EXHIBIT 10.1

 

AGREEMENT OF PURCHASE AND SALE

 

BY AND BETWEEN

 

PAINCARE HOLDINGS, INC.,

 

AND

 

CHRISTOPHER E. CENAC, M.D.

 

DATED: December 31, 2003

 

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AGREEMENT OF PURCHASE AND SALE

 

THIS AGREEMENT OF PURCHASE AND SALE (the “Agreement”) is entered into effective
this 31st day of December, 2003, by and between Christopher E. Cenac, M.D., an
individual residing in the State of Louisiana (hereinafter referred to as
“Seller”) and PainCare Holdings, Inc., a Florida corporation (hereinafter
referred to as “Buyer” or sometimes “PainCare”). Buyer, its Subsidiary (defined
below) and the Seller are sometimes referred to herein individually as a “Party”
and collectively as the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, Seller is a licensed medical provider in the State of Louisiana who
owns and operates a medical practice specializing in orthopedic medicine, pain
management procedures and other ancillary services, solely through Seller, his
physician employees and other medical personnel (the “Business”) with its
principle business location at 210 New Orleans Blvd., Houma, Louisiana 70364
(the “Business Location”); and

 

WHEREAS, Seller is desirous of selling all of the assets of the Business; and

 

WHEREAS, Buyer through a wholly owned subsidiary, PainCare Acquisition Company
VIII, Inc., a Florida corporation d/b/a the Bone & Joint Surgical Clinic
(hereinafter called “Subsidiary” and together with the Buyer sometimes
hereinafter called the “Acquiring Companies”) is desirous of buying said assets
all on the following terms and conditions.

 

NOW THEREFORE, in consideration of the mutual promises and covenants herein
contained and the sum of $10.00 and other good and valuable consideration paid
by Buyer to Seller, receipt of which is hereby acknowledged by Seller, it is
mutually covenanted and agreed by the parties hereto as follows:

 

1. PURCHASE AND SALE OF ASSETS

 

1.1 Assets to be Transferred. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined), and except as otherwise
stated, Seller shall sell, transfer, convey, assign, and deliver to Subsidiary
and Buyer shall purchase and accept, unless otherwise excluded as provided
herein, all of the business rights, claims and assets (of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued, contingent or otherwise, and wherever situated) of Seller,
used, held for use or acquired or developed for use in the Business, or
developed in the course of conducting the Business or by persons employed in the
Business (collectively the “Purchased Assets”). The Purchased Assets shall
include all the following assets or rights of the Seller, to the extent so used,
held, acquired or developed in the Business:

 

(a) Cash and Cash Equivalents and Accounts Receivable. All cash and cash
equivalents, and the Accounts Receivable for the Business described in
Disclosure Schedule 1.1.(a).

 

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(b) Leased Real Property. The lease of real property with respect to Business
Location (the “Real Property Lease”) described in Disclosure Schedule 1.1.(b).

 

(c) Personal Property. All other property described in Disclosure Schedule
1.1.(c).

 

(d) Inventory. All inventories including, without limitation, drugs, medication,
pharmaceutical supplies, other medical supplies, merchandise and durable medical
equipment on the Closing Date, together with related packaging and delivery
materials (collectively the “Inventory”).

 

(e) Personal Property Leases. All leases of equipment and other personal
property leased by Seller for use in the Business (the “Personal Property
Leases”) described in Disclosure Schedule 1.1(e).

 

(f) Intellectual Property. Seller’s interest in any and all Intellectual
Property. As used herein, the term “Intellectual Property” shall mean and
include: (i) all trademark rights, business identifiers, trade dress, logos,
service marks, trade names and brand names, all registrations thereof and
applications therefore and all goodwill associated with the foregoing; (ii) all
copyrights, copyright registrations and copyright applications, and all other
rights associated with the foregoing and the underlying works of authorship;
(iii) all patents and patent applications, and all international proprietary
rights associated therewith; (iv) all contracts or agreements granting any
right, title, license or privilege under the intellectual property rights of any
third party; (v) all inventions, mask works and mask work registrations,
know-how, discoveries, improvements, designs, trade secrets, shop and royalty
rights, employee covenants and agreements respecting intellectual property and
non-competition and all other types of intellectual property; (vi) all computer
software (including all data and related documentation); (vii) all other
proprietary rights; (viii) all copies and tangible embodiments of the foregoing
(in whatever form or medium); and (ix) all claims for infringement or breach of
any of the foregoing. Notwithstanding the foregoing, Intellectual Property shall
not include Seller’s interest in a book which he is co-authoring with Richard
Bunch, Ph.D, P.T.

 

(g) Contracts. All Seller’s rights in, to and under all contracts, agreements,
license agreements, purchase orders and sales orders (hereinafter “Contracts”)
of Seller as it relates to the Business. To the extent that any Contract for
which assignment to Buyer is provided herein is not assignable without the
consent of another party, this Agreement shall not constitute an assignment or
an attempted assignment thereof if such assignment or attempted assignment would
constitute a breach thereof. Seller and Buyer agree to use their reasonable best
efforts (without any requirement on the part of Buyer to pay any money or agree
to any change in the terms of any such Contract) to obtain the consent of such
other party to the assignment of any such Contract to Buyer in all cases in
which

 

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such consent is or may be required for such assignment. If any such consent
shall not be obtained, Seller agrees to cooperate with Buyer in any reasonable
arrangement designed to provide for Buyer the benefits intended to be assigned
to Buyer under the relevant Contract, including enforcement at the cost and for
the account of Buyer of any and all rights of Seller against the other party
thereto arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made, Buyer,
upon notice to Seller, shall have no obligation pursuant to Section 2.1 or
otherwise with respect to any such Contract and any such Contract shall not be
deemed to be a Purchased Asset hereunder.

 

(h) Computer Software. All computer programs and other software, documentation
and related property and information of Seller.

 

(i) Records and Files. All records, files, invoices, patient files and records,
customer lists, specifications, designs, drawings, accounting records, financial
records, business records, operating data and other data.

 

(j) Licenses; Permits. All licenses, permits and approvals necessary to operate
the Business in the State of Louisiana.

 

(k) Business Name. The trade name “Bone & Joint Surgical Clinic” and all rights
to use or allow others to use such name.

 

(l) General Intangibles. All prepaid items, all causes of action arising out of
occurrences before or after the Effective Date, and other intangible rights and
assets including, without limitation, telephone numbers, directory listings, and
prepaid advertisements.

 

1.2 Excluded Assets. Section 1.1 notwithstanding, Seller shall not sell,
transfer, assign, convey or deliver to Buyer, and Buyer will not purchase or
accept the following assets of Seller:

 

(a) Consideration. The consideration delivered by Buyer to Seller pursuant to
this Agreement.

 

(b) Tax Credits and Records. Federal, state and local income and franchise tax
credits and tax refund claims and associated returns and records. Buyer shall
have reasonable access to such records and may make excerpts therefrom and
copies thereof.

 

(c) Personal Assets. Those personal assets of Seller.

 

2. ASSUMPTION OF LIABILITIES

 

2.1 Liabilities to be Assumed. As used in this Agreement, the term “Liability”
shall mean and include any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or

 

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unknown, asserted or unasserted, liquidated or unliquidated, secured or
unsecured. Subject to the terms and conditions of this Agreement, on the
Effective Date, Buyer shall assume or take subject to, as the case may be, and
agrees to perform and discharge the following, and only the following,
Liabilities of Seller:

 

(a) Certain Liabilities. Those certain accounts payable and accrued Liabilities
reflected listed in Disclosure Schedule 2.1.(a).

 

(b) Contractual Liabilities. Seller’s Liabilities as of and after the Effective
Date under and pursuant to the Contracts described in Section 1.1.(b), 1.1.(e)
and 1.1.(g).

 

(c) Liabilities Under Permits and Licenses. Seller’s Liabilities as of and after
the Effective Date under any permits or licenses listed in Disclosure Schedule
1.1(j) and assigned to Buyer at the Closing.

 

(d) Line of Credit. Buyer is acquiring the Accounts Receivable for the Business
described in Disclosure Schedule 1.1.(a) subject to that certain secured
interest of South Louisiana Bank, 1362 West Tunnel Blvd., Houma, LA 70361 (the
“Bank”) as it pertains to that certain Promissory Note and Business Loan
Agreement (No. 30340905) dated March 12, 2002, which will have as of the Closing
Date a balance, including principal and accrued interest, of not more than
$605,000 (hereinafter, the “Bank Loan”). Buyer and Seller understand that the
Bank intends to convert the Bank Loan to an installment payment loan requiring
twenty three (23) equal monthly payments of $30,000 and a final payment on the
24th month equal to the unpaid principal balance and all accrued interest (the
“Installment Loan”). The Subsidiary agrees to make such payments out of its
available cash flow and to secure the payment of the Installment Loan with the
accounts receivable generated by the Subsidiary. Seller agrees to execute, if
the Bank requires, such additional guarantee, promissory note and any other
documents necessary to effectuate the closing of the Installment Loan. Finally,
Seller agrees that in the event the Subsidiary is unable to make, out of its
cash flow from operations, the payments required by the Installment Loan that he
will defer until such time as sufficient cash flow is available all necessary
cash payments that may otherwise be required to be made to him pursuant to this
Agreement and/or that certain Employment Agreement by and between the Subsidiary
and the Seller of even date herewith in order for the Subsidiary to satisfy the
Bank Loan.

 

The Liabilities described in subsections 2.1.(a), 2.1.(b), 2.1.(c) and 2.1(d)
above are hereinafter collectively described as the “Assumed Liabilities.”

 

2.2 Liabilities Not to be Assumed. Except as and to the extent specifically set
forth in Section 2.1, Buyer is not assuming nor buying the Purchased Assets
subject to any Liabilities of Seller and all such Liabilities shall be and
remain the responsibility of Seller.

 

2.3 Taxes Arising from Transaction. Buyer shall not assume or be responsible for
any taxes applicable to, imposed upon or arising out of the sale or transfer of
the Purchased Assets to

 

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Buyer and the other transactions contemplated by this Agreement, including but
not limited to any income, transfer, sales, use, gross receipts or documentary
stamp taxes.

 

2.4 Income and Franchise Taxes. Buyer shall not assume or be responsible for any
Liability of Seller for Federal income taxes and any state or local income,
profit or franchise taxes (and any penalties or interest due on account
thereof).

 

2.5 Product, Medical Malpractice and Service Liability. Buyer shall not assume
or be responsible for any Liability of Seller arising out of or in any way
relating to or resulting from, either directly or indirectly, any medical
negligence, malpractice or professional or personal liability or pharmaceutical,
medication or product manufactured, formulated, mixed, compounded, assembled or
sold or any service performed by Seller, his contractors or any of his employees
prior to the Effective Date (including any Liability of Seller or any of his
employees, contractors or agents for claims made for injury to person, damage to
property or other damage, whether made in product liability, tort, negligence,
breach of warranty or otherwise).

 

2.6 Litigation Matters. Buyer shall not assume or be responsible for any
Liability of Seller with respect to any action, claim, suit, proceeding,
arbitration, investigation or inquiry, whether civil, criminal or administrative
(“Litigation”).

 

2.7 Infringements. Buyer shall not assume or be responsible for any Liability of
Seller with respect to a third party for infringement of such third party’s
Intellectual Property.

 

2.8 Transaction Expenses. Buyer shall not assume or be responsible for any
Liabilities incurred by Seller in connection with this Agreement and the
transactions contemplated herein.

 

2.9 Liability For Breach. Buyer shall not assume or be responsible for any
Liabilities of Seller for any breach or failure to perform any of Seller’s
covenants and agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing, any other contract or agreement, whether or not assumed
hereunder, including breach arising from assignment of contracts hereunder
without consent of third parties.

 

2.10 Liabilities to Affiliates. Buyer shall not assume or be responsible for any
Liabilities of Seller to its present or former Affiliates.

 

2.11 Violation of Laws or Orders. Buyer shall not assume or be responsible for
any Liabilities of Seller for any violation of or failure to comply with any
statute, law, ordinance, rule or regulation (collectively, “Laws”) or any order,
writ, injunction, judgment, plan or decree (collectively, “Orders”) of any
court, arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, municipal, foreign or
other (collectively, “Government Entities”).

 

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3. PURCHASE PRICE - PAYMENT

 

3.1 Initial Transaction Consideration. Subject to the adjustments set forth in
Section 3.2 below, the initial aggregate transaction consideration that Buyer
shall pay to the Seller for the Purchased Assets shall equal (i) the amount of
the Assumed Liabilities plus (ii) Two Million Five Hundred Thousand and 00/100
Dollars ($2,500,000) comprised of: (x) One Million Two Hundred Fifty Thousand
and 00/100 Dollars ($1,250,000) (the “Cash Due At Closing”) which shall be
delivered via wire transfer on the Closing Date to a bank account designated by
the Seller; plus (y) Five Hundred Sixty Five Thousand and Forty Eight (565,048)
common shares, $.0001 par value, of Buyer (the “Initial Buyer Shares”) which for
purposes of this Agreement shall equal One Million Two Hundred Fifty Thousand
and 00/100 Dollars ($1,250,000), or $2.2122 per share. The Cash Due At Closing
and the Initial Buyer Shares shall hereinafter collectively be known as the
“Initial Transaction Consideration.”

 

3.2 Potential Post Closing Adjustments.

 

(a) Accounts Receivable Adjustment. If the Subsidiary, within the twelve (12)
month calendar period immediately following the Closing Date, does not collect a
total of at least Six Hundred Thousand and 00/100 Dollars ($600,000.00) from the
accounts receivable purchased pursuant to this Agreement (the “Acquired Accounts
Receivable”), then the Initial Transaction Consideration shall be reduced dollar
for dollar by the A/R Adjustment. The “A/R Adjustment” shall equal the
difference between Six Hundred Thousand and 00/100 Dollars ($600,000.00) and the
amount of the Acquired Accounts Receivable actually collected by the Subsidiary
during such twelve (12) month period. Buyer shall receive payment for the A/R
Adjustment through a lump sum cash payment from the Seller within seven (7) days
after the end of the twelve (12) month period.

 

3.3 Earn-out Payment.

 

(a) General. Subject to the condition that the Subsidiary achieves Formula
Period Profits (as defined in Subsection (f) below) of at least One Million and
00/100 Dollars ($1,000,000) (the “Earnings Threshold”) in each of the three (3)
successive twelve (12) month calendar periods beginning on January 1, 2004 (each
such twelve (12) month calendar period shall be referred to herein as a “Formula
Period”), then Buyer shall pay to the Seller a total amount of additional
consideration of Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000), payable in three equal annual installments of Eight Hundred Thirty
Three Thousand Three Hundred Thirty Three and 33/100 Dollars ($833,333.33) (the
“Intended Installment Payment”) as of the time and in the form of consideration
provided in Section 3.3(d) below and subject to adjustment as provided in
Section 3.3(b) and (c) below.

 

(b) Installment Payment Discount. Notwithstanding Section 3.3(a) above, if the
Subsidiary fails to achieve the Earnings Threshold in any Formula Period, the
amount of the Intended Installment Payment for such Formula Period shall be
recalculated to equal the product of the Intended Installment Payment,
multiplied by the Installment Payment Discount (as defined below) (the “Adjusted
Installment Payment”). The “Installment Payment Discount” shall equal

 

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(i) the Formula Period Profits (as defined in Subsection (f) below) for such
Formula Period divided by the Earnings Threshold; multiplied by (ii) ninety
percent (90%).

 

(c) Installment Payment Premium. Notwithstanding Section 3.3(b), if (i) the
Seller receives the Adjusted Installment Payment from Buyer in any Formula
Period (including the last Formula Period) rather than the Intended Installment
Payment as a result of the Formula Period Profits equaling less than the
Earnings Threshold for such Formula Period, and (ii) the Subsidiary’s Formula
Period Profits exceed the Earnings Threshold in the Formula Period immediately
subsequent to the Formula Period (or, with respect to the last Formula Period if
there is an Adjusted Installment Payment, the twelve (12) month period
immediately following the last Formula Period) for which the Installment Payment
Discount corresponded, then Buyer shall pay to the Seller the Installment
Payment Premium (as defined below). The “Installment Payment Premium” shall
equal the product of (A) the Formula Period Profits for the Formula Period (or,
the twelve (12) month period immediately following the last Formula Period, as
the case may be) in which the Installment Payment Premium is calculated minus
the Earnings Threshold, multiplied by (B) Seventy-five percent (75%). The
Installment Payment Premium shall be paid to the Seller in the same percentages,
form and time as the Installment Payments (as defined in Subsection 3.3(d)
below) are due for the Formula Period for which the Installment Payment Premium
is calculated.

 

(d) Manner of Payment. Within sixty (60) days after the end of each Formula
Period, Buyer shall prepare and deliver to the Seller a financial statement
presenting the Formula Period Profits for the Subsidiary for the applicable
Formula Period (the “Formula Period Profits Statement”). Ten (10) business days
after delivery of the Formula Period Profits Statement, the Seller shall in a
written notice to Buyer either accept or describe in reasonable detail any
proposed adjustments to the Formula Period Profits Statement and the reasons
therefore, and shall include pertinent calculations. If the Seller fails to
deliver notice of acceptance or objection to the Formula Period Profits
Statement within such ten (10) day period, the Seller shall be deemed to have
accepted the Formula Period Profits Statement. If the Seller accepts or fails to
object to the Formula Period Profits Statement within the ten (10) day period
set forth above, then within ninety (90) days after the end of the Formula
Period, Buyer shall pay to the Seller the Intended Installment Payment or the
Adjusted Installment Payment (each an “Installment Payment”, and collectively,
the “Installment Payments”) along with any Installment Payment Premium owed in
accordance with Subsection 3.3(c) above as follows: (i) fifty percent (50%) of
the Installment Payment shall be made in cash via wire transfer to a bank
account designated by the Seller at least five (5) days prior to the end of the
Formula Period; and (ii) fifty percent (50%) of the Installment Payment shall be
made in Buyer’s common shares, $.0001 par value (hereinafter the “Earn-out
Shares”), priced at Fair Market Value (as defined in Subsection 3.3(f) below) as
of the last day of the subject Formula Period. In the event Buyer and the Seller
are not able to agree on the Formula Period Profits Statement within thirty (30)
days from and after the receipt by Buyer of any objections raised by the Seller,
Buyer and the Seller shall each have the right to require that such disputed
determinations be submitted to an independent certified public accountant or
accounting firm that Buyer shall select, for computation or verification in
accordance with the provisions of this Agreement, and the Installment Payment
shall be paid by Buyer to the Seller within fifteen (15) days after receipt of
the accountant’s computation or

 

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verification. The foregoing provisions for certified public accounting firm
review shall be final and binding upon the Parties and there shall be no right
of appeal from such decision.

 

(e) Earn-out Cap. Notwithstanding anything to the contrary in this Section 3, in
no event whatsoever shall the aggregate amount of the Installment Payments and
Installment Payment Premiums payable to the Seller from Buyer in cash, in the
Earn-out Shares (as priced pursuant to this Agreement) or any other form of
consideration exceed Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000).

 

(f) Definitions for Purposes of Section 3. For purposes of Section 3 of this
Agreement, the following terms shall have the meanings set forth below:

 

(i) “Fair Market Value” shall mean the value of the Earn-out Shares determined
as follows:

 

1. if the principal market for Buyer’s common shares, $0.0001 par value (the
“Buyer’s Shares”) is a national securities exchange, then the “Fair Market
Value” of the Earn-out Shares shall equal the thirty (30) day trailing average
of the closing ask prices of the Buyer’s Shares as reported by such exchange or
on a composite tape reflecting transactions on such exchange; or

 

2. if the principal market for the Buyer Shares is not a national securities
exchange, but the price of the Buyer Shares is quoted on the National
Association of Securities Dealers Automated Quotation System (“NASDAQ”) Stock
Market, and (A) actual closing price information is available with respect to
the Buyer Shares, then the “Fair Market Value of the Earn-out Shares shall equal
the thirty (30) day trailing average of the closing ask prices of such stock on
the NASDAQ Stock Market; or (B) actual closing price information is not
available with respect to the Buyer Shares, then the “Fair Market Value” of the
Earn-out Shares shall equal the thirty (30) day trailing average of the bid
prices per share of such stock on the NASDAQ Stock Market; or

 

3. if the principal market for the Buyer Shares is neither a national securities
exchange and such stock is not quoted on NASDAQ, then the “Fair Market Value” of
the Earn-out Shares shall equal the thirty (30) day trailing average of the
closing ask prices of the Buyer Shares as reported by the OTC Bulletin Board
Service or by National Quotation Bureau, Incorporated, or a comparable service
selected by Buyer; or

 

4. if subsections (f)(i)(1)-(3) above are inapplicable or if no trades have been
made or no quotes are available for such day with respect to the Buyer Shares,
then the “Fair Market Value” of the Earn-out Shares shall be determined by an
independent third party appraiser selected by Buyer. Within ten (10) days after
the effective date of the appraiser’s appointment, the appraiser shall deliver
an appraisal of the Fair Market Value of the Earn-out Shares, which shall be
binding and conclusive on the Parties. The cost of any appraisal hereunder shall
be shared equally by the Parties, and each Party shall be responsible and
financially liable for its or his own attorneys’ fees; and

 

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5. with the understanding that notwithstanding the Fair Market Value ascribed to
the Earn-out Shares pursuant to subsections 3.3(f)(i) (1), (2), (3) or (4) above
in no event shall the Fair Market Value of the Earn-out Shares ever be less than
One and 50/00 Dollars ($1.50) per share.

 

(ii) “Formula Period Profits” shall mean the Subsidiary’s earnings before
deductions for interest, taxes, depreciation and amortization (“EBITDA”) as
calculated utilizing GAAP by Buyer’s independent certified public accountants
for the applicable Formula Period where possible, and as calculated by Buyer for
quarterly and less than quarterly periods for such Formula Period.
Notwithstanding the foregoing, the calculation of the Formula Period Profits
shall not include any costs or expenses related to: (i) the corporate overhead
of Buyer or other administrative or similar charges that Buyer might impose upon
the Subsidiary, except those charges for services provided directly to and for
the benefit of the Subsidiary; (ii) any non-recurring charges, losses, profits,
gains, or non-cash adjustments not related to the ongoing operations of the
Subsidiary’s business, including but not limited to discontinued operations,
extraordinary items, acquisition costs and goodwill charges incurred in
connection with the transactions contemplated hereby (excluding the write-off of
any goodwill with respect to the Subsidiary in accordance with FASA 142), or
unusual or infrequent items as such terms are defined pursuant to generally
accepted accounting principles, or (iii) any charge related to grants or
exercises of options of employees of the Subsidiary, or (iv) any direct costs
and expenses incurred by the Subsidiary during the first six (6) months of
employment (the “Capitalized Period”) as such expenses directly relate to an
additional physician for the Subsidiary’s business (the “Capitalized Physician
Expenses”) with the understanding that: (x) such new physician must be hired
within the first two (2) Formula Periods, (y) that the Capitalized Physician
Expenses shall not exceed $225,000 without PainCare’s approval, and (z) that the
Capitalized Physician Expenses will be amortized ratably and charged to the
Subsidiary’s earnings (i.e., Formula Period Profits) over the remaining Formula
Periods beginning on the first day of the first month following the Capitalized
Period. The Formula Period Profits shall specifically include without limitation
all revenues and expenses associated with Buyer’s MedX Rehabilitation Program
(except with respect to the costs associated with the acquisition of
rehabilitation equipment and the initial training of employees, which shall be
PainCare’s expense) which may be implemented by the Subsidiary subsequent to the
Closing unless the Parties otherwise mutually agree in writing. In addition, the
Formula Period Profits may include, at the election of the Seller, all revenues
and expenses associated with any one or more of Seller’s “Outside Activities” as
that term is defined in that certain Employment Agreement entered into by and
between the Subsidiary and Seller of even date herewith provided that the
Subsidiary receives all the revenues and profits associated with such Outside
Activities which are included in the Formula Period Profits.

 

(g) Capital Adjustments Affecting Common Stock.

 

1. The existence of the Earn-up Shares shall not affect in any way the right or
power of the Buyer or its shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the Buyer’s
capital structure or its business, or any merger or consolidation of the Buyer
or to issue any securities, bonds,

 

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debentures, or preferred or prior preference stock ahead of or affecting the
common stock of the Buyer or the rights thereof, or to effect the dissolution or
liquidation of the Buyer, or any sale or transfer of all or part of its assets
or business, or any other corporate act or proceeding, whether of a similar
character or otherwise.

 

2. In the event of a stock dividend, recapitalization, merger in which the Buyer
is the surviving corporation, split-up, combination or exchange of shares or the
like which results in a change in the number or kind of shares of common stock
which is outstanding immediately prior to such event, the aggregate number and
kind of shares subject to the rights of the Seller relative to the Earn-up
Shares (hereinafter the “Earn-up Rights”) and the price thereof, shall be
appropriately adjusted in the same manner as the number and kind of shares of a
shareholder of the Buyer who owned the same number and kind of shares
immediately prior to such event. Such adjustments shall be made by the Board of
Directors of the Buyer, whose determination shall be conclusive and binding on
all parties.

 

3. Except as otherwise expressly provided herein, the issuance by the Buyer of
shares of its capital stock of any class, or securities convertible into shares
of capital stock of any class, either in connection with direct sale or upon the
exercise of rights or warrants to subscribe therefore, or upon conversion of
shares or obligations of the Buyer convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to the number of or price to Buyer of the Earn-up Rights or any
Earn-up Shares.

 

4. In case of any consolidation or merger of the Buyer with or into another
corporation or the conveyance of all or substantially all of the assets of the
Buyer to another corporation or a share exchange transaction involving not less
than 50% of the issued and outstanding common stock of the Buyer, the Earn-up
Shares shall thereafter be convertible into the number of shares of stock or
other securities or property to which a holder of the number of shares of common
stock deliverable upon entitlement to the Earn-up Shares would have been
entitled upon such consolidation, merger, conveyance or exchange; and, in any
such case, appropriate adjustment shall be made in the application of the
provisions herein set forth with respect to the rights and interest thereafter
of the holders of the Earn-up Rights, to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
entitlement to the Earn-up Shares.

 

3.4 Pledge Agreement. Contemporaneous with the Closing, Buyer agrees to execute
a pledge agreement in the form attached hereto as Exhibit 3.4 (the “Pledge
Agreement”) to secure the payment of the Intended Installment Payments.

 

3.5. Prorations. The following prorations relating to the Purchased Assets will
be made as of the Effective Date, with Seller liable to the extent such items
relate to any time period prior to the Effective Date and Buyer liable to the
extent such items relate to periods as of and subsequent to the Effective Date
provided this Agreement is not terminated as provided for herein. Except as
otherwise specifically provided herein, the net amount of all such prorations
will be settled and paid as the parties agree:

 

(a) Personal property taxes, assessments and other taxes, if any, on or with
respect to the Purchased Assets.

 

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(b) Rents, additional rents, taxes and other items payable by Seller under any
lease, license, permit, contract or other agreement relative to the Assumed
Liabilities.

 

(c) The amount of rents, taxes and charges for sewer, water, fuel, telephone,
electricity and other utilities.

 

(d) All other items normally adjusted in connection with similar transactions.

 

3.6 Other Payments and Adjustments. The amount of wages and other remuneration
due in respect of periods prior to the Effective Date to employees of the
Business and the amount of bonuses due to such employees for all such periods
will be paid by Seller directly to such employees.

 

3.7 Allocation of Purchase Price. The aggregate Purchase Price (including the
assumption by Buyer of the Assumed Liabilities) shall be allocated among the
Purchased Assets for tax purposes in accordance with Disclosure Schedule 3.7.
Seller and Buyer will follow and use such allocation in all tax returns, filings
or other related reports made by them to any governmental agencies. To the
extent that disclosures of this allocation are required to be made by the
parties to the Internal Revenue Service (“IRS”) under the provisions of Section
1060 of the Internal Revenue Code of 1986, as amended (the “Code”) or any
regulations thereunder, Buyer and Seller will disclose such reports to the other
prior to filing with the IRS.

 

4. REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby makes the following representations and warranties to Buyer, each
of which is true and correct on the date this Agreement is executed and shall
remain true and correct to and including the Effective Date, shall be unaffected
by any investigation heretofore or hereafter made by Buyer, or any knowledge of
Buyer other than as specifically disclosed and accepted by Buyer in the
disclosure schedules delivered to Buyer at the time of the execution of this
Agreement, and shall survive the Closing of the transactions provided for
herein.

 

4.1 Authority. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Seller pursuant hereto
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized. No other or further act or proceeding on the part of
Seller or any lienholder or other party is necessary to authorize this Agreement
or the other documents and instruments to be executed and delivered by Seller
pursuant hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by Seller pursuant hereto
will constitute, valid binding agreements of Seller, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally,
and by general equitable principles.

 

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4.2 No Violation. Neither the execution and delivery of this Agreement or the
other documents and instruments to be executed and delivered by Seller pursuant
hereto, nor the consummation by Seller of the transactions contemplated hereby
and thereby (a) will violate any applicable Law or Order, (b) will require any
authorization, consent, approval, exemption or other action by or notice to any
Government Entity or (c) will 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 or other arrangement to which
the Seller is a party or by which the Seller is bound or to which any of the
Purchased Assets are subject, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
(as defined in Section 4.8), upon any of the Purchased Assets under, any term or
provision of any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which Seller is a party or by which
Seller or any of its assets or properties may be bound or affected.

 

4.3 Tax Matters. Except as set forth on Disclosure Schedule 4.3: (i) all state,
foreign, county, local and other tax returns relating primarily to the Business
or the Purchased Assets, or required to be filed by or on behalf of Seller in
any jurisdiction or any political subdivision thereof, have been timely filed
and the taxes paid or adequately accrued; (ii) Seller has duly withheld and paid
all taxes which it is required to withhold and pay relating to salaries and
other compensation heretofore paid to the employees, contractors and agents of
the Business; and (iii) Seller has not received any notice of underpayment of
taxes or other deficiency which has not been paid and there are outstanding
agreements or waivers extending the statutory period of limitations applicable
to any tax return or report relating primarily to the Business or the Purchased
Assets, or required to have been filed by Seller in any jurisdiction or
political subdivision thereof.

 

4.4 Absence of Undisclosed Liabilities. Except as and to the extent specifically
disclosed in Disclosure Schedule 4.4, Seller does not have any Liabilities,
other than commercial liabilities and obligations incurred in the ordinary
course of business and consistent with past practice and none of which has or
will have a material adverse effect on Seller or the Business, or the financial
condition or results of operations of the Business. Except as and to the extent
described in Disclosure Schedule 4.4, Seller has no knowledge of any basis for
the assertion against Seller or the Business or the Purchased Assets of any
liability and there are no circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may give rise to Liabilities,
except commercial liabilities and obligations incurred in the ordinary course of
Seller’s Business and consistent with past practice.

 

4.5 Compliance With Laws and Orders.

 

(a) Compliance. Except as set forth in Disclosure Schedule 4.5(a), the Business
(including each and all of its operations, practices, properties and assets) is
in compliance with all applicable laws and orders, including, without
limitation, those applicable to discrimination in employment, Medicare,
insurance billings, providing of medical services, sales

 

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of medication and durable medical equipment, occupational safety and health,
trade practices, competition and pricing, product warranties, zoning, building
and sanitation, employment, retirement and labor relations, and product
advertising. Except as set forth in Disclosure Schedule 4.5(a), Seller has not
received notice of any violation or alleged violation of, and is subject to no
Liability for past or continuing violation of, any laws or orders with respect
to the operations of the Business. All reports and returns required to be filed
by Seller with any Government Entity have been filed, and were accurate and
complete when filed. Without limiting the generality of the foregoing:

 

(i) The operation of the Business as it is now conducted does not, nor does any
condition existing at the Business Location, in any manner constitute a nuisance
or other tortuous interference with the rights of any person or persons in such
a manner as to give rise to or constitute the grounds for a suit, action, claim
or demand by any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect of the conduct of
the Business or the manner in which it is now conducted.

 

(ii) Seller has made all required payments to its unemployment compensation
reserve accounts with the appropriate governmental departments where it is
required to maintain such accounts with respect to the operations of the
Business, and each of such accounts has a positive balance.

 

(iii) Seller has timely filed, in a complete and correct manner, all requisite
claims and other reports required to be filed in connection with all state and
federal Medicare and Medicaid programs due on or before the date hereof. There
are no claims, actions, payment reviews, or appeals pending or threatened before
any commission, board or agency, including, without limitation, any intermediary
or carrier, the Administrator of the Health Care Financing Administration, the
Louisiana Department of Health and Rehabilitative Services, the Louisiana Board
of Medicine or any other state or federal agency with respect to any Medicare or
Medicaid claims filed by the Seller on or before the Effective Date or program
compliance matters, which would adversely affect the Business, the Purchased
Assets or the consummation of the transactions contemplated hereby. No
validation review or program integrity review related to the Seller (other than
normal, routine reviews) has been conducted by any commission, board or agency
in connection with the practice of medicine or any Medicare or Medicaid program,
and no such reviews are scheduled, pending or, threatened against or affecting
the Seller or the consummation of the transactions contemplated hereby.

 

(ii) Neither Seller nor any person or entity providing services for Seller have
engaged in any activities which are prohibited under 42 U.S.C. d1320a-7a or
d1320a-7b, or the regulations promulgated thereunder, pursuant to such statutes
or any other related state or local statutes and regulations, including but not
limited to the following: (a) knowingly and willfully making or causing to be
made a false statement or representation of a material fact in any application
for any benefit or payment; (b) knowingly and willfully making or causing to be
made any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failing to disclose knowledge
by a claimant of

 

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the occurrence of any event affecting the initial or continued right to any
benefit or payment on its, his or her own behalf or on behalf of another, with
intent to fraudulently secure such benefit or payment; and (d) knowingly and
willfully soliciting or receiving any remuneration kickback, bribe or rebate,
directly or indirectly, overtly or covertly, in cash or in kind, or offering to
pay or receive such remuneration in return for (e) referring an individual to a
person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part by Medicare or Medicaid, or
(f) purchasing, leasing or ordering, or arranging for or recommending
purchasing, leasing or ordering, any medication, goods, facility, service or
item for which payment may be made in whole or in part by Medicare or Medicaid.
No physician (or his or her immediate family members) having a “financial
relationship” with Seller, as that term is defined in 42 U.S.C. Section 1395nn,
is in a position, directly or indirectly, to refer patients or services to the
Seller, or any such referral complies with the requirements of 42 U.S.C. Section
1395nn and the regulations promulgated pursuant thereto.

 

(v) Seller has filed when due any and all material cost reports and other
documentation and reports, if any, required to be filed by third-party payors
and governmental agencies in compliance with applicable contractual provisions
and/or laws, regulations and rules.

 

(b) Licenses and Permits. Seller has all licenses, permits, approvals,
authorizations and consents of all Government Entities and insurance companies
including Medicare and all certificates, licenses and permits required for the
conduct of the Business. Except as set forth in Disclosure Schedule 4.5(b), the
Business (including its operations, properties and assets) is and has been in
compliance with all such permits and licenses, approvals, authorizations and
consents.

 

4.6 Title to and Condition of Properties.

 

(a) Marketable Title. Seller has good and marketable title to all the Purchased
Assets, free and clear of all mortgages, liens (statutory or otherwise),
security interests, claims, pledges, licenses, equities, options, conditional
sales contracts, assessments, levies, covenants, reservations, restrictions,
exceptions, limitations, charges or encumbrances of any nature whatsoever
(collectively, “Liens”) except those described in Disclosure Schedule 4.6(a).
None of the Purchased Assets are subject to any restrictions with respect to the
transferability thereof. Seller has complete and unrestricted power and right to
sell, assign, convey and deliver the Purchased Assets to Buyer as contemplated
hereby. At Closing, Buyer will receive good and marketable title to all the
Purchased Assets, free and clear of all Liens of any nature whatsoever except
those described in the appropriate Disclosure Schedule.

 

(b) Condition. All tangible assets constituting Purchased Assets hereunder are
in good operating condition and repair, free from any defects (except such minor
defects as do not interfere with the use thereof in the conduct of the normal
operations of Seller), have been maintained consistent with the standards
generally followed in the industry and are sufficient to carry on the business
of Seller as conducted during the preceding twelve (12) months and as
contemplated for the next three (3) years. All buildings and other structures
owned or otherwise

 

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utilized by Seller in operating the Business are in good condition and repair
and have no structural defects or defects affecting the plumbing, electrical,
sewerage, or heating, ventilating or air conditioning systems.

 

(c) No Condemnation or Expropriation. Neither the whole nor any portion of the
Purchased Assets is subject to any order to be sold or is being condemned,
expropriated or otherwise taken by any Government Entity with or without payment
of compensation therefore, nor to the best of Seller’s knowledge has any such
condemnation, expropriation or taking been proposed.

 

4.7 Insurance. Set forth in Disclosure Schedule 4.7 is a complete and accurate
list and description of all policies of errors and omissions, fire, liability,
product liability, workers compensation, health and other forms of insurance
presently in effect with respect to the Business and the Purchased Assets, true
and correct copies of which have heretofore been delivered to Buyer. Disclosure
Schedule 4.9 includes, without limitation, the carrier, the description of
coverage, the limits of coverage, retention or deductible amounts, amount of
annual premiums, date of expiration and the date through which premiums have
been paid with respect to each such policy, and any pending claims in excess of
$5,000.00. All such policies are valid, outstanding and enforceable policies and
provide insurance coverage for the Business and the Purchased Assets, of the
kinds, in the amounts and against the risks customarily maintained by
organizations similarly situated; and no such policy (nor any previous policy)
provides for or is subject to any currently enforceable retroactive rate or
premium adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events arising prior to the date
hereof. Disclosure Schedule 4.9 indicates each policy as to which (a) the
coverage limit has been reached or (b) the total incurred losses from the
beginning of the most recent fiscal year to date equal 25% or more of the
coverage limit. No notice of cancellation or termination has been received with
respect to any such policy, and Seller has no information or knowledge of any
act or omission of Seller which could result in cancellation of any such policy
prior to its scheduled expiration date. Seller has not been refused any
insurance with respect to any aspect of the operations of the Business nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
Seller has duly and timely made all claims it has been entitled to make under
each policy of insurance. There is no claim by Seller pending under any such
policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, and Seller does not know of any basis for denial
of any claim under any such policy. Seller has not received any written notice
from or on behalf of any insurance carrier issuing any such policy that
insurance rates therefore will hereafter be substantially increased (except to
the extent that insurance rates may be increased for all similarly situated
risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or non-renewal of any such policy. Such policies are sufficient in
all material respects for compliance by Seller with all requirements of law and
with the requirements of all material contracts to which Seller is a party.

 

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4.8. Contracts and Commitments.

 

(a) Real Property Lease. Except as set forth in Disclosure Schedule 1.1.(b),
Seller has no leases of real property used or held for use in connection with
the Business or the Purchased Assets.

 

(b) Personal Property Leases. Except as set forth in Disclosure Schedule 1.1(e),
Seller has no leases of personal property used or held for use in connection
with the Business or the Purchased Assets.

 

(c) Purchase Commitments. Seller has no purchase commitments for inventory items
or supplies in connection with the Business.

 

(d) Sales Commitments. Seller has no sales contracts or commitments to customers
or distributors in connection with or affecting the Business or the Purchased
Assets. Seller has no sales contracts or commitments in connection with or
affecting the Business or the Purchased Assets except those made in the ordinary
course of business, at arm’s length, and no such contracts or commitments are
for a sales price which would result in a loss to the Business.

 

(e) Contracts With Affiliates and Certain Others. Seller has no agreement,
understanding, contract or commitment (written or oral) in connection with or
affecting the Business or the Purchased Assets with any Affiliate or any other
officer, employee, agent, consultant, distributor, dealer or franchisee.

 

(f) Powers of Attorney. The Seller has not given a power of attorney, which is
currently in effect, to any person, firm or corporation for any purpose
whatsoever in connection with or affecting the Business or the Purchased Assets.

 

(g) Loan Agreements. Except as otherwise disclosed in the Disclosure Schedules,
Seller is not obligated under any loan agreement, promissory note, letter of
credit, or other evidence of indebtedness as a signatory, guarantor or
otherwise, which obligation constitutes or gives rise or could by its terms,
through the giving of notice or any other events short of judgment by a court,
give rise to a lien against any Purchased Asset.

 

(h) Guarantees. Except as otherwise disclosed in the Disclosure Schedules,
Seller has not guaranteed the payment or performance of any person, firm or
corporation, agreed to indemnify any person or act as a surety, or otherwise
agreed to be contingently or secondarily liable for the obligations of any
person, in connection with the Business or in any other way which affects the
Business or the Purchased Assets.

 

(i) Government Contracts. Except as otherwise disclosed in the Disclosure
Schedules, Seller is not a party to any contract with any governmental body.

 

(j) Burdensome or Restrictive Agreements. Seller is not a party to nor is it
bound by any agreement, deed, lease or other instrument in connection with or
affecting the Business or the Purchased Assets which is so burdensome as to
materially affect or impair the operation of the Business. Without limiting the
generality of the foregoing, Seller is not a party

 

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to nor is it bound by any such agreement requiring Seller to assign any interest
in any trade secret or proprietary information constituting Purchased Assets
hereunder, or prohibiting or restricting Seller in its operation of the Business
from competing in any business or geographical area or soliciting customers or
otherwise restricting it from carrying on the Business anywhere in the world.

 

(k) No Default. Seller is not in default under any lease, license, contract or
commitment in its operation of the Business, nor has any event or omission
occurred which through the passage of time or the giving of notice, or both,
would constitute a default thereunder or cause the acceleration of any of
Seller’s obligations or result in the creation of any Lien on any Purchased
Asset. No third party is in default under any such lease, contract or commitment
to which Seller is a party, nor has any event or omission occurred which,
through the passage of time or the giving of notice, or both, would constitute a
default thereunder, or give rise to an automatic termination, or the right of
discretionary termination thereof.

 

4.9. Employee Benefit Plans. There are no pension, thrift, savings, profit
sharing, retirement, incentive bonus or other bonus, medical, dental, life,
accident insurance, benefit, employee welfare, disability, group insurance,
stock purchase, stock option, stock appreciation, stock bonus, executive or
deferred compensation, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, and any employment or consulting
contracts, “golden parachutes,” collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all “employee benefit plans” (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”)), all employee manuals, and all written or binding oral
statements of policies, practices or understandings relating to employment,
which are provided to, for the benefit of, or relate to, any persons employed by
Seller in its operation of the Business (“Business Employees”).

 

4.10 Intellectual Property. Disclosure Schedule 4.10 lists all Intellectual
Property of the type described in Section 1.1(f) which are or were used, held
for use, or acquired or developed for use in the Business, or developed in the
course of conducting the Business or by persons employed in the Business,
specifying whether such Intellectual Property are owned, controlled, used or
held (under license or otherwise) by Seller, and also indicating which of such
Intellectual Property are registered. Seller is not infringing and has not
infringed any Intellectual Property of another in the operation of the Business,
nor is any other person infringing the Intellectual Property of Seller. Seller
has not granted any license or made any assignment of any Trade Right listed on
Disclosure Schedule 4.10, and no other person has any right to use any such
Trade Right. Seller does not pay any royalties or other consideration for the
right to use any Intellectual Property of others. There is no Litigation pending
or threatened to challenge Seller’s right, title and interest with respect to
its continued use and right to preclude others from using any Intellectual
Property of Seller. All Intellectual Property of Seller are valid, enforceable
and in good standing, and there are no equitable defenses to enforcement based
on any act or omission of Seller.

 

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4.11 Product Warranty and Product Liability. There are no warranties,
commitments or obligations with respect to the return, repair or replacement of
Products. There are no defects in design, construction or manufacture of
Products which would adversely affect performance or create an unusual risk of
injury to persons or property. None of the Products has been the subject of any
replacement, field fix, retrofit, modification or recall campaign and, to
Seller’s knowledge, no facts or conditions exist which could reasonably be
expected to result in such a recall campaign. As used in this Section 4.13, the
term “Products” means any and all medication and other products currently or at
any time previously manufactured, compounded, mixed, formulated, distributed or
sold by Seller, or by any predecessor of Seller under any brand name or mark
under which products are or have been manufactured, distributed or sold by
Seller, in or through the Business.

 

4.12 Assets Necessary to Business. The Purchased Assets include all property and
assets (except for the Excluded Assets), tangible and intangible, and all
leases, licenses and other agreements, which are necessary to permit Buyer to
carry on, as currently used or held for use in, the Business as presently
conducted.

 

4.13 No Brokers or Finders. Neither Seller nor any of his employees or agents
have retained, employed or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.

 

4.14 Financial Statements. Included as Disclosure Schedule 4.14 are true and
complete copies of the financial statements of the Seller consisting of (i) a
balance sheet of the Seller as of December 31, 2002 and the related statements
of operations for the year then ended (including the notes contained therein or
annexed thereto), which financial statements are audited, and (ii) an unaudited
balance sheet of the Seller as of September 30, 2003 (the “Recent Balance
Sheet”), and the related unaudited statements of operations for the nine (9)
months then ended (the “Recent Statement of Operations”) and for the
corresponding period of the prior year (including the notes and schedules
contained therein or annexed thereto). All of such financial statements
(including the notes and schedules contained therein or annexed thereto) are
true, complete and accurate, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, have been prepared
in accordance with the books and records of the Seller and fairly present, in
accordance with generally accepted accounting principles, the assets with
adequate provision made for doubtful accounts, liabilities and financial
position, the results of operations of the Seller as of the dates and for the
years and periods indicated.

 

4.15. Conduct Since Date of Recent Balance Sheet. Except as set forth in this
Agreement and as disclosed in Disclosure Schedule 4.15 hereto, none of the
following has occurred since the date of the Recent Balance Sheet:

 

(a) No Adverse Change. Any material adverse change in the financial condition,
Purchased Assets, Assumed Liabilities, Business, prospects or operations of the
Seller;

 

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(b) No Damage. Any material loss, damage or destruction, whether covered by
insurance or not, affecting the Seller’s Business or the Purchased Assets;

 

(c) No Increase in Compensation. Any increase in the compensation, salaries or
wages payable or to become payable to any employee or agent of the Seller
(including, without limitation, any increase or change pursuant to any bonus,
pension, profit sharing, retirement or other plan or commitment), or any bonus
or other employee benefit granted, made or accrued, that exceeds in the
aggregate a five percent (5%) increase in the total compensation or benefits
payable to any single employee or agent of the Seller;

 

(d) No Labor Disputes. Any labor dispute or disturbance, other than routine
individual grievances which are not material to the Business or the Purchased
Assets;

 

(e) No Commitments. Any commitment or transaction by the Seller (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business consistent with past practice;

 

(f) No Disposition of Property. Any sale, lease or other transfer or disposition
of any properties or assets of the Seller, except in the ordinary course of
business;

 

(g) No Indebtedness. Any indebtedness for borrowed money incurred, assumed or
guaranteed by the Seller;

 

(h) No Liens. Any mortgage, pledge, lien or encumbrance made on any of the
Purchased Assets;

 

(i) No Amendment of Contracts. Any entering into, amendment or termination by
the Seller of any Assumed Liability, or any waiver of material rights
thereunder, other than in the ordinary course of business;

 

(k) Credit. Any grant of credit to any customer or distributor on terms or in
amounts more favorable than those which have been extended to such customer or
distributor in the past, any other change in the terms of any credit heretofore
extended, or any other change of the Seller’s policies or practices with respect
to the granting of credit; or

 

(l) No Unusual Events. Any other event or condition not in the ordinary course
of business of the Seller.

 

4.16 Companies and Affiliates. Seller has no interests in any entity nor does
the Seller own or control, directly or indirectly, any capital stock of any
corporation or interest in any partnership, trust or unincorporated association,
or any interest or investment in any other corporation, association or other
business entity which operates any part of the Business or otherwise has a
contract with Seller with respect to providing any service or product to the
Business.

 

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4.17 Liabilities. Except as and to the extent specifically disclosed in the
Recent Balance Sheet, or in Disclosure Schedule 4.17, the Seller does not have
any material liabilities, commitments or obligations (secured or unsecured, and
whether accrued, absolute, contingent, direct, indirect or otherwise) other than
commercial liabilities and obligations incurred since the date of the Recent
Balance Sheet in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse effect on the
Business or the Purchased Assets. Except as and to the extent described in the
Recent Balance Sheet or in Disclosure Schedule 4.17, the Seller has no any
information, knowledge or belief of any basis for the assertion against the
Seller, business and/or Purchased Assets of any material liability and there are
no circumstances, conditions, happenings, events or arrangements, contractual or
otherwise, which may give rise to such material liabilities, except commercial
liabilities and obligations incurred in the ordinary course of the Seller’s
business and consistent with past practice.

 

As of the Closing, other than the current trade accounts payable or otherwise
described in the Disclosure Schedules, the Seller, as it pertains to the
Business and the Purchased Assets, shall not have any unpaid liabilities,
including, but not limited to, any bank debt, capital leases or any general or
professional liability claims, or be obliged in any other way to provide funds
in respect of, or to guarantee or assume, any debt, obligation or dividend of
any person, except endorsements in the ordinary course of business in connection
with the deposit, in banks or other financial institutions, of items for
collection. Except as disclosed in detail in Section 4.17 of the Disclosure
Schedule, the Seller does not have any Liabilities or obligations which might be
or become a charge against the Subsidiary.

 

4.18 Accounts Receivable. All Accounts Receivable of the Seller represent arm’s
length sales actually made in the ordinary course of business; are collectible
(net of the reserve shown on the Recent Balance Sheet for doubtful accounts) in
the ordinary course of business without the necessity of commencing legal
proceedings; are subject to no counterclaim or setoff; and are not in dispute.
Disclosure Schedule 4.18 contains an aged schedule of accounts receivable
included in the Recent Balance Sheet.

 

The Seller knows of no reason why such accounts receivable would not be
collectible by the Seller according to approximately the same ratios as accounts
receivable have been historically collectible by the Seller. All outstanding
accounts and notes receivable included on Disclosure Schedule 4.18 and generated
through the Closing arose in the ordinary course of business. The Seller has not
incurred any liabilities to customers for discounts, returns, promotional
allowances or otherwise, except as provided in the Disclosure Schedules.

 

4.19 Environmental Matters. The applicable Laws relating to pollution or
protection of the environment, including Laws relating to emissions, discharges,
generation, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes (“Waste”) into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air

 

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Act, the Resource Conservation and Recovery Act, the Toxic Substances Control
Act and the Comprehensive Environmental Response Compensation Liability Act
(“CERCLA”), as amended, and their state and local counterparts are herein
collectively referred to as the “Environmental Laws”. Without limiting the
generality of the foregoing provisions of this Section, Seller is in full
compliance with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder. Except as set forth in Disclosure Schedule
4.19, there is no Litigation nor any demand, claim, hearing or notice of
violation pending or threatened against the Seller relating in any way to the
Environmental Laws or any Order issued, entered, promulgated or approved
thereunder. Except as set forth in Disclosure Schedule 4.19, there are no past
or present or future events, conditions, circumstances, activities, practices,
incidents, actions, omissions or plans which may interfere with or prevent
compliance or continued compliance with the Environmental Laws or with any Order
issued, entered, promulgated or approved thereunder, or which may give rise to
any liability, including, without limitation, liability under CERCLA or similar
state or local Laws, or otherwise form the basis of any Litigation, hearing,
notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, of any Waste.

 

4.20 Personnel. Disclosure Schedule 4.20 attached hereto contains accurate and
complete information as to names and rates of compensation (whether in the form
of salaries, bonuses, commissions or other supplemental compensation now or
hereafter payable) of all personnel of the Seller, together with information as
to any contracts with any such personnel. Seller has no pension, profit-sharing,
bonus, incentive, insurance or other employee benefit plans (including without
limitation any such plans within the meaning of Section 3 (3) of the Employee
Retirement Income Security Act of 1974, as amended) in which any employees of
the Seller participate, except as set forth on the Disclosure Schedule 4.20.

 

4.21 Bank Accounts. Disclosure Schedule 4.21 sets forth the names and locations
of all banks, trust companies, savings and loan associations and other financial
institutions at which Seller, with respect to the Business, maintains a safe
deposit box, lock box or checking, savings, custodial or other account of any
nature, the type and number of each such account and the signatories therefore,
a description of any compensating balance arrangements, and the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.

 

4.22. Tax Matters.

 

(a) Tax Returns. The Seller has filed all Tax Returns it was required to file.
All such Tax Returns were correct and complete in all respects and were filed on
a timely basis. All Taxes owed by the Seller (whether or not shown on any Tax
Return) have been paid. The Seller currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim is currently
pending by an authority in a jurisdiction where the Business or Seller is
domiciled or may be subject to taxation by that jurisdiction. There are no
Security

 

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Interests on any of the Purchased Assets that arose in connection with any
failure (or alleged failure) to pay any Tax.

 

(b) Withholding. The Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.

 

(c) No Waivers. The Seller has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.

 

(d) Audits of Tax Returns. No Tax Return of the Seller is currently under audit
or examination by any taxing authority, and the Seller has not received a
written notice stating the intention of any taxing authority to conduct such an
audit or examination. Each deficiency resulting from any audit or examination
relating to Taxes by any taxing authority has been paid, except for deficiencies
being contested in good faith. The revenue agents’ reports related to any prior
audits and examinations are attached as part of Section 4.22 of the Disclosure
Schedule.

 

(e) Period of Assessment. There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
Taxes.

 

(f) Tax Agreements. The Seller is not a party to or bound by any tax sharing
agreement, tax indemnity obligation or similar agreement with respect to Taxes,
including any advance pricing agreement, closing agreement or other agreement
relating to Taxes with any taxing authority.

 

4.23 Insurance; Malpractice. Section 4.7 of the Disclosure Schedule contains a
list and brief description of all policies or binders of fire, liability,
product liability, workers compensation, health and other forms of insurance
policies or binders currently in force insuring against risks to which the
Seller has been a party, a named insured or otherwise the beneficiary of
coverage at any time during the five (5) years immediately preceding the Closing
Date. Section 4.23 of the Disclosure Schedule contains a description of all
current malpractice liability insurance policies of the Seller and the Seller’s
professional employees and all predecessor policies in effect. Except as set
forth on Section 4.23 of the Disclosure Schedule: (a) neither the Seller, nor
his professional employees, nor the Seller has, during the five (5) years
immediately preceding the Closing Date, filed a written application for any
insurance coverage relating to the Seller’s business or property which has been
denied by an insurance agency or carrier; and (b) the Seller, the Seller’s
professional employees and the Seller has been continuously insured for
professional malpractice claims during the same period.

 

4.24 Litigation. Except as noted in Section 4.24 of the Disclosure Schedule,
there is no litigation, arbitration, governmental claim, investigation or
proceeding, pending or, to the Seller’s knowledge, threatened, against the
Seller at law or in equity, before any court, arbitration tribunal or
governmental agency. The Seller has no knowledge of any facts on which claims
may hereafter be made against the Seller that will have a material adverse
effect on the Business,

 

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Purchased Assets or the Subsidiary. All medical malpractice claims, general
liability incidents and incident reports relating to the Business have been
submitted to the Seller’s insurer. All claims made or, to each of the Seller’s
knowledge, threatened against the Seller in excess of the deductible are covered
under Seller’s current insurance policies. Seller has provided Buyer with a
complete list of all general liability incidents, incident reports and
malpractice claims relating to the Business for the five (5) year period prior
to the Closing Date.

 

4.25 Health Care Compliance. The Seller is participating or otherwise authorized
to receive reimbursement from Medicare and Medicaid and is a party to other
third-party payor agreements set forth in Section 4.25 of the Disclosure
Schedule. All necessary certifications and contracts required for participation
in such programs are in full force and effect and have not been amended or
otherwise modified, rescinded, revoked or assigned, and no condition exists or
event has occurred which in itself or with the giving of notice or the lapse of
time or both would result in the suspension, revocation, impairment, forfeiture
or non-renewal of any such third-party payor program. The Seller is in
compliance in all material respects with the requirements of all such
third-party payors applicable thereto. None of Seller’s physician employees, the
Seller, or immediate family members of the Seller, have any financial
relationship (whether investment interest, compensation interest, or otherwise)
with any entity to which any of the foregoing refer patients, except for such
financial relationships that qualify for exceptions to state and federal laws
restricting physician referrals to entities in which they have a financial
interest.

 

4.26 Fraud and Abuse. The Seller and all persons and entities providing
professional services for the Business have not engaged in any activities which
are prohibited under 42 U.S.C. § 1320a-7b, or the regulations promulgated
thereunder pursuant to such statutes, or related state or local statutes or
regulations, or which are prohibited by rules of professional conduct, including
the following: (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failing to disclose Knowledge by a
claimant of the occurrence of any event affecting the initial or continued right
to any benefit or payment on its own behalf or on behalf of another, with intent
to fraudulently secure such benefit or payment; and (d) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or in kind or
offering to pay or receive such remuneration: (A) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid; or (B) in return for purchasing, leasing, or ordering or arranging for
or recommending purchasing, leasing, or ordering any good, facility, service or
item for which payment may be made in whole or in part by Medicare or Medicaid.
The Seller has at all times complied with the requirements of Louisiana Statutes
which prohibit physicians who have an ownership, investment or beneficial
interest in certain health care facilities from referring patients to such
facilities for the provisions of designated and other health services, and has
at all times complied with the Louisiana Statutes. Furthermore, the Seller has
filed all reports required to be filed by the State of Louisiana and federal law
regarding compensation arrangements and financial relationships between a
physician and an entity to which the physician refers patients.

 

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4.27 Legal Compliance. The Seller and his Affiliates have complied with all
applicable Laws (including rules, regulations, codes, injunctions, judgments,
orders, decrees, and rulings of federal, state, local, and foreign governments
(and all agencies thereof)), and no action, suit, proceeding, hearing,
complaint, claim, demand, notice or investigation has been filed or commenced,
or to the Knowledge of the Seller, threatened against the Seller or the Business
alleging any failure so to comply. The Seller and all physicians and other
health care professionals engaged or employed by the Seller have all permits and
licenses required by applicable Law, have made all required regulatory filings
and are not in violation of any such permit or license. The Business lawfully
operated in accordance with the requirements of all applicable Laws and has in
full force and effect all authorizations and permits necessary to operate a
medical practice. There are no outstanding notices of deficiencies relating to
the Seller or the Business issued by any governmental authority or third-party
payor requiring conformity or compliance with any applicable law or condition
for participation with such governmental authority or third-party condition for
participation with such governmental authority or third-party payor. The Seller
has not received notice and the Seller has no Knowledge or reason to believe
that, such necessary authorizations may be revoked or not renewed in the
ordinary course of business.

 

4.28 Rates and Reimbursement Policies. The jurisdiction in which the Business is
located does not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services provided by the Seller
except for restrictions promulgated by Louisiana law and regulation on charging
of excessive fees and limitations on charges for and profits from the sale of
medications, goods and devices and free samples. The Seller does not have any
rate appeal currently pending before any governmental authority or any
administrator of any third-party payor program. The Seller has no Knowledge of
any applicable Law, which affects rates or reimbursement procedures which has
been enacted, promulgated or issued preceding the date of this Agreement or any
such legal requirement proposed or currently pending in the State of Louisiana
which could have a material adverse effect on the Seller, the Business, or the
Purchased Assets or may result in the imposition of additional Medicaid,
Medicare, charity, free care, welfare, or other discounted or government
assisted patients at the Business or require the Subsidiary or Seller to obtain
any necessary authorization which the Seller does not currently possess. The
Seller has no Knowledge of any impending proposed reduction in reimbursement
from third party or other payors nor Knowledge of any threatened termination of
payor contracts.

 

4.29 Medical Staff. Except as set forth on Section 4.29 of the Disclosure
Schedule, the Seller has no Knowledge of a physician who is providing services
on behalf of the Business who plans, or has threatened to terminate his or her
employment or other relationship with the Seller and the Subsidiary. None of the
physicians providing services on behalf of the Business currently has plans to
retire from the practice of medicine in the next five (5) years.

 

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4.30 Seller and Other Providers. During the five (5) years preceding the Closing
Date, each physician, and other health care provider who is or was employed by,
or who renders or has rendered services on behalf of, the Business or the
Seller:

 

(a) Licenses. Has been duly licensed and registered, and in good standing by the
State of Louisiana to engage in the practice of medicine, and said license and
registration have not been suspended, revoked or restricted in any manner;

 

(b) Controlled Substances. Has current controlled substances registrations
issued by the State of Louisiana and the U.S. Drug Enforcement Administration,
which registrations have not been surrendered, suspended, revoked or restricted
in any manner;

 

(c) Actions. Except as set forth on Section 4.30 of the Disclosure Schedule, has
not been a party or subject to:

 

(i) Malpractice Actions. Any malpractice suit, claim (whether or not filed in
court), settlement, settlement allocation, judgment, verdict or decree;

 

(ii) Disciplinary Proceedings. Any disciplinary, peer review or professional
review investigation, proceeding or action instituted by any licensure board,
hospital, medical school, physical therapy school, health care facility or
entity, professional society or association, third party payor, peer review or
professional review committee or body, or governmental agency;

 

(iii) Criminal Proceedings. Any criminal complaint, indictment or criminal
proceedings;

 

(iv) Investigation. Any investigation or proceedings, whether administrative,
civil or criminal, relating to an allegation of filing false health care claims,
violating anti-kickback or fee-splitting laws, or engaging in other billing
improprieties;

 

(v) Mental Illnesses. Any organic or mental illness or condition that impairs or
may impair such physician’s ability to practice;

 

(vi) Substance Abuse. Any dependency on, habitual use or episodic abuse of
alcohol or controlled substances, or any participation in any alcohol or
controlled substance detoxification, treatment, recovery, rehabilitation,
counseling, screening or monitoring program;

 

(vii) Professional Ethics. Any allegation, or any investigation or proceeding
based on any allegation of violating professional ethics or standards, or
engaging in illegal, immoral or other misconduct (of any nature or degree),
relating to his or her practice; or

 

(viii) Application for Licensure. Any denial or withdrawal of an application in
any state for licensure as a physician or physical therapist, for medical staff
privileges at any hospital or other health care entity, for board certification
or recertification, for participation in any third party payment program, for
state or federal controlled substances registration, or for malpractice
insurance.

 

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4.31 Third-party Payors. Section 4.31 of the Disclosure Schedule sets forth an
accurate, correct and complete list of the Seller’s third-party payors. The
Seller has not received any notice nor has any Knowledge that any third-party
payor intends to terminate or materially reduce its business with, or
reimbursement to, the Seller. The Seller has no reason to believe that any
third-party payor will cease to do business with the Seller after, or as a
result of, the consummation of any transactions contemplated hereby. The Seller
does not know of any fact, condition or event which would adversely affect its
relationship with any third-party payor.

 

4.32 Disclosure. No representation or warranty by Seller in this Agreement, nor
any statement, certificate, schedule or exhibit hereto furnished or to be
furnished by or on behalf of Seller pursuant to this Agreement or in connection
with transactions contemplated hereby, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact necessary to
make the statements contained therein not misleading. All statements and
information contained in any certificate, instrument, disclosure schedules or
document delivered by or on behalf of Seller shall be deemed representations and
warranties by Seller.

 

4.33 Corporate Practice or Fee Splitting. The actions, transactions or
relationships arising from, and contemplated by, this Agreement does not violate
any law, rule or regulation relating to the corporate practice of medicine or
fee splitting. The Seller accordingly agrees that he will not and will not cause
any other Party, in an attempt to void or nullify this Agreement or any document
related to the Transaction or any relationship involving PainCare or Subsidiary
to sue, claim, aver, allege or assert that any such document or any such
relationship violates any law, rule or regulation relating to the corporate
practice of medicine or fee splitting.

 

4.34 Staff Privileges. Disclosure Schedule 4.34 lists all hospitals at which the
Seller has full staff privileges. Such staff privileges have not ever been
revoked, surrendered, suspended or terminated, and to the best of the Seller’s
Knowledge, there are no, and have not been any, facts, conditions or incidents
that may result in any such revocation, surrender, suspension or termination.

 

4.35 Intentions. The Seller intends to continue practicing medicine on a
full-time basis for the next five (5) years with the Subsidiary and does not
know of any fact or condition that adversely affects, or in the future may
adversely affect, his ability or intention to practice medicine on a full-time
basis for the next five (5) years with the Subsidiary.

 

4.36 Securities Representation.

 

(a) No Registration of the Buyer Shares; Investment Intent. The Seller
acknowledges that the Buyer Shares to be delivered pursuant to this Agreement
have not been and will not be registered under the Securities Act and may not be
resold without compliance with the Securities Act. The Buyer Shares to be
acquired by the Seller pursuant to this Agreement are being acquired solely for
his own account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of them in connection with a
distribution other than in compliance with the Securities Act.

 

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(b) Resale Restrictions. The Seller covenants, warrants and represents that none
of the Buyer Shares issued to Seller will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full compliance
with all of the applicable provisions of the Securities Act and the rules of
regulations of the Commission and applicable state securities laws, and the
applicable provisions of this Agreement. All certificates evidencing the Buyer
Shares shall bear appropriate legends.

 

(c) Ability to Bear Economic Risk. The Seller covenants, warrants and represents
that he is able to bear the economic risk of an investment in the Buyer Shares
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment and has such Knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect his own interests in
connection with the acquisition of the Buyer Shares. The Seller, and the
Seller’s purchaser representative, if any, have received copies of PainCare’s
most recent 10-KSB, 10-QSB and 8-K filings and have had an adequate opportunity
to ask questions and receive answers from the officers of PainCare concerning
any and all matters relating to the background and experience of the officers
and directors of PainCare, the plans for the operations of the business of
PainCare, and any plans for additional acquisitions and the like. The Seller,
and the Seller’s purchaser representative, if any, have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to such individual’s satisfaction.

 

(d) Accredited Investor. The Seller covenants, represents and warrants that he
is an: (a) individual with a net worth (either individually or jointly with his
respective spouse) in excess of One Million and No/100 Dollars ($1,000,000.00);
or (b) individual who had an income in excess of Two Hundred Thousand and No/100
Dollars ($200,000.00) in each of 2001 and 2002, or had a joint income with his
spouse in excess of Three Hundred Thousand and No/100 Dollars ($300,000.00) in
each of 2001 and 2002, and has a reasonable expectation of reaching the same
income level in 2003.

 

(e) Residency. The Seller covenants, warrants and represents that he is a
resident of the State of Louisiana, and received this Agreement and first
learned of the transactions contemplated hereby in the State of Louisiana. He
executed and will execute all documents contemplated hereby in the State of
Louisiana, and intends that the laws of the State of Louisiana govern this
transaction.

 

(f) No Registration. The Seller understands, agrees and acknowledges that the
Buyer Shares have not been registered under the Florida Securities Act, the
Louisiana Securities Act or the Securities Act in reliance upon exemption
provisions contained therein which PainCare believes are available.

 

(g) Disclosure. The representations and warranties contained in this Section 4
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Section 4 not misleading.

 

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(h) IT IS ACKNOWLEDGED BY THE SELLER THAT:

 

THE SELLER HAS GIVEN AND HIS REPRESENTATIVE(S) HAVE BEEN GIVEN THE OPPORTUNITY
TO ASK QUESTIONS OF, AND RECEIVE ANSWERS FROM, THE BUYER OR PERSON(S) ACTING ON
ITS BEHALF CONCERNING THE TERMS AND CONDITIONS OF THIS TRANSACTION, AND TO
OBTAIN ANY ADDITIONAL INFORMATION WHICH THE BUYER POSSESSES OR CAN ACQUIRE
WITHOUT UNREASONABLE EFFORT OR EXPENSE THAT IS NECESSARY FOR THE STOCKHOLDER TO
MAKE AN INVESTMENT DECISION WITH RESPECT TO THE BUYER.

 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE
MERITS OF OR GIVEN ITS APPROVAL TO THIS TRANSACTION OR THE BUYER’S SHARES. THE
PAINCARE SHARES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION.

 

4.37 HIPAA. Disclosure Schedule 4.37 lists and describes all plans and other
efforts of the Seller with respect to the practice locations to comply with the
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), including
the final regulations promulgated thereunder, whether such plans and efforts
have been put in place or are in process. Disclosure Schedule 4.37 includes but
is not limited in any manner whatsoever to any privacy compliance plan of the
Seller in place or in development, and any plans, analyses or budgets relating
to information systems including but not limited to necessary purchases,
upgrades or modifications to effect HIPAA compliance.

 

4.38 Improper and Other Payments. (a) Neither the Seller, any employee agent or
representative of the Seller nor any person acting on behalf of any of them, has
made, paid or received any unlawful bribes, kickbacks or other similar payments
to or from any person or authority, (b) no contributions have been made,
directly or indirectly, by the Seller to a domestic or foreign political party
or candidate; and (c) the internal accounting controls of the Seller are
believed to be adequate to detect any of the foregoing under current
circumstances.

 

4.39 Medical Waste. With respect to the generation, transportation, treatment,
storage, and disposal, or other handling of Medical Waste, the Seller, with
respect to the Business, has complied with all Medical Waste Laws (as
hereinafter defined).

 

“Medical Waste” includes, but is not limited to, (a) pathological waste, (b)
blood, (c) sharps, (d) wastes from surgery or autopsy, (e) dialysis waste,
including contaminated disposable equipment and supplies, (f) cultures and
stocks of infectious agents and associated biological agents, (g) contaminated
animals, (h) isolation wastes, (i) contaminated equipment, (j) laboratory waste,
and (k) various other biological waste and discarded materials contaminated with
or exposed to blood, excretion, or secretions from human beings or animals.
“Medical Waste” also includes any substance, pollutant, material, or contaminant
listed or regulated under the Medical Waste Tracking Act of 1988, 42 U.S.C.
§§6992, et seq. (“MWTA”).

 

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“Medical Waste Law” means the following, including regulations promulgated and
orders issued thereunder, all as may be amended from time to time: the MWTA; the
U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33 USCA §§2501 et
seq.; the Marine Protection, Research, and Sanctuaries Act of 1972, 33 USCA
§§1401 et seq.; the Occupational Safety and Health Act, 29 USCA §§651 et seq.;
the United States Department of Health and Human Services, National Institute
for Occupational Self-Safety and Health Infectious Waste Disposal Guidelines,
Publication No. 88-119; and any other federal, state, regional, county,
municipal, or other local laws, regulations, and ordinances insofar as they
purport to regulate Medical Waste, or impose requirements relating to Medical
Waste.

 

4.40 No Untrue or Inaccurate Representation or Warranty. No representation or
warranty by Sellers contains or will contain any untrue statement of fact, or
omits or will omit to state a fact necessary to make the statements therein not
misleading.

 

5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES. The Acquiring
Companies represent and warrant to the Seller that the statements contained in
this Section 5 are correct and complete as of the Closing Date.

 

5.1 Organization of PainCare and Subsidiary. PainCare is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Florida. Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida with authorization to do
business in Louisiana.

 

5.2 Authorization of Transaction. PainCare and Subsidiary have full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of PainCare, enforceable in
accordance with its terms and conditions.

 

5.3 Buyer Shares. All of the Initial Shares will be validly issued to the
Seller, fully paid and non-assessable. Buyer will deliver, good and marketable
title to the Initial Shares, which shares shall be fully paid and non-assessable
and except as otherwise provided in this Agreement shall be free and clear of
all Liens.

 

5.4 No Violations. Neither the execution, delivery nor performance of this
Agreement or any other documents, instruments or agreements executed by the
Buyer in connection herewith, nor the consummation of the transactions
contemplated hereby: (a) constitutes a violation of or default under (either
immediately, upon notice or upon lapse of time) the Articles of Incorporation or
Bylaws of Buyer, any provision of any contract to which Buyer or its assets may
be bound, any judgment to which Buyer is bound or any law applicable to Buyer;
or (b) result in the creation or imposition of any encumbrance upon, or give any
third person any interest in or right to, any or all of the Initial Shares or
any other capital stock of Buyer or any of the assets of Buyer; or (c) result in
the loss or adverse modification of, or the imposition of any fine or penalty
with respect to, any license, permit or franchise granted or issued to, or
otherwise held by or for the use of, Buyer.

 

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5.5 Consents. The execution, delivery and performance by Buyer of this Agreement
and the consummation by Buyer of the transactions contemplated hereby do not
require any consent that has not been received prior to the date hereof.

 

5.6 Brokers. Buyer has no liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which the Seller or the Seller could become liable or
obligated.

 

5.7 Full Disclosure. To the best knowledge of Buyer, no representation or
warranty by Buyer in this Agreement, nor any statement, certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of Buyer
pursuant to this Agreement or in connection with transactions contemplated
hereby, contains or shall contain any untrue statement of material fact or omits
or shall omit a material fact necessary to make the statements contained therein
not materially misleading.

 

6. OTHER MATTERS

 

6.1 Noncompetition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
Business, Seller hereby covenants and agrees as follows:

 

(a) Covenant Not to Compete. For a period of two (2) years after the Closing
Date, Seller will not directly or indirectly, within the Territory (as
hereinafter defined):

 

(1) be employed by, act as an agent, consultant or contractor of, engage in,
continue in or carry on any business which competes with the Business of the
Subsidiary or any business of PainCare or any of its subsidiaries that is
substantially similar to the Business of the Subsidiary, including owning or
controlling any financial interest in any corporation, partnership, firm or
other form of business organization which is so engaged;

 

(2) be employed by, consult with, advise or assist in any way, whether or not
for consideration, any corporation, partnership, firm or other business
organization which is now or becomes a competitor of the Subsidiary or PainCare
or its subsidiaries in any aspect with respect to the Business of the
Subsidiary, including, but not limited to, advertising or otherwise endorsing
the products of any such competitor; soliciting patients and customers or
otherwise serving as an intermediary for any such competitor; loaning money or
rendering any other form of financial assistance to or engaging in any form of
business transaction on other than on an arm’s length basis with any such
competitor;

 

(3) offer employment to an employee of the Subsidiary, PainCare or any of its
subsidiaries, without the prior written consent of PainCare; or

 

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(4) engage in any practice the purpose of which is to evade the provisions of
this covenant not to compete or to commit any act which adversely affects the
Subsidiary, the PainCare or its subsidiaries or their businesses, excluding
Outside Activities provided, however, that the foregoing shall not prohibit the
ownership of securities of corporations which are listed on a national
securities exchange or traded in the national over-the-counter market in an
amount which shall not exceed 5% of the outstanding shares of any such
corporation. The parties agree that the geographic scope of this covenant not to
compete shall include the Parish of Terrebonne, Louisiana (the “Territory”). The
parties agree that the Subsidiary or PainCare, as the case may be, may sell,
assign or otherwise transfer this covenant not to compete, in whole or in part,
to any person, corporation, firm or entity that purchases all or part of the
Subsidiary’s, or PainCare’s, business upon obtaining the prior written consent
of Seller which will not be unreasonably withheld. In the event a court of
competent jurisdiction determines that the provisions of this covenant not to
compete are excessively broad as to duration, geographical scope or activity, it
is expressly agreed that this covenant not to compete shall be construed so that
the remaining provisions shall not be affected, but shall remain in full force
and effect, and any such over broad provisions shall be deemed, without further
action on the part of any person, to be modified, amended and/or limited, but
only to the extent necessary to render the same valid and enforceable in such
jurisdiction.

 

6.2 Severability. If any covenant or provision contained in this Section is
determined to be void or unenforceable in whole or in part, it shall not be
deemed to affect or impair the validity of any other covenant or provision. If,
in any arbitration or judicial proceeding, a tribunal shall refuse to enforce
all of the separate covenants deemed included in this Section, then such
unenforceable covenants shall be deemed eliminated from the provisions hereof
for the purpose of such proceedings to the extent necessary to permit the
remaining separate covenants to be enforced in such proceedings.

 

(a) Covenant of Confidentiality. Seller shall not at any time subsequent to the
Closing, except as explicitly requested by Buyer, (i) use for any purpose, (ii)
disclose to any person, or (iii) keep or make copies of documents, tapes, discs
or programs containing, any confidential information concerning the Business,
the Purchased Assets or the Assumed Liabilities. For purposes hereof,
“confidential information” shall mean and include, without limitation, all
Intellectual Property which are Purchased Assets, all patient files and
information on the Business, and all other information concerning the processes,
apparatus, equipment, services offered, packaging, products, marketing and
distribution methods of the Business, not previously disclosed to the public
directly by Seller.

 

(b) Equitable Relief for Violations. Seller agrees that the provisions and
restrictions contained in this Section are necessary to protect the legitimate
continuing interests of Buyer in acquiring the Business through the purchase of
the Purchased Assets and the assumption of the Assumed Liabilities, and that any
violation or breach of these provisions will result in irreparable injury to
Buyer for which a remedy at law would be inadequate and that, in addition to any
relief at law which may be available to Buyer for such violation or breach and
regardless of any other provision contained in this Agreement, Buyer shall be
entitled to

 

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injunctive and other equitable relief as a court may grant after considering the
intent of this Section.

 

6.3 Use of Name. Following the Effective Date, neither Seller nor any Affiliate
shall, without the prior written consent of Buyer, make any use of the name
“Bone & Joint Surgical Clinic” or any other name confusingly similar thereto,
except as may be necessary for Seller to pay its liabilities, prepare tax
returns and other reports, and to otherwise wind up and conclude its business.

 

6.4 After Closing. After the Closing, each party will afford the other party,
its counsel, accountants and other representatives, during normal business
hours, reasonable access to the books, records and other data in such party’s
possession relating directly or indirectly to the properties, liabilities or
operations of the Business, with respect to periods prior to the Closing, and
the right to make copies and extracts therefrom, to the extent that such access
may be reasonably required by the requesting party for any proper business
purpose. Each party agrees for a period extending three years after the Closing
not to destroy or otherwise dispose of any such records without first offering
in writing to surrender such records to the other party, which party shall have
ten (10) days after such offer to agree in writing to take possession thereof.

 

6.5 Bulk Sales Compliance. Following the execution of this Agreement, Buyer and
Seller shall cooperate in complying with all provisions of the bulk sales or
bulk transfer statutes of all states having jurisdiction, in such a way as to
provide Buyer the greatest measure of protection against the creditors of Seller
allowable under all such statutes.

 

7. FURTHER COVENANTS OF SELLER

 

Seller covenants and agrees as follows:

 

7.1 Access to Information and Records. Seller shall give Buyer, its counsel,
accountants and other representatives(i)access during normal business hours to
all of the properties, books, records, contracts and documents of Seller
relating to the Business or the Purchased Assets or Assumed Liabilities for the
purpose of such inspection, investigation and testing as Buyer deems appropriate
(and Seller shall furnish or cause to be furnished to Buyer and its
representatives all information with respect to the Business Buyer may request);
(ii) access to employees, agents and representatives of the Business for the
purpose of conducting business, meetings and communications as Buyer reasonably
desires; and (iii) access to vendors, customers, manufacturers of its medication
and equipment, and others having business dealings with the Business.

 

7.2 Maintain Organization. Seller will take such action as may be necessary to
maintain, preserve, renew and keep in favor and effect the existence, rights and
franchises of the Business and will use their best efforts to preserve the
Business intact, to keep available to Buyer the present employees of the
Business, and to preserve for Buyer its present relationships with suppliers and
customers and others having business relationships with the Business.

 

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7.3 No Breach. Seller will not do or omit any act, or permit any omission to
act, which may cause a breach of any contract, commitment or obligation material
to the Business, or any breach of any representation, warranty, covenant or
agreement made by Seller herein, or which would have required disclosure
pursuant to this Agreement.

 

7.4 No Material Contracts. No contract or commitment will be entered into, and
no purchase of medication, equipment, inventory, or supplies and no sale of
goods or services (real, personal, or mixed, tangible or intangible) will be
made, by or on behalf of Seller or the Subsidiary in connection with its
operation of the Business.

 

7.5 Maintenance of Insurance. Seller shall take all necessary action to maintain
for the benefit of the Subsidiary all of the insurance set forth in Disclosure
Schedule 4.7.

 

7.6 Consents. Seller will use his best efforts prior to Closing to obtain all
consents necessary for the consummation of the transactions contemplated hereby.

 

7.7 Other Action. Seller shall use his best efforts to cause the fulfillment at
the earliest practicable date of all of the conditions to the parties’
obligations to consummate the transactions contemplated in this Agreement.

 

7.8 Disclosure. Seller shall have a continuing obligation which shall survive
the Closing to promptly notify Buyer in writing with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth herein or described in the
disclosure schedules, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.

 

8. CONDITIONS PRECEDENT TO BUYER’S OBLIGATIONS

 

Notwithstanding the execution and delivery of this Agreement or the performance
of any part hereof, Buyer’s obligations to consummate the transaction
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Section 8, except to the extent that such
satisfaction is waived by Buyer in writing.

 

8.1 Representations and Warranties True on the Effective Date. Each of the
representations and warranties made by Seller in this Agreement, and the
statements contained in the disclosure schedules or in any instrument, list,
certificate or writing delivered by Seller pursuant to this Agreement, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Effective Date as though such
representations and warranties were made or given on and as of the Effective
Date, except for any changes permitted by the terms of this Agreement or
consented to in writing by Buyer.

 

8.2 Compliance With Agreement. Seller shall have in all material respects
performed and complied with all of its agreements and obligations under this
Agreement which

 

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are to be performed or complied with by Seller prior to or on the Effective
Date, including the delivery of the closing documents specified in this
Agreement.

 

8.3 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any Government Entity shall have been
commenced against Buyer, Seller or the Business with respect to the transactions
contemplated hereby.

 

8.4. Consents and Approvals. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
prior to the Effective Date including, without limitation, the consent and
approval of the Bank and Merrill Lynch Financial Services, Inc. Notwithstanding
the foregoing, receipt of the consent of any third party to the assignment of a
Contract which is not (and is not required to be) disclosed in the disclosure
schedules shall not be a condition to Buyer’s obligation to close, provided that
the aggregate of all such Contracts does not represent a material portion of the
sales or expenditures of the Business. After the Closing, Seller will continue
to use its best effects to obtain any such consents or approvals, and Seller
shall not hereby be relieved of any liability hereunder for failure to perform
any of its covenants or for the inaccuracy of any representation or warranty.

 

8.5. Estoppel Certificates. Buyer shall have obtained Buyer on or prior to the
Effective Date an estoppel certificate or status letter from the landlord under
the lease for the Business Location to be assumed pursuant to this Agreement
which estoppel certificate or status letter will certify (i) the lease is valid
and in full force and effect; (ii) the amounts payable by Seller under the lease
and the date to which the same have been paid; (iii) whether there are, to the
knowledge of said landlord, any defaults thereunder, and, if so, specifying the
nature thereof; and (iv) that the transactions contemplated by this Agreement
will not constitute default under the lease and that the landlord consents to
the assignment of the lease to Buyer.

 

8.6 Completion of Due Diligence, Schedules & Exhibits. Completion of Buyer’s due
diligence and the completion and delivery of the Disclosure Schedules and
Exhibits required by this Agreement, all to the reasonable satisfaction of
Buyer, based upon its knowledge and information, of all matters relative to
Seller, the Purchased Assets, Assumed Liabilities and the Business. If Buyer
does not complete its due diligence or the Disclosure Schedules and Exhibits are
not completed and delivered to the appropriate Party or if the Buyer is not
reasonably satisfied as to all such matters by January 10, 2004, then this
Agreement and all other collateral documents executed in connection with the
transactions contemplated by this Agreement may be terminated and rescinded by
Buyer and Seller shall immediately return to the Buyer the Initial Transaction
Consideration and any other cost or expense incurred by Buyer with respect to
this transaction.

 

9. CONDITIONS PRECEDENT TO SELLER’S OBLIGATIONS

 

Notwithstanding the execution and delivery of this Agreement or the performance
of any part hereof, Seller’s obligations to consummate the transaction
contemplated by this Agreement

 

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shall be subject to the satisfaction of each of the conditions set forth in this
Section 9, except to the extent that such satisfaction is waived in writing by
Seller.

 

9.1 Representations and Warranties True on the Effective Date. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Effective Date as though such representations
and warranties were made or given on and as of the Effective Date.

 

9.2 Compliance With Agreement. Buyer shall have in all material respects
performed and complied with all of Buyer’s agreements and obligations under this
Agreement which are to be performed or complied with by Buyer prior to or on the
Effective Date, including the delivery of the closing documents specified in
this Agreement.

 

10. CLOSING

 

10.1 Closing Date. Consummation of the contemplated transaction (the “Closing”)
shall take place on December 31, 2003 or on such other date or at such other
time or place as may be mutually agreed upon in writing by the parties hereto
(the “Closing Date”). Notwithstanding the foregoing Closing Date, the parties
hereby agree that unless otherwise agreed in writing that the Closing shall not
be effective until the satisfaction or waiver of the conditions precedent set
forth in Sections 8 and 9 of this Agreement (the “Effective Date”). The Closing
shall take place at the offices of Buyer in Orlando, Florida, or at such other
place as the parties hereto shall agree upon. Such date is referred to in this
Agreement as the “Closing Date”.

 

10.2 Documents to be Delivered by Seller. At the Closing, Seller shall deliver
to Buyer the following documents, in each case duly executed or otherwise in
proper form:

 

(a) Bills of Sale. Bills of sale and such other instruments of assignment,
transfer, conveyance and endorsement as will be sufficient in the opinion of
Buyer and its counsel to transfer, assign, convey and deliver to Buyer the
Purchased Assets as contemplated hereby.

 

(b) Compliance Certificate. A certificate signed by the Seller that each of the
representations and warranties made by Seller in this Agreement is true and
correct in all material respects on and as of the Effective Date with the same
effect as though such representations and warranties had been made or given on
and as of the Effective Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Buyer), and that Seller has
performed and complied with all of Seller’s obligations under this Agreement
which are to be performed or complied with on or prior to the Effective Date.

 

(c) Other Documents. All other documents, instruments or writings required to be
delivered to Buyer at or prior to the Closing pursuant to this Agreement and
such other certificates of authority and documents as Buyer may reasonably
request.

 

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10.3 Documents to be Delivered by Buyer. At the Closing or as soon thereafter as
is reasonably possible, Buyer shall deliver to Seller the following
consideration and documents, in each case duly executed or otherwise in proper
form:

 

(a) Purchase Price. To Seller the Cash Due At Closing and Initial Shares
required by Section 3.1 hereof.

 

(b) Assumption of Liabilities. Such undertakings and instruments of assumption
as will be reasonably sufficient in the opinion of Seller and its counsel to
evidence the assumption of the Assumed Liabilities.

 

(c) Compliance Certificate. A certificate signed by the CEO of Buyer that the
representations and warranties made by Buyer in this Agreement are true and
correct on and as of the Effective Date with the same effect as though such
representations and warranties had been made or given on and as of the Effective
Date (except for any changes permitted by the terms of this Agreement or
consented to in writing by Seller), and that Buyer has performed and complied
with all of Buyer’s obligations under this Agreement which are to be performed
or complied with on or prior to the Effective Date.

 

(d) Other Documents. All other documents, instruments or writings required to be
delivered to Seller at or prior to the Closing pursuant to this Agreement and
such other certificates of authority and documents as Seller may reasonably
request.

 

11. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
period following the Execution Date:

 

11.1 General. In the event that at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party may reasonably request,
all at the sole cost and expense of the requesting Party.

 

11.2 Tax Returns. The Seller shall be responsible for preparing and filing all
income or franchise Tax Returns with respect to the Business relating to periods
of time prior to the Closing Date. The Subsidiary will be responsible for
preparing and filing all income and franchise Tax Returns of the Subsidiary
relating to periods after the Closing. The Seller will provide the Subsidiary
with an opportunity to review and comment on such Tax Returns (including any
amended returns). The Seller will take no positions on his Tax Returns that
relate to the tax period prior to the Closing Date that could adversely affect
PainCare or the Subsidiary after the Closing.

 

11.3 Transition. Neither the Seller nor the Buyer will take any action that is
designed, intended or likely to have the effect of discouraging any lessor,
licensor, customer, supplier or other business associate of the Seller from
maintaining the same business relationships with the Buyer and the Subsidiary
after the Closing as he, she or it maintained with the Seller prior to the
Closing.

 

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11.4 Litigation Support. In the event and for so long as any Party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with: (a) any
transaction contemplated under this Agreement; or (b) any fact, situation,
circumstances, status, condition, activity, practice, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
with respect to the Business, each of the Parties will cooperate with the
contesting or defending Party and its or his counsel in the contest or defense,
at the sole cost and expense of the contesting or defending Party except to the
extent that the contesting or defending party is entitled to indemnification
therefore under this Agreement.

 

11.5 Consents. The Seller hereby covenants and agrees that, after the Execution
Date, he will use his best efforts to obtain all authorizations, consents, and
approvals set forth in the Disclosure Schedules. If such consent, approval or
agreement is not obtained, or if an attempted assignment thereof would affect
the rights of the parties thereunder so that such parties would not in fact
receive all such rights, the Parties will cooperate in any arrangement designed
to provide for the Parties to receive the benefits under any such contract,
including enforcement for the benefit of PainCare and Subsidiary of any and all
rights of the Seller against a third party thereto arising out of the breach or
cancellation by such third party or otherwise.

 

11.6 Operational Covenants. Without the prior written consent of the Seller,
which shall not be unreasonably withheld, PainCare shall not, prior to the
conclusion of the third Formula Period:

 

(a) reorganize the Subsidiary, whether by integrating or consolidating the
business of the Subsidiary with other operating units of PainCare or its
subsidiaries or Affiliates, except in the case that at the time of such
integration or consolidation such transaction could not reasonably be expected
to have a material adverse effect on the Formula Period Profits;

 

(b) effect any reassignment, reprioritization, reallocation, restructuring, or
reduction of the Subsidiary human or other resources, their research and
development initiatives, or their marketing programs, except in a manner that at
the time of such event could not reasonably be expected to have a material
adverse effect on the Formula Period Profits or that are reasonably necessary in
light of the Subsidiary’s results of operation;

 

(c) amend the articles of incorporation or bylaws of the Subsidiary in any
manner that at the time of such amendment could reasonably be expected to have a
material adverse effect on the Formula Period Profits;

 

(d) cause the Subsidiary to become a party to or terminate any agreement which
at the time such agreement is entered into or terminated could reasonably be
expected to have a material adverse effect on the Formula Period Profits or that
is reasonably necessary in light of the Surviving Corporation’s results of
operation;

 

(e) cause the Subsidiary to undertake actions outside the ordinary course of its
business which at the time of such undertaking could reasonably be expected to
have a material adverse effect on the Formula Period Profits;

 

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(f) sell a material portion of the Subsidiary or its assets, merge the
Subsidiary with any other entity, sell a controlling interest in the Subsidiary,
or make any fundamental change in the business of the Subsidiary unless such
action(s) at the time of such undertaking could not reasonably be expected to
have a material adverse effect on the Formula Period Profits or that is
reasonably necessary in light of the Surviving Corporation’s results of
operation;

 

The parties hereby acknowledge and agree that the foregoing conditions shall
become null and void and of no further force or effect if the Formula Profits of
the Subsidiary in each of any two (2) consecutive calendar quarters are less
than $200,000, or if the Formula Profits of the Subsidiary in one (1) calendar
quarter is less than $100,000.

 

In the event that PainCare defaults in its performance of any of its obligations
under this Section and fails to cure such default within thirty (30) days (or
such other reasonable period if 30 days is not a sufficient amount of time to
cure such default, provided that PainCare shall have commenced in good faith and
is diligently pursuing its efforts to cure such default during such 30-day
period) of receiving a written notice of default from the Seller, PainCare shall
be deemed to be in breach of this Agreement.

 

12. INTENTIONALLY OMITTED

 

13. SURVIVAL AND INDEMNIFICATION.

 

13.1 Survival of Representations and Warranties. All of the representations,
warranties, covenants, and agreements including but not limited to the
restrictive covenants and the indemnification provisions contained in this
Agreement are material and have been relied upon by the Parties hereto and shall
survive the Closing. The representations and warranties contained herein shall
not be affected by any investigation, verification or examination by any Party
or by anyone on behalf of such Party.

 

13.2 Indemnification Provisions for the Benefit of PainCare and the Subsidiary.
In the event of: (a) a misrepresentation (or in the event any third party
alleges facts that, if true, would mean a misrepresentation) of any of the
Seller’s representations and/or warranties contained in this Agreement; (b) a
breach (or in the event any third party alleges facts that, if true, would mean
a breach) of any of the Seller’ covenants contained in this Agreement or any
other agreement executed in connection herewith; or (c) any Liability or Claim
against the Seller, the Business or the Purchased Assets of any nature
whatsoever accrued or existing as of the Closing Date or related to actions of
the Seller or arising out of the Business which occurred prior to the Closing
Date, which is not reflected on the Disclosure Schedules and accepted by the
Buyer, then the Seller agrees to indemnify PainCare and Subsidiary from and
against any Adverse Consequences PainCare and Subsidiary may suffer through and
after the date of the claim for indemnification resulting from, arising out of,
relating to, in the nature of, or caused by the misrepresentation or breach (or
alleged breach) or non-disclosed or non-accepted Liability. No provision of this
Agreement, including but not in any way limited to, any “Knowledge” qualifiers
or materiality

 

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standards in the representations and warranties of the Seller, shall have any
effect on the Sellers’ indemnity for any Liability arising prior to the Closing
Date.

 

13.3 Indemnification Provisions for the Benefit of the Seller. In the event of a
misrepresentation or breach (or in the event any third party alleges facts that,
if true, would mean a misrepresentation or breach) of any of PainCare’s or
Subsidiary’s representations, warranties, and covenants contained in this
Agreement, then PainCare and Subsidiary agree to indemnify the Seller from and
against any Adverse Consequences the Seller may suffer through and after the
date of the claim for indemnification resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach).

 

13.4 Matters Involving Third Parties.

 

13.4.1 Notification. If any third party shall notify any Party (the “Indemnified
Party”) with respect to any matter (a “Third Party Claim”) which may give rise
to a claim for indemnification against the other Party (the “Indemnifying
Party”) pursuant to this Section, then the Indemnified Party shall promptly
notify the Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying the Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless the
Indemnifying Party thereby is prejudiced and then only to the extent that the
Indemnifying Party is actually prejudiced.

 

13.4.2 Defense by Indemnifying Party. The Indemnifying Party shall have the
right to defend the Indemnified Party against the Third Party Claim with counsel
of its choice satisfactory to the Indemnified Party so long as: (i) the
Indemnifying Party notifies the Indemnified Party in writing within ten (10)
business days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party from and
against any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim; (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill the Indemnifying Party’s indemnification obligations hereunder;
(iii) the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief; (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or practice adverse
to the continuing business interests of the Indemnified Party; and (e) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.

 

13.4.3 Satisfactory Defense. So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 10.4(b) above: (i)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim; (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld or delayed unreasonably);
and (iii) the

 

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Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld or delayed unreasonably)
and any such settlement must include a complete release of the Indemnified
Party.

 

13.4.4 Conditions. In the event any of the conditions in Section 13.4.2 above is
or becomes unsatisfied, however: (i) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith); (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys’ fees and expenses); and (iii) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 13.

 

13.4.5 Right to Set-Off. If any such cost, loss, damage, expense, liability,
claim, or obligation occurs or is incurred by PainCare or Subsidiary, PainCare
or Subsidiary shall have the right, after written notice to the Seller, at
PainCare’s or Subsidiary’s option and in addition to any other actions permitted
by law, to offset the amount of any such cost, loss, damage, expense, liability,
obligation or claim against amounts due from PainCare or Subsidiary to the
Seller, including the right to offset any post-closing payment due from PainCare
or Subsidiary to the Seller under this Agreement or any other agreement.

 

13.4.6 Materiality. Notwithstanding any provision in this Agreement to the
contrary, the indemnifying Party’s obligation to indemnify the Indemnified Party
in connection with a breach of any representation, warranty, covenant or other
agreement included in this Agreement, and the amount of damages to be
indemnified, shall be determined without regard to any “material”, “materiality”
(or correlative meanings”) or “material adverse effect” qualifications,
provisions or exceptions set forth in such representation, warranty, covenant or
other agreement, each of which shall be deemed to be given for the purposes of
this Section 13 as though there were no such qualifications, provisions or
exceptions.

 

13.4.7 Limitation. The indemnification provisions set forth in this Section 13
shall be limited to all claims in excess of Twenty Five Thousand and 00/100
Dollars ($25,000) (the “Threshold”). Once a claim exceeds the Threshold, if a
Party is entitled to indemnification under this Section 13, such party shall
recover all appropriate funds from the first dollar of damages. Further, the
indemnitors shall not be liable for any liabilities resulting from claims that
are covered by any insurance policy or other indemnity or contribution agreement
unless, and only to the extent that, the full limit of such insurance policy,
indemnity or contribution agreement has been exceeded. The Party entitled to
indemnification shall have a duty to mitigate its damages.

 

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14. MISCELLANEOUS

 

14.1 Disclosure Schedules. Information set forth in the Disclosure Schedules
specifically refers to the article and section of this Agreement to which such
information is responsive and such information shall not be deemed to have been
disclosed with respect to any other article or section of this Agreement or for
any other purpose. The Disclosure Schedules shall not vary, change or alter the
language of the representations and warranties contained in this Agreement and,
to the extent the language in the Disclosure Schedules does not conform in every
respect to the language of such representations and warranties, such language
shall be disregarded and be of no force or effect.

 

14.2 Further Assurance. From time to time, at Buyer’s request and without
further consideration, Seller will execute and deliver to Buyer such documents
and take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to vest in
Buyer good, valid and marketable title to the business and assets being
transferred hereunder.

 

14.3. Assignment; Parties in Interest.

 

(a) Assignment. Except as expressly provided herein, the rights and obligations
of a party hereunder may not be assigned, transferred or encumbered without the
prior written consent of the other party. Notwithstanding the foregoing, Buyer
may, without consent of the other party, cause one or more subsidiaries of Buyer
to carry out all or part of the transactions contemplated hereby; provided,
however, that Buyer shall, nevertheless, remain liable for all of its
obligations, and those of any such subsidiary, to Seller hereunder.

 

(b) Parties in Interest. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the respective successors and permitted
assigns of the parties hereto. Nothing contained herein shall be deemed to
confer upon any other person any right or remedy under or by reason of this
Agreement.

 

14.4 Amendment and Modification. Buyer and Seller may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.

 

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14.5 Notice. All notices, requests, demands and other communications hereunder
shall be given in writing and shall be: (a) personally delivered; (b) sent by
telecopier, facsimile transmission or other electronic means of transmitting
written documents; or (c) sent to the parties at their respective addresses
indicated herein by registered or certified U.S. mail, return receipt requested
and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:

 

  (a) If to Buyer, to:

 

PainCare Holdings, Inc.

37 North Orange Avenue

Suite 500

Orlando, Florida 32801

Attention: President

 

or to such other person or address as Buyer shall furnish to Seller in writing.

 

  (b) If to Seller, to:

 

210 New Orleans Blvd.

Houma, LA 70364

 

(with a copy to)

 

_______________________

_______________________

_______________________ 

Facsimile:_______________

 

or to such other person or address as Seller and Principal Sellers shall furnish
to Buyer in writing.

 

If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt; and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Any party
to this Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section.

 

14.6 Intentionally Omitted.

 

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14.7 Entire Agreement. This instrument embodies the entire agreement between the
parties hereto with respect to the transactions contemplated herein, and there
have been and are no agreements, representations or warranties between the
parties other than those set forth or provided for herein.

 

14.8 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

14.9 Headings. The headings in this Agreement are inserted for convenience only
and shall not constitute a part hereof.

 

14.10 Press Releases, and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the other Parties.

 

14.11 Governing Law; Jurisdiction; Attorney’s Fees. This Agreement, and all
proceedings hereunder, shall be governed by and construed in accordance with the
domestic laws of the State of Florida without giving effect to any choice or
conflict of law provision or rule (either of the State of Florida or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Florida. In the event of any suit under this Agreement
or otherwise between the parties hereto, the prevailing Party shall be entitled
to all reasonable attorney’s fees and costs, including allocated costs of
in-house counsel, to be included in any judgment recovered. In addition, the
prevailing Party shall be entitled to recover reasonable attorney’s fees and
costs, including allocated costs of in-house counsel, incurred in enforcing any
judgment arising from a suit under this Agreement. This post-judgment attorney’s
fees and costs provision shall be severable from the other provisions of this
Agreement and shall survive any judgment on such suit and is not to be deemed
merged into the judgment.

 

14.12 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Parties. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence and all waivers must be in writing, signed
by the waiving Party, to be effective.

 

14.13 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.

 

14.14 Expenses. Except as set forth herein, each of the Parties will bear its or
his own costs and expenses (including, but not limited to, legal and accounting
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.

 

14.15 Further Assurances. Each Party shall, at the reasonable request of any
other Party hereto, execute and deliver to such other Party all such further
instruments, assignments,

 

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assurances and other documents, and take such actions as such other Party may
reasonably request in connection with the carrying out the terms and provisions
of this Agreement.

 

14.16 Construction. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
“including” shall mean including without limitation. Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, unless the Disclosure Schedule identifies the exception
with reasonable particularity. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from nor mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.

 

14.17 Survival. All of the representations, warranties, covenants and agreements
made by the Parties in this Agreement or pursuant hereto in any certificate,
instrument or document shall survive the consummation of the transactions
described herein shall survive for all applicable statute of limitations, and
may be fully and completely relied upon by Sellers and Purchasers, as the case
may be, notwithstanding any investigation heretofore or hereafter made by any of
them or on behalf of any of them, and shall not be deemed merged into any
instruments or agreements delivered at Closing or thereafter.

 

14.18 Incorporation of Exhibits and Schedules. The exhibits and schedules
(including the Disclosure Schedule) identified in this Agreement and the
recitals first set forth above are incorporated herein by reference and made a
part hereof.

 

14.19 Submission to Jurisdiction. Each party to this Agreement hereby submits to
exclusive jurisdiction of any state or federal court within Orange County,
Florida for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each party to this Agreement
hereby irrevocably waives, to the fullest extent permitted by law, any
objections which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.

 

15. DEFINITIONS. All capitalized words that are not capitalized for purposes of
grammar and which are not defined in the text of this Agreement are defined
terms with their definitions set forth on Exhibit 1.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date and year first above written.

 

“SELLER”       “BUYER”

Christopher E. Cenac, M.D.

     

PainCare Holdings, Inc.

By:  

/s/ Christopher E. Cenac

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      By:  

/s/ Randy Lubinsky

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Attest:

 

 

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Attest:

 

 

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