EXHIBIT 2.1
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                           Memorandum of Understanding
                                     Between
                                Nestor, Inc. and
                            Churchill Lane Associates


Nestor, Inc.  ("Nestor") and Churchill Lane Associates,  ("CLA") hereby agree to
the following  terms regarding the transfer as of the first day of July, 2002 to
CLA of all rights to the royalty  income (the  "Income")  paid to Nestor under a
certain  License  Agreement dated February 1, 2001 and amended June 18, 2002, by
and between ACI Worldwide Inc. ("ACI") and Nestor (the "Agreement").

     1.   Subject to and  immediately  upon the  execution  (the  "Closing")  of
          definitive documents  reasonable  satisfactory to both parties and the
          consent  (the  "Consent")  of  ACI to  the  transactions  contemplated
          therein,   CLA  agrees  to  pay   $3,100,000  in  cash  to  Nestor  in
          consideration  of the transferal to CLA by Nestor of the rights to the
          Income in  perpetuity.  No obligations or other rights of Nestor under
          the Agreement are to be transferred to CLA. It is the intention of the
          parties that such income be reported and paid  directly to CLA by ACI.
          Nestor and CLA will use their best efforts to secure ACI's approval of
          this.

     2.   Upon the date of execution of this MOU, CLA shall advance on or before
          5:00 pm (EST) on such date a  non-refundable  deposit in the amount of
          $300,000,  which  shall be offset  against  the total  amount due upon
          Closing.

     3.   If the Closing has not occurred by 9:00am (EST) on July 19, 2002,  CLA
          may  advance  on or before  5:00 pm (EST) on that  date an  additional
          non-refundable deposit of $300,000,  which shall be offset against the
          total amount due upon Closing,  to preserve their  acquisition  rights
          through August 1, 2002.

     4.   Nestor agrees to provide any information and documentation  reasonably
          requested  by  CLA  and   necessary  to  complete   their  review  and
          documentation  of the  proposed  transaction  in a timely  manner.  In
          addition, Nestor agrees to provide CLA with occasional consulting help
          to  assist  CLA in  understanding,  monitoring  and  evaluating  ACI's
          performance under the licensing agreement.


     5.   This MOU is intended to be a binding  commitment  by CLA and Nestor to
          consummate the transactions described herein, provided,  however, this
          MOU shall immediately terminate without any further obligations of one
          party to the other if: (a) ACI has by August 1,  2002,  failed to give
          the Consent;  or (b) the Closing has not occurred by July 19, 2002 and
          CLA has failed to make the  payment  set forth in section 3; or (c) on
          or before the Closing every non  participating  member of the Board of
          Directors of Nestor has not approved this MOU.

     6.   This MOU shall be governed by and enforced under the laws of the State
          of Delaware (without regard to those pertaining to choice of law).

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     7.   This  MOU  contains  the  complete  agreement  of  the  parties,   and
          supercedes all prior agreements (whether written or oral), relating to
          its  subject  matter.  It may only be amended  by a written  agreement
          signed by both  parties.  It may not be assigned by Nestor,  Inc.  The
          agreement  may be assigned by CLA with the  approval of Nestor,  Inc.,
          which shall not be unreasonably withheld.

For: Nestor, Inc.


By:               /s/ Nigel P. Hebborn
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By:        Nigel P. Hebborn, President & CEO
Dated:     July 15, 2002



For: Churchill Lane Associates



By:               /s/ Alan M. Wiener
   --------------------------------------------------
By:        Alan M. Wiener
Dated:     July 15, 2002




By:               /s/ Alvin J. Siteman
   --------------------------------------------------
By:        Alvin J. Siteman
Dated:     July 15, 2002




By:               /s/ Robert M. Carroll
   --------------------------------------------------
By:        Robert M. Carroll
Dated:     July 15, 2002


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