8-K

               SECURITIES AND EXCHANGE COMMISSION

                     WASHINGTON, D.C. 20549

                                

                            FORM 8-K

                         CURRENT REPORT

                                

             PURSUANT TO SECTION 13 OR 15 (D) OF THE

                 SECURITIES EXCHANGE ACT OF 1934

                                

                         Date of Report
      (Date of earliest event reported) September 19, 1996
                                

                          NESTOR, INC.

            (Exact name of registrant as specified in charter)

                                

                                

Delaware                      0-12-965        13-3163744
(State of other jurisdiction  (Commission     IRS employer
of incorporation)             file number)    identification no.




One Richmond Square, Providence, Rhode Island  02906
     (Address of principal executive offices)


Registrant's telephone number, including area code: 401-331-9640

                                

                              N/A

   (Former name or former address, if changed since last report)






Item 5.        Other Events.

     1) The Corporation entered into a Prism Non-Exclusive

License Agreement dated September 19, 1996, by and between the

Corporation and Applied Communications, Inc. ("ACI") allowing ACI

to integrate the Corporation's PRISM product into ACI's products

and to distribute sublicensed copies.  A copy of such License

Agreement is annexed as an exhibit hereto.







                            EXHIBITS


The Following exhibit is filed herewith:

Exhibit No.         Description

  10.31             Prism Non-Exclusive License Agreement dated 

                    as of September 19, 1996 between Nestor, Inc.

                    and Applied Communications, Inc.



                                
                           SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


Dated:  October 4, 1996            NESTOR, INC.

                                   (Registrant)


                                   By:
                                      /S/ Herbert S. Meeker
                                      Secretary

EX-10.31

                               

                                
              PRISM NON-EXCLUSIVE LICENSE AGREEMENT

     AGREEMENT  (this  "Agreement") made this nineteenth  day  of
September   1996,  by  and  between  Nestor,  Inc.,  a   Delaware
corporation,  having a place of business at One Richmond  Square,
Providence,  RI  02906  ("Nestor"), and  Applied  Communications,
Inc.,  a Nebraska corporation, having a place of business at  330
South 108 Avenue, Omaha, NE 68154, ("Licensee" and together  with
Nestor, the "Parties" and each singularly a "Party").

     WHEREAS  Licensee  wishes  to  acquire  a  world-wide,  non-
exclusive, limited license to use copies (the "Master Copies") of
three  versions of a software product developed by Nestor  called
PRISM(TM)  (the  "Nestor Software"), which copies and  software  are
more  fully  described  in the Schedule to  this  Agreement  (the
"Schedule"),  in connection with the integration  of  the  Nestor
Software  by  Licensee  into  the products  ("Subject  Products")
described  in the Schedule and with the marketing by Licensee  of
such  Subject  Products and of services related thereto,  and  to
copy, use and sublicense copies of the Nestor Software as part of
such integration and marketing activity,

     NOW THEREFORE, the Parties agree as follows:

I.   Grant of License.

     A.    Subject  to  the provisions of this Agreement,  Nestor
hereby  grants  to  Licensee, and Licensee accepts,  a  personal,
nontransferable  and  non-exclusive,  world-wide   license   (the
"License"), but only:

          1.    to use, internally to Licensee, those portions of
          the   Nestor  Software  which  are  identified  in  the
          Schedule  as  source  code for the  purpose  of  making
          Subject Products, such use shall consist solely of  (i)
          creating interfaces between the Nestor Software and the
          portions  of the Subject Products owned or licensed  by
          Licensee,  which  interfaces  shall  be  compiled  into
          object-code form prior to delivery to any third  party,
          including    without   limitation    any    subsidiary,
          distributor   or   sublicensee   of   Licensee,    (ii)
          translating  into  foreign languages  English  language
          expressions  that  form  part  of  the  graphical  user
          interface  of  the  PRISM  Analysis/Review  System  (as
          defined in the Schedule) and (iii) modifying the  PRISM
          Analysis/Review System; provided that, in the  case  of
          this  clause  (iii),  (a)  Licensee  shall  have  first
          requested that Nestor make such modification and Nestor
          shall  have  declined to do so, (b)  such  modification
          shall  not been released by Licensee to any third party
          without Nestor's prior written approval, which approval
          shall  not  be  unreasonably  withheld,  and  (c)  such
          modification shall become a part of the Nestor Software
          and  shall be owned by Nestor and licensed to  Licensee
          under  this Agreement, except that Nestor's obligations
          pursuant to paragraphs IV A and V B shall not apply  to
          any such modification made by Licensee.

          2.    to use, internally to Licensee, those portions of
          the   Nestor  Software  which  are  identified  in  the
          Schedule  as object code for the purpose of  delivering
          Subject  Products,  such  use  to  consist  solely   of
          including  or  incorporating  such  object  code  in  a
          Subject Product;
          
          3.    to  make  copies  of  the  compiled  object  code
          referred to in subparagraph 1, above, and of the object-
          code  copy  referred to in subparagraph  2,  above,  (a
          "Sublicense Copy" and, together with the Master Copy  -
          as  that  term is defined in the Schedule,  whether  in
          source   or  object  code  -  the  "Copies"  and   each
          singularly  a "Copy"), and (b) to sublicense,  directly
          or  acting  through  any Intermediary  (as  hereinafter
          defined),  within the field-of-use (the "Field-of-Use")
          defined  in the Schedule, in object-code form only  and
          subject  to  the  provisions of paragraph  II  of  this
          Agreement,  such Sublicense Copies for use as  part  of
          Subject Products (provided that Licensee reproduces and
          includes  on  all such copies any copyright  and  other
          proprietary notice of Nestor);
          
          4.     to   reproduce,  modify,  and  adapt  the   User
          Documentation of the Nestor Software, provided that (i)
          any   such   modification  that  may  affect   Nestor's
          intellectual-property  rights  shall  be   subject   to
          Nestor's  prior  written approval,  and  (ii)  Licensee
          shall indemnify, defend, and hold Nestor harmless  from
          any   and   all  expenses,  damages,  costs  (including
          reasonable  attorneys' fees) or losses  resulting  from
          any such modification or adaptation, unless approved in
          writing by Nestor;
          
          5.    to  make  and  use copies of the Nestor  Software
          within   the   premises   of   Licensee   and   Related
          Intermediaries  (as  hereinafter  defined)  solely  for
          demonstration purposes;
          
          6.    to distribute Sublicensed Copies, as  part of its
          distribution of Subject Products, directly  or  through
          Intermediaries   (as   hereinafter   defined),    which
          Intermediaries   shall  have  the  right   to   execute
          Sublicenses (as hereinafter defined), provided that (i)
          Licensee shall not deliver to any Intermediary any part
          of  the  Nestor Software in source code, (ii)  Licensee
          shall   prohibit  each  Intermediary  from   modifying,
          creating  derivative  works from  and,  to  the  extent
          permitted   by  law,  disassembling,  decompiling,   or
          "reverse  engineering" any part of a Sublicensed  Copy,
          and  Licensee shall take all lawful steps necessary  to
          enforce    such    prohibitions,(iii)   no    Unrelated
          Intermediary  (as  hereinafter  defined)   shall   take
          physical  possession  of any Copy,  and  (iv)  Licensee
          shall   have  entered  into  an  agreement  with   each
          Intermediary  containing such terms and  conditions  as
          are  necessary  to  effectuate  the  provisions  and/or
          limitations on use of paragraphs I B and V C, D, E  and
          F  of  this Agreement.  Licensee shall take all  lawful
          steps  necessary  to  enforce the  performance  by  all
          Intermediaries of each and every obligation  enumerated
          in  the  paragraph and will indemnify, defend and  hold
          Nestor harmless from any and all expenses, damages  and
          costs  (including reasonable attorneys' fees) or losses
          resulting from (i)any unlawful act or omission  of  any
          Intermediary,  (ii)  from any act or  omission  by  any
          Intermediary that would breach the provisions  of  this
          Agreement  enumerated  in the preceding  sentence,  and
          (iii)  any act or omission of an Intermediary that,  if
          committed  by Licensee, would constitute  a  breach  of
          this Agreement; and
          
          7.    to  sublicense its rights under this paragraph  A
          to  its  affiliate  known as U. S.  Software,  Inc.  (a
          Nebraska  corporation, hereinafter "USSI" ) solely  for
          the  purpose of permitting USSI to develop  a   Trans24
          Neural   Network   Interface   (as   defined   in   the
          Schedule)and to market and support a Trans24 version of
          the  Nestor  Software, but only so long as  USSI  shall
          remain  under  common control with  Licensee;  provided
          that  USSI  shall  have agreed,  in  a  writing  to  be
          delivered  to Nestor, to be bound by the provisions  of
          paragraphs I, II, IV , V, VI, VII, VIII and X  of  this
          Agreement,  and  further provided that  Licensee  shall
          indemnify,  defend, and hold Nestor harmless  from  any
          and  all expenses, damages, costs (including reasonable
          attorneys'  fees)  or  losses  resulting  from   (i)any
          unlawful act or omission of USSI, (ii) from any act  or
          omission  by  USSI that would breach the provisions  of
          this  Agreement  enumerated in the preceding  sentence,
          and  (iii)  any  act  or  omission  of  USSI  that,  if
          committed  by Licensee, would constitute  a  breach  of
          this Agreement.
          
      As  used  in this Agreement, (i) "Related Intermediary"  of
Licensee shall mean any subsidiary or affiliate of Licensee,  but
only  so long as such subsidiary or affiliate shall be controlled
by  or  under  common control with Licensee, and (ii)  "Unrelated
Intermediaries" shall mean any entity that is neither  controlled
by   or  under  common  control  with  Licensee  or  any  Related
Intermediary,  and  with  which   Licensee  has  entered  into  a
distribution agreement that complies with the provisions of  this
Agreement,   and  (iii)  "Intermediaries"  shall   mean   Related
Intermediaries  and  Unrelated Intermediaries and  "Intermediary"
shall mean any one of them.
     
     B.    Except as expressly permitted in paragraph I A of this
Agreement,  Licensee shall not have any right to use, sublicense,
copy,  create  derivative  works from,  rent,  lease,  assign  or
transfer any Copy. Specifically, without limitation, Licensee  is
expressly prohibited from sublicensing, delivering, or in any way
disclosing to any third party any part of the Nestor Software  in
source-code form.
     
     To   the  maximum  extent  permitted  by  law,  Licensee  is
prohibited  from  modifying  (except as  expressly  permitted  in
paragraph  I  A 1) the Nestor Software delivered to  Licensee  in
object-code  form  or  disassembling,  decompiling,  or  "reverse
engineering" in any way any part of the Nestor Software delivered
to Licensee in object-code form.

     C.   "Source code" is a computer program or any part thereof
in  human-readable  form; "object code"  is  a  computer  program
restricted in its entirety to machine-executable instructions.

     D. All rights not expressly granted to Licensee are reserved
by Nestor.

     II.  Right to Sublicense.
     
     A.    A  Sublicense Copy may be sublicensed only for use  in
and  as  part of a Subject Product. A sublicense of a  Sublicense
Copy (a "Sublicense") may not:

          (1)  entail  or  contemplate a transfer of  any  right,
title or interest in the Nestor Software (other then the right to
use the Sublicense Copy as part of the Subject Product),

          (2)  be granted except in connection with the use by  a
sublicensee  of  a Subject Product which contains the  Sublicense
Copy (including all Nestor proprietary property notices),

          (3)  be  granted  except for the internal  use  of  the
Nestor Software by the sublicensee or

          (4) allow any sublicensee to re-sublicense.
          
     B.   Each Sublicense shall also:

          (1)  contain any terms and conditions contained in this
Agreement that specifically apply to the Sublicense;

          (2)  contain such terms and conditions as are necessary
to  effectuate  the  provisions  and/or  limitations  on  use  of
paragraphs I B and V C, D, E and F;

          (3)  provide that any third-party supplier of  software
incorporated into a Subject Product  at its election  shall  have
the right to enforce the provisions of the Sublicense relating to
the use of its Software; and
          
          (4)  shall be entered into directly between Licensee or
an  Intermediary, as sublicensor, and an end-user  of  a  Subject
Product as sublicensee.

      A  sublicensee may be permitted to transfer its  Sublicense
and  Copy  only  as  part of a transfer of  the  Subject  Product
containing such Copy and only provided that (i) such transfer  is
on   a  permanent  basis,  (ii)  the  sublicensee  transfers  the
Sublicense, the Copy and all accompanying written materials,  and
retains  no  copy  in any form of the foregoing,  and  (iii)  the
transferee agrees to be bound by the terms of the Sublicense.

     C.    Prior  to  Licensee's  first  use  of  any  Sublicense
agreement relating to the Nestor Software, Licensee shall deliver
to  Nestor, for Nestor's approval,  a copy of those provisions of
such  Sublicense  that  pertain to the Nestor  Software.   Nestor
shall  indicate on such approved copy those provisions  that  may
not  be modified by Licensee or any Intermediary without Nestor's
prior  written  approval. Licensee also shall deliver  to  Nestor
prior to  its first commercial release or dissemination one  copy
of  (i)  all documentation relating to each version of the Nestor
Software  contained  in any Subject Product,  including  but  not
limited  to  all  packaging and related  materials  of  any  kind
referring  to Nestor, the Nestor Software or using any  trademark
of  Nestor, and (ii) all Licensee advertising or other  marketing
material of any kind referring to Nestor, the Nestor Software  or
any Subject Product containing the Nestor Software.

III. Royalty Rate, Payment and Related Matters.

     A.    Licensee shall pay to Nestor during the term  of  this
Agreement  royalties  as  set  forth  in  the  Schedule.   Earned
Royalties  shall be due and payable as set forth in the Schedule.
Annual  Quotas  (as  defined in the Schedule)  shall  be  payable
within  thirty  (30)  days after the end of  each  Year  of  this
Agreement.
     
     The  term  "Year of this Agreement" shall mean  any  twelve-
month period commencing with the first day of the month following
the  date  of execution of this Agreement.  Any other amount  due
under  this  Agreement  shall  be paid  when  specified  in  this
Agreement, or, if not so specified, within thirty (30) days after
the date of any invoice therefor. Except as provided in paragraph
IV  of  this Agreement, no payment shall be subject to a  refund;
however, Earned Royalties shall be credits against Annual Quotas.
All  payments due to Nestor from Licensee shall be made in U.  S.
Dollars.  If the Royalty Base underlying the calculation  of  any
part  of  Earned  Royalties  shall be  received  by  Licensee  in
currency  other than U. S. Dollars, such Royalty  Base  shall  be
converted to U. S. Dollars at the exchange rate published in  the
Wall  Street  Journal for the last day of the  month  immediately
preceding the date of payment of such Earned Royalty.  Any amount
not paid when due shall bear interest at the lower of one and one
half  (1  1/2%) percent per month or the maximum rate allowed  by
law.   In the event Nestor is required to institute an action  to
collect  any such amount and shall prevail in whole or  in  part,
Nestor  shall  be  entitled to reimbursement by Licensee  of  its
reasonable expenses so incurred (including attorneys' fees).

     B.    Nestor shall deliver to Licensee, at Licensee's  place
of  business first set forth above, the Base24 Master Copy within
fifteen  (15) days after receipt by Nestor of written  acceptance
of  similar software by Bank One, and such acceptance by Bank One
shall  constitute  acceptance by Licensee of such  Base24  Master
Copy   as   the  marketable  version  of  the  Nestor   Software,
notwithstanding any future change in the Base24 Master Copy  that
may  be agreed to by the Parties. If such acceptance by Bank  One
shall  not  occur within sixty (60) days after the  execution  of
this  Agreement,  the Annual Quota for the  first  Year  of  this
Agreement  shall  be  pro-rated as set  forth  in  the  Schedule.
Delivery by Nestor to Licensee of the Trans24 Master Copy and the
Trans24 Fault-tolerant Master Copy, and acceptance of such Master
Copies  by  Licensee, shall be as subsequently agreed to  by  the
Parties.

     C.   Licensee shall be liable and responsible for payment of
all taxes and duties (except income taxes accrued against Nestor)
arising  from this Agreement and shall indemnify and hold  Nestor
harmless from any failure of Licensee to do so.

     D.    Within thirty (30) days after the end of each  quarter
during  the  term  of this Agreement, Licensee shall  deliver  to
Nestor  a  certificate of a duly authorized officer  of  Licensee
setting  forth  the  number  of  Sublicense  Copies  made  and/or
sublicensed  during such quarter, together with an accounting  of
all amounts constituting a part of the Royalty Base collected  by
Licensee  or  any Related Intermediary and of the calculation  of
Earned  Royalties. Licensee will keep such records as will enable
the  royalties  payable hereunder to be accurately determined  by
Nestor.  Such  records  will be retained  by  Licensee  and  made
available, not more frequently than once during each Year of this
Agreement, to an independent certified public accountant selected
by  Nestor  for examination at the request and at the expense  of
Nestor  during  reasonable  business  hours  at  the  offices  of
Licensee set forth in the preamble to this Agreement for a period
of  at least five (5) years after the date of the transactions to
which the records relate.
     
If any such audit determines that any certificate of Licensee has
understated an amount owed to Nestor by Licensee, Licensee  shall
promptly pay to Nestor the amount of such understatement. If  any
audit determines that any such certificate is understated by more
than  two  percent  (2%),  Licensee shall additionally  reimburse
Nestor for the costs of that audit.

IV.    Third-party   Claims   and   Actions;   Infringement   and
Unauthorized Use
     
     A.   Provided Licensee has promptly upon learning of a claim
or  action (but in any event with sufficient notice not to  cause
Nestor's loss of its right to defend) notified Nestor in  writing
of  any  claim or action in which it is alleged that  the  Nestor
Software  infringes  (i)  a United States  issued  patent,  trade
secret,  or copyright or (ii) a corresponding foreign patent,  or
copyright  (iii) any other patent or copyright if Nestor,  in  it
sole  discretion,  shall  have elected to  take  control  of  the
defense or settlement thereof and Licensee, at no cost to  Nestor
(except  for reasonable out-of-pocket expenses), fully cooperates
with Nestor in such settlement or defense, Nestor shall take sole
control  of the settlement of such claim and the defense  of  any
litigation  resulting solely therefrom and shall  be  responsible
for  the  costs  of  such  defense and will  indemnify  and  hold
Licensee  harmless from the cost of any settlement  or   judgment
resulting solely therefrom.  If Nestor elects not to take control
of  the defense and settlement of any claim described in (iii) of
this paragraph, then any amount paid by Licensee in settlement or
judgment  of such claim shall be credited in a fair and equitable
pro-ration  by  Nestor against royalties payable by  Licensee  to
Nestor  up  to a maximum credit equal to the aggregate  royalties
previously  paid  by  Licensee to Nestor as Earned  Royalties  on
Sublicenses  in  the  jurisdiction in  which  such  intellectual-
property rights are claimed to have been infringed.
     
     If, in connection with any such claim (whether or not Nestor
assumes  control  of the defense and settlement thereof),  Nestor
deems  it  advisable  to replace parts of  the  Nestor  Software,
Licensee  shall  accept such replacement  provided  that  it  has
substantially  the  same  functions  and  features  as  the  part
replaced and is replaced at no cost to Licensee.  If, as a  final
result  of  a  claim  described in the  first  sentence  of  this
paragraph,  the  use  by  Licensee  of  the  Nestor  Software  is
enjoined,  Nestor  shall, at its sole option either  (i)  replace
such parts of the Nestor Software as have been enjoined (provided
that it has substantially the same functions and features as  the
part  replaced and is replaced at no cost to Licensee),  or  (ii)
procure a license for Licensee to use same at no additional  cost
to  Licensee,  or (iii) reimburse to Licensee such  part  of  the
royalty  therefor previously paid pursuant to this Agreement  for
the  affected Sublicense as may be fair and equitable  under  the
circumstances; provided, however, that if Nestor  elects  not  to
assume  control  of  the defense and settlement  of  a  claim  of
infringement  of  a  patent or copyright referred  to  in  clause
(iii)of  the preceding subparagraph of this paragraph IV  A,  its
maximum liability to Licensee shall be the maximum liability  set
forth in the final sentence of the preceding subparagraph of this
paragraph IV A. Notwithstanding the foregoing, the limitation  to
be  applied to all such payments by Nestor to Licensee  shall  be
applied cumulatively.
     
     Notwithstanding the foregoing and subject to paragraph  V  E
of this Agreement, Nestor assumes no obligation or liability for,
and Licensee will indemnify, defend and hold Nestor harmless from
any  and  all  expenses,  damages,  costs  (including  reasonable
attorneys'  fees) or losses resulting from any  claim  or  action
arising from or relating to (i) the breach by Licensee of any  of
its agreements, warranties or duties contained in this Agreement,
(ii)  injury  to person, business or property or other  claim  of
product  liability resulting or arising from the Subject Products
if the use of the Nestor Software alone would not have given rise
to   such  claim,  (iii)  the  use  of  the  Nestor  Software  in
combination  with  any other product, if the use  of  the  Nestor
Software  alone  would not have given rise to  such  claim,  (iv)
Nestor's  compliance with Licensee's design,  specifications,  or
instructions, (v) any actions or claims of trademark infringement
involving  any  marking or branding not applied  or  approved  in
advance  by Nestor, (vi) in whole or in part arising  out  of  or
relating to any modification of the Nestor Software not  made  by
Nestor (whether or not approved by Nestor) or (vii) any claim  of
direct or contributory infringement of any process patent arising
from  the  use  of any Subject Product if the use of  the  Nestor
Software alone would not have given rise to such claim.  The term
"Nestor  Software"  shall not include any  software  licensed  by
Nestor  from  third  parties.  Nestor assumes  no  obligation  or
liability  for  any claim or action arising from or  relating  to
such  software.  This paragraph IV A states the entire  liability
and obligation of Nestor and Licensee and the exclusive remedy of
Licensee  and  its sublicensees with respect to  any  actions  or
claims (i) of alleged infringement relating to or arising out  of
the  subject matter of this Agreement or (ii) otherwise described
in this paragraph IV A.

     B.    Licensee  shall immediately notify Nestor  (with  full
particulars) of any possible infringers or unauthorized users  of
the  Nestor Software of which Licensee obtains knowledge. Nestor,
in  its sole discretion, shall determine what steps, if any,  are
to  be taken with respect to any infringement or unauthorized use
of the Nestor Software and any damages recovered shall be payable
solely to Nestor. Licensee agrees to fully cooperate with Nestor,
at  no  cost  to  Nestor  (except  for  reasonable  out-of-pocket
expenses),  in all stages of any such action. In no  event  shall
Nestor  be  obligated  hereunder to commence  legal  proceedings.
Licensee  shall not undertake any legal action or other steps  of
any  kind  to  prevent  or  restrain  any  such  infringement  or
unauthorized  use or collect damages resulting therefrom  without
Nestor's advance written permission.

V.   Warranties and Covenants.

     A.    Each Party does hereby warrant that this Agreement has
been  duly and validly authorized and executed by it and  is  its
valid and binding obligation and that it has the legal right  and
authority to execute this Agreement.

     B.    Nestor  warrants that no claim has been  made  by  any
third  party that the Nestor Software infringes any United States
issued  patent, trade secret, or copyright of such  third  party.
Nestor warrants that it knows of no claim by any third party that
the  Nestor  Software infringes any foreign patent, copyright  or
trade  secret of such third party.  Nestor warrants that,  for  a
period  of  ninety (90) days after each installation,  PRISM,  as
defined in the Schedule, shall contain substantially the features
and  functions  listed in the document titled,  Prism  Functional
Description,  which is annexed hereto solely for the  purpose  of
listing  such  functions; provided, however, that  such  warranty
shall  be voided in its entirety if Licensee shall have made  any
functional  modification to the Nestor  software  or  shall  have
installed the Nestor software in a manner not in accordance  with
an installation guide to be mutually agreed upon by the Parties.

     C.    EXCEPT  AS PROVIDED IN SUBPARAGRAPHS B AND E  OF  THIS
PARAGRAPH  V, THE NESTOR SOFTWARE IS LICENSED AS-IS. NESTOR  DOES
NOT  WARRANT THAT THE NESTOR SOFTWARE AND THE TECHNOLOGY EMBODIED
THEREIN  ARE  CAPABLE  OF  INDUSTRIAL REALIZATION  OR  COMMERCIAL
EXPLOITATION,  THE  RISKS OF WHICH ARE BEING  ASSUMED  SOLELY  BY
LICENSEE,  AND  NESTOR  SHALL  HAVE  NO  RESPONSIBILITY  FOR  THE
CONSEQUENCES  OF  ANY SUCH FAILURE OF INDUSTRIAL  REALIZATION  OR
COMMERCIAL  EXPLOITATION.  IT IS UNDERSTOOD THAT  NESTOR  IS  NOT
MAKING  AND  EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES
THAT  THE  MANUFACTURE, USE, SUBLICENSING OR SALE OF THE  SUBJECT
PRODUCTS WILL NOT INFRINGE THE PATENTS, COPYRIGHTS, TRADEMARKS OR
OTHER PROPRIETARY PROPERTY RIGHTS OF ANY THIRD PARTY.

     D.  EXCEPT  AS  PROVIDED IN SUBPARAGRAPHS B AND  E  OF  THIS
PARAGRAPH V, NESTOR EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OR
GUARANTEES  OF  ANY KIND WHATSOEVER, EITHER EXPRESS  OR  IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

     E.    REGARDLESS OF WHETHER ANY REMEDY HEREIN FAILS  OF  ITS
ESSENTIAL  PURPOSE, IN NO EVENT WILL NESTOR  BE  LIABLE  FOR  ANY
INCIDENTAL,    SPECIAL,   EXEMPLARY,   PUNITIVE,   INDIRECT    OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING IN  ANY  WAY  TO
THIS  AGREEMENT,  THE  NESTOR SOFTWARE OR THE  USE  OF  THE  SAME
(INCLUDING,  WITHOUT  LIMITATION, DAMAGES FOR  LOST  INFORMATION,
LOST  SAVINGS,  LOST PROFITS OR BUSINESS INTERRUPTION),  EVEN  IF
NESTOR  HAS BEEN INFORMED, IS AWARE, OR SHOULD BE OR SHOULD  HAVE
BEEN  AWARE, OF THE POSSIBILITY OF SUCH DAMAGES.  THE SOLE REMEDY
FOR  ANY  DISK  OR  OTHER MACHINE READABLE MATERIAL  SUPPLIED  BY
NESTOR  WHICH  IS  PHYSICALLY DEFECTIVE  SHALL  BE,  AT  NESTOR'S
OPTION,  REPLACEMENT OF SUCH DISK OR MATERIAL OR  REFUND  OF  THE
ROYALTY PAID TO NESTOR RELATING TO SUCH DISK OR MATERIAL.  EXCEPT
FOR  INDEMNIFICATION OF LICENSEE BY NESTOR PURSUANT TO  PARAGRAPH
IV  A,  IN NO EVENT WILL NESTOR BE LIABLE IN DAMAGES OR OTHERWISE
IN  EXCESS  OF  THE  ROYALTIES RECEIVED BY NESTOR  FROM  LICENSEE
HEREUNDER.  EXCEPT  FOR  BREACHES  OF  THIS  AGREEMENT  AFFECTING
NESTOR'S INTELLECTUAL-PROPERTY RIGHTS (INCLUDING BUT NOT  LIMITED
TO  BREACHES OF PARAGRAPHS I, II, V. F. (1),(2) AND (5), AND  VII
OF  THIS  AGREEMENT) AND REGARDLESS OF WHETHER ANY REMEDY  HEREIN
FAILS  OF  ITS  ESSENTIAL PURPOSE, IN NO EVENT WILL  LICENSEE  BE
LIABLE FOR ANY INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT
OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING IN ANY WAY TO
THIS  AGREEMENT,  THE  NESTOR SOFTWARE OR THE  USE  OF  THE  SAME
(INCLUDING,  WITHOUT  LIMITATION, DAMAGES FOR  LOST  INFORMATION,
LOST  SAVINGS,  LOST PROFITS OR BUSINESS INTERRUPTION),  EVEN  IF
LICENSEE HAS BEEN INFORMED, IS AWARE, OR SHOULD BE OR SHOULD HAVE
BEEN AWARE, OF THE POSSIBILITY OF SUCH DAMAGES.
     
     F.    Licensee  further understands, agrees and/or  warrants
that:
            (1)  it  does not intend to and will not use, market,
sublicense, deliver or transfer in any way the Nestor Software in
violation of any applicable law, rule or regulation of the United
States,  or any State of the United States or any foreign country
of  applicable  jurisdiction (including  without  limitation  any
United  States  law,  rule or regulation relating  to  technology
export  or  transfer)  and it will obtain at  its  own  cost  any
required export licenses;

          (2)  it  will not accept any purchase order or contract
(including  without  limitation  any  United  States  or  foreign
government contract) that by its terms or by the operation of law
will abridge or otherwise diminish Nestor's intellectual-property
rights in and/or to the Nestor Software (and that all such orders
or  contracts  with  any government or governmental  agency  will
include  "restricted"  or "limited" rights provisions,  or  their
equivalents, or be on no less favorable terms to Nestor);

          (3) it has all legal right and authority to conduct its
activities as contemplated by this Agreement, including  but  not
limited  to  the production and license of the Subject  Products,
which  contain,  in addition to the Nestor Software,  substantial
valuable technology belonging or licensed to Licensee;

          (4) this Agreement is a license agreement only, not  an
agreement  for  the sale of any Copy of the Nestor Software,  and
neither Licensee nor any sublicensee obtains any right in  or  to
the  Nestor Software other than the limited right to  use  it  as
provided  in  this  Agreement, and in the case of  Licensee,  the
limited  rights expressly granted by the License,  and  no  other
right  to  create derivative works from, rent, lease,  assign  or
otherwise use, sublicense, copy or transfer any Copy is  granted,
either expressly, by implication or otherwise;

          (5)  Licensee will not infringe the copyright or  other
proprietary  rights  in  the Nestor Software  nor  permit  others
within  Licensee's  control  (including  without  limitation  any
Intermediary) to do so, and it and its sublicensees are,  to  the
maximum  extent  permitted  by law,  prohibited  from  modifying,
disassembling, decompiling, or "reverse engineering" any part  of
the Nestor Software;

          (6)  it  will be solely responsible and liable for  all
necessary or desirable steps to market, and (subject to  Nestor's
providing  the engineering and consulting support  set  forth  in
paragraph  VIII A of this Agreement), to adequately  support  and
maintain, the Subject Products;

          (7)  Licensee assumes all responsibility and  liability
for  the  selection of the Nestor Software to achieve the results
intended and for the installation of, use of and results obtained
from the Nestor Software or any Subject Product;

          (8) it is solely responsible for warranting the Subject
Products  and  liable  for any warranty claims  therefor  (either
express, implied or otherwise); and

          (9)  it is solely responsible for all expenses incurred
by it in its performance of this Agreement.

VI.  Expiration or Termination.

          A.    If Licensee shall have paid to Nestor, when  due,
the  Annual  Quotas and all other sums due to Nestor  under  this
Agreement and shall have been in continuous compliance  with  the
terms  of  this Agreement, (except for breaches which  have  been
fully  and  timely  cured) this Agreement and the  License  shall
**********CONFIDENTIALITY TREATMENT BEING SOUGHT**********
     
       Notwithstanding  the  foregoing,  this   Agreement   shall
immediately terminate if Licensee liquidates, dissolves, shall be
adjudicated insolvent, files or has filed against it  a  petition
in  bankruptcy  or  for reorganization which,  if  filed  against
Licensee,  has not been discharged within one hundred and  eighty
(180)  days of filing, takes advantage of any insolvency  act  or
proceeding, including an assignment for the benefit of creditors,
or  commits any other act of bankruptcy; provided, however,  that
Nestor  shall  only  have the right to suspend  the  License  and
Nestor's  performance  of its obligations  under  this  Agreement
during the pendency of any undischarged involuntary bankruptcy or
reorganization.

     B.   Either  Party  may  terminate this  Agreement  and  the
License by written notice to the other Party, if such other Party
shall  breach any of provision of this Agreement and such  breach
continues  for  at least thirty (30) days after  notice  thereof.
Licensee  may  terminate  this  Agreement  and  the  License   by
delivering  to  Nestor  one  hundred eighty  (180)  days  advance
written notice thereof.

     C.    Notwithstanding any termination or expiration of  this
Agreement,  the  License and any Sublicenses  shall  continue  in
effect  with  respect  to any Sublicense  Copies  sublicensed  by
Licensee prior to termination or expiration; and, except  in  the
event  of  termination  this Agreement by  Licensee  for  breach,
Licensee  shall  remain liable to Nestor for  royalties  accruing
with  respect to such Copies. In the event of termination of this
Agreement  for  breach, all future payments by sublicensees  that
constitute  part of the Earned Royalty Base shall  inure  to  the
benefit,  and  be  payable to the account of,  the  non-breaching
Party.  In the event of termination of this Agreement by Licensee
for  breach,  Licensee shall pay to Nestor during  the  remaining
term  of this Agreement, for each Sublicense then in effect,  the
greater  of  (i)  the  maintenance  fee  provided  for  in   such
Sublicense  or  (ii) an annual amount equal to fifteen  per  cent
(15%) of the Initial License Fee set forth in such Sublicense. In
addition  thereto, Licensee shall pay to Nestor any out-of-pocket
costs of Nestor in connection with maintenance-related travel  to
sublicensee  sites.  Such  fees shall be  adjusted,  as  mutually
agreed between the Parties, as fair compensation to Licensee  for
damages  arising from such breach by Nestor. In consideration  of
such   fees   and  reimbursed  costs,  Nestor  will  provide   to
sublicencees  during  the remaining term of  this  Agreement  the
maintenance  support  set  forth in  paragraph  VIII  A  of  this
Agreement.  Termination or expiration of this Agreement  and  the
License shall not release Licensee from any of its obligations or
liabilities accrued or incurred under this Agreement, or  rescind
or  give  rise to any right to rescind any payment made or  other
consideration given hereunder. Upon termination or expiration  of
this  Agreement  and  the  License,  Licensee  shall  cease   all
marketing  and other activities under the License and  shall,  at
Nestor's    election,   immediately   deliver   to   Nestor    or
(i) irretrievably destroy, or cause to be delivered or destroyed,
any  and  all Copies of the Nestor Software in whatever form  and
any written or other materials relating to the Nestor Software in
Licensee's possession, custody or control, and (ii) within thirty
(30) days, deliver to Nestor a certification thereof.

VII. Confidentiality.

      A.    Licensee agrees, acknowledges and covenants that  (i)
the  data  and  information relating to the  functioning  of  the
Nestor  Software, and (ii) any other information that  is  marked
"Confidential"  (in  either case, whether  oral,  written  or  in
machine-readable form) disclosed to Licensee by  Nestor  pursuant
to  the  provisions of this Agreement (collectively, the  "Nestor
Technology") contain valuable trade secrets and other proprietary
information  of  Nestor, that unauthorized use or  disclosure  of
such  Nestor  Technology would irreparably injure  Nestor,  which
injury cannot be remedied solely by the payment of money damages,
and  that  Licensee  shall  hold in  strict  confidence  and  not
disclose,  reproduce  or  use  the  Nestor  Technology  with  the
exception  of  information which: (i) is already  in  the  public
domain  at  the  time  of  disclosure; or (ii)  after  disclosure
becomes a part of the public domain by publication other than  by
Licensee  in  violation  of  this  Agreement  or  of  any   other
confidentiality  agreement  between  Licensee   and   Nestor   (a
"Confidentiality  Agreement"); or (iii) is received  by  Licensee
from  a  third party who did not require such information  to  be
held  in  confidence  and  who  did  not  acquire,  directly   or
indirectly  through one or more intermediaries, such  information
from Nestor under any obligation of confidence; or (iv) is agreed
to  by  Nestor  in  writing in advance  of  such  publication  or
reproduction. Licensee may disclose the Nestor Technology only to
its  employees and to Related Intermediaries and their respective
employees. provided the entity to whom a disclosure is made   (i)
needs  to know same in order to effectuate the purposes  of  this
Agreement, and (ii) has entered into a confidentiality  agreement
substantially  equivalent  to the foregoing  provisions  of  this
paragraph VII A, which confidentiality agreement can be  enforced
directly or indirectly by Licensee. Licensee guarantees to Nestor
the  performance by all Related Intermediaries of each and  every
obligation  under those agreements and this paragraph,  and  will
indemnify,  defend  and hold Nestor harmless  from  any  and  all
expenses,  damages  and  costs (including  reasonable  attorneys'
fees)  or losses resulting from any breach of such agreements  or
this paragraph.

     Licensee agrees to cooperate fully with Nestor, at  no  cost
to  Nestor (except for reasonable out-of-pocket expenses approved
in  advance  in  writing by Nestor), in any action or  proceeding
whereby Nestor seeks to prevent or restrain any unauthorized  use
of  the  Nestor  Technology  or to  seek  damages  therefor.  The
provisions  of  this Agreement shall not limit any  rights  which
Nestor  may have under any Confidentiality Agreement, whether  in
force before or after this Agreement.
     
     B.    Licensee  shall not disclose to Nestor any information
that  Licensee  considers to be confidential without  first  have
received  Nestor's  written consent to receive  such  disclosure.
Any  confidential information accepted by Nestor pursuant to such
a  written  consent shall be held in confidence  under  the  same
terms and conditions as those applicable to Licensee as set forth
in  subparagraph  A.  of this paragraph VII. Nestor  acknowledges
that the certificates to be delivered to it pursuant to paragraph
III  D  of this Agreement shall be deemed to be confidential  and
shall  be  treated  in  accordance with  the  provisions  of  the
preceding sentence of this subparagraph VII B, and their contents
shall  not be disclosed by Nestor except that their contents  may
be  disclosed  by  Nestor as required by law or as  necessary  to
enforce  Nestor's  rights and Licensee's obligations  under  this
Agreement.
     
     C.    All  of  the  provisions of this paragraph  VII  shall
survive  any  termination  or expiration  of  this  Agreement  or
License.

VIII.  Consulting, Training And Other Services; Enhancements  and
Upgrades

     A.   During  the  term of this Agreement, and provided  that
Licensee is then and always has been in full compliance with  all
of  the  terms  and  conditions of  this  Agreement  (except  for
breaches  which have been fully and timely cured),  Nestor  shall
provide  to  Licensee  such  services  related  to  the  use  and
installation  of  the  Nestor Software as are  described  in  the
Nestor   document  titled  PRISM  Software  and  Client   Support
(excluding   the  Installation  Program  described  therein),   a
specimen of which is attached to this Agreement, up to a  maximum
of  ninety-six  (96) hours of such maintenance support  for  each
Sublicense  during  the first year after the  execution  of  such
Sublicense,  and  a  maximum of forty-eight (48)  hours  of  such
maintenance  support during the second year and subsequent  years
after   the  execution  of  such  Sublicense.  Nestor  will   use
reasonable  commercial efforts to furnish additional  maintenance
support  at the request and expense of Licensee at Nestor's  then
effective  rates for engineering services. If Licensee deems  the
aforementioned level of support, or Nestor's support staffing, to
be  inadequate,  Licensee  may request  that  Nestor  secure  and
maintain additional support staff, all at Licensee's expense, and
Nestor  will  use  its  best efforts to do so.  Such  request  by
Licensee  shall  entail  a commitment by  Licensee  to  reimburse
Nestor  for  all  costs  and expenses  related  to  securing  and
maintain such additional staff for a period of not less than  two
years.   Such  commitment, if made, shall survive any termination
or   expiration  of  this  Agreement  for  the  balance  of   the
commitment.
     
     The  maintenance support described in this paragraph A shall
not  include   any  installation, consulting or customization  of
the   Nestor  Software,  or  modeling,  or  other  services   not
specifically referred to in this paragraph.
     
     B.    Such other services shall be done by Nestor only  upon
Nestor's acceptance, in its sole discretion, of a written request
from Licensee, which request shall be accompanied by a work order
setting forth the work being requested, the identity and location
of  the  relevant sublicensee, and the requested installation  or
delivery  date.  Upon acceptance of any such work  order,  Nestor
shall furnish a quotation, which may be on a fixed-price or time-
and-materials  basis  for  the work to  be  performed,  and  such
quotation  shall remain in effect for ninety (90) days  from  its
date.  The Parties expressly acknowledge and agree that  Licensee
shall be permitted to discount Nestor's quotation up to a maximum
discount of ten per cent (10%) without the prior written  consent
of Nestor.  Except as provided in the Schedule, fees attributable
to  installation, consulting, and/or customization services shall
be  retained by the Party performing such services and shall  not
be  subject  to  any Earned Royalty.  The rates  for  engineering
services set forth in the Schedule shall remain in effect for one
year  following  the  date of execution  of  this  Agreement  and
thereafter shall be adjusted as set forth in the Schedule and may
be further adjusted annually by Nestor upon sixty (60) days prior
written notice Licensee.
     
     C.  In consideration of such services, Licensee shall pay to
Nestor for all services rendered pursuant to this paragraph  VIII
B  engineering  fees  at  the rates set forth  in  the  Schedule.
Licensee  shall  also  reimburse to  Nestor  Nestor's  reasonable
travel  expenses  incurred in providing any services  under  this
paragraph  VIII.  All  services provided by  Nestor  pursuant  to
paragraph  VIII  shall be provided to Licensee, not to Licensee's
customers;  and,  notwithstanding  the  delivery  of   any   such
consulting   services,  Licensee  shall  be  and   remain   fully
responsible and liable to its customers for any Subject Product.

     D.  At  a mutually agreeable time or times during the  first
Year  of  this  Agreement, Nestor will provide  to  Licensee  and
Licensee's  staff an aggregate of four weeks of training  on  the
use and installation of the Nestor Software and two days of sales
training. Such training shall take place at Licensee's  place  of
business.  Licensee shall reimburse to Nestor Nestor's reasonable
travel  and  other  expenses  incurred  in  connection  with  the
activities contemplated by this paragraph VIII D.
     
     E.  During  the  first year of the term of  this  Agreement,
Nestor shall provide to Licensee a maximum of two person weeks of
such  marketing and sales support to Licensee as the Parties  may
agree.  Licensee  shall reimburse to Nestor  Nestor's  reasonable
travel  and  entertainment expenses incurred  in  providing  such
marketing and sales support.

     F.     Nestor  shall  deliver  to  Licensee  any   and   all
enhancements  and upgrades to the Nestor Software that  it  makes
generally  commercially available at no charge to other licensees
of  PRISM.  Nestor shall give Licensee notice of  the  scheduling
releases  no later than such notice is given generally  to  other
licensee  of  PRISM. Such enhancements and upgrades shall  become
part  of  the  respective Master Copy to which they pertain,  and
shall  be  subject  to all of the terms and  conditions  of  this
Agreement.  Such enhancements and upgrades shall not include  any
software marketed by Nestor under any mark other than PRISM,  nor
any software that Nestor is legally prohibited from delivering to
Licensee.
     
     G.  All payments due under this paragraph VIII shall be  due
thirty (30) days after the end of the month in which the services
or  expenses  to  which  they relate were rendered  or  incurred.
Payments  for  partial  staff weeks  or  staff  months  shall  be
prorated.  All activities described in this paragraph VIII  shall
be  subject to all of the terms and conditions of this  Agreement
(including, without limitation, those of paragraph VII).  If  and
to the extent Nestor delivers to Licensee any software as part of
such  activities, such software shall be deemed  delivered  under
and subject to all of the terms and conditions of the License and
this Agreement.

IX. Source-Code Escrow

      Within 90days after delivery by Nestor to Licensee  of  the
first Master Copy or of any update to the Nestor Software, Nestor
shall  deliver  to  an  escrow agent mutually  agreeable  to  the
Parties a copy of the source code of the Nestor Software, subject
to an escrow agreement that is mutually agreeable to the Parties.
Such escrow agreement shall provide that the source code shall be
delivered out of escrow to Licensee only if Nestor (i) files  for
a  liquidating bankruptcy or (ii) is otherwise liquidated and is,
or  its successor in interest is, and will continue to be, unable
to furnish to Licensee the technical support contemplated by this
Agreement.   Any source code delivered out of escrow to  Licensee
shall  be  used  by Licensee solely to maintain Subject  Products
delivered  to  sublicensees prior to such release, and  shall  be
subject to the provisions of paragraph VII of this Agreement. All
expenses  relating to such escrow arrangement shall be  borne  by
Licensee.  If Licensee shall fail to make timely payments of  all
amounts  due  to  the escrow agent, Nestor's  may  terminate  the
escrow  and  demand  return of the Nestor Software,  after  which
Nestor shall have no further obligation under this paragraph.

X.   Miscellaneous

     A.   Licensee will cause any and all Subject Products (which
include  the  Nestor  Software)  and  all  advertising  or  other
marketing  material  of  any  kind, documentation  and  packaging
therefor  to be marked and labeled with and/or reference Nestor's
patent  rights, copyrights,  and/or trade names in the  form  and
style  furnished  by  Nestor to Licensee. Licensee  shall  permit
Nestor  to  make reasonable inspections of the Subject  Products,
but  Nestor  shall  not be liable to Licensee,  sublicensees,  or
others  for  its  failure to do so or for any  defects  which  it
discovers or would or could have discovered by so doing. Licensee
shall  not otherwise use or make reference to such rights,  marks
or  names  of  Nestor without the advance written  permission  of
Nestor.  Nestor may, at any time and from time to  time,  in  its
sole  discretion,  alter  or  revoke  its  instructions  pursuant
hereto;  provided, however, that Licensee shall be  permitted  to
use   then  existing  stocks  of  documentation  and  advertising
materials unless, in the opinion of counsel to Nestor,  such  use
would be legally inadvisable.

     B.    Neither this Agreement, the License or other  interest
hereunder  shall  be  assignable  by  Licensee.  Subject  to  the
foregoing, this Agreement shall inure to the benefit of,  and  be
binding upon, the Parties' successors.
     
     C.    The  headings and captions used in this Agreement  are
for convenience only and are not to be used in the interpretation
of this Agreement.

     D.    The failure of either Party to require performance  of
any  provision of this Agreement shall not affect  the  right  to
subsequently  require  the  performance  of  such  or  any  other
provision  of this Agreement.  The waiver of either  Party  of  a
breach of any provision shall not be taken or held to be a waiver
of  any  subsequent  breach of that provision or  any  subsequent
breach of any other provision of this Agreement.

     E.    The Parties are independent contractors and engage  in
the  operation of their own respective businesses. Neither  Party
is  the  agent  or  employee of the other Party for  any  purpose
whatsoever.  Nothing  in this Agreement  shall  be  construed  to
establish  a  relationship  of  co-partners  or  joint  venturers
between the two Parties. Neither Party has the authority to enter
into any contract or assume any obligation for the other Party or
to  make  any warranty or representation on behalf of  the  other
Party.

     F.   If any provision of this Agreement is, or is determined
to   be,   invalid,  illegal  or  unenforceable,  all   remaining
provisions  of this Agreement shall nevertheless remain  in  full
force  and  effect, and no provision of this Agreement  shall  be
deemed  to be dependent upon any  provision so determined  to  be
invalid,  illegal  or  unenforceable unless  otherwise  expressly
provided  for  herein. Should any provision of this Agreement  be
found  or held to be invalid, illegal or unenforceable, in  whole
or  in part, such  provision shall be deemed amended to render it
enforceable  in  accordance with the spirit and  intent  of  this
Agreement.

     G.    This Agreement has been entered into, delivered and is
to  be  governed  by,  construed,  interpreted  and  enforced  in
accordance with the laws of the State of New York (without giving
reference  to  choice-of-law provisions) from  time  to  time  in
effect.  The Parties agree that the United Nations Convention  on
Contracts for the International Sale of Goods shall not apply  to
any of the transactions which are contemplated by this Agreement.

     H.    If  a  dispute  arises  out  of  or  relates  to  this
Agreement,  the License, a breach  thereof or Licensee's  use  of
the  Nestor  Software,  and  if said dispute  cannot  be  settled
through  direct discussions, the Parties agree to first  endeavor
to  settle the dispute in an amicable manner by mediation in  New
York,   New   York  administered  by  the  American   Arbitration
Association under its Commercial Mediation Rules. Thereafter, any
unresolved  controversy or claim arising out of  or  relating  to
this  Agreement, the License, a breach thereof or Licensee's  use
of  the  Nestor Software, shall be settled by arbitration  before
three  neutral  arbitrators (selected from  a  panel  of  persons
having  experience  with  and  knowledge  of  computers  and  the
computer business, at least one of whom shall be an attorney)  in
administered   by   the  American  Arbitration   Association   in
accordance   with   its   Commercial  Arbitration   Rules.   Such
arbitration  shall be located in New York, New York if  commenced
by  Licensee,  and in Chicago, Illinois if commenced  by  Nestor.
Any provisional or equitable remedy which would be available from
a  court  of law shall be available from the arbitrators  to  the
Parties. In any such proceeding limited civil discovery shall  be
permitted  for  the  production  of  documents,  which  shall  be
governed  by  the  Federal  Rules  of  Civil  Procedure  (without
reference  to any local rules of a particular court). All  issues
regarding discovery requests shall be decided by the arbitrators.
Judgment upon the award of the arbitrators may be enforced in any
court having jurisdiction thereof. The Parties hereby consent  to
the  non-exclusive jurisdiction of the courts of the State of New
York or to any Federal Court located within the State of New York
for  any  action (i) to compel arbitration, (ii) to  enforce  the
award  of  the  arbitrators or (iii) at any  time  prior  to  the
qualification and appointment of the arbitrators, for  temporary,
interim  or  provisional equitable remedies  and  to  service  of
process  in  any  such action by registered mail, return  receipt
requested, or by any other means provided by law.

     I.    This  Agreement  contains  the  entire  and  exclusive
agreement  of  the  Parties with respect to its  subject  matter.
Except  as  otherwise  provided, this  Agreement  supersedes  any
agreements  and understandings, whether written or oral,  entered
into  by the Parties prior to its effective date and relating  to
its   subject  matter.  No  modification  or  amendment  of  this
Agreement  shall  be  effective unless it is stated  in  writing,
specifically  refers hereto and is executed  on  behalf  of  each
Party. The written consent of Nestor required by any provision of
this  Agreement  shall  be deemed to be valid  and  binding  upon
Nestor only if executed by its President.

     J.    Except  as otherwise specified, all notices, payments,
certificates and reports hereunder shall be deemed given  and  in
effect  as of the date of mailing, when sent by express mail  (or
other overnight delivery service), postage prepaid, addressed  to
the  Parties  as  set  forth in the preamble  to  this  Agreement
directed in each case to the President of the Party receiving the
notice  (and  if  to  Licensee, with copy to General  Counsel  of
Licensee)   or  to such other addresses as the Parties  may  from
time  to time give written notice.  Each Party shall use its best
efforts  to respond expeditiously to requests of the other  Party
made pursuant to this Agreement.

     K.    Except  for  failure  to make any  payment  when  due,
neither Party hereto shall be liable to the other for failure  or
delay  in  meeting  any obligations hereunder as  the  result  of
strikes,  lockouts,  war, Acts of God, fire,  flood  or  acts  of
government, if beyond the control of such Party.

          IN WITNESS WHEREOF, the Parties hereto have set their
hands and seals by their duly authorized representatives as of
the day and year first above written.
                                
APPLIED COMMUNICATIONS, INC.     NESTOR, INC.
                                 
                                 
By:____________________________  By:____________________________
Name:/s/ Edward H. Mangold          Name:/s/ David Fox

Title: Senior Vice President,    Title: President
Americas





                            SCHEDULE

Nestor Software:

      "Nestor  Software"  shall  mean Master  Copies  of  PRISMT,
adapted  to function in conjunction with those products  marketed
by Licensee and known as Base24 and Trans24.  PRISM consists of a
credit-card fraud-scoring model ("PRISM Scoring System")  and  an
analytical workflow model ("PRISM Analysis/Review System").   The
Prism  Scoring System runs in batch mode on Tandem NSK  computers
and  under  the UNIX and MVS operating systems, and  will  accept
standardized  inputs  defined by a document titled  Base24  PRISM
Data   Interface  dated  as  of  August  15,  1996.   The   PRISM
Analysis/Review System runs on personal computers  under  Windows
NT.   As  used  in  this Agreement, the Master  Copy  adapted  to
function  in  conjunction with Base24 on  a  Tandem  computer  is
sometimes  referred to as the "Base24 Master  Copy";  the  Master
Copy  adapted  to  function with Trans24 under  UNIX  or  MVS  is
sometimes  referred  to  as the "Trans24 Master  Copy";  and  the
Master  Copy  adapted to function in a fault-tolerant  mode  with
Trans24 under UNIX is sometimes referred to as the "Trans24 Fault-
tolerant  Master  Copy". The Trans24 Fault-tolerant  Master  Copy
contains  calls  to object-code modules of a database  management
system  known  as  "Kala",  which modules  Licensee  will  obtain
directly  from their owner and will deliver to those sublicensees
requiring fault-tolerant Subject Products.

      It is understood that Nestor will use reasonable commercial
efforts, at Licensee's expense, to extend the scope of the Nestor
Software  to include any or all of (i) a debit-card fraud-scoring
model,  (ii)  a  retail-merchant and private-label  fraud-scoring
model,  (iii) a third-party-processor fraud-detection model,  and
(iv)  a  "Trans24 Interface", which will be an interface  between
the  PRISM Scoring System and Licensee's Trans24 product  running
under  the  UNIX or MVS operating systems. The Trans24  Interface
will be developed by Nestor in accordance with specifications  to
be   mutually  agreed  between  the  Parties,  and  will   accept
authorization  data and master-file data from a  "Neural  Network
Interface"  to  be  developed by Licensee, which  Neural  Network
Interface will convert authorization data generated by a  Trans24
system to a format acceptable by PRISM. The Trans24 Interface and
the  Neural  Network Interface, when developed,  shall,  together
with  their  counterparts  in  the interface  between  PRISM  and
Licensee's  Base24 product, be deemed to be included  within  the
meaning  of  the  term  "Nestor  Software"  for  the  purpose  of
determining the Royalty Base. Neither party may deliver any  such
interface  product in its entirety except for use in  conjunction
with  PRISM  and  Base24  or Trans24.  If Licensee  delivers  the
interface  to  a  customer to whom it has or will sublicense  the
Nestor Software, all amounts received for such interface will  be
deemed  part of the Earned Royalty Base.  If Nestor delivers  the
interface  to  a  customer  on the list of  Licensee's  customers
annexed to this Agreement (subject to the applicable exceptions),
all  amounts received by Nestor for such interface and PRISM will
be  credited  against the Cumulative Royalty Base as  hereinafter
set  forth in this Schedule.  Subject to the foregoing,   neither
Party  will owe the other Party any amount or be entitled to  any
credit,  for  authorized deliveries of such  interface  products.
Notwithstanding  the foregoing, either Party  may  use   for  any
purpose  the  portion of the interface that such party  developed
without  any  obligation to account to the other Party,  provided
that  such  use does not result in any use or disclosure  of  the
other  Party's  confidential information  or  other  intellectual
property.  All other extensions of the Nestor Software, including
without  limitation the extensions described  in  (i),  (ii)  and
(iii)  of  this  paragraph, shall be and remain the  property  of
Nestor.

Prior  to  the first commercial use of any version of the  Neural
Network Interface, Licensee shall deliver to Nestor a source-code
copy of such version, together with all related documentation.

     The  portion of the Nestor Software which is to be delivered
in  source  code  is  the (i) Application Program  Interface  and
Visual  Basic code needed to integrate PRISM within  Base24,  and
(ii)  the  PRISM Analysis Review System. All of the remainder  of
the Nestor Software is to be delivered in object code.

     Licensee  or  each sublicensee shall be required  to  obtain
licensed  copies of third-party software specified in the  System
Requirements  document  annexed  to  this  Agreement   including,
without  thereby limiting,  Windows NT, Atlas GIS and, for  UNIX-
based  systems, Kala database-management software  for  use  with
Trans24 Fault-tolerant Subject Products.
     
Subject Products:

     "Subject Products" shall mean computer software and hardware
consisting of the  products marketed by Licensee known as  Base24
(Tandem  NSK operating system) and Trans24 (UNIX or MVS)  systems
(either  as  currently  existing  or  as  hereafter  revised   or
modified,  if  in  the  latter case only with  substantially  and
materially   the   same   functionality   as   those    currently
existing),(i) with which Licensee shall have integrated,  at  the
time  of  installation, the object-code portions  of  the  Nestor
Software  or  (ii) if previously installed, to which the  object-
code  portions of the Nestor Software are added pursuant to  this
Agreement.

Field-of-Use:

     The term "Field-of-Use" shall mean integration of the Nestor
Software  into the Subject Products for the purpose of delivering
such  Subject Products for credit- and debit-card fraud detection
by  commercial  banks,  retail merchant organizations,  and  only
those entities identified as "Approved Processing Entities"  that
provide such services to retail merchants or commercial banks.

Approved Processing Entities:

Licensee  has  furnished to Nestor a copy of its  customer  list,
which  is  attached  to  this  Agreement,  on  which  Nestor  has
indicated  processors who are not approved.  All other  customers
of  Licensee  on  such  list who may be processors  are  Approved
Processing  Entities and are included in the  Field-of-Use.   The
name of any customer or prospective customer of Licensee who is a
processor and is not so approved must be submitted to Nestor  for
such approval and inclusion, at Nestor's sole discretion, in  the
Field-of-Use.

Royalties:

Earned Royalties:

Licensee  shall  pay  to Nestor the greater of  (i)  the  Minimum
Earned  Royalties  or (ii) the product of the applicable  Royalty
Rate times the Royalty Base, all of which are set forth below  in
this Schedule.

Earned Royalty Base:

The  following  revenues  received from sublicenses,  whether  by
Licensee  or  Related  Intermediaries,  in  connection  with  the
installation,   delivery  and  use  of  Subject  Products   shall
constitute  the  Royalty Base: all fees of any nature  whatsoever
arising  from  a  Sublicense  of the Nestor  Software,  including
without  limitation  (i) initial license fees (including  license
fees  charged  by  Licensee  for  PRISM  and  for  software  that
interfaces  PRISM with the remainder of any Subject Product,  and
installation fees to the extent that such fees exceed  Licensee's
normal charges for engineering services), (ii) maintenance  fees,
and  (iii) use fees.  If any portion of such revenue is  withheld
for  income-tax purposes, the Earned Royalty Base will be include
the gross amount of revenues without regard to such withholding.

Any  amount  paid  to Nestor by Licensee or any  sublicensee  for
engineering  or  consulting services, including  without  thereby
limiting  amounts paid to Nestor for installation,  modeling,  or
modification of the Nestor Software, shall be excluded  from  the
Royalty Base.

Earned Royalty Rate:

During  the  first two years of the term of this  Agreement,  the
Royalty  Rate  to  be applied in the calculation  of  any  Earned
Royalty shall depend upon the cumulative aggregate royalties paid
by  Licensee to Nestor from the commencement of the term of  this
Agreement up to the date of such calculation, as set forth below:

   **********CONFIDENTIALITY TREATMENT BEING SOUGHT**********

During  each subsequent Year of this Agreement, the Royalty  Rate
to  be  applied to the Royalty Base shall be the Royalty Rate  in
effect as at the end of the second Year of this Agreement.

The  above Cumulative Royalty Base and Cumulative Royalties Prior
to  Calculation shall relate only to Earned Royalties paid on the
Royalty  Base  and shall specifically exclude any  other  payment
made by License to Nestor for engineering or other services.

For the purposes of this section, the Cumulative Royalty Base
shall be deemed to include the Earned Royalty that would have
been payable to Nestor on any PRISM license entered into between
Nestor and any entity on the list of Licensee's customers annexed
to this Agreement, had Licensee entered into a Sublicense with
such entity; provided, however, that transactions with the
following entities shall not be so included, whether or not such
entities appear on the **********CONFIDENTIALITY TREATMENT BEING
SOUGHT**********

Minimum Earned Royalties:


In  no event shall Earned Royalties payable by Licensee to Nestor
with respect to any Sublicense be less than the following:

   **********CONFIDENTIALITY TREATMENT BEING SOUGHT**********

For  the  purposes of calculating Minimum Earned  Royalties,  the
term  "active  account"  shall mean  any  cardholder  account  of
sublicensee (or, in the case of a sublicensed processor, that  is
processed by sublicensee) that had a positive balance or at least
one  transaction (whether a charge or a payment)  or  posting  or
authorization  during the twelve (12) months  preceding  (i)  the
execution  of  the  relevant Sublicense in the  case  of  initial
license  fees,  and  (ii) each anniversary of  the  term  of  the
Sublicense in the case of use fees.


Quota

   **********CONFIDENTIALITY TREATMENT BEING SOUGHT**********

Credits

     Earned Royalties paid by Licensee to Nestor during any  Year
of  this  Agreement shall be credited toward the Quota  for  such
Year of this Agreement.
     
Exceptions to Earned Royalty Rates:

   **********CONFIDENTIALITY TREATMENT BEING SOUGHT**********


C.    Any copy of the Nestor Software that is (i) installed at an
office  of  Licensee or any of its subsidiaries  solely  for  the
purpose of demonstrating the Nestor Software, (ii) not used as  a
production system, and (iii) does not entail any charge to  third
parties  for its use, shall not be subject to the Minimum  Earned
Royalty set forth above.

Engineering and Modeling Fees:

      Licensee shall pay to Nestor fees for model development and
other engineering in accordance with the following fee schedule:

   **********CONFIDENTIALITY TREATMENT BEING SOUGHT**********



Payment Terms:

Earned Royalties related to Initial License Fees and installation
of  the  Nestor Software shall be paid no later than the earliest
of (i) (30) days of receipt of the related Earned Royalty Base by
Licensee   or  any  Intermediary,  (ii)  sixty  (60)  days   from
acceptance by the relevant sublicensee of the Subject Product, or
(iii)  120  days  from  the  date of execution  of  the  relevant
Sublicense, except for the first two Sublicenses entered into  by
Licensee,  for which the applicable period in this  clause  (iii)
shall  be 150 days.  Earned Royalties relating to Use Fees  shall
be  payable the earliest of (i) thirty (30) days from receipt  by
Licensee or any Intermediary, (ii) thirty (30) days from the date
on  which  payment  of  such use fee by the relevant  sublicensee
shall be due, or (iii) sixty (60) days after the commencement  of
the period to which such use fees apply.

Cost-of-Living Adjustments:

      All  royalties,  engineering and modeling fees,  any  other
amount  payable  by  Licensee to Nestor,  and  any  other  amount
expressed  in this Agreement as a dollar rate or absolute  dollar
amount  shall  be  adjusted during each Year  of  this  Agreement
beginning  with  the first anniversary date of the  execution  of
this  Agreement in proportion to increases in the Consumer  Price
Index  from  year to year during the term of this Agreement.  For
any  Year of this Agreement in which the Consumer Price Index has
increased  over  the  preceding  Year  of  this  Agreement,  such
increase shall be calculated by multiplying each such dollar rate
or  absolute amount then in effect by the most recently published
Consumer Price Index as at such anniversary date and dividing the
resulting product by the Consumer Price Index as at the preceding
anniversary date of execution of this Agreement or, in  the  case
of  the  first  anniversary of the execution of  this  Agreement,
dividing the resulting product by the Consumer Price Index as  at
the date of execution of this Agreement.