EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

by and among

PSHS PARTNERSHIP VENTURES, INC.,

JEFFREY KATZELL, M.D. AND MELANIE KATZELL, HIS WIFE,
AS TENANTS BY THE ENTIRETY,

MERRILL REUTER, M.D.,

PBSA INVESTMENTS, LLC,

PSHS ALPHA PARTNERS, LTD.,

PAINCARE HOLDINGS, INC,

and

PAINCARE SURGERY CENTERS I, INC.

Dated as of April 21, 2005

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TABLE OF CONTENTS

Page

ARTICLE I

PURCHASE AND SALE OF PARTNERSHIP INTERESTS; CLOSING

2

Section 1.1

Interpretation; Definitions

2

Section 1.2

Purchase and Sale of the PSHS Partnership Interests

8

Section 1.3

Purchase and Sale of the Katzell Partnership Interests

8

Section 1.4

Purchase and Sale of the Reuter Partnership Interests.

8

Section 1.5

Purchase and Sale of the PBSA Partnership Interests

8

Section 1.6

Closing Date

9

Section 1.7

Transactions To Be Effected at the Closing

9

Section 1.8

Post-Closing Working Capital Adjustment

11

ARTICLE II

REPRESENTATIONS AND WARRANTIES RELATING TO SELLERS AND THE PARTNERSHIP INTERESTS

13

Section 2.1

Organization

13

Section 2.2

Authority; Execution and Delivery; Enforceability

13

Section 2.3

No Conflicts; Consents

13

Section 2.4

Partnership Interests

14

Section 2.5

Investor Representations

14

ARTICLE III

REPRESENTATIONS AND WARRANTIES RELATING TO THE PARTNERSHIP

16

Section 3.1

Organization and Standing; Books and Records

16

Section 3.2

The Partnership Interests

17

Section 3.3

Authority; Execution and Delivery; Enforceability

18

Section 3.4

No Conflicts; Consents

18

Section 3.5

Financial Statements

18

Section 3.6

Assets Other than Real Property Interests

19

Section 3.7

Real Property

20

Section 3.8

Intellectual Property

20

Section 3.9

Contracts

21

Section 3.10

Banking and Insurance

23

Section 3.11

Taxes

23

Section 3.12

Proceedings

25

Section 3.13

Benefit Plans

25

Section 3.14

Employees and Labor Matters

26

Section 3.15

Absence of Changes or Events

27

Section 3.16

Compliance With Laws and Orders

27

Section 3.17

Environmental Matters

29

Section 3.18

Transactions with Affiliates

30

Section 3.19

Suppliers/Payors

30

Section 3.20

Private Offering

30

Section 3.21

No Undisclosed Liabilities

30

Section 3.22

Standard Warranties

31

Section 3.23

Questionable Payments

31

Section 3.24

Accounts Receivable

31

Section 3.25

Indemnification Claims

31

Section 3.26

Purchase Orders

31

Section 3.27

Malpractice

31

Section 3.28

Health Care Compliance

32

Section 3.29

Fraud and Abuse

32

Section 3.30

Legal Compliance

33

Section 3.31

Rates and Reimbursement Policies

33

Section 3.32

Medical Staff

33

Section 3.33

Medical Providers

33

Section 3.34

Third-party Payors

35

Section 3.35

Corporate Practice or Fee Splitting

35

Section 3.36

HIPAA

35

Section 3.37

Improper and Other Payments

35

Section 3.38

Medical Waste

36

Section 3.39

Certain Representations with respect to the Ambulatory Surgical Center

36

Section 3.40

Competing Facilities

37

Section 3.41

Disclosure

37

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

37

Section 4.1

Organization, Standing and Power

37

Section 4.2

Authority; Execution and Delivery; Enforceability

37

Section 4.3

No Conflicts; Consents

38

Section 4.4

Securities Act

38

Section 4.5

Purchaser Stock

38

ARTICLE V

COVENANTS

39

Section 5.1

Covenants Relating to Conduct of Business

39

Section 5.2

Access to Information

42

Section 5.3

Termination of Agreements with Sellers and any Affiliates of Sellers

42

Section 5.4

Prepayment of Indebtedness

42

Section 5.5

Reasonable Best Efforts

43

Section 5.6

Expenses; Transfer Taxes

43

Section 5.7

Brokers or Finders

44

Section 5.8

Publicity

44

Section 5.9

Further Assurances

44

Section 5.10

No Negotiation

44

Section 5.11

Notification; Updates to Disclosure Schedules

45

Section 5.12

Tax Matters

45

ARTICLE VI

CONDITIONS PRECEDENT

47

Section 6.1

Conditions to Each Party’s Obligation

47

Section 6.2

Conditions to Obligation of Purchaser

47

Section 6.3

Conditions to Obligation of Sellers

50

Section 6.4

Frustration of Closing Conditions

50

ARTICLE VII

TERMINATION, AMENDMENT AND WAIVER

50

Section 7.1

Termination

50

Section 7.2

Effect of Termination

51

Section 7.3

Amendments and Waivers

51

ARTICLE VIII

INDEMNIFICATION

51

Section 8.1

Survival of Representations and Warranties

51

Section 8.2

Indemnification Provisions for the Benefit of Purchaser

51

Section 8.3

Indemnification Provisions for the Benefit of Sellers

52

Section 8.4

Matters Involving Third Parties

52

Section 8.5

Limitation

53

Section 8.6

Mitigation

54

ARTICLE IX

GENERAL PROVISIONS

54

Section 9.1

Disclosure Schedule

54

Section 9.2

Assignment

54

Section 9.3

No Third-Party Beneficiaries

54

Section 9.4

Notices

54

Section 9.5

Counterparts

55

Section 9.6

Entire Agreement

55

Section 9.7

Severability

56

Section 9.8

Consent to Jurisdiction

56

Section 9.9

Governing Law

56

Section 9.10

Waiver of Jury Trial

56

Section 9.11

Attorney’s Fees

56

Section 9.12

Time of Essence

57

Section 9.13

Waiver

57

Section 9.14

Specific Performance

57

2

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SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT is entered into this 21st day of April, 2005,
(this “Agreement “) by and among PSHS PARTNERSHIP VENTURES, INC. , a Florida
corporation (the “PSHS Seller”); Jeffrey Katzell, M.D., and his wife, Melanie
Katzell, as tenants by the entirety (the “Katzell Seller”); Merrill Reuter, M.D.
(the “Reuter Seller”); PBSA Investments, LLC, a Florida limited liability
company (the “PBSA Seller”); (the foregoing are collectively, at times, referred
to as the “Sellers”); PSHS ALPHA PARTNERS, LTD., a Florida limited partnership
(the “Partnership”); and PAINCARE HOLDINGS, INC., a Florida corporation
(“PainCare”) and its wholly owned subsidiary, PAINCARE SURGERY CENTERS I, INC.,
a Florida corporation (the “Subsidiary”) (collectively, PainCare and the
Subsidiary shall hereinafter sometimes be called the “Purchaser”).

RECITALS

WHEREAS, the PSHS Seller has a 37.5% partnership interest in the Partnership as
the general partner; the Katzell Seller has an 18.75% partnership interest in
the Partnership as a limited partner; the Reuter Seller has an 18.75%
partnership interest in the Partnership as a limited partner; and the PBSA
Seller has a 25% partnership interest in the Partnership as a limited partner;

WHEREAS, the PSHS Seller desires to sell to Purchaser its entire 37.5%
partnership interest in the Partnership (the “PSHS Partnership Interest”), the
Katzell Seller desires to sell to Purchaser a 9% partnership interest in the
Partnership (the “Katzell Partnership Interest”), the Reuter Seller desires to
sell to Purchaser a 9% partnership interest in the Partnership (the “Reuter
Partnership Interest”), the PBSA Seller desires to sell to Purchaser a 12%
partnership interest in the Partnership (the “PBSA Partnership Interest”)
(collectively the “Partnership Interests”); and Purchaser desires to purchase
such respective Partnership Interests in the Partnership from the respective
Sellers, all pursuant to the terms and conditions set forth in this Agreement;

WHEREAS, after the sale of the Partnership Interests in the Partnership provided
for, and subject to the terms and conditions, in this Agreement, Purchaser will
own a 67.5% partnership interest in the Partnership, the Katzell Seller will own
a 9.75% partnership interest in the Partnership as a limited partner, the Reuter
Seller will own a 9.75% partnership interest in the Partnership as a limited
partner, the PBSA Seller will own a 13% partnership interest in the Partnership
as a limited partner.

NOW THEREFORE, in consideration of the promises contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

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ARTICLE I

PURCHASE AND SALE OF PARTNERSHIP INTERESTS; CLOSING

Section 1.1 Interpretation; Definitions.  

(a)

The headings contained in this Agreement, any Exhibit (as defined below) hereto,
the Sellers Disclosure Schedule, the Partnership Disclosure Schedule or the
Purchaser Disclosure Schedule and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits and schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Exhibit, the
Sellers Disclosure Schedule, the Partnership Disclosure Schedule or the
Purchaser Disclosure Schedule but not otherwise defined therein, shall have the
meaning as defined in this Agreement. The words “include” or “including” and
variations thereof shall be deemed to be followed by the words “without
limitation.” Any references to names in the singular shall be deemed to include
the plural and vice versa. When a reference is made in this Agreement to a
Section or an Exhibit, such reference shall be to a Section of, or an Exhibit
to, this Agreement unless otherwise indicated.

(b)

For all purposes hereof:

(1)

“Acquisition” means the purchase and sale of the Partnership Interests pursuant
to this Agreement.

(2)

“Affiliate” of any Person means another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person. An “affiliate” of a natural person shall
additionally mean any other natural person who is related to the individual, the
individuals spouse and any person related to such persons within the second
degree.

(3)

“Ambulatory Surgical Center” means the licensed ambulatory surgical center
located at 7597 Lake Worth Road, Lake Worth, Florida.

(4)

“Applicable Law” means any statute, law, ordinance, rule or regulation.

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(5)

“Cash Purchase Price for the PSHS Seller” means $3,399,607.50, in cash minus the
sum of (i) the Credit Facility Amount, if such indebtedness is not paid off in
full as of the Closing Date, (ii) the PSHS Seller’s pro rata share as compared
to the other Sellers (i.e., 37.5%) of the outstanding principal and accrued but
unpaid interest, fees and other amounts payable by the Partnership (including
any prepayment penalties) as of the Closing Date with respect to the Long Term
Capital Debt, and (iii) the PSHS Seller’s pro rata share as compared to the
other Sellers (i.e., 37.5%) of the amount of the Transaction Expenses.
 (Additionally, the PSHS Seller shall pay Purchaser the PSHS Seller’s pro rata
share as compared to the other Sellers (i.e., 37.5%) of the Working Capital
Adjustment Amount (as defined in Section 1.8 hereinbelow), post Closing pursuant
to the terms described in Section 1.8 hereinbelow, if applicable.)

(6)

“Cash Purchase Price for the Katzell Seller” means $1,087,874.37, in cash minus
the sum of (i) any indebtedness pursuant to which a lien has been placed on the
Katzell Partnership Interest, (ii) the Katzell Seller’s pro rata share as
compared to the other Sellers (i.e., 18.75%) of the outstanding principal and
accrued but unpaid interest, fees and other amounts payable by the Partnership
(including any prepayment penalties) as of the Closing Date with respect to the
Long Term Capital Debt, and (iii) the Katzell Seller’s pro rata share as
compared to the other Sellers (i.e., 18.75%) of the amount of the Transaction
Expenses.  (Additionally, the Katzell Seller shall pay Purchaser the Katzell
Seller’s pro rata share as compared to the other Sellers (i.e., 18.75%) of the
Working Capital Adjustment Amount (as defined in Section 1.8 hereinbelow), post
Closing pursuant to the terms described in Section 1.8 hereinbelow, if
applicable.)

(7)

“Cash Purchase Price for the Reuter Seller” means $815,905.78, in cash minus the
sum of (i) any indebtedness pursuant to which a lien has been placed on the
Reuter Partnership Interest, (ii) the Reuter Seller’s pro rata share as compared
to the other Sellers (i.e., 18.75%) of the outstanding principal and accrued but
unpaid interest, fees and other amounts payable by the Partnership (including
any prepayment penalties) as of the Closing Date with respect to the Long Term
Capital Debt, and (iii) the Reuter Seller’s pro rata share as compared to the
other Sellers (i.e., 18.75%) of the amount of the Transaction Expenses.
 (Additionally, the Reuter Seller shall pay Purchaser the Reuter Seller’s pro
rata share as compared to the other Sellers (i.e., 18.75%) of the Working
Capital Adjustment Amount (as defined in Section 1.8 hereinbelow), post Closing
pursuant to the terms described in Section 1.8 hereinbelow, if applicable.)

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(8)

“Cash Purchase Price for the PBSA Seller” means $1,450,499.16, in cash minus the
sum of (i) any indebtedness pursuant to which a lien has been placed on the PBSA
Partnership Interest, (ii) the PBSA Seller’s pro rata share as compared to the
other Sellers (i.e., 25%) of the outstanding principal and accrued but unpaid
interest, fees and other amounts payable by the Partnership (including any
prepayment penalties) as of the Closing Date with respect to the Long Term
Capital Debt, and (iii) the PBSA Seller’s pro rata share as compared to the
other Sellers (i.e., 25%) of the amount of the Transaction Expenses.
 (Additionally, the PBSA Seller shall pay Purchaser the PBSA Seller’s pro rata
share as compared to the other Sellers (i.e., 25%) of the Working Capital
Adjustment Amount (as defined in Section 1.8 hereinbelow), post Closing pursuant
to the terms described in Section 1.8 hereinbelow, if applicable.)

(9)

“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.

(10)

“Partnership Material Adverse Effect” shall mean a material adverse effect (i)
on the business, assets or results of operations of the Partnership or (ii) on
the ability of the Partnership to consummate the Acquisition and the other
transactions contemplated hereby.

(11)

“Consent” means any consent, approval, license, permit, order or authorization.

(12)

“Contract” means any contract, lease, license, indenture, agreement, commitment
or other legally binding arrangement.

(13)

“Credit Facility” means that certain Loan Agreement(s) dated as of October 15,
2003, between the Spectrum Health Solutions, Inc. and Equitable Bank, National
Association, together with any amendments thereto.

(14)

“Credit Facility Amount” means the outstanding principal and accrued but unpaid
interest, fees and other amounts payable (including any prepayment penalties) as
of the Closing Date (including the current portion thereof) with respect to the
Credit Facility.

(15)

“Damages” includes any loss, damage, injury, decline in value, Liability,
charge, cost, demand, settlement, judgment, award, fine, penalty, Tax, fee or
expense (including any reasonable expenses of investigation and reasonable legal
fees and disbursements).

(16)

“Environmental Laws” means any and all Applicable Laws, Judgments and Permits
issued, promulgated or entered into by or with any Governmental Entity as of the
Closing Date, relating to the environment, the protection, preservation or
reclamation of natural resources, or to the management, treatment, emission,
discharge, use, handling, storage, removal, cleanup, decontamination, discharge,
disposal or release of Hazardous Materials.

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(17)

“Fair Market Value of PainCare Stock” shall be defined as a price per share
equal to ninety percent (90%) multiplied by the average thirty (30) day closing
price of PainCare Holdings Inc.’s stock as reported on the American Stock
Exchange or such other established stock exchange on which PainCare Holding
Inc.’s stock is trading for the thirty (30) day period ending on the day
immediately preceding the complete execution of this Agreement by all parties to
this Agreement; provided, however, if the Closing does not occur within the
seventy-five (75) day period which immediately follows the complete execution of
this Agreement by all parties to this Agreement, then “Fair Market Value of
PainCare Stock” shall be defined as a price per share equal to ninety percent
(90%) multiplied by the average thirty (30) day closing price of PainCare
Holdings Inc.’s stock as reported on the American Stock Exchange or such other
established stock exchange on which PainCare Holding Inc.’s stock is trading for
the thirty (30) day period ending on the day immediately preceding the Closing
Date.

(18)

“GAAP” means United States generally accepted accounting principles in effect as
of the Closing Date, consistently applied.

(19)

“Governmental Entity” means any Federal, state, local or foreign government or
any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign.

(20)

“Hazardous Materials” means (1) petroleum products and byproducts, asbestos,
urea formaldehyde foam insulation, polychlorinated biphenyls, radon gas and
chlorofluorocarbons; and (2) any other material, substance or waste that is
prohibited or regulated pursuant to any Environmental Law.

(21)

“Intellectual Property” means any patent (including all reissues, divisions,
continuations and extensions thereof), patent application, trademark, trademark
registration, trademark application, service mark, trade name, business name,
brand name, copyright, copyright registration, design, design registration, or
any right to any of the foregoing.

(22)

“Judgment” means any judgment, order or decree.

(23)

“Knowledge of the Partnership” means (i) the actual current knowledge of John
Beebe, Jeffrey Katzell, M.D., Merrill Reuter, M.D. and/or the physician owners
of PBSA Investments, LLC, or (ii) the knowledge such persons would reasonably be
expected to have as a result of discharging their official duties in a
reasonable manner.

(24)

“Liability” means, with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, whether or not the same
is required to be accrued on the financial statements of such Person.

5

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(25)

“Long Term Capital Debt” means the long term portion of the capital debt set
forth on Schedule 1.1(b)(25).

(26)

“Noncompetition and Confidentiality Agreement” means that certain Noncompetition
and Confidentiality Agreement in the form of Exhibit A-1 to be entered into by
and between Sellers and the physician owners of the PBSA Seller, on the one
hand, and the Purchaser, on the other hand, and delivered at Closing.

(27)

“On-Site Services Agreement” means that certain On-Site Services Agreement in
the form of Exhibit A-2 to be entered into by and between Spectrum Personnel,
Inc. and the Purchaser and delivered at Closing.

(28)

“Ordinary Course of Business”: An action taken by a Person will be deemed to
have been taken in the Ordinary Course of Business only if that action:

(i)

is consistent in nature, scope and magnitude with the past practices of such
Person and is taken in the ordinary course of the normal, day-to-day operations
of such Person;

(ii)

does not require authorization by the board of directors, general partner,
stockholders or partners of such Person (or by any Person or group of Persons
exercising similar authority) and does not require any other separate or special
authorization of any nature; and

(iii)

is similar in nature, scope and magnitude to actions customarily taken, without
any separate or special authorization, in the ordinary course of the normal,
day-to-day operations of other Persons that are in the same line of business as
such Person.

(29)

“Other Indebtedness” of any Person means, without duplication of Long Term
Capital Debt, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than trade payables
incurred in the Ordinary Course of Business of such Person which are not more
than 30 days past due), (ii) all indebtedness of such Person evidenced by a
note, bond, debenture or similar instrument, (iii) the principal amount of all
obligations under or in respect of capitalized leases, (iv) the then drawable
stated amount of all letters of credit issued for the account of such Person
and, without duplication, all unreimbursed amounts drawn thereunder and (v) all
payment obligations of such Person under any interest rate protection agreements
and similar agreements to the extent constituting a liability under GAAP.

6

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(30)

“Partnership Agreement” means that certain Agreement of Limited Partnership for
PSHS Alpha Partners, Ltd., dated June 1997, that was entered into by the general
partner and limited partners as of such date to create PSHS Alpha Partners,
Ltd., as amended by that certain: (i) Amendment to Partnership Agreement dated
December 1, 1998 by and among the Partnership, the general partner and limited
partners as of such date; (ii) Second Amendment to Partnership Agreement dated
February 1999 by and among the Partnership, the general partner and limited
partners as of such date; and (iii) Third Amendment to Partnership Agreement
dated December 14, 2000 by and among the Partnership, the general partner and
limited partners as of such date.

(31)

“Permit” means all certificates, licenses, permits, authorizations or approvals
issued or granted to the Partnership.

(32)

“Person” means any individual, firm, corporation, partnership, limited liability
company, trust, joint venture, Governmental Entity or other entity.

(33)

“Purchaser Stock” means collectively the Purchaser Stock for the PSHS Seller and
the Purchaser Stock for the Reuter Seller.

(34)

“Purchaser Stock for the PSHS Seller” means shares of PainCare’s common stock,
$0.0001 par value, subject to adjustment for any stock splits, stock dividends
or comparable events prior to the Closing which collectively has a value equal
to $1,133,202.50 on the Closing Date using the Fair Market Value of PainCare
Stock (as defined herein).

(35)

“Purchaser Stock for the Reuter Seller” shares of PainCare’s common stock,
$0.0001 par value, subject to adjustment for any stock splits, stock dividends
or comparable events prior to the Closing which collectively has a value equal
to $271,968.59 on the Closing Date using the Fair Market Value of PainCare Stock
(as defined herein).

(36)

“Registration Rights Agreement” means the Registration Rights Agreement dated
the date hereof, substantially in the form of Exhibit A-3.

(37)

“Seller Material Adverse Effect” means, with respect to Sellers, a material
adverse effect on the ability of Sellers to consummate the transactions
contemplated hereby.

(38)

“subsidiary” of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body, or, if there are no such voting interests, 50% or more of the
equity interests of which is owned directly or indirectly by such first Person
or by another subsidiary of such first Person.

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(39)

“Support and Services Agreement” means that certain Support and Services
Agreement in the form of Exhibit A-4 to be entered into by and between Spectrum
Personnel, Inc. and the Purchaser and delivered at Closing.

(40)

“Tax” shall mean all forms of taxation or duties imposed, or required to be
collected or withheld, including charges, together with any related interest,
penalties or other additional amounts.

(41)

“Tax Return” shall mean any return, filing, report, questionnaire, information
statement or other document required to be filed, including any amendments that
may be filed, for any taxable period with any Taxing Authority (whether or not a
payment is required to be made with respect to such filing).

(42)

“Taxing Authority” shall mean any Governmental Entity exercising any authority
to impose, regulate or administer the imposition of Taxes.

(43)

“Total Consideration” means the sum of (i) $6,753,886.81, and (ii)  PainCare’s
common stock, $0.0001 par value delivered to the Sellers at the Closing which
collectively has a value equal to $1,405,171.09 on the Closing Date using the
Fair Market Value of PainCare Stock (as defined herein).

(44)

“Transaction Documents” means this Agreement, the Support and Services
Agreement, the On-Site Services Agreement, the Non-competition and
Confidentiality Agreement, the Registration Rights Agreement, the Amended and
Restated Limited Partnership Agreement, together with such other agreements,
certificates and documents delivered at Closing.

(45)

“Transaction Expenses” means all of the fees and expenses of the Partnership and
the Sellers incurred prior to or as of the Closing relating to the transactions
contemplated hereby for which the Sellers shall be responsible.

Section 1.2 Purchase and Sale of the PSHS Partnership Interests.  

(a)

On the terms and subject to the conditions of this Agreement, at the Closing,

(i)

the PSHS Seller shall sell, transfer, assign, convey and deliver to the
Purchaser, and Purchaser shall purchase from PSHS Seller, the PSHS Partnership
Interest (which is a 37.5% partnership interest in the Partnership) owned by the
PSHS Seller, free and clear of all Liens (as defined in Section 3.6
hereinbelow); and

(ii)

Purchaser shall deliver to the PSHS Seller: (a) the Cash Purchase Price for the
PSHS Seller, and (b) certificates representing the Purchaser Stock for the PSHS
Seller.

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Section 1.3 Purchase and Sale of the Katzell Partnership Interests.  (a)  On the
terms and subject to the conditions of this Agreement, at the Closing,

(i)

the Katzell Seller shall sell, transfer, assign, convey and deliver to the
Purchaser, and Purchaser shall purchase from the Katzell Seller, the Katzell
Partnership Interest (which is a 9% partnership interest in the Partnership)
owned by the Katzell Seller, free and clear of all Liens (as defined in Section
3.6 hereinbelow); and

(ii)

Purchaser shall deliver to the Katzell Seller the Cash Purchase Price for the
Katzell Seller.

Section 1.4 Purchase and Sale of the Reuter Partnership Interests.

(a)

On the terms and subject to the conditions of this Agreement, at the Closing,

(i)

the Reuter Seller shall sell, transfer, assign, convey and deliver to the
Purchaser, and Purchaser shall purchase from the Reuter Seller, the Reuter
Partnership Interest (which is a 9% partnership interest in the Partnership)
owned by the Reuter Seller, free and clear of all Liens (as defined in Section
3.6 hereinbelow); and

(ii)

Purchaser shall deliver to the Reuter Seller: (a) the Cash Purchase Price for
the Reuter Seller, and (b) certificates representing the Purchaser Stock for the
Reuter Seller.  To the extent the Reuter Seller desires to hold Purchaser Stock
for the Reuter Seller in a trust, the Purchaser agrees to facilitate such
request as long as the Reuter Seller shall provide a letter of instruction to
Purchaser as to the  legal name of such trust, requesting that the Purchaser
Stock for the Reuter Seller be issued in the name of such trust, and any other
information reasonably requested by Purchaser such that Purchaser can issues the
Purchaser Stock for the Reuter Seller in the name of such trust.

Section 1.5 Purchase and Sale of the PBSA Partnership Interests.  On the terms
and subject to the conditions of this Agreement, at the Closing,

(i)

the PBSA Seller shall sell, transfer, assign, convey and deliver to the
Purchaser, and Purchaser shall purchase from the PBSA Seller, the PBSA
Partnership Interest (which is a 12% partnership interest in the Partnership)
owned by the PBSA Seller, free and clear of all Liens (as defined in Section 3.6
hereinbelow); and

(ii)

Purchaser shall deliver to the PBSA Seller the Cash Purchase Price for the PBSA
Seller.

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Section 1.6 Closing Date.  The closing of the Acquisition (the “Closing”) shall
take place at the offices of PainCare or such other mutually agreed to location
or if mutually acceptable, remotely: (i) seventy-five (75) days after the
execution of this Agreement by all parties to this Agreement subject to the
satisfaction of the conditions set forth in Article VI (or, to the extent
permitted, waived by the parties entitled to the benefits thereof); or (ii) less
than seventy-five (75) days after the execution of this Agreement by all parties
to this Agreement at a date mutually agreed upon by the parties to this
Agreement if all of the conditions set forth in Article VI have been satisfied
(or, to the extent permitted, waived by the parties entitled to the benefits
thereof). The date on which the Closing occurs is referred to in this Agreement
as the “Closing Date.”

Section 1.7 Transactions To Be Effected at the Closing.  At the Closing:

(a)

the PSHS Seller shall deliver to Purchaser: (i) certificates representing the
PSHS Partnership Interest, duly endorsed to Purchaser or accompanied by
partnership interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any, affixed, which,
together with the certificates delivered to Purchaser by the PSHS Seller, shall
represent 37.5% of the partnership interests of the Partnership outstanding as
of the Closing Date; (ii)  Noncompetition and Confidentiality Agreement executed
by the PSHS Seller, and (iii) a certificate dated as of the Closing Date stating
the PSHS Seller’s name, tax identifying number and address, stating that the
PSHS Seller is not a “foreign person,” sworn to under penalties of perjury and
otherwise in form and substance sufficient to satisfy the requirement of
Treasury Regulation Section 1.1445-2(b)(2) (the “FIRPTA Certificate”).

(b)

the Katzell Seller shall deliver to Purchaser: (i) certificates representing the
Katzell Partnership Interest, duly endorsed to Purchaser or accompanied by
partnership interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any, affixed, which,
together with the certificates delivered to Purchaser by the Katzell Seller,
shall represent 9% of the partnership interests of the Partnership outstanding
as of the Closing Date; (ii)  Noncompetition and Confidentiality Agreement
executed by the Katzell Seller, and (iii) a certificate dated as of the Closing
Date stating the Katzell Seller’s name, tax identifying number and address,
stating that the Katzell Seller is not a “foreign person,” sworn to under
penalties of perjury and otherwise in form and substance sufficient to satisfy
the requirement of Treasury Regulation Section 1.1445-2(b)(2) (the “FIRPTA
Certificate”).

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(c)

the Reuter Seller shall deliver to Purchaser: (i) certificates representing the
Reuter Partnership Interest, duly endorsed to Purchaser or accompanied by
partnership interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any, affixed, which,
together with the certificates delivered to Purchaser by the Reuter Seller,
shall represent 9% of the partnership interests of the Partnership outstanding
as of the Closing Date; (ii)  Noncompetition and Confidentiality Agreement
executed by the Reuter Seller, and (iii) a certificate dated as of the Closing
Date stating the Reuter Seller’s name, tax identifying number and address,
stating that the Reuter Seller is not a “foreign person,” sworn to under
penalties of perjury and otherwise in form and substance sufficient to satisfy
the requirement of Treasury Regulation Section 1.1445-2(b)(2) (the “FIRPTA
Certificate”).

(d)

the PBSA Seller shall deliver to Purchaser: (i) certificates representing the
PBSA Partnership Interest, duly endorsed to Purchaser or accompanied by
partnership interest powers duly endorsed to Purchaser, in proper form for
transfer, with appropriate stock transfer Tax stamps, if any, affixed, which,
together with the certificates delivered to Purchaser by the PBSA Seller, shall
represent 12% of the partnership interests of the Partnership outstanding as of
the Closing Date; (ii)  Noncompetition and Confidentiality Agreement executed by
the PBSA Seller, and (iii) a certificate dated as of the Closing Date stating
the PBSA Seller’s name, tax identifying number and address, stating that the
PBSA Seller is not a “foreign person,” sworn to under penalties of perjury and
otherwise in form and substance sufficient to satisfy the requirement of
Treasury Regulation Section 1.1445-2(b)(2) (the “FIRPTA Certificate”).

(e)

Purchaser shall deliver to the PSHS Seller: (i) the Cash Purchase Price for the
PSHS Seller, and (ii) a certificate representing the Purchaser Stock for the
PSHS Seller issued to the PSHS Seller.

(f)

Purchaser shall deliver to the Katzell Seller by wire transfer to such bank
account of Bank of America designated in writing by the Katzell Seller (such
designation to be made at least three (3) business days prior to the Closing
Date) the Cash Purchase Price for the Katzell Seller.

(g)

Purchaser shall deliver to the Reuter Seller: (i) the Cash Purchase Price for
the Reuter Seller, and (ii) a certificate representing the Purchaser Stock for
the Reuter Seller issued to the Reuter Seller.

(h)

Purchaser shall deliver to the PBSA Seller the Cash Purchase Price for the PBSA
Seller.

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(i)

Purchaser shall: (i) deliver by wire transfer to such bank account of Equitable
Bank designated in writing by the PSHS Seller (such designation to be made at
least three business days prior to the Closing Date), immediately available
funds in an amount equal to the Credit Facility Amount, as shown on payoff
letters obtained by the PSHS Seller from Equitable Bank and delivered to
Purchaser at least one day prior to the Closing Date is such amounts have not
been paid off prior to the Closing Date; (ii) deliver by wire transfer to the
applicable bank account(s) designated in writing by the Partnership any other
Indebtedness of the Partnership, if any, if such amounts are not paid off prior
to the Closing Date, if applicable and (iii) deliver payment to the applicable
accounts designated therefore of all Transaction Expenses.

(j)

If there are any other liens encumbering the partnership interests being
purchased from any of the Sellers, then the attendant indebtedness needs to be
identified and paid off prior to Closing, or alternatively, Purchaser will pay
off such attendant indebtedness at the Closing and reduce the respective cash
portions of the purchase price payable to the applicable Seller(s).

Section 1.8 Post-Closing Working Capital Adjustment.  

(a)

Net Working Capital Statement.  Not more than 60 days after the Closing Date,
the Purchaser shall deliver to the Sellers a net working capital statement of
the Partnership as of the Closing Date (the “Net Working Capital Statement”)
prepared in accordance with generally accepted accounting principles (“GAAP”).
The Net Working Capital, as defined in Section 1.8(b), of the Partnership
reflected on the Net Working Capital Statement is referred to herein as the
“Final Closing Date Working Capital Position.”  The cash component of the Final
Closing Date Working Capital Position shall be at least $100,000.  Except as
provided in Section 1.8(d) hereof, fifteen (15) business days after delivery of
the Net Working Capital Statement (the “Adjustment Payment Date”), the Sellers
shall each pay the Purchaser their respective pro rata share the amount by which
the Agreed Closing Date Working Capital Position, as defined in Section 1.8(c)
exceeds the Final Closing Date Working Capital Position, if any, within thirty
(30) days of receiving notice of the same, or the Purchaser shall pay the
Sellers their pro rata share in the amount by which the Final Closing Date
Working Capital Position exceeds the Agreed Closing Date Working Capital
Position, as defined in Section 1.8(c), if any, within thirty (30) days of
receiving notice of the same.  In determining whether Sellers owe Purchaser
money or Purchaser owes Sellers money pursuant to the terms of the preceding
sentence: (i) the entire working capital position of the Partnership shall be
considered (meaning, for example, if the Final Closing Date Working Capital
Position is less than the Agreed Closing Date Working Capital Position and the
cash component of the Final Closing Date Working Capital Position is greater
than $100,000, then on these hypothetical facts, if true, Sellers would owe
Purchaser the difference between the Final Closing Date Working Capital Position
and the Agreed Closing Date Working Capital Position, notwithstanding that the
cash component of the Final Closing Date Working Capital Position is greater
than $100,000); and (ii) to the extent that the absolute value of the difference
between the Final Closing Date Working Capital Position and the Agreed

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(b)

Closing Date Working Capital Position is $5,000 or less, then neither Sellers
nor Purchaser will owe the other money pursuant to the preceding sentence.  All
payments under this Section 1.8(a), as applicable, shall be by wire transfer in
immediately available funds to a bank account designated by Purchaser or
Sellers.

(c)

Net Working Capital.  For purposes of this Agreement, “Net Working Capital”
shall mean, as of the date of determination, an amount equal to: (a) the sum of
the current assets, including, without limitation, the following items: (i)
cash, (ii) accounts receivable, (iii) inventories and supplies, and (iii)
prepaid expenses; minus (b) the sum of the current liabilities, including,
without limitation, the following items: (i) accounts payable, (ii) employee
liabilities, and (iii) accrued expenses, but excluding the current portion of
long-term debt and capital leases.

(d)

Agreed Closing Date Working Capital Position.  For purposes of this Agreement,
the “Agreed Closing Date Working Capital Position” means the “Net Working
Capital” of the Partnership, as defined in Section 1.8(b) on the Closing Date,
which is $1,900,000 (with $100,000 of such $1,900,000 being cash).

(e)

Manner of Payment.

(i)

Objection Period and Discussion Period.  Within ten (10) business days (the
“Objection Period”) after the Purchaser’s delivery of the Net Working Capital
Statement, the Sellers, collectively, shall, in a written notice to the
Purchaser, either accept or describe in reasonable detail any proposed
adjustment to the Net Working Capital Statement and the reasons therefor, and
shall include pertinent calculations.  If the Sellers collectively fail to
deliver notice of acceptance or objection to the Net Working Capital Statement
before the expiration of the Objection Period, then the Sellers shall be deemed
to have accepted the Net Working Capital Statement.

(ii)

Accounting Firm Review.  If the Purchaser and the Sellers are not able to agree
on the Net Working Capital Statement within thirty (30) business days from and
after the receipt by the Purchaser of any timely objections raised by the
Sellers (the “Discussion Period”), the Purchaser and the Sellers, collectively,
shall each have the right to require that such disputed determinations be
submitted to a certified public accounting firm as the Sellers, collectively,
and the Purchaser may then mutually agree upon in writing, for computation or
verification in accordance with the provisions of this Agreement, provided the
Purchaser or Sellers shall pay, as applicable, on the Adjustment Payment Date,
their respective share of the net of the undisputed portion(s) of the Working
Capital Adjustment contemplated by this Section 1.5.  If the Sellers and the
Purchaser cannot mutually agree on the identity of the accounting firm within
ten (10) business days after the expiration of the Discussion Period, then the
Sellers, on the one hand, and the Purchaser, on the other hand, shall each pick
a certified public accounting firm within three (3) business days after the
expiration of the ten (10) business day period, and such two (2) firms shall
select the identity of the third accounting firm within seven (7) business days
after the expiration of such three (3) business day period, which third
accounting firm shall be an independent accounting firm which does not currently
provide, and has not provided within the last two years, services

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to any of Sellers, Partnership or Purchaser.  All materials for the third
accounting firm to make a decision shall be provided by the parties to this
Agreement within five (5) business days after notice of a decision to use such
accounting firm shall have been given.  The accounting firm shall deliver its
decision to the parties to this Agreement within thirty (30) business days after
receipt of the materials.

(iii)

Binding Decision; Expenses.  The foregoing provisions for certified public
accounting firm review shall be specifically enforceable by the parties; the
decision of such accounting firm shall be final and binding upon the parties,
there shall be no right of appeal from such decision; and such accounting firm’s
fees and expenses for each such disputed determination shall be borne by the
party whose determination has been modified by such accounting firm’s report or
by all parties in proportion to the relative amount each party’s determination
has been modified.  Within five (5) business days after delivery of the
Accounting Firm’s decision, the Purchaser or each of the Sellers, as the case
may be, shall make their respective share of the required payment, if
applicable.  Any payments due under this Section 1.5 shall bear interest at
LIBOR, as published in the Wall Street Journal, from the Adjustment Payment
Date.

(f)

Ordinary Course of Business.  Following the Closing, Purchaser shall not take
any action with respect to the accounting books and records of the Partnership,
or the items reflected thereon, on which the Final Closing Date Working Capital
Position is to be based that are not in the Ordinary Course of Business.

ARTICLE II

REPRESENTATIONS AND WARRANTIES
RELATING TO SELLERS AND THE PARTNERSHIP INTERESTS

Except as set forth in the schedule dated the date of this Agreement from the
Sellers to Purchaser (the “Sellers Disclosure Schedule”), each of the physician
owners of the PBSA Seller and the Sellers, jointly and severally (with the
exception of the representations and warranties made in Section 2.5 of this
Agreement which are made severally), hereby represent and warrant to Purchaser,
as of the date of this Agreement and as of the Closing Date, as follows:

Section 2.1 Organization.  The PSHS Seller is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
organized.  The PBSA Seller is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized.

Section 2.2 Authority; Execution and Delivery; Enforceability.  Each of the
Sellers has full power and authority to execute this Agreement and to consummate
the Acquisition and the other transactions contemplated hereby. The execution
and delivery by each of the Sellers of this Agreement have been duly authorized
by all necessary action. Each of the Sellers has duly executed and delivered
this Agreement, and this Agreement constitutes a legal, valid and binding
obligation of each of the Sellers, enforceable against each of the Sellers in
accordance with its terms.

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Section 2.3 No Conflicts; Consents.  The execution and delivery by each of the
Sellers of this Agreement does not, and the consummation of the Acquisition and
the other transactions contemplated hereby and compliance by each of the Sellers
with the terms hereof will not conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, any provision
of (i) the governing instruments of any of the Sellers which are not a natural
person, (ii) any Contract to which any of the Sellers is a party or by which any
of its properties or assets is bound or (iii) any Judgment or Applicable Law
applicable to any of the Sellers or its, his or their, as applicable, properties
or assets, other than, in the case of clauses (ii) and (iii) above, any such
items that, individually or in the aggregate, would not have a Seller Material
Adverse Effect. No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to any
of the Sellers in connection with the execution, delivery and performance of
this Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby, other than (A) compliance with and filings with the Agency
for Health Care Administration and the Centers for Medicare and Medicaid
necessary with respect to the change in the owner of the Partnership Interests
as described in this Agreement, and (B) any Consent, registration, declaration
or filing the failure of which to obtain or make would not have, individually or
in the aggregate, a Seller Material Adverse Effect.

Section 2.4 Partnership Interests.  Each of the Sellers has good and valid title
to the respective Partnership Interests it, he or they, as applicable, is/are
selling pursuant to this Agreement, free and clear of all Liens. Upon delivery
to Purchaser at the Closing of certificates representing such Partnership
Interests, duly endorsed by the respective Sellers for transfer to Purchaser,
and upon each of the Sellers’ respective receipt of the amount payable to the
respective Seller pursuant to Section 1.4, good and valid title to such
Partnership Interests will pass to Purchaser, free and clear of any Liens, other
than those arising from acts of Purchaser or its Affiliates. Other than this
Agreement, and the Partnership Agreement, such Partnership Interests are not
subject to any voting trust agreement or other Contract, including any Contract
restricting or otherwise relating to the voting, dividend or distribution rights
or disposition of such Partnership Interests. None of the Sellers has other
equity interests or rights to acquire equity interests in the Partnership.

Section 2.5 Investor Representations.  In connection with the issuance by the
Purchaser of the Purchaser Stock for PSHS and the Purchaser Stock for Reuter as
partial payment of the Total Consideration, each of the PSHS Seller and the
Reuter Seller hereby represents and warrants to, and covenants with, the
Purchaser as follows:

(a)

By executing this Agreement, each of the Sellers acknowledges that:

(i)

There are continuing substantial risks incident to the acquisition of the
Purchaser’s Securities and each of the Sellers may at any time suffer a

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complete loss of value of their respective ownership of the Purchaser Stock for
PSHS and the Purchaser Stock for Reuter, as applicable;

(ii)

No federal or state agency has passed upon the Purchaser Stock issued in
connection with this Agreement or made any finding or determination as to the
fairness of the transactions contemplated hereby; and

(iii)

The PSHS Seller and the Reuter Seller, as applicable, must bear the risk of
acquiring the Purchaser Stock for PSHS and the Purchaser Stock for Reuter, as
applicable, for an indefinite period of time because the Purchaser Stock has not
been registered under the Securities Act or any state securities laws, and,
therefore, cannot be sold or transferred unless the sale or transfer is
subsequently registered under said laws or the Purchaser receives a legal
opinion of counsel reasonably satisfactory to the Purchaser that an exemption
from such registration is available.

(b)

Each of the PSHS Seller and the Reuter Seller further represents and warrants to
the Purchaser that:

(i)

Each of the PSHS Seller and the Reuter Seller has had the opportunity to examine
all aspects of the Purchaser, and its proposed operations and financial
condition that each of the Sellers has deemed relevant, including the
Purchaser’s public filings available on line at http://www.sec.gov/, and has had
the opportunity to ask such questions of directors, officers, employees and
representatives of the Purchaser as each of the Sellers deems necessary for an
evaluation of the Purchaser Stock;

(ii)

Purchaser has not granted, offered or sold the Purchaser Stock to the PSHS
Seller and the Reuter Seller by means of any form of general solicitation or
general advertising or by means of publicly disseminated advertisements or sales
literature;

(iii)

Each of the PSHS Seller and the Reuter Seller has adequate means of providing
for his, its or their, as applicable, current needs and possible future
contingencies, and each of the PSHS Seller and the Reuter Seller has no need,
and anticipates no need in the foreseeable future, to sell the Purchaser Stock;

(iv)

Each of the PSHS Seller and the Reuter Seller possesses such expertise,
knowledge and sophistication in financial and business matters generally that it
is capable of evaluating the merits and economic risks of acquiring the
Purchaser Stock. Each of the PSHS Seller and the Reuter Seller is able to bear
the economic risks of this investment and, consequently, without limiting the
generality of the foregoing, each of the PSHS Seller and the Reuter Seller is
able to hold the Purchaser Stock for an indefinite period of time and has
sufficient net worth to sustain a loss of its, their or his, as applicable,
entire investment in the event such loss should occur. Each of the PSHS Seller
and the Reuter Seller is acquiring the Purchaser Stock solely for investment for
the respective Seller’s own account (and not for the account of any other

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 person) and has no agreement, understanding or arrangement to subdivide, sell,
assign, transfer or otherwise dispose of all or any part of any of the Purchaser
Stock to any other Person; and

(v)

All of the representations and information provided in this Section 2.5 is
accurate and complete as of the date of this Agreement. If there should be any
material change in any such representations, Sellers will immediately furnish
accurate and complete information concerning any material change to the
Purchaser.

(c)

Each of the PSHS Seller and the Reuter Seller acknowledges, represents and
warrants that the PSHS Seller and the Reuter Seller, as applicable,
satisfies/satisfy one of the following:

(i)

The respective Seller is an accredited investor for purposes of Rule 501 under
the Securities Act;

(ii)

The respective Seller is a corporation, partnership or similar entity not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;

(iii)

The respective Seller is a natural person whose individual net worth, or joint
net worth with the respective Seller’s spouse, at the time of the acquisition of
the Purchaser Stock exceeds $1,000,000;

(iv)

The respective Seller is a natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with the
respective Seller’s spouse in excess of $300,000 in each of those years and has
a reasonable expectation of reaching the same income level in the current year;

(v)

The respective Seller is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Purchaser Stock, whose purchase
is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D promulgated under the Securities Act;

(vi)

The respective Seller is an entity in which all of the equity owners are
accredited investors; or

(vii)

The respective Seller, if not an accredited investor, possesses such expertise,
knowledge and sophistication in financial and business matters generally, and
familiarity with this investment, that together with its investment advisers it
is capable of evaluating the merits and economic risks of acquiring the
Purchaser Stock.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES
RELATING TO THE PARTNERSHIP

Except as set forth in the schedule dated the date of this Agreement from the
Partnership to Purchaser (the “Partnership Disclosure Schedule”), each of the
physician owners of the PBSA Seller and the Sellers, jointly and severally,
hereby represent and warrant to Purchaser, as of the date of this Agreement and
as of the Closing Date (or, to the extent that a representation or warranty
expressly relates to an earlier date, as of such earlier date), as follows:

Section 3.1 Organization and Standing; Books and Records.  

(a)

Except as set forth in Section 3.1(a) of the Partnership Disclosure Schedule,
the Partnership is a limited partnership duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation, which
jurisdiction is set forth in Section 3.1 of the Partnership Disclosure Schedule.
 The Partnership has full power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to own, lease or otherwise hold its properties and assets and to carry on its
business as presently conducted (the “Business”) at the locations for which such
Business is presently being conducted (the “Business Locations”). Except as set
forth in Section 3.1(a) of the Partnership Disclosure Schedule, the Partnership
is duly qualified and in good standing to do business as a foreign limited
partnership in each jurisdiction in which the conduct or nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary.

(b)

Except as set forth in Section 3.1(b) of the Partnership Disclosure Schedule,
the Partnership has made available to Purchaser true and complete copies of the
certificate of limited partnership, as amended to date, and the Partnership
Agreement of the Partnership. All actions taken by the Partnership, including
those taken by its general partner, limited partners, and employees, of the type
required to be reflected in its minute books will be reflected in the
Partnership’s minute books which are to be made available to Purchaser at least
5 days prior to Closing. No material action of a type which would normally
appear in a partnership’s minute books has been taken by the Partnership that
has not been otherwise disclosed to Purchaser. As of the Closing Date, the
minute books of the Partnership will have been made available for inspection by
Purchaser and will be true and complete.

Section 3.2 The Partnership Interests.  

(a)

The PSHS Seller has a 37.5% partnership interest in the Partnership as the
general partner; the Katzell Seller has an 18.75% partnership interest in the
Partnership as a limited partner; the Reuter Seller has an 18.75% partnership
interest in the Partnership as a limited partner; and the PBSA Seller has a 25%
partnership interest in the Partnership as a limited partner (collectively, the
“Issued and Outstanding

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Partnership Interests”).  Except for the Issued and Outstanding Partnership
Interests, there are no units, partner interests or other equity securities of
the Partnership issued, reserved for issuance or outstanding. The Issued and
Outstanding Partnership Interests are duly authorized, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under the Florida Revised Uniform Limited Partnership
Act, the certificate of limited partnership or limited partnership agreement of
the Partnership or any Contract to which the Partnership is a party or otherwise
bound. There are not any bonds, debentures, notes or other Indebtedness of the
Partnership having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of
partnership interests in the Partnership may vote (“Voting Partnership Debt”).
Except as set forth in Section 3.2 of the Partnership Disclosure Schedule, there
are no options, warrants, rights, convertible or exchangeable securities,
“phantom” unit or other equity rights, unit or other equity appreciation rights,
equity-based performance units, commitments, Contracts, arrangements or
undertakings of any kind to which the Partnership is a party or by which any of
them is bound (i) obligating the Partnership to issue, deliver or sell, or cause
to be issued, delivered or sold, additional partnership interests in the
Partnership or other equity interests in, or any security convertible or
exercisable for or exchangeable into any partnership interests in the
Partnership of or other equity interest in, the Partnership or any Voting
Partnership Debt or (ii) obligating the Partnership to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking. There are no outstanding contractual
obligations of the Partnership to repurchase, redeem or otherwise acquire any
partnership interests of the Partnership.

(b)

Except for the ownership interests set forth in Section 3.2(b) of the
Partnership Disclosure Schedule, the Partnership does not own, directly or
indirectly, any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest in any Person.

Section 3.3 Authority; Execution and Delivery; Enforceability.  The Partnership
has full power and authority to execute this Agreement and to consummate the
Acquisition and the other transactions contemplated hereby. The execution and
delivery by the Partnership of this Agreement and the consummation by the
Partnership of the Acquisition and the other transactions contemplated hereby
and thereby have been duly authorized by all necessary action. The Partnership
has duly executed and delivered this Agreement and this Agreement constitutes
its legal, valid and binding obligation, enforceable against it in accordance
with its terms.

Section 3.4 No Conflicts; Consents.  Except as set forth in Section 3.4 of the
Partnership Disclosure Schedule, the execution and delivery by the Partnership
of this Agreement does not, and the consummation of the Acquisition and the
other transactions contemplated hereby and compliance by the Partnership with
the terms hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or result in
the creation of any Lien upon any of the properties or assets of the Partnership
under, any provision of (i) the certificate of limited partnership

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 or the Partnership Agreement of the Partnership, (ii) any Contract to which the
Partnership is a party or by which any of its respective properties or assets is
bound or (iii) any Judgment or Applicable Law applicable to the Partnership or
its properties or assets, other than, in the case of clauses (ii) and (iii)
above, any such items that do not exceed $2,000 individually or $5,000 in the
aggregate. No Consent of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to the
Partnership in connection with the execution, delivery and performance of this
Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby, other than (A) compliance with and filings with the Agency
for Health Care Administration and the Centers for Medicare and Medicaid
regarding the sale of the Partnership Interests as provided for, and subject to
the terms and conditions, in this Agreement with respect to the Partnership’s
ownership and operation of the Ambulatory Surgical Center; and (B) compliance
with and filings under the Florida Revised Uniform Limited Partnership Act.

Section 3.5 Financial Statements.  

(a)

Section 3.5 of the Partnership Disclosure Schedule sets forth (i) the audited
balance sheet of the Partnership as of October 31, 2004, (ii) the unaudited
balance sheet of the Partnership as of January 31, 2005 (the “Balance Sheet”),
(iii) the audited statement of income and cash flows of the Partnership for the
fiscal year ended October  31, 2004, and (iv) the unaudited statement of income
and cash flows of the Partnership for the three months ended January 31, 2005
(the financial statements described in this sentence, collectively, the
“Financial Statements”). Except (i) as set forth in Section 3.5 of the
Partnership Disclosure Schedule, (ii) as described in the notes to the Financial
Statements, (iii) that the unaudited interim statements do not include footnote
disclosure as required by GAAP and (iv) in the case of the unaudited statements,
for normal, year-end adjustments (including recognizing taxes payable and bonus
accruals), the Financial Statements have been prepared in accordance with GAAP
and fairly present the financial condition and results of operations of the
Partnership as of the respective dates thereof and for the respective periods
indicated therein.

(b)

Audited financial statements for the Partnership for the stub period commencing
on November 1, 2004 and ending on and as of January 31, 2005, do not exist.

(c)

Except as set forth in Section 3.5(c) of the Partnership Disclosure Schedule,
the Partnership has accurately accrued in the Financial Statements for all
employee and management bonuses. Section 3.5(c) of the Partnership Disclosure
Schedule sets forth a complete and accurate accrual of all bonuses owed to
current and former employees and management as of the date of this Agreement and
as of the Closing Date.

(d)

Except as set forth in Section 3.5(d) of the Partnership Disclosure Schedule,
since January 31, 2005, (i) the Partnership has paid its accounts payable in a
consistent and timely manner and has not altered any of its practices, policies
or procedures in paying its accounts payable and (ii) no instance has occurred
where the

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Partnership took any action with regard to any account payable outside of the
Ordinary Course of Business.

(e)

Section 3.5(e) of the Partnership Disclosure Schedule identifies all individuals
who help in the production of the Financial Statements and the provision of
information for the preparation of the same and lists the responsibilities of
each such individuals.

Section 3.6 Assets Other than Real Property Interests.  

(a)

The Partnership has good and valid title to all assets reflected on the Balance
Sheet or thereafter acquired, other than those set forth in Section 3.6 of the
Partnership Disclosure Schedule or otherwise disposed of since the date of the
Balance Sheet in the Ordinary Course of Business, in each case free and clear of
all mortgages, liens, security interests, charges, easements, leases, subleases,
covenants, rights of way, options, claims, restrictions or encumbrances of any
kind (collectively, “Liens”), except (i) such Liens as are set forth in Section
3.6 of the Partnership Disclosure Schedule, (ii) mechanics’, carriers’,
workmen’s, repairmen’s or other like Liens arising or incurred in the Ordinary
Course of Business, Liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
Ordinary Course of Business and Liens for Taxes that are not due and payable or
that may thereafter be paid without penalty, which in the case of this clause
(ii) do not exceed $5,000 in the aggregate, (iii) Liens that secure obligations
that are reflected as liabilities on the Balance Sheet or Liens the existence of
which is referred to in the notes to the Balance Sheet and set forth in Section
3.6 of the Partnership Disclosure Schedule and (iv) other imperfections of title
or encumbrances, if any, that, individually or in the aggregate, do not impair
the continued use and operation of the assets to which they relate in the
conduct of the Business of the Partnership as presently conducted (the Liens
described in clauses (ii) through (iv) above, together with the Liens referred
to in clauses (ii) through (v) of Section 3.7(a), are referred to collectively
as “Permitted Liens”).

(b)

This Section 3.6 does not relate to real property or interests in real property,
such items being the subject of Section 3.7, or to Intellectual Property, such
items being the subject of Section 3.8.

Section 3.7 Real Property.  

(a)

Section 3.7 of the Partnership Disclosure Schedule sets forth a complete list of
all real property and interests in real property owned in fee by the Partnership
(individually, an “Owned Property”). Section 3.7 of the Partnership Disclosure
Schedule also sets forth a complete list of all real property and interests in
real property leased by the Partnership or used by the Partnership and material
to its Business and not otherwise owned in fee (individually, a “Leased
Property”). The Partnership has good and marketable fee title to all Owned
Property and good and valid title to the leasehold estates in all Leased
Property (an Owned Property or Leased Property being sometimes referred to
herein, individually, as a “Partnership Property”), in each case free and clear
of all Liens, except (i) the Liens described in clauses (ii) through (iv) of
Section

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3.6 above, (ii) such Liens as are set forth in Section 3.7 of the Partnership
Disclosure Schedule, (iii) leases, subleases and similar agreements set forth in
Section 3.7 of the Partnership Disclosure Schedule, (iv) easements, covenants,
rights-of-way and other similar restrictions of record, (v) (A) zoning, building
and other similar restrictions, (B) Liens that have been placed by any
developer, landlord or other third party on property over which the Partnership
has easement rights or on any Leased Property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants,
rights-of-way and other similar restrictions. None of the items set forth in
clause (v) above, individually or in the aggregate, impairs the continued use
and operation of the Partnership Property to which they relate in the conduct of
the Business of the Partnership as presently conducted.

(b)

True and complete copies of (A) all deeds, existing title insurance policies and
surveys of or pertaining to the Partnership Property and (B) all instruments,
agreements and other documents evidencing, creating or constituting any Real
Estate Encumbrance on Partnership Property have been delivered to Purchaser.

Section 3.8 Intellectual Property.  Section 3.8 of the Partnership Disclosure
Schedule sets forth a true and complete list of all material Intellectual
Property, owned, used, filed by or licensed to the Partnership. The Intellectual
Property set forth in Section 3.8 of the Partnership Disclosure Schedule is
referred to in this Agreement as the “Partnership Intellectual Property.” With
respect to all Partnership Intellectual Property that is registered or subject
to an application for registration, Section 3.8 of the Partnership Disclosure
Schedule sets forth a list of all jurisdictions in which such Partnership
Intellectual Property is registered or registrations were applied for and all
registration and application numbers. Except as set forth in Section 3.8 of the
Partnership Disclosure Schedule, (i) all the Partnership Intellectual Property
has been duly registered in, filed in or issued by the appropriate Governmental
Entity where such registration, filing or issuance is necessary or appropriate
for the conduct of the Business of the Partnership as presently conducted, (ii)
the Partnership is the sole and exclusive owner of, and the Partnership has the
right to use, execute, reproduce, display, perform, modify, enhance, distribute,
prepare derivative works of and sublicense, without payment to any other Person,
all the Partnership Intellectual Property, and the consummation of the
Acquisition and the other transactions contemplated hereby does not and will not
conflict with, alter or impair any such rights and (iii) during the past two
years, the Partnership has not received any written communication from any
Person asserting any ownership interest in or claiming any infringement by any
Partnership Intellectual Property.

Section 3.9 Contracts.  

(a)

A true and complete copy of all Contracts set forth in Section 3.9 of the
Partnership Disclosure Schedule has heretofore been made available to the
Purchaser by the Partnership. Except as set forth in Section 3.9 of the
Partnership Disclosure Schedule, the Partnership is not a party to or bound by
any:

(i)

covenant not to compete (other than pursuant to any radius restriction contained
in any lease, reciprocal easement or development,

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construction, operating or similar agreement) that limits the conduct of the
Business of the Partnership as presently conducted;

(ii)

Contract (other than this Agreement) with (A) any of Sellers or any Affiliate of
any of Sellers (other than the Partnership) or (B) any officer, director or
employee of the Partnership, any of Sellers or any Affiliate of any of Sellers;

(iii)

lease, sublease or similar Contract with any Person (other than the Partnership)
under which the Partnership is a lessor or sublessor of, or makes available for
use to any Person (other than the Partnership), (A) any Partnership Property or
(B) any portion of any premises otherwise occupied by the Partnership;

(iv)

license, sublicense, option or other agreement relating in whole or in part to
the Partnership Intellectual Property (including any license or other agreement
under which the Partnership is licensee or licensor of any Intellectual
Property);

(v)

Contract under which the Partnership has borrowed any money from, or issued any
note, bond, debenture or under which the Partnership has incurred Indebtedness
to, any Person (other than the Partnership) or any other note, bond, debenture
or other Indebtedness of the Partnership (other than in favor of the
Partnership) in any such case which, individually, is in excess of $2,000;

(vi)

Contract (including any so-called take-or-pay or keepwell agreements) under
which (A) any Person other than the Partnership, has directly or indirectly
guaranteed Indebtedness or Liabilities of the Partnership; (B) the Partnership
has directly or indirectly guaranteed Indebtedness or Liabilities of any Person,
other than the Partnership (in each case other than endorsements for the purpose
of collection in the Ordinary Course of Business), in any such case which,
individually, is in excess of $2,000; or (C) the Partnership has agreed to
indemnify any third party;

(vii)

Contract under which the Partnership has, directly or indirectly, made any
advance, loan, extension of credit or capital contribution to, or other
investment in, a Person (other than the Partnership and other than extensions of
trade credit in the Ordinary Course of Business), in any such case which,
individually, is in excess of $2,000;

(viii)

material Contract granting a Lien (other than Permitted Liens) upon any
Partnership Property or any other asset owned by the Partnership;

(ix)

Contract for the sale of any asset of the Partnership with a book value of
$2,000 individually or $5,000 in the aggregate (other than inventory sales in
the Ordinary Course of Business) or the grant of any preferential rights to
purchase any such asset or requiring the consent of any party to the transfer
thereof, other than any such Contract entered into in the Ordinary Course of
Business after the date of this Agreement and not in violation of this
Agreement;

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(x)

Contract with or license or Permit by or from any Governmental Entity;

(xi)

Contract for any joint venture, partnership or similar arrangement;

(xii)

Contract providing for the services of any dealer, distributor, sales
representative, franchisee or similar representative involving the payment or
receipt over the life of such Contract in excess of $5,000 by the Partnership;

(xiii)

Contract that has an aggregate future Liability to any Person (including the
Partnership) in excess of $5,000 and is not terminable by the Partnership by
notice of not more than 90 days for a cost of less than $1,000 (including
purchase orders and sales orders except purchase orders and sales orders entered
into in the Ordinary Course of Business after the date of this Agreement and not
in violation of this Agreement); or

(xiv)

Contract other than as set forth above to which the Partnership is a party or by
which it or any of its assets or Businesses is bound or subject that is material
to the Business of the Partnership or the use or operation of its assets,
including payor Contracts.

(b)

Except as set forth in Section 3.9 of the Partnership Disclosure Schedule, all
Contracts listed in Section 3.9 of the Partnership Disclosure Schedule (the
“Partnership Contracts”) are valid, binding and in full force and effect and, to
the knowledge of the Partnership, are enforceable by the Partnership in
accordance with their terms. Except as set forth in Section 3.9 of the
Partnership Disclosure Schedule, the Partnership has performed all material
obligations required to be performed by it to date under the Partnership
Contracts, and it is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any respect thereunder and, to the
knowledge of the Partnership, no other party to any Partnership Contract is
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder. The Partnership has not, except
as disclosed in Section 3.9 of the Partnership Disclosure Schedule, received any
notice of the intention of any party to terminate any Partnership Contract.

Section 3.10 Banking and Insurance.  

(a)

Section 3.10 of the Partnership Disclosure Schedule contains a true and complete
list of the names and locations of all financial institutions at which the
Partnership maintains a checking account, deposit account, securities account,
safety deposit box or other deposit or safekeeping arrangement and the names of
all persons authorized to draw against any funds therein.

(b)

The Partnership is not required by any Governmental Authorities to maintain or
be insured under any insurance.  The Partnership is insured under policies

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of insurance (including, without limitation, malpractice, commercial general
liability and commercial property) issued by insurers of recognized
responsibility insuring the Partnership and its assets and Business against such
losses and risks, and in such amounts, as the Partnership believes are customary
for limited partnerships engaged in the same or similar businesses and similarly
situated, and except as disclosed in Section 3.10 of the Partnership Disclosure
Schedule none of such losses or risks are self- or co-insured by the Partnership
(except with respect to customary deductibles and retainages). Section 3.10 of
the Partnership Disclosure Schedule describes each insurance policy (specifying
the insured, the insurer, the amount of coverage, the type of insurance, the
policy number, the expiration date, the estimated annual premium for the current
year and, if reasonably available, the next year, and any pending claims
thereunder) maintained by the Partnership. The insurance policies owned and
maintained by the Partnership are set forth in Section 3.10 of the Partnership
Disclosure Schedule. Except as set forth in Section 3.10 of the Partnership
Disclosure Schedule, all such policies are in full force and effect, all
premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but may be, required to be
paid with respect to any period ending prior to the Closing Date), and no notice
of cancellation or termination has been received with respect to any such policy
which has not been replaced on substantially similar terms prior to the date of
such cancellation.

Section 3.11 Taxes.  

(a)

Except as set forth in Section 3.11 of the Partnership Disclosure Schedule, (i)
all Tax Returns required to be filed by the Partnership and the Sellers with
respect to the Partnership have been timely filed, such Tax Returns are accurate
in all respects and all Taxes due by the Partnership and its partners
(regardless of whether shown on any such Tax Returns) have been paid or are
being contested in good faith; (ii) the most recent audited financial statements
for the Partnership reflect an adequate reserve for all Taxes payable by the
Partnership for all taxable periods and portions thereof through the date of
such financial statements; (iii) no request has been made for any extension of
time within which to file any Tax Returns required to be filed by or with
respect to the Partnership that have not since been filed; (iv) no Tax Return of
the Partnership has been audited or the subject of other Proceedings by any
Governmental Entity, there are no ongoing audits, examinations or other
administrative or court proceedings involving Taxes that relate to the
Partnership, and the Partnership has not received any written request for
information related to Taxes from any Governmental Entity or any notice from any
Governmental Entity of any pending examination or any proposed deficiency,
addition, assessment, demand for payment or adjustment relating to Taxes; (v) no
deficiencies for any Tax have been proposed, asserted or assessed against or
with respect to the Partnership or its partners that have not been settled and
paid; (vi) there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax Returns required to be
filed by or with respect to the Partnership; (vii) the Partnership is not a
party to or bound by any Tax sharing agreement, Tax indemnity obligation or
similar agreement, arrangement or practice with respect to Taxes. Purchaser has
heretofore been furnished by the Partnership with true, correct and complete
copies of each federal and each other material Tax Return of the Partnership
with respect to fiscal years 2001, 2002 and 2003, and of all reports of, and

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communications from, any Governmental Entities relating to such periods. The
Partnership has properly withheld or collected all amounts required by law for
income Taxes and employment Taxes relating to its employees, creditors,
independent contractors and other third parties, and for sales Taxes on sales,
and has properly and timely remitted such withheld or collected amounts to the
appropriate Governmental Entity. Section 3.11 of the Partnership Disclosure
Schedule lists all states to which any Tax in excess of $1,000 is properly
payable by the Partnership.

(b)

Except as set forth in Section 3.11 of the Partnership Disclosure Schedule, the
Partnership is not a party to any agreement or plan that could after the Closing
Date require the Partnership to make a payment that would result in (i) an
“excess parachute payment” within the meaning of section 280G of the Code (or
any corresponding provision of state, local or foreign Tax law) or (ii) a
payment that is not fully deductible as a result of section 162(m) of the Code
(or any corresponding provision of state, local or foreign Tax law). The
Partnership has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of section 6662 of the Code. The Partnership is not and
has never been included in a consolidated federal income Tax Return and has no
liability for the Taxes of any other Person as a transferee or successor, by
contract, or otherwise. The Partnership has not distributed stock of another
Person, nor had its equity distributed by another Person, in a transaction that
was purported or intended to be governed in whole or in part by section 355 or
section 361 of the Code. Except as set forth in Section 3.11(b) of the
Partnership Disclosure Schedule on the Closing Date, the Partnership has not
participated in any listed transaction, as defined in Treasury Regulation
Section 1.6011-4(b)(2) required to be reported in a disclosure statement
pursuant to Treasury Regulation Section 1.6011-4.

(c)

The Partnership will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing
Date, (ii) “closing agreement” as described in section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date, (iii) installment sale or open
transaction disposition made on or prior to the Closing Date, or (iv) prepaid
amount received on or prior to the Closing Date.

Section 3.12 Proceedings.  Section 3.12 of the Partnership Disclosure Schedule
sets forth a list as of the date of this Agreement of each pending or, to the
knowledge of the Partnership, threatened suit, action or proceeding (a
“Proceeding”) against the Partnership or any officer or director of the
Partnership in his capacity as an officer or director that (a) relates to or
involves amounts of more than $1,000, (b) seeks any material injunctive relief,
(c) relates to or involves any claim of sexual harassment or a directly related
claim or (d) may give rise to any legal restraint on or prohibition against the
transactions contemplated by this Agreement. Except as set forth in Section 3.12
of the Partnership Disclosure Schedule, the Partnership is not a party or
subject to or in default under (i) any Judgment or (ii) any Proceeding initiated
by the Partnership, against any other Person.

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Section 3.13 Benefit Plans.  

(a)

Section 3.13(a) of the Partnership Disclosure Schedule sets forth a true and
complete list of each “employee benefit plan” (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and each
other material compensation, bonus, pension, profit sharing, deferred
compensation, unit or other equity ownership, unit or other equity purchase,
unit or other equity option, phantom equity, retirement, employment,
change-in-control, welfare, collective bargaining, severance, disability, death
benefit, hospitalization and medical plan, program, policy and arrangement
maintained or contributed to (or required to be contributed to) for the benefit
of any current or former employee, officer or director of the Partnership and
with respect to which the Partnership would reasonably be expected to have
direct or contingent Liability (the “Partnership Benefit Plans “).

(b)

Except as set forth in Section 3.13(b) of the Partnership Disclosure Schedule,
(i) none of the Partnership Benefit Plans is a “multiemployer plan” within the
meaning of Section 3(37) of ERISA or is otherwise subject to Title IV of ERISA;
(ii) none of the Partnership Benefit Plans (other than coverage mandated under
Applicable Law) provides retiree medical or life insurance benefits to any
Person; (iii) each Partnership Benefit Plan has been administered in compliance
with its terms and the applicable provisions of ERISA, the Code and all other
applicable laws, rules and regulations; (iv) neither the Partnership nor any
entity required to be treated as a single employer with the Partnership under
Section 414 of the Code has any unsatisfied Liability under Title IV of ERISA;
(v) as of the date of this Agreement, there are no pending or, to the knowledge
of the Partnership, threatened investigations, claims or lawsuits in respect of
any Partnership Benefit Plan; (vi) except as set forth on the Partnership
Disclosure Schedule, no current or former employee, officer or director of the
Partnership will become entitled to any material payment, benefit or right, or
any materially increased and/or accelerated payment, benefit or right, as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby. No Partnership Benefit Plan to which the
Partnership has contributed or is or was required to contribute within the last
seven years has any unfunded vested benefits or Liabilities which could result
in any withdrawal Liability to the Partnership were the Partnership to effect a
“complete withdrawal” or “partial withdrawal” from such Partnership Benefit
Plan. Except as set forth in Section 3.13(b) of the Partnership Disclosure
Schedule, no Partnership Benefit Plan to which the Partnership has contributed
or is or was required to contribute within the last seven years has any unvested
benefits or Liabilities. The Partnership has no unfunded or under funded
Liability or Liabilities to any Partnership Benefit Plan.

Section 3.14 Employees and Labor Matters.  

(a)

Except as otherwise disclosed in Section 3.13 of the Partnership Disclosure
Schedule, Section 3.14(a) of the Partnership Disclosure Schedule contains a

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true and complete list of all employment or employment related Contracts with
any current or former officer, director, employee or consultant that involve an
unsatisfied Liability of the Partnership in excess of $2,000, and true and
complete copies of all such employment or employment related Contracts have been
delivered to Purchaser.

(b)

Except for the employment agreements set forth in Section 3.14(b) of the
Partnership Disclosure Schedule or as otherwise set forth in such Section of the
Disclosure Schedule, neither Purchaser nor the Partnership will have any
responsibility for continuing any person in the employ (or retaining any person
as a consultant) of the Partnership from and after the Closing or have any
Liability for any severance payments to or similar arrangements (including
bonuses) with any such person who shall cease to be an employee or consultant of
the Partnership at or prior to the Closing.

(c)

Except as set forth in Section 3.14(c) of the Partnership Disclosure Schedule,
(i) there is not occurring, and there has not occurred during the previous five
years, or, to the knowledge of the Partnership, been threatened, any strike,
slow down, picket, work stoppage or other concerted action by any union or other
group of employees or other persons against either Partnership or its premises
or products; (ii) there are, and during the previous five years have been, no
complaints or grievances known to the Partnership by any union, other group, or
class of employees or other persons which are unsettled or unresolved; and (iii)
to the knowledge of the Partnership, no union or other labor organization has
attempted to organize any of the employees of the Partnership.

(d)

Except as set forth in Section 3.14(d) of the Partnership Disclosure Schedule,
the Partnership has complied with all legal requirements relating to employment
and labor. Except as set forth in Section 3.14(d) of the Partnership Disclosure
Schedule, there are, and since the formation of the Partnership have been, and
to the knowledge of the Partnership in the two years prior to the formation of
the Partnership, no complaints or grievances that have been formally filed with
the Partnership or any Governmental Entity by any employee, consultant, customer
or vendor of the Partnership or former employee, consultant, vendor or customer
of the Partnership which are unsettled or unresolved relating to claims of
sexual harassment or related claims arising out of the same facts and
circumstances concerning any officer or director of the Partnership. Except as
otherwise disclosed in Section 3.14(d) of the Partnership Disclosure Schedule,
to the knowledge of the Partnership and Sellers, no facts or circumstances exist
that would reasonably be expected to result in a claim of wrongful termination,
employment discrimination, sexual harassment or other related claim by any
current or former employee of the Partnership against the Partnership or partner
of the Partnership in their capacity as a director or officer.

Section 3.15 Absence of Changes or Events.  Except as set forth in Section 3.15
of the Partnership Disclosure Schedule, from the date of the Balance Sheet to
the date of this Agreement, (i) there has not been any event or occurrence that
has resulted in a Partnership Material Adverse Effect; (ii) there has not been
any loss, damage or destruction to, or any interruption in the use of, any of
the assets of the Partnership (whether or not covered by insurance) having a net
book value in the aggregate in excess

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 of $2,000; (iii) the Partnership has not (x) declared, accrued, set aside or
paid any dividend or made any other distribution in respect of any of the
partnership interests in the Partnership or other securities, or (y)
repurchased, redeemed or otherwise reacquired any partnership interests in the
Partnership or other securities; (iv) the Partnership has not purchased or
otherwise acquired any assets from any other Persons for consideration in the
aggregate in excess of $2,000, except for supplies acquired by the Partnership
in the Ordinary Course of Business; (v) the Partnership has not written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other Indebtedness in an aggregate amount in excess of
$20,000; (vi) the Partnership has not incurred, assumed or otherwise become
subject to any Liability in an aggregate amount in excess of $5,000, other than
accounts payable (of the type required to be reflected as current liabilities in
the “liabilities” column of a balance sheet prepared in accordance with GAAP)
incurred by the Partnership in bona fide transactions entered into in the
Ordinary Course of Business; (vii) the Partnership has not changed any of its
methods of accounting or accounting practices in any respect; (viii) the
Partnership has not entered into any transaction or taken any other action
outside the Ordinary Course of Business; and (ix) the Partnership has not
agreed, committed or offered (in writing or otherwise) to take any of the
actions referred to in clauses “(iii)” through “(viii)” above.

Section 3.16 Compliance With Laws and Orders.  

(a)

Compliance.  Except as set forth in section 3.16 of the Partnership Disclosure
Schedule, the Partnership and its 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, Medicaid, insurance billings, providing
of medical services, sales 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 section 3.16
of the Partnership Disclosure Schedule, neither the Sellers nor the Partnership
has received notice of any violation or alleged violation of, and are subject to
no Liability for past or continuing violation of, any laws or orders with
respect to the Partnership and the operation of the Business.  All reports and
returns required to be filed by the Sellers or the Partnership 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 Locations, 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)

The Partnership has made all required payments to its unemployment compensation
reserve accounts with the appropriate governmental

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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)

The Partnership 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 Florida Department of Health and Rehabilitative
Services, the Florida Board of Medicine or any other state or federal agency
with respect to any Medicare or Medicaid claims filed by the Partnership on or
before the Closing or program compliance matters, which would adversely affect
the Partnership, the Business, or the consummation of the transactions
contemplated hereby. No validation review or program integrity review related to
the Sellers (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 Sellers or the consummation of the
transactions contemplated hereby.

(iv)

Neither the Sellers, the Partnership nor any person or entity providing services
for the Partnership have engaged in any activities which are prohibited under 42
U.S.C. Section1320a-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 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 the Partnership, 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 Partnership, or any such referral complies
with the requirements of 42 U.S.C. Section 1395nn and the regulations
promulgated pursuant thereto.

(v)

The Partnership 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.

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(b)

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

Section 3.17 Environmental Matters.  Except as set forth in Section 3.17 of the
Partnership Disclosure Schedule and except as would not have a Partnership
Material Adverse Effect, (a) the Partnership has obtained, and is in compliance
with, all Permits required under Environmental Laws for the Partnership to
conduct its Business as that business is conducted by the Partnership on the
Closing Date and to conduct its Business, as that business is conducted on the
Closing Date, on any property owned, leased or operated by the Partnership on
the Closing Date, (b) the Partnership is in compliance with all Environmental
Laws required to conduct its business as that Business is conducted by the
Partnership on the Closing Date and to conduct its Business, as that business is
conducted on the Closing Date, on any property owned, leased or operated by the
Partnership on the Closing Date, (c) neither the Sellers nor the Partnership has
received any (i) written communication from a Governmental Entity that alleges
that the Partnership is not in compliance with, or is liable under, any
Environmental Law, the substance of which has not been materially resolved; (ii)
any written request for information pursuant to any Environmental Law alleging
that the Partnership is a “potentially responsible party” with respect to any
investigation or remediation of any threatened or actual release of any
Hazardous Material by the Partnership or from any property owned, leased or
operated by the Partnership; (iii) any written notice from any Governmental
Entity listing or proposing to list any property currently owned, operated or
leased by the Partnership or any property at which the Partnership has disposed
of or to which the Partnership has otherwise transported Hazardous Materials on
the National Priorities List promulgated pursuant to CERCLA or any equivalent
state priority list of sites requiring investigation or cleanup; (d) there are
no, and to the knowledge of the Partnership have never have been any,
underground storage tanks owned or operated by the Partnership at any premises
currently owned or leased by the Partnership; and (e) there have not been any
releases of any Hazardous Material (i) at, on or under any property currently
owned, operated or leased by the Partnership or (ii) to the knowledge of the
Partnership and Sellers, at, on, or under any property to which the Partnership
has disposed of or otherwise transported Hazardous Materials that, in the case
of either (i) or (ii) could reasonably be expected to form the basis of any
claim against the Partnership under any Environmental Law.

Section 3.18 Transactions with Affiliates.  Except as set forth in Section 3.18
of the Partnership Disclosure Schedule, none of the Contracts set forth in
Section 3.9 of the Partnership Disclosure Schedule between the Partnership, on
the one hand, and any of the Sellers or any Affiliates of any of the Sellers, on
the other hand, will continue in effect subsequent to the Closing.

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Section 3.19 Suppliers/Payors.  Except as set forth in Section 3.19 of the
Partnership Disclosure Schedule, the Partnership does not have any supplier from
whom it purchased more than 10% of the total amount of goods and services which
it purchased during its most recent fiscal year.  Except as set forth in Section
3.19 of the Partnership Disclosure Schedule, the Partnership does not have any
payor from whom it received more than 10% of the total amount of revenues from
services it rendered during its most recent fiscal year.

Section 3.20 Private Offering.  None of Sellers, the Partnership, their
Affiliates or their representatives has issued, sold or offered any securities
of the Partnership to any person under circumstances that would cause the sale
of the Partnership Interests, as contemplated by this Agreement, to be subject
to the registration requirements of the Securities Act of 1933, as amended (the
“ Securities Act “). None of the Sellers, the Partnership, their Affiliates or
their representatives will offer the partnership interests of the Partnership or
any part thereof or any similar securities for issuance or sale to, or solicit
any offer to acquire any of the same from, anyone so as to make the sale of the
Partnership Interests subject to the registration requirements of Section 5 of
the Securities Act. Assuming the representations of Purchaser contained in
Section 4.5 are true and correct, the sale and delivery of the Partnership
Interests hereunder are exempt from the registration and prospectus delivery
requirements of the Securities Act.

Section 3.21 No Undisclosed Liabilities.  To the knowledge of the Partnership
and the Sellers, as of the date hereof, except for (i) any Liabilities set forth
on Section 3.5 or 3.21 of the Partnership Disclosure Schedule, (ii) Liabilities
set forth or provided for on the Balance Sheet or the notes thereto, (iii)
Liabilities which have arisen after January 31, 2005 in the Ordinary Course of
Business, (iv) any Indebtedness, (v) accounts payable or accrued expenses (of
the type required to be reflected as current liabilities in the “liabilities”
column of a balance sheet prepared in accordance with GAAP), and (vi)
Liabilities under the Contracts listed in Section 3.9 of the Partnership
Disclosure Schedule to the extent that the existence of such Liabilities is
reasonably ascertainable solely by reference to the Contracts, (A) the
Partnership has no Liabilities of the type required to be disclosed as provided
for in financial statements or in the notes thereto in accordance with GAAP and
(B) other than those that may exist or occur in the Ordinary Course of Business,
there exist no facts or circumstances that in the Partnership’s reasonable
judgment would be likely to give rise to a Liability of the type required to be
disclosed as provided for in financial statements or in the notes thereto in
accordance with GAAP.

Section 3.22 Standard Warranties.  Section 3.22 of the Partnership Disclosure
Schedule contains a true and complete description of the standard warranties
granted or made with respect to products sold or services rendered by the
Partnership.

Section 3.23 Questionable Payments.  Neither the Partnership nor the Sellers
have (a) used any partnership funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (b)
made any direct or indirect

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unlawful payments to government officials or employees, or foreign government
officials or employees, from partnership funds, (c) established or maintained
any unlawful or unrecorded fund of partnership monies or other assets, (d) made
any false or fictitious entries on the books of account of the Partnership or
(e) made or received any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.

Section 3.24 Accounts Receivable.  All accounts receivable of the Partnership
reflected on the Balance Sheet and all accounts receivable of the Partnership
that have arisen since the date of the Balance Sheet (except such accounts
receivable as have been collected since such date) arose in the Ordinary Course
of Business, to the knowledge of the Partnership are valid and enforceable
claims. The goods and services sold and delivered that gave rise to such
accounts were sold and delivered in conformity with all applicable express and
implied warranties, agreements and specifications. Except as set forth in
Section 3.24 of the Partnership Disclosure Schedule, to the knowledge of the
Partnership, such accounts receivable of the Partnership are subject to no valid
defense, offset or counterclaim and can be collected in the full amount thereof,
except to the extent of the allowance for doubtful accounts reflected on the
Balance Sheet. Section 3.24 of the Partnership Disclosure Schedule contains a
true complete aging of the Partnership’s accounts receivable as of the date of
the Balance Sheet.

Section 3.25 Indemnification Claims.  Section 3.25 of the Partnership Disclosure
Schedule sets forth all indemnification claims made by Sellers or the
Partnership relating to any Contract or agreement to purchase assets by the
Sellers for the benefit of the Partnership or by the Partnership for the benefit
of itself.

Section 3.26 Purchase Orders.  Except as set forth on Section 3.26 of the
Partnership’s Disclosure Schedule, (i) there were no individual purchase orders
outstanding on January 31, 2005 in excess of $5,000, (ii) there are no
outstanding individual purchase orders in excess of $5,000 as of the date
hereof, and (iii) purchase orders issued after the date hereof, will be in
accordance with Section 5.1.

Section 3.27  Malpractice.  Except as set forth on Section 3.27 of the
Partnership’s Disclosure Schedule Disclosure, the Partnership, its professional
employees and professional contractors (which does not include medical staff
physicians who use the Ambulatory Surgical Center pursuant to privileges) have
been continuously insured for professional malpractice claims during the five
(5) years immediately preceding the Closing.  Section 3.27 of the Partnership
Disclosure Schedule also sets forth a list of all claims for any insured loss in
excess of Five Thousand and 00/100 Dollars ($5,000) per occurrence filed by the
Partnership, its professional employees or professional contractors during the
five (5) years immediately preceding the Closing, including professional
malpractice liability claims.  The Partnership has been covered during the past
five (5) years by insurance in scope and amount customary and reasonable for the
Business in which it has engaged during the aforementioned period.
 Additionally, the medical staff physicians who have performed professional
services at the Ambulatory Surgical Center pursuant to privileges during the
five (5) years immediately preceding the Closing have been in compliance with
the minimal necessary requirements of Florida law governing financial
responsibility with respect to his or her physician practice and his or

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her performance of surgeries at the Ambulatory Surgical Center (currently
financial responsibility requirements are described in Florida Statutes Sections
458.320 and 459.0085, as applicable).

Section 3.28 Health Care Compliance.  The Partnership 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 3.27 of the
Partnership 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
Partnership and the Sellers are in compliance in all material respects with the
requirements of all such third-party payors applicable thereto.  None of the
Partnership’s physician employees, partners, or immediate family members of the
partners, 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.

Section 3.29 Fraud and Abuse.  The Partnership’s physician employees and all
persons and entities providing professional services for the Partnership have
not engaged in any activities which are prohibited under 42 U.S.C.
Section 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
Partnership has at all times complied with the requirements of Florida 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 Florida Statutes.  Furthermore, the Partnership
has filed all reports required to be filed by the State of Florida 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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Section 3.30 Legal Compliance.  The Sellers, the Partnership and their
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 Partnership, threatened against
the Partnership or the Business alleging any failure so to comply.  All
physicians and other health care professionals engaged or employed by the
Partnership 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 Partnership and the Business is 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 Partnership 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.  Neither the Sellers nor the
Partnership has received notice and the Partnership has no Knowledge or reason
to believe that, such necessary authorizations may be revoked or not renewed in
the Ordinary Course of Business.

Section 3.31 Rates and Reimbursement Policies.  The jurisdiction in which the
Partnership 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 Partnership except for restrictions promulgated by Florida 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
Partnership does not have any rate appeal currently pending before any
governmental authority or any administrator of any third-party payor program.
 The Partnership 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 Florida which could have a Partnership
Material Adverse Effect, or may result in the imposition of additional Medicaid,
Medicare, charity, free care, welfare, or other discounted or government
assisted patients of the Partnership or require the Partnership to obtain any
necessary authorization which the Partnership does not currently possess. The
Partnership 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.

Section 3.32 Medical Staff.  Except as set forth on Section 3.32 of the
Partnership Disclosure Schedule, the Partnership has no Knowledge of a physician
who is providing services on behalf of the Partnership who plans, or has
threatened to terminate his or her employment or other relationship with the
Partnership.

Section 3.33 Medical Providers.  With the exception of the sale contemplated by
this Agreement, none of the partners of the Partnership, nor any of the
physician

members of the PBSA Seller nor any of the other medical staff physicians who
have privileges to perform professional services at the Ambulatory Surgical
Center have threatened to discontinue or to terminate his or her relationship
with the Partnership and/or the provision of services at the Ambulatory Surgical
Center owned and operated by the Partnership.  None of the partners of the
Partnership who are licensed to practice medicine, nor any of the physician
members of the PBSA Seller nor any of the other medical staff physicians who
have privileges to perform professional services at the Ambulatory Surgical
Center plans to retire from the practice of medicine in the next five (5) years.
 The Partnership’s credentialing files for the five (5) years preceding the
Closing Date are set forth in Section 3.33 of the Partnership’s Disclosure
Schedule.  Additionally, during the five (5) years preceding the Closing Date,
each of the partners of the Partnership who are licensed to practice medicine as
of the Closing Date and each of the physician members of the PBSA Seller:  

(a)

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

(b)

Controlled Substances.  Has current controlled substances registrations issued
by the State of Florida 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 3.33 of the Partnership 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;

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(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 involuntary withdrawal of an
application in any state for licensure as a physician, 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.

Section 3.34 Third-party Payors.  Section 3.34 of the Partnership Disclosure
Schedule sets forth an accurate, correct and complete list of the Partnership’s
third-party payors. Neither the Sellers nor the Partnership has 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 Partnership.
 Neither the Sellers nor the Partnership has any reason to believe that any
third-party payor will cease to do business with the Partnership after, or as a
result of, the consummation of any transactions contemplated hereby.  Neither
the Sellers nor the Partnership knows of any fact, condition or event which
would adversely affect its relationship with any third-party payor.

Section 3.35 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 Partnership and each of the Sellers accordingly agrees that
they 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 the Partnership 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.

Section 3.36 HIPAA.  Section 3.36 of the Partnership Disclosure Schedule lists
and describes all plans and other efforts of the Partnership 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.  Section 3.36 of the Partnership
Disclosure Schedule includes but is not limited in any manner whatsoever to any
privacy compliance plan of the Partnership is 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.

Section 3.37 Improper and Other Payments.  

(a)

Neither the Sellers, Partnership, any employee agent or representative of the
Partnership 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 Partnership to a domestic or foreign political party or
candidate; and (c) the internal accounting controls of the Sellers are believed
to be adequate to detect any of the foregoing under current circumstances.

Section 3.38 Medical Waste.  With respect to the generation, transportation,
treatment, storage, and disposal, or other handling of Medical Waste, the
Partnership 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. Sections 6992, et seq. (“MWTA”).

“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.

Section 3.39 Certain Representations with respect to the Ambulatory Surgical
Center.  

(a)

Medicare Participation.  The Partnership with respect to the Ambulatory Surgical
Center is qualified for participation in the Medicare program. Complete and
accurate copies of the Partnership’s existing Medicare contracts have been
furnished to the Purchaser.  The Partnership is presently in compliance with all
of the terms, conditions and provisions of such contracts the noncompliance with
which would have a Partnership Material Adverse Effect on any such contract.

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(b)

Medicaid Participation.  The Partnership with respect to the Ambulatory Surgical
Center is qualified for participation in the Medicaid program.  Complete and
accurate copies of the Partnership’s existing Medicaid contracts have been
furnished to the Purchaser.  The Partnership is presently in compliance with all
of the terms, conditions and provisions of such contracts the noncompliance with
which would have a Partnership Material Adverse Effect on any such contract.

(c)

CHAMPUS Program.  The Partnership participates in the CHAMPUS program. The
Partnership is presently in compliance, in all respects, with all of the terms
and conditions of such participation the noncompliance with which would have a
Partnership Material Adverse Effect on any such participation.

Section 3.40 Competing Facilities.  Except as set forth in Section 3.40 of the
Partnership Disclosure Schedule, attached hereto, the Sellers are not aware of,
or otherwise have any knowledge of, any ambulatory surgery center, specialty
hospital, hospital or other facility that will provide ambulatory surgery center
or outpatient surgical services within a 25 mile radius of the Ambulatory
Surgical Center.

Section 3.41 Disclosure.  No representation or warranty by the physician owners
of the PBSA Sellers, the Sellers or the Partnership in this Agreement, nor any
statement, certificate, schedule or exhibit hereto furnished or to be furnished
by or on behalf of the Sellers or the Partnership 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 the Sellers and the
Partnership shall be deemed representations and warranties by the Sellers, the
physician owners of the PBSA Seller and the Partnership.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Except as set forth in the schedule dated the date hereof from Purchaser to the
Sellers (the “Purchaser Disclosure Schedule”), Purchaser hereby represents and
warrants to Sellers, as of the date of this Agreement and as of the Closing Date
(or, to the extent that a representation or warranty expressly relates to an
earlier date, as of such earlier date), as follows:

Section 4.1 Organization, Standing and Power.  Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has full corporate power and authority and possesses
all governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to carry on its Business as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the

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lack of which, individually or in the aggregate, would not have a material
adverse effect on the ability of Purchaser to consummate the Acquisition and the
other transactions contemplated hereby (a “Purchaser Material Adverse Effect”).
Purchaser has made available true and complete copies of the certificate of
incorporation and by-laws of Purchaser, as amended to date.

Section 4.2 Authority; Execution and Delivery; Enforceability.  Purchaser has
full power and authority to execute this Agreement and to consummate the
Acquisition and the other transactions contemplated hereby. The execution and
delivery by Purchaser of this Agreement and the consummation by Purchaser of the
Acquisition and the other transactions contemplated hereby have been duly
authorized by all necessary corporate action. Purchaser has duly executed and
delivered this Agreement, and this Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.

Section 4.3 No Conflicts; Consents.  The execution and delivery by Purchaser of
this Agreement do not and the consummation of the Acquisition and the other
transactions contemplated hereby and compliance by Purchaser with the terms
hereof will not conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Purchaser or any of its subsidiaries under, any
provision of (i) the certificate of incorporation or by-laws of Purchaser or any
of its subsidiaries, (ii) any Contract to which Purchaser or any of its
subsidiaries is a party or by which any of their respective properties or assets
is bound or (iii) any Judgment or Applicable Law applicable to Purchaser or any
of its subsidiaries or their respective properties or assets, other than, in the
case of clauses (ii) and (iii) above, any such items that, individually or in
the aggregate, would not have a Purchaser Material Adverse Effect. No Consent of
or registration, declaration or filing with any Governmental Entity is required
to be obtained or made by or with respect to Purchaser or any of its
subsidiaries in connection with the execution, delivery and performance of this
Agreement or the consummation of the Acquisition or the other transactions
contemplated hereby, other than (A) compliance with State of Florida, Medicare
and Medicaid laws and regulations and filings with the Agency for Health Care
Administration and the Centers for Medicare and Medicaid with respect to the
 Ambulatory Surgical Center which the Partnership owns and operates, (B)
compliance with and filings and notifications under the Florida Revised Uniform
Limited Partnership Act, and (C) any Consent, registration, declaration or
filing the failure of which to obtain or make would not have, individually or in
the aggregate, a Purchaser Material Adverse Effect.

Section 4.4  Securities Act.  The Partnership Interests purchased by Purchaser
pursuant to this Agreement are being acquired for investment only and not with a
view to any public distribution thereof, and Purchaser shall not offer to sell
or otherwise dispose of the Partnership Interests so acquired by it in violation
of any of the registration requirements of the Securities Act.

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Section 4.5 Purchaser Stock.  All of the Purchaser Stock will be validly issued
to the respective Sellers, fully paid and non-assessable.  PainCare will
deliver, good and marketable title to the respective Sellers to the Purchaser
Stock, 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.

ARTICLE V

COVENANTS

Section 5.1 Covenants Relating to Conduct of Business.  

(a)

Except for matters set forth in Section 5.1 of the Partnership Disclosure
Schedule or otherwise expressly permitted or required by the terms of this
Agreement or except as required by Applicable Law, from the date of this
Agreement to the Closing, the Partnership shall conduct its Business in the
Ordinary Course of Business and use reasonable best efforts to keep intact its
Business, keep available the services of its general partner, employees and
agents and maintain its relations and good will, preserve its relationships with
patients, doctors, customers, suppliers, licensors, licensees, distributors
landlords, creditors, employees, agents and others having business relationships
with it. The Partnership shall not take any action that would result in any of
the conditions to the purchase and sale of the Partnership Interests set forth
in Article VI not being satisfied. In addition (and without limiting the
generality of the foregoing), except as set forth in Section 5.1 of the
Partnership Disclosure Schedule or otherwise expressly permitted or required by
the terms of this Agreement or except as required by Applicable Law, the
Partnership shall not do any of the following without the prior written consent
of Purchaser (which consent may not be unreasonably withheld):

(i)

amend its certificate of limited partnership or limited partnership agreement;

(ii)

declare or pay any dividend or make any other distribution to its partners
whether or not upon or in respect of any of its partnership interests or other
equity interest;

(iii)

issue any units, partnership interests, or other equity interest or any option,
warrant or right relating thereto or any securities convertible into or
exchangeable for any partnership interests in the Partnership or other equity
interest;

(iv)

adopt or amend any Partnership Benefit Plan (or any plan that would be a
Partnership Benefit Plan if adopted) or enter into, adopt, extend (beyond the
Closing Date), renew or amend any collective bargaining agreement or other
Contract with any labor organization, union or association;

(v)

except for the matters set forth in Section 5.1 of the Partnership Disclosure
Schedule, establish or adopt any employee benefit plan or make

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any profit-sharing or similar payment to any of its directors, officers,
employees or independent contractors;

(vi)

pay any bonus, increase the amount of the wages, salary, commissions, fees,
fringe benefits or other compensation or remuneration payable to, any of its
partners, employees or independent contractors, except for any items not in
excess of $500 individually or $5,000 in the aggregate;

(vii)

incur or assume any Liabilities, obligations or Indebtedness for borrowed money
or guarantee any such Liabilities, obligations or Indebtedness, other than in
the Ordinary Course of Business;

(viii)

permit, allow or suffer any of its assets to become subjected to any Lien (other
than Permitted Liens) of any nature whatsoever that is not set forth on Section
3.6 of the Partnership Disclosure Schedule and would have been required to be
set forth in Section 3.6 or 3.7 of the Partnership Disclosure Schedule if
existing on the date of this Agreement;

(ix)

pay, loan or advance any amount to, or sell, transfer or lease any of its assets
to, or enter into any agreement or arrangement with, any of the Sellers or any
Affiliates of any of the Sellers, except for the matters set forth in Section
5.1 of the Partnership Disclosure Schedule;

(x)

make any change in any method of accounting or accounting practice or policy
other than those required by GAAP;

(xi)

acquire by merging or consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets (other than inventory) that are material;

(xii)

make or incur capital expenditures that are not currently budgeted and that, in
the aggregate, are in excess of $5,000;

(xiii)

sell, lease, license or otherwise dispose of any of its assets that are
material, individually or in the aggregate, to the Partnership, except inventory
sold in the Ordinary Course of Business;

(xiv)

enter into any lease of real property;

(xv)

terminate any insurance policy in effect as of the date hereof or allow any
material insurance policy to be terminated, in either case without using
reasonable efforts to obtain a replacement insurance policy on comparable terms
to the Partnership;

(xvi)

form any subsidiary or acquire the equity of any Person;

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(xvii)

commence or settle any Proceeding;

(xviii)

enter into any Contract, transaction or take any other action outside the
Ordinary Course of Business;

(xix)

enter into any transaction or take any other action that the Partnership knows
will cause or constitute a breach of any representation or warranty made by the
Partnership, the physician owners of the PBSA Seller or any of the Sellers in
this Agreement;

(xx)

discontinue the payment of its accounts payable that are payable in the Ordinary
Course of Business or deviate from or alter any of its practices, policies or
procedures in paying accounts payable other than in the Ordinary Course of
Business;

(xxi)

make any material modification to any material Contract or Permit; and

(xxii)

make or change any election, change an annual accounting period, adopt or change
any accounting method, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment relating to the Partnership,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to the Partnership or take other similar action relating to the filing
of any Tax Return or the payment of any Tax, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other action would or
could be reasonably expected to increase any Tax liability of the Partnership by
an amount in excess of $2,000 for any period ending after the Closing Date; and

(xxiii)

agree, commit or offer (in writing or otherwise) to take any of the actions
described in clauses “(i)” through “(xxii)” of this Section 5.1.

(b)

In addition (and without limiting the generality of the foregoing), except as
set forth in Section 5.1 of the Partnership Disclosure Schedule or otherwise
expressly permitted or required by the terms of this Agreement or except as
required by Applicable Law, the Partnership shall:

(i)

promptly (but in any event, no later than three business days after the
applicable matter or event) advise Purchaser in writing of the occurrence of any
matter or event that (A) constitutes or would reasonably be expected to
constitute a Partnership Material Adverse Effect, (B) resulted or would
reasonably be expected to result in a material breach of any of representations
and warranties set forth in Article II or Article III of this Agreement or (C)
would reasonably be expected to (i) constitute a Seller Material Adverse Effect
with respect to Sellers or (ii) adversely affect the ability of the Partnership
to consummate the transactions contemplated by this Agreement;

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(ii)

confer with Purchaser concerning operational matters of a material nature and
otherwise report periodically to Purchaser concerning the status of the
Business, operations, and finances of the Partnership;

(iii)

use reasonable best efforts to maintain in full force and effect all
Intellectual Property of the Partnership;

(iv)

comply with all Applicable Laws in the operation of the Partnership’s Business;

(v)

cooperate with the Purchaser and use its reasonable best efforts to cause the
conditions to the Purchaser’s obligations to close specified in Article VI below
to be satisfied and execute and deliver such further instruments of conveyance
and transfer and take such additional action as the Purchaser may reasonably
request to effect, consummate, confirm or evidence the transactions contemplated
by this Agreement; and

(vi)

upon reasonable request, use reasonable best efforts to arrange meetings with
such customers, suppliers, licensors, licensees, distributors, landlords,
creditors, employees, agents and others having business relationships with it as
the Purchaser shall reasonably designate in order that the Purchaser and the
Partnership may confer with such Persons regarding the Partnership and the
nature of the transactions contemplated by this Agreement.

Section 5.2 Access to Information.  The Partnership shall afford to Purchaser
and its accountants, counsel and other representatives full access, upon
reasonable notice during normal business hours during the period prior to the
Closing, to all the personnel, properties, books, Contracts, commitments, Tax
Returns and records of the Partnership, and, during such period shall make
available to Purchaser any information concerning the Partnership as Purchaser
may reasonably request; provided, however, that such access does not
unreasonably disrupt the normal operations of the Partnership. Nothing set forth
herein shall obligate any employee of the Partnership to unreasonably provide
any information regarding the Partnership in any other format or otherwise to
manipulate or reconfigure any data regarding the Partnership’s Business, assets,
financial performance or condition or operations. Nothing set forth in this
Agreement shall require any of the Partnership or the Sellers to provide
Purchaser with access to or copies of any information which must be maintained
as confidential in accordance with the terms of a written agreement with a third
party unless such agreement permits review by a third party bound by a
confidentiality agreement or information or mailing data which, in the
Partnership’s reasonable judgment, should not be provided to Purchaser until the
transactions contemplated hereby have been consummated.

Section 5.3 Termination of Agreements with Sellers and any Affiliates of
Sellers.  The Partnership and Sellers shall cause all agreements between the
Partnership, on the one hand, and Sellers or any of Sellers’ Affiliates, on the
other hand, to terminate,

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effective as of the Closing.  This Section  5.3 is not intended and shall not
apply to the medical staff privileges of any of the Sellers at the Ambulatory
Surgical Center.  All agreements with respect to such privileges shall remain in
full force and effect.

Section 5.4  Prepayment of Indebtedness.  The Partnership shall take all action
necessary under the Credit Facility to effect an optional prepayment on the
Closing Date of the Indebtedness incurred thereunder and to terminate the Credit
Facility and all agreements and Liens related thereto, effective as of the
Closing.

Section 5.5 Reasonable Best Efforts.  

(a)

On the terms and subject to the conditions of this Agreement, each party shall
use its reasonable best efforts to cause the Closing to occur, including taking
all reasonable actions necessary to comply promptly with all legal requirements
that may be imposed on it or any of its Affiliates with respect to the Closing.

(b)

Each of the Partnership and Purchaser shall as promptly as practicable following
the execution and delivery of this Agreement, file with the Agency for Health
Care Administration and the Centers for Medicare and Medicaid all necessary
applications and forms to notify such agencies of the change of ownership of the
Partnership with respect to the sale of the Partnership Interests provided for,
and subject to the terms and conditions, in this Agreement with respect to the
Partnership’s ownership and operation of the Ambulatory Surgical Center in order
that as of the Closing Date the Ambulatory Surgical Center will be appropriately
licensed under Florida law and have valid Medicare and Medicaid numbers.  Each
of the Partnership and Purchaser shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation and filing of such applications and forms.  The Partnership
and Purchaser shall keep each other apprised of the status of any communications
with, and any inquiries or requests for additional information from the Agency
for Health Care Administration and the Centers for Medicare and Medicaid with
respect to such applications and forms and shall comply promptly with any such
inquiry or request and shall promptly provide any supplemental information
requested in connection with applications and forms filed. Any such supplemental
information shall be in substantial compliance with the requirements of the
applicable laws and regulations. Each party shall use its reasonable best
efforts to obtain any clearance required under applicable laws and regulations
with respect to the Ambulatory Surgical Center being appropriately licensed
under Florida law, and being a valid Medicare and Medicaid provider, as of the
Closing Date.

(c)

Prior to the Closing, each party shall, and shall cause its Affiliates to, use
its reasonable best efforts to obtain, and to cooperate in obtaining, all
Consents from third parties necessary or appropriate to permit the consummation
of the Acquisition; provided, however, that no party shall be required to pay or
commit to pay any amount to (or incur any obligation in favor of) any Person
from whom any such Consent may be required (other than immaterial filing or
application fees or nominal amounts owing to such Person).

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(d)

The Partnership will exercise all of its rights to cause all Indebtedness owed
to the Partnership by Sellers or any Affiliate of Sellers to be paid in full
prior to Closing.

Section 5.6 Expenses; Transfer Taxes.  

(a)

Whether or not the Closing takes place, except as otherwise specifically
provided herein, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby by the Purchaser shall be
paid by the Purchaser and all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby by the Partnership or
the Sellers shall be paid by the Sellers.

(b)

All transfer, documentary, sales, use, stamp, registration and applicable real
estate transfer or gains and stock transfer Taxes incurred in connection with
this Agreement and the transactions contemplated hereby shall be borne by the
party required to pay such amounts pursuant to Applicable Law. Each party shall
use reasonable efforts to avail itself of any available exemptions from any such
Taxes, and to cooperate with the other parties in providing any information and
documentation that may be necessary to obtain such exemptions.

Section 5.7 Brokers or Finders.  Sellers, Purchaser and the Partnership
represents, as to itself, themselves and himself, as applicable, and its, their
and his Affiliates, as applicable, that no agent, broker, investment banker or
other firm or Person is or will be entitled to any broker’s or finder’s fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.

Section 5.8  Publicity.  From the date hereof through the Closing Date, no press
release concerning the transactions contemplated hereby shall be issued by any
party without the prior consent of the other parties, except as such press
release may be required by law or the rules or regulations of any United States
or foreign securities exchange, in which case the party required to make the
press release shall allow the other party reasonable time to comment on such
press release in advance of such issuance and shall incorporate the other
party’s comments to the extent they are reasonable.

Section 5.9  Further Assurances.  From time to time, as and when requested by
any party, each party shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
Agreement, including, in the case of Sellers, executing and delivering to
Purchaser such assignments, deeds, bills of sale, consents and other instruments
as Purchaser or its counsel may reasonably request as necessary or desirable for
such purpose.

Section 5.10  No Negotiation.  Until such time as this Agreement shall be
terminated pursuant to Section 7.1, neither the Partnership nor Sellers shall
directly or

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indirectly solicit, initiate, encourage or entertain any inquiries or proposals
from, discuss or negotiate with, provide any nonpublic information to or
consider the merits of any inquiries or proposals from any Person (other than
Purchaser) relating to any business combination transaction involving the
Partnership, including the sale by Sellers of its, his or their partnership
interests in the Partnership, the merger or consolidation of the Partnership or
the sale of the Partnership’s Business or any of the assets (other than in the
Ordinary Course of Business). The Partnership and Sellers shall notify Purchaser
of any such inquiry or proposal within 24 hours of receipt or awareness of the
same by such party.

Section 5.11 Notification; Updates to Disclosure Schedules.  During the period
between the date hereof and the Closing,  Sellers and the Partnership shall
promptly notify Purchaser in writing if they have knowledge of (a) any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a breach of any representation
or warranty made by Sellers or the Partnership in this Agreement; (b) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a breach of any representation
or warranty made by Sellers or the Partnership in this Agreement if such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance; (c) any
material breach of any covenant or obligation of Sellers or the Partnership; and
(d) any event, condition, fact or circumstance that would be reasonably expected
to make the timely satisfaction of any of the conditions set forth in Article VI
impossible or unlikely. If any event, condition, fact or circumstance that is
required to be disclosed pursuant to this Section 5.11 requires any change in
the Sellers Disclosure Schedule or the Partnership Disclosure Schedule, then the
Partnership and the Sellers shall promptly deliver to the Purchaser an update to
the applicable Disclosure Schedule specifying such change. Except as provided in
Section 8.1(a), no such update shall be deemed to supplement or amend the
Sellers Disclosure Schedule or the Partnership Disclosure Schedule for the
purpose of (i) determining the accuracy of any representation or warranty made
by Sellers or the Partnership in this Agreement or in any certificate delivered
at Closing, (ii) reducing the Sellers Obligations pursuant to Article VIII or
(iii) determining whether any of the conditions set forth in Article VI have
been satisfied.

Section 5.12 Tax Matters.  

(a)

Purchaser shall prepare and file or caused to be prepared and filed all Tax
Returns for the Partnership that are required to be filed after the Closing
Date; provided , however , that with respect to any Tax Return that includes any
taxable period ending on or before the Closing Date or with respect to the
portion ending on the Closing Date of any taxable period that includes (but does
not end on) such date (each, a “ Pre-Closing Tax Period “), Sellers shall be
permitted prior to filing to review and comment on all such Tax Returns and on
any amended Tax Returns relating to any Pre-Closing Tax Period which the
Purchaser intends to file after the Closing Date. Purchaser shall make any
revisions to such Tax returns that are reasonably requested by Sellers. In the
event that the Purchaser refuses to make a revision to any Tax Return that is
requested by Sellers, Sellers shall have the right prior to making any indemnity
payment pursuant to

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Section 8.2(b)(vii) to request arbitration of the amount pursuant to the
procedures set forth in Schedule 5.12, and the arbitrator shall reduce the
indemnity payment to which Purchaser would otherwise be entitled if and to the
extent that the arbitrator determines the indemnity payment would otherwise be
increased as a result of Purchaser’s refusal to make a revision to a Tax Return
that was reasonably requested by Sellers. Sellers and Purchaser shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section 5.12 and any
audit, litigation or other proceeding with respect to Taxes related to such Tax
Returns. Such cooperation shall include the retention and (upon the other
party’s request) the provision of records and information (in the case of the
Sellers, in its possession as of the Closing Date to the extent not previously
delivered to Purchaser) which are reasonably relevant to any such audit,
litigation or other proceeding and making themselves and their appropriate
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Each of Sellers
agrees (i) to retain (to the extent not previously delivered to Purchaser) all
books and records in each of Seller’s possession as of the Closing Date with
respect to Tax matters pertinent to the Partnership relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Purchaser, any extensions thereof)
of the respective taxable periods, and to abide by all record retention
agreements entered into prior to the Closing Date with any Governmental Entity,
and (ii) to give Purchaser reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the Purchaser so
requests, to allow Purchaser to take possession of such books and records. Each
of Sellers further agrees, upon request, to use its reasonable efforts to obtain
any certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).

(b)

Purchaser will provide Sellers with prompt notice of any written inquiries,
audits, examinations or proposed adjustments by the Internal Revenue Service or
any other Taxing Authority which relate to Partnership (“Tax Claim”) and which
Tax Claim might result in an indemnity payment by Sellers under Section 8.2
hereof; provided, however, that the failure to give such notice shall not affect
the indemnification provisions in Section 8.2 except to the extent Sellers have
been actually prejudiced as a result of such failure. Sellers shall be entitled
at their collective election and expense to control the resolution, disposition
and settlement of any Tax Claim that Sellers collectively acknowledge will be
indemnifiable in full pursuant to Section 8.2 if determined adversely (an
“Indemnified Tax Claim”), using counsel collectively selected by Sellers;
provided, however, that such counsel is reasonably satisfactory to Purchaser.
Sellers shall not settle any Indemnified Tax Claim that Sellers have
collectively elected to control without the prior written consent of Purchaser
(which consent shall not be unreasonably withheld or delayed). Purchaser shall
have the right to participate in all aspects of the defense of an Indemnified
Tax Claim that Sellers have collectively elected to control and shall have the
right, at its own expense, to employ its own counsel with respect to such
Indemnified Tax Claim. Sellers shall endeavor in good faith and use reasonable
efforts to advise Purchaser of all proceedings related to the contest of any
Indemnified Tax Claim that Sellers have collectively elected to control, all
action taken

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or proposed to be taken by any Taxing Authority with respect to such Indemnified
Tax Claim and all action proposed to be taken collectively by Sellers with
respect to such Indemnified Tax Claim. Sellers shall promptly notify Purchaser
if, in connection with any Indemnified Tax Claim that Sellers have collectively
elected to control, any Taxing Authority proposes to make any assessment or
adjustment with respect to Tax items of Partnership, which assessments or
adjustments might not result in an indemnity payment by the Sellers under
Section 8.2. Partnership or Purchaser shall control all proceedings with respect
to all Tax Claims other than Indemnified Tax Claims and with respect to
Indemnified Tax Claims that Sellers have not collectively elected to control. If
Sellers do not collectively elect to control an Indemnified Tax Claim, it shall
nonetheless reimburse Purchaser for all reasonable expenses relating to the
defense of such Indemnified Tax Claim.

(c)

With respect to a Tax Claim that relates only in part to Taxes that Sellers
acknowledges will be indemnifiable pursuant to Section 8.2 if determined
adversely (“Joint Tax Claim”), Purchaser will endeavor in good faith and use
reasonable efforts to advise Sellers of (A) all proceedings related to the
contest of such Joint Tax Claim, (B) all action taken or proposed to be taken by
any Taxing Authority with respect to such Joint Tax Claim, and (C) all actions
proposed to be taken by Purchaser with respect to such Joint Tax Claim.
Purchaser will permit Sellers reasonable opportunity to review the content of
documentation, protests, memoranda of fact and law, briefs, and stipulations of
fact relating solely to the indemnifiable portion of such Joint Tax Claim.
Purchaser will consider in good faith Sellers’ suggestions with respect to any
Joint Tax Claim. Purchaser will not settle any portion of a Joint Tax Claim that
would give rise to an indemnity payment by Sellers under Section 8.2 without the
prior written consent of Sellers (which consent shall not be unreasonably
withheld or delayed).

Section 5.13 The PSHS Seller agrees to make John Beebe, Robert Bernstein and Pam
Hebding available for reasonable amounts of time upon reasonable notice to
assist Purchaser in the operation of the Partnership and the Ambulatory Surgical
Center for the ninety (90) day time period which immediately follows the Closing
Date.  

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.1 Conditions to Each Party’s Obligation.  The obligation of Purchaser
to purchase and pay for the Partnership Interests and the obligation of Sellers
to sell the Partnership Interests to Purchaser is subject to the satisfaction or
waiver on or prior to the Closing of the following conditions:

(a)

Governmental Approvals. All authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity necessary for the consummation of the Acquisition shall have
been obtained or filed or shall have occurred.

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(b)

No Injunctions or Restraints. No Applicable Law or Injunction enacted, entered,
promulgated, enforced or issued by any Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Acquisition shall be
in effect.

Section 6.2 Conditions to Obligation of Purchaser.  The obligation of Purchaser
to purchase and pay for the Partnership Interests is subject to the satisfaction
(or waiver by Purchaser) on or prior to the Closing Date of the following
conditions:

(a)

Representations and Warranties. Taken as a whole, the representations and
warranties of Sellers and the Partnership in this Agreement that are qualified
as to materiality shall be true and correct, and those not so qualified shall be
true and correct in all material respects, as of the Closing Date as though made
on the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case, taken as a whole, such
representations and warranties that are qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date) and the Purchaser shall have
received a certificate to that effect signed by each of the Partnership and each
of the Sellers.

(b)

Performance of Obligations. Sellers and the Partnership shall have performed or
complied in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by Sellers or the Partnership,
as the case may be, by the time of the Closing and the Purchaser shall have
received a certificate to that effect signed by each of the Partnership and each
of the Sellers.

(c)

Authorizations. Purchaser shall have received a certificate of the Partnership
and each the Sellers, dated the Closing Date, certifying as to true and accurate
copies of all actions taken by the Partnership and the Sellers, as applicable,
related to or in connection with this Agreement and the Acquisition, the
certificate of limited partnership (certified by the Secretary of State of
Florida as of a recent date), and the Amended and Restated Partnership Agreement
of the Partnership, and the names, addresses and ownership interest in the
Partnership of all partners of the Partnership and the Sellers authorized to
execute this Agreement and the other documents executed or to be executed in
connection with this Agreement and the Acquisition.

(d)

Absence of Proceedings. There shall not be pending any Proceeding (i)
challenging or seeking to restrain or prohibit the Acquisition or any other
transaction contemplated by this Agreement, (ii) seeking to prohibit or limit
the ownership or operation by Purchaser or any of its Affiliates of any material
portion of the Business or the Partnership, or to compel the Purchaser, the
Partnership or any of their respective Affiliates to dispose of or hold separate
any material portion of the Business or assets of the Partnership, in each case
as a result of the Acquisition or any of the other transactions contemplated by
this Agreement or (iii) seeking to impose limitations on the ability of
Purchaser to acquire or hold, or exercise full rights of ownership of the

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Partnership Interests, including the right to vote the Partnership Interests on
all matters properly presented to the partners of the Partnership.

(e)

Consents. Each of the required Consents set forth in Section 3.4 of the
Partnership Disclosure Schedule shall have been obtained and be in full force
and effect. The Partnership shall have additionally delivered authorized
releases of all Liens of record or otherwise incurred pursuant to the Credit
Facility.

(f)

No Partnership Material Adverse Effect. There shall not have occurred any
Partnership Material Adverse Effect.

(g)

Support and Services Agreement and On-Site Services Agreement. Spectrum
Personnel, Inc. shall have executed and delivered to Purchaser the Support and
Services Agreement and the On-Site Services Agreement reflecting terms that meet
with the approval of Purchaser.

(h)

Certificate. Purchaser shall have received a certificate of the General Partner
of the Partnership attaching a true and correct copy of the certificate of
limited partnership and the partnership agreement of the Partnership, together
with all amendments thereto.

(i)

Partnership Interest Certificates and Partnership Interest Powers. Purchaser
shall have received certificates representing the Partnership Interests owned by
the Sellers duly endorsed to Purchaser or accompanied by unit powers duly
endorsed to Purchaser, in proper form for transfer, with appropriate transfer
Tax stamps, if any, affixed, or (iii) an affidavit of loss in the event that any
such certificates of Sellers shall have been lost or destroyed.

(j)

Other Noncompetition Agreements. Purchaser shall have received an Noncompetition
and Confidentiality Agreement executed by the Sellers and the owners of the PBSA
Seller and this condition has been satisfied as of the date of this Agreement
and as of the Closing Date.

(k)

Account information.  Purchaser shall have received a true and complete list of
the numbers or other identification of all the checking accounts, deposit
accounts, securities accounts, safety deposit boxes or other deposit or
safekeeping arrangements maintained by the Partnership as of the Closing Date.

(l)

Noncompetition and Confidentiality Agreement. Purchaser shall have received an
executed counterpart of the Noncompetition and Confidentiality Agreement from
Allied Surgical Centers, Inc. and Spectrum Personnel, Inc.

(m)

Amended and Restated Partnership Agreement.  The Partnership, Sellers (with the
exception of the PSHS Seller) and Purchaser shall have entered into an Amended
and Restated Partnership Agreement for the Partnership, to address commercially
reasonable issues, such as reasonable redemption provisions, reasonable
redemption prices and restrictive covenants, and with all terms of the Amended
and Restated Partnership Agreement meeting with the approval of Purchaser.

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(n)

Management Agreement.  The Partnership and Purchaser shall have entered into a
Management Agreement pursuant to which the Purchaser will provide management
services to Partnership, and providing for commercially reasonable terms
including a reasonable profit to manager, and with all terms of the Management
Agreement meeting the approval of the Purchaser.

(o)

Amended Certificate of Limited Partnership.  An Amended and Restated Certificate
of Limited Partnership for the Partnership, with terms that meet with the
approval of the Purchaser, shall have been filed with the State of Florida,
Department of State.

(p)

Estoppel Certificate of Landlord and Consent of Landlord, if Necessary.  The
landlord (the “Landlord”) of the premises where the Ambulatory Surgical Center
is located shall have executed and delivered to Purchaser and the Partnership an
Estoppel Certificate with terms that meet with the approval of the Purchaser,
and to the extent the terms of the lease (the “Premises Lease”) for such
premises requires the consent of the Landlord with respect to the change in the
ownership of the partnership interests of the Partnership as contemplated by,
and subject to the terms and conditions of, this Agreement, then the Landlord
shall have executed and delivered to Purchaser and the Partnership a written
consent to such change in ownership with respect to the continuity of the
Premises Lease.

(q)

Financing and Due Diligence.  Purchaser shall have completed acceptable
financing in the sole and absolute discretion of Purchaser necessary to compete
the transaction contemplated by this Agreement.  Purchaser shall have completed
its due diligence review of the Ambulatory Surgery Center and the Partnership,
including but not limited to its due diligence review of the medical staff
physicians who utilize, or have utilized, the Ambulatory Surgery Center, and
determined it is acceptable in the sole and absolute discretion of Purchaser.

(r)

State license, Medicare and Medicaid numbers.  As of the Closing Date the
Ambulatory Surgical Center would be appropriately licensed under Florida law and
have valid Medicare and Medicaid numbers.  

Section 6.3 Conditions to Obligation of Sellers.  The obligation of Sellers to
sell is subject to the satisfaction (or waiver by Sellers) on or prior to the
Closing Date of the following conditions:

(a)

Representations and Warranties. The representations and warranties of Purchaser
made in this Agreement that are qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, as of the Closing Date as though made on the Closing Date, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties that are qualified as to
materiality shall be true and correct,

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and those not so qualified shall be true and correct in all material respects,
on and as of such earlier date).

(b)

Performance of Obligations. Purchaser shall have performed or complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Purchaser by the time of the Closing.

(c)

Absence of Proceedings. There shall not be pending any Proceeding challenging or
seeking to restrain or prohibit the Acquisition or any other transaction
contemplated by this Agreement or seeking to obtain damages from Sellers or the
Partnership in connection with the Acquisition.

(d)

Registration Rights Agreement. The Purchaser shall have executed and delivered a
counterpart to the Registration Rights Agreement.

Section 6.4 Frustration of Closing Conditions.  Neither Purchaser nor Sellers
may rely on the failure of any condition set forth in this Article VI to be
satisfied if such failure was caused by such party’s failure to act in good
faith or to use its, their or his reasonable best efforts or commercially
reasonable best efforts, as applicable, to cause the Closing to occur.

ARTICLE VII

TERMINATION, AMENDMENT AND WAIVER

Section 7.1 Termination.  

(a)

Notwithstanding anything to the contrary in this Agreement, this Agreement may
be terminated and the Acquisition and the other transactions contemplated by
this Agreement abandoned at any time prior to the Closing:

(i)

by mutual written consent of Sellers and Purchaser;

(ii)

collectively by Sellers if any of the conditions set forth in Sections 6.1 or
6.3 shall have become incapable of fulfillment, and shall not have been waived
by Sellers;

(iii)

by Purchaser if any of the conditions set forth in Sections 6.1 or 6.2 shall
have become incapable of fulfillment, and shall not have been waived by
Purchaser; or

(iv)

if all of the conditions set forth in Sections 6.1, 6.2 and 6.3 have not been
satisfied or waived by the applicable party or parties within the seventy-five
(75) day period which immediately follows the complete execution of this
Agreement by all the signatories to this Agreement, then this Agreement shall
terminate at the end of such seventy-five (75) day period unless all parties to
this Agreement agree in writing that this Agreement shall not terminate at the
end of such seventy-five (75) day period.  

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(b)

In the event of termination by Purchaser or collectively by Sellers pursuant to
this Section 7.1, written notice thereof shall forthwith be given to the other
and the transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this Agreement
are terminated as provided herein, Purchaser shall return all documents and
other material (including all copies thereof, whether maintained in hard copy,
on computer disk or on computer hard drive) received from any of the Sellers or
the Partnership relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to Sellers.

Section 7.2 Effect of Termination.  If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in Section 7.1, this
Agreement shall become null and void and of no further force and effect, except
for the provisions of (i) Section 5.6 relating to certain expenses, (ii) Section
5.7 relating to finder’s fees and broker’s fees, (iii) Section 5.8 relating to
publicity; and (iv) Section 7.1 and this Section 7.02, each of which shall
survive indefinitely. Other than enforcement of such sections referenced in the
immediately preceding sentence by Purchaser or Sellers, if applicable, and
subject to the terms of such preceding sentence, if this Agreement terminates
pursuant to the terms of Section 7.1(a), then this Agreement is null and void;
neither Sellers, on the one hand, nor Purchasers, on the other hand, have any
obligation, duty or liability to the other whatsoever arising out of or related
to this Agreement or the other agreements that were contemplated to be entered
into pursuant to the terms of this Agreement; and each of Sellers, on the one
hand, and Purchasers, on the other hand, is responsible for their respective
costs with respect to this transaction, including, but not limited to, costs of
negotiating the transaction contemplated by this Agreement and conducting
attendant due diligence.

Section 7.3 Amendments and Waivers.  This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto. By an
instrument in writing, Purchaser, on the one hand, or Sellers, on the other
hand, may waive compliance by the other with any term or provision of this
Agreement that such other party was or is obligated to comply with or perform.

ARTICLE VIII

INDEMNIFICATION

Section 8.1 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 for the applicable statute of limitations. 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.

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Section 8.2 Indemnification Provisions for the Benefit of Purchaser.  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 Sellers’, the
physician owners’ of the PBSA Seller or the Partnership’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 Sellers’,
the physician owners’ of the PBSA Seller or the Partnership’s covenants
contained in this Agreement or any other agreement executed in connection
herewith; or (c) any Liability against the Partnership, the Business or the
Partnership’s assets of any nature whatsoever accrued or existing as of the
Closing or related to actions of the Sellers or arising out of the Partnership
or its Business which occurred prior to the Closing, which is not reflected on
the Disclosure Schedules and accepted by the Purchaser, then the owners of the
PBSA Seller and the Sellers, jointly and severally, agree to indemnify jointly
and severally the Purchaser and their Affiliates from and against any and all
Damages Purchaser and their Affiliates may incur or 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.

Section 8.3 Indemnification Provisions for the Benefit of Sellers.  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 Purchaser’s
representations, warranties, and covenants contained in this Agreement, then
Purchaser agrees to indemnify the Sellers from and against any and all Damages
Sellers may incur or 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).

Section 8.4 Matters Involving Third Parties.  

(a)

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.

(b)

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.

(c)

Satisfactory Defense.  So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with this Section: (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
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.

(d)

Conditions.  In the event any of the conditions in subsection c. 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 8.

(e)

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 as though there were no such qualifications, provisions or
exceptions.

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Section 8.5 Limitation.  The indemnification provisions set forth in this
Section 8 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 Article, 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.  Notwithstanding the
foregoing, the Sellers’, on the one hand, and the Purchaser’s, on the other
hand, obligation to indemnify under this Section 13 shall be limited to an
amount equal to $8,200,000; provided however that such cap shall not be
applicable to Sections 2.2, 2.5, 3.2, 3.3, 3.11, 3.16, 3.17, 3.28, 3.29, 3.30,
3.35, 3.36, 3.37, and 3.38.

Section 8.6 Mitigation.  Purchaser, on the one hand, and Sellers, on the other
hand, shall cooperate with each other with respect to resolving any claim or
liability with respect to which one party is obligated to indemnify any other
party hereunder, including by making commercially reasonable efforts to mitigate
or resolve any such claim or liability.

ARTICLE IX

GENERAL PROVISIONS

Section 9.1 Disclosure Schedule.  The information in the Disclosure Schedule
constitutes (i) exceptions to particular representations, warranties, covenants
and obligations of the Partnership and the Sellers as set forth in this
Agreement or (ii) descriptions or lists of shares, assets and liabilities and
other items referred to in this Agreement. The statements in the Disclosure
Schedule, and those in any supplement thereto, shall be deemed to modify (i) the
representations and warranties in the Section of this Agreement to which they
expressly relate and (ii) any other representation and warranty in this
Agreement to the extent that it would be reasonably apparent from a reading of
such disclosure item that it would also qualify or apply to such other
representations or warranty

Section 9.2 Assignment.  This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by any party (including by operation of
law in connection with a merger or consolidation of such party) without the
prior written consent of the other parties hereto. Any attempted assignment in
violation of this Section 9.2 shall be voidable by Purchaser, in the case of an
attempted assignment by any of Sellers, or by Sellers, in the case of an
attempted assignment by Purchaser in violation of this Section 9.2.

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Section 9.3 No Third-Party Beneficiaries.  This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.

Section 9.4 Notices.  All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered by hand or sent
by facsimile or sent, postage prepaid, by registered, certified or express mail
or overnight courier service and shall be deemed given when received, as
follows:

(a)

if to Purchaser, to:

PainCare Holdings, Inc.

1030 North Orange Avenue

Suite 105

Orlando, Florida  32801

Attention: CEO

With a copy to:

McDermott, Will & Emery

201 South Biscayne Blvd., Suite 2200

Miami, Florida 33131

Attention:  Jerry Sokol, Esq.

(b)

if to the PSHS Seller, to:

PSHS Partnership Ventures, Inc.

150 SW 12th Avenue, Suite 201

Pompano Beach, Florida 33069

Attention: President

(c)

if to the Reuter Seller, to:

Merrill Reuter, M.D.  

7625 Lake Worth Road

Lake Worth, Florida 33467

(d)

if to the Katzell Seller

Jeffrey Katzell, M.D. and

Melanie Katzell, as tenants by the entirety  

7625 Lake Worth Road

Lake Worth, Florida 33467

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(e)

if to the PBSA Seller

PBSA Investments, LLC

4665 South Congress

Lake Worth, Florida 33461

Section 9.5 Counterparts.  This Agreement may be executed in one or more
counterparts (by facsimile or original signature), all of which shall be
considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
the other parties.

Section 9.6 Entire Agreement.  This Agreement and the Transaction Agreements,
along with the Exhibits and disclosure schedules hereto and thereto, contain the
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings
relating to such subject matter. None of the parties shall be liable or bound to
any other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein or in
the Transaction Agreements.

Section 9.7 Severability.  If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any Person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any other Persons or
circumstances.

Section 9.8 Consent to Jurisdiction.  Each party irrevocably submits to the
exclusive jurisdiction of each state and federal court located in the County of
Orange, Florida (and each appellate court located in the State of Florida), for
the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each party further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such party’s respective address set forth above shall be effective service of
process for any action, suit or proceeding in Florida with respect to any
matters to which it has submitted to jurisdiction in this Section 9.8. Each
party irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in any state or federal court located in the
County of Orange, Florida (and any appellate court located in the state of
Florida) and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

Section 9.9 Governing Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Florida applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.

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Section 9.10 Waiver of Jury Trial.  Each party hereby waives to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or any transaction contemplated hereby. Each
party (a) certifies that no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement by, among other things, the mutual waivers and certifications in this
Section 9.10.

Section 9.11 Attorney’s Fees.  If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of any of the
transactions contemplated hereby is brought against any party to this Agreement,
unless attorneys’ fees are already provided for, the prevailing party shall be
entitled to recover reasonable attorneys’ fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).

Section 9.12 Time of Essence.  Time is of the essence of this Agreement.

Section 9.13 Waiver.  

(a)

Failure to Exercise Remedy Not Waiver.  No failure on the part of any Person to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of any Person in exercising any power, right, privilege or
remedy under this Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.

(b)

No Deemed Waiver.  No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.

Section 9.14 Specific Performance.  The Partnership and Sellers agree that: (a)
in the event of any breach by Sellers of Sellers’ covenants to deliver the
Partnership Interests owned by Sellers at the Closing, the Purchaser shall be
entitled (in addition to any other remedy that may be available to it to (i) a
decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision, and (ii) an
injunction restraining such breach or threatened breach; and (b) neither
Purchaser nor any other indemnitee shall be required to provide any bond or
other security in connection with any such decree, order or injunction or in
connection with any related action or Proceeding.

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[Signature Pages follow]

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

“Partnership”

“PainCare”

PSHS Alpha Partners, Ltd

PainCare Holdings, Inc.

By: /S/ JOHN W. BEEBE

By: /S/ RANDY LUBINSKY

Print Name: JOHN W. BEEBE

Print Name: RANDY LUBINSKY

 

Print Title: CEO

Print Title: CEO

Attest: _____________________

Attest: /S/ MARK SZPORKA

“Seller”

“Subsidiary”

The “PSHS Seller”

PSHS Partnership Ventures, Inc.

PainCare Surgery Centers I, Inc.

By: /S/ JOHN W. BEEBE

By: /S/ RANDY LUBINSKY

Print Name: JOHN W. BEEBE

Print Name: RANDY LUBINSKY

Print Title: PRESIDENT

Print Title: CEO

Attest: _____________________

Attest: /S/ MARK SZPORKA

The “Katzell Seller”

/S/ JEFFREY KATZELL, M.D.

Jeffrey Katzell, M.D., and

/S/ JEFFREY KATZELL, M.D. (By Power of Attorney)

Melanie Katzell, his wife, as tenants by the entirety

The Reuter Seller

/S/ MERRILL REUTER

Merrill Reuter, M.D.

[signature continue on following page]

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The PBSA Seller

PBSA Investments, LLC

By: /S/ FRED SIMON

Print Name: FRED SIMON

Print Title: PRESIDENT

The Physician Owners of the PBSA Seller

For purposes of the representations and warranties made in Articles II and III
of the Agreement and the indemnification provisions set forth in Article VIII of
the Agreement, the owners of the PBSA Investments, LLC are executing this
Agreement evidencing their agreement to such provisions.

/S/ STEVEN GOFF, M.D.

Steven Goff, M.D.

/S/ MARIANO IBARROLA, M.D.

Mariano Ibarrola, M.D.

/S/ FRED SIMON, M.D.

Fred Simon, M.D.

/S/ JACK ZELTZER, M.D.

Jack Zeltzer, M.D.