EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), made as of this 7 ^th 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.

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:

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.

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.

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.

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