NESTOR INC
EXHIBIT 10.1 (LEASE AGREEMENT)
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>lease.txt
<DESCRIPTION>EXHIBIT 10.1 (LEASE AGREEMENT)
<TEXT>
                                                                    EXHIBIT 10.1
                                                                    ------------

                                 LEASE AGREEMENT
                                 ---------------

                                    ARTICLE 1
                                    ---------

                              PRINCIPAL LEASE TERMS
                              ---------------------

DATE:                         May 27, 2005


LANDLORD:                     Admiral Associates
--------                      10 Admiral Street
                              Providence, Rhode Island 02908

TENANT:                       Current Address:
------                        ----------------
                              Nestor Traffic Systems, Inc.
                              400 Massasoit Ave. Suite 200
                              East Providence, RI  02914
                              New Address:
                              ------------
                              125 Whipple Street
                              Providence, Rhode Island 02908

LEASED PREMISES:              Approximately  Twelve Thousand Seven ----- Hundred
---------------               (12,700)  square feet of office  space and, to the
                              extent  provided  herein,  11,000  square  feet of
                              warehouse  space (the  "Premises")  located in the
                              group of buildings generally known and referred to
                              as the Union Paper  buildings  located on Admiral,
                              Whipple and Oriental  Streets,  Providence,  Rhode
                              Island,  02908 (the  "Complex").  The Premises are
                              more specifically identified as follows:

                              Building 2  Third Floor   Approx.10,300   sq.  ft.
                                                        (the  "Building 2 Office
                                                        Space")
                              Building 2  Second Floor  Approx. 600 sq. ft. (the
                                                        "Server Room")
                              Building 3  Third Floor   Approx.  1,800  sq.  ft.
                                                        (the  "Building 3 Office
                                                        Space")
                              Building 2  Second Floor  Approx.  11,000  sq. ft.
                                                         (the "Warehouse Space")

                              (The Building 2 Office Space, the Server Room, and
                              the  Building 3 Office  Space,  collectively,  are
                              sometimes referred to as the "Office Space".)

COMMENCEMENT DATE:            The first day of the month  following  the date on
-----------------             which Landlord notifies Tenant that the Build-Out,
                              as defined in Section 3.4, is complete.

INITIAL TERM:                 Except as  provided  in  Section  2.3,  sixty (60)
------------                  months.
<PAGE>

PERMITTED USE:                Office  and  warehouse   use,  in  the  designated
-------------                 portions of the Premises,  in connection  with the
                              operation  of  an  advanced   intelligent  traffic
                              management solutions business.

RENT:    INITIAL TERM         Office Space      $7,408.33 per month
----     ------------         Warehouse Space   (a) First Lease Year - Rent Free
                                                (b)  During  the  Second   Lease
                                                Year,  until  Landlord  delivers
                                                the Additional  Parking  Notice,
                                                as defined in Section  2.2(b)(i)
                                                - Rent Free
                                                (c) After the  earlier  to occur
                                                of the  date  of the  Additional
                                                Parking Notice  delivered during
                                                the  Second  Lease  Year and the
                                                second    anniversary   of   the
                                                Commencement Date - $4.00/sq.ft.


Renewal Term                  Office Space      $7,937.50 per month
------------                  Warehouse Space   $4.50/sq.ft.

                                    ARTICLE 2
                                    ---------

                                PREMISES AND USE
                                ----------------

     Section 2.1.  PREMISES.  (a) Subject to the terms and conditions set out in
this Lease,  Landlord  leases the Premises to Tenant for the  Permitted  Use and
Tenant accepts the Premises from Landlord for the Permitted Use.

               (b) The portion of the Warehouse  Space  occupied by Tenant shall
be determined by Tenant from time to time.

     Section 2.2. OPTION TO CONVERT SPACE. (a) Provided Tenant is not in default
of its obligations hereunder, Tenant shall have the option to convert all or any
portion of the  Warehouse  Space to Office Space (the  "Converted  Space") by so
notifying Landlord and fulfilling each of the conditions in this Section 2.2. In
no event shall Landlord be under any obligation to provide any parking spaces in
excess of those referred to in Section 2.5 by reason of having  received  notice
of  Tenant's  election to convert  unless the said notice by Tenant  follows the
receipt of an Additional Parking Notice by Landlord.

               (b) For purposes of this Lease, the following  definitions  shall
apply:

                    (i) The term "Additional Parking Notice" shall refer to that
notice  delivered by Landlord to Tenant  notifying Tenant of the availability of
not less than seventeen (17) parking spaces monitored remotely by means of video
cameras  in a fenced,  ungated  area in the  Complex  (the  "Additional  Parking
Spaces") in addition to those parking spaces referred to in Section 2.5.

                                       2
<PAGE>

                    (ii) The term  Applicable  Conversion  Space  shall refer to
that portion of the Warehouse  Space equal to the number of  additional  parking
spaces  identified  in  the  Additional   Parking  Notice  times  three  hundred
twenty-five (325) square feet.

               (c) In the event Tenant timely  elects to convert the  Applicable
Conversion Space, Tenant shall be entitled to identify the Applicable Conversion
Space,  provided the remaining  Warehouse  Space has lawful means of ingress and
egress.  In the event  Tenant does not timely  elect to convert  the  Applicable
Conversion  Space,  Landlord  shall  be  entitled  to  identify  the  Applicable
Conversion  Space,  provided the remaining  Warehouse  Space and the Server Room
have lawful means of ingress and egress.

               (d)  Notwithstanding  the  timely  notification  by Tenant of its
election to convert, Tenant shall not be entitled to convert unless the parties,
after using reasonable efforts,  reach agreement on the plans and specifications
for the leasehold  improvements  required in connection with the conversion (the
"Conversion  Work") not later than the second  anniversary  of the  Commencement
Date.

               (e) Landlord  shall  complete the  Conversion  Work in accordance
with the agreed-upon plans and specifications.

               (f) Landlord  shall notify  Tenant when the  Conversion  Work has
been completed. From and after such date, the rent attributable to the Converted
Space shall be equal to the rate then being charged for the Office Space.

               (g) Tenant shall be  responsible  for thirty (30%) percent of the
conversion  costs  ("Tenant's  Conversion  Share").  Tenant  shall pay  Tenant's
Conversion  Share  in  the  following  manner:  (a)  upon  finalization  of  the
conversion  plans and  specifications,  Tenant  shall pay to  Landlord an amount
equal to twenty-five (25%) percent of Tenant's  Conversion Share. ; (b) when the
Office Space is ready for the installation of drywall and such  installation has
begun,  Tenant shall pay an additional amount equal to twenty-five (25%) percent
of Tenant's  Conversion  Share; (c) upon completion of the interior  painting of
the Office  Space,  Tenant shall pay an additional  amount equal to  twenty-five
(25%) percent of Tenant's  Conversion  Share; and (d) on the Commencement  Date,
Tenant  shall pay the final  twenty-five  (25%)  percent of Tenant's  Conversion
Share.

     Section  2.3.  RIGHT  OF  FIRST  REFUSAL.  (a)  Notwithstanding  any  other
provision  in  this  Lease,  from  and  after  the  second  anniversary  of  the
Commencement  Date,  Tenant's  right to occupy all or a portion of the Warehouse
Space  shall be subject to  termination  as  provided  in this  Section  2.3. In
addition,  if, prior to the second  anniversary of the Commencement Date, Tenant
had not timely  elected to convert  the  Applicable  Conversion  Space under the
provisions  of  Section  2.2 after  receiving  the  Additional  Parking  Notice,
Tenant's  right to  occupy  all or a portion  of the  Warehouse  Space  shall be
subject to termination as provided in this Section 2.3.

               (b) In the event Landlord receives an offer (the "Offer") from an
unrelated  third  party to lease all or any  portion of the  Warehouse  Space as
built out office space and Landlord intends to accept the Offer,  Landlord shall


                                       3
<PAGE>

so notify  Tenant and provide  Tenant with the terms of the Offer.  Tenant shall
have the right,  by written  notice to Landlord given within ten (10) days after
its receipt of  Landlord's  notice,  to accept the terms of the Offer in its own
name.

               (c) If Tenant  shall not timely  accept the Offer,  Landlord  may
then lease that  portion of the  Warehouse  Space  identified  in the Offer (the
"Offer  Space") to the named offeror in accordance  with the terms of the Offer.
Tenant shall vacate the Offer Space within twenty (20) days following receipt of
a further  notice from  Landlord  notifying  Tenant of the  execution of the new
lease  containing  the terms of the Offer (the  "Replacement  Lease").  Upon the
execution  of the  Replacement  Lease,  Tenant's  right of first  refusal  shall
expire.

               (d) In the event  Tenant shall  timely  accept the Offer,  Tenant
shall  remain in  possession  of the Offer  Space,  subject  to the terms of the
Offer.  Where a conflict  exists between the terms of the Offer and the terms of
this Lease, the terms of the Offer shall supersede and replace the terms of this
Lease with respect to the Offer Space.

     Section 2.4.  COMMON AREAS.  Tenant shall have the  non-exclusive  right in
common with Landlord,  other  tenants,  invitees,  and others  legally  entitled
thereto, to use for their intended purposes, the elevators,  lobbies, pedestrian
walkways,  waiting areas,  corridors,  restrooms  (other than those described in
Section 5.2(a)), and other portions of the Complex that are available for common
use (the "Common Areas").

     Section  2.5 PARKING  SPACES.  On the  Commencement  Date,  Landlord  shall
designate forty (40) parking spaces monitored remotely by means of video cameras
for the use by employees of Tenant in a fenced, ungated area in the Complex.

                                    ARTICLE 3
                                    ---------

                                  TERM AND RENT
                                  -------------

     Section 3.1.  INITIAL TERM.  Subject to the  provisions of Section  2.3(c),
this  Lease  is for the  Term,  beginning  on the  Commencement  Date.  When the
Commencement  Date  is  determined,  the  parties  shall  execute  a  memorandum
confirming the Commencement Date.

     Section  3.2.  OPTION TO EXTEND.  Provided  Tenant is not in default of its
obligations hereunder,  Tenant shall have the option to renew this Lease for two
additional  one (1) year terms  commencing on the expiration of the Initial Term
(each such  additional  term, a "Renewal  Term").  In the event Tenant elects to
exercise the Option,  Tenant shall so notify  Landlord at least three (3) months
prior to the  expiration  of the Initial Term or the First  Renewal Term, as the
case may be.

     Section  3.3.  RENT.  (a) The rent  payable  during  the  Term  shall be as
described  in Article 1,  Section  2.2(f),  and Section 2.3 and shall be paid in
full in  advance  on the first  day of the month  without  demand  therefor  and
without deduction or set-off whatsoever.

                                       4
<PAGE>

               (b) From and after the date of an Additional Parking Notice until
the second  anniversary  of the  Commencement  Date,  the rent  payable  for the
Warehouse Space shall increase on an annualized  basis by an amount equal to the
number of Additional Parking Spaces times three hundred  twenty-five (325) times
Four ($4.00) Dollars.  From and after the second anniversary of the Commencement
Date,  the rent  payable for all of the  Warehouse  Space shall be equal to Four
($4.00) Dollars per square foot.

     Section 3.4 BUILD-OUT.  (a) Prior to the Commencement Date,  Landlord shall
complete the build-out of the Premises  (the  "Build-Out")  in  accordance  with
plans and  specifications to be agreed upon by the parties after the use by them
of reasonable efforts.

               (b) Tenant shall be  responsible  for thirty (30%) percent of the
cost of the Build-Out ("Tenant's Share"). Tenant shall pay Tenant's Share in the
following manner:  upon execution of this Lease, Tenant shall pay to Landlord an
amount equal to twenty-five  (25%) percent of Tenant's Share. On the same day of
each of the  following  three (3) months,  Tenant  shall pay  twenty-five  (25%)
percent of Tenant's Share.


               (c) It is  anticipated  that the cost of the  Build-Out  shall be
approximately Six Hundred Thousand ($600,000) Dollars (the "Projected Cost"). In
the event the cost of the Build-Out  exceeds the Projected  Cost other than as a
result of a change in design or the use of  materials  requested by Tenant other
than  those  described  in  the  plans  and  specifications,   Tenant  shall  be
responsible  for the timely payment of thirty (30%) percent of the excess in the
same  manner  as  described  in  Section  3.4(b).  In the  event the cost of the
Build-Out  exceeds the  Projected  Cost as a result of a change in design or the
use of materials requested by Tenant other than those described in the plans and
specifications, Tenant shall be responsible for the payment of all of the excess
within thirty (30) days following the receipt by it of an invoice from Landlord.

                                    ARTICLE 4
                                    ---------

                               TAXES AND INSURANCE
                               -------------------

     Section 4.1.  TAXES AND  ASSESSMENTS.  Landlord shall pay and discharge all
taxes,  water rents or charges,  sewer  rents or charges,  assessments  and such
other duties,  charges or payments,  ordinary or  extraordinary,  imposed by any
governmental  or public  authority  as shall  during  the term of this  Lease be
imposed, assessed, levied or become a lien upon the Premises.

     Section 4.2. TENANT'S INSURANCE. Tenant, at its sole expense, shall keep in
full force and effect a policy or  policies  of public  liability  and  property
insurance  with respect to the Premises in which the combined  single  limits of
public  liability  shall not be less than  $1,000,000  and in which the property
damage coverage of not less than $500,000.

     Section 4.3. INDEMNIFICATION.  (a)Tenant shall indemnify,  defend, and hold
Landlord  harmless from and against any injury,  loss,  claim,  or damage to any
person or property  while on or about the Premises  ("Loss")  unless the Loss is


                                       5
<PAGE>

caused by Landlord's negligence,  recklessness, willful misconduct, or breach of
any of the terms of this Lease.

               (b) Landlord shall  indemnify,  defend,  and hold Tenant harmless
from and  against  any  Loss if the Loss is  caused  by  Landlord's  negligence,
recklessness,  willful misconduct,  breach of any of the terms of this Lease, or
work or act done in, on, or about the Premises by Landlord,  its  employees,  or
agents.

     Section 4.4.  SUBROGATION.  Tenant releases Landlord from liability for any
and all loss or damage to the extent  covered by insurance  maintained by Tenant
even if such loss or damage shall be brought about by the fault or negligence of
Landlord or persons claiming under it or for whom it may be derivatively liable.


                                    ARTICLE 5
                                    ---------

                     MAINTENANCE, ALTERATIONS AND OPERATIONS
                     ---------------------------------------

     Section 5.1. MAINTENANCE BY LANDLORD.  Except to the extent necessitated by
the  negligence or failure to act by Tenant,  Landlord shall perform any and all
maintenance  and undertake such repairs as may be necessary in order to keep the
roof, structure,  plumbing,  sprinkler,  electrical,  heating,  ventilation, air
conditioning,  and  Common  Areas of the  Building  in good  order  and  repair,
reasonable wear and tear excepted.

     Section 5.2.  MAINTENANCE BY TENANT.  (a) Except as provided by Landlord in
accordance  with  Section  5.1 and  except  to the  extent  necessitated  by the
negligence  or failure to act by  Landlord,  Tenant  shall  perform  any and all
maintenance  and undertake such repairs as may be necessary in order to keep the
interior  of the  Premises in good order and  repair,  reasonable  wear and tear
excepted.  For this  purpose,  the bathrooms in the third floor hallway shall be
considered a part of the Premises and not a common area amenity.

               (b) In the event Tenant elects to use the  compactor  provided by
Landlord for trash removal,  Landlord shall add One Hundred ($100.00) Dollars to
the rent for each month of Tenant's usage.

     Section 5.3. UTILITIES. (a) Landlord shall furnish or cause to be furnished
electricity, heat, water and sewer service to the Premises in amounts sufficient
for the Permitted Use; provided,  however, Landlord shall not be responsible for
the  failure to deliver  any such  utilities  or services if the failure is as a
result of factors beyond Landlord's control.

               (b) Tenant shall be  responsible  for the cost of natural gas and
electricity consumed on the Premises.  The cost of water and sewer service shall
be included in the rent.

               (c) Landlord shall  separately  meter natural gas and electricity
consumed  in the  Premises.  Landlord  shall  prepare  and deliver an invoice to
Tenant for the natural gas and electricity  consumed by Tenant during the period
reflected in the bill  therefor  received by Landlord.  Landlord  shall bill and


                                       6
<PAGE>

Tenant shall pay for electricity  consumption at the G-02 rate charged from time
to time by The Narragansett Electric Company. Tenant shall pay each such invoice
with the next monthly payment of rent due hereunder. Tenant's payment obligation
hereunder shall be in the nature of the payment of rent.

               (d) Tenant,  at its sole expense,  shall be  responsible  for the
provision of telephone,  data, and other  communication  systems and services to
the Premises and shall pay directly to the service  provider all ongoing charges
in connection therewith.

     Section 5.4. TENANT'S  PROPERTY.  Tenant shall have the right to install in
the  Premises  trade  fixtures  and other  equipment  reasonably  necessary  for
carrying on the Permitted Use. Tenant will pay all taxes charged,  assessed,  or
imposed upon the personal  property of Tenant in or upon the Premises.  All such
property  shall be at the sole  risk and  hazard of  Tenant,  shall be deemed to
remain movable  property and, at the option of Tenant,  may be removed by Tenant
by the  expiration or sooner  termination of this Lease.  In all events,  Tenant
shall pay all  expenses  of and repair any damage  arising out of the removal of
all or any part of such property, however initiated.

     Section 5.5.  TENANT'S  IMPROVEMENTS.  Tenant shall not make any  leasehold
improvements  whether or not the same affect the  structure  of the  building in
which the Premises are located  (which shall be deemed to refer to  improvements
in any form, including  alterations,  partitions,  additions and constructions),
without first  obtaining  the consent of Landlord in writing  thereto which such
consent Landlord shall not unreasonably withhold.

     Section 5.6. REMOVAL UPON  TERMINATION OR EXPIRATION.  At the expiration or
sooner  termination  of this  Lease,  Tenant  shall  remove all of its goods and
effects,  together with all property and improvements  which Tenant is permitted
to remove under the terms of this Lease and  peaceably  yield up the Premises in
as good order,  repair,  and condition as the same were at the Commencement Date
or had been put in thereafter, reasonable wear and tear excepted.

     Section 5.7. LANDLORD'S ACCESS.  Tenant, at reasonable times and reasonable
advance notice (except in the case of an emergency),  shall permit Landlord, its
agents and  employees,  to examine  and inspect  the  Premises  and to enter the
Premises  as  necessary  to  perform  Landlord's  maintenance   responsibilities
hereunder.

                                    ARTICLE 6
                                    ---------

                                    CASUALTY
                                    --------

     Section 6.1. CASUALTY. (a) In the event that all or part of the Premises or
Common Areas is so destroyed by fire or other casualty as to render the Premises
or the remainder thereof  substantially  untenantable or unfit for the Permitted
Use,  for a period  reasonably  expected to exceed  ninety (90) days,  then this
Lease may be  terminated  at the  election  of either  Landlord or Tenant by the
giving,  within sixty (60) days following the date of such  casualty,  of thirty
(30) days'  notice in writing to the other party  hereto,  whereupon  this Lease


                                       7
<PAGE>

shall terminate as of the date of such casualty.  If neither Landlord nor Tenant
elects  to  terminate  this  Lease  or in  the  event  such  destruction  is not
sufficient  to permit either to terminate  hereunder,  then  Landlord,  within a
reasonable  time,  shall  replace,  restore or rebuild  the  destroyed  portions
thereof to  substantially  the same condition as existing  immediately  prior to
said  destruction,  and if such  restoration is not complete  within one hundred
eighty  (180) days of the event of such  damage,  Tenant  shall be  entitled  to
terminate  this  Lease at any  time up to the  time  that  such  restoration  is
complete.  Tenant,  at its sole expense,  shall be responsible  for restoring or
replacing those trade fixtures and equipment which it installed in the Premises.


               (b) In any event of destruction by fire or other casualty, a just
proportion  of the rent  according  to the  extent of the floor  space  rendered
substantially  untenantable or unfit for occupancy shall be abated from the date
of such  casualty  until such space  shall have been  restored  to a  tenantable
condition.

                                    ARTICLE 7
                                    ---------

                                     DEFAULT
                                     -------

     Section 7.1. TENANT'S  DEFAULT.  If Tenant shall neglect or fail to perform
or observe any term, covenant or condition by Tenant to be performed or observed
hereunder,  and such  neglect or failure  shall  continue for more than ten (10)
days after written  notice with respect to the covenant to pay Rent or any other
covenant  calling for the payment of money by Tenant  hereunder,  including  the
obligation to pay Tenant's Share and Tenant's  Conversion  Share,  and more than
thirty (30) days after  written  notice to Tenant  thereof  with  respect to any
other term, covenant or condition,  or if Tenant shall abandon,  vacate or cease
operating  from the  Premises,  or if a  petition  is filed by Tenant  under any
bankruptcy,  receivership,  or other insolvency or creditors'  rights law, or if
such a petition is filed  against  Tenant  under any such law and the same shall
not be dismissed, vacated, stayed, or set aside within thirty (30) days from the
date thereof,  then, and in any of said cases, Landlord may terminate this Lease
by so  notifying  Tenant.  At  the  time  of  the  termination  or at  any  time
thereafter,  Landlord  may rent the  Premises,  and for a term  which may expire
after the expiration of the term of this Lease,  without  releasing  Tenant from
any liability  whatsoever.  Tenant shall be liable for any  reasonable  expenses
incurred by Landlord in connection  with  obtaining  possession of the Premises,
with removing from the Premises  property of Tenant and persons  claiming  under
Tenant (including  warehouse charges) which Tenant was required by this Lease to
remove at the expiration or termination of this Lease, with putting the Premises
into condition for reletting,  and with any  reletting,  including,  but without
limitation,  any differences in the rent to be paid,  reasonable attorneys' fees
and brokers' fees; and any monies  collected from any reletting shall be applied
first to the  foregoing  expenses  and then to the payment of rent and all other
payments due from Tenant to Landlord.

     Section 7.2.  ATTORNEYS'  FEES. In the event of the default by either party
under  this  Lease,  the other  party  shall be  entitled  to  recover  from the
defaulting  party the amount of any attorneys' fees  reasonably  incurred by the
other party in enforcing its rights and remedies hereunder.

                                       8
<PAGE>

     Section  7.3.  NO WAIVER.  No consent or  waiver,  express or  implied,  by
Landlord  or Tenant to or of any  breach of any  term,  covenant,  or  condition
hereunder shall be construed as a consent or waiver to or of any other breach of
the same or any other term,  covenant or condition,  nor shall the acceptance by
Landlord of any rental or other payment when due hereunder  constitute a consent
or waiver by  Landlord to or of any breach of any term,  covenant  or  condition
hereunder.

                                    ARTICLE 8
                                    ---------

                                  MISCELLANEOUS
                                  -------------

     Section 8.1. SUBLETTING AND ASSIGNMENT. Tenant shall not assign this Lease,
whether  directly  or  indirectly  by a change or  changes in the  ownership  or
control of Tenant, or sublease all or any part of the Premises,  without on each
occasion  obtaining the prior written consent of Landlord which Landlord may not
unreasonably  withhold. No assignment of this Lease, sublease or transfer of the
whole or any part of the Premises,  nor the permitting of other use or occupancy
of the same  shall in any way  confer  rights  upon a third  person or affect or
reduce Tenant's continuing obligations under this Lease for the remainder of the
Initial Term or Renewal Term.

     Section 8.2 SECURITY  DEPOSIT.  Upon the  execution  of this Lease,  Tenant
shall pay to Landlord the sum of Seven  Thousand  Four Hundred  Eight and 33/100
($7,408.33) Dollars as a security deposit (the "Security Deposit"). The Security
Deposit  shall be held by  Landlord  throughout  the Term  without  interest  as
security  for  the  faithful  performance  of all of the  terms,  covenants  and
conditions of Tenant.  Landlord  shall have the option at any time and from time
to time to apply any part or the whole of the Security  Deposit to the curing of
any default by Tenant that may exist from time to time without  prejudice to any
other remedy which Landlord may have on account of such default.  Landlord shall
have the right to  commingle  the Security  Deposit with other funds.  If Tenant
shall  fully and  promptly  comply  with all of the  provisions  of this  Lease,
Landlord  shall  return  the  Security  Deposit  (or so much as in then  held by
Landlord) to Tenant after Tenant vacates the Premises.

     Section  8.3.  NO BROKER.  The parties  agree that  neither has engaged the
services of a broker or any person or entity to whom a commission  or fee is due
upon execution of this Lease.

     Section 8.4. FORCE MAJEURE. Landlord shall have no liability to Tenant, nor
shall  Tenant have any right to  terminate  this Lease or abate rent or assert a
claim of partial or total actual or constructive eviction, because of Landlord's
failure to perform any of its  obligations in the Lease if the failure is due to
reasons  beyond   Landlord's   reasonable   control;   strikes  or  other  labor
difficulties;  inability to obtain necessary  governmental permits and approvals
(including  building  permits or certificates of occupancy);  unavailability  or
scarcity of materials;  war; riot; civil insurrection;  accidents;  acts of God;
and governmental preemption in connection with a national emergency.

                                       9
<PAGE>

     Section 8.5.  HOLDING OVER. If Tenant shall hold possession of the Premises
beyond the Lease Term,  Tenant shall pay to Landlord,  for each month or portion
thereof as Tenant shall retain such  possession,  the greater of (a) 150% of the
monthly  rent in effect at the  expiration  of the Lease Term and other  charges
specified  herein or (b) that  monthly  rent that a bona fide  potential  tenant
ready,  willing and able to occupy the Premises  but for  Tenant's  holding over
shall at that time be offering to pay.  In the absence of any  express,  written
agreement  between  Landlord  and  Tenant,  no act or failure to act by Landlord
shall be deemed an acceptance  of Tenant's  occupancy for any fixed term (beyond
the term fixed  herein) in excess of one month.  Nothing  herein shall  preclude
Landlord  from the  exercise of any right of re-entry or other remedy under this
Lease or under law.

         Section 8.6. REMEDIES CUMULATIVE. Any and all rights and remedies which
the parties may have under this Lease and at law and equity shall be cumulative
and shall not be deemed inconsistent with each other and any two or more of such
rights and remedies may be exercised at the same time insofar as permitted by
law.

     Section 8.7. LANDLORD'S RIGHT TO CURE DEFAULTS. Landlord may, but shall not
be obligated,  at any time  following  thirty (30) days' prior written notice to
Tenant,  except if in Landlord's  reasonable  judgment an emergency shall exist,
upon telephonic  notice or an attempt to reach Tenant by telephone,  to cure any
default of Tenant and whenever Landlord so elects, Tenant shall pay to Landlord,
as  additional  rent,  the  reasonable  cost thereof,  together with  reasonable
attorneys fees, if any, incurred by Landlord in completing such cure.

     Section 8.8.  QUIET  ENJOYMENT.  Provided  Tenant  timely pays all rent and
performs and observes all terms, conditions, and covenants of this Lease, Tenant
shall  peaceably and quietly hold,  have,  and enjoy the Premises as provided in
this Lease,  without  hindrance or interruption from Landlord or anyone claiming
by, through, or under Landlord.

     Section 8.9. RULES AND REGULATIONS.  Tenant shall comply with all rules and
regulations  not  inconsistent  with the provisions of this Lease which Landlord
promulgates  from time to time and which apply uniformly to all occupants of the
Building.

     Section  8.10.  NOTICES.  All  notices  relating  to this Lease shall be in
writing and  delivered by  registered  mail,  return  receipt  requested,  or by
overnight express delivery, to the addresses of the respective parties first set
forth above,  or to such other  address as either party may from time to time in
writing direct the other party.

     Section  8.11.  ENTIRE  AGREEMENT.  All  negotiations,  understandings  and
discussions between Landlord and Tenant concerning the Premises are incorporated
within this Lease. No statement,  agreement,  or understanding,  whether oral or
written, not contained in this Lease shall be recognized or enforced.

     Section  8.12.  AMENDMENT.  This Lease  shall not be  modified  except by a
writing  executed by Landlord and Tenant.  No act or omission or any employee or
agent of Landlord or Tenant shall alter, change, or modify any provision of this
Lease.

                                       10
<PAGE>

     Section 8.13.  TIME OF ESSENCE.  Time is of the essence with respect to all
periods of time referred to in this Lease.


     Section  8.14.  RECORDING  MEMORANDUM.  The  recording  of this Lease shall
constitute an event of default  hereunder.  At the request of either party,  the
other shall  execute a memorandum  in form  reasonably  acceptable  to the other
containing the principal  non-financial  provisions of this Lease for recording.
The party  requesting the execution of the memorandum  shall be responsible  for
the costs of preparing and recording the memorandum.

                  IN WITNESS WHEREOF, the parties have caused their authorized
representatives to execute this Lease as of the date first above written.


LANDLORD:                                    ADMIRAL ASSOCIATES


                                             By: /s/ John M. Wilbur
                                                --------------------------------
                                                      Name:  John Wilbur
                                                      Title: CFO / Treasurer
                                                      Duly Authorized


TENANT:                                      NESTOR TRAFFIC SYSTEMS, INC.


                                             By: /s/ William B. Danzell
                                                --------------------------------
                                                      Name:  William B. Danzell
                                                      Title: Chairman
                                                      Duly Authorized




                                       11

</TEXT>
</DOCUMENT>
