annual planning, budget and strategic planning
                process;

            

       

      	B.  	
              Provide
                compensation opportunities which are competitive with those of other
                beverage alcohol or industry related companies in order to attract
                and
                retain key executives;

            

       

      	C.  	
              Motivate
                executives to achieve profit and other key goals of the
                Company;

            

       

      	D.  	
              Control
                overhead by designating a portion of annual compensation as a variable
                rather than fixed expense.

            

       

      	2.  	
              PROGRAM
                ADMINISTRATION

            

       

      	A.  	
              The
                Human Resources Committee (the “Committee”) of the Company’s Board of
                Directors is responsible for determining which employees shall receive
                awards and the amounts, terms and conditions of all awards under
                the
                Program. The Committee will delegate certain administrative duties
                to the
                Executive Vice President, Chief Human Resources
                Officer.

            

       

      	B.  	
              Decisions
                and determinations by the Committee will be final and binding upon
                all
                persons, including, but not limited to, participants and their personal
                representatives, heirs and assigns.

            

       

      	C.  	
              This
                Program creates no vested or contractual right to the compensation
                provided herein. The Committee shall have the authority to interpret,
                amend or cancel the Program at any time, or to make any other
                determinations that it believes necessary or advisable for the
                administration of the Program. The Committee’s authority includes the
                power, in its sole discretion, to reduce the amount of or eliminate
                an
                Award payable to a participant.

            

       

      	3.  	
              PROGRAM
                PARTICIPATION

            

       

      	A.  	
              The
                Committee is responsible for determining who may participate in the
                Program. The Company will provide a written recommendation to the
                Committee of the employees who he believes should be included in
                the
                Program for a Plan Year. Generally, Awards will

            

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          -
            2 -

        

      

       

      
        	 	
                be
                  made to employees who the Committee believes are in a position
                  to make
                  significant contributions to the financial success of the
                  Company.

              

      

       

       

      	B.  	
              The
                participants for the Plan Year are identified in Schedule A. These
                schedules may be revised at any time during the year, as
                appropriate.

            

       

      	C.  	
              Participants
                may be added to the Program at any time during a Plan Year provided
                that
                such addition occurs before December of the Plan Year. In this case,
                a
                participant’s Salary for purposes of determining an Award shall be
                prorated for the period remaining in the Plan Year. For purposes
                of
                proration, a participant shall be given credit for the entire month
                of any
                month in which the participant participates in the
                Program.

            

       

      	4.  	
              TERMINATION
                OF EMPLOYMENT

            

       

      	A.  	
              In
                the event that a participant terminates employment for reasons other
                than
                death, Disability, Retirement or involuntary termination without
                Cause
                during a Plan Year, the participant will forfeit all rights to an
                Award
                with respect to that Plan Year.

            

       

      	B.  	
              In
                the event that a participant terminates employment for reasons of
                death,
                Disability, Retirement, or involuntary termination without Cause,
                a
                ratable portion of any applicable Award may be paid, subject to the
                attainment of the applicable performance target. The ratable portion
                of
                the Award shall be determined by multiplying the Award by a fraction
                the
                numerator of which is the number of full or partial months during
                the Plan
                Year during which the participant was employed and the denominator
                of
                which is twelve. Such amount will be paid at the same time as when
                Awards
                are paid to other participants.

            

       

      	5.  	
              AWARD
                LEVELS

            

       

      	A.  	
              The
                amount of a participant’s Award will be calculated based on three
                variables: the participant’s management position, Salary and achieved
                performance for the Plan Year.

            

       

      	B.  	
              Each
                participant will be assigned to a certain category (“Participation
                Category”) based on the participant’s management position in the Company
                (see Schedule A).

            

       

      	C.  	
              The
                Committee has established performance targets for each participant
                that
                are based on one or more of the following: a Corporate financial
                performance target (“Corporate Target”), a Division/Company financial
                performance target (“Divisional Target”), an individual performance target
                (“Individual Target”) and a team performance target (“Team Target”).
                Corporate and Divisional/Company Targets are calculated based on
                the total
                CBI and divisional/company operating income, respectively, using
                the
                first-in, first-out method of accounting for inventory valuation
                before
                any adjustments are made for reserves. Schedule C sets forth the
                applicable Corporate and Divisional Targets. Participants who are
                treated
                as “Covered Employees” under Section 13 will have their incentive
                compensation calculated based solely on Corporate and Divisional
                Targets.
                Individual and Team Targets are calculated based on the performance
                of a
                group of employees acting as a team or teams, or individual performance.
                Individual and Team Targets for a participant shall be determined
                by the
                senior officer of the department in which the participant works during
                the
                Plan Year.

            

      
         

        
          
          

        

        
          
          

          
            

          

        

        
          -
            3 -

        

      

       

       

      	D.  	
              A
                participant who has a Corporate Target and one or more other types
                of
                targets (i.e., a Divisional Target, Individual Target and/or Team
                Target)
                will be assigned a weighting to determine the percentage that each
                of the
                targets will contribute towards the participant’s total Award. These
                weightings are set forth at Schedule D (e.g., the Award for a
                CEO/President will be calculated [*****] based on the Corporate Target
                and
                [*****] 
                based on the participant’s Divisional Target). The weightings assigned to
                the Corporate, Divisional, Individual and Team Targets will be referred
                to
                as the “Corporate Percentage”, “Divisional Percentage”, “Individual
                Percentage” and “Team Percentage”,
                respectively.

            

       

      	E.  	
              A
                participant’s Award will be calculated by multiplying the participant’s
                Salary by the appropriate percentage set forth in the Award Schedule
                (Schedule B) taking into account the participant’s Participation Category
                and performance level (e.g., threshold, target, maximum, etc.) with
                respect to the participant’s Corporate Target and multiplying such amount
                by the participant’s Corporate Percentage. If the actual performance level
                falls between the designated levels of performance set forth in Schedule
                B, the percentage by which the participant’s salary is multiplied will be
                interpolated. For example, if the actual performance level falls
                half way
                between the “threshold” and “midpoint” levels, the percentage will be
                calculated as the average of the percentages for the “threshold” and
                “midpoint” levels. A similar calculation is performed for the
                participant’s Divisional, Individual and Team Targets, if any, and the
                participant’s total Award will be the sum of these
                calculations.

            

       

      Example:  Assume
        an
        division CEO of Constellation Brands was listed in Participation Category
        A1,
        had a
        salary of [*****], and achieved the participant’s “threshold” Corporate Target
        and “maximum” Divisional Target. Based on these facts and Schedules B, C and D,
        the participant’s Award would be [*****] (i.e., [*****] x [*****] x [*****] +
        [*****] x [*****] x [*****]).

       

      	6.  	
              PERFORMANCE
                TARGETS

            

       

      	A.  	
              Performance
                measurement criteria will be established for the Plan Year and such
                criteria will relate to corporate, divisional and/or individual
                objectives. Performance targets will be established based on the
                selected
                criteria. Schedule C sets forth the applicable corporate and divisional
                performance criteria and targets for the Plan
                Year.

            

       

      	B.  	
              Schedule
                B sets forth the Award levels based on the attainment of the Corporate,
                Divisional, Individual and Team Targets determined in accordance
                with the
                criteria and targets set forth in
                Schedule C.

            

       

      	7.  	
              AWARD
                ADJUSTMENTS

            

       

      	A.  	
              The
                Committee may make adjustments in the performance criteria, performance
                targets, or in the manner in which such items are determined which
                could
                affect the Awards, 

            

       

      
        

        
            Confidential
            materials omitted and filed separately with the Securities and Exchange
            Commission. Asterisks denote such omission.

           

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          -
            4 -

        

      

       

      
        	  	
                either
                  positively or negatively, provided that such adjustments will only
                  be made
                  for events which by their nature are outside the significant influence
                  of
                  Program participants or which would cause significant unintended
                  effects.
                  In addition, extraordinary occurrences may be excluded or adjustments
                  made
                  when calculating Individual and Team Targets to ensure that the
                  best
                  interests of the Company and its participants are protected and
                  that
                  performance results are consistent with long-term financial and
                  developmental objectives.

              

      

       

      	B.  	
              There
                may be additional adjustments to the Awards of a particular participant
                in
                order to recognize differing levels of personal performance as assessed
                after the close of the Plan Year by the
                Committee.

            

       

      	8.  	
              EFFECT
                OF MERGER, ACQUISITION, REORGANIZATION,
                ETC.

            

       

      	A.  	
              If
                the Company participates during the Plan Year in any material transaction
                such as a corporate merger, consolidation, acquisition of property
                or
                stock, or reorganization that does not result in the termination
                of this
                Program, the Committee shall make adjustments to the performance
                criteria
                as shall be equitable and appropriate in order to make the criteria,
                as
                nearly as practicable, equivalent to the criteria immediately prior
                to
                such transaction.

            

       

      	B.  	
              In
                the event of a Change of Control, as defined under the Plan, the
                Plan Year
                shall end on the date of the Change in Control and the Corporate,
                Divisional, Individual and Team Targets shall be adjusted to reflect
                the
                early termination of the Plan Year. If the Corporate, Divisional,
                Individual and Team Targets, as adjusted, are deemed satisfied by
                the
                Committee, a participant may receive a ratable portion of the Award
                that
                would have been paid if the Plan Year had not been terminated early
                and
                the Corporate, Divisional, Individual and Team Targets had been satisfied.
                The ratable portion of the Award shall be determined by multiplying
                the
                original Award by a fraction with a numerator equal to the number
                of
                months from the first day of the Plan Year to the date of the Change
                of
                Control (including any fractional month) and a denominator equal
                to
                twelve.

            

       

      	9.  	
              PAYMENT
                OF AWARDS

            

       

      
        	  	
                The
                  entire Award calculated in accordance herewith shall be payable
                  within
                  thirty (30) days after a final unqualified audit opinion is provided
                  by
                  the Company’s independent public accountants after the end of each Plan
                  Year. Before any Award is paid to a participant, the Committee
                  will
                  certify, in writing, that the applicable performance targets were
                  achieved
                  and the amount of the Award is accurately
                  calculated.

              

      

       

      	10.  	
              ASSIGNMENT

            

       

      
        	  	
                No
                  right or interest of any Participant in the Program shall be assignable
                  or
                  transferable, or subject to any lien, directly, by operation of
                  law, or
                  otherwise, including levy, garnishment, attachment, pledge or
                  bankruptcy.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          -
            5 -

        

      

       

      	11.  	
              EMPLOYMENT
                RIGHT

            

       

      
        	  	
                The
                  Program shall not confer upon any participant any right to continued
                  employment. The right to dismiss any employee with or without cause
                  or
                  notice is specifically reserved to the
                  Company.

              

      

       

      	12.  	
              WITHHOLDING
                FOR TAXES

            

       

      
        	  	
                The
                  Company shall have the right to deduct from all payments under
                  this
                  Program any federal or state taxes or other employment related
                  withholdings required by law to be withheld with respect to such
                  payments.

              

      

       

      	13.  	
              SPECIAL
                RULES FOR CERTAIN EXECUTIVES

            

       

      	A.  	
              The
                Company’s Chief Executive Officer and certain other individuals designated
                by the Committee (“Covered Employees”) will be subject to special rules to
                ensure that the Awards granted to such individuals will be treated
                as
                qualified “performance-based compensation” under Internal Revenue Code
                Section 162(m). All provisions of the Program and the Plan shall
                be
                interpreted and administered consistently with that intent. The Committee
                will designate those individuals who are to be treated as “Covered
                Employees” on Schedule A.

            

       

      	B.  	
              Notwithstanding
                any provision to the contrary, the following rules will apply to
                Covered
                Employees:

            

       

      	(1)  	
              The
                Committee shall establish Corporate and Divisional Targets for Covered
                Employees that are tied to one or more of the Performance Criteria
                set
                forth in the Plan, and Covered Employees will not receive Awards
                based on
                Individual or Team Targets.

            

       

      	(2)  	
              The
                Committee shall establish a Corporate Target and, if applicable,
                a
                Divisional Target for Covered Employees within 90 days of the commencement
                of the Plan Year. The satisfaction of such targets shall be substantially
                uncertain at the time they are
                established.

            

       

      	(3)  	
              The
                amount of the Award shall be computed under an objective formula
                and the
                Committee shall have no discretionary authority to increase the amount
                of
                the Award or alter the methodology for calculating the Award, except
                as
                permitted by Section 162(m) of the Internal Revenue Code and the
                regulations promulgated thereunder (e.g., the Committee’s discretionary
                authority to adjust performance criteria or targets set forth in
                Section 7
                would not apply to Covered Employees).

            

       

      	(4)  	
              Before
                any Award is paid to a Covered Employee, the Committee will certify,
                in
                writing, that the Corporate Target and, if applicable, the Divisional
                Target was achieved and the amount of the Award is accurately
                calculated.

            

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          -
            6 -

        

      

       

       

      	14.  	
              DEFINITIONS

            

       

      	A.  	
              AWARD

            

       

      “Award”
        shall mean the award to a Participant as determined under the
        Program.

       

      	B.  	
              CAUSE

            

       

      “Cause”
        means gross negligence or willful misconduct or commission of a felony or
        an act
        of moral turpitude determined by the Committee to be detrimental to the best
        interests of the Company or, such other definition set forth in a written
        employment agreement with the Company.

       

      	C.  	
              THE
                COMPANY

            

       

      “The
        Company” shall mean Constellation Brands, Inc. and its direct and indirect
        subsidiaries.

       

      	D.  	
              DISABILITY

            

       

      “Disability”
        is defined as the inability of a participant to perform duties for a period
        in
        excess of the applicable short-term disability coverage provided by the
        Company.

       

      	E.  	
              PLAN
                and PLAN YEAR

            

       

      “Plan”
        shall mean the Constellation Brands, Inc. Annual Management Incentive
        Plan.

       

      “Plan
        Year” shall be the period commencing on March 1, 2006 and ending on February 28,
        2007.

       

      	F.  	
              RETIREMENT

            

       

      “Retirement”
        shall mean a participant’s termination of employment after attaining the age of
        60, provided that the participant has 10 years of service prior to termination
        (a participant’s service with a business the Company acquired through a stock or
        asset acquisition counts for purposes of the 10 year test).

       

      	G.  	
              SALARY

            

       

      “Salary”
        shall mean the participant’s actual base compensation earned for the 2007 Fiscal
        Year. Actual base compensation earned shall be determined exclusive of any
        other
        compensation such as stock option income, grants of any kind, bonus awards,
        etc.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          -
            7 -

        

      

    

     

    

      SCHEDULE
        A

       

      CONSTELLATION
        BRANDS, INC. ANNUAL MANAGEMENT INCENTIVE PLAN FOR EXECUTIVE
        OFFICERS

       

      

       

      EXECUTIVE
        PARTICIPATION LIST  

       

      

      
        	
                 

                Participation
                  Category

                 

              	
                 

                Title

                 

              	
                 

                Participant

                 

              
	
                 

                [*****]

                 

              	
                 

                 Chairman,
                  CEO

              	
                 

                 R.
                  Sands *

                 

              
	
                 

              	
                 

                 President,
                  COO

                 

              	
                 

                 R.
                  S. Sands *

                 

              
	
                 

              	
                 

              	
                 

              
	
                 

                [*****]

                 

              	
                 

                 EVP
                  Chief Financial Officer

                 

              	
                 

                 T.
                  Summer *

                 

              
	
                 

              	
                 

                 EVP
                  Chief Legal Officer

                 

              	
                 

                 T.
                  Mullin *

                 

              
	
                 

              	
                 

                 EVP
                  Strategy & Business Development

                 

              	
                 

                 P.
                  Hetterich *

                 

              
	
                 

              	
                 

                 EVP
                  Chief Human Resources Officer

                 

              	
                 

                 K.
                  Wilson *

                 

              
	
                 

              	
                 

                 CEO
                  Barton

                 

              	
                 

                 A.
                  Berk *

                 

              

      

    

    *
      "Covered" employee

    
      

      
        

      

      
            Confidential
          materials omitted and filed separately with the Securities and Exchange
          Commission. Asterisks denote such omission.

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            -
              8 -

          

        

         

        

           SCHEDULE
            B

          

          AWARD
            SCHEDULE

          FOR
            EXECUTIVE OFFICERS  

          

          

            
              	
                      Participation

                      Category

                    	
                      Threshold

                    	
                      Midpoint

                    	
                      Target

                    	
                      Midpoint

                    	
                      Maximum

                    
	
                      A2

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    
	
                      A1

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    

            

          

           

           

           

           

          

            

            
                Confidential
                materials omitted and filed separately with the Securities and Exchange
                Commission. Asterisks denote such omission.

               

            

          

        

         

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            -
              9 -

          

        

         

        

          SCHEDULE
            C

          

          PERFORMANCE
            SCHEDULE*

          (000’s)

          Performance
            based on Operating Income*

          

          [XXXXX]  

          

            
              	
                      0.25X

                    	
                      0.50X

                    	
                      1.00X

                    	
                      1.50X

                    	
                      2.00X

                    
	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    

            

          

           

          [XXXXX]

          

            
              	
                      0.25X

                    	
                      0.50X

                    	
                      1.00X

                    	
                      1.50X

                    	
                      2.00X

                    
	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    

            

          

           

          [XXXXX]

          

            
              	
                      0.25X

                    	
                      0.50X

                    	
                      1.00X

                    	
                      1.50X

                    	
                      2.00X

                    
	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    	
                      [*****]

                    

            

          

           

          

            
              	
                      *

                    	
                      The
                        measure of “operating income” for purposes hereof shall be operating
                        income determined using the first-in, first-out method of
                        accounting for
                        inventory valuation before any adjustments are made for reserves.
                        “Operating Income” is measured based on the Company’s performance for the
                        period from March 1, 2006 through February 28,
                        2007.

                    

            

            

              

            

            
              
                
                    Confidential
                    materials omitted and filed separately with the Securities and
                    Exchange
                    Commission. Asterisks denote such omission.

                  

                    
                      
                        
                        

                      

                      
                        
                        

                        
                          

                        

                      

                      
                        -
                          10 -

                      

                    

                    SCHEDULE
                      D

                    

                    WEIGHTINGS
                      FOR CORPORATE AND DIVISIONAL/COMPANY TARGETS  

                     

                     

                    
                      

                        
                          	
                                  Corporate/CBI

                                	
                                  Corporate
                                    FIFO

                                  Operating
                                    Income

                                	
                                  Individual

                                
	 Chairman/CEO	
                                  [*****]

                                	
                                  [*****]

                                
	 President/COO	
                                  [*****]

                                	
                                  [*****]

                                
	 EVP	
                                  [*****]

                                	
                                  [*****]

                                

                        

                      

                       

                    

                    

                      
                        	
                                Division/Company

                              	
                                Corporate
                                  FIFO

                                Operating
                                  Income

                              	
                                Divisional
                                  FIFO

                                Operating
                                  Income/Other

                              
	
                                CEO/President

                              	
                                [*****]

                              	
                                [*****]

                              

                      

                    

                     

                     

                     

                     

                     

                     

                     

                     

                    

                      

                      
                          Confidential
                          materials omitted and filed separately with the Securities
                          and Exchange
                          Commission. Asterisks denote such omission.Ex. 10.1 Restricted Stock Agreement

    EXHIBIT
      10.1

    
 

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

     

    The
      Restricted Stock Agreements are substantially identical in all material respects
      except as to the grantee and the number of shares.

    

    Grantee:

    

    George
      L.
      Ball

    Albert
      H.
      Cox, Jr.

    Terry
      E.
      Fields

    David
      N.
      Jordan 

    

    
      
         

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    RESTRICTED
      STOCK AGREEMENT

    

    This
      Restricted Stock Agreement (this “Agreement”)
      is
      made as of this 3rd day of July 2006 (the “Effective
      Date”)
      between Nestor, Inc., a Delaware corporation (the “Company”),
      and
      Albert H. Cox, Jr. (the “Director”).

    

    R
      E C
      I T A L S

    

    A. The
      Company believes it to be in the best interests of the Company and its
      stockholders to take action to promote the stability of its Board of Directors
      and otherwise align the interests of the members of the Board of Directors
      with
      those of the Company; and

    

    B. Accordingly
      the Company has determined to issue restricted shares of stock in accordance
      with the provisions of this Agreement and the 2004 Stock Incentive Plan of
      the
      Company (the “Plan”).
      

    

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

    

    
      	
              1.

            	
              Issuance
                of Restricted Stock.

            

    

    

    Pursuant
      to the provisions of the Plan, and subject to the terms and conditions of the
      Plan and the terms and conditions herein, upon
      execution of this Agreement (the “Grant Date”), the Company will issue to the
      Director 5,000 shares of Common Stock, $0.01 par value per share, of the Company
      (the “Common
      Stock”)
      in
      consideration of the Director’s services to the Company for the term ending at
      the 2006 annual meeting of stockholders. All of such Common Stock issued to
      the
      Director hereby is referred to herein as “Restricted
      Stock”.
      The
      Restricted Stock will also include equity interests of the Company issued with
      respect to the Restricted Stock by way of an equity split, dividend of equity
      or
      other recapitalization. To secure the restrictions on the Restricted Stock,
      the
      Company will retain possession of the certificates representing the Restricted
      Stock, together with executed stock powers in blank, and will provide the
      Director with copies thereof. 

    

    
      	
              2.

            	
              Vesting
                of Restricted Stock.

            

    

    

    All
      of
      the Restricted Stock is non-vested and forfeitable as of the Grant Date. The
      Restricted Stock granted hereunder will be deemed “vested” on the date of the
      annual meeting of the stockholders of the Company in 2006 (currently scheduled
      for July 6, 2006). 

    

    
      	
              3.

            	
              Forfeiture
                of Restricted Stock.

            

    

    

    If
      the
      Director’s service with the Company ceases for any reason, all Restricted Stock
      that is not then vested and non-forfeitable will be immediately forfeited to
      the
      Company upon such cessation for no consideration.

    

    
      	
              4.

            	
              Non-Transferability;
                Legend.

            

    

    

    Until
      the
      Restricted Stock becomes vested and non-forfeitable, it may not be assigned,
      transferred, pledged, hypothecated or disposed of in any way (whether by
      operation of law or otherwise) and shall not be subject to execution, attachment
      or similar process.

    
      
         

        

        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    

    The
      certificates representing the Restricted Stock will bear the following legend:
      

    

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
      AND OTHER TERMS SET FORTH IN A RESTRICTED STOCK AGREEMENT DATED AS OF JULY
      3,
      2006, BETWEEN THE COMPANY AND THE OTHER SIGNATORY THERETO. A COPY OF SUCH
      AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE
      OF BUSINESS WITHOUT CHARGE.”

    

    
      	
              5.

            	
              Rights
                as Stockholder.
                

            

    

    

    Except
      as
      otherwise provided in this Agreement with respect to the non-vested and
      forfeitable Restricted Stock, the Director is entitled to all rights of a
      stockholder of the Company, including the right to vote the Restricted Stock
      and
      receive dividends and/or other distributions declared on the Restricted
      Stock.

    

    
      	
              6.

            	
              General
                Provisions.

            

    

    

    (a) Severability.
      The
      parties agree that each provision herein shall be treated as a separate and
      independent clause, and the unenforceability of any one clause shall in no
      way
      impair the enforceability of any other clauses of this Agreement. If any one
      or
      more provisions of this Agreement is held to be invalid or unenforceable for
      any
      reason, including due to being overbroad in scope activity, subject or
      otherwise: (i) this Agreement shall be considered divisible; (ii) such
      provision shall be deemed inoperative to the extent it is deemed invalid or
      unenforceable; and (iii) in all other respects this Agreement shall remain
      in full force and effect; provided, however, that if any such provision may
      be
      made valid or enforceable by limitation thereof, then such provision shall
      be
      deemed to be so limited and shall be valid and/or enforceable to the maximum
      extent permitted by applicable law. 

    

    (b) Entire
      Agreement.
      This
      Agreement, together with the Plan, constitutes the entire agreement and
      understanding of the parties hereto concerning the subject matter hereof and
      from and after the date of this Agreement, this Agreement shall supersede any
      other prior negotiations, discussions, writings, agreements or understandings,
      both written and oral, between the parties with respect to such subject matter.
      

    

    (c) Counterparts.
      This
      Agreement may be executed in separate counterparts, each of which is deemed
      to
      be an original and all of which taken together constitute one and the same
      agreement. 

    

    (d) Successors
      and Assigns.

    

    
      	(i)  	
              This
                Agreement is personal to the Director and without the prior written
                consent of the Company shall not be assignable by the Director. This
                Agreement shall inure to the benefit of and shall be enforceable
                by the
                Director and the Director’s legal representatives.
                

            

    

    

    
      	 	
              (ii)

            	
              This
                Agreement shall inure to the benefit of and be binding upon the Company
                and its successors and assigns.

            

    

    
      
         

        

        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    
      	 	
              (iii)

            	
              Nothing
                in this Agreement, express or implied, is intended to or shall confer
                upon
                any person other than the parties hereto, and their respective heirs,
                legal representatives, successors, and permitted assigns, any rights,
                benefits, or remedies of any nature whatsoever under or by reason
                of this
                Agreement. 

            

    

    

    (e) Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Rhode Island, without giving effect to any choice of law or conflict
      of
      law provision or rule (whether of the State of Rhode Island or any other
      jurisdiction) that would cause the application of the law of any jurisdiction
      other than the State of Rhode Island. 

    

    (f) Remedies.
      Each of
      the parties to this Agreement and any such Person granted rights hereunder
      whether or not such Person is a signatory hereto shall be entitled to enforce
      its rights under this Agreement specifically to recover damages and costs
      (including reasonable attorneys’ fees) for any breach of any provision of this
      Agreement and to exercise all other rights existing in its favor. The parties
      hereto agree and acknowledge that money damages may not be an adequate remedy
      for any breach of the provisions of this Agreement and that any party and any
      such Person granted rights hereunder whether or not such Person is a signatory
      hereto may in its sole discretion apply to any court of law or equity of
      competent jurisdiction for specific performance and/or other injunctive relief
      (without posting any bond or deposit) in order to enforce or prevent any
      violations of the provisions of this Agreement. 

    

    (g) Amendment
      and Waiver.
      The
      provisions of this Agreement may be amended and waived only with the prior
      written consent of the Company and the Director and no course of conduct or
      failure or delay in enforcing the provisions of this Agreement shall be
      construed as a waiver of such provisions or affect the validity, binding effect
      or enforceability of this Agreement or any provision hereof. 

    

    (h) Notices.
      Any
      notice provided for in this Agreement must be in writing and must be either
      personally delivered, transmitted via facsimile, mailed by first class mail
      (postage prepaid and return receipt requested) or sent by reputable overnight
      courier service (charges prepaid) to the recipient at the address below
      indicated or at such other address or to the attention of such other person
      as
      the recipient party has specified by prior written notice to the sending party.
      Notices will be deemed to have been given hereunder and received when delivered
      personally, when received if transmitted via facsimile, five (5) days after
      deposit in the U.S. mail and one (1) day after deposit with a reputable
      overnight courier service. 

    

    If
      to the
      Company, to: 

    

    Nestor,
      Inc.

    42
      Oriental Street

    Providence,
      Rhode Island 02908

    Attention:
      President 

    

    With
      a
      copy to: 

    

    Nestor,
      Inc.

    42
      Oriental Street

    Providence,
      Rhode Island 02908

    Attention:
      Benjamin M. Alexander, Esq., General Counsel 

    
      
         

        

        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    

    If
      to the
      Director, to:

     

    ___________________________

    ___________________________

    ___________________________

    ___________________________

    

    (i) Business
      Days.
      If any
      time period for giving notice or taking action hereunder expires on a day which
      is a Saturday, Sunday or holiday in the state in which the Company’s chief
      executive office is located, the time period for giving notice or taking action
      shall be automatically extended to the business day immediately following such
      Saturday, Sunday or holiday. 

    

    (j) Descriptive
      Headings.
      The
      descriptive headings of this Agreement are inserted for convenience only and
      do
      not constitute a part of this Agreement. 

     

    (k) Construction.
      Where
      specific language is used to clarify by example a general statement contained
      herein, such specific language shall not be deemed to modify, limit or restrict
      in any manner the construction of the general statement to which it relates.
      The
      language used in this Agreement shall be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rule of strict construction
      shall
      be applied against any party. 

    

    (l) WAIVER
      OF JURY TRIAL.
      EACH OF
      THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
      ANY
      ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
      

    

    (m) Nouns
      and Pronouns.
      Whenever the context may require, any pronouns used herein shall include the
      corresponding masculine, feminine or neuter forms, and the singular form of
      nouns and pronouns shall include the plural and vice versa. 

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Restricted Stock
      Agreement as of the date first written above. 

    

    

      
        	 	 	
                NESTOR,
                  INC.

              
	 	 	 
	 	 	 
	
                By:
                  

              	 	
                /s/
                  Nigel P. Hebborn

              
	
                Name:

              	 	
                Nigel
                  P. Hebborn

              
	
                Title:

              	 	
                Chief
                  Financial Officer

              
	 	 	 
	 	 	 
	 	 	
                DIRECTOR:

              
	 	 	 
	 	 	 
	 	 	
                /s/
                  Albert H. Cox, Jr.

              
	
                Name:

              	 	
                Albert
                  H. Cox, Jr.

              

      

    
      
         

        

        
        

      

      
        -4-

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