EXHIBIT 10.42
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29 March 2005





Mr. Nigel P. Hebborn Nestor, Inc.
400 Massasoit Avenue, Suite 200
East Providence, RI  02914


Dear Mr. Hebborn:

Pursuant to Section 3.2 of your  Employment  Agreement  with Nestor,  Inc.  (the
"Company"), the Compensation Committee has set your bonus targets for 2005.

Your  bonus  for  2005  shall  be 1.0% of the  Company's  2005  earnings  before
interest,   taxes,   depreciation  and   amortization,   as  determined  by  the
Compensation Committee;  provided, however, that if the Company's net income for
2005 exceeds  $500,000,  your bonus for 2005 shall be 2.0% of the Company's 2005
earnings before interest, taxes, depreciation and amortization, as determined by
the Compensation Committee.


Very truly yours,

/s/ Robert G. Flanders, Jr.
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Robert G. Flanders, Jr.
Chairman, Compensation Committee