Unassociated Document


    
      

        EXHIBIT
10.35

        


        EXECUTION
COPY

        


         

        


         

        NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES .REPRESENTED
BY THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. NEITHER THIS NOTE NOR SUCH SECURITIES MAY BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED. NOTWITHSTANDING THE FOREGOING, THIS NOTE AND SUCH SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THIS NOTE OR SUCH SECURITIES. ANY TRANSFEREE OF
THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

         

        CONVERTIBLE
NOTE

         

        Issuance
Date:  February 4,
2008                                                                           Original
Principal Amount: U.S. $300,000

         

        FOR VALUE
RECEIVED, Nyer Medical Group, Inc., a Florida corporation (the “Company”), hereby promises to
pay to the order of Lucille Curry or registered assigns (“Holder”) the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether
upon the Maturity Date (as defined below), or acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and to pay interest
(“Interest”) on any
outstanding Principal at a rate per annum equal to the Interest Rate (as defined
below), from the date set out above as the Issuance Date (the “Issuance Date”) until the same
becomes due and payable and is fully paid, whether upon an Interest Date (as
defined below), or the Maturity Date (as defined below), acceleration,
conversion, redemption or otherwise (in each case in accordance with the terms
hereof). This Convertible Note (including all Convertible Notes issued in
exchange, transfer or replacement hereof, this “Note”) is being issued
pursuant to the First Amended and Restated Agreement dated as of December 20,
2007 by and between parties, including the initial Holders of the Registered
Notes (as defined below) and the Company (the “First Amended
Agreement”).  Certain capitalized terms are defined in Section
28.

         

        1.           PAYMENTS OF PRINCIPAL;
MATURITY.  The Company shall pay to the Holder an amount equal
to the Principal and any Interest owed and as yet unpaid on February 4, 2011 the
“Maturity Date”, or
earlier, as otherwise provided below.

         


        
          
             


          

          
             

            
              

            

          

          
             


          

        


        2.           INTEREST; INTEREST
RATE.

         

        (a)           Interest
on this Note shall commence accruing, at a rate per annum equal to the Interest
Rate, on the Issuance Date and shall be computed on the basis of a 365-day year
and actual days elapsed and shall be payable in arrears on the 15th day of
each Calendar Month during the period beginning on the Issuance Date and ending
on, and including, the Maturity Date (each, an “Interest Date”) with the first
Interest Date being March 15, 2008. Interest shall be payable on each Interest
Date, to the record holder of this Note on the applicable Interest Date, only in
cash (“Cash Interest”)
for the period following the Issuance Date through its first
anniversary.  Thereafter, Interest will be payable, at the option of
the Holder, in cash or Common Stock (as defined below), in accordance with the
Conversion Rate (as defined below), providing that the Holder designates any
payment of Interest to be paid in the form of Common Stock through delivery of a
Conversion Notice (as defined below), to be received by the Company no later
than five (5) Trading Days before the applicable Interest Date.

         

        (b)           From
and after the occurrence of an Event of Default (as defined below), the Interest
Rate shall be increased to fifteen percent (15%) per annum (or such lower
maximum rate of interest permitted to be charged under applicable law). In the
event that such Event of Default is subsequently timely cured, the adjustment
referred to in the preceding sentence shall cease to be effective and the
Interest Rate shall again be eight percent (8%) per annum as of the date of such
cure; provided that the Interest as calculated at such increased rate during the
continuance of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default through and
including the date of cure of such Event of Default.

         

        3.           CONVERSION OF
NOTES.  All or any of this Note shall be convertible into
shares of common stock of the Company, par value $0.0001 per share (the “Common Stock”), on the terms
and conditions set forth in this Section 3.

         

        (a)           Conversion
Right.  At any time or times on or after the first anniversary
of the Issuance Date, the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below). The Company shall not issue any fraction of
a share of Common Stock upon any conversion.  If the conversion would
result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up to the nearest whole
share. The Company shall pay any and all taxes that may be payable with respect
to the issuance and delivery of Common Stock upon conversion of any Conversion
Amount.

         

        (b)           Conversion Rate. The
number of shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to Section 3(a) shall be determined by dividing (x) such
Conversion Amount by (y) the Conversion Price (the “Conversion
Rate”).

         

        (i)           “Conversion Amount” means the
Interest or all or any of the Principal to be converted, redeemed or otherwise
with respect to which this determination is being made.

         


        
          
             


          

          
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        (ii)           “Conversion Price” means, as of
any Conversion Date (as defined below) or other date of determination, $1.84
(appropriately adjusted for any stock split, stock dividend, stock combination,
spin-off, split-up, reclassification, recapitalization, combination of shares or
other similar transaction that proportionately decreases or increases the. Common
Stock that occurs after the Issuance Date).

         

        (c)           Mechanics of
Conversion.

         

        (i)           Optional Conversion.
To convert any Conversion Amount into shares of Common Stock on any date on or
after the first anniversary of the Issuance Date (a “Conversion Date”), the Holder
shall transmit by facsimile (or otherwise deliver), for receipt on or prior to
11:59 p.m., New York time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the
Company; on or before the next Trading Day following the date of receipt of a
Conversion Notice, the Company shall transmit by facsimile a confirmation of
receipt of such Conversion Notice to the Holder and the transfer agent for the
Common Stock (the “Transfer
Agent”). On or before the third (3rd)
Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the
Company shall (X) provided that the Transfer Agent is participating in the Fast
Automated Securities Transfer Program of DTC, credit such aggregate number of
shares of Common Stock to which the Holder shall be entitled to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system, as specified in the Conversion Notice or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities Transfer
Program, issue and deliver to the address as specified in the Conversion Notice,
a certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. If the
outstanding Principal that has come due under this Note is greater than the
Principal portion of the Conversion Amount being converted, then the Company
shall as soon as practicable and in no event later than three (3)
Trading  Days after receipt of this Note and at its own expense,
deliver a new note in face amount equal to the outstanding Principal not
converted. The Holder (or such Holder’s designee) entitled to receive the shares
of Common Stock issuable upon a conversion of this Note shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
Conversion Date.

         

        (ii)           Company’s Failure to Timely
Convert. If, within four (4) Trading Days after the Company’s receipt of
the facsimile copy or other delivery of a Conversion Notice, the Company shall
fail to issue and deliver a certificate to the Holder or its designee or credit
the Holder’s or its designee’s balance account with DTC for the number of shares
of Common Stock to which the Holder is entitled upon such holder’s conversion of
any Conversion Amount (a “Conversion Failure”), and if
on or after such Trading Day the Holder purchases (in an open market transaction
or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such conversion that the Holder anticipated receiving
from the Company (a “Buy
In”), then the Company shall, within three (3) Trading Days after receipt
by the Company of the Holder’s written request and trade confirmations, in the
Holder’s discretion, either (i)

         


        
          
             


          

          
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        pay cash to the
Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for the shares
of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash
to the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock issuable pursuant to
the Conversion Notice, times (B) the Closing Sale Price of the Common Stock on
the Conversion Date (either (i) or (ii), a “Conversion Failure
Cure”).

         

        (iii)           Registration;
Book-Entry. The Company shall maintain a register (the “Register”) for the recordation
of the names and addresses of the Holders of each Note issued to a Holder of
even date herewith and the principal amount of the Note held by each such
Holder, together with all other convertible notes issued by the Company on the
Issuance Date with the same terms (collectively, the “Registered Notes”). The
entries on the Register shall be conclusive and binding for all purposes absent
manifest error. The Company and the Holders of the Registered Notes shall treat
each Holder 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. This
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 this Note by 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 designated assignee or transferee
pursuant to Section 16. Notwithstanding anything to the contrary set forth
herein, upon conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is
being converted or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice) requesting physical
surrender and reissue of this Note. The Holder and the Company shall maintain
records showing the Principal, Interest and Late Charges (as defined in Section
22(b)) converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Company, so as not to
require physical surrender of this Note upon conversion.

         

        (iv)           Disputes.  In
the event of a dispute as to the number of shares of Common Stock issuable to
the Holder in connection with a conversion of this Note, the Company shall issue
to the Holder the number of shares of Common Stock not in dispute and resolve
such dispute in accordance with Section 21.

         

        4.           RIGHTS UPON EVENT OF
DEFAULT.

         

        (a)           Event of Default.
Each of the following events (if they occur and are continuing beyond an
applicable cure periods) shall constitute an “Event of
Default”:

         


        
          
             


          

          
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        (i)           the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market or on an Eligible Market for a period of five (5) consecutive
Trading Days or for more than an aggregate of ten (10) Trading Days in any
365-day period;

         

        (ii)           the
Company’s failure to cure a Conversion Failure by effecting a Conversion Failure
Cure within three (3) Trading  Days after the Conversion
Failure;

         

        (iii)           at
any time following the tenth (10th)
consecutive Trading Day that the authorized number of shares is less than the
number of shares of Common Stock that all of the holders of Registered Notes
would be entitled to receive upon a conversion of one hundred and fifty percent
(150%) of the full Principal and Interest of this Note;

         

        (iv)           the
Company’s failure to pay to the Holder any amount of Principal (including,
without limitation, any redemption payment), Interest, Late Charges or other
amounts within five (5) Trading  Days after the same is due under this
Note or to timely perform any of its obligations under the Registration Rights
Agreement, any and all employment agreements to which the Holder is a party or
any other agreement entered in connection with the transactions contemplated or
obligations assumed in regard to the First Amended Agreement to which the Holder
is a party (collectively, the “Transaction
Documents”);

         

        (v)           any
default under, redemption of prior to maturity or acceleration prior to maturity
of any Indebtedness in excess of $100,000, in the aggregate, of the Company or
any of its subsidiaries, except a voluntary pre-payment of (A) the promissory
notes issued to the initial holders of the Registered Notes and assigned to Nyle
International Corp., (B) the promissory note(s) issued to certain members of the
Nyer family as payment for the redemption of their preferred stock of the
Company or (C) the promissory note issued to D.A.W., Inc. (“D.A.W.”), of even date with
this Note;

         

        (vi)           the
Company or any of its subsidiaries, pursuant to or within the meaning of Title
11, U.S. Code, or any similar Federal, foreign or state law for the relief of
debtors (collectively, “Bankruptcy Law”), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a
general assignment for the benefit of its creditors or (E) admits in writing
that it is generally unable to pay its debts as they become due;

         

        (vii)           a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company or any of its subsidiaries in an
involuntary case; provided that such order or decree must be a final order or
decree if the Company contests the initial order or decree within thirty (30)
days of its issuance, (B) appoints a Custodian of the Company or any of its
subsidiaries, or (C) orders the liquidation of the Company or any of its
subsidiaries;

         

        (viii)          a
final judgment or judgments for the payment of money aggregating in excess of
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        which judgments
are not, within sixty (60) days after the entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within sixty (60) days after the
expiration of such stay; provided, however, that any judgment which is covered
by insurance or an indemnity from a credit worthy party shall not be included in
calculating the $100,000 amount set forth above so long as the Company provides
the Holder with a written statement from such insurer or indemnity provider
(which written statement shall be reasonably satisfactory to the Holder) to the
effect that such judgment is covered by insurance or an indemnity and the
Company will receive the proceeds of such insurance or indemnity within thirty
(30) days of the issuance of such judgment;

         

        (ix)           the
Company breaches any material representation, warranty, covenant or other term
or condition of this Note or any Transaction Document, except, in the case of a
breach of a covenant which is curable, only if such breach continues for a
period of at least ten (10) consecutive Trading  Days;

         

        (x)           any
breach or failure in any respect to comply with Section 14 of this
Note;

         

        (xi)           at
any time after February 4, 2008, the Common Stock is unable to be transferred
with DTC through the Deposit Withdrawal at Custodian system except when caused
by circumstances beyond the reasonable control of the Company; or

         

        (xii)           the
Company fails to pay all Principal and Interest hereunder, as of the effective
date of a Fundamental Transaction.

         

        (b)           Redemption Right.
Upon the occurrence of an Event of Default with respect to this Note, the
Company shall within two (2) Trading  Days after the day on which the
Company is aware of the Event of Default deliver written notice thereof via
facsimile and overnight courier (an “Event of Default Notice”) to
the Holder. At any time after the earlier of the Holder’s receipt of an Event of
Default Notice and the Holder becoming aware of an Event of Default, the Holder
may, require the Company to redeem all or any portion of this Note by delivering
written notice thereof (the “Event of Default Redemption
Notice”) to the Company, which Event of Default Redemption Notice shall
indicate all or any of this Note the Holder is electing to redeem, and designate
whether payment is to be made in the form of cash or Common
Stock.  Each portion of this Note subject to redemption by the Company
pursuant to this Section 4(b) shall be redeemed by the Company at a price equal
to the greater of (i) the product of (x) the Conversion Amount to be redeemed
and (y) the Redemption Premium and (ii) the product of the Conversion Rate with
respect to such Conversion Amount in effect at such time as the Holder delivers
an Event of Default Redemption
Notice and (y) the Closing Sale Price of the Common Stock on the date
immediately preceding such Event of Default (the “Event of Default Redemption
Price”). Redemptions required by this Section 4(b) shall be made in
accordance with the provisions of Section 11. To the extent redemptions required
by this Section 4(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such redemptions
shall be deemed to be voluntary prepayments. The parties hereto agree that in
the event of the Company’s redemption of any portion of the Note under this
Section 4(b), the Holder’s damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute 


        
          
             


          

          
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        investment
opportunity for the Holder. Accordingly, any Redemption Premium due under this
Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder’s actual loss of its investment opportunity and not as a
penalty.

         

        (c)           Waiver of
Remedies.  Notwithstanding anything to the contrary above, the
Required Holders may waive the enforcement of any of the actions or remedies
available upon an Event of Default, on behalf of all of the holders of
Registered Notes.  Any such waiver must be in writing and must be
delivered to all of the holders of Registered Notes.

         

        5.           ADJUSTMENTS.

         

        (a)           Adjustment of Conversion Price upon
Issuance of Common Stock. If at any time after December 7, 2007, the
Company issues or sells, or in accordance with this Section 5(a) is deemed to
have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company,
but excluding shares of Common Stock deemed to have been issued or sold by the
Company in connection with any Excluded Securities) by means of Options,
Convertible Securities, or otherwise for a consideration per share (the “New Issuance Price”) less than
a price (the “Applicable
Price”) equal to the Conversion Price in effect immediately prior to such
issue or sale (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to the New Issuance Price. For purposes of determining the
adjusted Conversion Price under this Section 5(a), the following shall be
applicable:

         

        (i)           Issuance of
Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option
(and, subject to Section 5(a)(iii), without taking into account any contingent
downward adjustments in such option price per share) is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this Section 5(a)(i), the
“lowest price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option” shall be equal to
the sum of the lowest amounts of consideration (if any) received or receivable
by the Company with respect to any one share of Common Stock upon granting or
sale of the Option, upon exercise of the Option and upon conversion or exchange
or exercise of any Convertible Security issuable upon exercise of such Option
(and, subject to Section 5(a)(iii), without taking into account any contingent
downward adjustments in such option price per share). No further adjustment of
the Conversion Price shall be made upon the actual issuance of such share of
Common Stock or of such Convertible Securities upon the exercise of such Options
or upon the actual issuance of such Common Stock upon conversion or exchange or
exercise of such Convertible Securities.

         

        (ii)           Issuance of Convertible
Securities. If the Company in any manner issues or sells any Convertible
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        Common Stock is
issuable upon, such conversion or exchange or exercise thereof
(and, subject to Section 5(a)(iii), without taking into account any
contingent downward adjustments in such conversion or exchange price per share)
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 5(a)(ii), the “lowest price per share
for which one share of Common Stock is issuable upon such conversion or exchange
or exercise” shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion, or exchange or exercise of such Convertible Security (and, subject
to Section 5(a)(iii), without taking into account any contingent downward
adjustments in such option price per share). No further adjustment of the
Conversion Price shall be made upon the actual issuance of such share of Common
Stock upon conversion or exchange or exercise of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustment of the Conversion Price had been or
are to be made pursuant to other provisions of this Section 5(a), no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.

         

        (iii)           Change in Option Price or
Rate of Conversion. If the purchase price provided for in any Options,
the additional consideration, if any, payable upon the issue, conversion,
exchange or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or exercisable for
Common Stock changes at any time, the Conversion Price in effect at the time of
such change shall be adjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities provided for such
changed purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold. For purposes of
this Section 5(a)(iii), if the terms of any Option or Convertible Security that
was outstanding as of December 7, 2007 are changed in the manner described in
the immediately preceding sentence, then such Option or Convertible Security and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No adjustment
shall be made if such adjustment would result in an increase of the Conversion
Price then in effect.

         

        (iv)           Adjustment of Conversion
Price upon Subdivision or Combination of Common Stock.  If the
Company at any time on or after December 7, 2007 subdivides (by any stock split,
stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced so that, upon conversion the Holder shall be entitled to
receive the amount of Common Stock the Holder would have received if the Holder
had held the number of shares of Common Stock acquirable upon conversion of the
Conversion Amount set forth in the Conversion Notice (without taking into
account any limitations or restrictions on the convertibility of this Note)
immediately before the Record Date for such subdivision. If the Company at any
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        reverse stock
split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination will be proportionately increased
so that, upon conversion the Holder shall be entitled to receive the amount of
Common Stock the Holder would have received if the Holder had held the number of
shares of Common Stock acquirable upon conversion of the Conversion Amount set
forth in the Conversion Notice (without taking into account any limitations or
restrictions on the convertibility of this Note) immediately before the Record
Date for such combination.

         

        (b)           Calculation of Consideration
Received. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Company. If any Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received by the Company therefor.
If any Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration as
determined in good faith by the Board of Directors of the Company, except where
such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Closing Sale Price of such
securities on the date of receipt. If any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
jointly by the Company and the Required Holders. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation
Event”), the fair value of such consideration will be determined within
five (5) Trading  Days after the tenth day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the Required Holders. The determination of such appraiser shall be deemed
binding upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.

         

        (c)           Record Date. If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (A) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

         

        (d)           Other Events. If any
event occurs of the type contemplated by the provisions of this Section 5 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an
appropriate adjustment in the 

         


        
          
             


          

          
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        Conversion Price
so as to protect the rights of the Holder under this Note; provided that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 5.

         

        6.           RIGHTS UPON.ISSUANCE OF OTHER
SECURITIES

         

        (a)           Adjustments For Dividends,
Distributions And Reclassifications. In case at any time or from time to
time, the holders of Common Stock shall have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor:

         

        (i)           other
or additional stock, other securities, or property (including cash) by way of
dividend; or

         

        (ii)           other
or additional (or less) stock or other securities or property (including cash)
by way of spin-off, split-up, reclassification, recapitalization, combination of
shares or similar corporate restructuring;

         

        other than additional
shares of Common Stock issued as a stock dividend or in a stock-split
(adjustments in respect of which are provided for in Sections 6(b) or
6(c) hereof)
(“Dividend”),
then and in each such case each Holder, shall be entitled to receive upon
conversion the amount of stock and other securities and property which such
Holder would have received if the Holder had held the number of shares of Common
Stock acquirable upon conversion of the Conversion Amount set forth in the
Conversion Notice (without taking into account any limitations or restrictions
on the convertibility of this Note) immediately before the date on which a
record is taken for the grant, issuance or sale of such Dividend or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Dividend had been exercised
prior to the issuance of such Dividend, giving effect to all further adjustments
called for during such period by Sections 6(b) and
6(c)
hereof.

        


        (b)           Adjustments For Issuance Of
Common Stock And Amount Of Outstanding Common Stock.  If at any
time there shall occur any stock split, stock dividend, reverse stock split or
other subdivision of the Common Stock (“Stock Event”), then
the number of shares of Common Stock to be received by the Holder upon
conversion of this Note shall be appropriately adjusted such that the proportion
of the number of shares issuable hereunder to the total number of shares of the
Company (on a fully diluted basis) prior to such Stock Event is equal to the
proportion of the number of shares issuable hereunder to the total number of
shares of the Company (on a fully-diluted basis) after such Stock Event as if
the Holder had held the number of shares of Common Stock acquirable upon
conversion of the Conversion Amount set forth in the Conversion Notice (without
taking into account any limitations or restrictions on the convertibility of
this Note) immediately before the date on which a record is taken for such Stock
Event or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined with regard to such Stock Event as if the
conversion had been exercised prior to the occurrence of the Stock Event, giving
effect to all further adjustments called for during such period by Sections 6(a), and
6(c),
hereof.

         

        (c)           Reorganization,
Reclassification or Recapitalization.  In case at any time or
from time to time, the Company shall (i) effect a capital reorganization,
reclassification or

         


        
          
             


          

          
            -10-

            
              

            

          

          
             


          

        


        recapitalization,
(ii) consolidate with or merge into any other person, or (iii) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then in each such
case, the Holders, upon conversion of this Note at any time after the
consummation of such reorganization, recapitalization, consolidation, merger, or
the effective date of such dissolution, as the case may be, shall receive, in
lieu of the Common Stock or Other Securities (as defined below) issuable on such
exercise prior to such consummation or effective date, the stock and other
securities and property (including cash) to which such Holder would have been
entitled upon such consummation or in connection with such reorganization,
recapitalization, consolidation, merger or dissolution, as the case may be, as
if the Holder had fully held the number of shares of Common Stock acquirable
upon conversion of the Conversion Amount set forth in the Conversion Notice
(without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the reorganization, recapitalization, consolidation, merger or
dissolution, or, if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue or sale of
such event, all subject to further adjustment thereafter as provided in Sections 6(a) and
6(b)
hereof.

         

        (i)           Transfer to Holders Upon
Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall, at its expense, deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder after the effective date of such
dissolution pursuant to this Section 6(c) to the
Holder.

         

        (ii)           Continuation of
Terms. Upon any reorganization, consolidation, merger or transfer (and
any dissolution following any transfer) referred to in this Section 6(c), the
Note shall continue in full force and effect and the terms hereof shall be
applicable to the shares of stock and other securities and property receivable
on the conversion of the Note after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such Person shall have expressly assumed the terms of
the Note.

         

        (d)           Other
Securities.

         

        (i)           “Other Securities”
refers to any stock (other than Common Stock) Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property and other
securities of the Company or any other entity (corporate or otherwise) (i) which
the Holders at any time shall be entitled to receive, or shall have received, on
the conversion of the Note, in lieu of or in addition to Common Stock, or (ii)
which at any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities, in each case pursuant to
Section 6(a),
or 6(c)
hereof.

         


        
          
             


          

          
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        (ii)           In
case any Other Securities shall have been issued, or shall then be subject to
issue upon the conversion or exchange of any stock (or Other Securities) of the
Company (or any other issuer of Other Securities or any other entity referred to
in Section 6(c)
hereof) or to subscription, purchase or other acquisition pursuant to any rights
or options granted by the Company (or such other issuer or entity), the Holder
shall be entitled to receive upon conversion of the Note such amount of Other
Securities (in lieu of or in addition to Common Stock) as is determined in
accordance with the terms hereof, treating all references to Common Stock herein
as references to Other Securities to the extent applicable, and the
computations, adjustments and readjustments provided for in Section 6 with
respect to the number of shares of Common Stock issuable upon conversion of this
Note shall be made as nearly as possible in the manner so provided and applied
to determine the amount of Other Securities from time to time receivable on the
conversion of this Note, so as to provide the Holder with the benefits intended
by Section 6 and the other provisions of this Note as if the Holder had held the
number of shares of Common Stock acquirable upon conversion of the Conversion
Amount set forth in a Conversion Notice (without taking into account any
limitations or restrictions on the convertibility of this Note) immediately
before the date on which a record is taken for the grant, issuance or sale of
Other Securities or, if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue or sale of
Other Securities had the conversion been exercised prior to the issuance of such
Other Securities, giving effect to all further adjustments called for during
such period by Sections 6(a), 6(b) and 6(c)
above.

         

        7.           RIGHTS UPON FUNDAMENTAL
TRANSACTION

         

        (a)           Assumption. The
Company shall not enter into or be party to a Fundamental Transaction unless (i)
the Successor Entity assumes in writing all of the obligations of the Company
under this Note and the other Transaction Documents in accordance with the
provisions of this Section 7(a) pursuant to written agreements in form and
substance reasonably satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements to
deliver to each holder of Registered Notes in exchange for such Registered Notes
a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Registered Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the interest rates of the Registered Notes held by such
Holder, having similar conversion rights as the Registered Notes and having
similar ranking to the Registered Notes, and reasonably satisfactory to the
Required Holders and (ii) the Successor Entity (including its Parent Entity) is
a publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Note with the same effect as if
such Successor Entity had been named as the Company herein. Upon consummation of
the Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of the

         


        
          
             


          

          
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        Fundamental
Transaction, in lieu of the shares of Common Stock (or other securities, cash,
assets or other property) issuable upon the conversion of the Notes prior to
such Fundamental Transaction, such shares of publicly traded common stock (or
their equivalent) of the Successor Entity, as adjusted in accordance with the
provisions of this Note. The provisions of this Section shall apply similarly
and equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion of this
Note.  Notwithstanding anything else provided in this Note, the
Required Holders shall have the right to cause the Company to redeem the
Registered Notes upon the occurrence of a Fundamental Transaction through
payment of in immediately available funds of all Principal, Interest and other
amounts provided hereunder as of the effective date of the Fundamental
Transaction.

         

        8.           COMPANY RIGHT OF
REDEMPTION.

         

        (a)           General. After
February 4, 2009, the Company, at its option shall have the right to redeem,
with five (5) Trading Days’ advance written notice (the “Company Redemption Notice”), a
portion or all of the outstanding principal of this Note. The Holder may convert
after the Company Redemption Notice is received and until the Company Redemption
Price is received by the Holder.  Except as otherwise provided herein,
up to and including February 4, 2011, the redemption price shall be One Hundred
percent (100%) of the
face amount redeemed plus accrued and unpaid interest (the “Company Redemption
Price”).

         

        (b)           Mechanics of Company
Redemption. If the Company elects to redeem this Note in accordance with
Section 8(a), then the Company Redemption Price, if any, which is to be paid to
the Holder, shall be paid, by wire transfer of immediately available funds, an
amount in cash equal to 100% of the Company Redemption Price.

         

        (c)           Notwithstanding
the provisions of Sections 8(a) or 8(b), at any time following the sale by the
Company of all of the stock or substantially all of the assets of ADCO Surgical
Supply, Inc., ADCO South Medical Supplies, Inc. and/or the building known as
1292 Hammond Street, Bangor, Maine, the Company shall, if requested in writing
by the Required Holders, use the funds received by the Company from such sale
net of closing costs, including the payoff of the existing Indebtedness which is
secured by such property and reasonable professional fees, to redeem the
Registered Notes plus accrued interest (the “Financing
Redemption”).  The Company shall provide the Holders at least
ten (10) Trading Days prior notice (the “Financing Redemption Notice”)
which Financing Redemption Notice shall indicate the date on which the Company
is prepared to redeem the Note, which date shall not be more than fifteen (15)
nor less than ten (10) Trading Days after the date of the Financing Redemption
Notice.  The Holders shall provide the Company a written notice to be
received by the Company on or before the seventh (7th)
Trading Day following their receipt of the Financing Redemption Notice,
indicating their election to receive or forego any or all of the Financing
Redemption (the “Redemption
Participation Notice”). The Redemption Participation Notice shall set
forth the amount of the Note the Holder wishes to be redeemed as part of the
Financing Redemption (the “Financing Redemption
Price”).  Any redemption by the Company pursuant to this
Section 8(c) shall be redeemed by the Company at a price equal to the Company
Redemption Price. Redemptions required by this Section 8(c) shall be made
subject to and in accordance with the provisions of Section 11.

         


        
          
             


          

          
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        9.           NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Articles of Incorporation, Bylaws or through any reorganization, transfer of
assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, and will at all
times in good faith carry out all of the provisions of this Note and take all
reasonable action as maybe required to protect the rights of the Holder of this
Note.

         

        10.           RESERVATION OF AUTHORIZED
SHARES.

         

        (a)           Reservation. The
Company initially shall reserve out of its authorized and unissued Common Stock
a number of shares of Common Stock for Registered Notes equal to 150% of the
Conversion Rate with respect to the all of the Registered Notes outstanding as
of the Issuance Date. So long as any of the Registered Notes are outstanding,
the Company shall take all action necessary to reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Registered Notes, 150% of the number of shares of Common
Stock as shall from time to time be necessary to effect the conversion of all of
the Registered Notes then outstanding; provided that at no time shall the number
of shares of Common Stock so reserved be less than the number of shares required
to be reserved in the previous sentence (without regard to any limitations on
conversions) (the “Required
Reserve Amount”).

         

        (b)           Insufficient Authorized
Shares. If at any time while any of the Notes remain outstanding the
Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion
of the Registered Notes at least a number of shares of Common Stock equal to the
Required Reserve Amount (an “Authorized Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow the
Company to reserve the Required Reserve Amount for the Registered Notes then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than ninety (90) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its shareholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
shareholder with a proxy or information statement and shall use its reasonable
best efforts to solicit its shareholders’ approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the shareholders that they approve such proposal.

         

        11.           HOLDER’S REDEMPTIONS.
The Company shall deliver the (i) applicable Event of Default Redemption Price
to the Holder within five (5) Trading  Days after the Company’s
receipt of the Holder’s Event of Default Redemption Notice and (ii) the
applicable Financing Redemption Price on the date set forth in the Redemption
Notice.  In the event that the Company does not pay the applicable
Event of Default Redemption Price or Financing Redemption Price to the Holder
within the time period required, at any time thereafter and until the Company
pays such unpaid Redemption Price in full, the Holder shall have the option, in
lieu of redemption, to require the Company to promptly return to the Holder all
or any portion of this Note representing the Conversion Amount that was
submitted for redemption and for which the applicable Event of

         


        
          
             


          

          
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        Default
Redemption Price or Financing Redemption Price, as the case may be, (together
with any Late Charges thereon) has not been paid. Upon the Company’s receipt of
such notice, (x) the applicable Event of Default Redemption Notice or Redemption
Participation Notice shall be null and void with respect to such Conversion
Amount, (y) the Company shall immediately return this Note, or issue a new Note
(in accordance with Section 16(d)) to the Holder representing the sum of such
Conversion Amount to be redeemed together with accrued and unpaid Interest with
respect to such Conversion Amount and accrued and unpaid Late Charges with
respect to such Conversion Amount and Interest and (z) the Conversion Price of
this Note or such new Notes shall be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the applicable Event of
Default Redemption Notice or Redemption Participation Notice is voided and (B)
the lowest Closing Sale Price during the period beginning on and including the
date on which the applicable Event of Default Redemption Notice or Redemption
Participation Notice is delivered to the Company and ending on and including the
date on which the applicable Event of Default Redemption Notice or Redemption
Participation Notice is voided. The Holder’s delivery of a notice voiding a
Event of Default Redemption Notice or Redemption Participation Notice and
exercise of its rights following such notice shall not affect the Company’s
obligations to make any payments of Late Charges which have accrued prior to the
date of such notice with respect to the Conversion Amount subject to such
notice.

         

        12.           RESTRICTION ON REDEMPTION
AND CASH DIVIDENDS. Until all of the Registered Notes have been
converted, redeemed or otherwise satisfied in accordance with their terms, the
Company shall not, directly or indirectly, redeem, repurchase or declare or pay
any cash dividend or distribution on. its Common
Stock without the prior express written consent of the Required Holders, but if
any such cash dividend or distribution is made, then and in each case, the
Holder shall be entitled to receive the amount of cash dividend or distribution
as determined by the provisions of Section 6 hereof.

         

        13.           VOTING RIGHTS. The
Holder shall have no voting rights as the holder of this Note, except as
required by law, including but not limited to Chapter 607 of the Florida
Statutes, and as expressly provided in this Note.

         

        14.           COVENANTS.

         

        (a)           Rank. All payments
due under this Note shall be senior to or rank pari passu with all other
Indebtedness of the Company and its subsidiaries, exclusive of the Indebtedness
owed by D.A.W. to McKesson Corp. or any refinancing thereof.

         

        (b)           Incurrence of
Indebtedness. So long as this Note is outstanding, the Company shall not,
and the Company shall not permit any of its subsidiaries to, directly or
indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and (ii) Permitted
Indebtedness.

         

        (c)           Existence of Liens.
So long as this Note is outstanding, the Company shall not, and. the
Company shall not permit any of its subsidiaries to, directly or indirectly,
allow or suffer to exist any mortgage, lien, pledge, charge, security interest
or other encumbrance upon or in any property or assets (including accounts and
contract rights) owned by the Company or any of its subsidiaries (collectively,
“Liens”) other than
Permitted Liens.

         


        
          
             


          

          
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        (d)           Restricted Payments.
The Company shall not, and the Company shall not permit any of its subsidiaries
to, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or
in part, whether by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of any Permitted Indebtedness,
whether by way of payment in respect of principal of (or premium, if any) or
interest on, such Indebtedness if at the time such payment is due or is
otherwise made or, after giving effect to such payment, an event constituting,
or that with the passage of time and without being cured would constitute, an
Event of Default has occurred and is continuing.

         

        15.           VOTE TO ISSUE, OR CHANGE THE
TERMS OF NOTES. The affirmative vote at a meeting duly called for such
purpose or the written consent without a meeting of the Required Holders shall
be required for any change or amendment to this Note.  Any amendment
effected in accordance with this paragraph shall be binding upon each Holder,
each future holder, and the Company.

         

        16.           REISSUANCE OF THIS
NOTE.

         

        (a)           Transfer. If this
Note is to be transferred, the Holder shall surrender this Note to the Company,
whereupon the Company will issue promptly and deliver upon the order of the
Holder a new Note (in accordance with Section 16(d)), in the name of the validly
registered assigns or transferee, representing the outstanding Principal being
transferred by the Holder and, if less then the entire outstanding Principal is
being transferred, a new Note (in accordance with Section 16(d)) to the Holder
representing the outstanding Principal not being transferred. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that, by reason of
the provisions of Section 3(c)(iii) and this Section 16(a), following conversion
or redemption of any portion of this Note, the outstanding Principal represented
by this Note may be less than the Principal stated on the face of this
Note.

         

        (b)           Lost, Stolen or Mutilated
Note. Upon receipt by the Company of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Note, and, in
the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Note, the Company shall execute and deliver
to the Holder a new Note (in accordance with Section 16(d)) representing the
outstanding Principal.

         

        (c)           Note Exchangeable for
Different Denominations. This Note is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Note or
Notes (in accordance with Section 16(d) and in principal amounts of at least
$20,000) representing in the aggregate the outstanding Principal of this Note,
and each such new Note will represent such portion of such outstanding Principal
as is designated by the Holder at the time of such surrender.

         

        (d)           Issuance of New
Notes. Whenever the Company is required to issue a new Note pursuant to
the terms of this Note, such new Note (i) shall be of like tenor with this Note,
(ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding .(or in
the case of a new Note being issued pursuant to Section 16(a) or Section 16(c),
the

         


        
          
             


          

          
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        Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent
accrued Interest and Late Charges on the Principal and Interest of this Note,
from the Issuance Date.

         

        (e)           Registered
Instrument. This Note is a registered instrument and is not a bearer
instrument. The Note is registered as to both Principal and Interest with the
Company and its transfer agent and all payments hereunder shall be made to the
named Holder or, in the event of a transfer, to the transferee identified in the
record of ownership of the Note maintained by the Company. Transfer of this Note
may not be effected except in accordance with the provisions of the Note and the
First Amended Agreement.

         

        (f)           Notation of Payments and
Conversions. Concurrently with the receipt of any payment on account of
the principal balance of or interest on this Note, and concurrently with the
conversion of any portion hereof, the Holder shall note the date and amount of
such payment or the amount so converted on Exhibit II to this Note and promptly
deliver a copy of Exhibit II containing such notation to the Company. Any
transferee of this Note shall take this Note subject to confirmation with the
Company of the accuracy of Exhibit II, which confirmation shall be provided by
the Company reasonably and promptly.

         

        17.           REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder’s right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

         

        18.           PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of
an attorney for collection or enforcement or is collected or enforced through
any legal proceeding or the Holder otherwise takes action to collect amounts due
under this Note or to enforce the provisions of this Note or (b) there occurs
any bankruptcy, reorganization, receivership of the Company or other proceedings
affecting Company creditors’ rights and involving a claim under this Note, then
the Company shall pay the costs incurred by the Holder for such collection,
enforcement or action or in connection with such bankruptcy,

         


        
          
             


          

          
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        reorganization,
receivership or other proceeding, including, but not limited to, reasonable
attorneys’ fees and disbursements.

         

        19.           CONSTRUCTION;
HEADINGS. This Note shall be
deemed to be jointly drafted by the Company and the Holder and shall not be
construed against any person as the drafter hereof.  The headings of
this Note are for convenience of reference and shall not form part of, or affect
the interpretation of this Note.

         

        20.           FAILURE OR INDULGENCE NOT
WAIVER. No failure or delay on the part of the Holder in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.

         

        21.           DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Closing Sale Price, or
the arithmetic calculation of the Conversion Rate or any Redemption Price, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within one (1) business day of receipt of the Conversion Notice or
Redemption Notice or other event giving rise to such dispute, as the case may
be, to the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within one (1) Trading  Day of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within one (1) Trading  Day submit via
facsimile (a) the disputed determination of the Closing Sale Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder (such approval not to be unreasonably withheld or delayed) or (b) the
disputed arithmetic calculation of the Conversion Rate or any Redemption Price
to the Company’s independent, outside accountant. The Company, at the Company’s
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than five (5) Trading  Days from the
time it receives the disputed determination or calculations. Such investment
bank’s or accountant’s determination or calculation, as the case may be, shall
be binding upon all parties absent demonstrable error.

         

        22.           NOTICES;
PAYMENTS.

         

        (a)           Notices. Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with Section 7.5 of the First
Amended Agreement. The Company shall provide the Holder with prompt written
notice of all actions taken pursuant to this Note, including in reasonable
detail a description of such action and the reason therefore. Without limiting
the generality of the foregoing, the Company will give written notice to the
Holder (i) promptly upon any adjustment of the Conversion Price, setting forth
in reasonable detail, and certifying, the calculation of such adjustment and
(ii) at least ten days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.

         


        
          
             


          

          
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        (b)           Payments. Except as
otherwise set forth in this Note, whenever any payment of cash is to be made by
the Company to any Person pursuant to this Note, such payment shall be made in
lawful money of the United States of America by a check drawn on the account of
the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of the Holder, shall initially be as set forth on the Schedule of Buyers
attached to the First Amended Agreement), provided that the Holder may elect to
receive a payment of cash via wire transfer of immediately available funds by
providing the Company with prior written notice setting out such request and the
Holder’s wire transfer instructions. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a Trading  Day,
the same shall instead be due on the next succeeding day which is a
Trading  Day and, in the case of any Interest Date which is not the
date on which this Note is paid in full, the extension of the due date thereof
shall not be taken into account for purposes of determining the amount of
Interest due on such date. Any amount of Principal or other amounts due under
the Transaction Documents, other than Interest, which is not paid when due shall
result in a late charge being incurred and payable by the Company in an amount
equal to interest on such amount at the rate of fifteen percent (15.0%) per
annum from the date such amount was due until the same is paid in full (“Late Charge”).

         

        23.           CANCELLATION. After
all Principal, accrued Interest and other amounts at any time owed on this Note
has been converted or paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.

         

        24.           WAIVER OF NOTICE. To
the extent permitted by law, the Company hereby waives demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the First Amended
Agreement.

         

        25.           GOVERNING LAW; JURISDICTION;
JURY TRIAL. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the internal laws of the
Commonwealth of Massachusetts, without giving effect to any choice of law. or
conflict of law provision or rule (whether of the Commonwealth of Massachusetts
or any other jurisdictions) that would cause the application of the laws of
any.
jurisdictions other than the Commonwealth of Massachusetts. The Company and the
Holder hereby irrevocably submit to the exclusive jurisdiction of the Business
Litigation Session of the Superior Court for the Commonwealth of Massachusetts,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. The Company and the Holder
hereby irrevocably waive personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address it set forth on the signature page hereto and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. In the event that any
provision of this Note is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may

         


        
          
             


          

          
            -19-

            
              

            

          

          
             


          

        


        conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may .prove
invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of this Note. Nothing contained herein
shall be deemed or operate to preclude any Holder from bringing suit or taking
other legal action against the Company in any other jurisdiction to collect on
the Company’s obligations to the Holder, to realize on any collateral or any
other security for such obligations, or to enforce a judgment or other court
ruling in favor of the Holder.  EACH OF THE COMPANY AND THE HOLDER
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

         

        26.           WAIVERS.  The
observance of any term of this Note may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder (or their successors or
assigns).  Any waiver effected in accordance with this paragraph shall
be binding upon each Holder, each future holder, and the Company

         

        27.           REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

         

        The Company
represents and warrants to each Shareholder, as follows:

         

        (a)           Organization and Good
Standing.  The Company is a corporation duly organized, validly
existing, and in good standing in the State of Florida.  The Company
is duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required.  The Company
has full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it.  The Company has
delivered to the Holder, correct and complete copies of the charter and bylaws
of the Company (as amended to date).  The Company is not in default
under or in violation of any provision of its charter or bylaws.

         

        (b)           Authorization. The
Company has the full power and authority to execute, deliver, and issue this
Note and perform its obligations under this Note.  The execution,
delivery, and issuance of this Note by the Company, and the performance of the
Company's obligations under this Note have been duly authorized and constitute
the valid and legally binding obligation of the Company, enforceable in
accordance with its terms and conditions, except as enforcement may be limited
by applicable bankruptcy, insolvency or similar laws from time to time in effect
affecting creditors’ rights generally and by legal and equitable limitations on
the availability of specific remedies.  The Company need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency, stock exchange or any other
person in order to consummate the transactions contemplated hereby, other than
as set forth on Schedule 27(b) hereto.

         

        (c)           Litigation.  No
suit, action or other proceeding, or injunction or judgment or other order is
pending or, to the Company’s knowledge, threatened before any court or
governmental or regulatory official or agency or arbitrator, in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Note or the consummation of the transactions contemplated
hereby.

         


        
          
             


          

          
            -20-

            
              

            

          

          
             


          

        


        (d)           Non
Contravention.  Neither the execution, delivery, nor issuance
of this Note, nor the consummation of the transactions contemplated hereby, will
violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency,
stock exchange or court to which the Company is subject or conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under, any agreement, contract, lease, license, instrument,
articles of incorporation, by-laws or other arrangements to which the Company is
a party or by which it is bound or to which any of its assets is
subject.

         

        (e)           Valid Issuance; Absence of
Restrictions.  The issuance, sale and delivery of the Common
Stock upon conversion of this Note have been duly authorized by all necessary
corporate action on the part of the Company, and such shares of Common Stock
have been duly reserved for issuance.  The shares of Common Stock
issuable upon conversion of this Note, when issued upon such conversion, will be
duly and validly issued, fully paid and non-assessable, free of any preemptive
rights under applicable law or the Company’s articles of incorporation or
similar rights pursuant to any agreement to which the Company is a
party.

         

        28.           CERTAIN DEFINITIONS.
For purposes of this Note, the following terms shall have the following
meanings:

         

        (a)           “Approved Stock Plan” means any
employee benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company’s securities may be issued to any
employee, consultant, officer or director for services provided to the
Company.

         

        (b)           “Bloomberg” means Bloomberg
Financial Markets.

         

        (c)           “Calendar Month” means the
period beginning on and including the first of each calendar month and ending on
and including the last day of such calendar month.

         

        (d)           “Closing Sale Price” means, for
any security as of any date, the last closing bid price and last closing trade
price for such security on. the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins
to operate on an extended hours basis and does not designate the closing trade
price, then the last trade price of such security prior to 4:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last trade price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing trade price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no last closing trade price is available for any day, the last
closing bid price or, if no closing bid price is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc). If the Closing Sale
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Sale Price of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree

         


        
          
             


          

          
            -21-

            
              

            

          

          
             


          

        


        upon the fair
market value of such security, then such dispute shall be resolved pursuant to
Section 24. All such determinations to be appropriately adjusted for. any stock
dividend, stock split, stock combination or other similar transaction during the
applicable calculation period.

         

        (e)           “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto.

         

        (f)           “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Stock.

         

        (g)           “Eligible Market” means, The
New York Stock Exchange, Inc., the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market (the three prior markets, collectively
the “Nasdaq Stock
Market”), or the American Stock Exchange.

         

        (h)           “Excluded Securities” means any
Common Stock issued or issuable: (i) upon exercise or conversion of any Options
or Convertible Securities (as the case may be) issued after the date hereof
pursuant to any Approved Stock Plan, up to a maximum of ten percent (10%) of the
outstanding Common Stock; (ii) upon conversion of, or in exchange for, the
Registered Notes or Series 2 of the Class B Preferred Stock of the Company
issued to the holders of the Registered Notes on the date hereof; (iii) in
connection with any acquisition by the Company, whether through an acquisition
of stock or a merger of any business, assets or technologies the primary purpose
of which is not to raise equity capital; (iv) securities issued in connection
with corporate partnering transactions off terms approved by the Board of
Directors of the Company and the primary purpose of which is not to raise equity
capital; (v) upon exercise or conversion of any Options or Convertible
Securities (as the case may be) which are outstanding on the day immediately
preceding December 7, 2007 provided that the terms of such Options or
Convertible Securities are not amended, modified or changed on or after December
7, 2007; and (vi) upon exercise of any Options granted to Mark Dumouchel, David
Dumouchel, Wayne Gunter, Donato Mazzola and Michael Curry pursuant to employment
agreements dated as of February 4, 2008 by and among each of the aforementioned
individuals, D.A.W. and the Company.

         

        (i)           “Fundamental Transaction” means
that the Company shall, directly or. indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company  or its subsidiaries to another Person, (iii)
allow another Person or Persons to make a purchase, tender or exchange offer
that is accepted by the holders of more than the 50% of the outstanding shares
of Common Stock or more than the 50% of the outstanding shares of Voting Stock
(not including any shares of Voting Stock held by the Person or Persons making
or party to, or associated or affiliated with the Person or Persons making or
party to, such purchase, tender or exchange offer), (iv) consummate a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement)
with

         


        
          
             


          

          
            -22-

            
              

            

          

          
             


          

        


        another Person
whereby such other Person acquires more 50% of the outstanding shares of Common
Stock or more than 50% of the outstanding shares of Voting Stock (not including
any shares of Voting Stock held by the other Person or other Persons making or.
party to, or associated or affiliated with the other Persons making or party to,
such stock purchase agreement or other business combination), (v) reorganize,
recapitalize or reclassify its Common Stock or (vi) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) is or shall become the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of 50% of the outstanding shares of Common Stock or 50%
of the outstanding Voting Stock of the Company; provided that this definition of
“Fundamental Transaction” shall in no way be interpreted to include any
transaction contemplated by the First Amended Agreement.

         

        (j)           “GAAP” means United States
generally accepted accounting principles, consistently applied.

         

        (k)           “Indebtedness” of any Person
means, without duplication (i) all indebtedness for borrowed money, (ii) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, “surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, (viii) all obligations
issued, undertaken or assumed as part of any financing facility with respect to
accounts receivables of the Company and its subsidiaries, including, without
limitation, any factoring arrangement of such accounts receivables and (ix) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (i) through (viii) above.

         

        (l)           “Interest Rate” means eight
percent (8%) per annum.

         

        (m)           “Options” means any rights,
warrants or options to subscribe for or purchase Common Stock or Convertible
Securities.

         

        (n)           “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or
listed

         


        
          
             


          

          
            -23-

            
              

            

          

          
             


          

        


        on an Eligible
Market, or, if there is more than one such Person or Parent Entity, the Person
or Parent Entity with the largest public market capitalization as of the date of
consummation of the Fundamental Transaction.

         

        (o)           “Permitted Indebtedness” means
(A) Indebtedness incurred by the Company that is made expressly subordinate in
right of payment to the Indebtedness evidenced by this Note, as reflected in a
written agreement acceptable to the Holder and approved by the Holder in writing
(which approval shall not be unreasonably delayed), and which Indebtedness does
not provide at any time for (1) the payment, prepayment, repayment, repurchase
or defeasance, directly or indirectly, of any principal or premium, if any,
thereon until ninety-one (91) days after the Maturity Date or later and (2)
total interest and fees at a rate in excess of the Interest Rate hereunder, (B)
Indebtedness secured by Permitted Liens, (C) Indebtedness to trade creditors
incurred in the ordinary course of business, (D) extensions, refinancings and
renewals of any items of Permitted Indebtedness, provided that the principal
amount is not increased or the terms modified to impose more burdensome terms
upon the Company or its subsidiary, as the case may be, (E) Indebtedness
outstanding on the Issuance Date and as disclosed in Schedule 28(o) hereto, and
(F) Indebtedness of the Company or any subsidiary thereof, in addition to that
described in clauses (A) through (E) of this definition, that is not material to
the Company and in an aggregate principal amount outstanding at any time not to
exceed $100,000.

         

        (p)           “Permitted Liens” means (i) any
Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or
delinquent, (iii) any Lien created by operation of law, such as materialmen’s
liens, mechanics’ liens and other similar liens, arising in the ordinary course
of business with respect to a liability that is not yet due or delinquent or
that are being contested in good faith by appropriate proceedings, (iv) Liens
securing the Company’s obligations under the Registered Notes, (v) Liens (A)
upon or in any equipment acquired or held by the Company or any of its
subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
equipment, or (B) existing on such equipment at the time of its acquisition,
provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment, (vi) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) and (v) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase, (vii) leases or
subleases and licenses and sublicenses granted to others in the ordinary course
of the Company’s business, not interfering in any material respect with the
business of the Company and its subsidiaries taken as a whole, (viii) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payments of custom duties in connection with the importation of goods, (ix)
Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 4(a)(ii); (x) Liens with respect
to Indebtedness not individually in excess of $25,000 or in the aggregate in
excess of $100,000, which individually and in aggregate are not material to the
Company, and (xi) Liens existing as of this date and disclosed on Schedule 28(p)
hereto.

         


        
          
             


          

          
            -24-

            
              

            

          

          
             


          

        


        (q)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

         

        (r)           “Principal Market” means the
Nasdaq Stock Market.

         

        (s)           “Redemption Notices” means,
collectively, the Event of Default Redemption Notices, the Company Redemption
Notice, and, each of the foregoing, individually, a Redemption
Notice.

         

        (t)           “Redemption Premium” means
125%.

         

        (u)           “Redemption Prices” means,
collectively, the Event .of Default
Redemption Price, and the Company Redemption Price, and each of the foregoing,
individually, a Redemption Price.

         

        (v)           “Required Holders” means the
holders of Registered Notes representing at least a majority of the aggregate
principal amount of the Notes then outstanding.

         

        (w)           “Successor Entity” means the
Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
Entity.

         

        (x)           “Trading Day” means any day on
which the Common Stock are traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock are
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock are scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock are suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00 p.m., New York time).

         

        (y)           “Voting Stock” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).

         

         [Signature
Page Follows]

         

      

    

     

     

     


    
      
         


      

      
        -25-

        
          

        

      

      
         


      

    


    


     

    IN WITNESS
WHEREOF, the Company has caused this Note to be duly executed as of the Issuance
Date set out above.

     

    


     

    
      	 
      	
              NYER
      MEDICAL GROUP, INC.

               

            
	 
      	
              By: /s/Karen
  Wright

            
	 
      	
              Name: Karen
      Wright

            
	 
      	
              Title:   Vice
      President of Finance and Treasurer

            


    

    


     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


     

    EXHIBIT
I

    (To
be Executed by Holder in order to Convert Note)

     

    CONVERSION
NOTICE

    FOR
NYER MEDICAL GROUP, INC.

    CONVERTIBLE
NOTE DUE FEBRUARY 4, 2011

     

    The undersigned,
as Holder of the Convertible Note Due February 4, 2011 of Nyer Medical Group,
Inc. (the “Company”), in
the outstanding principal amount of U.S. $__________ (the “Note”), hereby elects to
convert that portion of the outstanding principal amount of the Note shown on
the next page into shares of Common Stock, $0.0001 par value per share (the
“Common Stock”), of the
Company according to the conditions of the Note, as of the date written below.
The undersigned hereby requests that share certificates for the Common Stock to
be issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee
will be charged to the Holder for any conversion, except for transfer taxes, if
any.

     

    Conversion
Information:

     

    NAME OF
HOLDER:_____________

     

    By:_________________________

    Print
Name:

    Print
Title:

    Print Address of
Holder:

     

    ___________________________

     

    Issue Common
Stock to:

     

    ___________________________

    at:_________________________

    ___________________________

     

    Electronically
transmit and credit Common Stock to:

     

    ___________________________

    at:_________________________

    ___________________________

     

    Date of
Conversion:_________________________

    Applicable
Conversion Rate $__________ per share of Common Stock

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    THE
COMPUTATION OF THE NUMBER OF COMMON SHARES TO

    BE
RECEIVED IS SET FORTH ON THE ATTACHED PAGE

     

    Page
2 to Conversion Notice for:

     

    (Name of
Holder)

    


    


    COMPUTATION OF NUMBER OF
COMMON SHARES TO BE RECEIVED

     

    
      
        	
                A.  Outstanding
      Principal Amount converted:

              	 	
                $

              	 
	
                B.  Accrued,
      unpaid interest on Outstanding Principal Amount converted:

              	 	
                $

              	 
	 
      	 	 
      	 
	
                Total
      dollar amount converted (total of A + B)

              	 	
                $

              	 
	
                Conversion
      Price

              	 	
                $

              	 
	 
      	 	 
      	 
	
                Total dollar amount
    converted

              	 =
      	
                $

              	 
	
                Conversion
      Price

              	 	
                $

              	 
	
                Number of
      shares of Common Stock

              	 =	
                 

              	 


      

    

     

     

    If the conversion
is not being settled by DTC, please issue and deliver

    certificate(s)
for shares of Common Stock in the following amount(s):

    


    Please issue and
deliver new Note(s) in the following amounts to:

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


     

    EXHIBIT
II

     

    SCHEDULE
OF PAYMENTS AND CONVERSIONS

    FOR
NYER MEDICAL GROUP, INC.

    CONVERTIBLE
NOTE DUE FEBRUARY 4, 2011

     

    


     

    
      	
              Date

            	
              Interest Payment

            	
              Principal Payment

            	
              Conversion Amount

            	
              Holder Initials

            	
              Company
      Initials

            
	 
      	 
      	 
      	 
      	 
      	 
      


    

    


     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    Schedule
27(b)

    


    Authorization

    


    


    
      	
               
      

            	
              1.

            	
              A consent
      will be required with respect to the Commercial Guaranty dated October 6,
      2004, by Nyer Medical Group, Inc. in favor of KeyBank
  NA.

            


    

    


    
      	
               
      

            	
              2.

            	
              The
      transactions contemplated by this agreement require filings, approvals and
      notices with respect to the U.S. Securities and Exchange Commission and
      the Nasdaq Stock Market LLC.

            
	 	 	 
	 	3.	Consent of
      Nyer’s shareholders will be required.


    

    


          

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Schedule
28(o)

    


    Indebtedness outstanding on
the Issuance Date

    


    
      	
              1.

            	
              Commercial
      Guaranty, dated October 6, 2004, by Nyer Medical Group, Inc. in favor of
      KeyBank, NA.

            
	
              2.

            	
              Agreement,
      dated October 6, 2004, between KeyBank, NA and ADCO Surgical Supply, Inc.
      – Promissory Note, which respect to a line of credit up to the amount of
      $300,000 (the “KeyBank Note”) (Also see, Letter, dated November 30, 2007,
      by KeyBank, NA to ADCO Surgical Supply, Inc. with respect to forbearance.
      involving the financial arrangements with respect to the KeyBank
      Note).

            
	
              3.

            	
              $400,000
      note, dated the date hereof, issued by the Company to member(s) of the
      Nyer Family in connection with the transactions contemplated by this
      note.

            
	
              4.

            	
              $350,000
      note, dated the date hereof, issued by the Company to Nyle International
      in connection with the transactions contemplated by this
    note.

            
	
              5.

            	
              $1,750,000
      note, dated the date hereof, issued by the Company to D.A.W.,
      Inc.

            
	
              6.

            	
              Anton
      Investments, Inc. and Conway Associates, Inc. have the following
      liabilities: accounts payable of $251,957 and accrued expenses and other
      liabilities of $46,671 for a total of $298,628.

            
	
              7.

            	
              Indebtedness
      of DAW and FMT: McKesson Corporation is a secured creditor of DAW. It is
      understood by the parties hereto that the information hereon with respect
      to DAW and FMT (if any) has been provided by such entities, and that Nyer
      shall not be liable in any way for such information under this or any
      related agreement.

            


    

    


     

    


    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Schedule
28(p)

     

    Liens

     

    
      	
              1.

            	
              Agreement,
      dated October 6, 2004, between KeyBank NA and ADCO Surgical Supply, Inc. –
      Mortgage, with respect to the property located at 1292 Hammond Street,
      Bangor, Maine.

            
	
              2.

            	
              McKesson
      Corporation is a secured creditor of DAW. It is understood by the parties
      hereto that the information hereon with respect to DAW and FMT (if any)
      has been provided by such entities, and that Nyer shall not be liable in
      any way for such information under this or any related
      agreement.

            


    

    


     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


     

    Schedule to
Exhibit 10.35

     

     

     

    The following
individuals have executed Convertible Promissory Notes with the Company which
are substantially identical in all material respects to the representative
Convertible Promissory Note filed herewith and are dated as of the respective
dates listed below.  The other Convertible Promissory Notes are omitted
pursuant to Instruction 2 to Item 601 of Regulation S-K.

     

     

    
      	
              Name
      of Signatory

            	
              Original
      Principal Amount of Note

            	
              Date

            
	
              David
      Dumouchel

            	
              $300,000.00

            	
              February 4,
      2008

            
	
              Wayne
      Gunter

            	
              $300,000.00

            	
              February 4,
      2008

            
	
              Donato
      Mazzola

            	
              $300,000.00

            	
              February 4,
      2008

            
	
              Mark
      Dumouchel

            	
              $300,000.00

            	
              February 4,
      2008