EXHIBIT 4.37.3 

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROMREGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLEEXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THESUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE PLEDGED IN A MANNER CONSISTENT WITH THE SECURITIES ACT IN CONNECTION WITH A BONA FIDE MARGINACCOUNT SECURED BY SUCH SECURITIES. 

 

**SYNOVA HEALTHCARE GROUP, INC.**

**6.5% SENIOR CONVERTIBLE PROMISSORY NOTE DUE JANUARY 12, 2012**

THIS NOTE is oneof a series of duly authorized and issued notes of Synova Healthcare Group, Inc., a Nevada corporation (the **“Company”**), designated as its 6.5% Senior Convertible Promissory Notes due January 12, 2012, in the original aggregateprincipal amount of fifteen million dollars ($15,000,000) (collectively, the **“Notes”** and each Note comprising the Notes, a **“Note”**). 

FOR VALUE RECEIVED, the Company promises to pay to Galt Industries, Inc., a Delaware corporation, or its registered assigns (the **“Investor”**), the principal sum of TWO HUNDRED NINETY FIVE THOUSANDDOLLARS ($295,000), on January 12, 2012 or such earlier date as this Note is required to be repaid as provided hereunder (the **“Maturity Date”**), and to pay interest to the Investor on the principal amount of this Noteoutstanding from time to time in accordance with the provisions hereof. All holders of Notes are referred to collectively, as the **“Investors.”** This Note is subject to the following additional provisions: 

1. Definitions. In addition to the terms defined elsewhere in this Note: (a) capitalized terms that are used but not otherwise defined herein havethe meanings given to such terms in the Purchase Agreement, dated as of January 12, 2007, among the Company and the Investors identified therein (the **“Purchase Agreement”**), and (b) the following terms have the meanings indicatedbelow: 

“**Bankruptcy Code**” means Title 11 of the United States Code (11 U.S.C. 101 et seq.), as amended from time to time(including any successor statute) and all rules and regulations promulgated thereunder. 

**“Bankruptcy Event”** means any of the following events: (a) the Company or anySubsidiary commences a case or other proceeding under any Bankruptcy Law relating to the Company or any Subsidiary thereof; (b) there is commenced against the Company or any Subsidiary any such case or proceeding that is not dismissed within 60days after commencement; (c) the Company or any subsidiary is adjudicated by a court of competent jurisdiction insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company orany Subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) under applicable law the Company or any Subsidiary makes a generalassignment for the benefit of creditors; (f) the Company or any Subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company or any Subsidiary calls a meeting ofits creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any Subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of theforegoing or takes any corporate or other action for the purpose of effecting any of the foregoing. 

“**Bankruptcy Law**”means the Bankruptcy Code of the United States and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, fraudulent conveyance or transfer, reorganization,or similar state or Federal debtor relief laws, statutes, rules, regulations, orders, or ordinances of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. 

**“Change of Control”** means the occurrence of any of the following in one or a series of related transactions: (i) an acquisitionafter the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act) of more than one-third of the voting rights or equity interests in the Company other than pursuant to theTransaction Documents; (ii) a replacement of more than one-half of the members of the Company’s board of directors in a twelve month period in a single election of directors that is not approved by those individuals who are members of theboard of directors on the date hereof (or other directors previously approved by such individuals); (iii) a Fundamental Transaction (as defined in Section 10(c)), a merger or consolidation of the Company or any Subsidiary or a sale of morethan one-half of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company’s securities prior to the first such transaction continue to hold atleast two-thirds of the voting rights and equity interests in the surviving entity or acquirer of such assets; (iv) a recapitalization, reorganization or other transaction involving the Company or any Subsidiary that constitutes or results in atransfer of more than one-third of the voting rights or equity interests in the Company, unless following such transaction or series of transactions, the holders of the Company’s securities prior to the first such transaction continue to holdat least two-thirds of the voting rights and equity interests in the surviving entity or acquirer of such assets and one-half or more of the Board of Directors of the Company remain the same; (v) consummation of a “Rule 13e-3transaction” as defined in 

 

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Rule 13e-3 under the Exchange Act with respect to the Company, or (vi) the execution by the Company or its controlling shareholders of an agreementproviding for or reasonably likely to result in any of the foregoing events. 

**“Closing Price”** means, for any date, theprice determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on an Eligible Market, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) onthe primary Eligible Market on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization or agencysucceeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent qualifiedappraiser selected in good faith and paid for by a majority in interest of the Investors. 

**“Common Stock”** means the commonstock of the Company, $0.001 par value per share, and any securities into which such common stock may hereafter be reclassified. 

**“Conversion Date”** means the date a Conversion Notice together with the Conversion Schedule is delivered to the Company in accordance with Section 5(a). 

**“Conversion Notice”** means a written notice in the form attached hereto as Exhibit A. 

**“Conversion Price”** means $1.00, subject to adjustment from time to time pursuant to Section 10. 

**“Default”** means any event or condition which constitutes an Event of Default or that upon notice, lapse of time or both would, unlesscured or waived, become an Event of Default. 

“**EBITDA**” means the net income of the Company from continuing operationsbefore interest expense (income), income taxes, depreciation and amortization expense, adding back non-cash charges including, without limitation, compensation charges for equity grants and charges for unconsolidated losses (gains), determined usingthe financial statements of the Company contained in the Quarterly Report on Form 10-QSB (or Form 10-Q) or Annual Report on Form 10-KSB (or Form 10-K) of the Company for the applicable quarter. 

“**EBITDA Target**” means for each date specified below, the target rolling twelve month EBITDA specified below: 

 

**Target EBITDA**
  **At 12 Months Ended**
($2.8 million)
  December 31, 2007
($2 million)
  March 31, 2008
$0
  June 30, 2008
$1 million
  September 30, 2008
$2 million
  December 31, 2008
$3 million
  March 31, 2009
$4 million
  June 30, 2009
$5 million
  September 30, 2009
$6.5 million
  December 31, 2009 and thereafter.
 

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**“Eligible Market”** means whichever of the New York Stock Exchange, the American StockExchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question. 

**“Equity Conditions Are Satisfied”** means, as of any date of determination, that each of the following conditions is (or would be)satisfied on such date, if the Company were to issue on such date all of the Underlying Shares then issuable upon (1) conversion in full of the outstanding principal amount of all Notes, and (2) the payment of accrued and unpaid intereston such Interest Payment Date under all the Notes of the Company: (i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance, (ii) the Common Stock is listed or quoted (and isnot suspended from trading) on an Eligible Market and such shares of Common Stock are approved for listing on such Eligible Market upon issuance, (iii) such Common Stock is registered for resale under the Registration Statement and theprospectus under such Registration Statement is available for the sale of all Registrable Securities held by the Investor, (iv) such issuance would be permitted in full without violating the rules or regulations of the Eligible Market on whichsuch shares are listed or quoted, (v) both immediately before and after giving effect thereto, no Default shall or would exist, and (vi) no public announcement of a pending or proposed Change of Control transaction has occurred that hasnot been consummated. 

**“Event Equity Value”** means the average of the Closing Prices for the five consecutive Trading Daysimmediately preceding either: (a) the date of an Event Notice or the date the Company becomes obligated to pay the Event Price under Section 7(b), as applicable, or (b) the date on which the Event Price with respect thereto (togetherwith any other payments, expenses and liquidated damages then due and payable under the Transaction Documents) is paid in full, whichever is greater. 

**“Event of Default”** means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree ororder of any court, or any order, rule or regulation of any administrative or governmental body): 

(i) any default in the payment (free ofany claim of subordination), when the same becomes due and payable (whether on a Prepayment Date, the Maturity Date or by acceleration or prepayment or otherwise), of (a) liquidated damages in respect of this Note, or (b) principal underor interest in respect of this Note. 

(ii) the Company or any Subsidiary (1) fails to pay when due or there is an acceleration of anymonetary obligation (regardless of amount) under any currently existing or hereafter arising debenture (other than a Note) or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under whichthere may be issued, or by which there may be secured or evidenced, any Indebtedness or under any long term leasing or factoring arrangement, if the aggregate amount of the obligations and liabilities of the Company and the subsidiaries thereunderexceed $50,000 (each of the foregoing 

 

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******Debt Agreement”**), or (2) fails to observe or perform any other obligation under any Material Debt Agreement, and such failure resultsin the obligations thereunder becoming or being declared due and payable prior to the date on which they would otherwise become due and payable. 

(iii) the occurrence or entering into by the Company or any subsidiary, or consummation of, any Change of Control. 

(iv) theCompany shall fail to observe or perform any covenant, condition or agreement contained in any Transaction Document (other than those specified in clause (i) above and clause (xviii) below), and such failure shall continue unremedied for aperiod of five Trading Days after the earliest of (i) the date on which written notice of such default is first given to the Company by the Investor (it being understood that no prior notice need be given in the case of a default that cannotreasonably be cured within five Trading Days), or (ii) the date the Company discovers or such default or reasonably should have discovered such default. 

(v) the Company creates or suffers to exist any Lien (other than judgment liens which are covered by clause (x) below) upon any of its properties, except in accordance with Section 5.4 of the PurchaseAgreement. 

(vi) the occurrence and continuance of an Event of Default under any other Note. 

(vii) any prepayment by the Company of any other Note or any other Indebtedness issued by it or any issuance of securities in exchange for any Notesissued by it (other than Underlying Shares upon conversion of such Notes in accordance with their terms as in effect on the Original Issue Date thereof), except in each case (i) if the Company offers to the Investor in writing the sameprepayment of this Note and all other Notes then held by such Investor on the same economic terms on which the Company prepays or offers to prepay (whichever is more favorable to the holder of such Note) such Notes and (ii) in accordance withthe prepayment provisions of Section 12 of this Note. 

(viii) any of the Company’s representations and warranties set forth inany Transaction Document shall be incorrect as of the date made or as of the Original Issue Date. 

(ix) the occurrence of a BankruptcyEvent. 

(x) one or more judgments for the payment of money in an aggregate amount in excess of $50,000 shall be rendered against theCompany or any subsidiary or any combination thereof (which shall not be fully covered by insurance without taking into account any applicable deductibles) and which shall remain undischarged or unbonded for a period of 30 consecutive days duringwhich execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any subsidiary to enforce any such judgment. 

 

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(xi) any Transaction Document shall cease, for any reason, to be in full force and effect, or theCompany shall so assert in writing or shall disavow any of its obligations thereunder. 

(xii) the Common Stock shall not be listed orquoted, or is suspended from trading, on an Eligible Market for a period of three Trading Days (which need not be consecutive Trading Days). 

(xiii) the Company fails to deliver a stock certificate evidencing Underlying Shares to an Investor within five Trading Days after a Conversion Date or in the case of exercises under a Warrant, within five Trading days after a Date ofExercise under, and as such term is defined in, such Warrant, or the conversion or exercise rights of the Investors pursuant to the terms hereof or the terms of the Warrants are otherwise suspended for any reason. 

(xiv) the Company fails to have available and reserved for the benefit of the holders of Notes and Warrants a number of authorized but unissued andotherwise unreserved shares of Common Stock sufficient to issue Underlying Shares upon any conversion of Notes or upon any exercise of Warrants. 

(xv) the Company effects or publicly announces its intention to effect any exchange, recapitalization or other transaction that effectively requires or rewards physical delivery of certificates evidencing the Common Stock, unless followingsuch transaction, the holders of the Company’s securities prior to the first such transaction continue to beneficially own at least two-thirds of the voting rights and equity interests in the surviving entity or acquirer. 

(xvi) Intentionally omitted. 

(xvii) aRegistration Statement under the Registration Rights Agreement is not effective as to all Registrable Securities (as defined in the Registration Rights Agreement), and available for use by the holders of Registrable Securities, for in excess of anaggregate of 30 Trading Days (which need not be consecutive Trading Days) during the Effectiveness Period (as defined in the Registration Rights Agreement). 

(xviii) the Company fails to make any cash payment required under the Transaction Documents (other than as set forth in paragraph (i) above). 

(xix) Intentionally omitted. 

(xx) theCompany’s EBITDA is less than the EBITDA Target at the end of any calendar quarter commencing with the quarter ended December 31, 2007; provided, however, that failure to meet the EBITDA Target shall not constitute an Eventof Default if: (a) the VWAP of the Common Stock for 20 Trading Days during any 30 consecutive Trading Day period during the applicable calendar quarter was greater than 200% of the Conversion Price (subject to adjustment pursuant toSection 10), and (b) the average daily trading volume for the Common Stock for the 30 Trading Day period referenced in clause (a) above was 150,000 shares. 

 

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(xxi) the Company closes its stockholder books or records in any manner which prevents the timelyexercise of the Warrant, pursuant to the terms thereof. 

**“Indebtedness”** of any Person shall mean, without duplication,(a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of suchPerson upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of suchPerson issued or assumed as the deferred purchase price of property or services (other than unsecured accounts payable incurred in the ordinary course of business and no more than ninety (90) days past the due date set forth in the invoicetherefor), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not theobligations secured thereby have been assumed, (g) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements that exceedamounts necessary to hedge the Company’s cross-currency exposure and (h) all obligations of such Person as an account party in respect of letters of credit and bankers’ acceptances. The Indebtedness of any Person shall include theIndebtedness of any partnership in which such Person is a general partner. 

**“Original Issue Date”**has the meaning setforth on the face of this Note. 

**“Proceeding”** means a claim, suit, arbitration, investigation or proceeding (including,without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 

**“RegistrationStatement”** shall have the meaning set forth in the Purchase Agreement. 

**“Trading Day”** means (i) a day onwhich the Common Stock is traded on an Eligible Market, (ii) if the Common Stock is not listed on an Eligible Market, a day on which the Common Stock is traded in the Pink Sheets LLC (or any similar organization or agency succeeding to itsfunctions of reporting prices), or (iii) if the Common Stock is not reported by the Pink Sheets LLC (or any similar organization or agency succeeding to its functions of reporting prices) then Trading Day shall mean a Business Day. 

**“Underlying Shares”** means the shares of Common Stock issuable upon conversion of the Notes and payment of interest thereunder.

**“VWAP”** means, with respect to any date of determination, the daily volume weighted average price (as reported byBloomberg using the VAP function) of the Common Stock on such date of determination, or if there is no such price on such date of determination, then the daily volume weighted average price on the date nearest preceding such date. 

2. Interest. 

(a) The Company shallpay interest to the Investor on the aggregate unconverted and then outstanding principal amount of this Note at the rate of 6.5% per annum, 

 

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payable quarterly in cash, in arrears on each three month anniversary of the Original Issue Date (each, an **“Interest Payment Date**”), exceptif such date is not a Trading Day, in which case such interest shall be payable on the next succeeding Trading Day; provided, further that, during the continuance of an Event of Default, this Note shall bear interest at the rate of 12.0% perannum. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed and shall accrue daily commencing on the Original Issue Date. 

(b) Notwithstanding the foregoing, subject to the conditions and limitations set forth below, in lieu of paying accrued interest in cash the Company may, at its option, on each Interest Payment Date, pay accruedinterest on this Note in kind by increasing the unpaid principal amount of this Note, and interest shall thereafter accrue on this Note on quarterly compounded basis. The Company must deliver written notice to the Investor indicating the manner inwhich it intends to pay interest at least ten Trading Days prior to each Interest Payment Date, but the Company may indicate in any such notice that the election contained therein shall continue for subsequent Interest Payment Dates until rescinded.Failure to timely provide such written notice shall be deemed an irrevocable election by the Company to pay such interest in cash. All interest payable in respect of the Notes on any Interest Payment Date must be paid in the same manner. 

3. Registration of Notes. The Company shall maintain a register (the “***Register***”) for the recordation of the names andaddresses of the holders of each Note and the principal amount of the Notes held by such holders (the “***Registered Notes***”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error.The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of principal and interest hereunder,notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Noteby a holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designatedassignee or transferee pursuant to Section 4. 

4. Registration of Transfers and Exchanges. The Company shall register the transferof any portion of this Note in the Register upon surrender of this Note to the Company at its address for notice set forth herein. Upon any such registration or transfer, a new Note, in substantially the form of this Note (any such new debenture, a**“New Note”**), evidencing the portion of this Note so transferred shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall be issued to the transferring Investor.The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Note. The Company agrees that its prior consent is not required for the transfer of anyportion of this Note; provided, however, that the Company shall be entitled to reasonable assurance, including an opinion of counsel reasonably acceptable to the Company, that such transfer complies with applicable federal and state securities laws.This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Investor surrendering the same. No service charge or other fee will be imposed in connection with any suchregistration of transfer or exchange. 

 

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5. Conversion. 

(a) At the Option of the Investor. All or any portion of the principal amount of this Note then outstanding together with any accrued and unpaid interest hereunder shall be convertible into shares of CommonStock at the Conversion Price, at the option of the Investor, at any time and from time to time from and after the Original Issue Date. The Investor may effect conversions under this Section 5(a) by delivering to the Company a Conversion Noticetogether with a schedule in the form of Schedule 1 attached hereto (the **“Conversion Schedule”**). If the Investor is converting less than all of the principal amount represented by this Note, the Company shall honor suchconversion to the extent permissible hereunder and shall promptly deliver to the Investor a Conversion Schedule indicating the principal amount which has not been converted. 

(b) Intentionally Omitted. 

6.Mechanics of Conversion. 

(a) The number of Underlying Shares issuable upon any conversion hereunder shall equal the outstandingprincipal amount of this Note to be converted, divided by the Conversion Price on the Conversion Date, plus (if indicated in the applicable Conversion Notice) the amount of any accrued but unpaid interest on this Note through the Conversion Date,divided by the Conversion Price on the Conversion Date. 

(b) The Company shall, by the third Trading Day following each Conversion Date,issue or cause to be issued and cause to be delivered to or upon the written order of the Investor and in such name or names as the Investor may designate a certificate for the Underlying Shares issuable upon such conversion, free of restrictivelegends if at such time a Registration Statement is then effective and available for use by the Investor. The Investor, or any Person so designated by the Investor to receive Underlying Shares, shall be deemed to have become holder of record of suchUnderlying Shares as of such Conversion Date. The Company shall use its best efforts to deliver Underlying Shares hereunder electronically (via a DWAC) through the Depository Trust Corporation or another established clearing corporation performingsimilar functions. 

(c) The Investor shall not be required to deliver the original Note in order to effect a conversion hereunder.Execution and delivery of the Conversion Notice shall have the same effect as cancellation of the Note and issuance of a New Note representing the remaining outstanding principal amount. 

(d) The Company’s obligations to issue and deliver Underlying Shares upon conversion of this Note in accordance with the terms hereof are absoluteand unconditional, irrespective of any action or inaction by the Investor to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or anysetoff, counterclaim, recoupment, limitation or termination, or 

 

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any breach or alleged breach by the Investor or any other Person of any obligation to the Company or any violation or alleged violation of law by theInvestor or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Investor in connection with the issuance of such Underlying Shares. 

(e) If by the third Trading Day after a Conversion Date the Company fails to deliver to the Investor such Underlying Shares in such amounts and in themanner required pursuant to Section 5(a) (a “**Conversion Failure**”), then the Investor will have the right, exercisable at any time prior to receipt of the required Underlying Shares, to rescind the Conversion Notice pertainingthereto by giving written notice to the Company prior to such Investor’s receipt of such Underlying Shares. The Company shall, within two Trading Days, notify the Investor and the holders of each of the other Notes should a Conversion Failureoccur with respect to this Note or any other Note. 

(f) If a Conversion Failure occurs and prior to the receipt of such Underlying Shares,the Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of the Underlying Shares which the Investor anticipated receiving upon such conversion (a**“Buy-In”**), then the Company shall: (1) pay in cash to the Investor (in addition to any other remedies available to or elected by the Investor) the amount by which (x) the Investor’s total purchase price (includingbrokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Underlying Shares that the Company was required to deliver to the Investor in connection with theexercise at issue by (B) the Closing Price at the time of the obligation giving rise to such purchase obligation and (2) at the option of the Investor, either void the conversion at issue and reinstate the principal amount of Notes (plusaccrued interest therein) for which such conversion was not timely honored or deliver to the Investor the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligationshereunder. The Investor shall provide the Company reasonably detailed evidence or written notice indicating the amounts payable to the Investor in respect of the Buy-In. 

(g) If a Conversion Failure occurs, then the Company shall pay damages to the holder for each Trading Day of such Conversion Failure in an amount equal to 1.5% of the product of (A) the sum of the number ofUnderlying Shares not issued to the Investor on or prior to third (3rd) Trading Day after the Conversion Date and to which the Investor is entitled, and (B) the Closing Price of the Common Stock on such date. 

7. Events of Default. 

(a) At anytime or times following the occurrence and during the continuance of an Event of Default (except in the case of clause (iii) within the definition of Event of Default, in which case Section 7(c) herein shall control), the Investor mayelect, by notice to the Company (an **“Event Notice”**), to require the Company to purchase all or any portion of the outstanding principal amount of this Note, as indicated in such Event Notice, at a purchase price in Dollars in cashequal to the greater of: (A) 102% of such outstanding principal amount, plus all accrued but unpaid interest thereon and any unpaid liquidated damages and other amounts then owing to the Investor under the Transaction Documents, through thedate of 

 

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purchase, or (B) the Event Equity Value of the Underlying Shares that would be issuable upon conversion of such principal amount and payment in CommonStock of all such accrued but unpaid interest thereon (without regard to any condition precedent or conversion limitation contained herein) plus any liquidated damages payable pursuant to the Transaction Documents. The aggregate amount payablepursuant to the preceding sentence is referred to as the **“Event Price.”** The Company shall pay the aggregate Event Price to the Investor (free of any claim of subordination) no later than the third Trading Day following the date ofdelivery of the Event Notice, and upon receipt thereof the Investor shall deliver the original Note so repurchased to the Company. If the Company is unable to redeem all principal interest and other amounts designated in an Event Notice and suchother Event Notices received from other Investors received within seven (7) Business Days of the Investor’s Event Notice, then the Company shall redeem a pro rata amount from each Investor of the Notes based on the principal amount of theNotes submitted for redemption pursuant to such Event Notice and such other Event Notices received by the Company during such seven (7) Business Day period. Any partial payments made by the Company pursuant to the preceding sentence shall notrelieve the Company of the obligation to pay the remaining unpaid amounts. 

(b) Upon the occurrence of any Bankruptcy Event with respectto the Company, all outstanding principal and accrued but unpaid interest on this Note and any unpaid liquidated damages and other amounts then owing under the Transaction Documents shall immediately become due and payable in full in Dollars in cash(free of any claim of subordination), without any action by the Investor, and the Company shall immediately be obligated to repurchase this Note held by such Investor at the Event Price pursuant to the preceding paragraph as if the Investor haddelivered an Event Notice immediately prior to the occurrence of such Bankruptcy Event. 

(c) Change of Control. 

(i) Upon the occurrence or entering into by the Company or any subsidiary, or consummation of, any Change of Control prior to the one year anniversary ofthe Closing Date, the Investor may elect to require the Company to purchase all or any portion of the outstanding principal amount of this Note, as indicated in such Event Notice, at a purchase price in Dollars in cash equal to the greater of:(A) 125% of such outstanding principal amount, plus all accrued but unpaid interest thereon and any unpaid liquidated damages and other amounts then owing to the Investor under the Transaction Documents, through the date of purchase, or(B) the Event Equity Value of the Underlying Shares that would be issuable upon conversion of such principal amount and payment in Common Stock of all such accrued but unpaid interest thereon (without regard to any condition precedent orconversion limitation contained herein) plus any liquidated damages payable pursuant to the Transaction Documents. 

(ii) Upon theoccurrence or entering into by the Company or any subsidiary, or consummation of, any Change of Control between the one year and two year anniversaries of the Closing Date, the Investor may elect to require the Company to purchase all or any portionof the outstanding principal amount of this Note, as indicated in such Event Notice, at a purchase price in Dollars in cash equal to the greater of: (A) 120% of such outstanding principal amount, plus all accrued but unpaid interest thereon andany unpaid liquidated damages and other amounts then owing to the Investor under the Transaction 

 

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Documents, through the date of purchase, or (B) the Event Equity Value of the Underlying Shares that would be issuable upon conversion of such principalamount and payment in Common Stock of all such accrued but unpaid interest thereon (without regard to any condition precedent or conversion limitation contained herein) plus any liquidated damages payable pursuant to the Transaction Documents.

(iii) Upon the occurrence or entering into by the Company or any subsidiary, or consummation of, any Change of Control between the twoyear and three year anniversaries of the Closing Date, the Investor may elect to require the Company to purchase all or any portion of the outstanding principal amount of this Note, as indicated in such Event Notice, at a purchase price in Dollarsin cash equal to the greater of: (A) 115% of such outstanding principal amount, plus all accrued but unpaid interest thereon and any unpaid liquidated damages and other amounts then owing to the Investor under the Transaction Documents, throughthe date of purchase, or (B) the Event Equity Value of the Underlying Shares that would be issuable upon conversion of such principal amount and payment in Common Stock of all such accrued but unpaid interest thereon (without regard to anycondition precedent or conversion limitation contained herein) plus any liquidated damages payable pursuant to the Transaction Documents. 

(iv) Upon the occurrence or entering into by the Company or any subsidiary, or consummation of, any Change of Control following the three year anniversary of the Closing Date, the Investor may elect to require the Company to purchase all orany portion of the outstanding principal amount of this Note, as indicated in such Event Notice, at a purchase price in Dollars in cash equal to the greater of: (A) 102% of such outstanding principal amount, plus all accrued but unpaid interestthereon and any unpaid liquidated damages and other amounts then owing to the Investor under the Transaction Documents, through the date of purchase, or (B) the Event Equity Value of the Underlying Shares that would be issuable upon conversionof such principal amount and payment in Common Stock of all such accrued but unpaid interest thereon (without regard to any condition precedent or conversion limitation contained herein) plus any liquidated damages payable pursuant to theTransaction Documents. 

(v) If any Investor makes an election under Section 7(c) of that Investor’s Note, then the Company shallprovide notice of such election to all other Investors. 

(d) In connection with any Event of Default, the Investor need not provide andthe Company hereby waives any presentment, demand, protest or other notice of any kind (other than the Event Notice), and the Investor may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to itunder applicable law. Any such declaration may be rescinded and annulled by the Investor at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereto.

8. Ranking. This Note ranks pari passu with all other Notes now or hereafter issued pursuant to the Transaction Documents. TheCompany shall repay amounts due under this Note and all other Notes on a pro rata basis, based upon the relative unpaid principal balances thereof then due. The Company will not, directly or indirectly, enter into, create, incur, assume or suffer toexist any indebtedness of any kind, on or with respect to any of its property or assets 

 

12 

now owned or hereafter acquired or any interest therein or any income or profits therefrom, that is senior or pari passu in any respect to the Company’sobligations under the Notes other than Permitted Indebtedness. 

9. Reservation of Underlying Shares. The Company covenants that itwill at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of UnderlyingShares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) this entire Note (taking into account the adjustments of Section 10), free from preemptive rights or any other contingent purchase rights of personsother than the Investor. The Company covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 

10. Certain Adjustments. The Conversion Price is subject to adjustment from time to time as set forth in this Section 10. 

(a) Stock Dividends and Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend on its Common Stock orotherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stockinto a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which thedenominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination ofshareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b) Pro Rata Distributions. If the Company, at any time while this Note is outstanding, distributes to all holders of Common Stock(i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (ineach case, **“Distributed Property”**), then, at the request of the Investor delivered before the 90th day after the record date fixed for determination of shareholders entitled to receive such distribution, the Company will deliver tothe Investor, within five Trading Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that the Investor would have been entitled to receive in respect of the Underlying Shares for which thisNote could have been converted immediately prior to such record date. If such Distributed Property is not delivered to the Investor pursuant to the preceding sentence, then upon any conversion of this Note that occurs after such record date, theInvestor shall be entitled to receive, in addition to the Underlying Shares otherwise issuable upon such conversion, the Distributed Property that the Investor would have been entitled to receive in respect of such number of Underlying Shares hadthe Investor been the record holder of such Underlying Shares immediately prior to such record date. Notwithstanding the foregoing, this Section 10(b) shall not apply to any distribution of rights or securities in respect of adoption by theCompany of a shareholder rights plan, which events shall be covered by Section 10(a). 

 

13 

(c) Fundamental Transactions. If, at any time while this Note is outstanding, (i) theCompany effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer orexchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of theCommon Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stockcovered by Section 10(a) above) (in any such case, a **“Fundamental Transaction”**), then the Investor shall have the right to: (x) declare an Event of Default pursuant to clause (iii) thereunder, or (y) upon anysubsequent conversion of this Note, receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled toreceive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the **“Alternate Consideration”**) or (z) require the survivingentity to issue to the Investor an instrument identical to this Note (with an appropriate adjustment to the conversion price) such that the Investor may receive shares of the surviving company’s common stock. For purposes of any suchconversion, the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given anychoice as to the securities, cash or property to be received in a Fundamental Transaction, then the Investor shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such FundamentalTransaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction (or, if different, the ultimate parent of such successor or entity or the entity issuingthe Alternate Consideration) shall issue to the Investor a new debenture consistent with the foregoing provisions and evidencing the Investor’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant towhich a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that this Note (or any such replacement security) will besimilarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. 

(d) Subsequent Equity Sales.

(i) If the Company or any subsidiary thereof, as applicable, at any time while this Note is outstanding, shall issue or enter into anyagreement or understanding to issue shares of Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at a price per share less than the Conversion Price (if the holder of the Common Stock or Common StockEquivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights issued in connection with suchissuance, be entitled to receive shares of Common Stock at a price less than the Conversion Price, such 

 

14 

issuance shall be deemed to have occurred for less than the Conversion Price), then, the Conversion Price shall be reduced to mirror such lower price. Suchadjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Investor in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalent subjectto this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. 

(ii) For purposes of this subsection 10(d), the following subsections (d)(ii)(l) to (d)(ii)(5) shall also be applicable: 

(1) Issuance of Rights or Options. In case at any time the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or topurchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called **“Options”** and such convertible or exchangeablestock or securities being called **“Convertible Securities”**) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stockis issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amount, if any,received or receivable by the Company as consideration for the granting of such Options, plus (y) the aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of suchOptions which relate to Convertible Securities, the aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximumnumber of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Conversion Price in effectimmediately prior to the time of the granting of such Options, then the total number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable uponthe exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes ofadjusting the Conversion Price. Except as otherwise provided in subsection 10(d)(ii)(3), no adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Optionsor upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. 

(2) Issuance of ConvertibleSecurities. In case the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities areimmediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the sum (which sum shall constitute the applicable consideration) of (x) the total amountreceived or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus (y) the aggregate amount of additional consideration, if any, payable to the Company upon the 

 

15 

conversion or exchange thereof, by (ii) the total number of shares of Common Stock issuable upon the conversion or exchange of all such ConvertibleSecurities) shall be less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shallbe deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding for purposes of adjusting the Conversion Price, provided that (a) exceptas otherwise provided in subsection 10(d)(ii)(3), no adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of theConversion Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Conversion Price have been made pursuant to the otherprovisions of subsection 10(d). 

(3) Change in Option Price or Conversion Rate. Upon the happening of any of the following events,namely, if the purchase price provided for in any Option referred to in subsection 10(d)(ii)(l) hereof, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subsections10(d)(ii)(l) or 10(d)(ii)(2), or the rate at which Convertible Securities referred to in subsections 10(d)(ii)(l) or 10(d)(ii)(2) are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changesunder or by reason of provisions designed to protect against dilution), the Conversion Price in effect at the time of such event shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options orConvertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. 

(4) Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, theconsideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connectiontherewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fairvalue of such consideration as determined in good faith by the Board of Directors of the Company, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In caseany Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Optionsshall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Company. If Common Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith,other Options or Convertible Securities (the **“Additional Rights”**) are issued, then the consideration received or deemed to be received by the Company shall be reduced by the fair market value of the Additional Rights (as determinedusing the Black-Scholes option pricing model or another method mutually agreed to by the Company and the Investor). The Board of Directors of the Company shall respond promptly, in writing, to an 

 

16 

inquiry by the Investors as to the fair market value of the Additional Rights. In the event that the Board of Directors of the Company and the Investors areunable to agree upon the fair market value of the Additional Rights, the Company and the Investors shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost ofsuch appraiser shall be borne evenly by the Company and the Investor. 

(5) Record Date. In case the Company shall take a record ofthe holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options orConvertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or thedate of the granting of such right of subscription or purchase, as the case may be. 

(iii) Notwithstanding the foregoing, no adjustmentwill be made under this paragraph (d) in respect of: (1) the issuance of securities upon the exercise or conversion of any Common Stock Equivalents issued by the Company prior to the Original Issue Date of this Note (but will apply to anyamendments, modifications, and reissuances thereof and as a result of any changes, resets or adjustments to a conversion or exchange price thereunder whether or not as a result of any amendment, modification or reissuance), (2) the grant ofoptions or warrants, or the issuance of additional securities, under any duly authorized Company stock option, stock incentive plan, restricted stock plan or stock purchase plan in existence on the Closing Date, or (3) securities issuedpursuant to the Allendale Acquisition Agreement. 

(e) Reclassifications; Share Exchanges. In case of any reclassification of theCommon Stock, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control transactions), the Investors of theNotes then outstanding shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification orshare exchange, and the Investors shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of Common Stock of the Company into which such shares of Notes could have been convertedimmediately prior to such reclassification or share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges. 

(f) Calculations. All calculations under this Section 10 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. 

(g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 10, the Company at its expense will promptlycompute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon writtenrequest, the Company will promptly deliver a copy of each such certificate to the Investor. 

 

17 

(h) Notice of Corporate Events. If the Company (i) declares a dividend or any otherdistribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any subsidiary, (ii) authorizesand publicly approves, or enters into any agreement contemplating or solicits shareholder approval for any Fundamental Transaction or (iii) publicly authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company,then the Company shall deliver to the Investor a notice describing the material terms and conditions of such transaction, at least 20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock inorder to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Investor is given the practical opportunity to convert this Note prior to such time so as toparticipate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 

11. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Underlying Shares on conversion of this Note.If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of this Note or payment of interest hereon, the number of Underlying Shares to be issued will be rounded up to the nearest wholeshare. 

12. Prepayment. 

(a) At Company’s Option. If at any time following the three year anniversary of the Original Issue Date: (i) the VWAP of the Common Stock for 20 Trading Days during any 30 consecutive Trading Day period (each of whichTrading Days must occur following the three year anniversary of the Original Issue Date) ending on the Trading Day immediately preceding the date on which the Prepayment Notice (as defined below) is delivered by the Company, is greater than 200% ofthe Conversion Price (subject to adjustment pursuant to Section 10), and (ii) the average daily trading volume for the Common Stock for the 30 Trading Day period referenced in clause (i) above is 150,000 shares and (iii) theEquity Conditions Are Satisfied, then, subject to the conditions set forth in this Section, the Company may, in its sole discretion, elect to prepay this Note, in whole or in part, by paying to the Investor, in immediately available funds, 102% ofthe then outstanding principal amount (or portion thereof as applicable), plus all accrued but unpaid interest, due under this Note, on the date that is the fifth Trading Day after written notice thereof (a **“Prepayment Notice”**) isreceived by the Investor (such fifth Trading Day shall be known as the **“Prepayment Date”**) at the address last shown on the records of the Company for the Investor or given by the Investor to the Company for the purpose of notice;provided, that the conditions to giving such notice must be in effect at all times during the entire 30 Trading Day period referenced in (i) above through the expiration of the Prepayment Date (other than as to clause (i) abovewhich only needs to be satisfied up to the time of the delivery of the Prepayment Notice) or any such Prepayment Notice shall be null and void. Under no circumstances may the Company deliver more than one Prepayment Notice in any 90 calendar dayperiod. 

 

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(b) At Investor’s Option. The Company shall redeem this Note, in whole or in part, at 115%of the redeemed portion of the principal balance plus any accrued and unpaid interest thereon, if and to the extent that the Investor requests such a redemption in writing: (i) on any day within the 30 Trading Days following the release of theCompany’s earnings for the twelve month period ending December 31, 2007 (or, if the Company shall not have released such earnings by March 31, 2008, then on any day within the 30 Trading Days commencing April 1, 2008), or(ii) on any day within the 30 Trading Days following the release of the Company’s earnings for the twelve month period ending December 31, 2008 (or, if the Company shall not have released such earnings by March 31, 2009, then onany day within the 30 Trading Days commencing April 1, 2009); provided, however, that if (1) the Equity Conditions Are Satisfied as to the Common Stock issuable under this Note and (2) the Common Stock (a) istrading above 175% of the Conversion Price for 20 out of the 30 consecutive Trading Days immediately preceding the related earnings release, and (b) has a daily dollar trading volume in excess of $500,000 for 20 out of 30 such Trading Days,then the Investor’s redemption right under this Section 12(b) shall not apply for that period. 

(c) Upon Failure to Register. The Company shall, if and only if Investors representing at least 70% of the aggregate principal amount of Notes outstanding so elect, redeem this Note, in whole or in part (asspecified by such Investors), if: (1) a Registration Statement under Section 2(a) of the Registration Rights Agreement is not declared effective by the Commission by the 270th day following the Closing Date, or (2) a Registration Statement under Section 2(c) of the Registration Rights Agreement is not declared effective bythe Commission by the later of 360 days following the Closing or the 210th day following the date a request for suchRegistration Statement is made by the Investors in accordance with the terms of the Registration Rights Agreement. 

13. AdditionalCovenants and Negative Covenants. Each of covenants and negative covenants of the Company set forth in the Purchase Agreement are hereby incorporated herein by reference as if set forth in this Note in their entirety, and the Company herebyagrees in favor of the Investors to comply with each of the covenants and negative covenants. 

14. Notices. Any and all notices orother communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication isdelivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimileat the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnightcourier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to 1400 North Providence Road, Suite 6010, Media, Pennsylvania, 19063,facsimile: (610) 565-7081, attention: Chief Financial Officer, (ii) if to the Investor, to the address or facsimile number appearing on the Company’s shareholder records or such other address or facsimile number as the Investor may provide tothe Company in accordance with this Section. 

 

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15. Miscellaneous. 

(a) This Note shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. 

(b) Subject to Section 15(a), above, nothing in this Note shall be construed to give to any person or corporation other than the Company and the Investor any legal or equitable right, remedy or cause under thisNote. This Note shall inure to the sole and exclusive benefit of the Company and the Investor. 

(c) All questions concerning theconstruction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Eachparty agrees that all Proceedings shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan (the **“New York Courts”**). Each party hereto hereby irrevocably submits to theexclusive jurisdiction of the New York Courts for any Proceeding, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court or that a New YorkCourt is an inconvenient forum for such Proceeding. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail orovernight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained hereinshall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legalProceeding. The prevailing party in a Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding. 

(d) The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of theprovisions hereof. 

(e) In case any one or more of the provisions of this Note shall be invalid or unenforceable in any respect, thevalidity and enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be acommercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Note. 

(f) Noprovision of this Note may be waived or amended except (i) in accordance with the requirements set forth in the Purchase Agreement, and (ii) in a written instrument signed, in the case of an amendment, by the Company and the Investor or,in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Note shall be deemed 

 

20 

to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shallany delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. 

(g) To theextent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or atany time hereafter in force, in connection with any claim, action or Proceeding that may be brought by any Investor in order to enforce any right or remedy under the Notes. Notwithstanding any provision to the contrary contained in the Notes, it isexpressly agreed and provided that the total liability of the Company under the Notes for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the **“Maximum Rate”**), and, withoutlimiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Notes exceed such Maximum Rate. Itis agreed that if the maximum contract rate of interest allowed by law and applicable to the Notes is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interestallowed by law will be the Maximum Rate of interest applicable to the Notes from the effective date forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate ispaid by the Company to any Investor with respect to indebtedness evidenced by the Notes, such excess shall be applied by such Investor to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handlingsuch excess to be at such Investor’s election. 

[REMAINDER OF PAGE INTENTIONALLY BLANK-SIGNATURE PAGE TO FOLLOW] 

 

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer asof the date first above indicated. 

 
**SYNOVA HEALTHCARE GROUP, INC.**By: 
/s/ Stephen E. King
Name: Stephen E. KingTitle: Chairman and Chief Executive Officer
***{Signature Page to Note}***

 

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**EXHIBIT A**

CONVERSION NOTICE 

(To be Executed by the Registered Investor in order to convert Notes) 

The undersigned hereby elects to convert the principal amount of Note indicated below, into shares of Common Stock of Synova Healthcare Group, Inc., as ofthe date written below. If shares are to be issued in the name of a Person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonablyrequested by the Company in accordance therewith. No fee will be charged to the Investor for any conversion, except for such transfer taxes, if any. All terms used in this notice shall have the meanings set forth in the Note. 

 
Conversion calculations:  
 

Date to Effect Conversion
  
 

Principal amount of Note owned prior toconversion
  
 

Principal amount of Note to beConverted
  
 

Principal amount of Note remaining afterConversion
  
 

DTC Account
  
 

Number of shares of Common Stock to beIssued
  
 

Applicable ConversionPrice
  
 

Name of Investor
  
By:                                                                                                                    
  
Name:
  
Title:

 

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**Schedule 1**

Synova Healthcare Group, Inc. 

6.5% Senior Convertible Promissory Notes due January 12, 2012 

CONVERSION SCHEDULE 

This ConversionSchedule reflects conversions made under the above referenced Notes. 

Dated: 

 

**Date of Conversion**
 
**Amount of**

**Conversion**
 
**Aggregate**

**Principal**

**Amount**

**Remaining**

**Subsequent to**

**Conversion**
 
**Applicable Conversion**

**Price**

 

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