Merger Agreement and Reorganization Plan



  
 EXHIBIT 10.1

  
 MERGER AGREEMENT AND PLAN OF REORGANIZATION

  
 BY AND AMONG 
  
 PAINCARE HOLDINGS, INC., 
  
 PAINCARE ACQUISITION COMPANY VII, INC., 
  
 HEALTH CARE CENTER OF TAMPA, INC. 
  
 AND 
  
 SAQIB KHAN, M.D. 
  
 EXECUTION DATE: DECEMBER 22, 2003. 
  
  







 TABLE OF CONTENTS 
  

	 DEFINITIONS
	  	1
		
	 TRANSACTION
	  	1
				
	 	 	 2.1
	  	 Transaction
	  	1
				
	 	 	 2.2
	  	 Effect of the Merger
	  	2
				
	 	 	 2.3
	  	 Effective Time; Filing of Certificates of Merger
	  	2
				
	 	 	 2.4
	  	 Articles of Incorporation
	  	2
				
	 	 	 2.5
	  	 Bylaws
	  	2
				
	 	 	 2.6
	  	 Directors and Officers
	  	2
				
	 	 	 2.7
	  	 Tax Consequences
	  	2
				
	 	 	 2.8
	  	 Additional Actions
	  	2
				
	 	 	 2.9
	  	 No Dissenters’ Rights
	  	2
				
	 	 	 2.10
	  	 Surrender of Certificates
	  	3
				
	 	 	 2.11
	  	 Conversion of Shares
	  	3
				
	 	 	 2.12
	  	 Shareholder Consent and Release
	  	3
				
	 	 	 2.13
	  	 Piggyback Registration
	  	3
		
	 TRANSACTION CONSIDERATION
	  	4
				
	 	 	 3.2
	  	 Potential Post Closing Adjustments
	  	4
				
	 	 	 3.3
	  	 Earn-out Payment
	  	5
				
	 	 	 3.4
	  	 Pledge Agreement
	  	8
		
	 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
	  	8
				
	 	 	 4.1
	  	 Organization, Qualification, and Corporate Power
	  	8
				
	 	 	 4.2
	  	 Capitalization
	  	8
				
	 	 	 4.3
	  	 Authorization
	  	8
				
	 	 	 4.4
	  	 Noncontravention
	  	9
				
	 	 	 4.5
	  	 Broker’s Fees
	  	9
				
	 	 	 4.6
	  	 Title to Assets
	  	9
				
	 	 	 4.7
	  	 No Subsidiaries
	  	9
				
	 	 	 4.8
	  	 Financial Statements
	  	9
				
	 	 	 4.9
	  	 Events Subsequent to Most Recent Year End
	  	10

  

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	 	 	4.10	  	 Undisclosed Liabilities
	  	12
				
	 	 	 4.11
	  	 Tax Matters
	  	12
				
	 	 	 4.12
	  	 Real Property
	  	14
				
	 	 	 4.13
	  	 Intellectual Property
	  	15
				
	 	 	 4.14
	  	 Condition of Tangible Assets
	  	15
				
	 	 	 4.15
	  	 Contracts
	  	15
				
	 	 	 4.16
	  	 Powers of Attorney
	  	16
				
	 	 	 4.17
	  	 Insurance; Malpractice
	  	16
				
	 	 	 4.18
	  	 Litigation
	  	17
				
	 	 	 4.19
	  	 Health Care Compliance
	  	17
				
	 	 	 4.20
	  	 Fraud and Abuse
	  	18
				
	 	 	 4.21
	  	 Legal Compliance
	  	18
				
	 	 	 4.22
	  	 Rates and Reimbursement Policies
	  	19
				
	 	 	 4.23
	  	 Medical Staff
	  	19
				
	 	 	 4.24
	  	 Employees
	  	19
				
	 	 	 4.25
	  	 Employee Benefits
	  	19
				
	 	 	 4.26
	  	 Physicians and Other Providers
	  	21
				
	 	 	 4.27
	  	 Guaranties
	  	22
				
	 	 	 4.28
	  	 Environment, Health, and Safety
	  	22
				
	 	 	 4.29
	  	 Certain Business Relationships with the Company and its Affiliates
	  	23
				
	 	 	 4.30
	  	 Third-party Payors
	  	23
				
	 	 	 4.31
	  	 Bank Accounts
	  	23
				
	 	 	 4.32
	  	 Tax Status
	  	23
				
	 	 	 4.33
	  	 Binding Obligation
	  	23
				
	 	 	 4.34
	  	 No Corporate Practice or Fee Splitting
	  	23
				
	 	 	 4.35
	  	 Staff Privileges
	  	23
				
	 	 	 4.36
	  	 Intentions
	  	23
				
	 	 	 4.37
	  	 Securities Representation
	  	24
				
	 	 	 4.38
	  	 HIPAA
	  	25
				
	 	 	 4.39
	  	 Improper and Other Payments
	  	25
				
	 	 	 4.40
	  	 Accounts Receivable
	  	25
				
	 	 	 4.41
	  	 Medical Waste
	  	26

  

 ii 









	 	 	4.42	  	 No Untrue or Inaccurate Representation or Warranty
	  	26
		
	 REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES
	  	26
				
	 	 	 5.1
	  	 Organization of PainCare and Subsidiary
	  	26
				
	 	 	 5.2
	  	 Authorization of Transaction
	  	26
		
	 CLOSING
	  	26
		
	 CLOSING DELIVERIES
	  	27
				
	 	 	 7.1
	  	 Deliveries of the Company and the Shareholder
	  	27
				
	 	 	 7.2
	  	 Deliveries of PainCare
	  	28
		
	 CONDITIONS TO THE OBLIGATIONS OF PAINCARE AND SUBSIDIARY
	  	28
				
	 	 	 8.1
	  	 Representations and Warranties; Covenants and Agreements
	  	28
				
	 	 	 8.2
	  	 Due Diligence
	  	28
		
	 POST-CLOSING COVENANTS
	  	28
				
	 	 	 9.1
	  	 General
	  	28
				
	 	 	 9.2
	  	 Tax Returns
	  	29
				
	 	 	 9.3
	  	 Transition
	  	29
				
	 	 	 9.4
	  	 Litigation Support
	  	29
				
	 	 	 9.5
	  	 Consents
	  	29
				
	 	 	 9.6
	  	 Operational Covenants
	  	29
		
	 SURVIVAL AND INDEMNIFICATION
	  	30
				
	 	 	 10.1
	  	 Survival of Representations and Warranties
	  	30
				
	 	 	 10.2
	  	 Indemnification Provisions for the Benefit of PainCare and Subsidiary
	  	31
				
	 	 	 10.3
	  	 Indemnification Provisions for the Benefit of the Shareholder
	  	31
				
	 	 	 10.4
	  	 Matters Involving Third Parties
	  	31
		
	 RESTRICTIVE COVENANTS; CONFIDENTIALITY
	  	33
				
	 	 	 11.1
	  	 Shareholder Restrictive Covenants
	  	33
				
	 	 	 11.2
	  	 Defenses
	  	34
				
	 	 	 11.3
	  	 No Running of Covenant During Breach
	  	35
				
	 	 	 11.4
	  	 Blue Pencil Doctrine
	  	35
				
	 	 	 11.5
	  	 Confidentiality, Press Releases, and Public Announcements
	  	35
				
	 	 	 11.6
	  	 Conduct of Business
	  	36
				
	 	 	 11.7
	  	 No Third-Party Beneficiaries
	  	38

  

 iii 









	 MISCELLANEOUS.
	  	38
				
	 	 	 12.1
	  	 Entire Agreement
	  	38
				
	 	 	 12.2
	  	 Succession and Assignment
	  	38
				
	 	 	 12.3
	  	 Counterparts
	  	38
				
	 	 	 12.4
	  	 Headings
	  	38
				
	 	 	 12.5
	  	 Notices
	  	38
				
	 	 	 12.6
	  	 Governing Law; Jurisdiction; Attorney’s Fees
	  	39
				
	 	 	 12.7
	  	 Amendments and Waivers
	  	39
				
	 	 	 12.8
	  	 Severability
	  	39
				
	 	 	 12.9
	  	 Expenses
	  	39
				
	 	 	 12.10
	  	 Further Assurances
	  	39
				
	 	 	 12.11
	  	 Construction
	  	40
				
	 	 	 12.12
	  	 Survival
	  	40
				
	 	 	 12.13
	  	 Incorporation of Exhibits and Schedules
	  	40
				
	 	 	 12.14
	  	 Submission to Jurisdiction
	  	40
				
	 	 	 12.15
	  	 Notification of Certain Matters
	  	40

  

 iv 








 MERGER AGREEMENT AND PLAN OF REORGANIZATION 
  
 THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
“Agreement”) is made and entered into as of this 22nd day of December, 2003 (the “Execution
Date”) by and among PAINCARE HOLDINGS, INC., a Florida corporation (“PainCare”), PAINCARE ACQUISITION COMPANY VII, INC., a Florida corporation (“Subsidiary”, and together with PainCare, the “Acquiring
Companies”), HEALTH CARE CENTER OF TAMPA, INC. a Florida corporation (the “Company”), and SAQIB KHAN, M.D., an individual (the “Shareholder”). PainCare, Subsidiary, the Company and the Shareholder are sometimes
referred to herein individually as a “Party” and collectively as the “Parties.” 
  
 RECITALS 
  
 A. The Company operates a medical practice and the Shareholder is a licensed medical provider in the State of Florida and owns all of the issued and outstanding shares of the Company stock; 
  
 B. PainCare desires to enter into this Agreement in order for the
Subsidiary, which is a wholly-owned subsidiary of PainCare, to acquire the business and assets of the Company; 
  
 C. All of the Parties hereto desire to enter into this Agreement to effectuate the Merger, as hereinafter defined, of the Company with and into
Subsidiary pursuant to the terms and conditions of this Agreement; and 
  
 F. It is the intention of the Parties for the Merger contemplated herein to qualify as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. 
  
 NOW, THEREFORE, in consideration of the premises and the actual
promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the receipt and adequacy of which are hereby conclusively acknowledged, the Parties, intending to become legally bound, hereby agree as
follows: 
  
 TERMS AND CONDITIONS 
  
 1. DEFINITIONS. All capitalized words that are not capitalized for purposes of
grammar and which are not defined in the text of this Agreement are defined terms with their definitions set forth on Exhibit 1. 
  
 2. TRANSACTION. 
  
 2.1 Transaction. Upon the terms and subject to the conditions hereof and in accordance with the provisions of the Florida Business
Corporation Act (the “Florida Act”), the Company shall be merged with and into Subsidiary (the “Merger”) and the separate existence of the Company shall thereupon cease, and Subsidiary, as the surviving corporation (the
“Surviving Corporation”), shall continue to exist under and be governed by the Florida Act (the “Transaction”). 
  

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 2.2 Effect of the Merger. At and after the Effective Time, as defined in Section 2.3 below,
the effect of the Merger shall, in all respects, be as provided in the Florida Act. From and after the Effective Time, the Surviving Corporation shall continue to be a Florida corporation. 
  
 2.3 Effective Time; Filing of Certificates of Merger. The
Merger shall be effected by the filing at the time of the Closing or as soon as practicable thereafter, of the Articles of Merger (the “Articles of Merger”), substantially in the form of Exhibit 2.3 attached hereto, with the Secretary of
the State of Florida in accordance with the provisions of the Florida Act. The Merger shall become effective as of 11:59 p.m. on the date of such filing (the “Effective Time”) and the Parties shall take any and all other lawful actions and
do any and all other lawful things necessary to cause the Merger to become effective. 
  
 2.4 Articles of Incorporation. As of the Effective Time, the articles of incorporation of Subsidiary, as in effect immediately prior to the Effective Time, shall be the articles of incorporation of the
Surviving Corporation saving the change of the Subsidiary’s name to Health Care Center of Tampa, Inc. until thereafter amended in accordance with applicable law. 
  
 2.5 Bylaws. As of the Effective Time, the bylaws of Subsidiary, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with its terms and applicable law. 
  
 2.6 Directors and Officers. As of the Effective Time, the directors and officers of Subsidiary immediately prior to the Effective Time shall
be the directors and officers of the Surviving Corporation. Each director and officer of the Surviving Corporation shall hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation. At the Closing, the
Company shall cause to be delivered to Subsidiary the written resignations of all of the directors and officers of the Company, which resignations shall be unconditional and effective as of the Closing Date (as defined in Section 6 below).

  
 2.7 Tax Consequences. It is intended by the
Parties hereto that the Merger shall constitute a tax-free reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. 
  
 2.8 Additional Actions. If, at any time after the Closing, the Surviving Corporation shall consider or be advised that any further acts are
necessary or desirable: (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, title to and possession of any property or right of the Company acquired or to be acquired by reason of, or as a result of, the Merger; or
(b) otherwise to carry out the purposes of this Agreement, then the Shareholder shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments and assurances in law
and to do all other acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in the Surviving Corporation and otherwise to carry out the purposes of this Agreement; and the officers and directors of the
Surviving Corporation are fully authorized in the name of the Shareholder and the Company to take any and all such actions. 
  
 2.9 No Dissenters’ Rights Comprising the sole shareholder of the Company, the Shareholder’s approval and execution of this
Agreement constitutes unanimous approval of the transactions contemplated herein; therefore, neither the Shareholder, nor any other party, is entitled to dissenters’ rights under the laws of the State of Florida. 
  

 2 








 2.10 Surrender of Certificates. 
  
 (a) Company’s Shares. At the Closing, the Shareholder
shall be required to surrender to Subsidiary the original stock certificate(s) which immediately prior to the Effective Time represented all of the Company Shares (the “Certificate”) (together with all stock powers duly endorsed to
Subsidiary). Until so surrendered, each Certificate which immediately prior to the Effective Time represented the Company Shares (other than Company Shares held in the Company treasury) shall upon and after the Effective Time by virtue of the Merger
be deemed for all purposes to represent and evidence only the right to receive the PainCare Shares determined in accordance with Section 3 and the other consideration set forth in Section 3, as provided in this Agreement. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of the Company Shares shall be made at any time thereafter. 
  
 (b) Dividends. No dividends or other distributions declared or made with respect to the PainCare Shares with a record date after the Closing
will be paid to the holder of any unsurrendered Certificate with respect to the PainCare Shares represented thereby until the holder of record of such Certificate shall surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the Certificate representing whole PainCare Shares issued in exchange therefore, without interest, at the time of such surrender, the amount of dividends or other distributions with a
record date after the Closing payable with respect to such whole PainCare Shares. 
  
 2.11 Conversion of Shares. Each share of capital stock of Subsidiary issued and outstanding immediately prior to the Closing shall continue to represent one (1) validly issued, fully paid and
non-assessable share of capital stock of the Surviving Corporation after the Merger. By virtue of the Merger and without any action on the part of the Shareholder the Company Shares shall be converted into the Initial PainCare Shares described in
Section 3.1. The PainCare Shares received by the Shareholder shall not be transferable by the Shareholder other than: (a) by will or the laws of intestate succession; (b) in accordance with applicable state and federal securities laws including
without limitation Rule 144 of the Securities Act; and (c) subject to the term and conditions of any applicable lock-up letter. 
  
 2.12 Shareholder Consent and Release. The Shareholder hereby consents to the Transaction and approves the execution and delivery of this
Agreement and the transactions contemplated hereby. Effective on the Effective Time, the Shareholder hereby releases the Company from any and all claims he may, could or will have, whether arising before or after the Effective Time, against the
Company as a result of the Shareholder having served as a stockholder, director, officer, employee, agent, lender, or in any other capacity of or for the Company. 
  
 2.13 Piggyback Registration. At Closing, the parties shall enter into a Registration Rights Agreement
substantially in the form attached hereto as Exhibit 2.13. 
  

 3 








 3. TRANSACTION CONSIDERATION. 
  
 3.1 Initial Transaction Consideration. Subject to the adjustments set forth in Section 3.3 below, the initial
aggregate transaction consideration that PainCare shall transfer to the Shareholder shall equal Three Million Eight Hundred Seventy Five Thousand and 00/100 Dollars ($3,875,000) comprised of: (i) One Million Nine Hundred Thirty Seven Thousand Five
Hundred and 00/100 Dollars ($1,937,500) (the “Cash Due At Closing”) which shall be delivered via wire transfer on the Closing Date to a bank account designated by the Shareholder; plus (ii) a number of PainCare Shares (the “Initial
PainCare Shares”) which will be determined by dividing One Million Nine Hundred Thirty Seven Thousand Five Hundred and 00/100 Dollars ($1,937,500) by ninety percent (90%) of Fair Market Value [as defined in 3.3(f) below] of one share of
PainCare common as determined as of the date immediately preceding the Closing Date. The parties agree that no fractional shares will be issued to the Shareholder and if the above described formula results in a fractional share that the number of
Initial PainCare Shares will be reduced to the next lowest whole number. The Cash Due At Closing and the Initial PainCare Shares shall hereinafter collectively be known as the “Initial Transaction Consideration.” 
  
 3.2 Potential Post Closing Adjustments. 
  
 (a) Accounts Receivable Adjustment. If the Surviving
Corporation, within the six (6) month calendar period immediately following the Closing Date, does not collect a total of Eight Hundred Thousand and 00/100 Dollars ($800,000.00) in accounts receivable, then the Transaction Consideration shall be
reduced dollar for dollar by the A/R Adjustment. The “A/R Adjustment” shall equal the difference between the amount of accounts receivable collected by the Surviving Corporation during such time period and Eight Hundred Thousand and 00/100
Dollars ($800,000.00). PainCare shall receive payment for the A/R Adjustment through a lump sum cash payment from the Shareholder within seven (7) days after the end of the six (6) month period. 
  
 (b) Other Net Equity Adjustments. If the Closing Date Balance
Sheet (as defined in subsection (c) below) reflects Other Net Equity (as defined below) that is less than Two Hundred Thousand and 00/100 Dollars ($200,000.00) (“Agreed Other Net Equity”), then the cash portion of the initial Transaction
Consideration shall be reduced dollar for dollar (the “Other Net Equity Adjustment”) by the difference between (i) the Agreed Other Net Equity; and (ii) the Other Net Equity set forth in the Closing Date Balance Sheet. “Other Net
Equity” shall mean the cash in the bank accounts of the Company’s immediately following the Closing, net of all current liabilities of the Company. 
  
 (c) Closing Date Balance Sheet. Within ninety (90) days after the Closing Date, PainCare or its Affiliate will prepare and deliver to the
Shareholder a balance sheet of the Company as of the close of business on the Closing Date prepared in accordance with GAAP (the “Closing Date Balance Sheet”). Within six (6) days after PainCare’s delivery of the Closing Date Balance
Sheet to the Shareholder, the Shareholder shall, in a written notice to PainCare, either accept or describe in reasonable detail any proposed adjustments to the Closing Date Balance Sheet and the reasons therefore, and shall include pertinent
calculations. If the Shareholder fails to deliver notice of acceptance or objection to the Closing Date Balance Sheet within such six (6) day period, the Shareholder shall be deemed to have accepted the Closing Date Balance Sheet. Except in the case
of a dispute with respect to the Closing Date Balance 

  

 4 








 
Sheet, within seven (7) days after delivery of the Closing Date Balance Sheet (the “Adjustment Payment Date”), the Shareholder shall pay the Other
Net Equity Adjustment to PainCare in cash. In the event that PainCare and the Shareholder are not able to agree on the Closing Date Balance Sheet within thirty (30) days from and after the receipt by PainCare of any objections raised by the
Shareholder, then either Party shall each have the right to require that such disputed determinations be submitted to an independent certified public accountant or accounting firm that PainCare shall select, for computation or verification in
accordance with the provisions of this Agreement, and the Other Net Equity Adjustment shall be paid by the Shareholder to PainCare within five (5) days after receipt of the accountant’s computation or verification. The foregoing provisions for
certified public accounting firm review shall be final and binding upon the Parties and there shall be no right of appeal from such decision. Such accounting firm’s fees and expenses for 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. Any payments due under this Section 3.3 shall bear interest at
eight percent (8%) per annum from the Adjustment Payment Date. 
  
 3.3 Earn-out Payment. 
  
 (a)
General. Subject to the condition that the Surviving Corporation achieves Formula Period Profits (as defined in Subsection (f) below) of at least One Million Five Hundred Fifty Thousand and 00/100 Dollars ($1,550,000) (the
“Earnings Threshold”) in each of the three (3) successive twelve (12) month calendar periods beginning on the first day of the first month immediately following the Closing Date or if the Closing Date is the first day of the month then on
the Closing Date (each such twelve (12) month calendar period shall be referred to herein as a “Formula Period”), then PainCare shall pay to the Shareholder a total amount of additional consideration of Three Million Eight Hundred Seventy
Five Thousand and 00/100 Dollars ($3,875,000) for the Formula Periods, payable in three equal annual installments of One Million Two Hundred Ninety One Thousand Six Hundred Sixty Six and 67/100 Dollars ($1,291,666.67) (the “Intended Installment
Payment”) in the form of consideration provided in Section 3.3(d) below and subject to adjustment as provided in Section 3.3(b) and (c) below. 
  
 (b) Installment Payment Discount. Notwithstanding Section 3.3(a) above, if the Surviving Corporation fails to achieve the Earnings Threshold
in a Formula Period, the amount of the Intended Installment Payment for such Formula Period shall be recalculated to equal the product of the Intended Installment Payment, multiplied by the Installment Payment Discount (as defined below) (the
“Adjusted Installment Payment”). The “Installment Payment Discount” shall equal (i) the Formula Period Profits (as defined in Subsection (f) below) for such Formula Period divided by the Earnings Threshold; multiplied by (ii)
ninety percent (90%). 
  
 (c) Installment Payment
Premium. Notwithstanding Section 3.3(b), if (i) the Shareholder receives the Adjusted Installment Payment from PainCare in a Formula Period (saving the last Formula Period) rather than the Intended Installment Payment as a result of the
Formula Period Profits equaling less than the Earnings Threshold for such Formula Period, and (ii) the Surviving Corporation’s Formula Period Profits exceed the Earnings Threshold in the Formula Period immediately subsequent to the Formula
Period for which the Installment Payment Discount corresponded, then PainCare shall pay to the Shareholder the Installment Payment Premium (as defined below). The “Installment Payment Premium” shall equal the product of (A) the Formula
Period Profits for the Formula Period in which the Installment 

  

 5 








 
Payment Premium is calculated less the Earnings Threshold, multiplied by (B) Seventy-five percent (75%). The Installment Payment Premium shall be paid to the
Shareholder in the same percentages, form and time as the Installment Payments (as defined in Subsection (d) below) are due for the Formula Period for which the Installment Payment Premium is calculated. 
  
 (d) Manner of Payment. Within sixty (60) days after the end of
each Formula Period, PainCare or its Affiliate shall prepare and deliver to the Shareholder a financial statement presenting the Formula Period Profits for the Surviving Corporation for the applicable Formula Period (the “Formula Period Profits
Statement”). Five (5) days after delivery of the Formula Period Profits Statement, the Shareholder shall in a written notice to PainCare either accept or describe in reasonable detail any proposed adjustments to the Formula Period Profits
Statement and the reasons therefore, and shall include pertinent calculations. If the Shareholder fails to deliver notice of acceptance or objection to the Formula Period Profits Statement within such five (5) day period, the Shareholder shall be
deemed to have accepted the Formula Period Profits Statement. If the Shareholder accepts or fails to object to the Formula Period Profits Statement within the five (5) day period set forth above, then within ninety (90) days after the end of the
Formula Period, PainCare shall pay to the Shareholder the Intended Installment Payment or the Adjusted Installment Payment (each an “Installment Payment”, and collectively, the “Installment Payments”) along with any Installment
Payment Premium owed in accordance with Subsection (c) above as follows: (i) fifty percent (50%) of the Installment Payment shall be made in cash via wire transfer to a bank account designated by the Shareholder at least five (5) days prior to the
end of the Formula Period; and (ii) fifty percent (50%) of the Installment Payment shall be made in PainCare Shares priced at Fair Market Value (as defined in Subsection (f) below). In the event PainCare and the Shareholder are not able to agree on
the Formula Period Profits Statement within thirty (30) days from and after the receipt by PainCare of any objections raised by the Shareholder, PainCare and the Shareholder shall each have the right to require that such disputed determinations be
submitted to an independent certified public accountant or accounting firm that PainCare shall select, for computation or verification in accordance with the provisions of this Agreement, and the Installment Payment shall be paid by PainCare to the
Shareholder within fifteen (15) days after receipt of the accountant’s computation or verification. The foregoing provisions for certified public accounting firm review shall be final and binding upon the Parties and there shall be no right of
appeal from such decision. 
  
 (e) Earn-out Cap.
Notwithstanding anything to the contrary in this Section 3, in no event whatsoever shall the aggregate amount of the Installment Payments paid to the Shareholder from PainCare in cash, in the PainCare Shares or any other form of consideration
exceed Three Million Eight Hundred Seventy Five Thousand and 00/100 Dollars ($3,875,000). 
  
 (f) Definitions for Purposes of Section 3.4. For purposes of Section 3.4 of this Agreement, the following terms shall have the meanings set forth below: 
  
 (i) “Fair Market Value” shall mean the value of the PainCare
Shares determined as follows: 
  
 (1) if the principal market
for the PainCare Shares is a national securities exchange, then the “Fair Market Value” of the PainCare Shares shall equal the thirty (30) day trailing average of the closing ask prices of the PainCare Shares as reported by such exchange
or on a composite tape reflecting transactions on such exchange; or 
  

 6 








 (2) if the principal market for the PainCare Shares is not a national securities exchange, but the price
of the PainCare Shares is quoted on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) Stock Market, and (A) actual closing price information is available with respect to the PainCare Shares, then the
“Fair Market Value of the PainCare Shares shall equal the thirty (30) day trailing average of the closing ask prices of such stock on the NASDAQ Stock Market; or (B) actual closing price information is not available with respect to the
PainCare Shares, then the “Fair Market Value” of the PainCare Shares shall equal the thirty (30) day trailing average of the bid prices per share of such stock on the NASDAQ Stock Market; or 
  
 (3) if the principal market for the PainCare Shares is neither a national
securities exchange and such stock is not quoted on NASDAQ, then the “Fair Market Value” of the PainCare Shares shall equal the thirty (30) day trailing average of the closing ask prices of the PainCare Shares as reported by the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated, or a comparable service selected by PainCare; or 
  
 (4) if subsections (f)(i)(1)-(4) above are inapplicable or if no trades have been made or no quotes are available for such day with respect to the
PainCare Shares, then the “Fair Market Value” of the PainCare Shares shall be determined by an independent third party appraiser selected by PainCare. Within ten (10) days after the effective date of the appraiser’s appointment, the
appraiser shall deliver an appraisal of the Fair Market Value of the PainCare Shares, which shall be binding and conclusive on the Parties. The cost of any appraisal hereunder shall be shared equally by the Parties, and each Party shall be
responsible and financially liable for its or his own attorneys’ fees; and 
  
 (5) with the understanding that notwithstanding the Fair Market Value ascribed to the PainCare Shares pursuant to subsections 3.3(f)(1), (2), (3) or (4) above in no event shall the Fair Market Value of the PainCare
Shares ever be less than One and no/00 Dollars ($1.00) per share. 
  
 (ii) “Formula Period Profits” shall mean the Surviving Corporation’s earnings before deductions for interest, taxes, depreciation and amortization (“EBITDA”) as calculated utilizing GAAP by PainCare’s
independent certified public accountants for the applicable Formula Period where possible, and as calculated by PainCare for quarterly and less than quarterly periods for such Formula Period. Notwithstanding the foregoing, the calculation of the
Formula Period Profits shall not include any costs or expenses related to: (i) the corporate overhead of PainCare or other administrative or similar charges that PainCare might impose upon the Surviving Corporation, except those charges for services
provided directly to and for the benefit of the Surviving Corporation; (ii) any non-recurring charges, losses, profits, gains, or non-cash adjustments not related to the ongoing operations of the Surviving Corporation’s business, including but
not limited to discontinued operations, extraordinary items, acquisition costs and goodwill charges incurred in connection with the transactions contemplated hereby (excluding the write-off of any goodwill with respect to the Surviving Corporation
in accordance with FASA 142), or unusual or infrequent items as such terms are defined pursuant to generally accepted accounting principles, or (iii) any charge related to grants or exercises of options of employees of the Surviving Corporation. The
Formula Period Profits shall specifically include without limitation revenues and expenses associated with PainCare’s MedX Rehabilitation Program which may be implemented by the Surviving Corporation subsequent to the Closing unless the Parties
otherwise mutually agree in writing. 
  

 7 








 3.4 Pledge Agreement. Contemporaneous with the Closing, PainCare agrees to execute a pledge
agreement in the form attached hereto as Exhibit 3.4 (the “Pledge Agreement”) to secure the payment of the Intended Installment Payments. 
  
 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The Shareholder represents and warrants to the Acquiring Companies that the statements contained in
this Section 4 are correct and complete as of the Closing Date, except as set forth in the disclosure schedule accompanying this Agreement (the “Disclosure Schedule”). The Disclosure Schedule will be arranged in paragraphs corresponding to
the numbered paragraphs contained in this Section 4 to the Agreement. 
  
 4.1 Organization, Qualification, and Corporate Power. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida. The Company has full power and authority and all
licenses, permits and authorizations necessary to carry on the businesses in which it is currently engaged and to own and use the properties owned and used by it. Section 4.1 of the Disclosure Schedule lists all of the officers and members of the
Board of Directors of the Company, as of the date immediately preceding the Closing Date. The Company has made available to the Acquiring Companies correct and complete copies of the minute book, articles of incorporation and bylaws of the Company,
as amended to date. Copies of the minute book (containing the records of meetings of the stockholders, the board of directors and any committees of the board of directors), the stock certificate books and stock record books of the Company are
correct and complete in all material respects and will have been delivered to PainCare prior to or at the Closing. The Company is not in default under or in violation of any provision of its articles of incorporation or bylaws. 
  
 4.2 Capitalization. The entire authorized capital stock of the
Company consists of one thousand (1,000) shares of common stock, no par value, of which one (1) share of common stock is issued and outstanding (the “Company Shares”). All of the issued and outstanding Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable and are held of record by the Shareholder as set forth in Section 4.2 of the Disclosure Schedule. The Shareholder has good title to the Company Shares free and clear of any and all liens,
claims, security interests or other encumbrances of any Person. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, redemption rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the
Company. There are no stockholders’ agreements, voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company. 
  
 4.3 Authorization. The Company has full power and authority (including full corporate power and authority) and
the Shareholder has all necessary authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by the Company has been duly authorized and approved by its board
of directors and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the transactions contemplated hereby. The Company has given 

  

 8 








 
the Shareholder any and all notice required to be given to the Shareholder under applicable law. This Agreement constitutes the valid and legally binding
obligation of the Company and the Shareholder, enforceable in accordance with its terms and conditions. 
  
 4.4 Noncontravention. Except as set forth in Section 4.4 of the Disclosure Schedule, neither the execution and the delivery of this
Agreement by the Company or the Shareholder, nor the consummation of the transactions contemplated hereby will: (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, or other restriction of any
government, governmental agency or any other third party whatsoever, or court to which the Company or the Shareholder are subject, or any provision of the articles of incorporation or bylaws of the Company; or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which
the Company or the Shareholder are a party or by which either the Company or the Shareholder is bound or to which any of the Company’s assets are subject (or result in the imposition of any Security Interest upon any of its assets). Except as
set forth in Section 4.4 of the Disclosure Schedule, the Shareholder and the Company need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency or any other third
party whatsoever in order for the Parties to consummate the transactions contemplated by this Agreement. The Parties agree that Section 4.4 of the Disclosure Schedule shall be divided into two (2) sections, consisting of: (i) Section 4.4(a) which
shall list all such authorizations, consents and approvals which must be obtained prior to the Closing, as a condition to Closing; and (ii) Section 4.4(b) which shall list all such authorizations, consents and approvals which will not be obtained
prior to Closing which shall be obtained within a reasonable period of time after Closing. 
  
 4.5 Broker’s Fees. Neither the Company nor the Shareholder has any Liability or obligation to pay any fees, expenses, or commissions to any consultant, broker, finder, or agent with respect to the
transactions contemplated by this Agreement. 
  
 4.6 Title
to Assets. Section 4.6 of the Disclosure Schedule contains a complete, true and correct list of all of the assets of the Company. The Company has good and marketable title to, or a valid leasehold interest in, the properties and assets used
by it, located on its premises, or shown on the Most Recent Financial Statement, as defined in Section 4.8 below, or acquired after the date thereof, free and clear of all Security Interests. The assets set forth in Section 4.6, in conjunction with
any assets which the Company leases, constitute all of the assets used by the Company in connection with its business as presently conducted and all assets necessary or appropriate for the continued operation of the Company’s business.

  
 4.7 No Subsidiaries. The Company has no
Subsidiaries and does not control, directly or indirectly, or have any direct or indirect equity participation in any corporation, partnership, limited liability company, trust or other business association. 
  
 4.8 Financial Statements. Attached as Section 4.8 of the
Disclosure Schedule are true and complete copies of the following Company financial statements (collectively, the “Financial Statements”): (a) audited balance sheets, statements of operation and retained earnings, and cash flow for the
year ended December 31, 2002 (the “Most Recent Year End”) for the Company; and (ii) interim statements of operation and retained earnings and cash flow (the 

  

 9 








 
“Most Recent Financial Statements”) for the month ended September 30, 2003 (the “Most Recent Month End”) for the Company. The Financial
Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and complete, and are consistent with the books and records of the Company (which books and records are correct and complete); provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments which will not be material. Except as provided in the Most Recent Financial Statements, or as fully disclosed in Section 4.8 of the Disclosure Schedule, the Company does not have any Liabilities or obligations
(whether accrued, absolute, contingent, whether due or to become due or otherwise) which might be or become a charge against the Company since the date of the Most Recent Financial Statements. The Shareholder acknowledges and agrees that PainCare
and Subsidiary relied upon the financial information set forth in the Financial Statements in order to determine the Transaction Consideration. 
  
 4.9 Events Subsequent to Most Recent Year End. Since the Most Recent Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future prospects of the Company. Without limiting the generality of the foregoing, since the Most Recent Year End: 
  
 (a) Sale or Lease of Assets. The Company has not sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for fair market value in the ordinary course of its business; 
  
 (b) Contracts. The Company has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) outside the ordinary course of business; 
  
 (c) Change in Contracts. No third party (or the Company) has accelerated, terminated, modified, or canceled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) to which
the Company is a party or by which it is bound and neither the Shareholder nor the Company has any intent to do any of the foregoing or has received a verbal or written indication of any third party’s intent to do any of the foregoing;

  
 (d) Security Interests. The Company has not
imposed any Security Interest upon any of its assets, tangible or intangible; 
  
 (e) Investments. The Company has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and
acquisitions); 
  
 (f) Debts. The Company has not
issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation; 
  

(g) Liabilities Unaffected. The Company has not delayed or postponed the payment of accounts payable and other Liabilities or accelerated
the collection of accounts, notes or other receivables; 
  

 10 








 (h) Claims Unaffected. The Company has not canceled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the ordinary course of its business; 
  
 (i) Articles and Bylaws. There has been no change made or authorized in the articles of incorporation or bylaws of the Company; 

 
 (j) Changes in Equity. The Company has not issued, sold, or
otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock; 
  
 (k) Distribution. The Company has not declared, set aside, or
paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; 
  
 (l) Property Damage. The Company has not experienced any damage, destruction, or loss (whether or not covered
by insurance) to its property or assets; 
  
 (m)
Transactions with Affiliates. The Company has not made any loan to, or entered into any other transaction with, any of its directors, officers and employees; 
  
 (n) Collective Bargaining Agreements. The Company has not entered into any collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or agreement; 
  
 (o) Compensation Changes. The Company has not granted any increase in the base compensation of any of its directors, officers, and employees; 
  
 (p) Employee Benefit Plans. The Company has not adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan); 
  
 (q) Officers; Directors; Employees. The Company has not made
any change in the employment terms for any of its directors, officers and employees, other than to terminate such agreements as required herein; 
  
 (r) Charitable or Capital Contributions. The Company has not made or pledged to make any charitable or other capital contribution;

  
 (s) Ordinary Course of Business. There has not
been any other occurrence, event, incident, action, failure to act, or transaction outside the ordinary course of business involving the Company; 
  
 (t) Accounting Practices. There has not been any change in any method of accounting or accounting principle, estimate or practice of the
Company; 
  
 (u) Accounts Receivable. The Company
has not accelerated the collection of any Accounts Receivable or any other amounts owed to it; and 
  

 11 








 (v) In General. Neither the Company nor the Shareholder has committed to do any of the
foregoing. 
  
 4.10 Undisclosed Liabilities. The
Company has no Liability and there is no basis for any present or future action, suit, proceeding, hearing, investigation, complaint, claim, or demand against it giving rise to any Liability, except for: (a) Liabilities set forth on the Most Recent
Financial Statements; (b) Liabilities disclosed in the Disclosures Schedule; and (c) Liabilities which have arisen after the Most Recent Month End in the ordinary course of business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law). As of the Closing, other than the current trade accounts payable, the Company shall not have any unpaid liabilities, including, but not
limited to, any bank debt, capital leases or any general or professional liability claims, or be obliged in any other way to provide funds in respect of, or to guarantee or assume, any debt, obligation or dividend of any person, except endorsements
in the ordinary course of business in connection with the deposit, in banks or other financial institutions, of items for collection. Except as provided in the Most Recent Financial Statements, or as disclosed in detail in Section 4.8 of the
Disclosure Schedule, the Company does not have any Liabilities or obligations which might be or become a charge against the Company. 
  
 4.11 Tax Matters. 
  
 (a) Tax Returns. The Company has filed all Tax Returns it was required to file. All such Tax Returns were correct and complete in all
respects and were filed on a timely basis. All Taxes owed by the Company (whether or not shown on any Tax Return) have been paid. The Company currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim is
currently pending by an authority in a jurisdiction where the Company is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax. 
  
 (b) Withholding. The
Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. 
  
 (c) No Disputes of Claims. No Shareholder or director or
officer (or employee responsible for Tax matters) of the Company expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Company
either: (a) claimed or raised by any authority in writing; or (b) as to which any of the Shareholder, directors and officers (and employees responsible for Tax matters) of the Company has Knowledge based upon personal contact with any agent of such
authority. Section 4.11 of the Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to the Company for taxable periods ended on or after December 31, 2002, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of audit. The Shareholder has made available to PainCare correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and its Affiliates since December 31, 2002. 
  

 12 








 (d) No Waivers. The Company has not waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or deficiency. 
  
 (e) No Special Circumstances. The Company has not made any payments, is not obligated to make any payments, nor is a party to any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. The Company has not been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). The Company 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 Code Section 6662. 
  
 (f) Subchapter “S”. The Company has elected, by the
unanimous consent of its shareholders and in compliance with all applicable legal requirements, to be taxed under Subchapter “S” of the Code and corresponding provisions under any applicable state and local laws, and such elections are
currently in full force and effect for the Company. No action has been taken by the Company or the Shareholder that may result in the revocation of any such elections. The Company has no “Subchapter C earnings and profits,” as defined in
Code Section 1362(d). The Company has no “net unrealized built-in gain,” as such term is defined in Code Sections 1374(d)(1) and 1374(d)(8). The Company has no Liability, absolute or contingent, for the payment of any income Taxes under
the Code or under Subchapter “S” of the Code. 
  
 (g)
Audits of Tax Returns. No Tax Return of the Company is currently under audit or examination by any taxing authority, and the Company has not received a written notice stating the intention of any taxing authority to conduct such an
audit or examination. Each deficiency resulting from any audit or examination relating to Taxes by any taxing authority has been paid, except for deficiencies being contested in good faith. The revenue agents’ reports related to any prior
audits and examinations are attached as part of Section 4.11 of the Disclosure Schedule. 
  
 (h) Period of Assessment. There is no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any Taxes. 
  
 (i) Tax Agreements. The Company is not a party to or bound by
any tax sharing agreement, tax indemnity obligation or similar agreement with respect to Taxes, including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority. 
  
 (j) Inclusions in Taxable Periods. The Company will be required
to include in a taxable period ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the
completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Code Section 481 with respect to a change in method of accounting occurring before the Closing Date or comparable provisions of
state, local or foreign tax law. As of the Closing Date, the Shareholder will place funds in a separate bank account in the name of the Company in an amount sufficient to pay all such liabilities and such funds shall be used to pay such liabilities
as they become due. 
  

 13 








 (k) Consents. The Company has not filed a consent pursuant to or agreed to the application
of Code Section 341(f). 
  
 (l) Personal Holding.
The Company has not, during the five (5) year period ending on the Closing Date, been a personal holding company within the meaning of Code Section 541. 
  
 (m) Consolidated Tax Returns. The Company has never filed or been included in any combined or consolidated Tax Return with any other person
or been a member of an Affiliated Group filing a consolidated federal income Tax Return. 
  
 4.12 Real Property. The Company does not own any real property. Section 4.12 of the Disclosure Schedule lists and describes briefly all real property leased or subleased by the Company. The Shareholder
has made available to PainCare and Subsidiary correct and complete copies of the leases and subleases listed in Section 4.12 of the Disclosure Schedule (as amended to date). With respect to each lease and sublease listed in Section 4.12 of the
Disclosure Schedule: 
  
 (a) Binding. The lease or
sublease is legal, valid, binding, enforceable, and in full force and effect; 
  
 (b) Continued Validity. The lease or sublease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions
contemplated hereby; 
  
 (c) No Defaults. The
Company is not in breach or default under the lease or sublease and no third party is in breach or default under the lease or sublease, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit
termination, modification or acceleration thereunder; 
  
 (d)
Repudiation. Neither the Company nor any other party to the lease has repudiated any provision of the lease or sublease; 
  
 (e) No Disputes. There are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; 
  
 (f) Subleases. With respect to each sublease, the
representations and warranties set forth in subsections 4.12(a) through 4.12(e) above are true and correct with respect to the underlying lease; 
  
 (g) Encumbrances. None of the Company or its Affiliates has assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold; 
  
 (h)
Approvals. All facilities leased or subleased thereunder have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations; and 
  

 14 








 (i) Utilities. All facilities leased or subleased thereunder are supplied with utilities
and other services reasonably necessary for the operation of said facilities. 
  
 4.13 Intellectual Property. The Company owns or has the right to use pursuant to a valid license, sublicense, agreement, or permission all Intellectual Property necessary or desirable for the operation
of the businesses of the Company as presently conducted and as presently proposed to be conducted. No claim or demand of any Person has been made, nor is there any proceeding that is pending, or to the Shareholder’s Knowledge, threatened, which
challenges the rights of the Company with respect to any Intellectual Property or asserts that the Company is infringing or otherwise in conflict with or is required to pay any royalty or license fee with respect to any Intellectual Property.

  
 4.14 Condition of Tangible Assets. Each tangible
asset of the Company is free from defects (patent and latent), has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable, designed and intended for
the purposes for which it presently is used by the Shareholder and the Company and is not outdated in comparison with the assets used for similar purposes by similar businesses. 
  
 4.15 Contracts. Section 4.15 of the Disclosure Schedule lists the following contracts and other agreements,
written or oral, to which the Company was a party immediately preceding the Closing: 
  
 (a) Personal Property Leases. Any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments; 
  
 (b) Services. Any agreement (or group of related agreements)
for the furnishing or receipt of services, the performance of which will extend over a period of more than one (1) year; 
  
 (c) Partnership; Joint Venture. Any agreement constituting a partnership or joint venture; 
  
 (d) Indebtedness. Any agreement (or group of related
agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation; 
  
 (e) Confidentiality; Non-Competition. Any agreement concerning confidentiality or non-competition; 
  
 (f) Shareholders’ Agreements. Any agreement by and between
the Shareholder and any Affiliate of the Company; 
  
 (g)
Plans. Any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan or arrangement for the benefit of its current or former directors, officers, and employees; 
  

 15 








 (h) Employment or Consulting Agreements. Any agreement for the employment of any individual
on a full-time or part-time or the engagement of any individual as a consultant or independent contractor, or otherwise compensating an individual for services rendered or to be rendered to the Company; 
  
 (i) Advances; Loans. Any agreement under which the Company has
advanced or loaned any amount to any of its directors, officers and employees outside the ordinary course of business; 
  
 (j) Adverse Effects. Any agreement under which the consequences of a default or termination could have a material adverse effect on the
business, financial condition, operations, results of operations or future prospects of the Company; and 
  
 (k) Other Agreements. Any other agreement (or group of related agreements) the performance or rendering of which involves consideration in
excess of Five Thousand and No/100 Dollars ($5,000.00). 
  
 The
Shareholder has made available to PainCare and Subsidiary a correct and complete copy of each written agreement listed in Section 4.15 of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4.15 of the Disclosure Schedule. With respect to each such agreement: (i) the agreement is legal, valid, binding, enforceable, and in full force and effect; (ii) there shall be no
breach or other violation resulting from the consummation of the transactions contemplated hereby; (iii) the Company is not in default or breach and no other party is in breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement; and (iv) neither the Company nor any other party has repudiated any provision of the agreement. None of the agreements listed in
Section 4.15 of the Disclosure Schedule requires the consent or approval of any Person, or any compensation or payment to be made to any such Person by reason of the transactions contemplated by this Agreement, or the merger of the Company
with and into another Person. 
  
 4.16 Powers of
Attorney. There are no outstanding powers of attorney executed on behalf of the Company. 
  
 4.17 Insurance; Malpractice. Section 4.17 of the Disclosure Schedule contains a list and brief description of all policies or binders of
fire, liability, product liability, workers compensation, health and other forms of insurance policies or binders currently in force insuring against risks to which the Company has been a party, a named insured or otherwise the beneficiary of
coverage at any time during the five (5) years immediately preceding the Closing Date. Section 4.17 of the Disclosure Schedule contains a description of all current malpractice liability insurance policies of the Shareholder, the Company and the
Company’s professional employees and all predecessor policies in effect. Except as set forth on Section 4.17 of the Disclosure Schedule: (a) neither the Company, nor its professional employees, nor the Shareholder has, during the five (5) years
immediately preceding the Closing Date, filed a written application for any insurance coverage relating to the Company’s business or property which has been denied by an insurance agency or carrier; and (b) the Company, the Company’s
professional employees and the Shareholder has been continuously insured for professional 

  

 16 








 
malpractice claims during the same period. Section 4.17 of the 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 Company, the Company’s professional employees or the Shareholder during the five (5) years immediately preceding the Closing Date, including workers compensation, general
liability, environmental liability and professional malpractice liability claims. With respect to each insurance policy listed in Section 4.17 of the Disclosure Schedule: (i) the policy is legal, valid, binding, enforceable, and in full force and
effect; (ii) the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iii) neither the Company, the Shareholder, other
health care professionals nor any other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or acceleration, under the policy; (iv) the Company has not repudiated any provision thereof and no other party to the policy has repudiated any provision thereof; (v) there is no claim
pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriter(s) of such policies or any notice that a defense will be afforded with reservation of rights; (vi) the Company has not received: (A)
any notice that any issuer of any such policy has filed for protection under applicable bankruptcy laws or is otherwise in the process of liquidating or has been liquidated; or (B) any other indication that such policies are no longer in full force
and effect or that the issuer of any such policy is no longer willing or able to perform its obligations thereunder; and (vii) neither the Shareholder nor the Company has received any written notice from or on behalf of any insurance carrier issuing
such policies, that there will hereafter be a cancellation, or an increase in a deductible or non-renewal of existing policies. The Company 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. 
  
 4.18 Litigation. Except as noted in Section 4.18 of the Disclosure Schedule, there is no litigation, arbitration, governmental claim, investigation or proceeding, pending or, to each of the Seller’s knowledge, threatened,
against the Company, or the Sellers at law or in equity, before any court, arbitration tribunal or governmental agency. Each of the Sellers has no knowledge of any facts on which claims may hereafter be made against the Company that will have a
Material Adverse Effect on the Company. All medical malpractice claims, general liability incidents and incident reports relating to the Business have been submitted to the Sellers’ or Company’s insurer. All claims made or, to each of the
Sellers’ knowledge, threatened against the Company or the Sellers in excess of the deductible are covered under Sellers’ or Company’s current insurance policies. Sellers have provided Purchasers with a complete list of all general
liability incidents, incident reports and malpractice claims relating to the Business or the Center that have for the five (5) year period prior to the Closing Date. 
  
 4.19 Health Care Compliance. The Company is participating or otherwise authorized to receive reimbursement
from Medicare and Medicaid and is a party to other third-party payor agreements set forth in Section 4.19 of the Disclosure Schedule. All necessary certifications and contracts required for participation in such programs are in full force and effect
and have not been amended or otherwise modified, rescinded, revoked or assigned, and no condition exists or event has occurred which in itself or with the giving of notice or the lapse of time or both would result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such third-party 

  

 17 








 
payor program. The Company is in compliance in all material respects with the requirements of all such third-party payors applicable thereto. None of the
Company, its physician employees, the Shareholder, or immediate family members of the Shareholder or other physician employees, have any financial relationship (whether investment interest, compensation interest, or otherwise) with any entity to
which any of the foregoing refer patients, except for such financial relationships that qualify for exceptions to state and federal laws restricting physician referrals to entities in which they have a financial interest. 
  
 4.20 Fraud and Abuse. The Company, the Shareholder, and all
persons and entities providing professional services for the Company have not engaged in any activities which are prohibited under 42 U.S.C. § 1320a-7b, or the regulations promulgated thereunder pursuant to such statutes, or related state or
local statutes or regulations, or which are prohibited by rules of professional conduct, including the following: (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for
any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failing to disclose Knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment; and (d) knowingly and willfully soliciting or receiving
any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay or receive such remuneration: (A) in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medicaid; or (B) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering
any good, facility, service or item for which payment may be made in whole or in part by Medicare or Medicaid. The Company 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
Company 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. 
  
 4.21 Legal Compliance. The Company and its predecessors and
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 Shareholder and the Company, threatened against the Company alleging any failure so to comply. The Company and all
physicians and other health care professionals engaged or employed by the Company 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 Company
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
Company 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 

  

 18 








 
such governmental authority or third-party payor. The Company has not received notice and the Company and Shareholder has no Knowledge or reason to believe
that, such necessary authorizations may be revoked or not renewed in the ordinary course of business. 
  
 4.22 Rates and Reimbursement Policies. The jurisdiction in which the Company 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 Company 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 Company does not have any rate appeal currently pending before any governmental authority or any administrator of any third-party payor program. The Company and the Shareholder
have no Knowledge of any applicable Law, which affects rates or reimbursement procedures which has been enacted, promulgated or issued within the eighteen (18) months preceding the date of this Agreement or any such legal requirement proposed or
currently pending in the State of Florida which could have a Material Adverse Effect on the Company, its business or operations, or may result in the imposition of additional Medicaid, Medicare, charity, free care, welfare, or other discounted or
government assisted patients at the Company or require the Company to obtain any necessary authorization which the Company does not currently possess. Neither the Company nor the Shareholder have Knowledge of any impending proposed reduction in
reimbursement from third party or other payors nor Knowledge of any threatened termination of payor contracts. 
  
 4.23 Medical Staff. Except as set forth on Section 4.23 of the Disclosure Schedule, the Shareholder has no Knowledge of a physician who is
providing services on behalf of the Company who plans, or has threatened to terminate his or her employment or other relationship with the Company. None of the physicians providing services on behalf of the Company currently has plans to retire from
the practice of medicine in the next three (3) years. 
  
 4.24
Employees. Except as set forth on Section 4.24 of the Disclosure Schedule: (a) there is no unfair labor practice charge or complaint pending or threatened relating to the business of the Company; and (b) payment in full to all of the
employees of the Company of all wages, salaries, commissions, bonuses, benefits, and other compensation lawfully due and owing to such employees or otherwise arising under any policy, practice, agreement, plan, program, statute, or other law as of
the Closing Date has been made. 
  
 4.25 Employee
Benefits. 
  
 (a) Plans. Section 4.25 of
the Disclosure Schedule lists each Employee Benefit or health and welfare plan that the Company maintains or to which the Company contributes. 
  
 (b) Compliance. Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in
all material respects with its terms and with the applicable requirements of ERISA, the Code and other applicable laws. 
  
 (c) Reports and Descriptions. All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1’s, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. 
  

 19 








 (d) Contributions. All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions for any pay period ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Company. All premiums or other payments due for all periods ending on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan. 
  
 (e) Qualified Plan. Each such Employee Benefit Plan which is an Employee Pension Benefit Plan and is intended to meet the requirements of a “qualified plan” under Code Section 401(a) meets such requirements and has
received, within the last two (2) years, a favorable determination letter from the IR. 
  
 (f) Market Value. The market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in accordance with PBGC methods, factors, and assumptions applicable to an Employee Pension Benefit Plan terminating on the date for determination. 
  
 (g) Copies. The Shareholder has delivered to PainCare and
Subsidiary correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the IRS, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan. 
  
 (h) Maintenance of Plans. With respect to each Employee Benefit Plan that the Company maintains, ever has maintained, or to which it contributes, ever has contributed, or ever has been required to
contribute: 
  
 (i) Reportable Events. No such
Employee Benefit Plan which is an Employee Pension Benefit Plan has been completely or partially terminated or been the subject of a Reportable Event as to which notices would be required to be filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan has been instituted or threatened; and 
  
 (ii) Prohibited Transactions. There have been no Prohibited Transactions with respect to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure
to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than any Multiemployer Plan), other than routine claims for benefits, is pending or threatened. The Shareholder and the Company have no Knowledge of any basis for any such action, suit, proceeding, hearing, or
investigation. 
  

 20 








 4.26 Physicians and Other Providers. During the five (5) years preceding the Closing Date,
each physician, and other health care provider who is or was employed by, or who renders or has rendered services on behalf of, the Company: 
  
 (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 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 4.26 of the Disclosure Schedule, has not been a party or subject to: 
  
 (i) Malpractice Actions. Any malpractice suit, claim (whether or not filed in court), settlement, settlement allocation, judgment, verdict
or decree; 
  
 (ii) Disciplinary Proceedings. Any
disciplinary, peer review or professional review investigation, proceeding or action instituted by any licensure board, hospital, medical school, physical therapy school, health care facility or entity, professional society or association, third
party payor, peer review or professional review committee or body, or governmental agency; 
  
 (iii) Criminal Proceedings. Any criminal complaint, indictment or criminal proceedings; 
  
 (iv) Investigation. Any investigation or proceedings, whether administrative, civil or criminal, relating to an allegation of filing false
health care claims, violating anti-kickback or fee-splitting laws, or engaging in other billing improprieties; 
  
 (v) Mental Illnesses. Any organic or mental illness or condition that impairs or may impair such physician’s ability to practice;

  
 (vi) Substance Abuse. Any dependency on,
habitual use or episodic abuse of alcohol or controlled substances, or any participation in any alcohol or controlled substance detoxification, treatment, recovery, rehabilitation, counseling, screening or monitoring program; 
  
 (vii) Professional Ethics. Any allegation, or any
investigation or proceeding based on any allegation of violating professional ethics or standards, or engaging in illegal, immoral or other misconduct (of any nature or degree), relating to his or her practice; or 
  
 (viii) Application for Licensure. Any denial or withdrawal of
an application in any state for licensure as a physician or physical therapist, for medical staff privileges at any hospital or other health care entity, for board certification or recertification, for participation in any third party payment
program, for state or federal controlled substances registration, or for malpractice insurance. 
  

 21 








 4.27 Guaranties. The Company is not a guarantor or otherwise liable for any Liability or
obligation (including indebtedness) of any other Person. 
  
 4.28
Environment, Health, and Safety. 
  
 (a)
Compliance. Each of the Company and its predecessors and Affiliates has complied and is in compliance with all Environmental, Health, and Safety Requirements. 
  
 (b) Permits and Licenses. Without limiting the generality of the foregoing, each of the Company and its
Affiliates has obtained and complied with, and is in compliance with, all permits, licenses and other authorizations that are required pursuant to Environmental, Health, and Safety Requirements for the occupation of its facilities and the operation
of its business; a list of all such permits, licenses and other authorizations is set forth on Section 4.28 of the Disclosure Schedule. 
  
 (c) Notices. None of the Company nor its predecessors or Affiliates has received any written or oral notice, report or other information
regarding any actual or alleged violation of Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under Environmental, Health, and Safety Requirements. 
  
 (d) Hazardous Substances. None of the Company or its predecessors or Affiliates has treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including without limitation any hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a
manner that has given or would give rise to liabilities, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Solid Waste Disposal Act, as amended or any other Environmental, Health, and Safety Requirements. 
  
 (e) Neither the Company nor Sellers have received any communication (written or oral), whether from a governmental
authority, citizens’ group, employee or otherwise, that alleges that the Business or the Company is not in full compliance with Environmental Laws, or that the Company, the Business or Sellers are otherwise subject to liability under
Environmental Laws, and to the best each of Sellers’ knowledge, there are no circumstances that may prevent or interfere with such full compliance in the future. There is no Environmental Claim (as defined below) pending or, to the best
knowledge of each of the Sellers, threatened against the Company, the Business or the Center. 
  
 (f) Sellers have no knowledge of any actions, activities, circumstances, conditions, events or incidents, including, but not limited to, the release, emission, discharge, presence or disposal of any Hazardous
Substances that could form the basis of any Environmental Claim against the Company, the Business or the Center, or Sellers in connection with the Business or the Center. 
  

 22 








 4.29 Certain Business Relationships with the Company and its Affiliates. Neither the
Shareholder nor any of his Affiliates have been involved in any business arrangement or relationship with the Company and its Affiliates within the past twelve (12) months, and none of the Shareholder and his Affiliates owns any asset, tangible or
intangible, which is material to the business of any of the Company and its Affiliates. 
  
 4.30 Third-party Payors. Section 4.30 of the Disclosure Schedule sets forth an accurate, correct and complete list of the Company’s third-party payors. Neither the Company nor the Shareholder 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 Company. The Company has no reason to believe that any third-party payor will cease to do
business with the Company after, or as a result of, the consummation of any transactions contemplated hereby. The Company does not know of any fact, condition or event which would adversely affect its relationship with any third-party payor.

  
 4.31 Bank Accounts. Section 4.31 of the
Disclosure Schedule sets forth all of the bank and security accounts and all safe deposit boxes maintained by the Company and all lines of credit owned or used by the Company, and the names of all persons with authority to withdraw funds from, or
execute drafts or checks on, each such account. 
  
 4.32 Tax
Status. The Shareholder is not a “nonresident alien individual” or “foreign corporation” for purposes of Code Section 897(a)(1). 
  
 4.33 Binding Obligation. This Agreement constitutes the valid and legally binding obligation of the Shareholder, enforceable in accordance
with its terms and conditions. 
  
 4.34 No Corporate
Practice or Fee Splitting. The Shareholder does not have any Knowledge that the actions, transactions or relationships arising from, and contemplated by, the Transaction violate any law, rule or regulation relating to the corporate practice
of medicine or fee splitting. The Shareholder accordingly agrees that he will not and will not cause any other Party, in an attempt to void or nullify this Agreement or any document related to the Transaction or any relationship involving PainCare
or Subsidiary to sue, claim, aver, allege or assert that any such document or any such relationship violates any law, rule or regulation relating to the corporate practice of medicine or fee splitting. 
  
 4.35 Staff Privileges. Schedule 4.35 lists all hospitals at
which the Shareholder has full staff privileges. Such staff privileges have not ever been revoked, surrendered, suspended or terminated, and to the best of the Shareholder’s Knowledge, there are no, and have not been any, facts, conditions or
incidents that may result in any such revocation, surrender, suspension or termination. 
  
 4.36 Intentions. The Shareholder intends to continue practicing medicine on a full-time basis for the next three (3) years with the Company or the Surviving Corporation and does not know of any fact or
condition that adversely affects, or in the future may adversely affect, his ability or intention to practice medicine on a full-time basis for the next three (3) years with the Company or the Surviving Corporation. 
  

 23 








 4.37 Securities Representation. 
  
 (a) No Registration of the PainCare Shares; Investment Intent.
The Shareholder acknowledges that the PainCare Shares to be delivered pursuant to this Agreement have not been and will not be registered under the Securities Act and may not be resold without compliance with the Securities Act. The PainCare Shares
to be acquired by the Shareholder pursuant to this Agreement are being acquired solely for his own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of them in connection with a
distribution other than in compliance with the Securities Act. 
  
 (b) Resale Restrictions. The Shareholder covenants, warrants and represents that none of the PainCare Shares issued to Shareholder will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the Securities Act and the rules of regulations of the Commission and applicable state securities laws, and the applicable provisions of this Agreement. All certificates
evidencing the PainCare Shares shall bear appropriate legends. 
  
 (c) Ability to Bear Economic Risk. The Shareholder covenants, warrants and represents that he is able to bear the economic risk of an investment in the PainCare Shares acquired pursuant to this Agreement and can afford to
sustain a total loss of such investment and has such Knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the proposed investment and therefore has the capacity to protect his own
interests in connection with the acquisition of the PainCare Shares. The Shareholder, and the Shareholder’s purchaser representative, if any, have received copies of PainCare’s most recent 10-KSB, 10-QSB AND 8-K filings and have had an
adequate opportunity to ask questions and receive answers from the officers of PainCare concerning any and all matters relating to the background and experience of the officers and directors of PainCare, the plans for the operations of the business
of PainCare, and any plans for additional acquisitions and the like. The Shareholder, and the Shareholder’s purchaser representative, if any, have asked any and all questions in the nature described in the preceding sentence and all questions
have been answered to such individual’s satisfaction. 
  
 (d)
Accredited Investor. The Shareholder covenants, represents and warrants that he is an: (a) individual with a net worth (either individually or jointly with his respective spouse) in excess of One Million and No/100 Dollars
($1,000,000.00); or (b) individual who had an income in excess of Two Hundred Thousand and No/100 Dollars ($200,000.00) in each of 2001 and 2002, or had a joint income with his spouse in excess of Three Hundred Thousand and No/100 Dollars
($300,000.00) in each of 2001 and 2002, and has a reasonable expectation of reaching the same income level in 2003. 
  
 (e) Residency. The Shareholder covenants, warrants and represents that he is a resident of the State of Florida, and received this Agreement
and first learned of the transactions contemplated hereby in the State of Florida. He executed and will execute all documents contemplated hereby in the State of Florida, and intends that the laws of the State of Florida govern this transaction.

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

 

 24 








 (g) Disclosure. The representations and warranties contained in this Section 4 do not
contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 4 not misleading. 
  
 (h) IT IS ACKNOWLEDGED BY THE STOCKHOLDER THAT: 
  
 THE STOCKHOLDER HAS GIVEN AND HIS REPRESENTATIVE(S) HAVE BEEN GIVEN THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE ANSWERS
FROM, THE BUYER OR PERSON(S) ACTING ON ITS BEHALF CONCERNING THE TERMS AND CONDITIONS OF THIS TRANSACTION, AND TO OBTAIN ANY ADDITIONAL INFORMATION WHICH THE BUYER POSSESSES OR CAN ACQUIRE WITHOUT UNREASONABLE EFFORT OR EXPENSE THAT IS NECESSARY FOR
THE STOCKHOLDER TO MAKE AN INVESTMENT DECISION WITH RESPECT TO THE BUYER. 
  
 THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE MERITS OF OR GIVEN ITS APPROVAL TO THIS TRANSACTION OR THE BUYER’S SHARES. THE PAINCARE SHARES ARE OFFERED PURSUANT TO AN EXEMPTION
FROM REGISTRATION. 
  
 4.38 HIPAA. Schedule 4.38
lists and describes all plans and other efforts of the Shareholder with respect to the practice locations to comply with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), including the final regulations promulgated
thereunder, whether such plans and efforts have been put in place or are in process. Schedule 4.38 includes but is not limited in any manner whatsoever to any privacy compliance plan of the Company in place or in development, and any plans, analyses
or budgets relating to information systems including but not limited to necessary purchases, upgrades or modifications to effect HIPAA compliance. 
  
 4.39 Improper and Other Payments. (a) Neither the Company, any director, officer, employee thereof, nor any agent or representative of the
Company 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
Company to a domestic or foreign political party or candidate; and (c) the internal accounting controls of the Company are believed by the Company’s management to be adequate to detect any of the foregoing under current circumstances.

  
 4.40 Accounts Receivable. Schedule 4.40 sets
forth a list, accurate, correct and complete in all respects, of all outstanding accounts and notes receivable of the Company as of the Closing Date. All outstanding accounts and notes receivable reflected on Schedule 4.40 are due and valid claims
against account debtors for services rendered in accordance with the usual business practices and historical collection experience of the Company and are subject to no counterclaims, and have been outstanding for the periods indicated in the aging
analysis at Schedule 4.40. The Shareholder know of no reason why such accounts receivable would not be collectible by the Company according to approximately the same ratios as accounts receivable have been historically collectible by the Company.
All outstanding accounts and notes receivable included on Schedule 4.40 and generated through the Closing arose in the ordinary course of business. The Company has not incurred any liabilities to customers for discounts, returns, promotional
allowances or otherwise, except as provided in the Financial Statements. 
  

 25 








 4.41 Medical Waste. With respect to the generation, transportation, treatment, storage, and
disposal, or other handling of Medical Waste, the Company, with respect to the business, has complied with all Medical Waste Laws (as hereinafter defined). 
  
 “Medical Waste” includes, but is not limited to, (a) pathological waste, (b) blood, (c) sharps, (d) wastes from surgery or autopsy, (e) dialysis waste,
including contaminated disposable equipment and supplies, (f) cultures and stocks of infectious agents and associated biological agents, (g) contaminated animals, (h) isolation wastes, (i) contaminated equipment, (j) laboratory waste, and (k)
various other biological waste and discarded materials contaminated with or exposed to blood, excretion, or secretions from human beings or animals. “Medical Waste” also includes any substance, pollutant, material, or contaminant listed or
regulated under the Medical Waste Tracking Act of 1988, 42 U.S.C. §§6992, et seq. (“MWTA”). 
  
 “Medical Waste Law” means the following, including regulations promulgated and orders issued thereunder, all as may be amended from time to time: the MWTA; the
U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33 USCA §§2501 et seq.; the Marine Protection, Research, and Sanctuaries Act of 1972, 33 USCA §§1401 et seq.; the Occupational Safety and Health Act, 29 USCA
§§651 et seq.; the United States Department of Health and Human Services, National Institute for Occupational Self-Safety and Health Infectious Waste Disposal Guidelines, Publication No. 88-119; and any other federal, state, regional,
county, municipal, or other local laws, regulations, and ordinances insofar as they purport to regulate Medical Waste, or impose requirements relating to Medical Waste. 
  
 4.42 No Untrue or Inaccurate Representation or Warranty. No representation or warranty by Sellers contains or
will contain any untrue statement of fact, or omits or will omit to state a fact necessary to make the statements therein not misleading. 
  
 5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES. The Acquiring Companies represent and warrant to the Shareholder that the statements contained
in this Section 5 are correct and complete as of the Closing Date. 
  
 5.1 Organization of PainCare and Subsidiary. PainCare is a corporation duly organized, validly existing, and in good standing under the laws of the State of Florida. Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida. 
  
 5.2 Authorization of Transaction. PainCare and Subsidiary have full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of PainCare, enforceable in accordance with its terms and conditions. 
  
 6. CLOSING. The closing of the Transaction (the “Closing”) shall take place at the offices of PainCare, or via remote location as coordinated by
the Parties’ respective counsel within three (3) days of the closing of that certain financing arrangement which PainCare is undertaking for the purpose of funding the Cash Due At Closing but in no event shall the Closing take place later than
December 31, 2003, or such other date as the Parties may mutually agree (the “Closing Date”). 
  

 26 








 7. CLOSING DELIVERIES. 
  
 7.1 Deliveries of the Company and the Shareholder. At or prior to the Closing, the Company and the Shareholder
shall deliver to the Acquiring Companies the following: 
  
 (a)
Consents and Approvals. Copies of all authorizations, consents, and approvals of governments, governmental agencies and third parties referred to in Section 4.4(a) of the Disclosure Schedule; 
  
 (b) Termination of Agreements. Copies of documents effectuating
the termination of any and all written employment and independent contractor agreements, compensation agreements, buy-sell agreements and other similar agreements entered into by the Company and which are in effect immediately preceding the Closing,
which terminations shall each include a complete release of the Company from all known or unknown obligations or liabilities; 
  
 (c) Company Stock. The Certificates and stock powers, duly endorsed, transferring the Company Stock to Subsidiary and the officer and
director resignations required in Section 4.6; 
  
 (d)
Corporate Authorization. A resolution of the Shareholder and board of directors of the Company which authorizes the Transaction in accordance with: (a) applicable law; (b) the Company’s articles of incorporation and bylaws; and
(c) all other requirements for proper corporate authorization; 
  
 (e) Employment Agreement. A duly executed signature page to the Employment Agreement, in the form attached hereto as Exhibit 7.1(e), dated as of the Closing date, by and between the Surviving Corporation and the Shareholder;

  
 (f) Proper Certification. A copy of documents
evidencing that the Company may operate its business for any lawful purposes, and to allow Persons other than those licensed to practice medicine in the State of Florida to own shares of the Company’s Stock, which documents shall be in form and
substance reasonably satisfactory to PainCare and Subsidiary; 
  
 (g) Payoffs. Payoff letters from those creditors of the Company listed in Section 7.1(g) of the Disclosure Schedule; 
  
 (h) Good Standing Certificate. A certificate issued by the appropriate state governmental authority no more than ten (10) days prior to the
Closing Date evidencing the good standing of the Company; 
  
 (i)
Secretary’s Certificate. A certificate of the secretary of the Company certifying that the minute books, articles of incorporation and bylaws of the Company, attached as exhibits to such certificate, are true, correct, and
complete; and 
  

 27 








 (j) Other documents. Such other instruments or documents as may be necessary or appropriate
to carry out the Transactions. 
  
 7.2 Deliveries of
PainCare. At the Closing, PainCare shall deliver to the Shareholder the following: 
  
 (a) Transaction Consideration. The Initial Transaction Consideration; 
  
 (b) Resolutions. A resolution of the board of directors of PainCare, and the sole shareholder and members of the board of directors of
Subsidiary, authorizing the Transaction; 
  
 (c) Pledge
Agreement. A duly executed signature page to the Pledge Agreement, in the form attached hereto as Exhibit 3.4, dated as of the Closing date; 
  
 (d) Registration Rights Agreement. A duly executed signature page to the Registration Rights Agreement, in the form attached hereto as
Exhibit 2.13, dated as of the Closing date; 
  
 (e) Other
documents. Such other instruments or documents as may be necessary or appropriate to carry out the Transactions. 
  
 8. CONDITIONS TO THE OBLIGATIONS OF PAINCARE AND SUBSIDIARY. Each and every obligation of PainCare and Subsidiary under this Agreement shall be subject to
the satisfaction on or before the Closing Date of each of the following conditions, unless waived in writing by PainCare and Subsidiary: 
  
 8.1 Representations and Warranties; Covenants and Agreements. The representations and warranties of the Shareholder in this Agreement and
all information contained in any exhibit, certificate, schedule or attachment hereto or in any writing delivered by, or on behalf of the Shareholder or the Company shall be true and correct when made and shall be true and correct in all material
respects on the Closing Date as though then made, except as expressly provided for herein. Both the Shareholder and the Company shall have performed and complied with all agreements, covenants and conditions and shall have made all deliveries
required by this Agreement to be performed, delivered and complied with by them prior to the Closing Date; and 
  
 8.2 Due Diligence. The Acquiring Companies shall be satisfied, in their sole discretion, with the results of their due diligence examination
of the Company and, if the Acquiring Companies so choose, the completion of a satisfactory audit of the Company by the Acquiring Companies’ certified public accountants and the rendering by such accountants of an unqualified opinion letter.

  
 9. POST-CLOSING COVENANTS. The Parties agree as follows with
respect to the period following the Execution Date: 
  
 9.1
General. In the event that at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such
further instruments and documents) as any 

  

 28 








 
other Party may reasonably request, all at the sole cost and expense of the requesting Party; provided, however, that the costs and expenses associated with
the taking of any action necessary to execute or deliver to PainCare any stock powers and such other instruments of transfer as may be necessary to transfer ownership of the Company’s Shares by the Shareholder shall be borne by the Shareholder.

  
 9.2 Tax Returns. The Shareholder shall be
responsible for preparing and filing all income or franchise Tax Returns of the Company relating to periods of time prior to the Closing Date. The Subsidiary will be responsible for preparing and filing all income and franchise Tax Returns of the
Company relating to periods after the Closing. The Shareholder will provide the Subsidiary with an opportunity to review and comment on such Tax Returns (including any amended returns). The Shareholder will take no positions on the Tax Returns of
the Company that relate to the tax period prior to the Closing Date that could adversely affect the Company after the Closing. The income of the Company will be apportioned to the period up to the Closing Date and the period from and after the
Closing Date in accordance with the provisions of Code Section 1362(e)(6)(D) by closing the books of the Company as of the close of business on the last calendar day immediately preceding the Closing Date. 
  
 9.3 Transition. Neither the Shareholder nor the Company will
take any action that is designed, intended or likely to have the effect of discouraging any lessor, licensor, customer, supplier or other business associate of the Company from maintaining the same business relationships with the Company after the
Closing as he, she or it maintained with the Company prior to the Closing. 
  
 9.4 Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand in
connection with: (a) any transaction contemplated under this Agreement; or (b) any fact, situation, circumstances, status, condition, activity, practice, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing
Date involving the Company, each of the Parties will cooperate with the contesting or defending Party and its or his counsel in the contest or defense, at the sole cost and expense of the contesting or defending Party except to the extent that the
contesting or defending party is entitled to indemnification therefore under this Agreement. 
  
 9.5 Consents. The Shareholder hereby covenants and agrees that, after the Execution Date, he will use his best efforts to obtain all authorizations, consents, and approvals set forth in Section 4.4(b) of
the Disclosure Schedule. If such consent, approval or agreement is not obtained, or if an attempted assignment thereof would affect the rights of the parties thereunder so that such parties would not in fact receive all such rights, the Parties will
cooperate in any arrangement designed to provide for the Parties to receive the benefits under any such contract, including enforcement for the benefit of PainCare and Subsidiary of any and all rights of the Shareholder against a third party thereto
arising out of the breach or cancellation by such third party or otherwise. 
  
 9.6 Operational Covenants. Without the prior written consent of the Shareholder, which shall not be unreasonably withheld, PainCare shall not, prior to the conclusion of the third Formula Period:

  
 (a) reorganize the Surviving Corporation, whether by integrating or
consolidating the business of the Surviving Corporation with other operating units of PainCare or its subsidiaries or affiliates, except in the case that at the time of such integration or consolidation such transaction could not reasonably be
expected to have a Material Adverse Effect on the Formula Revenues; 
  

 29 








 (b) effect any reassignment, reprioritization, reallocation, restructuring, or reduction of the Surviving
Corporation’s human or other resources, their research and development initiatives, or their marketing programs, except in a manner that at the time of such event could not reasonably be expected to have a Material Adverse Effect on the Formula
Revenues or that are reasonably necessary in light of the Surviving Corporation’s results of operation; 
  
 (c) amend the articles of incorporation or bylaws of the Surviving Corporation in any manner that at the time of such amendment could reasonably be
expected to have a Material Adverse Effect on the Formula Revenues; 
  
 (d) cause the Surviving Corporation to become a party to or terminate any agreement which at the time such agreement is entered into or terminated could reasonably be expected to have a Material Adverse Effect on the Formula Revenues or
that is reasonably necessary in light of the Surviving Corporation’s results of operation; 
  
 (e) cause the Surviving Corporation to undertake actions outside the ordinary course of its business which at the time of such undertaking could
reasonably be expected to have a Material Adverse Effect on the Formula Revenues; 
  
 (f) sell a material portion of the Surviving Corporation or its assets, merge the Surviving Corporation with any other entity, sell a controlling interest in the Surviving Corporation, or make any fundamental change
in the business of the Surviving Corporation unless such action(s) at the time of such undertaking could not reasonably be expected to have a Material Adverse Effect on the Formula Revenues or that is reasonably necessary in light of the Surviving
Corporation’s results of operation; 
  
 The parties hereby
acknowledge and agree that the foregoing conditions shall become null and void and of no further force or effect if the Formula Profits of the Surviving Corporation in each of any two (2) consecutive calendar quarters are less than $500,000, or if
the Formula Profits of the Surviving Corporation in one (1) calendar quarter is less than $200,000. 
  
 In the event that PainCare defaults in its performance of any of its obligations under this Section and fails to cure such default within thirty (30) days
(or such other reasonable period if 30 days is not a sufficient amount of time to cure such default, provided that PainCare shall have commenced in good faith and is diligently pursuing its efforts to cure such default during such 30-day period) of
receiving a written notice of default from the Shareholder, PainCare shall be deemed to be in breach of this Agreement. 
  
 10. SURVIVAL AND INDEMNIFICATION. 
  
 10.1 Survival of Representations and Warranties. All of the representations, warranties, covenants, and agreements including but not limited
to the restrictive covenants and 

  

 30 








 
the indemnification provisions contained in this Agreement are material and have been relied upon by the Parties hereto and shall survive the Closing for
their applicable statute of limitations saving the covenants set forth in Section 9.6 which shall expire and terminate as of the end of the last Formula Period, or as otherwise provided in Section 9.6. 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. 
  
 10.2 Indemnification Provisions for the Benefit of PainCare and Subsidiary. In the event of: (a) a misrepresentation (or in the event any
third party alleges facts that, if true, would mean a misrepresentation) of any of the Shareholder’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 Shareholder’ covenants contained in this Agreement or any other agreement executed in connection herewith; or (c) any Liability of the Company of any nature whatsoever accrued or existing as of the Closing Date or
related to actions of the Company which occurred prior to the Closing Date, which is not reflected on the Financial Statements or the Closing Date Balance Sheet, then the Shareholder agrees to indemnify PainCare and Subsidiary from and against any
Adverse Consequences PainCare and Subsidiary may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the misrepresentation or breach (or alleged breach) or
non-disclosed Liability. No provision of this Agreement, including but not in any way limited to, any “Knowledge” qualifiers or materiality standards in the representations and warranties of the Shareholder, shall have any effect on the
Shareholders’ indemnity for any Liability arising prior to the Closing Date. 
  
 10.3 Indemnification Provisions for the Benefit of the Shareholder. In the event of a misrepresentation or breach (or in the event any third party alleges facts that, if true, would mean a
misrepresentation or breach) of any of PainCare’s or Subsidiary’s representations, warranties, and covenants contained in this Agreement, then PainCare and Subsidiary agree to indemnify the Shareholder from and against any Adverse
Consequences the Shareholder may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). 
  
 10.4 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 10, 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 

  

 31 








 
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 Section 10.4(b) above: (i) the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim; (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld or delayed unreasonably); and (iii) the 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 Section 10.4(b) 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 10. 
  
 (e) Right to
Set-Off. If any such cost, loss, damage, expense, liability, claim, or obligation occurs or is incurred by PainCare or Subsidiary, PainCare or Subsidiary shall have the right, after written notice to the Shareholder, at PainCare’s or
Subsidiary’s option and in addition to any other actions permitted by law, to offset the amount of any such cost, loss, damage, expense, liability, obligation or claim against amounts due from PainCare or Subsidiary to the Shareholder,
including the right to offset any post-closing payment due from PainCare or Subsidiary to the Shareholder under this Agreement or any other agreement. 
  
 (f) 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 10 as though there were no such qualifications, provisions or exceptions. 
  

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 (g) Limitation. The indemnification provisions set forth in this Section 10 shall be
limited to all claims in excess of Twenty Five Thousand and 00/100 Dollars ($25,000) (the “Threshold”). Once a claim exceeds the Threshold, if a Party is entitled to indemnification under this Section 10, 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. 
  
 11. RESTRICTIVE COVENANTS; CONFIDENTIALITY. 
  
 11.1 Shareholder Restrictive Covenants. As an inducement to
the Company to execute this Agreement and in order to preserve the goodwill associated with the business of the Surviving Company and in addition to and not in limitation of any covenants contained in any agreement executed and delivered herewith,
Shareholder hereby covenants and agrees as follows: 
  
 (a)
Covenant Not to Compete. During the Term of the Employment Agreement entered into with the Shareholder as of the Closing date and for a period of two (2) years after its termination “For Cause”, Shareholder will not directly or
indirectly, within the Territory (as hereinafter defined): 
  
 (i) be employed by, act as an agent, consultant or contractor of, engage in, continue in or carry on any business which provides pain care medicine, pain management and/or musculoskeletal rehabilitative (but not including any
anesthesiology) services in competition with the business of the Surviving Company or any business of PainCare or any of its subsidiaries that is substantially similar to such business, including owning or controlling any financial interest in any
corporation, partnership, firm or other form of business organization which is so engaged; 
  
 (ii) be employed by, consult with, advise or assist in any way, whether or not for consideration, any corporation, partnership, firm or other business organization which is now or becomes a competitor of the Surviving
Company or PainCare and its subsidiaries in any aspect with respect to the Business of the Surviving Company, including, but not limited to, advertising or otherwise endorsing the products of any such competitor; soliciting patients and customers or
otherwise serving as an intermediary for any such competitor; loaning money or rendering any other form of financial assistance to or engaging in any form of business transaction on other than on an arm’s length basis with any such competitor;

  
 (iii) offer employment to an employee of the Surviving
Company (excluding Stephanie Lomsak), PainCare or any of its subsidiaries, without the prior written consent of the Surviving Company; or 
  

 33 








 (iv) engage in any practice the purpose of which is to evade the provisions of this covenant not to
compete or to commit any act which adversely affects the Surviving Company, the PainCare or its subsidiaries or their businesses; 
  
 provided, however, that the foregoing shall not prohibit the ownership of securities of corporations which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which shall not exceed 5% of the outstanding shares of any such corporation. The parties agree that the geographic scope of this covenant not to compete shall be a twenty (20) mile radius
originating from any office of the Surviving Company (the “Territory”). The parties agree that the Surviving Company or PainCare, as the case may be, may sell, assign or otherwise transfer this covenant not to compete, in whole or in part,
to any person, corporation, firm or entity that purchases all or part of the Surviving Company’s, or PainCare’s, business upon obtaining the prior written consent of Shareholder which will not be unreasonably withheld. In the event a court
of competent jurisdiction determines that the provisions of this covenant not to compete are excessively broad as to duration, geographical scope or activity, it is expressly agreed that this covenant not to compete shall be construed so that the
remaining provisions shall not be affected, but shall remain in full force and effect, and any such over broad provisions shall be deemed, without further action on the part of any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such jurisdiction. 
  
 (b) Consideration. PainCare, Subsidiary and the Shareholder has carefully considered the nature and extent of the restrictions imposed by this Section 11.1 and the rights and remedies conferred upon
PainCare and Subsidiary hereunder and hereby expressly acknowledge and agree that: (i) the restricted territory, period, and activities are reasonable and are necessary and fully required to protect the legitimate business interests of PainCare and
Subsidiary; (ii) any violation of the terms of these restrictive covenants would have a substantial detrimental effect on PainCare’s and Subsidiary’s businesses; (iii) the restrictive covenants do not stifle the Shareholder’s inherent
skill and experience; and (iv) would not operate as a bar to any of the Shareholder’s means of support. Because of the difficulty of measuring economic losses to PainCare and Subsidiary as a result of the breach of the foregoing covenants, and
because of the immediate and irreparable damage that would be caused to PainCare and Subsidiary for which it would have no other adequate remedy, the Shareholder agrees that, in the event of a breach by him of the foregoing covenants, the covenants
set forth in this Section 11.1 may be enforced by PainCare and Subsidiary by injunctions and restraining orders, in addition to all other available legal remedies. 
  
 (c) Third-Party Beneficiaries. All successors and assigns of PainCare, Subsidiary, all Affiliates of PainCare
and Subsidiary, and all successors and assigns of such Affiliates are third-party beneficiaries of the restrictive covenants contained in this Section 11.1 and the provisions of this Section 11.1 are intended for the benefit of, and may be enforced
by, PainCare’s and Subsidiary’s successors and assigns and PainCare’s and Subsidiary’s Affiliates and such Affiliates’ successors and assigns. 
  
 11.2 Defenses. The existence of any claim or cause of action by the Shareholder against PainCare or
Subsidiary, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by PainCare, Subsidiary, or any of PainCare’s or Subsidiary’s successors and assigns or Affiliates and such Affiliates’
successors and assigns, but shall be litigated separately. The provisions of this Section 11 shall survive the termination of this Agreement. 
  

 34 








 11.3 No Running of Covenant During Breach. The covenants set forth in this Section 11 shall
apply for the applicable periods as set forth above. If the Shareholder violates such covenants, and PainCare, Subsidiary or any of their successors and assigns or Affiliates bring a legal action for injunctive or other relief, such party bringing
the action shall not, as a result of the time involved in obtaining the relief, be deprived of the benefit of the full period of the covenant period, unless a court of competent jurisdiction holds that the covenant is not enforceable in whole or in
part. Accordingly, for any time period that the Shareholder is in violation of the covenant, such time period shall not be included in calculating the applicable time period of the covenant. 
  
 11.4 Blue Pencil Doctrine. The covenants set forth in this
Section 11 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 
  
 11.5 Confidentiality, Press Releases, and Public Announcements.

  
 (a) No Party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior written approval of the other Parties. 
  
 (b) The Parties covenant and agree that from and after the Execution Date, neither of the Parties nor their Affiliates (to the extent any such Affiliate
has received Confidential Information as defined below or Trade Secrets, as defined below) shall disclose, divulge, furnish or make accessible to anyone any Confidential Information or Trade Secrets, or in any way use any Confidential Information or
Trade Secrets in the conduct of any business; provided, however, that nothing in this Section 11.5 will prohibit the disclosure of any Confidential Information or Trade Secrets which is required to be disclosed by a Party or any of its or his
Affiliates in connection with any public company laws or regulations, court action or any proceeding before any authority. Notwithstanding the foregoing, in the case of a disclosure contemplated by this Section 11.5, no disclosure shall be made
until the disclosing Party shall give notice to the non-disclosing Party of the intention to disclose such Confidential Information or Trade Secrets so that the non-disclosing Party may contest the need for disclosure, and the disclosing Party will
cooperate (and will cause its or his Affiliates and their respective representatives to cooperate) with the non-disclosing in connection with any such proceeding. Notwithstanding any provision of this Agreement which may be to the contrary, the
foregoing provisions restricting the use of Confidential Information and Trade Secrets shall survive the Closing for the time period equal to five (5) years from the Execution Date. For the purpose of this Agreement, the term “Confidential
Information” shall mean all records, files, reports, protocols, policies, manuals, databases, processes, procedures, computer systems, materials and other documents pertaining to the operations of a Party and the term “Trade Secrets”
shall mean information, including a formula, pattern, compilation, program, device, method, technique, or process that: (i) derives independent economic value, actual or potential, from not being 

  

 35 








 
generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii)
is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 
  
 11.6 Conduct of Business. From the date hereof through the Closing, the Shareholder shall, except as contemplated by this Agreement, or as consented to by PainCare in writing, cause the Company to be
operated in the ordinary course and in accordance with past practice and will not take any action inconsistent with this Agreement or with the consummation of the Closing. Without limiting the generality of the foregoing, the Company shall not, and,
with respect to the Company, the Shareholder shall not, except as specifically contemplated by this Agreement, as set forth in Section 11.6 of the Disclosure Schedule, or as consented to by PainCare in writing: 
  
 (a) change or amend the organizational documents of the Company; 

 
 (b) enter into, extend, materially modify, terminate or renew any lease or
any contract, except modifications, extensions or renewals of contracts in the ordinary course of business; 
  
 (c) sell, assign, transfer, convey, lease, mortgage, pledge or otherwise dispose of or encumber any of the assets or any interests therein of the Company
except in the ordinary course of business and, without limiting the generality of the foregoing, the Company will maintain, dispose of, and sell inventory consistent with past practices; 
  
 (d) incur any liability for indebtedness for borrowed money, guarantee the obligations of others, indemnify or agree to
indemnify others or, except in the ordinary course of business, incur any other liability; 
  
 (e) take any action with respect to the grant of any bonus, severance or termination pay (otherwise than pursuant to policies or agreements of the Company in effect on the date hereof that are described in the
Disclosure Schedule) or with respect to any increase of benefits payable under its severance or termination pay policies or agreements in effect on the date hereof or increase in any manner the compensation or fringe benefits of any employee of the
Company or pay, any benefit not required by any existing Employee Plan or policy; 
  
 (f) make any change in the key management structure of the Company, including, without limitation, the hiring of additional officers or the termination of existing officers; 
  
 (g) adopt, enter into or amend any Employee Plan, agreement (including,
without limitation, any collective bargaining or employment agreement), trust, fund or other arrangement for the benefit or welfare of any employee, except for any such amendment as may be required to comply with applicable regulations; 

 
 (h) fail to maintain all Employee Plans in accordance with applicable
Regulations; 
  

 36 








 (i) acquire by merger or consolidation with, or merge or consolidate with, or purchase substantially all
of the assets of, or otherwise acquire any material assets or business of, any corporation, partnership, association or other business organization or division thereof or acquire any subsidiary; 
  
 (j) willingly allow or permit to be done any act by which any of the
insurance policies of the Company or Shareholder may be suspended, impaired or canceled; 
  
 (k) enter into, renew, modify or revise any agreement or transaction relating to the Company with any of its or their Affiliates; 
  
 (l) fail to maintain the assets of the Company in substantially their current state of repair, excepting normal wear and
tear, or fail to replace (consistent with the Company’s past practice) inoperable, worn-out or obsolete or destroyed assets; 
  
 (m) make any loans or advances relating to the Company to any partnership, firm, individual, or corporation, except for expenses incurred in the ordinary
course of business consistent with past practice; 
  
 (n) fail to
comply in all material respects with all laws and regulations applicable to the Company; 
  
 (o) change any of the accounting methods or practices of the Company as historically applied or make any new elections or change any existing elections with respect to Taxes; 
  
 (p) intentionally do any other act which would cause any representation or
warranty of the Company or the Shareholder in this Agreement to be or become untrue, or any covenant in this Agreement to be breached, in any material respect; 
  

(q) fail to use reasonable efforts consistent with past business practice to (i) maintain the Company so that the services of its officers, employees,
consultants and agents will remain available to it on and after the Closing Date, (ii) maintain existing relationships with suppliers, patients, customers and others having business dealings with the Company and (iii) otherwise preserve the goodwill
of the business of the Company so that such relationships and goodwill will be preserved on and after the Closing Date; 
  
 (r) enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder; 
  
 (s) declare, set aside for payment, or pay any dividend or distribution in
respect of any capital stock of the Company, redeem, purchase or otherwise acquire any of the Company’s equity securities; or otherwise transfer any of the assets of the Company to or on behalf of any Shareholder of the Company or any Affiliate
of the Company, including, without limitation, any payment of principal of or interest on any debt owed to any of the foregoing or any payment of a bonus, fee or other payment to any of the foregoing as an employee of the Company; or 
  

 37 








 (t) fail to comply with all applicable filing, payment, withholding, collection and record retention
obligations under all applicable federal, state, local or foreign Tax laws. 
  
 11.7 No Third-Party Beneficiaries. Other than with respect to the restrictive covenants set forth in Section 11, this Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns. 
  
 12.
MISCELLANEOUS. 
  
 12.1 Entire Agreement
This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they
related in any way to the subject matter hereof. 
  
 12.2
Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors, assigns, distributees, heirs, and grantors of any revocable trusts of a Party hereto.
No Party may assign either this Agreement or any of its or his rights, interests, or obligations hereunder without the prior written approval of the other Parties; provided, however, PainCare and Subsidiary, may, without the prior consent of the
other Party, assign this Agreement to their Affiliates. 
  
 12.3
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 
  
 12.4 Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 
  
 12.5 Notices All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given: (a) upon receipt if it is sent by facsimile, (b) the next business day if sent by reputable overnight courier, or (c) five (5) days after mailing if by certified mail return receipt
requested, postage prepaid, and addressed or otherwise sent to the intended recipient as set forth below: 
  

	 If to PainCare
	  	 
	 or Subsidiary:
	  	 PainCare Holdings, Inc.

	 	  	 37 North Orange Avenue

	 	  	 Suite 500

	 	  	 Orlando, Florida 32801

	 	  	 Attention: President

		
	 If to the Shareholder:
	  	 Saqib Kahn, M.D.

	 	  	 202 Parkview Place

	 	  	 Lakeland, Florida 33805


  

 38 









	 With copies to:
	  	 Jeffrey M. Lasman, Esquire

	 	  	 LASMAN LAW FIRM, P.A.

	 	  	 115 Providence Road

	 	  	 Brandon, Florida 33511


  
 Any Party may send any notice,
request, demand, claim, or other communication hereunder to the intended recipient at the address or facsimile number set forth above using any other means (including personal delivery, messenger service, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address or facsimile number to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. 
  
 12.6 Governing Law; Jurisdiction; Attorney’s Fees. This Agreement, and all proceedings hereunder, shall be governed by and construed in
accordance with the domestic laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (either of the State of Florida or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Florida. In the event of any suit under this Agreement or otherwise between the parties hereto, the prevailing Party shall be entitled to all reasonable attorney’s fees and costs, including allocated costs
of in-house counsel, to be included in any judgment recovered. In addition, the prevailing Party shall be entitled to recover reasonable attorney’s fees and costs, including allocated costs of in-house counsel, incurred in enforcing any
judgment arising from a suit under this Agreement. This post-judgment attorney’s fees and costs provision shall be severable from the other provisions of this Agreement and shall survive any judgment on such suit and is not to be deemed merged
into the judgment. 
  
 12.7 Amendments and Waivers.
No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence and all waivers must be
in writing, signed by the waiving Party, to be effective. 
  
 12.8
Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in any other jurisdiction. 
  
 12.9 Expenses. Except as set forth herein, each of the Parties will bear its or his own costs and expenses (including, but not limited to,
legal and accounting fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. 
  
 12.10 Further Assurances. Each Party shall, at the reasonable request of any other Party hereto, execute and deliver to such other Party all
such further instruments, assignments, assurances and other documents, and take such actions as such other Party may reasonably request in connection with the carrying out the terms and provisions of this Agreement. 
  

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 12.11 Construction. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein, unless the Disclosure Schedule identifies the exception with reasonable particularity. The Parties intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from nor mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. 
  
 12.12 Survival. All of the representations, warranties,
covenants and agreements including but not limited to Articles VI and VII made by the Parties in this Agreement or pursuant hereto in any certificate, instrument or document shall survive the consummation of the transactions described herein shall
survive for all applicable statute of limitations, and may be fully and completely relied upon by Sellers and Purchasers, as the case may be, notwithstanding any investigation heretofore or hereafter made by any of them or on behalf of any of them,
and shall not be deemed merged into any instruments or agreements delivered at Closing or thereafter. 
  
 12.13 Incorporation of Exhibits and Schedules. The exhibits and schedules (including the Disclosure Schedule) identified in this Agreement
and the recitals first set forth above are incorporated herein by reference and made a part hereof. 
  
 12.14 Submission to Jurisdiction. Each party to this Agreement hereby submits to exclusive jurisdiction of any state or federal court within
Orange County, Florida for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each party to this Agreement hereby irrevocably waives, to the fullest extent permitted by law, any
objections which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 
  
 12.15 Notification of Certain Matters. Between the date
of this Agreement and the Closing, the Company and/or the Shareholder, as applicable, shall give prompt notice to PainCare of (i) the occurrence, or failure to occur, of any event which occurrence or failure would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material respect any time from the date hereof to the Closing Date and (ii) any material failure of the Company or any Affiliate, officer, director, employee, agent or
Shareholder of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. During the same period, the Shareholder and/or the Company shall promptly notify PainCare of the occurrence
of any breach by the Shareholder or the Company of any covenant in this or of the occurrence of any event that may make the satisfaction of the conditions to Closing impossible or unlikely, and PainCare shall promptly notify the Shareholder or the
Company of the occurrence of any such breach or event that comes 

  

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to its attention. Should any such fact or condition require any change in any Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, the Shareholder will promptly deliver to PainCare a supplement to the Disclosure Schedule specifying such change. PainCare shall not be required to Close if any such supplement to the Disclosure
Schedules or failure to satisfy a covenant, condition or agreement constitutes a material adverse effect. 
  
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 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above
written. 
  

	 PAINCARE:

	
	PAINCARE HOLDINGS, INC., a Florida corporation
		
	 By:
	 	 /s/ Randy Lubinsky


	 Print:
	 	 Randy Lubinsky

	 Its:
	 	 CEO

	
	 SUBSIDIARY:

	
	PAINCARE ACQUISITION COMPANY VII, INC., a Florida corporation
		
	 By:
	 	 /s/ Randy Lubinsky


	 Print:
	 	 Randy Lubinsky

	 Its:
	 	 CEO

	
	 COMPANY:

	
	HEALTH CARE CENTER OF TAMPA, INC. a Florida corporation
		
	 By:
	 	 /s/ Saqib Khan


	 Print:
	 	 Saqib Khan

	 Its:
	 	 President

	
	 SHAREHOLDER:

	
	 /s/ Saqib Khan.


	 Saqib Khan



  

 42