If you want to run a unix shell script from Applescript, then use "do script" and not "do shell script". The latter will not use your PATH and so will not find convert. If you want to use do shell script, then you must provide the full path to convert.
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tell application "Terminal"
do script "yourscript"
end tell
or
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do shell script "export PATH=/usr/local/bin:$PATH; path2/yourscript"
The former will open the terminal app and run the script, so you will see any progress or errors.
The latter will run in the background and you will not see any progress or errors as far as I have experiences. I use the former.