CONVERTIBLE NOTE

EXHIBIT 10.44

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THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT

BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE

COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR

SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION

STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY

SATISFACTORY TO NESTOR, INC., THAT SUCH REGISTRATION IS NOT REQUIRED.

CONVERTIBLE NOTE

FOR VALUE RECEIVED, NESTOR, INC., a Delaware corporation (hereinafter

called the "Borrower"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o

Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South

Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the "Holder") or

its registered assigns or successors in interest, on order, without demand, the

sum of Six Million Dollars ($6,000,000), together with any accrued and unpaid

interest and fees on May 16, 2008 (the "Maturity Date"). Capitalized terms used

herein without definition shall have the meanings ascribed to such terms in that

certain Securities Purchase Agreement dated as of the date hereof between the

Borrower and the Holder (the "Purchase Agreement").

The following terms shall apply to this Note:

ARTICLE I

INTEREST & AMORTIZATION

1.1 (a) INTEREST RATE. Interest payable on this Note shall accrue at the

"base rate" or "prime rate" published in the WALL STREET JOURNAL from time to

time, plus four percent (4.00%) (such sum, the "Contract Rate") commencing on

June 1, 2005 and be payable in arrears on the first day of each consecutive

calendar month thereafter, and on the Maturity Date, accelerated or otherwise,

due and payable as described below. The Contract Rate shall be increased or

decreased as the case may be for each increase or decrease in the Prime Rate in

an amount equal to such increase or decrease in the Prime Rate; each change to

be effective as of the day of the change. Except pursuant to Section 1.1(b), the

Contract Rate shall not at any time be less than six percent (6.00%). Interest

shall be calculated on the basis of a 360 day year, provided however, that if

the closing price of the Common Stock shall exceed $5.82 for a period of no less

than five (5) consecutive trading days in a given calendar month, the Contract

Rate shall be reduced to the "base rate" or "prime rate" published in the Wall

Street Journal from time to time, plus two percent (2.00%) for such calendar

month.

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(b) CONTRACT RATE ADJUSTMENTS AND PAYMENTS. The Contract Rate shall be

calculated on the last business day of each calendar month hereafter (other than

for increases or decreases in the Prime Rate which shall be calculated and

become effective in accordance with the terms of Section 1.1(a)) until the

Maturity Date (each a "Determination Date") and shall be subject to adjustment

as set forth herein. If (i) the Borrower shall have registered the shares of the

Common Stock underlying the conversion of this Note and each Warrant on a

registration statement declared effective by the Securities and Exchange

Commission (the "SEC"), and (ii) the market price (the "Market Price") of the

Common Stock as reported by Bloomberg, L.P. on the Principal Market for the five

(5) trading days immediately preceding a Determination Date exceeds the then

applicable Fixed Conversion Price by at least twenty-five percent (25%), the

Contract Rate for the succeeding calendar month shall automatically be reduced

by 200 basis points (200 b.p.) (2%) for each incremental twenty-five percent

(25%) increase in the Market Price of the Common Stock above the then applicable

Fixed Conversion Price. Notwithstanding the immediately foregoing, the Contract

Rate shall not be less than 0.0%.

1.2 PRINCIPAL. The Borrower shall make repayments of principal on the Note

as follows:

---------------- ---------------------- ---------------- ----------------------

Date Principal Payment Date Principal Payment

---------------- ---------------------- ---------------- ----------------------

9/1/2005 181,818 2/1/2007 181,818

10/1/2005 181,818 3/1/2007 181,818

11/1/2005 181,818 4/1/2007 181,818

12/1/2005 181,818 5/1/2007 181,818

1/1/2006 181,818 6/1/2007 181,818

2/1/2006 181,818 7/1/2007 181,818

3/1/2006 181,818 8/1/2007 181,818

4/1/2006 181,818 9/1/2007 181,818

5/1/2006 181,818 10/1/2007 181,818

6/1/2006 181,818 11/1/2007 181,818

7/1/2006 181,818 12/1/2007 181,818

8/1/2006 181,818 1/1/2008 181,818

9/1/2006 181,818 2/1/2008 181,818

10/1/2006 181,818 3/1/2008 181,818

11/1/2006 181,818 4/1/2008 181,818

12/1/2006 181,818 5/1/2008 181,818

1/1/2007 181,818

---------------- ---------------------- ---------------- ----------------------

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ARTICLE II

BORROWER PAYMENT OPTIONS

2.1 MONTHLY PAYMENTS IN CASH OR COMMON STOCK. The Borrower shall make

monthly payments of (i) accrued and unpaid interest on the aggregate principal

of the Note (plus any payments due and owing under the Purchase Agreement and

the Note not previously paid) and (ii) payments of principal according to the

schedule set forth in Section 1.2 hereof (collectively, the "Monthly Amount")

beginning on September 1, 2005 and on the first day of each consecutive calendar

month thereafter (each a "Repayment Date"). Subject to the terms hereof, the

Borrower has the sole option to determine whether to satisfy payment of the

Monthly Amount in full on each Repayment Date either in cash or in shares of

Common Stock, or a combination of both. The Borrower shall deliver to the Holder

a written irrevocable notice in the form of Exhibit B attached hereto electing

to pay such Monthly Amount in full on such Repayment Date in either cash or

Common Stock, or a combination of both ("Repayment Election Notice"). Such

Repayment Election Notice shall be delivered to the Holder at least ten (10)

days prior to the applicable Repayment Date (the date of such notice being

hereinafter referred to as the "Notice Date"). If such Repayment Election Notice

is not delivered within the prescribed period set forth in the preceding

sentence, then the repayment shall be made in cash. If the Borrower elects or is

required to repay all or a portion of the Monthly Amount in cash on a Repayment

Date, then, with respect to the portion of the Monthly Amount to be paid in

cash, on such Repayment Date the Borrower shall pay to the Holder an amount

equal to (x) 103% of the principal portion of the Monthly Amount plus (y) any

accrued and unpaid interest in satisfaction of such obligation. If the Borrower

repays all or a portion of the Monthly Amount in shares of Common Stock, the

number of such shares to be issued for such Repayment Date shall be the number

determined by dividing (x) the portion of the Monthly Amount to be paid in

shares of Common Stock, by (y) 5.82 (the "Fixed Conversion Price").

2.2 No EFFECTIVE REGISTRATION. Notwithstanding anything to the contrary

herein, the Borrower shall be prohibited from exercising its right to repay the

Monthly Amount in shares of Common Stock (and must deliver cash in respect

thereof) on the applicable Repayment Date if at any time from the Notice Date

until the time at which the Holder receives such shares there fails to exist an

effective registration statement or an Event of Default hereunder exists or

occurs, unless otherwise waived in writing by the Holder in whole or in part at

the Holder's option.

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2.3 COMMON STOCK PAYMENT RESTRICTIONS. Notwithstanding anything to the

contrary herein, for the avoidance of doubt, (a) if the volume weighted average

price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market

for each of the 10 trading days preceding a Repayment Date was greater than 120%

of the Fixed Conversion Price, the Borrower may elect to pay all or a portion of

the Monthly Amount in shares of Common Stock; (b) if the volume weighted average

price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market

for any of the 10 trading days preceding a Repayment Date was less than 120% of

the Fixed Conversion Price, and the Borrower has elected to pay all or a portion

of the Monthly Amount in shares of Common Stock, then, instead of the Borrower

delivering the required number of shares of Common Stock on the Repayment Date,

the Holder and the Borrower may mutually agree to convert an amount equal to

what the Borrower elected to pay in shares of Common Stock at a conversion price

equal to 87% of the volume weighted average price of the three (3) lowest days

during the twenty (20) trading days immediately preceding the Repayment Date.

Any part of the Monthly Amount not converted into shares of Common Stock by the

following Repayment Date shall be paid by the Borrower in cash on such following

Repayment Date. Any such cash payments not made on or before such repayment Date

shall be added to the next succeeding Monthly Amount. At any time during the

relevant month or mutual agreement per above is not attained, the Borrower shall

pay the Monthly Amount, or the unconverted part thereof, in cash and the

conversion price set forth in this Section 2.3 shall no longer be applicable.

2.4 OPTIONAL PREPAYMENTS IN COMMON STOCK. In the event that the Common

Stock trades on the Principal Market at a volume weighted average price greater

than 120% of the Fixed Conversion Price for a period of at least ten (10)

consecutive trading days, then the Borrower may, at its sole option, provide the

Holder written notice ("Call Notice") requiring the conversion at the Fixed

Conversion Price of all or a portion of the Note held by the Holder (subject to

the limitation provided for in Section 3.3) as of the date set forth in such

Call Notice (the "Call Date"). The Call Date shall be at least twenty (20)

trading days following the date of the Call Notice, provided a registration

statement covering resales of that number of Conversion Shares provided for in

the Call Notice has been declared effective and is available for use. The number

of Conversion Shares to be issued in connection with any such conversion

pursuant to a particular Call Notice pursuant to this Section 3.9 shall not

exceed 25% of the aggregate dollar trading volume of the Common Stock for the

twenty (20) trading days immediately preceding the Call Date. If the price of

the Common Stock falls below 120% of the Conversion Price during the twenty (20)

trading day period preceding the Call Date, then the Holder will no longer be

required to convert the Note pursuant to such Call Notice. The Borrower shall

not be permitted to give the Holder more than one notice during any 20-day

period.

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2.5 The Borrower may prepay this Note ("Optional Redemption") by paying to

the Holder a sum of money equal to one hundred fifteen percent (115%) of the

Principal Amount outstanding at such time together with accrued but unpaid

interest thereon and any and all other sums due, accrued or payable to the

Holder arising under this Note, the Purchase Agreement or any other Related

Agreement (the "Redemption Amount") outstanding on the Redemption Payment Date

(as defined below). The Borrower shall deliver to the Holder a written notice of

redemption (the "Notice of Redemption") specifying the date for such Optional

Redemption (the "Redemption Payment Date"), which date shall be not earlier than

seven (7) days after the date of the Notice of Redemption (the "Redemption

Period"). A Notice of Redemption shall not be effective with respect to any

portion of this Note for which the Holder has previously delivered a Notice of

Conversion (as hereinafter defined) or for conversions elected to be made by the

Holder pursuant to Section 3.3 during the Redemption Period. The Redemption

Amount shall be determined as if the Holder's conversion elections had been

completed immediately prior to the date of the Notice of Redemption. On the

Redemption Payment Date, the Redemption Amount must be paid in good funds to the

Holder. In the event the Borrower fails to pay the Redemption Amount on the

Redemption Payment Date as set forth herein, then such Redemption Notice will be

null and void A Notice of Redemption may be given by the Borrower, provided no

Event of Default, as described in the Note, shall have occurred or be

continuing.

2.6 Upon a Change of Control (as defined below) occurring with respect to

the Borrower, unless Holder shall have expressly consented to such Change of

Control in writing, Borrower shall prepay this Note in accordance with Section

2.5. A "Change of Control" shall mean any event or circumstance as a result of

which (i) any "Person" or "group" (as such terms are defined in Sections 13(d)

and 14(d) of the Exchange Act, as in effect on the date hereof), other than the

Holder, is or becomes the "beneficial owner" (as defined in Rules 13(d)-3 and

13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more on a

fully diluted basis of the then outstanding voting equity interest of the

Borrower (other than a "Person" or "group" that beneficially owns 35% or more of

such outstanding voting equity interests of the Borrower on the date hereof),

(ii) the Board of Directors of the Borrower shall cease to consist of a majority

of the Borrower's board of directors on the date hereof (or directors nominated

or elected by (x) a majority of the board of directors in effect immediately

prior to such nomination or election (y) a "Person" or "group" that beneficially

owns 35% or more of such outstanding voting equity interests of the Borrower on

the date hereof) or (iii) the Borrower or any of its Subsidiaries merges or

consolidates with, or sells all or substantially all of its a