Merger Agreement



 Exhibit 10.1 
  
 MERGER AGREEMENT AND PLAN OF REORGANIZATION 
  
 BY AND AMONG 
  
 PAINCARE HOLDINGS, INC., 
  
 PAINCARE ACQUISITION COMPANY XI, INC., 
  
 DYNAMIC REHABILITATION CENTERS, INC. 
  
 AND 
  
 JEFFREY M. WAYNE, INDIVIDUALLY AND AS 
  
 TRUSTEE OF THE JEFFREY M. WAYNE TRUST 
  
 AND 
  
 MICHAEL WAYNE, INDIVIDUALLY AND AS 
  
 TRUSTEE
OF THE MICHAEL WAYNE TRUST 
  
 JUNE 1, 2004. 








 TABLE OF CONTENTS 
  

							
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	1.	 	DEFINITIONS.	  	2
			
	2.	 	TRANSACTION.	  	2
				
	 	 	2.1	 	Transaction.	  	2
				
	 	 	2.2	 	Effect of the Merger.	  	2
				
	 	 	2.3	 	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.	  	3
				
	 	 	2.8	 	Additional Actions.	  	3
				
	 	 	2.9	 	No Dissenters’ Rights.	  	3
				
	 	 	2.10	 	Surrender of Certificates.	  	3
				
	 	 	 	 	 (a)    Company’s Shares.
	  	3
				
	 	 	 	 	 (b)    Dividends.
	  	3
				
	 	 	2.11	 	Non-Transferred Assets.	  	4
				
	 	 	2.12	 	Conversion of Shares.	  	4
				
	 	 	2.13	 	Shareholder Consent and Release.	  	4
				
	 	 	2.14	 	Registration.	  	4
				
	 	 	2.15	 	Shareholders’ Obligation to Furnish Information.	  	5
				
	 	 	2.16	 	Suspension of Sales Pending Amendment to Prospectus.	  	5
				
	 	 	2.17	 	Registration Expenses.	  	6
			
	3.	 	TRANSACTION CONSIDERATION.	  	6
				
	 	 	3.1	 	Merger Consideration.	  	6
				
	 	 	3.2	 	Intentionally Omitted.	  	7
				
	 	 	3.3	 	Closing Date Adjustments	  	7
				
	 	 	 	 	 (a)    Transaction Related Adjustment.
	  	7
				
	 	 	 	 	 (b)    Financial Statements.
	  	7
				
	 	 	 	 	 (c)    Closing Date Balance Sheet.
	  	7
				
	 	 	3.4	 	Earnout Payment.	  	8

  

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	 	 	 	 	 (a)    General.
	  	8
				
	 	 	 	 	 (b)    Installment Payment Discount.
	  	8
				
	 	 	 	 	 (c)    Installment Payment Premium.
	  	9
				
	 	 	 	 	 (d)    Manner of Payment.
	  	9
				
	 	 	 	 	 (e)    Earnout Cap.
	  	10
				
	 	 	 	 	 (f)     Definitions for Purposes of Section 3
	  	10
			
	4.	 	REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.	  	11
				
	 	 	4.1	 	Organization, Qualification, and Corporate Power.	  	11
				
	 	 	4.2	 	Capitalization.	  	12
				
	 	 	4.3	 	Authorization.	  	12
				
	 	 	4.4	 	Noncontravention.	  	12
				
	 	 	4.5	 	Broker’s Fees.	  	13
				
	 	 	4.6	 	Title to Assets.	  	13
				
	 	 	4.7	 	No Subsidiaries.	  	13
				
	 	 	4.8	 	Financial Statements.	  	13
				
	 	 	4.9	 	Events Subsequent to Most Recent Year End.	  	13
				
	 	 	 	 	 (a)    Sale or Lease of Assets.
	  	13
				
	 	 	 	 	 (b)    Contracts.
	  	14
				
	 	 	 	 	 (c)    Change in Contracts.
	  	14
				
	 	 	 	 	 (d)    Security Interests.
	  	14
				
	 	 	 	 	 (e)    Investments.
	  	14
				
	 	 	 	 	 (f)     Debts.
	  	14
				
	 	 	 	 	 (g)    Liabilities Unaffected.
	  	14
				
	 	 	 	 	 (h)    Claims Unaffected.
	  	14
				
	 	 	 	 	 (i)     Articles and Bylaws.
	  	14
				
	 	 	 	 	 (j)     Changes in Equity.
	  	14
				
	 	 	 	 	 (k)    Distribution.
	  	14
				
	 	 	 	 	 (l)     Property Damage.
	  	14
				
	 	 	 	 	 (m)   Transactions with Affiliates.
	  	15

  

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	 	 	 	 	 (n)    Collective Bargaining Agreements.
	  	15
				
	 	 	 	 	 (o)    Compensation Changes.
	  	15
				
	 	 	 	 	 (p)    Employee Benefit Plans.
	  	15
				
	 	 	 	 	 (q)    Officers; Directors; Employees.
	  	15
				
	 	 	 	 	 (r)     Charitable or Capital Contributions.
	  	15
				
	 	 	 	 	 (s)    Ordinary Course of Business.
	  	15
				
	 	 	 	 	 (t)     Accounting Practices.
	  	15
				
	 	 	 	 	 (u)    Accounts Receivable.
	  	15
				
	 	 	 	 	 (v)    In General.
	  	15
				
	 	 	4.10	 	Undisclosed Liabilities.	  	15
				
	 	 	4.11	 	Tax Matters.	  	16
				
	 	 	 	 	 (a)    Tax Returns.
	  	16
				
	 	 	 	 	 (b)    Withholding.
	  	16
				
	 	 	 	 	 (c)    No Disputes of Claims.
	  	16
				
	 	 	 	 	 (d)    No Waivers.
	  	16
				
	 	 	 	 	 (e)    No Special Circumstances.
	  	16
				
	 	 	 	 	 (f)     Subchapter “S”.
	  	16
				
	 	 	 	 	 (g)    Audits of Tax Returns.
	  	17
				
	 	 	 	 	 (h)    Tax Agreements.
	  	17
				
	 	 	 	 	 (i)     Consents.
	  	17
				
	 	 	 	 	 (j)     Personal Holding Company.
	  	17
				
	 	 	 	 	 (k)    Consolidated Tax Returns.
	  	17
				
	 	 	4.12	 	Real Property.	  	17
				
	 	 	 	 	 (a)    Binding.
	  	17
				
	 	 	 	 	 (b)    Continued Validity.
	  	17
				
	 	 	 	 	 (c)    No Defaults.
	  	17
				
	 	 	 	 	 (d)    Repudiation.
	  	17
				
	 	 	 	 	 (e)    No Disputes.
	  	18
				
	 	 	 	 	 (f)     Subleases.
	  	18

  

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	 	 	 	 	 (g)    Encumbrances.
	  	18
				
	 	 	 	 	 (h)    Approvals.
	  	18
				
	 	 	 	 	 (i)     Utilities.
	  	18
				
	 	 	4.13	 	Intellectual Property.	  	18
				
	 	 	4.14	 	Condition of Tangible Assets.	  	18
				
	 	 	4.15	 	Contracts.	  	18
				
	 	 	 	 	 (a)    Personal Property Leases.
	  	18
				
	 	 	 	 	 (b)    Services.
	  	18
				
	 	 	 	 	 (c)    Partnership; Joint Venture.
	  	18
				
	 	 	 	 	 (d)    Indebtedness.
	  	19
				
	 	 	 	 	 (e)    Confidentiality; Non-Competition.
	  	19
				
	 	 	 	 	 (f)     Shareholders’ Agreements.
	  	19
				
	 	 	 	 	 (g)    Plans.
	  	19
				
	 	 	 	 	 (h)    Employment or Consulting Agreements.
	  	19
				
	 	 	 	 	 (i)     Advances; Loans.
	  	19
				
	 	 	 	 	 (j)     Adverse Effects.
	  	19
				
	 	 	 	 	 (k)    Other Agreements.
	  	19
				
	 	 	4.16	 	Powers of Attorney.	  	19
				
	 	 	4.17	 	Insurance; Malpractice.	  	20
				
	 	 	4.18	 	Litigation.	  	20
				
	 	 	4.19	 	Health Care Compliance.	  	21
				
	 	 	4.20	 	Fraud and Abuse.	  	21
				
	 	 	4.21	 	Legal Compliance.	  	21
				
	 	 	4.22	 	Rates and Reimbursement Policies.	  	22
				
	 	 	4.23	 	Medical Staff.	  	22
				
	 	 	4.24	 	Employees.	  	22
				
	 	 	4.25	 	Employee Benefits.	  	22
				
	 	 	 	 	 (a)    Plans.
	  	22
				
	 	 	 	 	 (b)    Compliance.
	  	22

  

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	 	 	 	 	 (c)    Reports and Descriptions.
	  	22
				
	 	 	 	 	 (d)    Contributions.
	  	23
				
	 	 	 	 	 (e)    Qualified Plan.
	  	23
				
	 	 	 	 	 (f)     Market Value.
	  	23
				
	 	 	 	 	 (g)    Copies.
	  	23
				
	 	 	 	 	 (h)    Maintenance of Plans.
	  	23
				
	 	 	 	 	 (i)       Reportable Events.
	  	23
				
	 	 	 	 	 (ii)      Prohibited Transactions.
	  	23
				
	 	 	4.26	 	Physicians and Other Providers.	  	24
				
	 	 	 	 	 (a)    Licenses.
	  	24
				
	 	 	 	 	 (b)    Controlled Substances.
	  	24
				
	 	 	 	 	 (c)    Actions.
	  	24
				
	 	 	 	 	 (i)       Malpractice Actions.
	  	24
				
	 	 	 	 	 (ii)      Disciplinary Proceedings.
	  	24
				
	 	 	 	 	 (iii)     Criminal Proceedings.
	  	24
				
	 	 	 	 	 (iv)     Investigation.
	  	24
				
	 	 	 	 	 (v)      Mental Illnesses.
	  	24
				
	 	 	 	 	 (vi)     Substance Abuse.
	  	24
				
	 	 	 	 	 (vii)     Professional Ethics.
	  	24
				
	 	 	 	 	 (viii)   Application for Licensure.
	  	24
				
	 	 	4.27	 	Guaranties.	  	25
				
	 	 	4.28	 	Environment, Health, and Safety.	  	25
				
	 	 	 	 	 (a)    Compliance.
	  	25
				
	 	 	 	 	 (b)    Permits and Licenses.
	  	25
				
	 	 	 	 	 (c)    Notices.
	  	25
				
	 	 	 	 	 (d)    Hazardous Substances.
	  	25
				
	 	 	4.29	 	Certain Business Relationships with the Company and its Affiliates.	  	26
				
	 	 	4.30	 	Third-party Payors.	  	26
				
	 	 	4.31	 	Bank Accounts.	  	26

  

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	 	 	4.32	 	Tax Status.	  	26
				
	 	 	4.33	 	Binding Obligation.	  	26
				
	 	 	4.34	 	No Corporate Practice or Fee Splitting.	  	26
				
	 	 	4.35	 	Intentions.	  	26
				
	 	 	4.36	 	Securities Representation.	  	27
				
	 	 	 	 	 (a)    No Registration of PainCare Shares; Investment Intent.
	  	27
				
	 	 	 	 	 (b)    Resale Restrictions.
	  	27
				
	 	 	 	 	 (c)    Ability to Bear Economic Risk.
	  	27
				
	 	 	 	 	 (d)    Accredited Investor.
	  	27
				
	 	 	 	 	 (e)    Residency.
	  	27
				
	 	 	 	 	 (f)     No Registration.
	  	27
				
	 	 	4.37	 	HIPAA	  	28
				
	 	 	4.38	 	Improper and Other Payments	  	28
				
	 	 	4.39	 	Accounts Receivable	  	28
				
	 	 	4.40	 	Medical Waste	  	28
				
	 	 	4.41	 	No Untrue or Inaccurate Representation or Warranty	  	29
			
	5.	 	REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES.	  	29
				
	 	 	5.1	 	Organization of PainCare and Subsidiary.	  	29
				
	 	 	5.2	 	Authorization of Transaction.	  	29
				
	 	 	5.3	 	No Conflict or Violation.	  	29
				
	 	 	5.4	 	Consents and Approvals.	  	29
				
	 	 	5.5	 	Disclosure Documents.	  	30
				
	 	 	5.6	 	Capitalization.	  	30
				
	 	 	5.7	 	Litigation.	  	30
				
	 	 	5.8	 	No Undisclosed Liabilities.	  	30
				
	 	 	5.9	 	No Brokers.	  	31
				
	 	 	5.10	 	Material Misstatements or Omissions.	  	31
			
	6.	 	CLOSING; TERMINATION.	  	31
			
	7.	 	CLOSING DELIVERIES.	  	31

  

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	 	 	7.1	 	Deliveries of the Company and the Shareholder.	  	31
				
	 	 	 	 	 (a)    Consents and Approvals.
	  	31
				
	 	 	 	 	 (b)    Termination of Agreements.
	  	31
				
	 	 	 	 	 (c)    Certificate of Merger.
	  	31
				
	 	 	 	 	 (d)    Corporate Authorization.
	  	31
				
	 	 	 	 	 (e)    Payoffs.
	  	32
				
	 	 	 	 	 (f)     Good Standing Certificate.
	  	32
				
	 	 	 	 	 (g)    Secretary’s Certificate.
	  	32
				
	 	 	 	 	 (h)    Medicare Provider Number.
	  	32
				
	 	 	 	 	 (i)     Managed Care Agreement.
	  	32
				
	 	 	 	 	 (j)     Other documents.
	  	32
				
	 	 	7.2	 	Deliveries of PainCare.	  	32
				
	 	 	 	 	 (a)    Transaction Consideration.
	  	32
				
	 	 	 	 	 (b)    Resolutions.
	  	32
				
	 	 	 	 	 (c)    Articles of Merger.
	  	32
				
	 	 	 	 	 (d)    Management Services.
	  	32
				
	 	 	 	 	 (e)    Secretary Certificate.
	  	32
				
	 	 	 	 	 (f)     Permitted Indebtedness.
	  	32
				
	 	 	 	 	 (g)    Other Documents.
	  	32
			
	8.	 	CONDITIONS TO THE OBLIGATIONS OF THE PARTIES	  	33
				
	 	 	8.1	 	Conditions for the Benefit of PainCare and the Subsidiary.	  	33
				
	 	 	8.2	 	Conditions for the Benefit of the Shareholders.	  	33
			
	9.	 	COVENANTS.	  	33
				
	 	 	9.1	 	Operations.	  	33
				
	 	 	9.2	 	Deliveries.	  	33
				
	 	 	9.3	 	Distribution of Sub-Chapter S Income by the Company.	  	33
				
	 	 	9.4	 	Post-Closing General Covenants.	  	34
				
	 	 	9.5	 	Tax Returns.	  	34
				
	 	 	9.6	 	Transitions.	  	34

  

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	 	 	9.7	 	Litigation Support.	  	34
				
	 	 	9.8	 	Consents.	  	34
				
	 	 	9.9	 	Operational Covenants.	  	35
				
	 	 	9.10	 	Capital Adjustments.	  	36
				
	 	 	9.11	 	Shareholders’ Guarantee.	  	36
			
	10.	 	SURVIVAL AND INDEMNIFICATION.	  	36
				
	 	 	10.1	 	Survival of Representations and Warranties.	  	36
				
	 	 	10.2	 	Indemnification Provisions for the Benefit of PainCare and Subsidiary.	  	36
				
	 	 	10.3	 	Indemnification Provisions for the Benefit of the Shareholder.	  	37
				
	 	 	10.4	 	Matters Involving Third Parties.	  	37
				
	 	 	 	 	10.4.1     Notification.	  	37
				
	 	 	 	 	10.4.2     Defense by Indemnifying Party.	  	37
				
	 	 	 	 	10.4.3     Satisfactory Defense.	  	38
				
	 	 	 	 	10.4.4     Conditions.	  	38
				
	 	 	10.5	 	Right to Set-Off.	  	38
				
	 	 	10.6	 	Limitation.	  	38
				
	 	 	10.7	 	Post-Closing Access to Records.	  	39
			
	11.	 	RESTRICTIVE COVENANTS; CONFIDENTIALITY.	  	39
				
	 	 	11.1	 	Competitive Activities.	  	39
				
	 	 	11.2	 	Termination of Right to Engage in Competitive Business Opportunities.	  	39
				
	 	 	11.3	 	Non-Competition.	  	40
				
	 	 	11.4	 	Relief for Violations.	  	41
				
	 	 	11.5	 	Severability.	  	41
				
	 	 	11.6	 	Confidentiality, Press Releases, and Public Announcements.	  	41
				
	 	 	11.7	 	Conduct of Business.	  	41
				
	 	 	11.8	 	No Third-Party Beneficiaries.	  	43
			
	12.	 	MISCELLANEOUS	  	43
				
	 	 	12.1	 	Entire Agreement.	  	43
				
	 	 	12.2	 	Succession and Assignment.	  	44

  

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	 	 	12.3	 	Counterparts.	  	44
				
	 	 	12.4	 	Headings.	  	44
				
	 	 	12.5	 	Notices.	  	44
				
	 	 	12.6	 	Governing Law; Jurisdiction; Attorney’s Fees.	  	45
				
	 	 	12.7	 	Amendments and Waivers.	  	45
				
	 	 	12.8	 	Severability.	  	45
				
	 	 	12.9	 	Expenses.	  	45
				
	 	 	12.10	 	Further Assurances.	  	46
				
	 	 	12.11	 	Construction.	  	46
				
	 	 	12.12	 	Survival.	  	46
				
	 	 	12.13	 	Incorporation of Exhibits and Schedules.	  	46
				
	 	 	12.14	 	Submission to Jurisdiction.	  	46
				
	 	 	12.15	 	Retention of Records.	  	46

  

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 MERGER AGREEMENT AND PLAN OF REORGANIZATION 
  
 THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
“Agreement”) is made and entered into effective the 1st day of June, 2004 (the “Execution
Date”) by and among PAINCARE HOLDINGS, INC., a Florida corporation (“PainCare”), PAINCARE ACQUISITION COMPANY XI, INC., a Florida corporation (“Subsidiary”), in which PainCare and the Subsidiary are sometimes
referred to herein as the “Acquiring Companies”, and DYNAMIC REHABILITATION CENTERS, INC., a Michigan corporation (the “Company”), and JEFFREY M. WAYNE, INDIVIDUALLY AND AS TRUSTEE OF THE JEFFREY M. WAYNE TRUST,
AND MICHAEL WAYNE, INDIVIDUALLY AND AS TRUSTEE OF THE MICHAEL WAYNE TRUST (each, a “Shareholder;” collectively, the “Shareholders”), in which the Company and the Shareholders are sometimes referred to herein
as the “Sellers.” PainCare, Subsidiary, the Company and the Shareholders are sometimes referred to herein individually as a “Party” and collectively as the “Parties.” 
  
 RECITALS 
  
 A. The Company owns and operates a physical rehabilitation medical
practice (hereinafter sometimes called the “Business”) at the locations set forth on Schedule “A” attached hereto (hereinafter sometimes collectively called the “Center”) and the Shareholders own all of the issued and
outstanding shares of stock in the Company (the “Company Shares”); 
  
 B. PainCare is in the business of acquiring the certain assets of medical practices and entering into management services agreements with practices entities associated with the acquired practice; 
  
 C. PainCare desires to enter into this Agreement in order for the
Subsidiary, which is a wholly-owned subsidiary of PainCare, to acquire the Non-Transferred Assets (as hereafter defined) of the Company; 
  
 D. Simultaneous with this transaction, Karazim Medical Consultants, PLC, a Michigan professional limited liability company (hereinafter the
“New PC”), will be reorganized to operate the physical rehabilitation medical practice and in connection with same will transfer all the Company’s Transferred Assets (as hereafter defined) to the New PC. 
  
 E. In connection with this acquisition, PainCare desires to have
Subsidiary enter into a management services agreement with the New PC, in which the management services agreement is the significant inducement for the Subsidiary to acquire the Non-Transferred Assets of the Company; 
  
 F. 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 
  
 G. 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. 
  

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 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. Immediately prior to the Merger, the Company will transfer all of its Transferred Assets to the New PC. Upon the terms and
subject to the conditions hereof and in accordance with the provisions of the Michigan Business Corporation Act (the “Michigan Act”) and 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”). 
  
 2.2 Effect of
the Merger. At and after the Statutory Merger Time, as defined in Section 2.3 below, the effect of the Merger shall, in all legal respects, be as provided in the Michigan Act and the Florida Act. From and after the Statutory Merger Time, the
Surviving Corporation shall continue to be a Florida corporation. 
  
 2.3 Filing of Certificates of Merger. The Merger shall be legally 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 and the Secretary of the State of Michigan in accordance with the provisions of the Florida Act and the Michigan Act, respectively (hereinafter the
“Statutory Merger Time”). 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 Statutory Merger Time, the articles of incorporation of Subsidiary,
as in effect immediately prior to the Statutory Merger Time, shall be the articles of incorporation of the Surviving Corporation until thereafter amended in accordance with applicable law. 
  
 2.5 Bylaws. As of the Statutory Merger Time, the bylaws of
Subsidiary, as in effect immediately prior to the Statutory Merger 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 Statutory Merger Time,
the directors and officers of Subsidiary immediately prior to the Statutory Merger 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 
  

 2 








 Corporation. 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 Shareholders 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 Shareholders and the Company to
take any and all such actions. 
  
 2.9 No Dissenters’
Rights. Comprising all of the Shareholders of the Company, the Shareholders’ approval and execution of this Agreement constitutes unanimous approval of the transactions contemplated herein; therefore, neither Shareholder, nor any other
party, is entitled to dissenters’ rights under the laws of the State of Michigan. 
  
 2.10 Surrender of Certificates. 
  
 (a) Company’s Shares. At the Closing, the Shareholders shall be required to surrender to Subsidiary the original stock certificate numbers 18 and 19 evidencing eighty-five (85) shares of stock
issued and outstanding, which immediately prior to the Closing Date 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 Closing Date represented the Company Shares (other than Company Shares held in the Company treasury) shall upon and after the Closing Date by virtue of the Merger be deemed for all purposes to represent and evidence only the
right to receive the Merger Consideration, as hereinafter defined, as provided in this Agreement. As of the Closing Date, 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 therefor,
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. 
  

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 2.11 Non-Transferred Assets. Simultaneous with the execution of this Agreement, the Company
will transfer to New PC the assets set forth in Schedule 2.11(a) (the “Transferred Assets”) and all remaining assets of the Company including, without limitation the assets set forth in Schedule 2.11(b) will be deemed
(“Non-Transferred Assets.”) 
  
 2.12
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 Shareholders the Company Shares shall be converted into the Merger Consideration. The PainCare Shares to be received by the Shareholders as
part of the Merger Consideration shall be subject to restrictions of the sale, transfer or distribution thereof as set forth in Section 4.36. 
  
 2.13 Shareholder Consent and Release. The Shareholders hereby consent to the Transaction and approve the execution and delivery of this
Agreement and the transactions contemplated hereby. Effective on the Closing Date, each Shareholder hereby releases the Company from any and all claims each may, could or will have, whether arising before or after the Closing Date, against the
Company as a result of the Shareholders having served as a stockholder, director, officer, employee, agent, or in any other capacity of the Company. 
  
 2.14 Registration. 
  
 (a) Saving any current or pending registration of any PainCare capital stock, if within the three (3) year period commencing on the date any PainCare
Shares are issued to the Shareholders PainCare proposes for any reason to register the PainCare Shares under the Securities Act [other than a registration in connection with respect to an exchange offer (Form S-4) or filed in connection with an
employee stock option or other benefit plan (Form S-8, or any substitute form that may be adopted by the Commission)], PainCare shall promptly give written notice to each Shareholder of its intention to so register the PainCare Shares and, upon
written request by either Shareholder, given within twenty (20) days after delivery of any such notice by PainCare, to include in such registration PainCare Shares held by such Shareholder (which request shall specify the number of PainCare Shares
proposed to be included in such registration). PainCare shall use its reasonable best efforts to cause all such PainCare Shares to be included in such registration on the same terms and conditions as the securities otherwise being included in such
registration; if the managing underwriters advise PainCare that the inclusion of the PainCare Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of the PainCare Shares proposed to be
registered by PainCare, then PainCare shall include in such registration the PainCare Shares requested to be included in such registration, pro rata from among the holders of any and all PainCare shares to be registered pursuant to such registration
according to the number of shares proposed by each holder to be included. In the event PainCare determines not to pursue, or to withdraw, a registration as to which it has given notice pursuant to this section, the Shareholders shall have no further
rights hereunder with respect to such proposed registration. Notwithstanding any other provision of this Section to the contrary, PainCare shall not be required to include any of the PainCare Shares in a registration statement relating to an
underwritten offering of PainCare’s securities unless the Shareholders accept the terms of the underwriting as agreed upon between PainCare and the underwriters selected by it, including, without limitation, any Underwriter’s Cutback
and/or Lockup, and the Shareholders agree to promptly execute and/or deliver such documents in connection with such registration as PainCare or the managing underwriter may reasonably request. 
  

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 (b) Each Shareholder may exercise his rights under Section 2.14(b) above on an unlimited number of
occasions. PainCare shall pay all Registration Expenses (as defined below) of any registration effected under this Section, except that in the event of withdrawal by a Shareholder, the withdrawing Shareholder shall pay (or reimburse PainCare for)
the amount of registration, filing or listing fees relating to his PainCare Shares included in the registration and shall pay the fees of PainCare’s counsel associated with such withdrawal, unless such withdrawal is due to the Shareholders
obtaining material adverse information that was not known by him at the time he requested inclusion of his PainCare Shares in the registration. 
  
 (c) The Shareholders may not participate in any registration under this Section which is underwritten unless they agree to sell such PainCare Shares on
the basis provided in any underwriting agreement (with terms not inconsistent herewith and customary in underwriting agreements for secondary distributions) approved by PainCare, provided that the Shareholders shall not be required to make any
representations or warranties to PainCare or the underwriters (other than representations and warranties regarding such Shareholder and such Shareholder’s intended method of distribution). 
  
 2.15 Shareholders’ Obligation to Furnish
Information. PainCare may require the Shareholders to furnish PainCare such information regarding the distribution of such securities as PainCare may from time to time reasonably request. If the failure by the Shareholders to furnish such
information as expeditiously as possible would prevent (i) the registration statement relating to such registration from being declared effective by the Securities Exchange Commission, or (ii) members of the National Association of Securities
Dealers, Inc. from participating in the distribution of the PainCare Shares proposed to be registered, PainCare may exclude the Shareholders’ PainCare Shares from such registration. 
  
 2.16 Suspension of Sales Pending Amendment to Prospectus.  
  
 (a) The Shareholders agree that, upon receipt of any notice from PainCare of
the happening of any event of that requires PainCare not to proceed with the registration, or if PainCare has decided not to proceed with the registration for any reason, the Shareholders shall forego the disposition of any PainCare Shares covered
by the registration statement or prospectus until he is advised in writing by PainCare that the use of the applicable prospectus may be resumed and, if so directed by PainCare, the Shareholders shall deliver to PainCare (at PainCare’s expense,
except as hereinafter provided) all copies, other than permanent file copies, then in Shareholders possession of any prospectus covering such PainCare Shares. 
  

(b) Each Shareholder agrees that he shall, as expeditiously as possible, notify PainCare at any time when a prospectus relating to a registration
statement covering such Shareholder’s PainCare Shares is required to be delivered under the Securities Act, of the happening of any event which requires changes to be made in the registration statement or any related prospectus so that such
registration statement or prospectus shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading as a result of any information
provided by the Shareholders for inclusion in such prospectus included in such registration statement and, 
  

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 at the request of PainCare, as expeditiously as possible prepare and furnish to it such information as may be necessary
so that, after incorporation into a supplement or amendment of such prospectus as thereafter delivered to the purchasers of such PainCare Shares, the information provided by such Shareholder shall not include an untrue statement of a material fact
or a misstatement of a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading and, in such event the expenses of delivery to PainCare of
copies of any prospectus in the Shareholder’s possession shall be at the expense of the Shareholder. 
  
 2.17 Registration Expenses.  
  
 (a) All expenses incident to PainCare’s performance of or compliance with its obligations under this Section 2, including without limitation all (i)
registration and filing fees, (ii) fees and expenses of compliance with securities laws, (iii) printing expenses, (iv) messenger and delivery expenses, (v) internal expenses, (vi) reasonable fees and disbursements of its counsel and its independent
certified public accountants (including “comfort” letters), (vii) securities act liability insurance, (viii) reasonable fees and expenses of any special experts retained by PainCare in connection with the registration hereunder, and (ix)
reasonable fees and expenses of other persons retained by PainCare (all such expenses being referred to herein as “Registration Expenses”) shall be borne by PainCare. 
  
 (b) Notwithstanding the foregoing, the following costs and expenses shall be excluded from the term “Registration
Expenses”: (i) all underwriting discounts and commissions, (ii) all applicable transfer taxes, (iii) the fees and disbursements of any counsel retained by the Shareholder, and (iv) except as provided in Section 2.17(a), all other costs, fees,
and expenses incurred by the Shareholders in connection with the exercise of his registration rights hereunder. 
  
 3. TRANSACTION CONSIDERATION. 
  
 3.1 Merger Consideration. The aggregate merger consideration (the “Merger Consideration”) shall consist of (i) the Closing Date
Consideration (the “Closing Date Consideration”) as hereafter defined, and (ii) the Earnout Payment as determined under Section 3.4 below. Subject to adjustment as provided in Section 3.3 below, the Closing Date Consideration that PainCare
shall deliver to the Shareholders in the amounts and denominations set forth in Section 3.1 of the Disclosure Schedule upon the satisfaction of the Closing Conditions and the Closing shall equal Four Million Five Hundred Thousand and 00/100 Dollars
($4,500,000), comprised of: (i) Two Million Two Hundred Fifty Thousand and 00/100 Dollars ($2,250,000) (the “Cash Due At Closing”) to be delivered via wire transfer to bank account(s) designated by the Shareholders, plus (ii) Nine Hundred
Twenty Seven Thousand Four Hundred Fourteen shares (927,414) of PainCare Shares, valued at Two Dollars and 42.61/100 Cents ($2.4261) per share and having an aggregate value of Two Million Two Hundred Fifty Thousand and 00/100 Dollars ($2,250,000)
(the “PainCare Shares Due At Closing”). At least one (1) day prior to the Closing Date, the Shareholders shall notify PainCare in writing of the bank account(s) to which the Cash Due At Closing shall be wired. 
  

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 3.2 Intentionally Omitted.  
  
 3.3 Closing Date Adjustments. The Closing Date
Consideration shall be subject to adjustment as follows: 
  
 (a)
Transaction Related Adjustments. The Cash Due At Closing shall not be reduced by the amount of any cash payments made by the Company with respect to expenses paid on behalf of the Shareholders (rather than the Company) such as legal,
accounting and financial advisory fees or as otherwise specifically allowed pursuant to this Agreement, subject to and conditioned upon the Company satisfying the Required Cash and Agreed Upon Net Equity as set forth in Section 3.3(c) below.

  
 (b) Financial Statements. The Company has
prepared financial statements consisting of (i) a balance sheet, statement of income and expenses statement in accordance with GAAP as of and for the year ended December 31, 2003 (the “GAAP Financial Statements”); and (ii) a balance sheet,
a statement of income and expenses as of and for the quarters ended March 31, 2003 and 2004; (the “Interim Financial Statements”) all of which are included in Section 3.3(b) of the Disclosure Schedule. The GAAP Financial Statements have
been certified by an independent auditor and have been prepared using accounting principles consistent with the accounting principles utilized by PainCare. The Interim Financial Statements have been prepared in accordance with the cash method of
accounting. The GAAP Financial Statements and the Interim Financial Statements (collectively, the “Financial Statements”) present fairly the financial condition of the Company as of such dates and the results of the 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), saving with respect to the Interim Financial Statements any applicable footnotes or
ordinary year end adjustments that would otherwise be required in annual GAAP statements . 
  
 (c) Closing Date Balance Sheet. Within forty-five (45) days after the Closing Date, PainCare or its Affiliate will prepare and deliver to each 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 fourteen (14) days after PainCare’s delivery of the Closing Date Balance Sheet to the Shareholders, the Shareholders 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 Shareholders fail to deliver notice
of acceptance or objection to the Closing Date Balance Sheet within such fourteen (14) day period, the Shareholders 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 Sheet, within fifteen (15) days after delivery of the Closing Date Balance Sheet (the “Adjustment Payment Date”), the Shareholders shall pay the Other Net Equity Adjustment (as defined below), if any to PainCare. In the event that
PainCare and the Shareholders 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 BDO Seidman, an independent certified public accountant, for computation or verification in accordance with the provisions of this Agreement, and the Net Equity Adjustment, if any, shall be paid by
the Shareholders to PainCare within ten (10) 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. 
  

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 If the final Closing Date Balance Sheet reflects Cash of the Company that is less than Fifty Thousand
Dollars ($50,000.00) (the “Required Cash”) then the Cash Due at Closing shall be reduced and the Shareholders shall be required to immediately return to PainCare dollar for dollar by an Amount equal to the Required Cash less Cash reflected
on the Closing Date Balance Sheet. If the final Closing Date Balance Sheet reflects Net Shareholders’ Equity (as defined below) of the Company that is less than One Million and 00/100 Dollars ($1,000,000.00) (“Agreed Net Equity”) then
the Closing Date Consideration shall be reduced (50% in Cash Due at Closing and 50% in PainCare Shares Due At Closing) and the Shareholders shall be required to immediately return to PainCare dollar for dollar an amount equal to the difference
between (x) the Agreed Net Equity; and (y) the Net Shareholders’ Equity set forth in the Closing Date Balance Sheet (the “Net Equity Adjustment”). “Net Shareholders’ Equity” shall mean the book value of the
Company’s tangible assets (plus accounts receivable and less the Required Cash) net of all Liabilities as set forth in the Closing Balance Sheet of the Company. 
  
 3.4 Earnout 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 Eight Hundred Thousand and 00/100 Dollars ($1,800,000) (the “Earnings Threshold”) in each of the three (3) successive twelve (12) month calendar periods beginning on the first of the
first month immediately following the Closing Date unless the Closing occurs on the first day of a month in which case the first 12 month period shall begin 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 Shareholders in the amounts and denominations set forth in Section 3.4 of the Disclosure Schedules a total amount of additional consideration of Four Million Five Hundred
Thousand and 00/100 Dollars ($4,500,000) for the Formula Periods, payable in three equal annual installments of One Million Five Hundred Thousand and no/100 Dollars ($1,500,000) (the “Intended Installment Payment”) in the form of
consideration and subject to adjustment as provided in Section 3.4(b) below. Each Shareholder hereby acknowledges and agrees that the Intended Installment Payments to be made by PainCare, if earned, are expressly subordinate to the rights and
obligations to the Laurus Master Fund, Ltd. (“Laurus”) as provided in those certain Securities Purchase Agreements, Security Agreements and Pledge Agreements between PainCare and Laurus dated February 27, 2004 and March 22, 2004. Payment
of the Intended Installment Payment is secured by a pledge of Subsidiary’s stock pursuant to a Stock Pledge Agreement (the “Stock pledge Agreement”). 
  
 (b) Installment Payment Discount. Notwithstanding Section 3.4(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 reflected below) (the “Adjusted Installment Payment”). The “Adjusted Installment Payment” 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%) if the Formula Period Profits are $1,300,000 or more but less than the Earnings Threshold; or (iii) seventy-five percent (75%) if the Formula Period Profits are $900,000 or more but less than
$1,300,000; or (iv) sixty percent (60%) if the Formula Period Profits are less than $900,000. 
  

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 (c) Installment Payment Premium. Notwithstanding Section 3.4(b), if (i) the Shareholders
receive the Adjusted Installment Payment from PainCare in a Formula Period rather than the Intended Installment Payment as a result of the Formula Period Profits equaling less than the Earnings Threshold for such Formula Period, and (ii) the
Subsidiary’s Formula Period Profits exceed the Earnings Threshold in the Formula Period immediately subsequent to the Formula Period for which the Installment Payment Discount corresponded (or, in the case of the last Formula Period the
immediately succeeding twelve (12) month calendar period following the last Formula Period [the, “Additional Formula Period”]), then PainCare shall pay to the Shareholders 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 Payment Premium is calculated less the Earnings Threshold, multiplied by (B) ninety percent (90%). The
Installment Payment Premium shall be paid to the Shareholders 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 Shareholders a financial statement prepared in accordance with the Company’s past practices presenting the Formula Period Profits for the
Surviving Corporation for the applicable Formula Period (the “Formula Period Profits Statement”). Ten (10) days after delivery of the Formula Period Profits Statement, the Shareholders 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 Shareholders fail to deliver notice of acceptance or objection to the Formula
Period Profits Statement within such ten (10) day period, the Shareholders shall be deemed to have accepted the Formula Period Profits Statement. If the Shareholders accept or fail to object to the Formula Period Profits Statement within the ten
(10) day period set forth above, then within ninety (90) days after the end of the Formula Period, PainCare shall pay to the Shareholders 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 Shareholders 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 below) per
one share of PainCare common stock for all Formula Periods. In the event PainCare and the Shareholders 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 Shareholders shall each have the right to require that such disputed determinations be submitted to BDO Seidman, an independent certified public accounting firm, for computation or verification in
accordance with the provisions of this Agreement, and the Installment Payment shall be paid by PainCare to the Shareholders 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. 
  

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 (e) Earnout Cap. Notwithstanding anything to the contrary in this Section 3, in no event
whatsoever shall the aggregate amount of the Installment Payments (inclusive of Installment Payment Premiums) paid to the Shareholders from PainCare in cash, in PainCare Shares or any other form of consideration exceed Four Million Five Hundred
Thousand and 00/100 Dollars ($4,500,000). 
  
 (f)
Definitions for Purposes of Section 3. For purposes of Section 3 of this Agreement: 
  
 (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 prior to the end of each Formula Period (or Additional Formula
Period, as the case may be) for which an Installment Payment (or Installment Payment Premium, as the case may be) are calculated as reported by such exchange or on a composite tape reflecting transactions on such exchange; or 
  
 (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 prior to the end of each Formula Period (or Additional
Formula Period, as the case may be) for which an Installment Payment (or Installment Payment Premium, as the case may be) are calculated; 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)-(3) 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 mutually agreed upon by the Parties. 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 3.4(f)(1), (2), (3) or (4) above in no event shall the Fair Market Value of the PainCare Shares ever be less than Two and 50/00 Dollars ($2.50) per share. 
  

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 (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 data 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 Subsidiary, except those reasonable charges for services provided directly to and for the benefit of the Subsidiary (ii) salaries of Jeffrey Wayne’s replacement, if
Jeffrey Wayne’s employment contract is terminated for reasons other than “For Cause” (as that term is defined in Mr. Wayne’s employment agreement with the Surviving Corporation of even date herewith); (ii) any non-recurring
charges, losses, profits, gains, or non-cash adjustments not related to the ongoing operations of the Subsidiary’s business, including but not limited to discontinued operations, extraordinary items, acquisition costs and goodwill charges
incurred in connection with the transactions contemplated hereby (excluding the write-off of any goodwill with respect to the Surviving Corporation in accordance with FASA 142), or unusual or infrequent items as such terms are defined pursuant to
generally accepted accounting principles, (iii) any charge related to grants or exercises of options, or (iv) costs or expenses of the Surviving Corporation’s employee benefits which exceed the costs or expenses of those same or similar
benefits currently being provided to the Company’s employees. 
  
 4.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The Shareholders represent and warrant to the Acquiring Companies that the statements contained in this Section 4 are true, correct and complete in all material respects as of the
date of this Agreement, except as set forth in the Disclosure Schedule accompanying this Agreement or any other separate writing referencing this Agreement from the Shareholder or its legal counsel which specifically references the applicable
section and describes the excepted item with reasonable particularity. 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 Michigan. Except as otherwise disclosed in writing to the Acquiring Companies, 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), copies of 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 Statutory Merger Time. The Company is not in default under or in violation of any provision of its articles of incorporation or bylaws.

  

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 4.2 Capitalization. The entire authorized capital stock of the Company consists of sixty
thousand (60,000) shares of common stock (the “Shares”), of which eighty five (85) Shares are issued and outstanding. 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 Shareholders. Each Shareholder has good title to their respective Company Shares as set forth in Section 4.2 of the Disclosure Statement 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 each 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 each Shareholder any and all notice required to be given to each 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 Shareholders, nor the consummation of the transactions contemplated hereby will result in: (a) to the best of Shareholders’ Knowledge a violation any applicable statute, 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 Shareholders are subject, or (b) a violation of 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 Shareholders are a party or by which either the Company or the Shareholders 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 Shareholders 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 Date, 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 the Closing Date which shall be obtained within a reasonable period of time after the Closing Date. 
  

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 4.5 Broker’s Fees. Except as set forth in Section 4.5 of the Disclosure Statement,
neither the Shareholders nor the Company have entered into any broker or finder’s agreement for which either Shareholder, the Company or PainCare is required to pay any Liability or obligation to pay any fees, expenses, or commissions to any
consultant, broker, finder, or agent with respect to this transaction. 
  
 4.6 Title to Assets. Section 4.6(a) of the Disclosure Schedule contains a complete, true and correct list of all of the assets of the Company. Except as to assets disposed of in the ordinary course of business subsequent to
the date hereof and as otherwise contemplated by this Agreement, 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 Closing Date Balance
Sheet or acquired after the date thereof, free and clear of all Security Interests except as set forth in Section 4.6(b) of the Disclosure Statement which includes, but is not limited to, the Permitted Indebtedness (described in Section 4.6(b) of
the Disclosure Schedule) in the amount not to exceed $100,000. Except for the Transferred Assets which are to be transferred to New PC, 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 3.3(b) of the Disclosure Schedule are copies of the GAAP Financial Statements and the Interim
Financial Statements. Except as provided in the Interim Financial Statements, or as fully disclosed in Section 4.8 of the Disclosure Schedule, the Company does not have any material Liabilities or obligations (whether accrued, absolute, contingent,
whether due or to become due or otherwise i.e., accounts payable, accrued expenses) which would be required by GAAP to be reported either in the financials or footnotes as a charge (or, potential charge) against the Company since the date of the
Interim Financial Statements. The Shareholder acknowledges and agrees that PainCare and Subsidiary relied upon the financial information set forth in the Financial Statements and that except as may otherwise be disclosed in Section 4.8 of the
Disclosure Schedules, the revenues reflected in both the GAAP Financial Statements and the Interim Financial Statements will, to the best Knowledge and belief of the Shareholder, continue to approximate for at least the next three (3) years the same
or greater levels as reflected in such Statements. Likewise, the Shareholders will use their best efforts to maintain and grow such revenue streams for the benefit of the New PC, PainCare and the Subsidiary and will take no action or omit to take
any action that may otherwise have a material adverse effect on such revenues or otherwise cause such revenue streams to be diverted to any other entity or individual including the Shareholders. 
  
 4.9 Events Subsequent to Most Recent Year End. Since December
31, 2003 (the “Most Recent Year End”), there has not been any material adverse change in the business, financial condition, operations, results of operations or to the Knowledge of Shareholders any threatened adverse change which would
affect 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; 
  

 13 








 (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 Shareholders nor the Company has any intent to do any of the foregoing or has received a written
indication of any third party’s intent to do any of the foregoing; 
  
 (d) Security Interests. Except as set forth in Section 4.9 of the Disclosure Statement, the Company has not granted 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. Except as set forth in Section 4.9 of the Disclosure Statement, 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 except in the normal course of business delayed or postponed the payment of accounts payable
and other Liabilities; 
  
 (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. Except for distributions of subchapter S
income as permitted by Section 9.3 below, 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; 
  

 14 








 (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 other than payment of normal consideration; 
  
 (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 increased 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 or officers, 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, notes or any other amounts owed to it; and 
  
 (v) In General. Neither the Company nor the Shareholders have committed to do any of the foregoing. 
  
 4.10 Undisclosed Liabilities. Except as otherwise disclosed in Section 4.10 or separately to the Acquiring Companies, the Company has no
Liability and to the Shareholders’ Knowledge 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
disclosed in the Disclosures Schedule; (b) contractual obligations incurred in the ordinary course of business; and (d) Liabilities which have arisen after the Interim Financial Statements 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, leasehold obligations and
accrued payroll and benefit obligations, the Company shall not have any unpaid Liabilities, other than those listed in the Section 4.10 Disclosure Schedule, including, but not limited to, any bank debt, capital leases or any general or professional
liability 
  

 15 








 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. 
  
 4.11 Tax Matters. 
  
 (a) Tax Returns. Except as set forth in Disclosure Schedule 4.11, 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 remitted when due, all Taxes required to have been withheld or paid in connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party. 
  
 (c) No
Disputes of Claims. 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 Shareholders, directors and officers (and employees
responsible for Tax matters) of the Company has Knowledge. 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,
2001, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Shareholders have 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, 2001. 
  
 (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). 
  
 (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 Shareholders that may result in the revocation of any such elections. 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. 
  

 16 








 (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) 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. 
  
 (i) Consents. The Company has not filed a consent pursuant to
or agreed to the application of Code Section 341(f). 
  
 (j)
Personal Holding Company. 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. 
  
 (k) 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 Shareholders have 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 to Shareholders’ Knowledge 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; 
  

 17 








 (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. The Company has not 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 
  
 (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 Shareholders’ 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 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. 
  
 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 and which the performance or rendering of which involves consideration in excess of Twenty Five Thousand and No/100 Dollars ($25,000.00) (hereinafter the
“Economic Threshold”): 
  
 (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; 
  

 18 








 (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 without regard to the Economic Threshold;

  
 (f) Shareholders’ Agreements. Any agreement
by and between the Shareholders 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;

  
 (h) Employment or Consulting Agreements. Any
written agreement for the employment of any individual on a full-time or part-time basis 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 without regard to the Economic Threshold; 
  
 (j) Adverse Effects. Any agreement which in the opinion of the
Shareholders could under which the consequences of a default or termination 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 the Economic Threshold. 
  
 The Shareholders have 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). 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 material 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. 
  

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 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 Shareholders 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 and the Company’s professional employees have been continuously insured for professional 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, or the Company’s professional employees 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) 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 Shareholders 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. 
  
 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 Shareholders’ Knowledge, threatened, against the Company, or the Shareholders at law or in equity, before any court, arbitration tribunal or governmental agency. Each of the Shareholders 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 Company’s insurer. All claims made or, to Shareholders’ Knowledge, threatened against the Company or the Shareholders in excess of the deductible are covered under the Shareholders’ or Company’s current
insurance policies. Section 4.18 of the Disclosure Schedule provides 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 date hereof. 
  

 20 








 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 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 Shareholders, or immediate family members of the Shareholders 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 Michigan Public Health Code 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 Michigan Public Health Code.
Furthermore, the Company has filed all reports required to be filed by the State of Michigan 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. Except as separately
disclosed in a letter to the Acquiring Companies, the Company has materially complied with all applicable Laws (including 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 Shareholders and the Company, threatened against the Company alleging any

  

 21 








 failure so to comply. The Company and all physicians and other health care professionals engaged or employed by the
Company (or associated with the Company as a result of being engaged or employed by New PC) have all permits and licenses required by applicable Law, have made all required regulatory filings and are not in material violation of any such permit or
license. Except as separately disclosed in a letter to the Acquiring Companies, 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 saving those that have been assigned or transferred to the New PC in accordance with this Agreement. The 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 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. Except as set for in
Section 4.22 of the Disclosure Schedules, the Company does not have any rate appeal currently pending before any governmental authority or any administrator of any third-party payor program. 
  
 4.23 Medical Staff. Except as set forth on Section 4.23 of the
Disclosure Schedule, the Shareholders have no Knowledge of a physician who is providing services on behalf of the Company or New PC who plans, or has threatened to terminate his or her employment or other relationship with the Company. To the
Shareholders Knowledge, 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 has been made 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. 
  

 22 








 (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 IRS. 
  
 (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 Shareholders have 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. To Shareholders’ Knowledge, 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 Shareholders and the Company have no Knowledge of any basis for any such
action, suit, proceeding, hearing, or investigation. 
  

 23 








 4.26 Physicians and Other Providers. During the five (5) years preceding the Closing Date,
each physician (but only with respect to the time period that such physician was employed by the Company), and who is or was employed by, or who renders or has rendered services on behalf of, the Company or New PC: 
  
 (a) Licenses. Has been duly licensed and registered, and in
good standing by the State of Michigan 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 Michigan 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 with respect to services rendered while an employee of the Company; 
  
 (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 proceeding or to Shareholders’ Knowledge, any investigation, whether administrative, civil or criminal, relating to an allegation of filing false health care claims, violating anti-kickback or fee-splitting laws, or engaging in other
billing improprieties; 
  
 (v) Mental Illnesses.
Any organic or mental illness or condition that impairs or may impair such physician’s ability to practice; 
  
 (vi) Substance Abuse. any dependency on, habitual use or episodic abuse of alcohol or controlled substances, or any participation in any
alcohol or controlled substance detoxification, treatment, recovery, rehabilitation, counseling, screening or monitoring program; 
  
 (vii) Professional Ethics. Any allegation, or any investigation or proceeding based on any allegation of violating professional ethics or
standards, or engaging in illegal, immoral or other misconduct (of any nature or degree), relating to his or her practice; or 
  
 (viii) Application for Licensure. Any denial or withdrawal of an application in any state for licensure as a physician or physical
therapist, for medical staff privileges at any hospital or other health care entity, for board certification or recertification, for participation in any third party payment program, for state or federal controlled substances registration, or for
malpractice insurance. 
  

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 4.27 Guaranties. Saving the guaranties listed in Section 4.27 of the Disclosure Schedule,
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. The Company has complied and is in material compliance with all Environmental, Health, and Safety Requirements. 

 
 (b) Permits and Licenses. Without limiting the generality of
the foregoing, the Company has obtained and complied in all material respects with, and is in compliance in all material respects 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. The Company has not 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. The Company has not 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) The Company has not received any communication (written or oral), whether from a governmental authority, citizens’
group, employee, that alleges that the Business or the Company is not in full compliance with Environmental Laws, or that the Company is otherwise subject to Liability under Environmental Laws, and 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 Shareholders’ Knowledge, threatened against the Company, the Business or the Center. 
  
 (f) There are no 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 Shareholders in
connection with the Business or the Center. 
  

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 4.29 Certain Business Relationships with the Company and its Affiliates. Except as
contemplated hereby with respect to New PC and as disclosed in Disclosure Statement, neither the Shareholders nor any of their Affiliates have been involved in any business arrangement or relationship except as an director, officer or employer with
the Company and its Affiliates within the past twelve (12) months, and except for leased real property none of the Shareholders and their 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
4.19 of the Disclosure Schedule sets forth an accurate, correct and complete list of the Company’s third-party payors. Neither the Company nor the Shareholders have 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. Neither the Company nor the Shareholders have any 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. Neither the Company nor the Shareholders 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.
Neither Shareholder is 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. Except as disclosed in a separate letter to the Acquiring Companies, 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 Shareholders 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 Intentions. Subject to the terms of an Employment
Agreement, Jeffrey Wayne intends to continue managing the business operations of the Surviving Corporation on a full-time basis for the next five (5) years and does not know of any fact or condition that adversely affects, or in the future may
adversely effect, his ability or intention to manage the business of the Surviving Corporation on a full-time basis for the next five (5) years. 
  

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 4.36 Securities Representation. 
  
 (a) No Registration of PainCare Shares; Investment Intent.
Each 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 each 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. Each 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 PainCare Shares shall bear the legends contained in the PainCare Stockholders’ Agreement. 
  
 (c) Ability to Bear Economic Risk. Each Shareholder covenants, warrants and represents that he is able to bear the economic risk of an
investment in 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. Each Shareholder, and the Shareholder’s purchaser representative, if any, have received copies of
PainCare’s most recent 10-K, 10-Q 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. Each 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. Each Shareholder 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 2002 and 2003, or had a joint income
with his spouse in excess of Three Hundred Thousand and No/100 Dollars ($300,000.00) in each of 2002 and 2003, and has a reasonable expectation of reaching the same income level in 2004. 
  
 (e) Residency. Jeffrey Wayne is a resident of the State of Michigan, and Michael Wayne is a resident of
Florida. Each received this Agreement and first learned of the transactions contemplated hereby in the State of Michigan. Each Shareholder executed and will execute all documents contemplated hereby in the State of Michigan, and intends that the
laws of the State of Michigan govern this transaction. 
  
 (f)
No Registration. Each Shareholder acknowledges that the PainCare Shares have not been registered under the Michigan Securities Act or the Securities Act in reliance upon exemption provisions contained therein which PainCare believes
are available. 
  

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 4.37 HIPAA. Schedule 4.37 lists and describes all plans and other efforts of the
Shareholders 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 4.37 includes but is not limited in any manner whatsoever to any privacy compliance plan of Sellers in place or in development, and any plans, analyses or budgets relating to information systems including but
not limited to necessary purchases, upgrades or modifications to effect HIPAA compliance. 
  
 4.38 Improper and Other Payments. (a) Neither the Company, any director, officer, or any 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 are those of a privately held company and are believed by the Company’s management to be adequate to detect any of the foregoing under current circumstances. 
  
 4.39 Accounts Receivable. Schedule 4.39 sets forth a list,
accurate, correct and complete in all respects, of all outstanding accounts and notes receivable of the Company as of the last day of the month immediately preceding the Closing Date. All outstanding accounts and notes receivable reflected on
Schedule 4.39 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 4.39. The Shareholders 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 4.39 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 
  
 4.40 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 
  

 28 








 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. 
  
 4.41 No Untrue or Inaccurate Representation or Warranty. No representation or warranty by Shareholders or the
Company contains or will contain any untrue statement of fact, or omits or will omit to state a fact necessary to make the statements and information contained in this Section 4 not misleading. 
  
 5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING COMPANIES. The Acquiring
Companies represent and warrant to the Shareholders 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. The execution and delivery of this
Agreement has been approved and authorized by the Board of Directors of PainCare. 
  
 5.3 No Conflict or Violation. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in (a) a violation of or a conflict with
any provision of the Certificate or Articles of Incorporation or bylaws of PainCare or Subsidiary, (b) a breach of, or a default under, any term or provision of any contract, agreement, indebtedness, lease, commitment, license, franchise, permit,
authorization or concession to which the PainCare or Subsidiary is a party, which breach or default could reasonably be expected to have a material adverse effect on the business or financial condition of PainCare or Subsidiary or their ability to
consummate the transactions contemplated hereby or (c) to the Knowledge of PainCare result in a violation by PainCare or Subsidiary of any statute, ordinance, code, order, judgment, writ, injunction, decree or award, which violation could reasonably
be expected to have a material adverse effect on the business or financial condition of PainCare or Subsidiary, or their ability to consummate the transactions contemplated hereby. 
  
 5.4 Consents and Approvals. Except as set forth on Disclosure Schedule 5.4, to the Knowledge of
PainCare no notice to, declaration, filing or registration with, or authorization, consent or approval of, or permit from, any domestic or foreign governmental or regulatory body or authority, or any other person or entity, is required to be made or
obtained by PainCare or Subsidiary in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 
  

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 5.5 Disclosure Documents. PainCare has delivered or Stockholder has had the opportunity to
obtain and review PainCare’s Form 10-KSB for the year ending December 31, 2003 and current Forms 8-K (the “PainCare Disclosure Documents”). The PainCare Disclosure Documents are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which such statements were made, not misleading. To the Knowledge of PainCare
nothing has occurred after the date of the documents contained in the Disclosure Documents that would individually or in the aggregate have a material adverse effect on PainCare. 
  
 5.6 Capitalization. The authorized capital stock of PainCare consists of 75,000,000 shares of Common Stock,
$.0001 par value per share, which as of April 1, 2004, approximately 28,000,000 shares are issued and outstanding, 10,000,000 shares of “blank check” preferred none of which have been issued or are outstanding. All of the PainCare Shares
are, and all shares of PainCare Shares to be issued pursuant to this Agreement will be, validly issued, fully paid and non-assessable. Disclosure Schedule 5.6(a) hereto sets forth a listing of all options, warrants and outstanding PainCare
securities which are convertible (with or without the payment of consideration) into shares of the Common Stock of PainCare, including all contingently issuable shares of such Common Stock issuable pursuant to agreements outstanding as of April 1,
2004. Disclosure Schedule 5.6(b) also sets forth the terms of any financing proposed to be raised by PainCare in connection with the transactions contemplated by this Agreement. 
  
 5.7 Litigation. Except as set forth in Disclosure Schedule 5.7, there is no charge, complaint, action, order,
writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, labor dispute, arbitrable action or investigation (collectively, “Actions”) pending or, to the Knowledge of PainCare, threatened against, relating to
or affecting (i) PainCare or its assets or the operation of the business of PainCare as currently operated and as proposed to be operated, (ii) any Employee Plan of PainCare or any trust or other funding instrument, fiduciary or administrator
thereof or (iii) the transactions contemplated by this Agreement, before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, any of which is reasonably
expected to result in a loss not covered by insurance in excess of $100,000 or reasonably expected to have a material adverse effect on PainCare. PainCare is not in default with respect to any judgment, order, writ, injunction or decree of any court
or governmental agency, and there are no unsatisfied judgments against the PainCare or the business of PainCare. Except as set forth in Disclosure Schedule 5.7, each Action pending or, to the Knowledge of PainCare, threatened (whether or not
disclosed in Disclosure Schedule 5.7), is covered by insurance of reputable and solvent insurance companies. 
  
 5.8 No Undisclosed Liabilities. Except as set forth in Disclosure Schedule 5.8, to the Knowledge of PainCare, PainCare has no liabilities or
obligations (absolute, accrued, contingent or otherwise) except (i) liabilities that are reflected and reserved against on PainCare’s audited balance sheet dated December 31, 2003 (the “PainCare Balance Sheet Date”) that have not been
paid or discharged since the date thereof and (ii) Liabilities incurred by PainCare since the PainCare Balance Sheet Date in the ordinary course of business consistent with past practice (none of which relates to any breach of contract, breach of
warranty, tort, infringement or violation of law or arose out of any complaint, action, suit or proceeding except those which individually or in the aggregate would not have a material adverse effect on PainCare). 
  

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 5.9 No Brokers. There is no obligation on the part of PainCare to pay any finder’s
fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 
  
 5.10 Material Misstatements Or Omissions. To the Knowledge of PainCare, no representations or warranties by PainCare in this Agreement, nor
any document, exhibit, statement, certificate or schedule furnished or to be furnished to the Shareholders pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact necessary to make the statements or facts contained therein not misleading. 
  
 6. CLOSING; TERMINATION. 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 commencing at 10:00 a.m. Eastern Daylight Time on the later of (i) the third business date following the date on which the New PC obtains its Medicare provider number and the Company effectively
assigns all Transferred Assets and managed care contracts to the New PC, (ii) the date upon which all other conditions to the Parties obligations have been met or waived, or (iii) such other date or time as the Parties may mutually agree (the
“Closing Date”). In the event that the Closing has not occurred on or before June 15, 2004, this Agreement may be terminated by either Party provided such Party has, as of the date of such election to terminate, fulfilled all conditions to
the obligations of the other Party. In the event that Closing does not occur by June 30, 2004, this Agreement shall terminate unless the Parties otherwise agree in writing. 
  
 7. CLOSING DELIVERIES. 
  
 7.1 Deliveries of the Company and the Shareholders. At or prior to the Closing Date, the Company and the Shareholders 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 except to the extent waived in writing by the Acquiring
Companies; 
  
 (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) Certificate of Merger. Duly executed Certificate of Merger; 
  
 (d) Corporate Authorization. A certified copy of resolution(s) of the Shareholders 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; 
  

 31 








 (e) Payoffs. Payoff letters from those creditors listed in Section 7.1(e) of the Disclosure
Schedules; 
  
 (f) Good Standing Certificate. A
certificate issued by the appropriate state governmental authority evidencing the good standing of the Company and the New PC; 
  
 (g) Secretary’s Certificate. A certificate of the secretary of the Company certifying that the copies of the articles of incorporation
and bylaws of the Company, attached as exhibits to such certificate, are true, correct, and complete; and 
  
 (h) Medicare Provider Number. A copy of the completed application for New PC’s Medicare provider number duly executed. 
  
 (i) Managed Care Agreements. An assignment(s) of all Managed
Care Agreements to which the Company is a party to the New PC. 
  
 (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 or prior to the Closing Date, PainCare shall deliver to Shareholders the following: 
  
 (a) Transaction Consideration. The Transaction Consideration;

  
 (b) Resolutions. A certified copy of the
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) Articles of Merger. Duly executed Articles of Merger. 
  
 (d) Management Services. Duly executed Management Services Agreement. 
  
 (e) Secretary’s Certificate. A certificate of the
secretary of the Subsidiary certifying that the Certificate of Incorporation and bylaws of the Subsidiary, attached as exhibits to such Certificate, are true, correct and complete; and 
  
 (f) Permitted Indebtedness. Evidence that $100,000 of the Permitted Indebtedness (i.e., the Fifth Third
Bank Revolving Note [for line of credit] dated March 23, 2004 ) has been paid. 
  
 (g) Other Documents. Such other instruments or documents as may be necessary or appropriate to carry out the Transactions, including (i) a mutually agreeable and executed employment agreement for
Jeffrey Wayne, (ii) Stock Pledge Agreement, (iii) license agreement for use of the name “Dynamic Rehabilitation Centers,” (iv) evidence of stock option grants, and (v) a duly executed Management Services Agreement between New PC and
Subsidiary. 
  

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 8. CONDITIONS TO THE OBLIGATIONS OF THE PARTIES. The obligations of the Parties to Close are subject to the
satisfaction of the following respective conditions by the Closing Date unless waived by the Party for whose benefit the condition applies. 
  
 8.1 Conditions for the Benefit of PainCare and the Subsidiary. (a) The representations and warranties of the Shareholders and the Company 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 Shareholders or the Company shall be true and correct in all material respects when made and
on the Closing Date as though then made, except as expressly provided for herein, and (b) both the Shareholders 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 (c) New PC shall have filed an application for a Medicare provider number to obtain payment or reimbursement for its services, and (d) the
Company shall have assigned to the New PC any and all Transferred Assets and payor contracts of the Company, and such payors have provided written consent to such assignment or otherwise were properly notified of such assignment pursuant to the
terms of such payor contracts. 
  
 8.2 Conditions for the
Benefit of the Shareholders. (a) The representations and warranties of PainCare 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
PainCare or the Subsidiary 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, (b) both PainCare and the Subsidiary 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 (c) PainCare stock value has not
decreased below $2.25 per share. 
  
 9. COVENANTS. The Parties
covenant and agree as follows: 
  
 9.1 Operations.
As of the Statutory Merger Time, the New PC and the Subsidiary will execute and deliver to each other the Management Services Agreement and Jeffrey Wayne and the Subsidiary will execute and deliver the Employment Agreement. 
  
 9.2 Deliveries. PainCare will promptly deliver and make
available to Shareholder copies of any filings made by it under the Securities Act or the Securities Exchange Act, including the exhibits thereto and any correspondence with the Securities Exchange Commission or its staff. 
  
 9.3 Distributions of Sub-Chapter S Income by the Company. Not
later than the Statutory Merger Time, Shareholders may withdraw up to one hundred percent (100%) of the taxable income (as determined by using the cash method of accounting) allocated to Shareholders for the period beginning on January 1, 2004 and
ending on the Closing Date subject to the requirement that Shareholder shall insure that as of the Closing Date that the Company will have a minimum cash balance of Fifty Thousand Dollars ($50,000). The Shareholders shall not be entitled to any
additional distributions or payments with respect to taxable income of the Company (i) for the period ending after the Closing Date, other than as specifically set forth in this Agreement or pursuant to any separate assignment executed by
Subsidiary. 
  

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 9.4 Post-Closing General Covenant. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party may reasonably request,
all at the sole cost and expense of the requesting Party; 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 Shareholders shall be borne by the Shareholder. 
  
 9.5 Tax Returns. The Shareholders 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. PainCare and the Subsidiary will provide to the Shareholders access to all books and records of the Company necessary to the preparation, audit or litigation of such Tax Returns and the Subsidiary, as
the successor to the Company will execute such Tax Returns. The Shareholders will take no positions on the Tax Returns of the Company that relate to the tax period prior to the Closing Date that could materially adversely affect the Company or
PainCare after the Closing. The Shareholders will provide PainCare with an opportunity to review and comment on such Tax Returns (including any amended returns). PainCare will be responsible for preparing and filing all income and franchise Tax
Returns of the Company relating to periods 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, with recognition that the Company files on that basis of a cash rather than accrual method. The Acquiring
Companies shall be solely responsible for any taxes due arising from conversion to the accrual method. 
  
 9.6 Transition. Neither the Shareholders nor the Company will take any action that is designed or with the intention 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.

  
 9.7 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 therefor under this
Agreement. 
  
 9.8 Consents. The Shareholders hereby
agree that they will use their reasonably 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 Shareholders against a third party thereto arising out of the breach or cancellation by such third party or otherwise. 
  

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 9.9 Operational Covenants. Without the prior written consent of Shareholders, 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 Period Profits; 
  
 (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 Period Profits 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 Period Profits; 
  
 (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 Period Profits 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 Period Profits; 
  
 (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 Period Profits or that is reasonably necessary in light of the
Surviving Corporation’s results of operation; 
  
 The
Acquiring Companies will cooperate with Shareholders in implementing a business plan and effecting transactions reasonably necessary to maintain or improve Formula Period Profits. 
  
 The parties hereby acknowledge and agree that the foregoing covenants in this Section 9.9 shall become null and void and of
no further force or effect if (i) the Formula Period Profits of the Surviving Corporation in any three (3) consecutive Formula Period calendar quarters (taken in the aggregate) are less than $1,200,000, or in any two (2) consecutive Formula Period
calendar quarters less than $300,000, or (ii) the Management Fee (as described in the Management Agreement of even date herewith) is not paid within 30 days of its due date. 
  

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 9.10 Capital Adjustments. In the event of a stock dividend, recapitalization, or merger in
which PainCare is the surviving corporation, split-up, combination or exchange of shares or the like which results in a change in the number or kind of shares of common stock which is outstanding immediately prior to such event, the rights of the
Shareholders to receive PainCare Shares in respect of this Agreement and the price thereof, shall be appropriately adjusted in the same manner as the number and kind of shares a shareholder of PainCare who owned the same number and kind of shares
immediately prior to such event. Such adjustments shall be made in good faith by the Board of Directors of PainCare, whose determination shall be conclusive and binding on all parties, subject to manifest error. 
  
 In case of any consolidation or merger of PainCare with or into another party
or parties or the conveyance of all or substantially all of the assets of PainCare to another party or parties or a share exchange transaction involving more than 50% of the issued and outstanding common stock of PainCare, the PainCare Shares and
right to receive PainCare Shares shall thereafter be convertible into the number of shares of stock, options or other securities or property to which a shareholder of the PainCare who owned the same number and kind of shares prior to such event
would have been entitled upon such consolidation, merger, conveyance, conversion or exchange; and, in any such case, appropriate adjustment shall be made in the application of the provisions herein set forth with respect to the rights and interest
thereafter of the Shareholder’ rights to receive PainCare Shares, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as reasonably possible, in relation to any shares of stock or other property thereafter
deliverable upon the Shareholders’ entitlement to same. 
  
 9.11 Shareholders’ Guarantee. The Shareholders hereby agree that if at anytime during the first 120 days following the Closing the New PC does not generate a sufficient amount of cash flow to pay its debts, bills and
obligations (collectively the “PC Obligations”) as such PC Obligations become due and the Surviving Corporation has insufficient cash flow to loan any such deficit to the PC to pay such PC Obligations then, in such event, the Shareholders
agree to pay to the Surviving Corporation an amount up to but not in excess of $50,000 to cover such PC Obligations. 
  
 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 the indemnification provisions contained in this Agreement are material and have been relied upon by the Parties hereto and shall survive the Closing for a period not to exceed four (4) years. 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 Shareholders’ or Company’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 Shareholders’ or Company’s 
  

 36 








 covenants contained in this Agreement, or; (c) any Liability of the Company or the Shareholders of any nature whatsoever
accrued or existing as of the Closing Date or related to actions or inactions of the Company or the Shareholders which occurred prior to the Closing Date, unless such Liability is reflected on the Financial Statements, the Closing Date Balance
Sheet, or Section 10.2 of the Disclosure Statement, the Subsidiary explicitly agrees to assume or take the assets of the Company subject to the Liabilities set forth in Section 10.2 of the Disclosure Statement, as the case may be, then the
Shareholders agree 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 non-disclosed or non-assumed Liability. 
  
 10.3 Indemnification Provisions for the Benefit of the Shareholder. In the event of (a) a misrepresentation (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 and/or warranties contained in this Agreement, or (b) any liability of the Acquiring Companies arising after the
Closing Date or which is set forth on Section 10.2 of the Disclosure Statement, or (c) a breach (or in the event any third party alleges facts that, if true, would mean a breach) of the Acquiring Company’s covenants contained in this Agreement,
then PainCare and Subsidiary agree to indemnify the Shareholders from and against any Adverse Consequences the Shareholders 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. 
  
 10.4 Matters
Involving Third Parties. 
  
 10.4.1
Notification. If any third party shall notify any Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) which may give rise to a claim for indemnification against the other Party (the
“Indemnifying Party”) pursuant to this Section 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. 
  
 10.4.2 Defense by Indemnifying Party. The Indemnifying Party
shall have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party notifies the Indemnified Party in writing within ten (10)
business days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against any Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill the Indemnifying Party’s indemnification obligations hereunder; (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief;
(iv) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the
Indemnified Party; and (e) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. 
  

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 10.4.3 Satisfactory Defense. So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 10.4.2 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. 
  
 10.4.4
Conditions. In the event any of the conditions in Section 10.4.2 above is or becomes unsatisfied, however: (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith); (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses); and (iii) the Indemnifying Party will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 10. 
  
 10.5 Right to Set-Off. If any such cost, loss, damage, expense, Liability, claim, or obligation occurs or is incurred
by PainCare or Subsidiary as an Indemnified Party, PainCare or Subsidiary shall have the right, after written notice to the Shareholders but only after a factual determination of such adverse consequences by a court of competent jurisdiction, 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 Shareholders under this Agreement or any other agreement. 
  
 10.6 Limitation. The indemnification and related provisions set forth in this entire 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 in excess of the Threshold. Further, the indemnitors shall not be liable for any Liabilities resulting from claims that are covered by any insurance policy or other indemnity or contribution agreement unless, and only to the extent that, the
full limit of such insurance policy, indemnity or contribution agreement has been exceeded. The Party entitled to indemnification shall have a duty to mitigate its damages. Notwithstanding the foregoing, a Party’s obligation to indemnify under
this Article 10 shall be limited to an amount equal to $4,500,000 plus the amount of any Earnout Installment Payments paid or due pursuant to Section 3.4 of this Agreement; provided however that such cap shall not be applicable to with respect to
any indemnification matter which arise from or out of fraudulent conduct or intention wrongful acts or omissions of any Shareholder or the Company or with respect to Sections 4.1, 4.3, 4.11 and/or 4.36. 
  

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 10.7 Post-Closing Access to Records. The Acquiring Companies will provide the Shareholders
reasonable access to all records of the Business, which is reasonably necessary to fulfill Shareholders’ obligations hereunder. 
  
 11. RESTRICTIVE COVENANTS; CONFIDENTIALITY. 
  
 11.1 Competitive Activities. Notwithstanding anything to the contrary in this Agreement saving Section 11.2 below, the parties agree that,
after the closing of the transactions contemplated by this Agreement, the Shareholders will have the right to engage in the following described activities which may be competitive with the Subsidiary and PainCare: (a) opening rehabilitation clinics
of the same or similar type as those of the Company outside a 10 mile radius from any of the Subsidiary’s or PainCare’s then existing rehabilitation offices or operations, and (b) entering into agreements with hospitals or other heath care
providers to manage their rehabilitation facilities outside a 10 mile radius from any of the Subsidiary’s or PainCare’s then existing offices and/or operations (each a “Competitive Business Opportunity); provided that with
respect to each Competitive Business Opportunity: (i) such Opportunity shall not unreasonably interfere with the services to be provided to the Subsidiary by Jeffrey Wayne pursuant to his Employment Agreement, and (ii) PainCare shall have the right
of first refusal to purchase the Shareholders’ interest in each such Competitive Business Opportunity based on a pricing formula and on such terms substantially similar to the pricing formula and terms used by PainCare to purchase the Company
as provided herein, upon written notice from Shareholders setting forth their desire to sell such Competitive Business Opportunities. If within thirty (30) days after receipt of such notice, PainCare does not advise the Shareholders in writing of
its intent to enter into a definitive agreement to purchase such Competitive Business Opportunity, then PainCare’s right of first refusal will terminate and Shareholders shall be free to sell such Competitive Business Opportunity to any third
party for a period of one hundred twenty (120) days. If the Shareholders and such third party are unable to consummate a transaction during such one hundred twenty (120) day period then, in such event, PainCare’s right of first refusal as
provided herein shall re-apply to such Competitive Business Opportunity. The Acquiring Companies acknowledge and agree that Shareholders are permitted to use the Subsidiary’s Confidential Information in connection with the Competitive Business
Opportunities and Subsidiary personnel with PainCare’s prior written approval and the provision for reasonable reimbursement to the Subsidiary for the cost of such personnel. PainCare’s right of first refusal as provided herein with
respect to any Competitive Business Opportunity will terminate on the fifth anniversary date of the Closing of this transaction. 
  
 11.2 Termination of Right to Engage in Competitive Business Opportunities. Notwithstanding Section 11.1 above if at anytime during the
Formula Periods the Formula Period Profits of the Surviving Corporation in any three (3) consecutive Formula Period calendar quarters (taken in the aggregate) are less than $1,200,000, or in any two (2) consecutive Formula Period calendar quarters
less than $300,000 then, in such event, PainCare by providing written notice to the Shareholders shall have the right to terminate the Shareholders’ rights as provided in Section 11.1 above to engage in Competitive Business Opportunities. Upon
the receipt of such termination notice the Shareholders will immediately cease and desist from engaging, participating or otherwise involving themselves in any further 
  

 39 








 Competitive Business Opportunities without PainCare’s prior written consent which may be withheld in its sole and
absolute discretion with the understanding that in the event of such termination, the Shareholders shall have the right to continue to engage and operate any Competitive Business Opportunity which exists as of the date of such termination.

  
 11.3 Non-Competition. Other than with respect to
Competitive Business Opportunities, for a period of two years from the Closing Date (or such longer period if required by an Employment Agreement)(the “Non-compete Period”), Shareholders will not directly, or indirectly, within the
Territory (as hereinafter defined): 
  
 (a) Establish, operate
or provide physical rehabilitation operational or management at any medical office, hospital, clinic or out-patient and/or ambulatory treatment or diagnostic facility or become employed by, or serve as a health care consultant or medical director to
any health care provider providing services similar to those provided by the New PC, PainCare or Subsidiary, or engage or participate in or finance any business which engages in direct competition with the business being conducted by the new PC,
PainCare or the Surviving Corporation at such time; 
  
 (b)
Request, induce or advise any patients, insurance companies, managed care plans, suppliers, vendors, employers or other customers of the business conducted by the New PC, PainCare, and/or its subsidiaries including the Subsidiary or Affiliates to
withdraw, curtail or cancel their business or other relationships with the New PC, PainCare, and/or its subsidiaries including the Subsidiary, or assist, induce, help or join any other person or entity in doing any of the above activities; or

  
 (c) Induce or attempt to influence any employee of the New
PC, PainCare, and/or its subsidiaries including the Subsidiary Company, to terminate his or her employment with the New PC, PainCare, and/or its subsidiaries including the Subsidiary, or to hire, recruit or solicit any such employee, whether or not
so induced or influenced without the prior written consent of PainCare; 
  
 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 ten (10) mile radius originating from any office or operation of the Company, Subsidiary or PainCare (the
“Territory”). The parties agree that the Subsidiary or PainCare, as the case may be, may sell, assign or otherwise transfer this covenant not to compete, in whole or in part, to any person, corporation, firm or entity that purchases all or
part of the Subsidiary’s, or PainCare’s business but such assignment may be made only if the assignee acknowledges, in writing, Shareholder’s right to engage in Competitive Business Opportunities. 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. 
  

 40 








 11.4 Relief for Violations. Shareholders agree that the provisions and restrictions
contained in this Section are necessary to protect the legitimate continuing interests of the Subsidiary and PainCare and that any violation or breach of these provisions will result in irreparable injury to the Subsidiary and PainCare for which a
remedy at law would be inadequate 
  
 11.5
Severability. If any covenant or provision contained in Article XI is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other covenant or provision. If, in any
arbitral or judicial proceeding, a tribunal shall refuse to enforce all of the separate covenants deemed included in this Article XI, then such unenforceable covenants shall be deemed eliminated from the provisions hereof for the purpose of such
proceedings to the extent necessary to permit the remaining separate covenants to be enforced in such proceedings. 
  
 11.6 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 11.6 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 court action or any proceeding before any authority.
Notwithstanding the foregoing, in the case of a disclosure contemplated by this Section 11.6, 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 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. 
  
 11.7 Conduct of Business. From the date hereof through the Closing, the Shareholders 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 
  

 41 








 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 Shareholders 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) 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 or as contemplated by this Agreement; 
  
 (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; 
  
 (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; 
  

 42 








 (k) enter into, renew, modify or revise any agreement or transaction relating to the Company with any of
its or their Affiliates except as contemplated by this Agreement; 
  
 (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) intentionally do any other act which would cause any representation or
warranty of the Company or the Shareholders in this Agreement to be or become untrue, or any covenant in this Agreement to be breached, in any material respect; 
  

(p) 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; 
  
 (q) enter into any agreement, or otherwise become obligated, to do any action prohibited hereunder; 
  
 (r) except as provided herein, 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 
  
 (s) fail to comply with all applicable
filing, payment, withholding, collection and record retention obligations under all applicable federal, state, local or foreign Tax laws. 
  
 11.8 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. 
  

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 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, FL 32801
	 	  	Attention: CEO
		
	If to the Shareholders:	  	Jeffrey M. Wayne
	 	  	4419 Coffey Court
	 	  	Troy, MI 48098
		
	 	  	Michael Wayne
	 	  	260 Woodwind
	 	  	Bloomfield Hills, MI 48034
		
	 	  	AND
		
	 	  	2366 N. Gulf Shore Blvd.
	 	  	Apt. 504
	 	  	Naples, FL 34103

  

 44 









			
	 If to the Company:
	 	 Dynamic Rehabilitation Centers, Inc.

	 	 	 1800 W. Big Beaver Rd., Ste. 150

	 	 	 Troy, MI 48084

		
	 With copy in each case to:
	 	 Linda Paullin-Hebden, Esq.

	 	 	 Raymond & Prokop, P.C.

	 	 	 26300 Northwestern Hwy., 4th Floor

	 	 	 P.O. Box 5058

	 	 	 Southfield, MI 48086-5058


  
 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 Michigan 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, Shareholder shall bear and be responsible and shall pay for all costs and expenses (including,
but not limited to, legal and accounting fees and expenses) incurred by Shareholder, the Company and the New PC in connection with this Agreement and the transactions contemplated hereby. 
  

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 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. 
  
 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 the Acquiring Companies, 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. With respect to any legal proceeding brought by PainCare which arises out of
or relates to this Agreement or the transactions contemplated hereby, exclusive jurisdiction and venue with respect to such matter shall lie in any state or federal court within Oakland County, Michigan. With respect to any legal proceeding brought
by the Shareholders or the Company which arises out of or relates to this Agreement or the transactions contemplated hereby, exclusive jurisdiction and venue with respect to such matter shall lie in any state or federal court within Orange County,
Florida. 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 Retention of Records. The Acquiring Companies and any permitted transferee shall not destroy or otherwise dispose of any books or records acquired pursuant to this Agreement for a period of seven
(7) years from the date hereof, and shall allow the Shareholders and their designated agents reasonable access to such books and records upon reasonable prior written request and during normal business hours. 
  
 [SIGNATURES APPEAR ON NEXT PAGE] 
  

 46 








 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

	
	ACQUISITION:
	
	 PAINCARE ACQUISITION COMPANY XI,
 INC., a Florida corporation

		
	 By:
	 	 /S/ RANDY LUBINSKY


	 Print:
	 	 RANDY LUBINSKY

	 Its:
	 	 CEO

	
	COMPANY:
	
	 DYNAMIC REHABILITATION CENTERS,
 INC., a Michigan corporation

		
	 By:
	 	 /S/ JEFFREY M. WAYNE


	 Print:
	 	 JEFFREY M. WAYNE

	 Its:
	 	 PRESIDENT

	
	SHAREHOLDERS:
	
	 /S/ JEFFREY M. WAYNE


	 Jeffrey M. Wayne, individually and as Trustee of
 the Jeffrey M. Wayne Trust

	
	 /S/ MICHAEL WAYNE


	 Michael Wayne, individually and as Trustee of the
 Michael Wayne Trust



  

 47 









			
	EXHIBITS
	Exhibit 1	 	Definitions
	Exhibit 2.3	 	Articles of Merger
	
	DISCLOSURE SCHEDULES
		
	2.11(a)	 	Transferred Assets
	2.11(b)	 	Non-Transferred Assets
	3.3(b)	 	Financial Statements
	4.1	 	Officers and Directors
	4.2	 	Capitalization
	4.4(a)	 	Consents to be Obtained Prior to Closing
	4.4(b)	 	Consents to be Obtained After Closing
	4.6	 	Assets
	4.8	 	Financial Statements
	4.10	 	Liabilities
	4.11	 	Tax Returns
	4.12	 	Real Property
	4.15	 	Material Contracts
	4.17	 	Insurance
	4.18	 	Litigation
	4.19	 	Third Party Payor Agreements
	4.22	 	Rate and Reimbursement Policies
	4.23	 	Medical Staff
	4.24	 	Employment Matters
	4.25	 	Employment Benefits
	4.26	 	Physician Matters
	4.27	 	Guaranties
	4.28	 	Environmental Permits, Licenses and Approvals
	4.30	 	Third Party Payors
	4.31	 	Bank Accounts
	4.37	 	HIPAA
	4.39	 	Accounts Receivable
	5.4	 	Consents and Approvals
	5.6(a)	 	Capitalization
	5.6(b)	 	Financing proposed to be raised by PainCare in connection with the transactions contemplated by this Agreement
	5.7	 	Litigation
	5.8	 	Undisclosed Liabilities of PainCare
	7.1(e)	 	Payoffs
	10.2	 	Indemnification
	11.7	 	Conduct of Business

  

 48 








 EXHIBIT 1 
  

DEFINITIONS 
  
 For purposes of this Agreement, the following terms shall have the meanings set forth below: 
  
 1. “Accounts Receivable” means the accounts receivable of the Company and the New
PC determined in accordance with GAAP with respect to the operations of the Company prior to the Closing Date arising from the rendering of services to patients through the Closing Date, including, without limitation, those from private pay
patients, private insurance payors, third party payors and governmental programs. 
  
 a. “Adjustment Payment Date” has the meaning set forth in Section 3.3(c). 
  
 b. “Adverse Consequences” means all actions, suits, proceedings, hearings, investigations, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses. 
  
 c. “Affiliate” shall mean, with respect to any Person: (a) any corporation, proprietorship, partnership, limited liability
company, or any other business entity whatsoever that, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such Person; and (b) if the Person is an individual, any other individual who
is related to such Person. For the purposes of this definition, the terms “controls,” “is controlled by” and “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Neither PainCare nor Subsidiary is an Affiliate of the Company or the Shareholders for purposes of this
Agreement and neither the Shareholders nor the Company is an Affiliate of PainCare or Subsidiary for purposes of this Agreement. 
  
 d. Intentionally Omitted. 
  
 e. “Agreement” has the meaning set forth in the Preamble. 
  
 f. “Articles of Merger” has the meaning set forth in Section 2.3. 
  
 g. “Cash Due at Closing” has the meaning set forth in Section 3.1. 
  
 h. “Certificate(s)” has the meaning set forth in Section 2.10. 
  
 i. “Closing” has the meaning set forth in Section 6. 
  

 49 








 j. “Closing Date” has the meaning set forth in Section 6. 
  
 k. “Closing Date Balance Sheet” has the meaning set forth in Section 3.3.

  
 l. “Code” means the Internal Revenue Code of 1986, as amended.

  
 m. “Commission” means the U.S. Securities and Exchange Commission.

  
 n. “Company” has the meaning set forth in the Preamble. 

 
 o. “Company Shares” means any share of common stock of the Company. 

 
 p. “Disclosure Schedule” has the meaning set forth in Section 4. 
  
 q. “ Earnings Threshold” has the meaning set forth in Section 3.4. 
  
 r. “EBITDA” has the meaning set forth in Section 3.4. 
  
 s. Intentionally Omitted. 
  
 t. “Employee Benefit Plan” means any: (a) nonqualified deferred compensation or retirement plan or arrangement which is an
Employee Pension Benefit Plan; (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan; (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan); (d) Employee Welfare Benefit Plan; or (e) any bonus, incentive, severance, stock option, stock purchase, short-term disability plan or other material fringe benefit plan, program or arrangement, including policies
concerning holidays, vacations and salary continuation during short absences for illness or otherwise. 
  
 u. “Employee Pension Benefit Plan” has the meaning set forth in ERISA Section 3(2). 
  
 v. “Employee Welfare Benefit Plan” has the meaning set forth in ERISA Section 3(1). 
  
 w. “Environmental, Health, and Safety Requirements” means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Federal Water Pollution Control Act, the Safe Drinking Water Act, the Toxic Substance Control Act, the Emergency Planning and Community Right-to-Know Act of 1986,
the Hazardous Material Transportation Act, and the Occupational Safety and Health Act of 1970, each as amended, together with all other laws (including rules, regulations, codes, injunctions, judgments, orders, decrees, and rulings) of federal,
state, local, and foreign governments (and all agencies thereof) concerning pollution or protection of the environment, public health and safety, or employee health and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials (including petroleum products and asbestos) or 
  

 50 








 wastes into ambient air, surface water, ground water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials or wastes. 
  
 x. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended. 
  
 y. “Fair Market Value” has the meaning set forth in Section 3.4. 
  
 z. “Fiduciary” has the meaning set forth in ERISA Section 3(21). 
  
 aa. “Financial Statements” has the meaning set forth in Section 4.8. 
  
 bb. “Florida Act” and “Michigan Act” have the meanings set forth in
Section 2.1. 
  
 cc. “Formula Period” has the meaning set forth in
Section 3.4. 
  
 dd. “Formula Period Profits Statement” has the meaning
set forth in Section 3.4. 
  
 ee. “GAAP” means the United States
generally accepted accounting principles in effect from time to time. 
  
 ff.
“HIPAA” has the meaning set forth in Section 4.37. 
  
 gg.
“Indemnified Party” has the meaning set forth in Section 10.4. 
  
 hh.
“Indemnifying Party” has the meaning set forth in Section 10.4. 
  
 ii.
“Intended Installment Payment” has the meaning set forth in Section 3.4. 
  
 jj. “Installment Payment” has the meaning set forth in Section 3.4. 
  
 kk. “Installment Payment Discount” has the meaning set forth in Section 3.4. 
  
 ll. “Installment Payment Premium” has the meaning set forth in Section 3.4. 
  
 mm. “Intellectual Property” means: (a) all trade secrets and confidential business information (including customer and supplier lists, ideas, research and
development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, pricing and cost information, and business and marketing plans and proposals); (b) all
trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations,
and renewals in connection therewith; (c) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, 
  

 51 








 and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (d) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith; (e) all computer software (including data and related documentation); (f) all other proprietary rights;
and (g) all copies and tangible embodiments thereof (in whatever form or medium). 
  
 nn. “IRS” means the U.S. Internal Revenue Service. 
  
 oo.
“Knowledge” An individual will be deemed to have “Knowledge of a particular fact or other matter if: 
  
 (a) such individual is actually aware of such fact or other matter; or 
  
 (b) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course
of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter. 
  
 A Person (other than an individual) will be deemed to have “Knowledge” of a particular fact or other matter if Shareholders or any individual
who is a serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter. 
  
 pp. “Liability” or “Liabilities” means any liability, whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including, but not in any way limited to, any liability for Taxes.

  
 qq. “Management Agreement” means that certain Management Services
Agreement by and among PainCare Acquisition Company XI, Inc., the New PC and Dr. Alo, dated as of the Statutory Merger Time. 
  
 1.1 “Medical Waste” has the meaning set forth in Section 4.40 
  
 1.2 “Merger” has the meaning set forth in Section 2.1. 
  
 1.3 “Most Recent Year End” has the meaning set forth in Section 4.9. 
  
 1.4 “Multiemployer Plan” has the meaning set forth in ERISA Section 3(37). 
  
 1.5 “NASDAQ” has the meaning set forth in Section 3.4. 
  
 1.6 “New PC” has the meaning set forth in Paragraph D of the Recitals. 
  
 1.7 “Other Net Equity Adjustment” has the meaning set forth in Section 3.3.

  
 1.8 “PainCare” has the meaning set forth in the Preamble.

  

 52 








 1.9 “PainCare Shares” means any share of common stock, $.0001 par value per share, of PainCare. 
  
 1.10 “Party(ies)” has the meaning set forth in the Preamble. 
  
 1.11 “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA. 
  
 1.12 “Person” means an
individual, a partnership, a corporation, an association, a joint stock company, a limited liability company or partnership, a trust, a joint venture, an unincorporated organization, any other form of entity whatsoever, or a governmental entity (or
any department, agency, or political subdivision thereof). 
  
 1.13
“Prohibited Transaction” has the meaning set forth in ERISA Section 406 and Code Section 4975. 
  
 1.14 “Reportable Event” has the meaning set forth in ERISA Section 4043. 
  
 1.15 “Securities Act” means the Securities Act of 1933, as amended. 
  
 1.16 “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 1.17 “Security Interest” means any lien, claim, encumbrance, mortgage, hypothecation, pledge, or other security interest,
excluding purchase money security interests arising in the ordinary course of business and liens arising by operation of law for Taxes not yet due and payable. 
  

1.18 “Shareholder” and “Shareholders” has the meaning set forth in the Preamble, and shall further include any individual who acquires shares of
the Company stock, New PC stock, or the PainCare Shares, pursuant to the terms of this Agreement. 
  
 1.19 “Subsidiary” has the meaning set forth in the Preamble. 
  
 1.20 “Surviving Corporation” has the meaning set forth in Section 2.1. 
  
 1.21 “Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property,
sales, use, production, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including interest, penalty, or additions thereto, whether disputed or not, and whether or not accrued on the
Financial Statements. 
  
 1.22 “Tax Return” means any return,
declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 
  

 53 








 1.23 “Third Party Claim” has the meaning set forth in Section 10.4. 
  
 1.24 “Trade Secrets” has the meaning set forth in Section 11.5. 
  
 1.25 “Transaction” has the meaning set forth in Section 2.1. 
  
 1.26 “Transaction Consideration” has the meaning set forth in Section 3.1.

  
 1.27 “Transferred Assets” has the meaning set forth in Section 2.11.

  

 54