Document:

Merger Agreement and Plan of Reorganization

 Exhibit 10.1 
  
 MERGER AGREEMENT AND PLAN OF REORGANIZATION 
  
 BY AND AMONG 
  
 PAINCARE HOLDINGS, INC., 
  
 PAINCARE ACQUISITION COMPANY XIII, INC., 
  
 RICK TAYLOR, D.O., P.A. 
  
 AND 
  
 RICK TAYLOR, D.O. 
  
 EXECUTION DATE: JUNE 7, 2004. 

 TABLE OF CONTENTS 
  

									
	 	  	 	  	Page

	 1.
	  	DEFINITIONS.	  	2
			
	 2.
	  	TRANSACTION.	  	2
				
	 	  	2.1	 	Transaction.	  	2
				
	 	  	2.2	 	Effect of the Merger.	  	2
				
	 	  	2.3	 	Filing of Certificates.	  	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	 	Medical Assets.	  	3
				
	 	  	2.12	 	Conversion of Shares.	  	4
				
	 	  	2.13	 	Shareholder Consent and Release.	  	4
				
	 	  	2.14	 	Registration.	  	4
				
	 	  	2.15	 	Shareholder’s 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	 	Distributions of Cash.	  	7
				
	 	  	3.3	 	Closing Date Adjustments	  	7
					
	 	  	 	 	(a)	 	Transaction Related Adjustments.	  	7
					
	 	  	 	 	(b)	 	Closing Date Balance Sheet.	  	7
				
	 	  	3.4	 	Earnout Payment.	  	8
					
	 	  	 	 	(a)	 	General.	  	8
					
	 	  	 	 	(b)	 	Installment Payment Discount.	  	8

  

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	 	  	 	 	(c)	 	Installment Payment Premium.	  	8
					
	 	  	 	 	(d)	 	Manner of Payment.	  	9
					
	 	  	 	 	(e)	 	Earnout Cap.	  	9
					
	 	  	 	 	(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.	  	11
				
	 	  	4.3	 	Authorization.	  	11
				
	 	  	4.4	 	Noncontravention.	  	12
				
	 	  	4.5	 	Broker’s Fees.	  	12
				
	 	  	4.6	 	Title to Assets.	  	12
				
	 	  	4.7	 	No Subsidiaries.	  	12
				
	 	  	4.8	 	Financial Statements.	  	13
				
	 	  	4.9	 	Events Subsequent to Most Recent Year End.	  	13
					
	 	  	 	 	(a)	 	Sale or Lease of Assets.	  	13
					
	 	  	 	 	(b)	 	Contracts.	  	13
					
	 	  	 	 	(c)	 	Change in Contracts.	  	13
					
	 	  	 	 	(d)	 	Security Interests.	  	13
					
	 	  	 	 	(e)	 	Investments.	  	13
					
	 	  	 	 	(f)	 	Debts.	  	13
					
	 	  	 	 	(g)	 	Liabilities Unaffected.	  	13
					
	 	  	 	 	(h)	 	Claims Unaffected.	  	14
					
	 	  	 	 	(i)	 	Articles and Bylaws.	  	14
					
	 	  	 	 	(j)	 	Changes in Equity.	  	14
					
	 	  	 	 	(k)	 	Intentionally Omitted.	  	14
					
	 	  	 	 	(l)	 	Property Damage.	  	14
					
	 	  	 	 	(m)	 	Transactions with Affiliates.	  	14
					
	 	  	 	 	(n)	 	Collective Bargaining Agreements.	  	14
					
	 	  	 	 	(o)	 	Compensation Changes.	  	14
					
	 	  	 	 	(p)	 	Employee Benefit Plans.	  	14

  

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	 	 	(q)	 	Officers; Directors; Employees.	  	14
				
	 	 	(r)	 	Charitable or Capital Contributions.	  	14
				
	 	 	(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.	  	15
				
	 	 	(a)	 	Tax Returns.	  	15
				
	 	 	(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.	  	16
				
	 	 	(h)	 	Period of Assessment.	  	17
				
	 	 	(i)	 	Tax Agreements.	  	17
				
	 	 	(j)	 	Inclusions in Taxable Periods.	  	17
				
	 	 	(k)	 	Consents.	  	17
				
	 	 	(l)	 	Personal Holding Company	  	17
				
	 	 	(m)	 	Consolidated Tax Returns.	  	17
			
	 4.12
	 	Real Property.	  	17
				
	 	 	(a)	 	Binding.	  	17
				
	 	 	(b)	 	Continued Validity.	  	17
				
	 	 	(c)	 	No Defaults.	  	17
				
	 	 	(d)	 	Repudiation.	  	18
				
	 	 	(e)	 	No Disputes.	  	18
				
	 	 	(f)	 	Encumbrances.	  	18
				
	 	 	(g)	 	Approvals.	  	18
				
	 	 	(h)	 	Utilities.	  	18

  

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	 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.	  	19
				
	 	 	(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.	  	20
			
	 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.	  	22
			
	 4.22
	 	Rates and Reimbursement Policies.	  	22
			
	 4.23
	 	Medical Staff.	  	22
			
	 4.24
	 	Employees.	  	23
			
	 4.25
	 	Employee Benefits.	  	23
				
	 	 	(a)	 	Plans.	  	23
				
	 	 	(b)	 	Compliance.	  	23
				
	 	 	(c)	 	Reports and Descriptions.	  	23
				
	 	 	(d)	 	Contributions.	  	23
				
	 	 	(e)	 	Qualified Plan.	  	23
				
	 	 	(f)	 	Market Value.	  	23

  

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	 	 	(g)	 	Copies.	  	23
				
	 	 	(h)	 	Maintenance of Plans.	  	24
					
	 	 	 	 	(i)	 	Reportable Events.	  	24
					
	 	 	 	 	(ii)	 	Prohibited Transactions.	  	24
			
	 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.	  	25
					
	 	 	 	 	(v)	 	Mental Illnesses.	  	25
					
	 	 	 	 	(vi)	 	Substance Abuse.	  	25
					
	 	 	 	 	(vii)	 	Professional Ethics.	  	25
					
	 	 	 	 	(viii)	 	Application for Licensure.	  	25
			
	 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
			
	 4.32
	 	Tax Status.	  	26
			
	 4.33
	 	Binding Obligation.	  	26
			
	 4.34
	 	No Corporate Practice or Fee Splitting.	  	27
			
	 4.35
	 	Intentions.	  	27
			
	 4.36
	 	Securities Representation.	  	27

  

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	 	 	 	 	 (a)
	 	 No Registration of PainCare Shares; Investment Intent.
	  	27
					
	 	 	 	 	 (b)
	 	 Resale Restrictions.
	  	27
					
	 	 	 	 	 (c)
	 	 Ability to Bear Economic Risk.
	  	27
					
	 	 	 	 	 (d)
	 	 Accredited Investor.
	  	28
					
	 	 	 	 	 (e)
	 	 No Registration.
	  	28
				
	 	 	 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.
	  	30
				
	 	 	 5.4
	 	 Consents and Approvals.
	  	30
				
	 	 	 5.5
	 	 Disclosure Documents.
	  	30
				
	 	 	 5.6
	 	 Capitalization.
	  	30
				
	 	 	 5.7
	 	 Litigation.
	  	30
				
	 	 	 5.8
	 	 No Undisclosed Liabilities.
	  	31
				
	 	 	 5.9
	 	 No Brokers.
	  	31
				
	 	 	 5.10
	 	 Compliance with Laws.
	  	31
				
	 	 	 5.11
	 	 Material Misstatements or Omissions
	  	31
			
	 6.
	 	 CLOSING; TERMINATION.
	  	31
			
	 7.
	 	 CLOSING DELIVERIES.
	  	32
				
	 	 	 7.1
	 	 Deliveries of the Company and the Shareholder.
	  	32
					
	 	 	 	 	 (a)
	 	 Consents and Approvals.
	  	32
					
	 	 	 	 	 (b)
	 	 Termination of Agreements.
	  	32
					
	 	 	 	 	 (c)
	 	 Company Stock.
	  	32
					
	 	 	 	 	 (d)
	 	 Corporate Authorization.
	  	32

  

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	 	 	 	 	 (e)
	 	 Secretary’s Certificate.
	 	32
					
	 	 	 	 	 (f)
	 	 Medicare Provider Number.
	 	32
					
	 	 	 	 	 (g)
	 	 Managed Care Agreements.
	 	32
					
	 	 	 	 	 (h)
	 	 Other documents.
	 	32
				
	 	 	 7.2
	 	 Deliveries of PainCare.
	 	32
					
	 	 	 	 	 (a)
	 	 Transaction Consideration.
	 	32
					
	 	 	 	 	 (b)
	 	 Resolutions.
	 	32
					
	 	 	 	 	 (c)
	 	 Secretary’s Certificate.
	 	33
					
	 	 	 	 	 (d)
	 	 Other Documents.
	 	33
			
	 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 Shareholder.
	 	33
			
	 9.
	 	 COVENANTS.
	 	33
				
	 	 	 9.1
	 	 Operations.
	 	33
				
	 	 	 9.2
	 	 Deliveries.
	 	33
				
	 	 	 9.3
	 	 Distributions of Sub-Chapter S Income by the Company.
	 	33
				
	 	 	 9.4
	 	 Post-Closing General Covenant.
	 	34
				
	 	 	 9.5
	 	 Tax Returns.
	 	34
				
	 	 	 9.6
	 	 Litigation Support.
	 	34
				
	 	 	 9.7
	 	 Consents.
	 	34
				
	 	 	 9.8
	 	 Operational Covenants.
	 	35
				
	 	 	 9.9
	 	 Capital Adjustments.
	 	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
					
	 	 	 	 	 (a)
	 	 Notification.
	 	37
					
	 	 	 	 	 (b)
	 	 Defense by Indemnifying Party.
	 	37

  

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	 	 	 	 	 (c)
	  	 Satisfactory Defense.
	  	38
					
	 	 	 	 	 (d)
	  	 Conditions.
	  	38
				
	 	 	 10.5
	 	 Right to Set-Off.
	  	38
				
	 	 	 10.6
	 	 Materiality.
	  	39
				
	 	 	 10.7
	 	 Limitation.
	  	39
				
	 	 	 10.8
	 	 Survival of Representations and Warranties of Shareholder.
	  	39
				
	 	 	 10.9
	 	 No Other Representations or Warranties.
	  	39
			
	 11.
	 	 RESTRICTIVE COVENANTS; CONFIDENTIALITY.
	  	40
				
	 	 	 11.1
	 	 Restrictive Covenants.
	  	40
					
	 	 	 	 	 (a)
	  	 Restricted Period.
	  	40
					
	 	 	 	 	 (b)
	  	 Consideration.
	  	41
					
	 	 	 	 	 (c)
	  	 Third-Party Beneficiaries.
	  	41
				
	 	 	 11.2
	 	 Intentionally Omitted.
	  	42
				
	 	 	 11.3
	 	 No Running of Covenant During Breach.
	  	42
				
	 	 	 11.4
	 	 Blue Pencil Doctrine.
	  	42
				
	 	 	 11.5
	 	 Confidentiality, Press Releases, and Public Announcements.
	  	42
				
	 	 	 11.6
	 	 Conduct of Business.
	  	43
				
	 	 	 11.7
	 	 No Third-Party Beneficiaries.
	  	45
			
	 12.
	 	 MISCELLANEOUS
	  	45
				
	 	 	 12.1
	 	 Entire Agreement.
	  	45
				
	 	 	 12.2
	 	 Succession and Assignment.
	  	45
				
	 	 	 12.3
	 	 Counterparts.
	  	45
				
	 	 	 12.4
	 	 Headings.
	  	45
				
	 	 	 12.5
	 	 Notices.
	  	45
				
	 	 	 12.6
	 	 Governing Law; Jurisdiction; Attorney’s Fees.
	  	46
				
	 	 	 12.7
	 	 Amendments and Waivers.
	  	46
				
	 	 	 12.8
	 	 Severability.
	  	46
				
	 	 	 12.9
	 	 Expenses.
	  	46
				
	 	 	 12.10
	 	 Further Assurances.
	  	46
				
	 	 	 12.11
	 	 Construction.
	  	47

  

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	 12.12
	  	 Survival.
	  	47
			
	 12.13
	  	 Incorporation of Exhibits and Schedules.
	  	47
			
	 12.14
	  	 Submission to Jurisdiction.
	  	47

  

 ix 

 MERGER AGREEMENT AND PLAN OF REORGANIZATION 
  
 THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
“Agreement”) is made and entered into on the 7th day of June, 2004 (the “Execution Date”)
by and among PAINCARE HOLDINGS, INC., a Florida corporation (“PainCare”), PAINCARE ACQUISITION COMPANY XIII, INC., a Florida corporation (“Subsidiary”), in which PainCare and the Subsidiary are sometimes referred to
herein as the “Acquiring Companies”, and RICK TAYLOR, D.O., P.A., a Texas professional association (the “Company”), and RICK TAYLOR, D.O., an individual (“Shareholder”). 
  
 RECITALS 
  
 A. The Company owns and operates a medical practice (hereinafter
sometimes called the “Business”) at 2900 South Loop 256, Palestine, Texas 75801 (hereinafter sometimes called the “Center”) and Shareholder is a licensed medical provider in the State of Texas and owns all of the issued and
outstanding shares of stock in the Company (the “Company Shares”); 
  
 B. PainCare is in the business of acquiring the non-medical assets of medical practices and entering into management services agreements with practices entities associated with the acquired assets; 

 
 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-medical assets of the Company; 
  
 D. In connection with this transaction, Shareholder will convert the Company from a Texas professional association to a Texas business corporation,
will immediately cease the practice of medicine in the name of the Company and will change the Company’s name to Rick Taylor Conversion, Inc. (hereinafter the “Conversion”). Prior to or contemporaneous with such Conversion,
Shareholder will form a new Texas professional association, PainCare Clinics, P.A. (hereinafter the “New PA”), to operate his medical practice and in connection with same will transfer all the Company’s medical assets to the New PA.

  
 E. In connection with this acquisition, PainCare
desires to have Subsidiary enter into a management services agreement with the New PA, in which the management services agreement is the significant inducement for the Subsidiary to acquire the non-medical 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. 
  

 1 

 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 shall file articles of conversion to convert from a professional association
to a business corporation and as of such time will immediately cease the practice of medicine. Upon the terms and subject to the conditions hereof and in accordance with the provisions of the Texas Business Corporation Act (the “Texas
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 Texas 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
Texas in accordance with the provisions of the Florida Act and the Texas 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 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 

 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, any further acts are necessary: (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, title to and possession of any property or right of the Company acquired or to be acquired by reason of, or as a result of, the Merger; or (b) otherwise to carry out the purposes of this Agreement, then the
Shareholder shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments and assurances in law and to do all other acts necessary or proper to vest, perfect or
confirm title to and possession of such property or rights in the Surviving Corporation and otherwise to carry out the purposes of this Agreement; and the officers and directors of the Surviving Corporation are fully authorized in the name of the
Shareholder and the Company to take any and all such actions. 
  
 2.9 No Dissenters’ Rights. As a result of the unanimous approval of the transactions contemplated herein by the Shareholder; neither the Shareholder, nor any other party, is entitled to dissenters’ rights under the
laws of the State of Texas or the State of Florida. 
  
 2.10
Surrender of Certificates. 
  
 (a)
Company’s Shares. At the Closing, the Shareholder shall be required to surrender to Subsidiary the original stock certificates evidencing one thousand (1,000) 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. 
  

2.11 Medical Assets. Those assets (the “Medical Assets”) of the Company which require a medical license to own or utilize, such
as medical records and any pharmaceutical supplies, shall not become the possession of Subsidiary pursuant to the Merger. The Company shall convey all such Medical Assets, which have nominal value, to the New PA as of, or prior to, the Statutory
Merger Time for nominal consideration. 
  

 3 

 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 Shareholder the Company Shares shall be converted into the Merger Consideration. The PainCare Shares to be received by the Shareholder 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 Shareholder hereby consents to the Transaction and approves the execution and delivery of this Agreement and the transactions contemplated hereby. Effective on the Closing Date, the Shareholder hereby releases the
Company from any and all claims against the Company relating to the period prior to the Closing Date which he may, could or will have, as a result of the Shareholder having served as a stockholder, director, officer, employee, agent, or in any other
capacity of the Company; provided, however, such release shall not operate to release the Company (or the Surviving Corporation as successor to the Company) from (i) Shareholder’s rights (whether arising under the Company’s By-Laws
or by statute or other applicable law) to indemnification, or (ii) the obligation to make the distributions of pre-Closing Date income as permitted under this Agreement, or (iii) claims, if any, arising from Shareholder serving as a guarantor or
joint-obligor with respect to those certain obligations of the Company as identified in Section 2.13 of the Disclosure Schedule. 
  
 2.14 Registration. 
  
 (a) If within the three (3) year period commencing on the Closing Date, PainCare proposes for any reason to register the PainCare Shares under the
Securities Act [other than a registration in connection with the registration of the securities owned by Midsummer Capital and the Laurus Master Fund currently in process or 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 the Shareholder of its intention to so register the PainCare Shares and, upon
written request by the Shareholder, given within twenty (20) days after delivery of any such notice by PainCare, to include in such registration PainCare Shares held by the Shareholder (which request shall specify the number of PainCare Shares
proposed to be included in such registration), PainCare shall attempt 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; provided
however, that 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 if such registration is in part an underwritten primary or secondary registration on behalf of PainCare, 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 Shareholder shall have no further rights or obligations hereunder with respect to such proposed registration. Notwithstanding any other provision of this
Section to the contrary, PainCare shall not be 
  

 4 

 required to include any of the PainCare Shares in a registration statement relating to an underwritten offering of
PainCare’s securities unless the Shareholder accepts 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
Shareholder agrees to promptly execute and/or deliver such documents in connection with such registration as PainCare or the managing underwriter may reasonably request. 
  
 (b) The Shareholder may exercise his rights under Section 2.14(a) 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 the Shareholder, the 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 reasonable fees of PainCare’s counsel associated with such withdrawal, unless such withdrawal is due to the Shareholder 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 Shareholder may not participate in any registration under this Section which is underwritten unless he agrees 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 Shareholder 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 Shareholder’s Obligation to Furnish Information.
PainCare may require Shareholder 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 Shareholder 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 Shareholder’s PainCare Shares from such registration. 
  
 2.16 Suspension of Sales Pending Amendment to Prospectus. 
  
 (a) The Shareholder agrees that, upon receipt of any written notice from PainCare of the happening of any event that
requires PainCare not to proceed with the registration, or if PainCare has decided not to proceed with the registration for any reason, the Shareholder 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 Shareholder shall deliver to PainCare (at PainCare’s expense, except as hereinafter provided)
all copies, other than permanent file copies, then in Shareholder’s possession of any prospectus covering such PainCare Shares. 
  
 (b) The Shareholder agrees that he shall, as expeditiously as possible, notify PainCare at any time when a prospectus relating to a registration statement
covering such 
  

 5 

 Shareholder’s PainCare Shares is required to be delivered under the Securities Act, of the happening of any event
actually known to him 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 Shareholder for inclusion in such prospectus included in such registration statement and, 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 Shareholder in connection with the exercise of his registration rights hereunder. 
  
 2.18 Rule 144. PainCare, from and after the Closing, shall take such reasonable actions and make all such
filings as may be reasonably necessary to ensure that Rule 144 under the Securities Act will be available for sales of any PainCare Shares held by Shareholder pursuant to this Agreement after the first anniversary date of the issuance of such
Shares. Upon request by Shareholder, PainCare shall furnish to Shareholder a written statement setting forth its compliance with the current public information reporting requirements of Rule 144. This covenant shall expire upon an effective
registration statement which includes such PainCare Shares held by Shareholder. 
  
 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. 
  

 6 

 Subject to adjustment as provided in Section 3.3 below, the Closing Date Consideration that PainCare shall deliver to the
Shareholder upon the satisfaction of the Closing conditions shall equal Three Million Seven Hundred Fifty Thousand and 00/100 Dollars ($3,750,000), comprised of: (i) One Million Eight Hundred Seventy Five Thousand and 00/100 Dollars ($1,875,000)
(the “Cash Due At Closing”) to be delivered via wire transfer to a bank account designated by the Shareholder, plus (ii) Seven Hundred Sixty One Thousand Five Hundred Forty Five Shares (761,545) PainCare Shares, valued at approximately Two
Dollars and 46.21/100 ($2.4621) per share and having an aggregate value of One Million Eight Hundred Seventy Five Thousand and 00/100 Dollars ($1,875,000). At least one (1) day prior to the Closing Date, the Shareholder shall notify PainCare in
writing of the bank account to which the Cash Due At Closing shall be wired and to what location the PainCare Shares are to be sent. 
  
 3.2 Distributions of Cash. It is understood and agreed that the Company shall have the right to distribute all of its cash to the
Shareholder at any time on or prior to the Closing Date saving the Required Cash as provided in Section 3.3(b) below. 
  
 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 be reduced by the amount of any cash payments made by the Company or the Acquiring Companies with respect to any expenses paid on behalf of the Shareholder (rather than the Company) expect as otherwise specifically allowed pursuant to this
Agreement. 
  
 (b) Closing Date Balance Sheet.
Within forty-five (45) days after the Closing Date, PainCare or its Affiliate will prepare and deliver to 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 thirty (30) days after PainCare’s delivery of the Closing Date Balance Sheet to Shareholder, Shareholder shall, in a written notice to PainCare, either accept or describe in reasonable detail any
proposed adjustments to the Closing Date Balance Sheet and the reasons therefore, and shall include pertinent calculations. If Shareholder fails to deliver notice of acceptance or objection to the Closing Date Balance Sheet within such thirty (30)
day period, the Shareholder shall be deemed to have accepted the Closing Date Balance Sheet. Except in the case of a dispute with respect to the Closing Date Balance Sheet, within thirty (30) days after delivery of the Closing Date Balance Sheet
(the “Adjustment Payment Date”), the Shareholder shall pay the Net Equity Adjustment (as defined below) to PainCare. In the event that PainCare and Shareholder are not able to agree on the Closing Date Balance Sheet within thirty (30) days
from and after the receipt by PainCare of any objections raised by Shareholder, then either Party shall each have the right to require that such disputed determinations be submitted to an independent certified public accountant or accounting firm
that PainCare and Shareholder shall jointly select, for computation or verification in accordance with the provisions of this Agreement, and the Net Equity Adjustment, if any, shall be paid by the Shareholder to PainCare within ten (10) business
days after receipt of the accountant’s computation or verification. The foregoing provisions for accounting firm review shall be final and binding upon the Parties and there shall be no right of appeal from such decision. Such accounting
firm’s fees and expenses for such disputed determination shall be borne by the Party whose determination has been modified by such accounting firm’s report or by all Parties in 
  

 7 

 proportion to the relative amount each Party’s determination has been modified. Any payments due under this Section
3.3 shall bear interest at eight percent (8%) per annum from the Adjustment Payment Date. 
  
 If the final Closing Date Balance Sheet reflects Cash of the Company that is less than Twenty Thousand Dollars ($20,000.00) (the “Required Cash”), or Net Shareholder’s Equity (as defined below) of the
Company that is less than One Hundred Twenty Five Thousand and 00/100 Dollars ($125,000.00)(“Agreed Net Equity”), then the Cash Due at Closing shall be reduced and the Shareholder shall be required to immediately return to PainCare dollar
for dollar (the “Net Equity Adjustment”) by (i) an Amount equal to the Required Cash less Cash reflected on the Closing Date Balance Sheet, and (ii) the difference between (x) the Agreed Net Equity; and (y) the Net Shareholder’s
Equity set forth in the Closing Date Balance Sheet. “Net Shareholder’s Equity” shall mean the book value of the Company’s tangible non-medical assets plus its accounts receivable (less the Required Cash) net of all liabilities 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 Five Hundred Thousand and 00/100 Dollars ($1,500,000) (the “Earnings Threshold”) in each of the three (3) successive twelve (12) month
calendar periods beginning on the first (1st) day 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 Shareholder a total amount of additional consideration of Three Million Seven Hundred Fifty Thousand and 00/100 Dollars ($3,750,000) for the Formula Periods, payable in three equal annual installments of One Million Two Hundred Fifty
Thousand and 00/100 Dollars ($1,250,000) (the “Intended Installment Payment”) in the form of consideration and subject to adjustment as provided in Section 3.4(d) below. 
  
 (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 defined below) (the “Adjusted Installment Payment”). The “Installment Payment Discount” shall equal (i) the Formula Period Profits (as defined in Subsection (f) below) for such Formula Period divided by the Earnings
Threshold; multiplied by (ii) ninety percent (90%). By way of example of this Section 3.4(b), if the Formula Period Profits of the Surviving Corporation is $1,200,000 for the first Formula Period, then the Adjusted Installment Payment with respect
to such Formula Period would be $900,000 (i.e. $1,250,000 x [(1,200,000 ÷ 1,500,000) x 0.90]. 
  
 (c) Installment Payment Premium. Notwithstanding Section 3.4(b), if (i) the Shareholder receives 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 Surviving Corporation’s Formula Period Profits
exceed the Earnings Threshold in the Formula Period immediately subsequent to the Formula Period for which the Installment Payment Discount corresponded, 
  

 8 

 then PainCare shall pay to the Shareholder the Installment Payment Premium (as defined below). The “Installment
Payment Premium” shall equal the product of (A) the Formula Period Profits for the Formula Period in which the Installment Payment Premium is calculated less the Earnings Threshold, multiplied by (B) Seventy-five percent (75%). By way of
example of this Section 3.4(c), if the Formula Period Profits of the Surviving Corporation is less than $1,500,000 for the first Formula Period and the Formula Period Profits of the Surviving Corporation is $1,700,000 for the second Formula Period,
then the Installment Payment Premium with respect to such second Formula Period would be $150,000 (i.e. [$1,700,000 - $1,500,000] x 0.75). The Installment Payment Premium shall be paid to the Shareholder in the same percentages, form and time as the
Installment Payments (as defined in Subsection (d) below) are due for the Formula Period for which the Installment Payment Premium is calculated. 
  
 (d) Manner of Payment. Within sixty (60) days after the end of each Formula Period, PainCare or its Affiliate shall prepare and deliver to
Shareholder a financial statement presenting the Formula Period Profits for the Surviving Corporation for the applicable Formula Period (the “Formula Period Profits Statement”). Within thirty (30) days after delivery of the Formula Period
Profits Statement, Shareholder shall in a written notice to PainCare either accept or describe in reasonable detail any proposed adjustments to the Formula Period Profits Statement and the reasons therefore, and shall include pertinent calculations.
If Shareholder fails to deliver notice of acceptance or objection to the Formula Period Profits Statement within such thirty (30) day period, the Shareholder shall be deemed to have accepted the Formula Period Profits Statement. If Shareholder
accepts or fails to object to the Formula Period Profits Statement within the thirty (30) day period set forth above, then within ninety (90) days after the end of the Formula Period, PainCare shall pay to the Shareholder the Intended Installment
Payment or the Adjusted Installment Payment (each an “Installment Payment”, and collectively, the “Installment Payments”) along with any Installment Payment Premium owed in accordance with Subsection (c) above as follows: (i)
fifty percent (50%) of the Installment Payment shall be made in cash via wire transfer to a bank account designated by the Shareholder; 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 Shareholder are not able to agree on the Formula Period Profits Statement within thirty (30) days from and after the receipt by
PainCare of any objections raised by Shareholder, PainCare and Shareholder shall each have the right to require that such disputed determinations be submitted to an independent certified public accountant or accounting firm that PainCare and
Shareholder shall jointly select, for computation or verification in accordance with the provisions of this Agreement, and the Installment Payment shall be paid by PainCare to the Shareholder within fifteen (15) days after receipt of the
accountant’s computation or verification. The foregoing provisions for accounting firm review shall be final and binding upon the Parties and there shall be no right of appeal from such decision. 
  
 (e) Earnout Cap. Notwithstanding anything to the contrary in
this Section 3, in no event whatsoever shall the aggregate amount of the Installment Payments paid to the Shareholder from PainCare in cash, in PainCare Shares or any other form of consideration exceed Three Million Seven Hundred Fifty Thousand and
00/100 Dollars ($3,750,000). 
  

 9 

 (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 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; 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 selected jointly by PainCare and Shareholder. 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 Dollars and 50/100 ($2.50) per share. 
  
 (ii) “Formula Period Profits” shall mean the Surviving
Corporation’s earnings before deductions for interest, taxes, depreciation and amortization (“EBITDA”) as calculated utilizing GAAP by PainCare’s independent certified public accountants for the applicable Formula Period, 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 its Affiliates or other administrative or similar charges that PainCare or its Affiliates might impose upon the Surviving Corporation, except those charges for services provided directly to and for the benefit, or as required, of the
Surviving Corporation; and (ii) any non-recurring 
  

 10 

 charges, losses, profits, gains, or non-cash adjustments not related to the ongoing operations of the Surviving
Corporation’s business, including but not limited to discontinued operations, extraordinary items, acquisition costs and goodwill charges incurred in connection with the transactions contemplated hereby (excluding the write-off of any goodwill
with respect to the Surviving Corporation in accordance with FASB 142), or unusual or infrequent items as such terms are defined pursuant to generally accepted accounting principles, or (iii) any charge related to grants or exercises of options of
employees of the Surviving Corporation. 
  
 4. REPRESENTATIONS AND
WARRANTIES OF THE SHAREHOLDER. The Shareholder represents and warrants to the Acquiring Companies that the statements contained in this Section 4 are correct and complete as of the date of this Agreement, except as set forth in the
disclosure schedule accompanying this Agreement (the “Disclosure Schedule”). The Disclosure Schedule will be arranged in paragraphs corresponding to the numbered paragraphs contained in this Section 4 to the Agreement. 
  
 4.1 Organization, Qualification, and Corporate Power. As of
the Closing Date, the Company will be a corporation duly organized, validly existing, and in good standing under the laws of the State of Texas. The Company has full power and authority and all licenses, permits and authorizations necessary to carry
on the businesses in which it is currently engaged and to own and use the properties owned and used by it. Section 4.1 of the Disclosure Schedule lists all of the officers and members of the Board of Directors of the Company, as of the date
immediately preceding the Closing Date. The Company has made available to the Acquiring Companies correct and complete copies of the minute book, articles of incorporation and bylaws of the Company, as amended to date. Copies of the minute book
(containing the records of meetings of the stockholders, the board of directors and any committees of the board of directors), the stock certificate books and stock record books of the Company are correct and complete in all material respects and
will have been delivered to PainCare prior to or at the Statutory Merger Time. The Company is not in default under or in violation of any provision of its articles of incorporation or bylaws. 
  
 4.2 Capitalization. The entire authorized capital stock of the
Company consists of One Hundred Thousand (100,000) shares of common stock (the “Shares”), of which One Thousand (1,000) 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 Shareholder. The Shareholder has good title to the Company Shares free and clear of any and all liens, claims, security interests or other encumbrances of any Person. There
are no outstanding or authorized options, warrants, purchase rights, subscription rights, redemption rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. There are no stockholders’ agreements, voting trusts,
proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company. 
  
 4.3 Authorization. The Company has full power and authority (including full corporate power and authority) and Dr. Rick Taylor on behalf of
each Shareholder has all necessary authority to execute, bind each Shareholder and deliver this Agreement and to perform 
  

 11 

 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 shareholders 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 the
Shareholder any and all notice required to be given to the Shareholder under applicable law. This Agreement constitutes the valid and legally binding obligation of the Company and the Shareholder, enforceable in accordance with its terms and
conditions. 
  
 4.4 Noncontravention. Except as set
forth in Section 4.4 of the Disclosure Schedule, neither the execution and the delivery of this Agreement by the Company or the Shareholder, nor the consummation of the transactions contemplated hereby will: (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, or other restriction of any government, governmental agency or any other third party whatsoever, or court to which the Company or the Shareholder are subject, or any provision of the
articles of incorporation or bylaws of the Company; or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any material agreement, contract, lease, license, instrument or other arrangement to which the Company or the Shareholder are a party or by which either the Company or the Shareholder is bound or to which any of the Company’s
assets are subject (or result in the imposition of any Security Interest upon any of its assets). Except as set forth in Section 4.4 of the Disclosure Schedule, the Shareholder and the Company need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental agency or any other third party whatsoever in order for the Parties to consummate the transactions contemplated by this Agreement. 
  
 4.5 Broker’s Fees. The Shareholder has not entered into
any broker or finder’s agreement for which he, the Company or PainCare is required to pay any Liability or has any obligation to pay any fees, expenses, or commissions to any consultant, broker, finder, or agent in connection with the
transactions contemplated by this Agreement. 
  
 4.6 Title
to Assets. Section 4.6 of the Disclosure Schedule contains a complete, true and correct list of all of the assets of the Company. Except for the security interest in the assets of the Company held by First State Bank or except as to assets
disposed of in the ordinary course of business subsequent to the date hereof or disposed of 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, or shown on the April 30, 2004 Balance Sheet (the “Latest Balance Sheet”) or acquired after the date thereof, free and clear of all Security Interests. Except for the Medical Assets which are to be transferred to New PA, 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.

  

 12 

 4.8 Financial Statements. The Company has prepared financial statements consisting of (i) a
balance sheet and statement of income and expenses as of and for the year ended December 31, 2003 (the “Year-End Financial Statements”); and (ii) a balance sheet and a statement of income and expenses as of and for the four month period
ending April 30, 2003 and 2004 (the “Interim Financial Statements”) all of which are included in Section 4.8 of the Disclosure Schedule. The Year-End Financial Statements and the Interim Financial Statements (collectively, the
“Financial Statements”) have been prepared in accordance with the cash method of accounting. 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 in all material respects, and are consistent with the books and records of the Company (which books and records are correct and complete in all material respects). 
  
 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 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 material assets, tangible or intangible, other than for fair market value in the ordinary course of its business; 
  
 (b) Contracts. Other than this Agreement, 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, adversely modified, or
canceled any material agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) to which the Company is a party or by which it is bound and neither the Shareholder nor the Company has any intent to do
any of the foregoing or has received a verbal or written indication of any third party’s intent to do any of the foregoing; 
  
 (d) Security Interests. The Company has not had imposed any Security Interest upon any of its assets, tangible or intangible; 
  
 (e) Investments. The Company has not made any capital
investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions); 
  
 (f) Debts. The Company has not issued any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation; 
  
 (g) Liabilities Unaffected. The Company has not delayed or postponed the payment of accounts payable and other Liabilities or accelerated the collection of accounts, notes or other receivables;

  

 13 

 (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. Except in connection with the Conversion, there has been no change made or authorized in the articles of
incorporation or bylaws of the Company; 
  
 (j) Changes in
Equity. Except in connection with the Conversion, 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)
Intentionally Omitted. 
  
 (l) Property
Damage. The Company has not experienced any material damage, destruction, or loss (whether or not covered by insurance) to its property or assets; 
  
 (m) Transactions with Affiliates. The Company has not made any loan to, or entered into any other transaction with, any of its directors,
officers and employees outside the ordinary course of business provided that any such transaction entered into within the sixty (60) day period immediately preceding the Closing Date is listed in Section 4.9(m) of the Disclosure Schedule;

  
 (n) Collective Bargaining Agreements. The
Company has not entered into any collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; 
  
 (o) Compensation Changes. The Company has not granted any increase in the compensation of any of its directors, officers, and employees
outside of the ordinary course of business provided that any such compensation increase provided to such individuals within the sixty (60) day period immediately preceding the Closing Date is listed in Section 4.9(o) of the Disclosure Schedule;

  
 (p) Employee Benefit Plans. The Company has not
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other
Employee Benefit Plan); 
  
 (q) Officers; Directors;
Employees. The Company has not made any change in the employment terms for any of its directors, officers and employees, other than increases in compensation in the ordinary course of business or 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; 
  

 14 

 (s) Ordinary Course of Business. To the Knowledge of the Shareholder, there has not been
any other occurrence, event, incident, action, failure to act, or transaction outside the ordinary course of business involving the Company other than as contemplated by this Agreement; 
  
 (t) Accounting Practices. There has not been any change in any method of accounting or accounting principle,
estimate or practice of the Company; 
  
 (u) Accounts
Receivable. The Company has not accelerated the collection of any Accounts Receivable or any other amounts owed to it; and 
  
 (v) In General. Neither the Company nor the Shareholder has committed to do any of the foregoing. 
  
 4.10 Undisclosed Liabilities. The Company has no Liability and
to the Knowledge of the Shareholder there is no reasonable basis for any present or future action, suit, proceeding, hearing, investigation, complaint, claim, or demand against the Company giving rise to any Liability, except for: (a) Liabilities
disclosed in the Disclosures Schedule; (b) contractual obligations incurred in the ordinary course of business; (c) Liabilities reflected on the Latest Balance Sheet; (d) Liabilities which have arisen after the date of the Latest Balance Sheet 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), and (e) Liabilities for professional
fees relating to the transactions contemplated by this Agreement which shall be the sole obligation of the Shareholder. As of the Closing, other than the current trade accounts payable, leasehold obligations, accrued payroll and benefit obligations,
accrued property taxes, the note payments on that certain promissory note issued in favor of First State Bank with respect to Equipment Loan #160794760 with pay-off as of 5/24/04 of #298,858.34 for DRX9000 medical equipment (the “Equipment
Note”), 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 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 material 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. 
  

 15 

 (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. No Shareholder or director or officer (or employee responsible for Tax matters) of the Company expects any
authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax Liability of the Company either: (a) claimed or raised by any authority; or (b) as to which any
Shareholder, directors and officers (and employees responsible for Tax matters) of the Company has Knowledge based upon personal contact with any agent of such authority. Section 4.11 of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Company for taxable periods ended on or after December 31, 2000, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The
Shareholder has made available to PainCare correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company since December 31, 2000. 
  
 (d) No Waivers. The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. 
  
 (e) No Special Circumstances. The Company has not made any payments, is not obligated to make any payments, nor is a party to any agreement
that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G. The Company has not been a United States real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662. 
  
 (f) Subchapter
“S”. The Company has elected, by the unanimous consent of its shareholders and in compliance with all applicable legal requirements, to be taxed under Subchapter “S” of the Code and corresponding provisions under any
applicable state and local laws, and such elections are currently in full force and effect for the Company. No action has been taken by the Company or the Shareholder that may result in the revocation of any such elections. The Company has no
“Subchapter C earnings and profits,” as defined in Code Section 1362(d). The Company has no “net unrealized built-in gain,” as such term is defined in Code Sections 1374(d)(1) and 1374(d)(8). The Company has no Liability,
absolute or contingent, for the payment of any income Taxes under the Code or under Subchapter “S” of the Code. 
  
 (g) Audits of Tax Returns. No Tax Return of the Company is currently under audit or examination by any taxing authority, and the Company has
not received a written notice stating the intention of any taxing authority to conduct such an audit or examination. Each deficiency resulting from any audit or examination relating to Taxes by any taxing authority has been paid, except for
deficiencies being contested in good faith. The revenue agents’ reports related to any prior audits and examinations are attached as part of Section 4.11 of the Disclosure Schedule. 
  

 16 

 (h) Period of Assessment. There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any Taxes. 
  
 (i) Tax Agreements. The Company is not a party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement with respect to Taxes, including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any taxing authority. 
  
 (j) Inclusions in Taxable Periods. The Company will be required to include in a taxable period ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period
but was not recognized in any prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Code Section 481 with
respect to a change in method of accounting occurring before the Closing Date or comparable provisions of state, local or foreign tax law. PainCare agrees to pay all such tax as they become due. 
  
 (k) Consents. The Company has not filed a consent pursuant to
or agreed to the application of Code Section 341(f). 
  
 (l)
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. 
  
 (m) Consolidated Tax Returns. The Company has never filed or
been included in any combined or consolidated Tax Return with any other person or been a member of an Affiliated Group filing a consolidated federal income Tax Return. 
  
 4.12 Real Property. The Company does not own any real property. Section 4.12 of the Disclosure Schedule lists
and describes briefly all real property leased or subleased by the Company. The Shareholder has made available to PainCare and Subsidiary correct and complete copies of the leases and subleases listed in Section 4.12 of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in Section 4.12 of the Disclosure Schedule: 
  
 (a) Binding. The lease or sublease is legal, valid, binding, enforceable, and in full force and effect; 
  
 (b) Continued Validity. The lease or sublease will continue to
be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; 
  
 (c) No Defaults. The Company is not in breach or default in any material respect under the lease or sublease and to the Knowledge of the
Shareholder, no third party is in breach or default under the lease or sublease, and to the Knowledge of the Shareholder, no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination,
modification or acceleration thereunder; 
  

 17 

 (d) Repudiation. Neither the Company nor any other party to the lease has repudiated any
provision of the lease or sublease; 
  
 (e) No
Disputes. There are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease; 
  
 (f) Encumbrances. The Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; 
  
 (g) Approvals. To the
Knowledge of the Shareholder, 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 to the Knowledge of the
Shareholder, have been operated and maintained in accordance with applicable laws, rules, and regulations; and 
  
 (h) 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.
No claim or demand of any Person has been made, nor is there any proceeding that is pending, or to the Shareholder’s Knowledge, threatened, which challenges the rights of the Company with respect to any Intellectual Property or asserts that the
Company is infringing or otherwise in conflict with or is required to pay any royalty or license fee with respect to any Intellectual Property. 
  
 4.14 Condition of Tangible Assets. Each tangible asset of the Company 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 Company and, to the Knowledge of Shareholder, is not outdated in comparison with the
assets used for similar purposes by similar businesses. 
  
 4.15
Contracts. Section 4.15 of the Disclosure Schedule lists the following contracts and other agreements, written or oral, to which the Company was a party immediately preceding the Closing: 
  
 (a) Personal Property Leases. Any agreement (or group of
related agreements) for the lease of personal property to or from any Person providing for lease payments in excess of Five Thousand Dollars ($5,000.00) per year; 
  
 (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; 
  

 18 

 (c) Partnership; Joint Venture. Any agreement constituting a partnership or joint venture;

  
 (d) Indebtedness. Any agreement (or group of
related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation; 
  
 (e) Confidentiality; Non-Competition. Any agreement concerning confidentiality or non-competition; 
  
 (f) Shareholders’ Agreements. Any agreement by and between
the Shareholder and 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 agreement for the
employment of any individual on a full-time or part-time or the engagement of any individual as a consultant or independent contractor, or otherwise compensating an individual for services rendered or to be rendered to the Company; 
  
 (i) Advances; Loans. Any agreement under which the Company has
advanced or loaned any amount to any of its directors, officers and employees outside the ordinary course of business; 
  
 (j) Adverse Effects. Any other agreement under which the consequences of a default or termination could have a material adverse effect on
the business, financial condition, operations, results of operations or future prospects of the Company; and 
  
 (k) Other Agreements. Any other agreement (or group of related agreements) the performance or rendering of which involves consideration in
excess of Five Thousand and No/100 Dollars ($5,000.00). 
  
 The
Shareholder has made available to PainCare and Subsidiary a correct and complete copy of each written agreement listed in Section 4.15 of the Disclosure Schedule (as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4.15 of the Disclosure Schedule. With respect to each such agreement: (i) the agreement is legal, valid, binding, enforceable, and in full force and effect; (ii) there shall be no
breach or other violation resulting from the consummation of the transactions contemplated hereby; (iii) the Company is not in default or breach in any material respect and to the Knowledge of the Shareholder, no other party is in breach or default,
and to the Knowledge of Shareholder, 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 the Subsidiary. 
  

 19 

 4.16 Powers of Attorney. Except as set forth in Section 4.16 of the Disclosure Schedule,
there are no outstanding powers of attorney executed on behalf of the Company. 
  
 4.17 Insurance; Malpractice. Section 4.17 of the Disclosure Schedule contains a list and brief description of all policies or binders of fire, liability, product liability, workers compensation, health
and other forms of insurance policies or binders currently in force insuring against risks to which the Company is currently a party, a named insured or otherwise the beneficiary of coverage. Section 4.17 of the Disclosure Schedule contains a
description of all current malpractice liability insurance policies of Shareholder, the Company, and the Company’s professional employees. Except as set forth on Section 4.17 of the Disclosure Schedule: (a) neither the Company nor Shareholder
has, during the five (5) years immediately preceding the Closing Date, filed a written application for any insurance coverage relating to the Company’s business or property which has been denied by an insurance agency or carrier; and (b) the
Company, the Company’s professional employees, and Shareholder 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, the Company’s professional employees, or Shareholder during the five (5) years immediately preceding the Closing Date, including workers
compensation, general liability, environmental liability and professional malpractice liability claims. With respect to each insurance policy listed in Section 4.17 of the Disclosure Schedule: (i) the policy is legal, valid, binding, enforceable,
and in full force and effect; (ii) other than policies to be reissued in the name of the New PA, the policy will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) neither the Company, Shareholder, nor to the Knowledge of Shareholder, 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 to
the Knowledge of Shareholder, 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
Shareholder nor the Company has received any written notice from or on behalf of any insurance carrier issuing such policies, that there will hereafter be a cancellation or 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 Shareholder’s Knowledge, threatened, against the Company or Shareholder at law or in equity, before any court, arbitration
tribunal or governmental agency. Shareholder has no knowledge of 
  

 20 

 any facts on which claims may hereafter be reasonably made against the Company that will have a Material Adverse Effect
on the Company. All known 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 Shareholder’s Knowledge, threatened against
the Company or Shareholder in excess of the deductible are covered under Shareholder’s 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 in excess of $5,000 relating to the Business or the Center that have been filed for the five (5) year period prior to the date hereof. 
  
 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 to the Knowledge of Shareholder, 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 (to the Knowledge of Shareholder), the Shareholder, or immediate family members of the Shareholder 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, Shareholder, and all persons
and entities (to the Knowledge of Shareholder) 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 Texas Statutes which prohibit
physicians who have an ownership, investment or beneficial interest in certain health care facilities from referring patients to such facilities for the provisions of designated and other health services, and has at all times complied with the Texas
Statutes. Furthermore, the Company has filed all reports required to be filed by the State of Texas and federal law regarding compensation arrangements and financial relationships between a physician and an entity to which the physician refers
patients. 
  

 21 

 4.21 Legal Compliance. The Company has complied in all material respects with all
applicable Laws (including rules, regulations, codes, injunctions, judgments, orders, decrees, and rulings of federal, state, local, and foreign governments (and all agencies thereof)), and no action, suit, proceeding, hearing, complaint, claim,
demand, notice or investigation has been filed or commenced, or to the Knowledge of the Shareholder, threatened against the Company alleging any failure so to comply. The Company and all physicians and other health care professionals engaged or
employed by the Company (or associated with the Company as a result of being engaged or employed by New PA) have all permits and licenses required by applicable Law, have made all required regulatory filings and are not in violation of any such
permit or license. The Company is lawfully operated in accordance in all material respects 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 PA in accordance with this Agreement. 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 payor. The Company has not received notice and the Shareholder has no knowledge or reason to believe that, such necessary
authorizations may be revoked or not renewed in the ordinary course of business. 
  
 4.22 Rates and Reimbursement Policies. The jurisdiction in which the Company is located does not currently impose any restrictions or limitations on rates which may be charged to private pay patients
receiving services provided by the Company except for restrictions promulgated by Texas law and regulation on charging of excessive fees and limitations on charges for and profits from the sale of medications, goods and devices and free samples. The
Company does not have any rate appeal currently pending before any governmental authority or any administrator of any third-party payor program. The Shareholder is not aware of any applicable Law which affects rates or reimbursement procedures which
has been enacted, promulgated or issued within the eighteen (18) months preceding the date of this Agreement or any such legal requirement proposed or currently pending in the State of Texas which could have a Material Adverse Effect on the Company,
its business or operations, or may result in the imposition of additional Medicaid, Medicare, charity, free care, welfare, or other discounted or government assisted patients at the Company or require the Company to obtain any necessary
authorization which the Company does not currently possess. The Shareholder is not aware of any impending proposed reduction in reimbursement from third party or other payors and is not aware of any threatened termination of payor contracts.

  
 4.23 Medical Staff. Except as set forth on
Section 4.23 of the Disclosure Schedule, the Shareholder has no Knowledge of a physician who is providing services on behalf of the Company or New PA, as applicable, who plans, or has threatened to terminate his or her employment or other
relationship with the Company or the New PA, as applicable. The Shareholder is not aware that any of the physicians providing services on behalf of the Company or New PA, as applicable, currently has plans to retire from the practice of medicine in
the next three (3) years. 
  

 22 

 4.24 Employees. Except as set forth on Section 4.24 of the Disclosure Schedule: (a) there
is no unfair labor practice charge or complaint pending or threatened relating to the business of the Company; and (b) payment in full to all of the employees of the Company of all wages, salaries, commissions, bonuses, benefits, and other
compensation lawfully due and owing to such employees or otherwise arising under any policy, practice, agreement, plan, program, statute, or other law as of the Closing Date has been made. 
  
 4.25 Employee Benefits. 
  
 (a) Plans. Section 4.25 of the Disclosure Schedule lists each
Employee Benefit or health and welfare plan that the Company maintains or to which the Company contributes. 
  
 (b) Compliance. Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in
all material respects with its terms and with the applicable requirements of ERISA, the Code and other applicable laws. 
  
 (c) Reports and Descriptions. All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1’s, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section 4980B have been met with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. 
  
 (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 Shareholder has delivered to PainCare and Subsidiary correct and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the IRS, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan.

  

 23 

 (h) Maintenance of Plans. With respect to each Employee Benefit Plan that the Company
maintains, ever has maintained, or to which it contributes, ever has contributed, or ever has been required to contribute: 
  
 (i) Reportable Events. No such Employee Benefit Plan which is an Employee Pension Benefit Plan has been completely or partially terminated
or been the subject of a Reportable Event as to which notices would be required to be filed with the PBGC. No proceeding by the PBGC to terminate any such Employee Pension Benefit Plan has been instituted or threatened; and 
  
 (ii) Prohibited Transactions. There have been no Prohibited
Transactions with respect to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than any Multiemployer Plan), other than routine claims for benefits, is
pending or threatened. The Shareholder and the Company have no Knowledge of any basis for any such action, suit, proceeding, hearing, or investigation. 
  
 4.26 Physicians and Other Providers. During the five (5) years preceding the Closing Date, each physician, and other health care provider
who is or was employed by, or who renders or has rendered services on behalf of, the Company or New PA: 
  
 (a) Licenses. Has been duly licensed and registered, and in good standing by the State of Texas 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 Texas and the U.S. Drug Enforcement Administration, which registrations have not been surrendered,
suspended, revoked or restricted in any manner; 
  
 (c)
Actions. Except as set forth on Section 4.26 of the Disclosure Schedule, has not been a party or subject to: 
  
 (i) Malpractice Actions. Any malpractice suit, claim (whether or not filed in court), settlement, settlement allocation, judgment, verdict
or decree; 
  
 (ii) Disciplinary Proceedings. Any
disciplinary, peer review or professional review investigation, proceeding or action instituted by any licensure board, hospital, medical school, physical therapy school, health care facility or entity, professional society or association, third
party payor, peer review or professional review committee or body, or governmental agency; 
  
 (iii) Criminal Proceedings. Any criminal complaint, indictment or criminal proceedings; 
  

 24 

 (iv) Investigation. Any investigation or proceedings, whether administrative, civil or
criminal, relating to an allegation of filing false health care claims, violating anti-kickback or fee-splitting laws, or engaging in other billing improprieties; 
  
 (v) Mental Illnesses. Any organic or mental illness or condition that impairs or may impair such
physician’s ability to practice; 
  
 (vi) Substance
Abuse. Any dependency on, habitual use or episodic abuse of alcohol or controlled substances, or any participation in any alcohol or controlled substance detoxification, treatment, recovery, rehabilitation, counseling, screening or
monitoring program; 
  
 (vii) Professional Ethics.
Any allegation, or any investigation or proceeding based on any allegation of violating professional ethics or standards, or engaging in illegal, immoral or other misconduct (of any nature or degree), relating to his or her practice; or 

 
 (viii) Application for Licensure. Any denial or withdrawal
of an application in any state for licensure as a physician or physical therapist, for medical staff privileges at any hospital or other health care entity, for board certification or recertification, for participation in any third party payment
program, for state or federal controlled substances registration, or for malpractice insurance. 
  
 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 materially complied and is in material compliance with all Environmental, Health, and Safety Requirements. 
  
 (b) Permits and Licenses. Without limiting the generality of the foregoing, to the Knowledge of the
Shareholder, 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 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 
  

 25 

 facility (and to the Knowledge of the Shareholder, 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, whether from a governmental authority, citizens’ group, employee or
otherwise, that alleges that the Business or the Company is not in full compliance with Environmental Laws, or that the Company is otherwise subject to liability under Environmental Laws, and to the Shareholder’s Knowledge, there are no
circumstances that may prevent or interfere with such full compliance in the future. There is no Environmental Claim (as defined below) pending or, to the Shareholder’s Knowledge, threatened against the Company or the Business. 
  
 (f) The Shareholder has no Knowledge of any actions, activities,
circumstances, conditions, events or incidents, including, but not limited to, the release, emission, discharge, presence or disposal of any Hazardous Substances that could form the basis of any Environmental Claim against the Company or the
Business. 
  
 4.29 Certain Business Relationships with the
Company and its Affiliates. Except as contemplated hereby with respect to the Company and the New PA, neither the Shareholder nor any of his Affiliates have been involved in any business arrangement or relationship with the Company within
the past twelve (12) months, and none of the Shareholder and his Affiliates owns any asset, tangible or intangible, which is material to the business of the Company. 
  
 4.30 Third-party Payors. Section 4.30 of the Disclosure Schedule sets forth an accurate, correct and complete
list of the Company’s third-party payors. Neither the Company nor the Shareholder has received any notice nor has any Knowledge that any third-party payor intends to terminate or materially reduce its business with, or reimbursement to, the
Company. The Shareholder has no reason to believe that any third-party payor will cease to do business with the Company after, or as a result of, the consummation of any transactions contemplated hereby. The Shareholder does not know of any fact,
condition or event which would adversely affect its relationship with any third-party payor. 
  
 4.31 Bank Accounts. Section 4.31 of the Disclosure Schedule sets forth all of the bank and security accounts and all safe deposit boxes maintained by the Company and all lines of credit owned or used by
the Company, and the names of all persons with authority to withdraw funds from, or execute drafts or checks on, each such account. 
  
 4.32 Tax Status. The Shareholder is not a “nonresident alien individual” or “foreign corporation” for purposes of Code
Section 897(a)(1). 
  
 4.33 Binding Obligation. This
Agreement constitutes the valid and legally binding obligation of the Shareholder, enforceable in accordance with its terms and conditions. 
  

 26 

 4.34 No Corporate Practice or Fee Splitting. The Shareholder does not have any Knowledge
that the actions, transactions or relationships arising from, and contemplated by, the Transaction violate any law, rule or regulation relating to the corporate practice of medicine or fee splitting. The Shareholder accordingly agrees that he will
not and will not cause any other Party, in an attempt to void or nullify this Agreement or any document related to the Transaction or any relationship involving PainCare or Subsidiary to sue, claim, aver, allege or assert that any such document or
any such relationship violates any law, rule or regulation relating to the corporate practice of medicine or fee splitting. 
  
 4.35 Intentions. The Shareholder intends to continue managing the business operations of the New PA pursuant to his Employment Agreement 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 New PA for the next five (5) years. 
  
 4.36 Securities Representation. 
  
 (a) No Registration of PainCare Shares; Investment Intent. The
Shareholder acknowledges that the PainCare Shares to be delivered pursuant to this Agreement have not been and will not be registered under the Securities Act (except as provided for in this Agreement) and may not be resold without compliance with
the Securities Act. The PainCare Shares to be acquired by the Shareholder pursuant to this Agreement are being acquired solely for his own account, for investment purposes only and with no present intention of distributing, selling or otherwise
disposing of them in connection with a distribution other than in compliance with the Securities Act. 
  
 (b) Resale Restrictions. The Shareholder covenants, warrants and represents that none of the PainCare Shares issued to Shareholder will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act and the rules of regulations of the Commission and applicable state
securities laws and this Agreement. 
  
 (c) Ability to Bear
Economic Risk. The Shareholder covenants, warrants and represents that he is able to bear the economic risk of an investment in PainCare Shares acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and
has such Knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the proposed investment and therefore has the capacity to protect his own interests in connection with the acquisition of
the PainCare Shares. The Shareholder, and the Shareholder’s purchaser representative, if any, have received copies of PainCare’s most recent 10-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. The Shareholder, and the Shareholder’s purchaser representative, if any, have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to such
individual’s satisfaction. 
  

 27 

 (d) Accredited Investor. The Shareholder covenants, represents and warrants that he is an:
(a) individual with a net worth (either individually or jointly with his respective spouse) in excess of One Million and No/100 Dollars ($1,000,000.00); or (b) individual who had an income in excess of Two Hundred Thousand and No/100 Dollars
($200,000.00) in each of 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) No Registration. The Shareholder
understands, agrees and acknowledges that the PainCare Shares have not been registered under the Texas Securities Act or the Securities Act in reliance upon exemption provisions contained therein which PainCare believes are available. 
  
 4.37 HIPAA. Schedule 4.37 lists and describes all plans and
other efforts of Shareholder with respect to the practice locations to comply with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), including the final regulations promulgated thereunder, whether such plans and
efforts have been put in place or are in process. Schedule 4.37 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, nor to the Knowledge of Shareholder, any director, officer, employee, agent or
representative of the Company or any person acting on behalf of any of them, has made, paid or received any unlawful bribes, kickbacks or other similar payments to or from any person or authority, (b) no contributions have been made, directly or
indirectly, by the Company to a domestic or foreign political party or candidate; and (c) the internal accounting controls of the Company are believed by the Company’s management to be adequate to detect any of the foregoing under current
circumstances. 
  
 4.39 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 are valid claims against account debtors for services rendered in accordance with the usual business practices and historical collection experience of the Company and to the best of
Shareholder’s knowledge, are subject to no counterclaims, and have been outstanding for the periods indicated in the aging analysis at Schedule 4.39. The Shareholder know of no reason why such accounts receivable would not be collectible by the
Company according to approximately the same ratios as accounts receivable have been historically collectible by the Company. All outstanding accounts and notes receivable included on Schedule 4.39 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 in all material respects with all Medical Waste Laws (as hereinafter defined). 
  

 28 

 “Medical Waste” includes, but is not limited to, (a) pathological waste, (b) blood, (c) sharps,
(d) wastes from surgery or autopsy, (e) dialysis waste, including contaminated disposable equipment and supplies, (f) cultures and stocks of infectious agents and associated biological agents, (g) contaminated animals, (h) isolation wastes, (i)
contaminated equipment, (j) laboratory waste, and (k) various other biological waste and discarded materials contaminated with or exposed to blood, excretion, or secretions from human beings or animals. “Medical Waste” also includes any
substance, pollutant, material, or contaminant listed or regulated under the Medical Waste Tracking Act of 1988, 42 U.S.C. §§6992, et seq. (“MWTA”). 
  
 “Medical Waste Law” means the following, including regulations promulgated and orders issued thereunder, all as
may be amended from time to time: the MWTA; the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33 USCA §§2501 et seq.; the Marine Protection, Research, and Sanctuaries Act of 1972, 33 USCA §§1401 et seq.; the
Occupational Safety and Health Act, 29 USCA §§651 et seq.; the United States Department of Health and Human Services, National Institute for Occupational Self-Safety and Health Infectious Waste Disposal Guidelines, Publication No. 88-119;
and any other federal, state, regional, county, municipal, or other local laws, regulations, and ordinances insofar as they purport to regulate Medical Waste, or impose requirements relating to Medical Waste. 
  
 4.41 No Untrue or Inaccurate Representation or Warranty. No
representation or warranty by Shareholder contains or will contain any untrue material statement of fact, or omits or will omit to state a material 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 Shareholder that the statements contained in this Section 5 are correct and complete as of the date of this Agreement and 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. PainCare is the
direct parent of the Subsidiary, with PainCare directly owning all of the issued and outstanding shares of stock of the Subsidiary. 
  
 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 their obligations hereunder. This Agreement constitutes the valid and legally binding obligation of PainCare and Subsidiary, enforceable in accordance with its terms and conditions. The execution,
delivery, and performance of this Agreement has been approved and authorized by the Board of Directors of PainCare and Subsidiary and no other corporate proceedings on the part of PainCare and Subsidiary are necessary to authorize this Agreement and
the transactions contemplated hereby. 
  

 29 

 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 the 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 the PainCare or Subsidiary or its ability to consummate the transactions contemplated hereby or (c) a violation by the PainCare or Subsidiary of any statute, rule, regulation,
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 the 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, 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 the PainCare or Subsidiary in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby. 
  
 5.5 Disclosure
Documents. PainCare has delivered or Shareholder has had the opportunity to obtain and review PainCare’s Form 10-KSB for the year ending December 31, 2003, Form 10-QSB for the quarter ending March 31, 2004 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 or the Subsidiary. 
  
 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 May 31, 2004, approximately 29,400,000 shares are
issued and outstanding and 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
duly authorized, 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 May 31, 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 the PainCare, threatened against, relating to or affecting (i) PainCare
or its assets or the operation of the business of the PainCare as currently operated and 
  

 30 

 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, court, 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. To the knowledge of 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 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 could not have a material adverse effect on PainCare). 
  
 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 Compliance With Laws. To the Knowledge of PainCare and the Subsidiary, PainCare and Subsidiary have complied with all applicable Laws
except where the failure to so comply would not individually or in the aggregate have a material adverse effect on PainCare and the Subsidiary taken as a whole. 
  

5.11 Material Misstatements Or Omissions. No representations or warranties by PainCare or Subsidiary in this Agreement, nor any document,
exhibit, statement, certificate or schedule furnished or to be furnished to the Shareholder 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 be effective between the Parties as of the date upon which all other
conditions to the Parties obligations have been met or waived, or such other date or time as the Parties may mutually agree (the “Closing Date”). 
  

 31 

 7. CLOSING DELIVERIES. 
  
 7.1 Deliveries of the Company and the Shareholder. At or prior to the Closing Date, the Company and the
Shareholder shall deliver to the Acquiring Companies the following: 
  
 (a) Consents and Approvals. Copies of all authorizations, consents, and approvals of governments, governmental agencies and third parties referred to in Section 4.4(a) of the Disclosure Schedule; 
  
 (b) Termination of Agreements. Copies of documents effectuating
the assignment, to the extent assignable, 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; 
  
 (c) Company
Stock. The Certificates and stock powers, duly endorsed, transferring the Company Stock to Subsidiary and the officer and director resignations required in Section 4.6; 
  
 (d) Corporate Authorization. A certified copy of resolution(s) of the Shareholder and board of directors of
the Company which authorizes the Transaction in accordance with: (a) applicable law; (b) the Company’s articles of incorporation and bylaws; and (c) all other requirements for proper corporate authorization; 
  
 (e) Secretary’s Certificate. A certificate of the
secretary of the Company and the New PA certifying that the resolutions, articles of incorporation and bylaws of the Company and the New PA, attached as exhibits to such certificate, are true, correct, and complete; and 
  
 (f) Medicare Provider Number. A certification from Shareholder
that following Closing Shareholder will fully cooperate in the preparation and execution of the application for New PA’s Medicare provider number with such application to be filed within fifteen (15) days of the Closing Date. 
  
 (g) Managed Care Agreements. To the extent assignable,
assignment(s) of all Managed Care Agreements to which the Company is a party to the New PA. 
  
 (h) 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 the Shareholder the following: 
  
 (a)
Transaction Consideration. The Closing Date 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 in
accordance with: (a) applicable law; (b) the articles of incorporation and bylaws of PainCare and Subsidiary; and (c) all other requirements for proper corporate authorization; 
  

 32 

 (c) Secretary’s Certificate. A certificate of the secretary of PainCare and Subsidiary
certifying that the articles of incorporation and bylaws of PainCare and Subsidiary attached as exhibits to such certificate are true, correct, and complete; and 
  
 (d) Other documents. Such other instruments or documents as may be necessary or appropriate to carry out the
Transactions. 
  
 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 Shareholder and the Company in this Agreement or in any schedule hereto 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, and (b) both the Shareholder and the Company shall have performed and complied with all agreements, covenants and conditions and shall have made all deliveries required by this Agreement to be performed,
delivered and complied with by them prior to the Closing Date; and (c) to the extent assignable, the Company shall have assigned to the New PA any and all Medical Assets and payor contracts of the Company, and (e) the filing of the Articles of
Merger with and the acceptance of such Articles by the Secretary of State of the State of Texas and Florida. 
  
 8.2 Conditions for the Benefit of the Shareholder. (a) The representations and warranties of PainCare and Subsidiary in this Agreement and
all information contained in any schedule hereto 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
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) the
filing of the Articles of Merger with and the acceptance of such Articles by the Secretary of State of the State of Florida and Texas. 
  
 9. COVENANTS. The Parties covenant and agree as follows: 
  
 9.1 Operations. As of the Statutory Merger Time, the New PA and the Subsidiary will execute and deliver to each other the Management
Services Agreement and Shareholder and the New PA 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, one hundred percent (100%) of the
taxable income (as determined by using the cash method of accounting) allocated to Shareholder for the period beginning on January 1, 2004 and ending on the Closing Date shall have been distributed to the Shareholder 
  

 33 

 subject to the requirement that Shareholder shall insure that as of the Closing Date that the Company will have a minimum
cash balance of Twenty Thousand Dollars ($20,000.00). The Shareholder shall not be entitled to any additional distributions or payments with respect to taxable income of the Company for the period ending after the Closing Date, other than as
specifically set forth in this Agreement. 
  
 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 Shareholder shall be borne by the Shareholder. 
  
 9.5 Tax Returns. Shareholder shall be responsible for preparing
and filing all income or franchise Tax Returns of the Company relating to periods of time prior to the Closing Date. PainCare and the Subsidiary will provide Shareholder access to all books and records of the Company necessary to the preparation of
such Tax Returns and the Subsidiary, as the successor to the Company will execute such Tax Returns. The Shareholder will take no positions on the Tax Returns of the Company that relate to the tax period prior to the Closing Date that could adversely
affect the Company or PainCare after the Closing. The Shareholder 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.

  
 9.6 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. 
  
 9.7 Consents. The Shareholder hereby
covenants and agrees that he will use his best efforts to obtain all authorizations, consents, and approvals set forth in Section 4.4(b) of the Disclosure Schedule. If such consent, approval or agreement is not obtained, or if an attempted
assignment thereof would affect the rights of the parties thereunder so that such parties would not in fact receive all such rights, the Parties will cooperate in any arrangement designed to provide for the Parties to receive the benefits under any
such contract, including enforcement for the benefit of PainCare and Subsidiary of any and all rights of the Shareholder against a third party thereto arising out of the breach or cancellation by such third party or otherwise. 
  

 34 

 9.8 Operational Covenants. Without the prior written consent of Shareholder, which will not
be unreasonably withheld, PainCare and its Affiliates 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 or any other Person, 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, amend or terminate any agreement which at the time such agreement is entered into, amended or
terminated could 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; 
  
 (e) cause the Surviving Corporation to undertake actions outside the ordinary
course of its business or that are reasonably necessary in light of the Surviving Corporation’s results of operation; 
  
 (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 except as may be reasonably necessary in light of the Surviving Corporation’s results of operation; or 
  
 (g) cause the Surviving Corporation to undertake any action which at the time
of such undertaking could reasonably be expected to have a material adverse effect on the Formula Period Profits except as may be reasonably necessary in light of the Surviving Corporation’s results of operation. 
  
 The parties hereby acknowledge and agree that the foregoing covenants in this
Section 9.8 shall become null and void and of no further force or effect if the Formula Period Profits of the Surviving Corporation for any two (2) consecutive calendar quarters are less than 
  

 35 

 $600,000 combined, or if the Formula Period Profits of the Surviving Corporation in one (1) calendar quarter is less than
$250,000, unless in each case, such deficit results from the failure of the New PA to recover payment from Medicaid, Medicine, or Blue Cross as a result of transitioning the Company’s business to the New PA.  
  
 9.9 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 Shareholder 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’s right 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 Shareholder’s entitlement to same. 
  
 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, except as set forth in Section 10.8 shall survive the Closing for their applicable statute of limitations. The representations and warranties contained herein shall not be affected by any
investigation, verification or examination by any Party or by anyone on behalf of such Party. 
  
 10.2 Indemnification Provisions for the Benefit of PainCare and Subsidiary. In the event of: (a) a misrepresentation (or in the event any third party alleges facts that, if true, would mean a
misrepresentation) of any of the Shareholder’s representations and/or warranties contained in this Agreement; (b) a breach (or in the event any third party alleges facts that, if true, would mean a breach) of any of the Shareholder’s
covenants contained in this Agreement; (c) any Liability (including, in this case only, consequential and incidental damages) incurred by the PainCare, the Company, the Surviving Corporation or the New P.A. with respect to any breach by the
Shareholder or Company occurring prior or subsequent to the Closing with respect to that certain Non-competition Agreement by and between Palestine Principal 
  

 36 

 Healthcare Limited Partnership and Rick Taylor, D.O. and Rick Taylor, D.O., P.A. dated March 22, 2002 with the
understanding that this indemnity shall not apply to any Liability associated with the expansion of any product or service offering provided by the Surviving Corporation or New P.A. subsequent to Closing which is caused or directed by PainCare
beyond the product and service offering provided by the Company prior to the Closing unless and until such agreement expires or is terminated; (d) any matter described in the Disclosure Schedules which the Shareholder agrees to assume and/or
indemnify PainCare and/or the Surviving Corporation; and (e) any Liability of the Company of any nature whatsoever accrued or existing as of the Closing Date or related to actions of the Company which occurred prior to the Closing Date, other than
(i) Liabilities reflected on the Financial Statements, (ii) Liabilities which have arisen after the Latest Balance Sheet in the ordinary course of business, or (iii) Liabilities reflected on the Disclosure Schedules which the Subsidiary explicitly
agrees as documented in Section 10.2 of the Disclosure Schedule to assume or take the assets of the Company subject to, as the case may be, then the Shareholder agrees to indemnify PainCare and Subsidiary from and against any Adverse Consequences
PainCare and Subsidiary may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the misrepresentation or breach (or alleged breach) or non-disclosed Liability
under this Section 10.2. No provision of this Agreement, including but not in any way limited to, any “Knowledge” qualifiers or materiality standards in the representations and warranties of the Shareholder, shall have any effect on the
Shareholder’s obligation to provide indemnity of any Liability arising prior to the Closing Date which was required but omitted from the Disclosure Schedule. 
  
 10.3 Indemnification Provisions for the Benefit of the Shareholder. In the event of a misrepresentation or
breach (or in the event any third party alleges facts that, if true, would mean a misrepresentation or breach) of any of PainCare’s or Subsidiary’s representations, warranties, and/or covenants contained in this Agreement, then PainCare
and Subsidiary agree to, jointly and severally, indemnify the Shareholder from and against any Adverse Consequences the Shareholder may suffer through and after the date of the claim for indemnification resulting from, arising out of, relating to,
in the nature of, or caused by the misrepresentation or breach. 
  
 10.4 Matters Involving Third Parties. 
  
 (a) Notification. If any third party shall notify any Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) which may give rise to a claim for indemnification against the other
Party (the “Indemnifying Party”) pursuant to this Section 10, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying
the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless the Indemnifying Party thereby is prejudiced and then only to the extent that the Indemnifying Party is actually prejudiced. 
  
 (b) Defense by Indemnifying Party. The Indemnifying Party shall
have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably 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 
  

 37 

 resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim; (ii) the Indemnifying
Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill the Indemnifying Party’s
indemnification obligations hereunder; (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; (iv) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party; and (e) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently. 
  
 (c) Satisfactory
Defense. So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 10.4(b) above: (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim; (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be
withheld or delayed unreasonably) and any such settlement must include a complete release of the Indemnifying Party; and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld or delayed unreasonably) and any such settlement must include a complete release of the Indemnified Party. 
  
 (d) Conditions. In the event any of the conditions in Section
10.4(b) above is or becomes unsatisfied, however: (i) the Indemnified Party may defend against the Third Party Claim; provided that 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 delayed or withheld unreasonably), and any such settlement must include a complete release of the Indemnifying Party; (ii) if the Indemnified Party is entitled
to Indemnification under this Section 10, 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) if the Indemnified Party is entitled to indemnification from the Indemnifying Party under this Section10, 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. Any Adverse Consequences which PainCare or Subsidiary suffers, sustains or becomes subject to and with respect to
which PainCare or Subsidiary is entitled to indemnification from Shareholder pursuant to this Section 10, shall first be satisfied by such combination of cash and/or PainCare Shares as the Shareholder shall determine, in his sole discretion, so as
to continue the qualification of the Merger as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, with the value of any PainCare Shares used to satisfy the indemnification to be based upon the Fair Market Value
of the PainCare Shares (as defined in Section 3.3(f)) at the time the amount of Adverse Consequences is finally determined. PainCare and the Subsidiary shall also have the right to offset any indemnification obligations of Shareholder against any
Installment or post-closing payment due from PainCare or Subsidiary to the Shareholder under this Agreement or any other agreement. 
  

 38 

 10.6 Materiality. In determining the amount of Adverse Consequences resulting from any
misrepresentation, breach, or default, any materiality standard contained in the applicable representation, warranty, or covenant shall be disregarded; provided that such materiality standard shall be considered in determining whether or not a
misrepresentation, breach, or default occurred. 
  
 10.7
Limitation. The indemnification provisions set forth in this Section 10 shall be limited to all claims in excess of Fifty Thousand and 00/100 Dollars ($50,000) (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 (including 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 $3,500,000 plus the amount of any 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 a Party or with respect to Sections
4.1, 4.3, 4.6, 4.11 and/or 4.36 or with respect to Sections 5.1, 5.2, and/or 5.6. 
  
 10.8 Survival of Representations and Warranties of Shareholder. Notwithstanding anything in this Agreement to the contrary, the representations and warranties of the Parties set forth in this Agreement
and the indemnity obligations of the Parties under Section 10 of this Agreement shall survive only for a period of three and one-half (3.5) years after the Closing or the applicable statute of limitations (whichever is shorter) (the “Expiration
Date”). The Parties and their Affiliates shall not be entitled to make, and hereby waive the right to assert, any claim for indemnification or otherwise relating to the foregoing matters unless the same seek indemnification for such claim by
written notice to the Indemnifying Party dated and delivered in accordance with the notice provisions set forth in Section 12.5 below on or before the Expiration Date. 
  
 10.9 No Other Representations or Warranties. Shareholder has not made any representations or warranties,
express or implied, with respect to the Company, the New PA or the transactions contemplated by this Agreement except as specifically provided in Section 4, the Disclosure Schedules or elsewhere in this Agreement or in any other agreement executed
in connection with this transaction. Likewise, PainCare and the Subsidiary have not made any representations or warranties, express or implied, with respect to PainCare, the Subsidiary or the transactions contemplated by this Agreement except as
specifically provided in Section 5, the Disclosure Schedules or elsewhere in this Agreement or in any other agreement executed in connection with this transaction. 
  
 10.8 Exclusive Remedy. The terms and provisions of this Section 10 shall be the sole and exclusive right and
remedy of PainCare, Subsidiary, and their Affiliates, successors and 
  

 39 

 assigns with respect to any matter arising out of this Agreement and the transactions contemplated hereby, including
without limitation, the representations, warranties, covenants and agreements of the Shareholder set forth in this Agreement, and such Persons hereby waive all other rights or remedies that may exist, whether at law, equity, or otherwise;
provided however, that the foregoing shall not be construed to limit the equitable remedies of specific performance or injunctive relief of such Persons in respect of any breach by the Shareholder of any covenant or other agreement of
Shareholder set forth in this Agreement. 
  
 11. RESTRICTIVE COVENANTS;
CONFIDENTIALITY.  
  
 11.1
Restrictive Covenants. 
  
 (a) Restricted
Period. Shareholder hereby agrees that during the time period commencing as of the Closing Date and continuing for a period of two (2) years after his termination “For Cause” by the New P.A. pursuant to his Employment Agreement
with the New P.A. of even date herewith (the “Restricted Period”), neither Shareholder nor any of his Affiliates, shall, other than on behalf of the New PA, PainCare or Subsidiary, directly or indirectly, for himself, or on behalf of any
other corporation, person, firm, partnership, association, or any other entity whatsoever (whether as an individual, agent, servant, employee, employer, officer, director, shareholder, investor, principal, consultant or in any other capacity
whatsoever) take any action or undertake any matter set forth in 11.1(a)(i)-(ii) below; provided, however, that the Restricted Period shall terminate upon the earlier to occur of (i) any bankruptcy, liquidation or assignment for the benefit of
creditors applicable to either PainCare or Subsidiary, or (ii) upon a default by PainCare or Subsidiary in any material covenant or term of this Agreement to be performed after the Closing or any material covenant or term of the Management Services
Agreement if Shareholder shall have given written notice of such default to PainCare and such default shall not have been cured within 30 business days after the giving of such notice. 
  
 (i) be employed by, act as an agent, consultant or contractor of, engage in, continue in or carry on any business which
competes with the business of the New P.A. or the Surviving Corporation (the business of such parties is pain management medicine, orthopedic medicine, physical rehabilitation or ancillary medical activities related thereto), including owning or
controlling any financial interest in any corporation, partnership, firm or other form of business organization which is so engaged; 
  
 (ii) be employed by, consult with, advise or assist in any way, whether or not for consideration, any corporation, partnership, firm or other business
organization which is now or becomes a competitor of the New P.A. or the Surviving Corporation in any aspect with respect to the business of the New P.A. or the Surviving Corporation, including, but not limited to, advertising or otherwise endorsing
the products of any such competitor; soliciting patients and customers or otherwise serving as an intermediary for any such competitor; loaning money or rendering any other form of financial assistance to or engaging in any form of business
transaction on other than on an arm’s length basis with any such competitor; 
  
 (iii) offer employment to an employee of the New P.A. or the Surviving Corporation, or PainCare or any of its subsidiaries, without the prior written consent of PainCare; 
  

 40 

 or 
  
 (iv) engage in any practice the purpose of which is to evade the provisions of this covenant not to compete or to commit any act which adversely affects
the New P.A. or the Surviving Corporation, or PainCare or its subsidiaries or their businesses; 
  
 provided, however, that the foregoing shall not prohibit the ownership of securities of corporations which are listed on a national securities exchange
or traded in the national over-the-counter market in an amount which shall not exceed 5% of the outstanding shares of any such corporation. The parties agree that the geographic scope of this covenant not to compete shall be a one hundred (100) mile
radius extending outward from the Clinic’s location as it may exist from time to time (the “Territory”). The parties agree that PainCare may sell, assign or otherwise transfer this covenant not to compete, in whole or in part, to any
person, corporation, firm or entity that purchases all or part of the Surviving Corporation’s, or PainCare’s, business. In the event a court of competent jurisdiction determines that the provisions of this covenant not to compete are
excessively broad as to duration, geographical scope or activity, it is expressly agreed that this covenant not to compete shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any
such over broad provisions shall be deemed, without further action on the part of any person, to be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable in such jurisdiction. 
  
 (b) Consideration. PainCare, Subsidiary and Shareholder have
carefully considered the nature and extent of the restrictions imposed by this Section 11.1 and the rights and remedies conferred upon PainCare and Subsidiary hereunder and hereby expressly acknowledge and agree that: (i) the restricted territory,
period, and activities are reasonable and are necessary and fully required to protect the legitimate business interests of PainCare and Subsidiary; (ii) any violation of the terms of these restrictive covenants would have a substantial detrimental
effect on PainCare’s and Subsidiary’s businesses; (iii) the restrictive covenants do not stifle Shareholder’s inherent skill and experience; and (iv) would not operate as a bar to any of Shareholder’s means of support. Because of
the difficulty of measuring economic losses to PainCare and the Surviving Corporation as a result of the breach of the foregoing covenants, and because of the immediate and irreparable damage that would be caused to PainCare and the Surviving
Corporation for which it would have no other adequate remedy, Shareholder agrees that, in the event of a breach by him of the foregoing covenants, the covenants set forth in this Section 11.1 may be enforced by PainCare and the Surviving Corporation
by injunctions and restraining orders, in addition to all other available legal remedies. 
  
 (c) Third-Party Beneficiaries. All successors and assigns of PainCare, Subsidiary, all Affiliates of PainCare and Subsidiary, and all successors and assigns of such Affiliates are third-party
beneficiaries of the restrictive covenants contained in this Section 11.1 and the provisions of this Section 11.1 are intended for the benefit of, and may be enforced by, PainCare’s and Subsidiary’s successors and assigns and
PainCare’s and Subsidiary’s Affiliates and such Affiliates’ successors and assigns. 
  

 41 

 11.2 Intentionally Omitted. 
  
 11.3 No Running of Covenant During Breach. The covenants set forth in this Section 11 shall apply for the
applicable periods as set forth above. If Shareholder violates such covenants, and PainCare, the Surviving Corporation or any of their successors and assigns or Affiliates bring a legal action for injunctive or other relief, such party bringing the
action shall not, as a result of the time involved in obtaining the relief, be deprived of the benefit of the full period of the covenant period, unless a court of competent jurisdiction holds that the covenant is not enforceable in whole or in
part. Accordingly, for any time period that Shareholder is in violation of the covenant, such time period shall not be included in calculating the applicable time period of the covenant. 
  
 11.4 Blue Pencil Doctrine. The covenants set forth in this Section 11 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable,
then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed. 
  
 11.5 Confidentiality, Press Releases, and Public Announcements. 
  
 (a) No Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written approval of the other Parties. 
  
 (b) The Parties covenant and agree that from and after the Execution Date, neither of the Parties nor their Affiliates (to the extent any such Affiliate
has received Confidential Information as defined below or Trade Secrets, as defined below) shall disclose, divulge, furnish or make accessible to anyone any Confidential Information or Trade Secrets, or in any way use any Confidential Information or
Trade Secrets in the conduct of any business; provided, however, that nothing in this Section 11.5 will prohibit the disclosure of any Confidential Information or Trade Secrets which is required to be disclosed by a Party or any of its or his
Affiliates in connection with any court action or any proceeding before any authority. Notwithstanding the foregoing, in the case of a disclosure contemplated by this Section 11.5, no disclosure shall be made until the disclosing Party shall give
notice to the non-disclosing Party of the intention to disclose such Confidential Information or Trade Secrets so that the non-disclosing Party may contest the need for disclosure, and the disclosing Party will cooperate (and will cause its or his
Affiliates and their respective representatives to cooperate) with the non-disclosing in connection with any such proceeding. Notwithstanding any provision of this Agreement which may be to the contrary, the foregoing provisions restricting the use
of Confidential Information and Trade Secrets shall survive the Closing for the time period equal to five (5) years from the Execution Date. For the purpose of this Agreement, the term “Confidential Information” shall mean all records,
files, reports, protocols, policies, manuals, databases, processes, procedures, computer systems, materials and other documents pertaining to the operations of a Party and the term “Trade Secrets” shall mean information, including a
formula, pattern, compilation, program, device, method, technique, or process that: (i) derives independent economic value, actual or potential, from not being 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. 
  

 42 

 11.6 Conduct of Business. From the date hereof through the Closing, the Shareholder shall,
except as contemplated by this Agreement, or as consented to by PainCare in writing, cause the Company to be operated in the ordinary course and in accordance with past practice and will not take any action inconsistent with this Agreement or with
the consummation of the Closing. Without limiting the generality of the foregoing, the Company shall not, and, with respect to the Company, the Shareholder shall not, except as specifically contemplated by this Agreement, as set forth in Section
11.6 of the Disclosure Schedule, or as consented to by PainCare in writing (such consent not to be unreasonably withheld or delayed): 
  
 (a) change or amend the organizational documents of the Company; 
  

(b) enter into, extend, materially modify, terminate or renew any lease or any contract, except 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; 
  

 43 

 (j) willingly allow or permit to be done any act by which any of the insurance policies of the Company or
Shareholder may be suspended, impaired or canceled; 
  
 (k) enter
into, renew, modify or revise any agreement or transaction relating to the Company with any of its 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 Shareholder 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. 
  
 11.7 No Third-Party Beneficiaries. Other than with respect to the restrictive covenants set forth in Section
11, this Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. 
  

 44 

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

			
	 If to PainCare
	 	 
	 or Subsidiary:
	 	 PainCare Holdings, Inc.

	 	 	 37 North Orange Avenue

	 	 	 Suite 500

	 	 	 Orlando, Florida 32801

	 	 	 Attention: President

		
	 If to the Shareholder:
	 	 Rick Taylor, D.O.

	 	 	 3404 Comanche Trace Drive

	 	 	 Kerrville, Texas 78028

		
	 With a copy in each case to:
	 	 W. Marc McDonald, Esq.

	 	 	 Bourland, Wall & Wenzel, P.C.

	 	 	 301 Commerce Street

	 	 	 Suite 1500

	 	 	 Fort Worth, Texas 76102

  

 45 

 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 Texas 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 to be included in any judgment recovered. In addition, the prevailing Party shall be entitled to recover reasonable attorney’s
fees and costs 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 PA in connection with this Agreement and the transactions
contemplated hereby. 
  
 12.10 Further Assurances.
Each Party shall, at the reasonable request of any other Party hereto, execute and deliver to such other Party all such further instruments, assignments, assurances and other documents, and take such actions as such other Party may reasonably
request in connection with the carrying out the terms and provisions of this Agreement. 
  

 46 

 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. Subject to Section 10.8 above, all of the
representations, warranties, covenants and agreements including but not limited to Articles IV and V 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 Shareholder 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 following are incorporated herein by reference and made a part hereof: (i) all
exhibits and schedules (including the Disclosure Schedules) identified in this Agreement; (ii) the recitals first set forth above; and (iii) any other document, memorandum and/or letter signed by the Parties or their legal counsel with instructions
to incorporate such document, memorandum and/or letter into to this Section. 
  
 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 Kerr County, TX. With respect to any legal proceeding brought by the Shareholder 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, FL. 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. 
  
 [SIGNATURES APPEAR ON NEXT PAGE] 
  

 47 

 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/ MARK SZPORKA

	Print:	 	 MARK SZPORKA

	Its:	 	 CFO

	
	ACQUISITION:
	
	PAINCARE ACQUISITION COMPANY XIII, INC., a Florida corporation
		
	By:	 	 /S/ MARK SZPORKA

	Print:	 	 MARK SZPORKA

	Its:	 	 CFO

	
	COMPANY:
	
	 RICK TAYLOR, D.O., P.A.

		
	By:	 	 /S/ RICK TAYLOR

	Print:	 	 RICK TAYLOR

	Its:	 	 PRESIDENT

	
	SHAREHOLDER:
	
	 /S/ RICK TAYLOR

	 Rick Taylor, D.O.

  

 48 

 EXHIBITS 
  

			
		
	Exhibit 1	  	Definitions
		
	Exhibit 2.3	  	Articles of Merger

  
 DISCLOSURE
SCHEDULES 
  

			
		
	2.13	  	Shareholder Consent and Release
		
	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
		
	4.23	  	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
		
	11.1	  	Restricted Period
		
	11.6	  	Conduct of Business

 EXHIBIT 1 
  

DEFINITIONS 
  
 For purposes of this Agreement, the following terms shall have the meanings set forth below: 
  

	1.1	“Accounts Receivable” means the accounts receivable of the Company and the New PA determined in accordance with GAAP with respect to the operations of the Company and New
PA 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.

  

	1.2	“Adjustment Payment Date” has the meaning set forth in Section 3.3(c). 

  

	1.3	“Adverse Consequences” means all actions, suits, proceedings, hearings, investigations, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages (other than incidental or consequential 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. 

  

	1.4	“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 Shareholder for purposes of this Agreement and neither the Shareholder nor the Company is
an Affiliate of PainCare or Subsidiary for purposes of this Agreement. 

  

	1.5	“Agreement” has the meaning set forth in the Preamble. 

  

	1.6	“Articles of Merger” has the meaning set forth in Section 2.3. 

  

	1.7	“Cash Due at Closing” has the meaning set forth in Section 3.1. 

  

	1.8	“Certificate(s)” has the meaning set forth in Section 2.10. 

  

	1.9	“Closing” has the meaning set forth in Section 6. 

  

 2 

	1.10	“Closing Date” has the meaning set forth in Section 6. 

  

	1.11	“Closing Date Balance Sheet” has the meaning set forth in Section 3.3. 

  

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

  

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

  

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

  

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

  

	1.16	“Disclosure Schedule” has the meaning set forth in Section 4. 

  

	1.17	“ Earnings Threshold” has the meaning set forth in Section 3.4. 

  

	1.18	“EBITDA” has the meaning set forth in Section 3.4. 

  

	1.19	“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. 

  

	1.20	“Employee Pension Benefit Plan” has the meaning set forth in ERISA Section 3(2). 

  

	1.21	“Employee Welfare Benefit Plan” has the meaning set forth in ERISA Section 3(1). 

  

	1.22	“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 wastes into 

  

 3 

 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. 
  

	1.23	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended. 

  

	1.24	“Fair Market Value” has the meaning set forth in Section 3.4. 

  

	1.25	“Fiduciary” has the meaning set forth in ERISA Section 3(21). 

  

	1.26	“Financial Statements” has the meaning set forth in Section 4.8. 

  

	1.27	“Florida Act” and “Texas Act” have the meanings set forth in Section 2.1. 

  

	1.28	“Formula Period” has the meaning set forth in Section 3.4. 

  

	1.29	“Formula Period Profits Statement” has the meaning set forth in Section 3.4. 

  

	1.30	“GAAP” means the United States generally accepted accounting principles in effect from time to time. 

  

	1.31	“HIPAA” has the meaning set forth in Section 4.37. 

  

	1.32	“Indemnified Party” has the meaning set forth in Section 10.4. 

  

	1.33	“Indemnifying Party” has the meaning set forth in Section 10.4. 

  

	1.34	“Intended Installment Payment” has the meaning set forth in Section 3.4. 

  

	1.35	“Installment Payment” has the meaning set forth in Section 3.4. 

  

	1.36	“Installment Payment Discount” has the meaning set forth in Section 3.4. 

  

	1.37	“Installment Payment Premium” has the meaning set forth in Section 3.4. 

  

	1.38	“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, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, 

  

 4 

 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). 
  

	1.39	“IRS” means the U.S. Internal Revenue Service. 

  

	1.40	“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, or 
  
 (c) A Person (other than an individual) will be deemed to have “Knowledge” of a particular fact or other matter if
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. 
  

	1.41	Liability” 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. 

  

	1.42	“Management Agreement” means that certain Management Services Agreement by and among PainCare Acquisition Company XIII, Inc., the New PA and Shareholder, dated as of the
Statutory Merger Time. 

  

	1.43	“Medical Assets” has the meaning set forth in Section 2.11. 

  

	1.44	“Medical Waste” has the meaning set forth in Section 4.40 

  

	1.45	“Merger” has the meaning set forth in Section 2.1. 

  

	1.46	“Most Recent Year End” has the meaning set forth in Section 4.9. 

  

	1.47	“Multiemployer Plan” has the meaning set forth in ERISA Section 3(37). 

  

	1.48	“NASDAQ” has the meaning set forth in Section 3.4. 

  

	1.49	“New PA” has the meaning set forth in Paragraph D of the Recitals. 

  

	1.50	“Other Net Equity Adjustment” has the meaning set forth in Section 3.3. 

  

 5 

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

  

	1.52	“PainCare Shares” means any share of common stock, $.0001 par value per share, of PainCare. 

  

	1.53	“Party(ies)” has the meaning set forth in the Preamble. 

  

	1.54	“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 

  

	1.55	“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). 

  

	1.56	“Prohibited Transaction” has the meaning set forth in ERISA Section 406 and Code Section 4975. 

  

	1.57	“Reportable Event” has the meaning set forth in ERISA Section 4043. 

  

	1.58	“Securities Act” means the Securities Act of 1933, as amended. 

  

	1.59	“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended. 

  

	1.60	“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. 

  

	1.61	“Shareholder” has the meaning set forth in the recitals. 

  

	1.62	“Subsidiary” has the meaning set forth in the Preamble. 

  

	1.63	“Surviving Corporation” has the meaning set forth in Section 2.1. 

  

	1.64	“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. 

  

	1.65	“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. 

  

 6 

	1.66	“Third Party Claim” has the meaning set forth in Section 10.4. 

  

	1.67	“Trade Secrets” has the meaning set forth in Section 11.5. 

  

	1.68	“Transaction” has the meaning set forth in Section 2.1. 

  

	1.69	“Transaction Consideration” has the meaning set forth in Section 3.1. 

  

 7Amendment No. 2 to Amended and Restated Credit Agreement

 
Exhibit 10.39 
  
 BROOKSTONE, INC.

 BROOKSTONE COMPANY, INC. 
 BROOKSTONE STORES, INC. 
 BROOKSTONE PURCHASING, INC. 
 GARDENERS EDEN, INC. 
  
 Dated as
of: April     , 2004 
  
 Fleet National Bank 
       Individually and as Agent 
 40 Broad
Street 
 Boston, Massachusetts 02109 
  
 Citizens Bank of Massachusetts, 
       Individually and as Documentation Agent 
 28 State Street 
 Boston, Massachusetts 02109 
  
 BankNorth, N.A. 
 7 New England Executive Park 
 Suite 700 
 Burlington, Massachusetts 01803 
  
 National City Bank 
 One South Broad Street,
15th Floor 
 Philadelphia, Pennsylvania 19107 
  
 Sovereign Bank 
 75 State Street - sst 04-10 
 Boston, Massachusetts 02109 
  
 Re: Amendment No. 2 to Amended and Restated Credit Agreement 
  
 Ladies and Gentlemen: 
  
 We refer to the Amended and Restated Credit Agreement, dated as of February 21, 2002 (the “Agreement”), among Brookstone, Inc. (the
“Parent”), Brookstone Company, Inc. (the “Company”), Brookstone Stores, Inc. (“Stores”), Brookstone Purchasing, Inc. (“Purchasing”), Gardeners Eden Company, Inc., who was dissolved on February 2, 2004,
(“GE”), Gardeners Eden Purchasing, Inc., who was dissolved on February 2, 2004 (“GE Purchasing”), Gardeners Eden By Mail, Inc., whose name has been changed to Gardeners Eden, Inc., (“GE Mail”), the lenders party thereto
(collectively, the “Lenders”), Fleet National Bank as agent for the Lenders (“Fleet” or the “Agent”), and Citizens Bank of Massachusetts as documentation agent (the “Documentation Agent”). Upon the terms and
subject to the conditions contained in the Agreement, you agreed to make Loans and to issue Letters of Credit for the Borrowers. 
  
 Terms used in this letter agreement (this “Amendment No. 2”) which are not defined herein, but which are defined in the Agreement, shall have
the same respective meanings herein as therein. 

 We have requested that you make certain amendments to the Agreement and certain related Lender
Agreements. You have advised us that you are prepared and would be willing to make the amendments so requested by us on the condition that we join with you in this Amendment No. 2. 
  
 Accordingly, in consideration of these premises, the promises, mutual covenants and agreements contained in this Amendment
No. 2, and fully intending to be legally bound by this Amendment No. 2, we hereby agree with you as follows: 
  
 ARTICLE I 
  
 AMENDMENTS TO AGREEMENT 
  
 Effective as of April
    , 2004 (herein, the “Modification Date”), the Agreement is amended as follows: 
  
 (a) The definition of “Brookstone Subsidiaries” contained in Section 1.1 of the Agreement is amended: (i) by deleting the reference to
“Brookstone By Mail, Inc.”; and (ii) by inserting in its place the following: “Brookstone International Holdings Inc. (“Brookstone International”), Advanced Audio Concepts, Limited (“Audio”)”. It is
acknowledged that Brookstone International is a newly-formed Subsidiary which is wholly-owned by the Company and Audio is a newly-formed Subsidiary which is wholly-owned by Brookstone International, and as such, each is becoming a party to the
Subsidiary Guaranty and certain of the Security Documents pursuant to Section 5.10(b). It is acknowledged that Brookstone By Mail, Inc. has been merged into Stores. 
  
 (b) The second paragraph of the definition of “Fixed Charge Coverage” contained in Section 1.1. of the Agreement
is amended by deleting the reference to “$24,000,000” with respect to the aggregate Capital Expenditures and inserting in its place the following: “$25,000,000” by deleting the reference to $10,000,000” with respect to the
new headquarters construction and inserting in its place the following”: “$11,000,000”. 
  
 (c) Section 5.9 of the Agreement (“Fixed Charge Coverage”) is amended to read in its entirety as follows: 
  
 “5.9 Fixed Charge Coverage. The Parent shall maintain, at the
end of each fiscal quarter for the period of four consecutive fiscal quarters then ending, consolidated Fixed Charge Coverage of not less than 1.35 to 1.0.” 
  
 (d) The definition of “Lender Agreements” contained in Section 1.1 of the Agreement shall, wherever used in the
Agreement or any of the other Lender Agreements, be deemed to also mean and include this Amendment No. 2 and each of the other Amendment Documents delivered in connection herewith. 
  
 (e) Section 5.2(c) of the Agreement (“Conduct of Business”) is amended by deleting the parenthetical in the last
three lines thereof, it being acknowledged that Brookstone Realty, Inc. was previously merged into Stores, and Brookstone Fork Distribution was previously dissolved. 

 (f) Clause (d) of Section 6.1 of the Agreement is amended to read in its entirety as follows: 

 
 “(d) Indebtedness of Stores to the City of Mexico, Missouri
evidenced by a capitalized lease of Stores’ facility in the City of Mexico, Missouri in an aggregate amount not to exceed $2,500,000, (including, without duplication, payments under the City of Mexico bond held by Commerce Bank, National
Association, which represents the base rental obligation under such capitalized lease), Indebtedness (including a capital lease or mortgage financing) incurred in connection with the expansion of the Company’s existing distribution facility in
an aggregate amount not exceeding $14,000,000, and Indebtedness (including a capital lease or mortgage financing) incurred in connection with the construction of a new headquarters in an aggregate amount not exceeding $11,000,000.” 

 
 It is acknowledged that Company has assigned the lease of the facility in
the City of Mexico, Missouri to Stores. 
  
 (g) Clause (f)
contained in Section 6.2 of the Agreement (“Contingent Liabilities”) is amended by inserting at the end thereof (before the period) the following: 
  
 “and Guarantees by the Parent or the Company of the Indebtedness of Stores permitted under Section 6.1(d) in connection with the City of Mexico,
Missouri capital lease.” 
  
 (h) The first paragraph of
Section 6.10 of the Agreement (“Capital Expenditures”) is amended to read in its entirety as follows: 
  
 “6.10. Capital Expenditures. The Parent and its Subsidiaries shall not make Capital Expenditures in an aggregate amount in any fiscal year
exceeding the sum of (a) $19,000,000 for the fiscal year ending January 31, 2004, (b) $21,500,000 for the fiscal year ending January 29, 2005, and (c) $23,000,000 for the fiscal year ending January 28, 2006. Up to $4,000,000 of the amount (if any)
of Capital Expenditures not used in any fiscal year may be used in the next succeeding fiscal year, provided that the amount (if any) of Capital Expenditures unused in the fiscal year ending February 1, 2003 shall not be permitted to be used
in any other fiscal year.” 
  
 (i) Section 11.13 of the
Agreement (“Collateral Release Conditions”) is hereby deleted in its entirety, and shall have no further force or effect. 
  
 (j) Clause (k) of Section 6.4 of the Agreement and the second paragraph of Section 6.10 of the Agreement are each amended by deleting the reference to
“$10,000,000” with respect to the new headquarters construction, and inserting in its place the following: “$11,000,000.” In addition, the second paragraph of said Section 6.10 is further amended by deleting the reference to
“$5,500,000” with respect to the new headquarters construction, and inserting in its place the following: “$6,500,000.” 
  
 (k) Exhibit E to the Agreement is amended to read in its entirety as set forth in Annex A to this Amendment No. 2. 

 (l) The Table set forth in the first paragraph of Schedule 1.2 to the Agreement (the “Pricing
Schedule”) is amended to read in its entirety as follows: 
  

								
	 “ Status

	  	Level I

	  	Level II

	  	Level III

	 
	 Applicable LIBOR Margin
	  	1.75	  	1.50	  	1.25	 
	 Applicable Base Rate Margin
	  	0.25	  	0.00	  	0.00	 
	 Documentary Letter of Credit Fee
	  	0.875	  	0.75	  	0.625	 
	 Commitment Fee
	  	0.50	  	0.375	  	0.300	”

  
 (m) The definitions
of “Level I Status”, “Level II Status”, “Level III Status” and “Level IV Status” contained in the second paragraph of Schedule 1.2 to the Agreement (the “Pricing Schedule”) are respectively amended
to read in their entirety as follows: 
  
 “Level I Status” exists at any date if, at such date, the Fixed Charge Coverage ratio for the four consecutive quarters then ending is greater than or equal to 1.35 to 1.0 and less than 1.45-to-1.0 and no Default exists.

  
 “Level II Status” exists at any
date if, at such date, the Fixed Charge Coverage ratio for the four consecutive quarters then ending is greater than or equal to 1.45-to-1.0 and less than 1.60-to-1.0 and no Default exists. 
  
 “Level III Status” exists at any date if, at such
date, the Fixed Charge Coverage ratio for the four consecutive quarters then ending is greater than or equal to 1.60-to-1.0 and no Default exists.” 
  
 ARTICLE II 
  
 REPRESENTATIONS AND WARRANTIES 
  
 The Borrowers hereby jointly and severally represent and warrant to you as follows: 
  
 (a) Representations in Agreement. Each of the representations and warranties made by the Borrowers to you in the Agreement was true, correct and
complete when made and, after giving effect to all of the acknowledgements, arrangements and transactions contemplated by this Amendment No. 2, is true, correct and complete with respect to the Borrowers on and as of the date hereof with the same
full force and effect as if each of such representations and warranties had been made by the Borrowers on the date hereof and in this Amendment No. 2. 
  
 (b) No Defaults or Events of Default. No Default or Event of Default exists on the date of this Amendment No. 2 (after giving effect to all of the
acknowledgements, arrangements and transactions contemplated by this Amendment No.2). 

 (c) Binding Effect of Documents. This Amendment No. 2 has been duly executed and delivered to you
by the Borrowers and is in full force and effect as of the date hereof, and the agreements and obligations of the Borrowers contained herein constitute legal, valid and binding obligations of the Borrowers enforceable against the Borrowers in
accordance with their respective terms. 
  
 ARTICLE III

  
 PROVISIONS OF GENERAL APPLICATION 
  
 (a) No Other Changes. Except to the extent specifically amended and
supplemented hereby, all of the terms, conditions and the provisions of the Agreement and the other Lender Agreements shall remain unmodified, and the Agreement and the other Lender Agreements, as amended and supplemented by this Amendment No. 2,
are confirmed as being in full force and effect. 
  
 (b)
Governing Law. This Amendment No. 2 is intended to take effect as a sealed instrument and shall be deemed to be a contract under the laws of the Commonwealth of Massachusetts. This Amendment No. 2 and the rights and obligations of each of the
parties hereto shall be governed by and interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. 
  
 (c) Binding Effect; Assignment. This Amendment No. 2 shall be binding upon and inure to the benefit of each of the parties hereto and their
respective successors in title and assigns. 
  
 (d)
Counterparts. This Amendment No. 2 may be executed in any number of counterparts, each of which when executed and delivered shall be deemed an original, but all of which together shall constitute one instrument. In making proof of this
Amendment No. 2, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. 
  
 (e) Conflict with Other Agreements. If any of the terms of this Amendment No. 2 shall conflict in any respect with any of the terms of any of the
Agreement or any other Lender Agreements, the terms of this Amendment No. 2 shall be controlling. 
  
 (f) Conditions Precedent. This Amendment No. 2 shall become and be effective as of the Modification Date, but only if (i) the Borrowers shall have
delivered to the Agent, fully executed and duly authorized, this Amendment No. 2 (together with a revised Exhibit E in the form of Annex A hereto), (ii) the form of acceptance at the end of this Amendment No. 2 shall be signed by the
Agent and the Lenders, (iii) the form of guarantor consent at the end of this Amendment No. 2 shall be signed by the Brookstone Subsidiaries, (iv) Brookstone International and Audio shall have become parties to the Subsidiary Guaranty and, as
required by the Agent, the Security Documents, appropriate financing statements shall have been executed and filed naming Brookstone International as Debtor, and all security interests created thereunder shall have been perfected in favor of the
Agent and constitute first-priority liens, (v) 100% of the capital stock of Brookstone International and 65% of the capital stock of Audio shall have become subject to a perfected, first-priority pledge in favor of the Agent, and original stock
certificates along with stock powers executed in blank shall have been delivered to the Agent, 

 (vi) satisfactory lien search results shall have been delivered to the Agent with respect to the assets of Brookstone
International, (vii) satisfactory evidence of insurance with respect to Brookstone International shall have been delivered to the Agent, and the interest of the Agent as loss payee and additional insured and the provision of 30 days advance notice
of cancellation shall have been endorsed on all instruments of insurance issued in respect of property and liability, (viii) the Agent shall have received confirmation of the filing of UCC amendments reflecting the name change of Gardeners Eden By
Mail, Inc. to Gardeners Eden, Inc., (ix) the Agent shall have received from Brookstone International, Audio and each Borrower a copy, certified by a duly authorized officer of such Person to be true and complete on the Modification Date, of records
of all corporate action taken by such Person to authorize (A) its execution and delivery of this Amendment No. 2 and any other document to which it is a party delivered in connection with this Amendment No. 2 (together with Amendment No. 2, the
“Amendment Documents”), (B) its performance of all of its agreements and obligations under each of such documents, and (C) any transactions contemplated by the Amendment Documents to which it is a party, and (x) the Borrowers shall have
paid all legal fees incurred in connection with this Amendment No. 2. 

 If you are in agreement with the foregoing, please sign the form of acceptance on the enclosed
counterpart of this Amendment No. 2 and return such counterpart to the undersigned along with the closing items referenced in clause (f) above, whereupon this Amendment No. 2, as so accepted by you, shall become a binding agreement among you and the
undersigned. 
  

			
	Very truly yours,
	
	BROOKSTONE, INC.
		
	By:	 	 /s/

	Title:	 	 
	
	BROOKSTONE COMPANY, INC.
		
	By:	 	 /s/

	Title:	 	 
	
	BROOKSTONE STORES, INC.
		
	By:	 	 /s/

	Title:	 	 
	
	BROOKSTONE PURCHASING, INC.
		
	By:	 	 /s/

	 	 	 
	Title:	 	 
	
	GARDENERS EDEN, INC. (f/k/a Gardeners Eden By Mail, Inc.)
		
	By:	 	 /s/

	Title:	 	 

  
 (Signatures
continued on next page) 

 The foregoing Amendment No. 2 is hereby accepted by the undersigned as of April     ,
2004. 
  
 FLEET NATIONAL BANK, 
  

			
	 	 	Individually and as Agent
		
	By:	 	 /s/

	Title:	 	 
	
	CITIZENS BANK OF MASSACHUSETTS,
	 	 	Individually and as Documentation
	 	 	Agent
		
	By:	 	 /s/

	Title:	 	 
	
	BANKNORTH, N.A.
		
	By:	 	 /s/

	Title:	 	 
	
	NATIONAL CITY BANK
		
	By:	 	 /s/

	Title:	 	 
	
	SOVEREIGN BANK
		
	By:	 	 /s/

	Title:	 	 

 ANNEX A 
  
 Exhibit E 
 Subsidiaries

  
 Brookstone Company, Inc. 
 Brookstone Stores, Inc. 
 Brookstone Purchasing, Inc. 
 Brookstone Properties, Inc. 
 Brookstone Holdings, Inc. 
 Brookstone International Holdings, Inc. 
 Brookstone O’Hare, LLC

 Brookstone Retail Puerto Rico, Inc. 
 Gardeners Eden, Inc.

 Advance Audio Concepts, Limited 

 CONSENT OF GUARANTORS 
  
 Each of Brookstone Properties, Inc., Brookstone Holdings, Inc., Brookstone Retail Puerto-Rico, Inc. and Brookstone By Mail,
Inc., who was merged into Brookstone Stores, Inc. on February 2, 2004 (collectively referred to herein as the “Guarantors”) has jointly and severally guaranteed the Obligations of the Borrowers under the Agreement by executing an Amended
and Restated Unlimited Guaranty dated as of February 21, 2002 (the “Unlimited Guaranty”). By executing this letter, each of the Guarantors who are signatories to this Consent hereby absolutely and unconditionally reaffirms the Unlimited
Guaranty, and acknowledges and agrees to the terms and conditions of this letter and the Agreement as amended hereby. 
  

			
	 BROOKSTONE PROPERTIES, INC.

	 BROOKSTONE HOLDINGS, INC.

	 BROOKSTONE RETAIL PUERTO-RICO, INC.

		
	 By:
	 	 /s/ Philip Roizin

	 	 	Philip Roizin, Treasurer

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