EXHIBIT 10.4


             REAFFIRMATION AND RATIFICATION AGREEMENT AND AMENDMENT


                                                              December 28, 2005
Laurus Master Fund, Ltd.
c/o Laurus Capital Management, LLC
825 Third Avenue
New York, New York 10022

Ladies and Gentlemen:


Reference is made to the (a) the Security Agreement dated as of the May 16, 2005
by Nestor Traffic  Systems,  Inc.  ("NTSI") and Nestor,  Inc. (the "Company") in
favor of Laurus  Master Fund,  Ltd., a Cayman  Islands  company  ("Laurus")  (as
amended,  modified or supplemented from time to time, the "Security Agreement"),
(b) the Pledge and Security  Agreement dated as of May 16, 2005 between NTSI and
Laurus (as  amended,  modified or  supplemented  from time to time,  the "Pledge
Agreement")  and (c) the  Subsidiary  Guaranty  dated as of May 16, 2005 made by
NTSI in favor of Laurus(as amended,  modified or supplemented from time to time,
the  "Subsidiary  Guaranty",  and together  with the Security  Agreement and the
Pledge Agreement, the "Existing Security and Guaranty Agreements").

To induce Laurus to provide additional  financial  accommodations to the Company
evidenced by (i) that certain  Secured Term Note,  dated December 28, 2005, made
by the Company in favor of Laurus (as  amended,  modified or  supplemented  from
time to time, the "Note"), (ii) the Securities Purchase Agreement referred to in
the Note (as amended,  modified or supplemented from time to time, the "Purchase
Agreement") and (iii) the Related Agreements referred to in, and defined in, the
Purchase  Agreement  (the  agreements  set forth in the  preceding  clauses  (i)
through (iii), inclusive,  collectively, the "December Agreements"), each of the
Company and NTSI hereby:

     (a) represents and warrants to Laurus that it has reviewed and approved the
terms and provisions of the December  Agreements and the documents,  instruments
and agreements entered into in connection therewith;

     (b) acknowledges,  ratifies and confirms that all indebtedness incurred by,
and all other  obligations  and  liabilities  of, the Company and NTSI under the
December  Agreements  are  (i)  "Obligations"  under,  and  as  defined  in  the
Subsidiary  Guaranty,  (ii) "Obligations" under, and as defined in, the Security
Agreement  and  (iii)  "Indebtedness"  under,  and as  defined  in,  the  Pledge
Agreement;

     (c)  acknowledges,  ratifies and confirms that the December  Agreements are
"Documents"  under,  and as defined in,  each of the  Subsidiary  Guaranty,  the
Security Agreement and the Pledge Agreement;

     (d) acknowledges,  ratifies and confirms that all of the terms, conditions,
representations  and covenants  contained in the Existing  Security and Guaranty



Agreements  are in full force and effect as of the date hereof and shall  remain
in full force and effect after giving effect to the execution and  effectiveness
of the December Agreements;

     (e)  represents  and warrants  that no offsets,  counterclaims  or defenses
exist as of the date hereof with respect to any of the undersigned's obligations
under any Existing Security and Guaranty Agreement; and

     (f)  acknowledges,  ratifies and confirms the grant by the Company and NTSI
to  Laurus  of a  security  interest  in the  assets of  (including  the  equity
interests owned by) the Company and NTSI, respectively, as more specifically set
forth in the Existing Security and Guaranty Agreements.

     The Company,  NTSI and Laurus hereby agree that this letter agreement shall
constitute  a  "Related  Agreement"  under,  and as  defined  in,  the  Purchase
Agreement.



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     This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York.

                                          Very truly yours,

                                          NESTOR TRAFFIC SYSTEMS, INC.




                                          By:_______________________________
                                             Name:
                                             Title:





                                          NESTOR, INC.




                                          By:_______________________________
                                             Name:
                                             Title:


Acknowledged and Agreed to by:


LAURUS MASTER FUND, LTD.


By:___________________________
   Name:
   Title:




                   [SIGNATURE PAGE TO REAFFIRMATION AGREEMENT]




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