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 IX, INC., 
  
 KENNETH M. ALO, M.D., P.A. 
  
 AND 
  
 KENNETH M. ALO, M.D. 
  
 EXECUTION DATE: DECEMBER 31, 2003. 

  
 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 Articles of Merger	  	2
	 	  	2.4	  	Articles of Incorporation	  	2
	 	  	2.5	  	Bylaws	  	2
	 	  	2.6	  	Directors and Officers	  	3
	 	  	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	  	4
	 	  	2.12	  	Conversion of Shares	  	4
	 	  	2.13	  	Shareholder Consent and Release	  	4
	 	  	2.14	  	Piggyback Registration	  	4
	 	  	2.15	  	Shareholder’s Obligation to Furnish Information	  	5
	 	  	2.16	  	Suspension of Sales Pending Amendment to Prospectus	  	6
	 	  	2.17	  	Registration Expenses	  	6
	 3.
	  	TRANSACTION CONSIDERATION	  	7
	 	  	3.1	  	Merger Consideration	  	7
	 	  	3.2	  	Intentionally Omitted	  	7
	 	  	3.3	  	Closing Date Adjustments	  	7
	 	  	 	  	(a	)	 	Transaction Related Adjustment	  	7
	 	  	 	  	(b	)	 	Financial Statements	  	7
	 	  	 	  	(c	)	 	Closing Date Balance Sheet	  	7
	 	  	3.4	  	Earnout Payment	  	8
	 	  	 	  	(a	)	 	General	  	8

  

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	 	  	 	  	 	 	 	 	  	Page

	 	  	 	  	(b	)	 	Installment Payment Discount	  	9
	 	  	 	  	(c	)	 	Installment Payment Premium	  	9
	 	  	 	  	(d	)	 	Manner of Payment	  	9
	 	  	 	  	(e	)	 	Earnout Cap	  	10
	 	  	 	  	(f	)	 	Definitions for Purposes of Section 3.4	  	10
	 	  	 	  	(g	)	 	Adjustments to Installment Payments	  	11
	 	  	3.5	  	Intentionally Omitted.	  	11
	 4.
	  	REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER	  	11
	 	  	4.1	  	Organization, Qualification, and Corporate Power	  	11
	 	  	4.2	  	Capitalization	  	11
	 	  	4.3	  	Authorization	  	12
	 	  	4.4	  	Noncontravention	  	12
	 	  	4.5	  	Broker’s Fees	  	12
	 	  	4.6	  	Title to Assets	  	12
	 	  	4.7	  	No Subsidiaries	  	13
	 	  	4.8	  	Financial Statements	  	13
	 	  	4.9	  	Events Subsequent to Most Recent Year End	  	13
	 	  	 	  	(a	)	 	Sale or Lease of Assets	  	13
	 	  	 	  	(b	)	 	Contracts	  	13
	 	  	 	  	(c	)	 	Change in Contracts	  	13
	 	  	 	  	(d	)	 	Security Interests	  	13
	 	  	 	  	(e	)	 	Investments	  	14
	 	  	 	  	(f	)	 	Debts	  	14
	 	  	 	  	(g	)	 	Liabilities Unaffected	  	14
	 	  	 	  	(h	)	 	Claims Unaffected	  	14
	 	  	 	  	(i	)	 	Articles and Bylaws	  	14
	 	  	 	  	(j	)	 	Changes in Equity	  	14
	 	  	 	  	(k	)	 	Distribution	  	14
	 	  	 	  	(l	)	 	Property Damage	  	14
	 	  	 	  	(m	)	 	Transactions with Affiliates	  	14

  

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	 	  	 	  	 	 	 	 	  	Page

	 	  	 	  	(n	)	 	Collective Bargaining Agreements	  	14
	 	  	 	  	(o	)	 	Compensation Changes	  	14
	 	  	 	  	(p	)	 	Employee Benefit Plans	  	14
	 	  	 	  	(q	)	 	Officers; Directors; Employees	  	14
	 	  	 	  	(r	)	 	Charitable or Capital Contributions	  	15
	 	  	 	  	(s	)	 	Ordinary Course of Business	  	15
	 	  	 	  	(t	)	 	Accounting Practices	  	15
	 	  	 	  	(u	)	 	Accounts Receivable	  	15
	 	  	 	  	(v	)	 	In General	  	15
	 	  	 4.10
	  	Undisclosed Liabilities	  	15
	 	  	 4.11
	  	Tax Matters	  	15
	 	  	 	  	(a	)	 	Tax Returns	  	15
	 	  	 	  	(b	)	 	Withholding	  	15
	 	  	 	  	(c	)	 	No Disputes of Claims	  	15
	 	  	 	  	(d	)	 	No Waivers	  	16
	 	  	 	  	(e	)	 	No Special Circumstances	  	16
	 	  	 	  	(f	)	 	Subchapter “S”	  	16
	 	  	 	  	(g	)	 	Audits of Tax Returns	  	16
	 	  	 	  	(h	)	 	Period of Assessment	  	16
	 	  	 	  	(i	)	 	Tax Agreements	  	16
	 	  	 	  	(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	  	17
	 	  	 	  	(e	)	 	No Disputes	  	17

  

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	 	  	 	  	 	 	 	 	  	Page

	 	  	 	  	(f	)	 	Subleases	  	17
	 	  	 	  	(g	)	 	Encumbrances	  	18
	 	  	 	  	(h	)	 	Approvals	  	18
	 	  	 	  	(i	)	 	Utilities	  	18
	 	  	 4.13
	  	Intellectual Property	  	18
	 	  	 4.14
	  	Condition of Tangible Assets	  	18
	 	  	 4.15
	  	Contracts	  	18
	 	  	 	  	(a	)	 	Personal Property Leases	  	18
	 	  	 	  	(b	)	 	Services	  	18
	 	  	 	  	(c	)	 	Partnership; Joint Venture	  	18
	 	  	 	  	(d	)	 	Indebtedness	  	18
	 	  	 	  	(e	)	 	Confidentiality; Non-Competition	  	19
	 	  	 	  	(f	)	 	Shareholders’ Agreements	  	19
	 	  	 	  	(g	)	 	Plans	  	19
	 	  	 	  	(h	)	 	Employment or Consulting Agreements	  	19
	 	  	 	  	(i	)	 	Advances; Loans	  	19
	 	  	 	  	(j	)	 	Adverse Effects	  	19
	 	  	 	  	(k	)	 	Other Agreements	  	19
	 	  	 4.16
	  	Powers of Attorney	  	19
	 	  	 4.17
	  	Insurance; Malpractice	  	19
	 	  	 4.18
	  	Litigation	  	20
	 	  	 4.19
	  	Health Care Compliance	  	21
	 	  	 4.20
	  	Fraud and Abuse	  	21
	 	  	 4.21
	  	Legal Compliance	  	21
	 	  	 4.22
	  	Rates and Reimbursement Policies	  	22
	 	  	 4.23
	  	Medical Staff	  	22
	 	  	 4.24
	  	Employees	  	22
	 	  	 4.25
	  	Employee Benefits	  	22
	 	  	 	  	(a	)	 	Plans	  	22
	 	  	 	  	(b	)	 	Compliance	  	23

  

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	 	  	 	  	 	 	 	 	  	Page

	 	  	 	  	(c	)	 	Reports and Descriptions	  	23
	 	  	 	  	(d	)	 	Contributions	  	23
	 	  	 	  	(e	)	 	Qualified Plan	  	23
	 	  	 	  	(f	)	 	Market Value	  	23
	 	  	 	  	(g	)	 	Copies	  	23
	 	  	 	  	(h	)	 	Maintenance of Plans	  	23
	 	  	 (i)
	  	Reportable Events	  	23
	 	  	 (ii)
	  	Prohibited Transactions	  	23
	 	  	 4.26
	  	Physicians and Other Providers	  	24
	 	  	 	  	(a	)	 	Licenses	  	24
	 	  	 	  	(b	)	 	Controlled Substances	  	24
	 	  	 	  	(c	)	 	Actions	  	24
	 	  	 (i)
	  	Malpractice Actions	  	24
	 	  	 (ii)
	  	Disciplinary Proceedings	  	24
	 	  	 (iii)
	  	Criminal Proceedings	  	24
	 	  	 (iv)
	  	Investigation	  	24
	 	  	 (v)
	  	Mental Illnesses	  	24
	 	  	 (vi)
	  	Substance Abuse	  	24
	 	  	 (vii)
	  	Professional Ethics	  	24
	 	  	 (viii)
	  	Application for Licensure	  	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	  	26
	 	  	 4.35
	  	Intentionally Omitted	  	26

  

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	 	  	 	  	 	 	 	 	  	Page

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

  

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	 	  	 	  	 	 	 	 	  	Page

	 	  	 	  	(d	)	 	Corporate Authorization	  	31
	 	  	 	  	(e	)	 	Payoffs	  	32
	 	  	 	  	(f	)	 	Good Standing Certificate	  	33
	 	  	 	  	(g	)	 	Secretary’s Certificate	  	31
	 	  	 	  	(h	)	 	Medicare Provider Number	  	32
	 	  	 	  	(i	)	 	Discuss any managed care agreement	  	32
	 	  	 	  	(j	)	 	Other documents	  	32
	 	  	7.2	  	Deliveries of PainCare	  	32
	 	  	 	  	(a	)	 	Transaction Consideration	  	32
	 	  	 	  	(b	)	 	Resolutions	  	32
	 	  	 	  	(c	)	 	Other Documents	  	32
	 8.
	  	CONDITIONS TO THE OBLIGATIONS OF THE PARTIES	  	32
	 	  	8.1	  	Conditions for the Benefit of PainCare and the Subsidiary	  	32
	 	  	8.2	  	Conditions for the Benefit of the Shareholder	  	32
	 9.
	  	COVENANTS	  	33
	 	  	9.1	  	Operations Pending Closing	  	33
	 	  	9.2	  	Deliveries Pending Closings	  	33
	 	  	9.3	  	Distribution of Sub-Chapter S Income by the Company	  	33
	 	  	9.4	  	Post-Closing General Covenants	  	33
	 	  	9.5	  	Tax Returns	  	33
	 	  	9.6	  	Transitions	  	34
	 	  	9.7	  	Litigation Support	  	34
	 	  	9.8	  	Consents	  	34
	 	  	9.9	  	Operational Covenants	  	34
	 	  	9.10	  	Capital Adjustments	  	35
	 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	  	36
	 	  	10.4	  	Matters Involving Third Parties	  	36

  

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	 	  	 	  	 	 	 	 	  	Page

	 	  	 	  	(a	)	 	Notification	  	36
	 	  	 	  	(b	)	 	Defense by Indemnifying Party	  	36
	 	  	 	  	(c	)	 	Satisfactory Defense	  	37
	 	  	 	  	(d	)	 	Conditions	  	37
	 	  	10.5	  	Right to Set-Off	  	37
	 	  	10.6	  	Materiality	  	37
	 	  	10.7	  	Limitation	  	38
	 11.
	  	RESTRICTIVE COVENANTS; CONFIDENTIALITY	  	38
	 	  	11.1	  	Restrictive Covenants	  	38
	 	  	 	  	(a	)	 	Restricted Period	  	38
	 	  	 	  	(b	)	 	Consideration	  	39
	 	  	 	  	(c	)	 	Third-Party Beneficiaries	  	39
	 	  	11.2	  	Defenses	  	39
	 	  	11.3	  	No Running of Covenant During Breach	  	39
	 	  	11.4	  	Blue Pencil Doctrine	  	40
	 	  	11.5	  	Confidentiality, Press Releases, and Public Announcements	  	40
	 	  	11.6	  	Conduct of Business	  	40
	 	  	11.7	  	No Third-Party Beneficiaries	  	42
	 12.
	  	MISCELLANEOUS	  	42
	 	  	12.1	  	Entire Agreement	  	42
	 	  	12.2	  	Succession and Assignment	  	42
	 	  	12.3	  	Counterparts	  	43
	 	  	12.4	  	Headings	  	43
	 	  	12.5	  	Notices	  	43
	 	  	12.6	  	Governing Law; Jurisdiction; Attorney’s Fees	  	44
	 	  	12.7	  	Amendments and Waivers	  	44
	 	  	12.8	  	Severability	  	44
	 	  	12.9	  	Expenses	  	44
	 	  	12.10	  	Further Assurances	  	44
	 	  	12.11	  	Construction	  	44
	 	  	12.12	  	Survival	  	45
	 	  	12.13	  	Incorporation of Exhibits and Schedules	  	45
	 	  	12.14	  	Submission to Jurisdiction	  	45

  

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 Page 
  
 MERGER AGREEMENT AND PLAN OF REORGANIZATION 
  
 THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
“Agreement”) is made and entered into effective the 31st day of December, 2003 (the “Execution
Date”) by and among PAINCARE HOLDINGS, INC., a Florida corporation (“PainCare”), PAINCARE ACQUISITION COMPANY IX, INC., a Florida corporation (“Subsidiary”), in which PainCare and the Subsidiary are sometimes
referred to herein as the “Acquiring Companies”, and KENNETH M. ALO, M.D., P.A., a Texas professional association (the “Company”), and KENNETH M. ALO, M.D., an individual (“Dr. Alo”). 
  
 RECITALS 
  
 A. The Company owns and operates a medical practice (hereinafter
sometimes called the “Business”) at 17270 Red Oak Drive, Suite 110, Houston, TX 77090 (hereinafter sometimes called the “Center”) and Dr. Alo 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 practice;

  
 C. PainCare desires to enter into this Agreement in
order for the Subsidiary, which is a wholly-owned subsidiary of PainCare, to acquire the non-medical assets of the Company; 
  
 D. In connection with this transaction, Dr. Alo 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 KMA Merger Corp., Inc. (hereinafter the “Conversion”). Contemporaneous with such Conversion, Dr. Alo will form a new
Texas profession corporation, Kenneth Alo, M.D., P.A (hereinafter the “New PC”), to operate his medical practice and in connection with same will transfer all the Company’s medical assets to the New PC. 
  
 E. Immediately following the Conversion and formation of the New PC,
Dr. Alo will (i) sell fifty percent (50%) of the Company Shares to the NCCCK Children’s Trust, a Non-Grantor Trust (the “Trust”), and (ii) assign the remaining Company Shares to Alpha Three FLP, a Nevada limited partnership (the
“Partnership”). Hereinafter Dr. Alo, the Trust and the Partnership will collectively sometimes be referred to herein as the “Shareholder” and sometimes Dr. Alo, the Trust, the Partnership and the Company will collectively
sometimes be referred to herein as the “Sellers.” PainCare, the Subsidiary, and the Sellers are sometimes referred to herein individually as a “Party” and collectively as the “Parties.” 
  
 F. In connection with this acquisition, PainCare desires to have
Subsidiary enter into a management services agreement with the New PC, in which the management services agreement is the significant inducement for the Subsidiary to acquire the non-medical assets of the Company; 
  
 G. 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 
  

 H. It is the intention of the Parties for the Merger contemplated herein to qualify as a tax-free
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. 
  
 NOW, THEREFORE, in consideration of the premises and the actual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the receipt and adequacy of which
are hereby conclusively acknowledged, the Parties, intending to become legally bound, hereby agree as follows: 
  
 TERMS AND CONDITIONS 
  
 1. DEFINITIONS. All capitalized words that are not capitalized for purposes of grammar and which are not defined in the text of this Agreement are defined terms with their definitions set forth on Exhibit 1. 

 
 2. TRANSACTION. 
  
 2.1 Transaction. Immediately prior to the Merger, the Company
shall file an amendment of its certificate of incorporation to convert from a professional corporation 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). 
  
 2.7 Tax
Consequences. It is intended by the Parties hereto that the Merger shall constitute a tax-free reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. 
  
 2.8 Additional Actions. If, at any time after the Closing, the
Surviving Corporation shall consider or be advised that any further acts are necessary or desirable: (a) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, title to and possession of any property or right of the
Company acquired or to be acquired by reason of, or as a result of, the Merger; or (b) otherwise to carry out the purposes of this Agreement, then the Shareholder shall be deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments and assurances in law and to do all other acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement; and the officers and directors of the Surviving Corporation are fully authorized in the name of the Shareholder and the Company to take any and all such actions. 
  
 2.9 No Dissenters’ Rights. 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 (or,
the Extended Time, as the case may be), 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 (or, the Extended Time, as the case may be) 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 PC as of the Statutory Merger Time for no required consideration. 
  
 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 he
may, could or will have, whether arising before or after the Closing Date, against the Company 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) 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)
PainCare hereby represents to the Shareholder that it is obligated pursuant to that certain Registration Rights Agreement (the “Registration Rights Agreement”) dated December 17, 2003, among PainCare and certain investors, to file a Form
S-3 Registration Statement (the “Registration Statement”) with the SEC no later than January 30, 2004. PainCare hereby agrees that it will include in the Registration Statement for purposes of registration in accordance with the provisions
contained in the Registration Rights Agreement and the Registration Statement all of the PainCare Shares that will or may be issued to the Shareholder as part of the Closing Date Consideration and the Intended Installment Payments (hereinafter the
“Registrable Shares”). If, for whatever reason, such Registration Statement does not become effective with the SEC or if PainCare is required by the SEC to remove the Registrable Shares from the Registration Statement then, in such event,
the following provisions dealing with registration rights shall apply. 
  
 (b) Subject to Section 2.14(a) above, if within the three (3) year period commencing on the Execution 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 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 hereunder with respect to such proposed registration. Notwithstanding any other provision of this Section to the contrary, PainCare shall not be required to include any of the PainCare Shares in a registration statement relating to an
underwritten offering of PainCare’s securities unless the 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. 
  
 (c) The Shareholder may exercise his rights under Section
2.14(b) above on an unlimited number of occasions. PainCare shall pay all Registration Expenses (as defined below) of any registration effected under this Section, except that in the event of withdrawal by 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 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. 
  
 (d) 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 notice from PainCare of the happening of any event of that requires PainCare not to proceed with the registration, or if PainCare has decided not to proceed with the registration for any reason, the 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 Shareholder’s PainCare Shares is required to be delivered under the Securities Act, of the happening of any event which requires
changes to be made in the registration statement or any related prospectus so that such registration statement or prospectus shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading as a result of any information provided by the 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. 
  

 3. TRANSACTION CONSIDERATION. 
  
 3.1 Merger Consideration. The aggregate merger consideration (the “Merger Consideration”) shall
consist of (i) the Closing Date Consideration (the “Closing Date Consideration”) as hereafter defined, and (ii) the Earnout Payment as determined under Section 3.4 below. Subject to adjustment as provided in Section 3.3 below, the Closing
Date Consideration that PainCare shall deliver to the Shareholder upon the satisfaction of the Closing Conditions shall equal Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000), comprised of: (i) One Million Seven Hundred Fifty
Thousand and 00/100 Dollars ($1,750,000) (the “Cash Due At Closing”) to be delivered via wire transfer to a bank account designated by the Shareholder, plus (ii) Seven Hundred Seventy Seven Thousand, Seven Hundred Seventy Eight Shares
(777,778) PainCare Shares, valued at approximately Two Dollars and Twenty Five Cents ($2.25) per share and having an aggregate value of One Million Seven Hundred Fifty Thousand and 00/100 Dollars ($1,750,000). At least one (1) day prior to the
Extended Time, 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 Intentionally Omitted. 
  
 3.3 Closing Date Adjustments. The Closing Date Consideration
shall be subject to adjustment as follows: 
  
 (a) Transaction Related Adjustments. The Cash Due At Closing shall 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) Financial Statements. The Company has prepared financial statements consisting of (i) a statement of Assets and
Liabilities-Cash Basis, and a Statement of Revenue and Expenses-Cash Basis as of December 31, 2002. An independent auditor converted these statements into Accrual Financials and “GAAP Financial Statements.” The Statement of Assets and
Liabilities – Cash Basis and the Statement of Revenue and Expenses-Cash Basis for the periods ended September 30, 2002 and 2003 “Interim Financials” also include outside revenues and expenses that are directly and indirectly
associated with the medical services and/or any medical services and/or any medical products generated by acts of the Company and/or Dr. Alo. A balance sheet, statement of operations and cash flow statement in accordance with GAAP as of and for the
year ended December 31, 2002 (the “GAAP Financial Statements”); and the Interim Financial Statements are included in Section 3.3(b) of the Disclosure Schedule. The GAAP Financial Statements have been certified by an independent auditor and
have been prepared using accounting principles consistent with the accounting principles utilized by PainCare. The Interim Financial Statements have been prepared in accordance with the cash method of accounting. The GAAP Financial Statements
present fairly the financial condition of the Company as of such dates and the results of the operations of the Company for such periods, and are fairly presented and complete. 
  
 (c) Closing Date Balance Sheet. Within forty-five (45) days after the Closing Date,
PainCare or its Affiliate will prepare and deliver to Dr. Alo 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 ten (10) business days
after PainCare’s delivery of 

  

 
the Closing Date Balance Sheet to Dr. Alo, Dr. Alo 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 Dr. Alo fails to deliver notice of acceptance or objection to the Closing Date Balance Sheet within such ten (10) business 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 ten (10) business days after delivery of the Closing Date Balance Sheet
(the “Adjustment Payment Date”), the Shareholder shall pay the Other Net Equity Adjustment (as defined below) to PainCare. In the event that PainCare and Dr. Alo 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 Dr. Alo, then either Party shall each have the right to require that such disputed determinations be submitted to an independent certified public accountant or accounting firm
that PainCare shall select, for computation or verification in accordance with the provisions of this Agreement, and the Net Equity Adjustment 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 certified public accounting firm review shall be final and binding upon the Parties and there shall be no right of appeal from such decision. Such accounting firm’s
fees and expenses for such disputed determination shall be borne by the Party whose determination has been modified by such accounting firm’s report or by all Parties in proportion to the relative amount each Party’s determination has been
modified. Any payments due under this Section 3.3 shall bear interest at eight percent (8%) per annum from the Adjustment Payment Date. 
  
 If the final Closing Date Balance Sheet reflects Cash of the Company that is less than Fifty Thousand Dollars ($50,000) (the
“Required Cash”), or Net Shareholder’s Equity (as defined below) of the Company that is less than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000)(“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 Four Hundred Thousand and 00/100 Dollars ($1,400,000) (the “Earnings Threshold”) in each of the three (3) successive twelve (12) month calendar periods beginning on the first of the first month
immediately following the Closing Date unless the Closing occurs on the first day of a month in which case the first 12 month period shall begin on the Closing Date, (each such twelve (12) month calendar period shall be referred to herein as a
“Formula Period”), then PainCare shall pay to the Shareholder a total amount of additional consideration of Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000) for the Formula Periods, payable in three equal annual
installments of One Million One Hundred Sixty Six Thousand Six Hundred Sixty Six and 67/100 Dollars ($1,166,666.67) (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%). 
  
 (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 Subsidiary’s Formula
Period Profits exceed the Earnings Threshold in the Formula Period immediately subsequent to the Formula Period for which the Installment Payment Discount corresponded, 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%). 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 Dr. Alo a financial statement presenting the Formula Period Profits for the
Surviving Corporation for the applicable Formula Period (the “Formula Period Profits Statement”). Ten (10) business days after delivery of the Formula Period Profits Statement, Dr. Alo 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 Dr. Alo fails to deliver notice of acceptance or objection to the Formula Period
Profits Statement within such ten (10) business day period, the Shareholder shall be deemed to have accepted the Formula Period Profits Statement. If Dr. Alo accepts or fails to object to the Formula Period Profits Statement within the ten (10)
business day period set forth above, then within ninety (90) days after the end of the Formula Period, PainCare shall pay to the Shareholder the Intended Installment Payment or the Adjusted Installment Payment (each an “Installment
Payment”, and collectively, the “Installment Payments”) along with any Installment Payment Premium owed in accordance with Subsection (c) above as follows: (i) fifty percent (50%) of the Installment Payment shall be made in cash via
wire transfer to a bank account designated by the Shareholder at least ten (10) business days prior to the end of the Formula Period; and (ii) fifty percent (50%) of the Installment Payment shall be made in PainCare Shares priced at Fair Market
Value (as defined below) per one share of PainCare common stock for all Formula Periods. In the event PainCare and Dr. Alo 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 Dr. Alo, PainCare and Dr. Alo shall each have the right to require that such disputed determinations be submitted to an independent certified public accountant or accounting firm that PainCare shall select, for
computation or verification in accordance with the provisions of this Agreement, and the Installment Payment shall be paid by PainCare to the Shareholder within fifteen (15) days after receipt of the accountant’s computation or verification.
The foregoing provisions for certified 

  

 
public accounting firm review shall be final and binding upon the Parties and there shall be no right of appeal from such decision. 
  
 (e) 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 Five
Hundred Thousand and 00/100 Dollars ($3,500,000). 
  
 (f) Definitions for Purposes of Section 3. For purposes of Section 3 of this Agreement: 
  
 (i) “Fair Market Value” shall mean the value of the PainCare Shares determined as follows: 
  
 (1) if the principal market for the PainCare Shares is a
national securities exchange, then the “Fair Market Value” of the PainCare Shares shall equal the thirty (30) day trailing average of the closing ask prices of the PainCare Shares 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 by PainCare.
Within ten (10) days after the effective date of the appraiser’s appointment, the appraiser shall deliver an appraisal of the Fair Market Value of the PainCare Shares, which shall be binding and conclusive on the Parties. The cost of any
appraisal hereunder shall be shared equally by the Parties, and each Party shall be responsible and financially liable for its or his own attorneys’ fees; and 
  
 (5) with the understanding that notwithstanding the Fair Market Value ascribed to the PainCare Shares
pursuant to subsections 3.4(f)(1), (2), (3) or (4) above in no event shall the Fair Market Value of the PainCare Shares ever be less than One and 50/00 Dollars ($1.50) 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 where possible, and as
calculated by PainCare for quarterly and less than quarterly data for such Formula Period. Notwithstanding the foregoing, the calculation of the Formula Period Profits shall not include any costs or expenses related to: (i) the corporate overhead of
PainCare or other administrative or similar charges that PainCare might impose upon the Subsidiary, except those charges for services provided directly to and for the benefit of the Subsidiary; (ii) any non-recurring charges, losses, profits, gains,
or non-cash adjustments not related to the ongoing operations of the Subsidiary’s business, including but not limited to discontinued operations, extraordinary items, acquisition costs and goodwill charges incurred in connection with the
transactions contemplated hereby (excluding the write-off of any goodwill with respect to the Surviving Corporation in accordance with FASA 142), or unusual or infrequent items as such terms are defined pursuant to generally accepted accounting
principles, (iii) any charge related to grants or exercises of options pursuant to the Independent Contractor Agreement. 
  
 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. The Company is 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 Ten Thousand (10,000) 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 Alo on behalf of each Shareholder has all necessary authority to execute, bind each Shareholder and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by the Company has been duly authorized and approved by its board of directors and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions contemplated hereby. The Company has given the Shareholder any and all notice required to be given to the Shareholder under applicable law. This Agreement constitutes the valid and legally
binding obligation of the Company and the Shareholder, enforceable in accordance with its terms and conditions. 
  
 4.4 Noncontravention. Except as set forth in Section 4.4 of the Disclosure Schedule, neither the execution and the delivery of this
Agreement by the Company or the Shareholder, nor the consummation of the transactions contemplated hereby will: (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, or other restriction of any
government, governmental agency or any other third party whatsoever, or court to which the Company or the Shareholder are subject, or any provision of the articles of incorporation or bylaws of the Company; or (b) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which
the Company or the Shareholder are a party or by which either the Company or the Shareholder is bound or to which any of the Company’s assets are subject (or result in the imposition of any Security Interest upon any of its assets). Except as
set forth in Section 4.4 of the Disclosure Schedule, the Shareholder and the Company need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency or any other third
party whatsoever in order for the Parties to consummate the transactions contemplated by this Agreement. 
  
 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 obligation to pay any fees, expenses, or commissions to any consultant, broker, finder, or agent. 
  
 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 as to assets disposed of in the ordinary course of business subsequent to the date hereof and as otherwise contemplated by this Agreement, the Company has good and marketable title to, or a valid leasehold interest in, the properties and
assets used by it, located on its premises, or shown on the Closing Date Balance Sheet or acquired after the date thereof, free and clear of all Security Interests. Except for the Medical Assets which are to be transferred to New PC, the assets set
forth in Section 4.6, in conjunction with any assets which the Company leases, constitute all of the assets used by the Company in connection with its business as presently conducted and all assets necessary or appropriate for the continued
operation of the Company’s business. 
  

 4.7 No Subsidiaries. The Company has no Subsidiaries and does not control, directly or
indirectly, or have any direct or indirect equity participation in any corporation, partnership, limited liability company, trust or other business association. 
  

4.8 Financial Statements. Attached as Section 3.3(b) of the Disclosure Schedule are copies of the GAAP Financial Statements and the
Interim Financial Statements. Except as provided in the Interim Financial Statements, or as fully disclosed in Section 4.8 of the Disclosure Schedule, the Company does not have any Liabilities or obligations (whether accrued, absolute, contingent,
whether due or to become due or otherwise i.e., accounts payable, accrued expenses) which might be or become a charge against the Company since the date of the Interim Financial Statements. The Shareholder acknowledges and agrees that PainCare and
Subsidiary relied upon the financial information set forth in the Financial Statements in order to determine the Transaction Consideration and that except as may otherwise be disclosed in Section 4.8 of the Disclosure Schedules, the revenues
reflected in both the GAAP Financial Statements and the Interim Financial Statements will, to the best knowledge and belief of the Shareholder, continue to approximate for at least the next three (3) years the same or greater levels as reflected in
such Statements with the understanding that with respect to the GAAP Financial Statements that such statements do not include the following income earned by Dr. Alo during the year ended December 31, 2002: (i) approximately $450,000 of income from
Pain and Health P.A.; (ii) approximately $300,000 in educational training, speaking and honorarium fees; (iii) approximately $84,000 in medical director fees; and (iv) approximately $16,000 in transcription fees (collectively, these fees and
additional income items shall hereinafter be called the “Other Income”). Likewise, Dr. Alo will use his best efforts to maintain and grow such revenue streams inclusive of the Other Income for the benefit of the New PC, PainCare and the
Subsidiary and will take no action or omit to take any action that may otherwise have a material adverse effect on such revenues or otherwise cause such revenue streams inclusive of the Other Income to be diverted to any other entity or individual
including the Shareholder. 
  
 4.9 Events Subsequent to Most
Recent Year End. Since December 31, 2002 (the “Most Recent Year End”), there has not been any material adverse change in the business, financial condition, operations, results of operations, or future prospects of the Company.
Without limiting the generality of the foregoing, since the Most Recent Year End: 
  
 (a) Sale or Lease of Assets. The Company has not sold, leased, transferred, or assigned any of its assets, tangible or
intangible, other than for fair market value in the ordinary course of its business; 
  
 (b) Contracts. The Company has not entered into any agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) outside the ordinary course of business; 
  
 (c) Change in Contracts. No third party (or the Company) has accelerated, terminated, modified, or canceled any agreement, contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) to which the Company is a party or by which it is bound and neither the Shareholder nor the Company has any intent to do any of the foregoing or has received a verbal or written indication of any third party’s intent to do any of
the foregoing; 
  
 (d) Security
Interests. The Company has not 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;

  
 (h) Claims Unaffected. The
Company has not canceled, compromised, waived, or released any right or claim (or series of related rights and claims) outside the ordinary course of its business; 
  
 (i) Articles and Bylaws. There has been no change made or authorized in the articles of
incorporation or bylaws of the Company; 
  
 (j)
Changes in Equity. The Company has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock; 
  
 (k)
Distribution. Except for distributions of subchapter S income as permitted by Section 9.3 below, the Company has not declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash
or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock; 
  
 (l) Property Damage. The Company has not experienced any damage, destruction, or loss (whether or not covered by insurance)
to its property or assets; 
  
 (m)
Transactions with Affiliates. The Company has not made any loan to, or entered into any other transaction with, any of its directors, officers and employees; 
  
 (n) Collective Bargaining Agreements. The Company has not entered into any collective
bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement; 
  
 (o) Compensation Changes. The Company has not granted any increase in the base compensation of any of its directors,
officers, and employees; 
  
 (p) Employee
Benefit Plans. The Company has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken
any such action with respect to any other Employee Benefit Plan); 
  
 (q) Officers; Directors; Employees. The Company has not made any change in the employment terms for any of its directors, officers and employees, other than to terminate such agreements as required
herein; 
  

 (r) Charitable or Capital Contributions. The Company has not made or
pledged to make any charitable or other capital contribution; 
  
 (s) Ordinary Course of Business. There has not been any other occurrence, event, incident, action, failure to act, or transaction outside the ordinary course of business involving the Company;

  
 (t) Accounting Practices.
Saving the changes associated with the change to GAAP with respect to the GAAP Financial Statements, 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
there is no basis for any present or future action, suit, proceeding, hearing, investigation, complaint, claim, or demand against it giving rise to any Liability, except for: (a) Liabilities disclosed in the Disclosures Schedule; (b) contractual
obligations incurred in the ordinary course of business; and (d) Liabilities which have arisen after the Interim 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). As of the Closing, other than the current trade accounts payable, leasehold obligations and accrued payroll and benefit obligations, the Company shall
not have any unpaid liabilities, other than those listed in the Section 4.10 Disclosure Schedule, including, but not limited to, any bank debt, capital leases or any general or professional liability claims, or be obliged in any other way to provide
funds in respect of, or to guarantee or assume, any debt, obligation or dividend of any person, except endorsements in the ordinary course of business in connection with the deposit, in banks or other financial institutions, of items for collection.

  
 4.11 Tax Matters. 
  
 (a) Tax Returns. Except as set forth in
Disclosure Schedule 4.11, the Company has filed all Tax Returns it was required to file. All such Tax Returns were correct and complete in all respects and were filed on a timely basis. All Taxes owed by the Company (whether or not shown on any Tax
Return) have been paid. The Company currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim is currently pending by an authority in a jurisdiction where the Company is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. 
  
 (b) Withholding. The Company has withheld, and remitted when due, all Taxes required to have
been withheld or paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. 
  
 (c) No Disputes of Claims. No Shareholder or director or officer (or employee responsible for Tax matters) of the Company
expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or 

  

 
claim concerning any Tax Liability of the Company either: (a) claimed or raised by any authority in writing; or (b) as to which any Shareholder, directors
and officers (and employees responsible for Tax matters) of the Company has Knowledge based upon personal contact with any agent of such authority. Section 4.11 of the Disclosure Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Company for taxable periods ended on or after December 31, 2002, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Shareholder has made
available to PainCare correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by any of the Company and its Affiliates since December 31, 2002. 
  
 (d) No Waivers. The Company has not waived any
statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. 
  
 (e) No Special Circumstances. The Company has not made any payments, is not obligated to make any payments, nor is a party
to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G. The Company has not been a United States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. 
  
 (f) Subchapter “S”. The Company has elected, by the unanimous consent of its shareholders and in compliance with all applicable legal requirements, to be taxed under Subchapter “S” of the Code and
corresponding provisions under any applicable state and local laws, and such elections are currently in full force and effect for the Company. No action has been taken by the Company or the Shareholder that may result in the revocation of any such
elections. The Company has no “Subchapter C earnings and profits,” as defined in Code Section 1362(d). The Company has no “net unrealized built-in gain,” as such term is defined in Code Sections 1374(d)(1) and 1374(d)(8). The
Company has no Liability, absolute or contingent, for the payment of any income Taxes under the Code or under Subchapter “S” of the Code. 
  
 (g) Audits of Tax Returns. No Tax Return of the Company is currently under audit or examination by any taxing authority, and
the Company has not received a written notice stating the intention of any taxing authority to conduct such an audit or examination. Each deficiency resulting from any audit or examination relating to Taxes by any taxing authority has been paid,
except for deficiencies being contested in good faith. The revenue agents’ reports related to any prior audits and examinations are attached as part of Section 4.11 of the Disclosure Schedule. 
  
 (h) Period of Assessment. There is no
agreement or other document extending, or having the effect of extending, the period of assessment or collection of any Taxes. 
  
 (i) Tax Agreements. The Company is not a party to or bound by any tax sharing agreement, tax indemnity obligation or similar
agreement with respect to Taxes, including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority. 
  

 (j) Inclusions in Taxable Periods. The Company will be required to include
in a taxable period ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of accounting, the cash method of accounting or Code Section 481 with respect to a change in method of accounting occurring before the Closing Date or comparable provisions of state, local
or foreign tax law. 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 under the lease or sublease and no third party is in breach or
default under the lease or sublease, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder; 
  
 (d) Repudiation. Neither the Company nor any
other party to the lease has repudiated any provision of the lease or sublease; 
  
 (e) No Disputes. There are no disputes, oral agreements, or forbearance programs in effect as to the lease or sublease;

  
 (f) Subleases. With respect to
each sublease, the representations and warranties set forth in subsections 4.12(a) through 4.12(e) above are to Shareholder’s Knowledge true and correct with respect to the underlying lease; 
  

 (g) Encumbrances. None of the Company or its Affiliates has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold; 
  
 (h) Approvals. All facilities leased or subleased thereunder have received all approvals of governmental authorities
(including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules, and regulations; and 
  
 (i) Utilities. All facilities leased or subleased thereunder are supplied with utilities and
other services reasonably necessary for the operation of said facilities. 
  
 4.13 Intellectual Property. Except as to the Software Consulting Agreement with ETC. – Pay Technology and its Intellectual Proprietary Rights associated with this Software Consulting Agreement, the
Company owns or has the right to use pursuant to a valid license, sublicense, agreement, or permission all Intellectual Property necessary or desirable for the operation of the businesses of the Company as presently conducted and as presently
proposed to be conducted. No claim or demand of any Person has been made, nor is there any proceeding that is pending, or to the Shareholder’s Knowledge, threatened, which challenges the rights of the Company with respect to any Intellectual
Property or asserts that the Company is infringing or otherwise in conflict with or is required to pay any royalty or license fee with respect to any Intellectual Property. 
  
 4.14 Condition of Tangible Assets. Each tangible asset of the Company is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable, designed and intended for the purposes for which it presently is used by Dr. Alo
and the Company and is not outdated in comparison with the assets used for similar purposes by similar businesses. 
  
 4.15 Contracts. Section 4.15 of the Disclosure Schedule lists the following contracts and other agreements, written or oral, to which the
Company was a party immediately preceding the Closing: 
  
 (a) Personal Property Leases. Any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments; 
  
 (b) Services. Any agreement (or group of related agreements) for the furnishing or receipt of
services, the performance of which will extend over a period of more than one (1) year; 
  
 (c) Partnership; Joint Venture. Any agreement constituting a partnership or joint venture; 
  
  
 (d) Indebtedness. Any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation;

  

 (e) Confidentiality; Non-Competition. Any agreement concerning
confidentiality or non-competition; 
  
 (f)
Shareholders’ Agreements. Any agreement by and between the Shareholder and any Affiliate of the Company; 
  
 (g) Plans. Any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other
plan or arrangement for the benefit of its current or former directors, officers, and employees; 
  
 (h) Employment or Consulting Agreements. Any agreement for the employment of any individual on a full-time or part-time or
the engagement of any individual as a consultant or independent contractor, or otherwise compensating an individual for services rendered or to be rendered to the Company; 
  
 (i) Advances; Loans. Any agreement under which the Company has advanced or loaned any amount
to any of its directors, officers and employees outside the ordinary course of business; 
  
 (j) Adverse Effects. Any agreement under which the consequences of a default or termination could have a material adverse
effect on the business, financial condition, operations, results of operations or future prospects of the Company; and 
  
 (k) Other Agreements. Any other agreement (or group of related agreements) the performance or rendering of which involves
consideration in excess of Five Thousand and No/100 Dollars ($5,000.00). 
  
 The Shareholder has made available to PainCare and Subsidiary a correct and complete copy of each written agreement listed in Section 4.15 of the Disclosure Schedule (as amended to date) and a written summary
setting forth the terms and conditions of each oral agreement referred to in Section 4.15 of the Disclosure Schedule. With respect to each such agreement: (i) the agreement is legal, valid, binding, enforceable, and in full force and effect;
(ii) there shall be no breach or other violation resulting from the consummation of the transactions contemplated hereby; (iii) the Company is not in default or breach and no other party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration, under the agreement; and (iv) neither the Company nor any other party has repudiated any provision of the agreement. None of the
agreements listed in Section 4.15 of the Disclosure Schedule requires the consent or approval of any Person, or any compensation or payment to be made to any such Person by reason of the transactions contemplated by this Agreement, or the
merger of the Company with and into another Person. 
  
 4.16
Powers of Attorney. 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 has been a party, a named insured or
otherwise the beneficiary of coverage at any time during the five (5) years immediately preceding the Closing 

  

 
Date. Section 4.17 of the Disclosure Schedule contains a description of all current malpractice liability insurance policies of Dr. Alo, the Company and the
Company’s professional employees and all predecessor policies in effect. Except as set forth on Section 4.17 of the Disclosure Schedule: (a) neither the Company, nor its professional employees, nor Dr. Alo 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 Dr. Alo has 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 Dr. Alo during the five (5) years immediately preceding the Closing Date, including workers compensation, general liability, environmental
liability and professional malpractice liability claims. With respect to each insurance policy listed in Section 4.17 of the Disclosure Schedule: (i) the policy is legal, valid, binding, enforceable, and in full force and effect; (ii) the policy
will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (iii) neither the Company, Dr. Alo, other health care professionals nor any
other party to the policy is in breach or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; (iv) the Company has not repudiated any provision thereof and no other party to the policy has repudiated any provision thereof; (v) there is no claim pending under any of such policies
as to which coverage has been questioned, denied or disputed by the underwriter(s) of such policies or any notice that a defense will be afforded with reservation of rights; (vi) the Company has not received: (A) any notice that any issuer of any
such policy has filed for protection under applicable bankruptcy laws or is otherwise in the process of liquidating or has been liquidated; or (B) any other indication that such policies are no longer in full force and effect or that the issuer of
any such policy is no longer willing or able to perform its obligations thereunder; and (vii) neither Dr. Alo nor the Company has received any written notice from or on behalf of any insurance carrier issuing such policies, that there will hereafter
be a cancellation, or an increase in a deductible or non-renewal of existing policies. The Company has been covered during the past five (5) years by insurance in scope and amount customary and reasonable for the business in which it has engaged
during the aforementioned period. 
  
 4.18
Litigation. Except as noted in Section 4.18 of the Disclosure Schedule, there is no litigation, arbitration, governmental claim, investigation or proceeding, pending or, to Shareholder’s Knowledge, threatened, against the Company,
or Dr. Alo at law or in equity, before any court, arbitration tribunal or governmental agency. Each of the Sellers has no knowledge of any facts on which claims may hereafter be made against the Company that will have a Material Adverse Effect on
the Company. All medical malpractice claims, general liability incidents and incident reports relating to the Business have been submitted to Company’s insurer. All claims made or, to Shareholder’s Knowledge, threatened against the Company
or Dr. Alo in excess of the deductible are covered under Dr. Alo’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 relating to the Business or the Center that have 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 no condition exists or event has occurred which in itself or with the giving of notice or the lapse of time or both would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such third-party payor program. The Company is in compliance in all material respects with the requirements of all such third-party payors applicable thereto. None of the Company,
its physician employees, the Shareholder, or immediate family members of the Shareholder or other physician employees, have any financial relationship (whether investment interest, compensation interest, or otherwise) with any entity to which any of
the foregoing refer patients, except for such financial relationships that qualify for exceptions to state and federal laws restricting physician referrals to entities in which they have a financial interest. 
  
 4.20 Fraud and Abuse. The Company, Dr. Alo, and all persons and
entities providing professional services for the Company have not engaged in any activities which are prohibited under 42 U.S.C. § 1320a-7b, or the regulations promulgated thereunder pursuant to such statutes, or related state or local statutes
or regulations, or which are prohibited by rules of professional conduct, including the following: (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failing to disclose Knowledge by a claimant of the occurrence of
any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to fraudulently secure such benefit or payment; and (d) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay or receive such remuneration: (A) in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medicaid; or (B) in return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing, or ordering
any good, facility, service or item for which payment may be made in whole or in part by Medicare or Medicaid. The Company has at all times complied with the requirements of 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. 
  
 4.21 Legal Compliance. The Company and its predecessors and
Affiliates have complied with all applicable Laws (including rules, regulations, codes, injunctions, judgments, orders, decrees, and rulings of federal, state, local, and foreign governments (and all agencies thereof)), and no action, suit,
proceeding, hearing, complaint, claim, demand, notice or investigation has been filed or commenced, or to the Knowledge of the Shareholder and the Company, threatened against the Company alleging any failure so to comply. The Company and all
physicians and other health care professionals engaged or employed by the Company (or associated with the Company as a result of being engaged or employed by New PC) have all permits and licenses required by applicable Law, have made all required
regulatory filings and 

  

 
are not in violation of any such permit or license. The Company is lawfully operated in accordance with the requirements of all applicable Laws and has in
full force and effect all authorizations and permits necessary to operate a medical practice saving those that have been assigned or transferred to the New PC 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 condition for participation
with such governmental authority or third-party payor. The Company has not received notice and the Company and Shareholder has no knowledge or reason to believe that, such necessary authorizations may be revoked or not renewed in the ordinary course
of business. 
  
 4.22 Rates and Reimbursement
Policies. 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 Company and the Shareholder have no Knowledge of any applicable Law, which affects rates or reimbursement procedures which has been enacted, promulgated or issued
within the eighteen (18) months preceding the date of this Agreement or any such legal requirement proposed or currently pending in the State of 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. Neither the Company nor the Shareholder have Knowledge of any impending proposed reduction in reimbursement from third party or other payors nor Knowledge of any threatened termination of payor contracts. 
  
 4.23 Medical Staff. Except as set forth on Section 4.23 of the
Disclosure Schedule, the Shareholder has no Knowledge of a physician who is providing services on behalf of the Company or New PC who plans, or has threatened to terminate his or her employment or other relationship with the Company. None of the
physicians providing services on behalf of the Company currently has plans to retire from the practice of medicine in the next three (3) years. 
  
 4.24 Employees. Except as set forth on Section 4.24 of the Disclosure Schedule: (a) there is no unfair labor practice charge or complaint
pending or threatened relating to the business of the Company; and (b) payment in full to all of the employees of the Company of all wages, salaries, commissions, bonuses, benefits, and other compensation lawfully due and owing to such employees or
otherwise arising under any policy, practice, agreement, plan, program, statute, or other law as of the Closing Date has been made. 
  
 4.25 Employee Benefits. 
  
 (a) Plans. Section 4.25 of the Disclosure Schedule lists each Employee Benefit or health and welfare plan that the Company
maintains or to which the Company contributes. 
  

 (b) Compliance. Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all material respects with its terms and with the applicable requirements of ERISA, the Code and other applicable laws. 
  
 (c) Reports and Descriptions. All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1’s, and Summary Plan Descriptions) have been filed or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code Section 4980B have been met with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan. 
  
 (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. 
  

(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 PC: 
  
 (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; 
  
 (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.
Each of the Company and its predecessors and Affiliates has complied and is in material compliance with all Environmental, Health, and Safety Requirements. 
  
 (b) Permits and Licenses. Without limiting the generality of the foregoing, each of the Company and its Affiliates 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. None of the Company nor its predecessors or Affiliates has received any written
or oral notice, report or other information regarding any actual or alleged violation of Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to any of them or its facilities arising under Environmental, Health, and Safety Requirements. 
  
 (d) Hazardous Substances. None of the Company or its predecessors or Affiliates has treated,
stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including without limitation any hazardous substance, or owned or operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would give rise to liabilities, including any Liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees,
pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Solid Waste Disposal Act, as amended or any other Environmental, Health, and Safety Requirements. 
  
 (e) The Company has not received any communication (written
or oral), whether from a governmental authority, citizens’ group, employee or otherwise, that alleges that the Business or the Company is not in full compliance with Environmental Laws, or that the Company 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, the Business or the Center. 
  

 (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, the Business or the Center,
or Sellers in connection with the Business or the Center. 
  
 4.29
Certain Business Relationships with the Company and its Affiliates. Except as contemplated hereby with respect to the Company and the New PC, neither the Shareholder nor any of his Affiliates have been involved in any business
arrangement or relationship with the Company and its Affiliates within the past twelve (12) months, and none of the Shareholder and his Affiliates owns any asset, tangible or intangible, which is material to the business of any of the Company and
its Affiliates. 
  
 4.30 Third-party Payors. Section
4.30 of the Disclosure Schedule sets forth an accurate, correct and complete list of the Company’s third-party payors. Neither the Company nor the Shareholder has received any notice nor has any Knowledge that any third-party payor intends to
terminate or materially reduce its business with, or reimbursement to, the Company. The Company has no reason to believe that any third-party payor will cease to do business with the Company after, or as a result of, the consummation of any
transactions contemplated hereby. The Company does not know of any fact, condition or event which would adversely affect its relationship with any third-party payor. 
  
 4.31 Bank Accounts. Section 4.31 of the Disclosure Schedule sets forth all of the bank and security accounts
and all safe deposit boxes maintained by the Company and all lines of credit owned or used by the Company, and the names of all persons with authority to withdraw funds from, or execute drafts or checks on, each such account. 
  
 4.32 Tax Status. The Shareholder is not a “nonresident
alien individual” or “foreign corporation” for purposes of Code Section 897(a)(1). 
  
 4.33 Binding Obligation. This Agreement constitutes the valid and legally binding obligation of the Shareholder, enforceable in accordance
with its terms and conditions. 
  
 4.34 No Corporate
Practice or Fee Splitting. The Shareholder does not have any Knowledge that the actions, transactions or relationships arising from, and contemplated by, the Transaction violate any law, rule or regulation relating to the corporate practice
of medicine or fee splitting. The Shareholder accordingly agrees that he will not and will not cause any other Party, in an attempt to void or nullify this Agreement or any document related to the Transaction or any relationship involving PainCare
or Subsidiary to sue, claim, aver, allege or assert that any such document or any such relationship violates any law, rule or regulation relating to the corporate practice of medicine or fee splitting. 
  
 4.35 Intentions. Dr. Alo intends to continue managing the
business operations of the New PC on an as needed basis for the next three (3) 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
PC on an as needed basis for the next three (3) 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 and may not be resold without compliance with the Securities Act. The
PainCare Shares to be acquired by the Shareholder pursuant to this Agreement are being acquired solely for his own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of them in
connection with a distribution other than in compliance with the Securities Act. 
  
 (b) Resale Restrictions. The Shareholder covenants, warrants and represents that none of the PainCare Shares issued to
Shareholder will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act and the rules of regulations of the Commission and
applicable state securities laws, and the applicable provisions of any PainCare Stockholders’ Agreement and this Agreement. All certificates evidencing PainCare Shares shall bear the legends contained in the PainCare Stockholders’
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.

  
 (d) Accredited Investor. The
Shareholder covenants, represents and warrants that he is an: (a) individual with a net worth (either individually or jointly with his respective spouse) in excess of One Million and No/100 Dollars ($1,000,000.00); or (b) individual who had an
income in excess of Two Hundred Thousand and No/100 Dollars ($200,000.00) in each of 2001 and 2002, or had a joint income with his spouse in excess of Three Hundred Thousand and No/100 Dollars ($300,000.00) in each of 2001 and 2002, and has a
reasonable expectation of reaching the same income level in 2003. 
  
 (e) 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 Dr. Alo with respect to the practice locations to comply with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),
including the final regulations promulgated thereunder, whether such plans and efforts have been put in place or are in process. Schedule 4.37 includes but is not limited in any manner whatsoever to any privacy compliance plan of Sellers in place or
in development, and any plans, analyses or budgets relating to information systems including but not limited to necessary purchases, upgrades or modifications to effect HIPAA compliance. 
  

 4.38 Improper and Other Payments. (a) Neither the Company, any director, officer, employee
thereof, nor any agent or representative of the Company nor any person acting on behalf of any of them, has made, paid or received any unlawful bribes, kickbacks or other similar payments to or from any person or authority, (b) no contributions have
been made, directly or indirectly, by the Company to a domestic or foreign political party or candidate; and (c) the internal accounting controls of the Company are believed by the Company’s management to be adequate to detect any of the
foregoing under current circumstances. 
  
 4.39 Accounts
Receivable. Schedule 4.39 sets forth a list, accurate, correct and complete in all respects, of all outstanding accounts and notes receivable of the Company as of the last day of the month immediately preceding the Closing Date. All
outstanding accounts and notes receivable reflected on Schedule 4.39 are due and valid claims against account debtors for services rendered in accordance with the usual business practices and historical collection experience of the Company and 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 with all Medical Waste Laws (as hereinafter defined). 
  
 “Medical Waste” includes, but is not limited to, (a) pathological waste, (b) blood, (c) sharps, (d) wastes from surgery or autopsy, (e) dialysis waste,
including contaminated disposable equipment and supplies, (f) cultures and stocks of infectious agents and associated biological agents, (g) contaminated animals, (h) isolation wastes, (i) contaminated equipment, (j) laboratory waste, and (k)
various other biological waste and discarded materials contaminated with or exposed to blood, excretion, or secretions from human beings or animals. “Medical Waste” also includes any substance, pollutant, material, or contaminant listed or
regulated under the Medical Waste Tracking Act of 1988, 42 U.S.C. §§6992, et seq. (“MWTA”). 
  
 “Medical Waste Law” means the following, including regulations promulgated and orders issued thereunder, all as may be amended from time to time: the MWTA; the
U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33 USCA §§2501 et seq.; the Marine Protection, Research, and Sanctuaries Act of 1972, 33 USCA §§1401 et seq.; the Occupational Safety and Health Act, 29 USCA
§§651 et seq.; the United States Department of Health and Human Services, National Institute for Occupational Self-Safety and Health Infectious Waste Disposal Guidelines, Publication No. 88-119; and any other federal, state, regional,
county, municipal, or other local laws, regulations, and ordinances insofar as they purport to regulate Medical Waste, or impose requirements relating to Medical Waste. 
  

 4.41 No Untrue or Inaccurate Representation or Warranty. No representation or warranty by
Sellers contains or will contain any untrue statement of fact, or omits or will omit to state a fact necessary to make the statements 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 Closing Date. 
  
 5.1 Organization of PainCare and Subsidiary. PainCare is a corporation duly organized, validly existing, and in good standing under the laws
of the State of Florida. Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. 
  
 5.2 Authorization of Transaction. PainCare and Subsidiary have full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of PainCare, enforceable in accordance with its terms and conditions. The execution and delivery of this
Agreement has been approved and authorized by the Board of Directors of PainCare. 
  
 5.3 No Conflict or Violation. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in (a) a violation of or a conflict with
any provision of the Certificate or Articles of Incorporation or bylaws of 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 Company 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 Stockholder has had the opportunity to obtain and review
PainCare’s Form 10-KSB for the year ending December 31, 2002, Form S-4/A filed with the SEC on July 11, 2002, Form 10-QSB for the period ending September 30, 2003, Form 14A (Definitive Proxy) filed with the SEC on September 17, 2002 and current
Forms 8-K (the “PainCare Disclosure Documents”). The PainCare Disclosure Documents are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which such statements were made, not misleading. 

  

 
To the knowledge of PainCare nothing has occurred after the date of the documents contained in the Disclosure Documents that would individually or in the
aggregate have a material adverse effect on PainCare. 
  
 5.6
Capitalization. The authorized capital stock of PainCare consists of 75,000,000 shares of Common Stock, $.0001 par value per share, which as of December 31, 2003, approximately 24,000,000 shares are issued and outstanding, 10,000,000
shares of “blank check” preferred none of which have been issued or are outstanding. All of the PainCare Shares are, and all shares of PainCare Shares to be issued pursuant to this Agreement will be, validly issued, fully paid and
non-assessable. Disclosure Schedule 5.6(a) hereto sets forth a listing of all options, warrants and outstanding PainCare securities which are convertible (with or without the payment of consideration) into shares of the Common Stock of PainCare,
including all contingently issuable shares of such Common Stock issuable pursuant to agreements outstanding as of December 31, 2003. 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) the PainCare or its assets or the operation of the business of the PainCare as currently
operated and as proposed to be operated, (ii) any Employee Plan of PainCare or any trust or other funding instrument, fiduciary or administrator thereof or (iii) the transactions contemplated by this Agreement, before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, any of which is reasonably expected to result in a loss not covered by insurance in excess of $100,000 or reasonably expected to
have a material adverse effect on PainCare. To the knowledge of the PainCare, the PainCare is not in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments
against the PainCare or the business of the PainCare. Except as set forth in Disclosure Schedule 5.7, each Action pending or, to the knowledge of the 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, 2002 (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 Material Misstatements Or Omissions. To the knowledge of PainCare, no representations
or warranties by PainCare in this Agreement, nor any document, exhibit, statement, certificate or schedule furnished or to be furnished to the 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 12:00 p.m. Eastern Daylight Time on December 31, 2003 (the “Closing Date”). However, in the event that the Parties have not satisfied all of the conditions necessary to Close by the Closing Date including, without limitation,
the completion, review and approval of all the disclosure schedules (hereinafter the “Closing Conditions”) then, in such event, either Party may extend the time period for satisfying such Closing Conditions until 4:00 p.m. Pacific Time,
Friday, January 9, 2004 (hereinafter the “Extended Time”) with the understanding and agreement that if the Closing Conditions are completed to the mutual satisfaction of the parties by the Extended Time that this Transaction shall be
effective as of the Closing Date. In the event that the Closing Conditions have not been completed to the mutual satisfaction of the parties by the Extended Time, this Agreement may be terminated by either Party unless the Parties through their
respective legal counsel otherwise agree in writing to an additional extension of time not to exceed ten (10) consecutive days beginning on the day immediately following the Extended Time for satisfying such Closing Conditions. 
  

	7.	CLOSING DELIVERIES. 

  
 7.1 Deliveries of the Company and the Shareholder. At or prior to the Extended Time, the Company and the Shareholder shall deliver to the
Acquiring Companies the following: 
  
 (a)
Consents and Approvals. Copies of all authorizations, consents, and approvals of governments, governmental agencies and third parties referred to in Section 4.4(a) of the Disclosure Schedule; 
  
 (b) Termination of Agreements. Copies of
documents effectuating the termination of any and all written employment and independent contractor agreements, compensation agreements, buy-sell agreements and other similar agreements entered into by the Company and which are in effect immediately
preceding the Closing, which terminations shall each include a complete release of the Company from all known or unknown obligations or liabilities; 
  
 (c) Company Stock. The Certificates and stock powers, duly endorsed, transferring the Company Stock to Subsidiary and the
officer and director resignations required in Section 4.6; 
  
 (d) Corporate Authorization. A 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 PC certifying that the minute
books, articles of incorporation and bylaws of the Company and the New PC, attached as exhibits to such certificate, are true, correct, and complete; and 
  

 (f) Medicare Provider Number. A copy of the completed application for New
PC’s Medicare provider number signed by Dr. Alo together with Dr. Alo’s certification that such application has been or will be filed in the very near future. 
  
 (g) Managed Care Agreements. An assignment(s) of all Managed Care Agreements to which
the Company is a party to the New PC. 
  
 (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 Extended Time, PainCare shall deliver to the Shareholder the following: 
  
 (a) Transaction Consideration. The Transaction
Consideration; 
  
 (b) Resolutions.
A certified copy of the resolution of the board of directors of PainCare, and the sole shareholder and members of the board of directors of Subsidiary, authorizing the Transaction; and 
  
 (c) 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 Extended Time 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 and all information contained in any exhibit, certificate, schedule or attachment hereto or in any writing delivered by, or on behalf of the Shareholder or
the Company shall be true and correct when made and shall be true and correct in all material respects on the Closing Date (and the Extended Time) 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 Extended Time; and (c) New PC
shall have filed an application for a Medicare provider number to obtain payment or reimbursement for its services, and (d) the Company shall have assigned to the New PC any and all Medical Assets and payor contracts of the Company, and such payors
have provided written consent to such assignment or otherwise were properly notified of such assignment pursuant to the terms of such payor contracts. 
  
 8.2 Conditions for the Benefit of the Shareholder. (a) The representations and warranties of PainCare in this Agreement and all information
contained in any exhibit, certificate, schedule or attachment hereto or in any writing delivered by, or on behalf of PainCare or the Subsidiary shall be true and correct when made and shall be true and correct in all material respects on the Closing
Date (and the Extended Time) 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 Extended Time. 
  

	9.	COVENANTS. The Parties covenant and agree as follows: 

  
 9.1 Operations. As of the Statutory Merger Time, the New PC and the Subsidiary will execute and deliver to each other the Management
Services Agreement and Dr. Alo and the New PC will execute and deliver the Employment Agreement. Dr. Alo shall be designated by the Subsidiary as the Medical Group Administrator under the Management Services 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, 2003 and ending on the Closing Date shall
have been distributed to the Shareholder subject to the requirement that Shareholder shall insure that as of the Closing Date that the Company will have a minimum cash balance of Fifty Thousand Dollars ($50,000). The Shareholder shall not be
entitled to any additional distributions or payments with respect to taxable income of the Company (i) for the period ending after the Closing Date, other than as specifically set forth in this Agreement. 
  
 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. Dr. Alo shall be responsible for preparing and filing all income or franchise Tax Returns of the Company relating to
periods of time prior to the Closing Date. PainCare and the Subsidiary will provide to Dr. Alo 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. The Acquiring Companies shall be solely responsible for any taxes due
arising from conversion to the accrual method. 
  

 9.6 Transition. Neither the Shareholder nor the Company will take any action that is
designed, intended or likely to have the effect of discouraging any lessor, licensor, customer, supplier or other business associate of the Company from maintaining the same business relationships with the Company after the Closing as he, she or it
maintained with the Company prior to the Closing. 
  
 9.7
Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand in connection with: (a) any transaction
contemplated under this Agreement; or (b) any fact, situation, circumstances, status, condition, activity, practice, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each of
the Parties will cooperate with the contesting or defending Party and its or his counsel in the contest or defense, at the sole cost and expense of the contesting or defending Party except to the extent that the contesting or defending party is
entitled to indemnification therefor under this Agreement. 
  
 9.8
Consents. The 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. 
  
 9.9 Operational
Covenants. Without the prior written consent of Shareholder, which shall not be unreasonably withheld, PainCare shall not, prior to the conclusion of the third Formula Period: 
  
 (a) reorganize the Surviving Corporation, whether by integrating or consolidating the business of the
Surviving Corporation with other operating units of PainCare or its subsidiaries or affiliates, except in the case that at the time of such integration or consolidation such transaction could not reasonably be expected to have a material adverse
effect on the Formula Period Profits; 
  
 (b)
effect any reassignment, reprioritization, reallocation, restructuring, or reduction of the Surviving Corporation’s human or other resources, their research and development initiatives, or their marketing programs, except in a manner that at
the time of such event could not reasonably be expected to have a material adverse effect on the Formula Period Profits or that are reasonably necessary in light of the Surviving Corporation’s results of operation; 
  
 (c) amend the articles of incorporation or bylaws of the
Surviving Corporation in any manner that at the time of such amendment could reasonably be expected to have a material adverse effect on the Formula Period Profits; 
  

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

  
 (e) cause the Surviving Corporation to
undertake actions outside the ordinary course of its business which at the time of such undertaking could reasonably be expected to have a material adverse effect on the Formula Period Profits; 
  
 (f) sell a material portion of the Surviving Corporation or
its assets, merge the Surviving Corporation with any other entity, sell a controlling interest in the Surviving Corporation, or make any fundamental change in the business of the Surviving Corporation unless such action(s) at the time of such
undertaking could not reasonably be expected to have a material adverse effect on the Formula Period Profits or that is reasonably necessary in light of the Surviving Corporation’s results of operation; 
  
 The parties hereby acknowledge and agree that the foregoing
covenants in this Section 9.9 shall become null and void and of no further force or effect if the Formula Period Profits of the Surviving Corporation in each of any two (2) consecutive calendar quarters are less than $600,000, or if the Formula
Period Profits of the Surviving Corporation in one (1) calendar quarter is less than $100,000. 
  
 9.10 Capital Adjustments. In the event of a stock dividend, recapitalization, or merger in which PainCare is the surviving corporation, split-up, combination or exchange of shares or the like which
results in a change in the number or kind of shares of common stock which is outstanding immediately prior to such event, the rights of the 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 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, or; (c) any Liability of the Company of any nature whatsoever accrued
or existing as of the Closing Date or related to actions of the Company which occurred prior to the Closing Date, which is not reflected on the Financial Statements, the Closing Date Balance Sheet, or Section 10.2 of the Disclosure Schedule and
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. 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 unless such Liability was incurred on behalf of the Company by Subsidiary
under the Management Agreement. 
  
 10.3 Indemnification
Provisions for the Benefit of the Shareholder. In the event of a misrepresentation or breach (or in the event any third party alleges facts that, if true, would mean a misrepresentation or breach) of any of PainCare’s or
Subsidiary’s representations, warranties, and covenants contained in this Agreement, then PainCare and Subsidiary agree to indemnify the Shareholder from and against any Adverse Consequences the Shareholder may suffer through and after the date
of the claim for indemnification resulting from, arising out of, relating to, in the nature of, or caused by the breach (or the alleged breach). 
  
 10.4 Matters Involving Third Parties. 
  
 (a) Notification. If any third party shall notify any Party (the “Indemnified Party”) with respect to any matter
(a “Third Party Claim”) which may give rise to a claim for indemnification against the other Party (the “Indemnifying Party”) pursuant to this Section 10, then the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless the Indemnifying Party thereby is prejudiced and
then only to the extent that the Indemnifying Party is actually prejudiced. 
  
 (b) Defense by Indemnifying Party. The Indemnifying Party shall have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice 

  

 
satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party notifies the Indemnified Party in writing within ten (10) business days after
the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim; (ii) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill the Indemnifying Party’s indemnification obligations hereunder; (iii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief; (iv) settlement of, or
an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party; and
(e) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. 
  
 (c) Satisfactory Defense. So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance
with Section 10.4(b) above: (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; (ii) the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld or delayed unreasonably); and (iii) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld or delayed unreasonably) and any such settlement must include a complete release of the Indemnified
Party. 
  
 (d) Conditions. In the
event any of the conditions in Section 10.4(b) above is or becomes unsatisfied, however: (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith); (ii) the Indemnifying Party will reimburse the Indemnified Party promptly
and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses); and (iii) the Indemnifying Party will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 10. 
  
 10.5 Right to Set-Off. If any such cost, loss, damage, expense, liability, claim, or obligation occurs or is incurred by PainCare or
Subsidiary, PainCare or Subsidiary shall have the right, after written notice to the Shareholder, at PainCare’s or Subsidiary’s option and in addition to any other actions permitted by law, to offset the amount of any such cost, loss,
damage, expense, liability, obligation or claim against amounts due from PainCare or Subsidiary to the Shareholder, including the right to offset any post-closing payment due from PainCare or Subsidiary to the Shareholder under this Agreement or any
other agreement. 
  
 10.6 Materiality.
Notwithstanding any provision in this Agreement to the contrary, the indemnifying Party’s obligation to indemnify the Indemnified Party in connection with a breach of any representation, warranty, covenant or other agreement included in this
Agreement, and the amount of damages to be indemnified, shall be determined without regard to any 

  

 
“material”, “materiality” (or correlative meanings”) or “Material Adverse Effect” qualifications, provisions or exceptions
set forth in such representation, warranty, covenant or other agreement, each of which shall be deemed to be given for the purposes of this Section 10 as though there were no such qualifications, provisions or exceptions. 
  
 10.7 Limitation. The indemnification provisions set forth in
this Section 10 shall be limited to all claims in excess of Twenty Five Thousand and 00/100 Dollars ($25,000) (the “Threshold”). Once a claim exceeds the Threshold, if a Party is entitled to indemnification under this Section 10, such
party shall recover all appropriate funds from the first dollar of damages. Further, the indemnitors shall not be liable for any liabilities resulting from claims that are covered by any insurance policy or other indemnity or contribution agreement
unless, and only to the extent that, the full limit of such insurance policy, indemnity or contribution agreement has been exceeded. The Party entitled to indemnification shall have a duty to mitigate its damages. 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 Earnout Installment Payments paid or due pursuant to Section 3.4 of this Agreement prior to any reduction of such
Installment Payments permitted under Section 3.4(g); provided however that such cap shall not be applicable to Sections 4.1, 4.2, 4.3, 4.8, 4.10, 4.11, 4.17, 4.18, 4.19, 4.20, 4.22, 4.25, 4.27, 4.36, 4.37 and 4.38. 
  
 11. RESTRICTIVE COVENANTS; CONFIDENTIALITY. 
  
 11.1 Restrictive Covenants. 
  
 (a) Restricted Period. Dr Alo hereby agrees
that during the time period commencing as of the Closing Date and continuing for a period of two (2) years thereafter (the “Restricted Period”), neither Dr. Alo nor any of his Affiliates, shall, other than on behalf of the New PC, 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 Dr. Alo 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) Establish, operate or provide physician
services at any medical office, hospital, clinic or out-patient and/or ambulatory treatment or diagnostic facility or become employed by, or serve as a health care consultant or medical director to any health care provider providing services similar
to those provided by PainCare or Subsidiary, or engage or participate in or finance any business which engages in direct competition with the business being conducted by PainCare or the Surviving Corporation at such time, anywhere within a one
hundred (100) mile radius of the Company or the New PC; 
  
 (ii) Solicit or engage in the solicitation of, or serve or accept any business from patients, insurance companies, managed care plans, employers or other customers 

  

 
of the business conducted by the New PC or the Surviving Corporation for services competitive with those of the New PC or the Subsidiary, and their
successors and assigns; 
  
 (iii) Request, induce
or advise any patients, insurance companies, managed care plans, suppliers, vendors, employers or other customers of the business conducted by the New PC or the Subsidiary to withdraw, curtail or cancel their business or other relationships with the
New PC or the Subsidiary, or assist, induce, help or join any other person or entity in doing any of the above activities; or 
  
 (iv) Induce or attempt to influence any employee of the New PC, PainCare, and/or its subsidiaries including the Subsidiary Company, to
terminate his or her employment with the New PC, PainCare, and/or its subsidiaries including the Subsidiary, or to hire, recruit or solicit any such employee, whether or not so induced or influenced. 
  
 (b) Consideration. PainCare, Subsidiary and
Dr. Alo 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 Dr. Alo’s inherent skill and experience; and (iv) would not operate as a bar to any of Dr. Alo’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, Dr. Alo 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. 
  
 11.2 Defenses. The existence of any claim or cause of action by the Shareholder against PainCare or
Subsidiary, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by PainCare, Subsidiary, or any of PainCare’s or Subsidiary’s successors and assigns or Affiliates and such Affiliates’
successors and assigns, but shall be litigated separately. The provisions of this Section 11 shall survive the termination of this Agreement. 
  
 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 Dr. Alo 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 Dr. Alo 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. 
  
 11.6 Conduct of Business. From the date hereof through the Closing, the Shareholder shall, except as contemplated by this Agreement, or as
consented to by PainCare in writing, cause the Company to be operated in the ordinary course and in accordance with past practice and will not take any action inconsistent with this Agreement or with the consummation of the Closing. Without limiting
the generality of the foregoing, the Company shall not, and, with 

  

 
respect to the Company, the Shareholder shall not, except as specifically contemplated by this Agreement, as set forth in Section 11.6 of the Disclosure
Schedule, or as consented to by PainCare in writing: 
  
 (a) change or amend the organizational documents of the Company; 
  
 (b) enter into, extend, materially modify, terminate or renew any lease or any contract, except modifications, extensions or renewals of contracts in the ordinary course of business or as contemplated by this
Agreement; 
  
 (c) sell, assign, transfer,
convey, lease, mortgage, pledge or otherwise dispose of or encumber any of the assets or any interests therein of the Company except in the ordinary course of business and, without limiting the generality of the foregoing, the Company will maintain,
dispose of, and sell inventory consistent with past practices; 
  
 (d) incur any liability for indebtedness for borrowed money, guarantee the obligations of others, indemnify or agree to indemnify others or, except in the ordinary course of business, incur any other liability;

  
 (e) take any action with respect to the grant
of any bonus, severance or termination pay (otherwise than pursuant to policies or agreements of the Company in effect on the date hereof that are described in the Disclosure Schedule) or with respect to any increase of benefits payable under its
severance or termination pay policies or agreements in effect on the date hereof or increase in any manner the compensation or fringe benefits of any employee of the Company or pay, any benefit not required by any existing Employee Plan or policy;

  
 (f) make any change in the key management
structure of the Company, including, without limitation, the hiring of additional officers or the termination of existing officers; 
  
 (g) adopt, enter into or amend any Employee Plan, agreement (including, without limitation, any collective bargaining or employment
agreement), trust, fund or other arrangement for the benefit or welfare of any employee, except for any such amendment as may be required to comply with applicable regulations; 
  
 (h) fail to maintain all Employee Plans in accordance with applicable Regulations; 
  
 (i) acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or otherwise acquire any material assets or business of, any corporation, partnership, association or other business organization or division thereof or acquire any subsidiary;

  
 (j) willingly allow or permit to be done any
act by which any of the insurance policies of the Company or Dr. Alo may be suspended, impaired or canceled; 
  
 (k) enter into, renew, modify or revise any agreement or transaction relating to the Company with any of its or their Affiliates 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 
  
 (t) fail to comply with all applicable filing, payment, withholding, collection and record retention obligations under all applicable federal, state, local or foreign Tax laws. 
  
 11.7 No Third-Party Beneficiaries. Other than with respect to the restrictive covenants set forth in Section
11, this Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. 
  
 12. MISCELLANEOUS. 
  
 12.1 Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof. 
  
 12.2 Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors, assigns, distributees, heirs, and grantors of any revocable trusts of a Party hereto. No Party may assign either this 

  

 
Agreement or any of its or his rights, interests, or obligations hereunder without the prior written approval of the other Parties; provided, however,
PainCare and Subsidiary, may, without the prior consent of the other Party, assign this Agreement to their Affiliates. 
  
 12.3 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. 
  
 12.4
Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 
  
 12.5 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given: (a) upon receipt if it is sent by facsimile, (b) the next business day if sent by reputable overnight courier, or (c) five (5) days after mailing if by
certified mail return receipt requested, postage prepaid, and addressed or otherwise sent to the intended recipient as set forth below: 
  

	 If to PainCare or Subsidiary:
	 	 PainCare Holdings, Inc.
 37 North Orange
Avenue
 Suite 500
 Orlando, Florida 32801
 Attention: President

		
	 If to the Shareholder:
	 	 Kenneth M. Alo, M.D.
 17270 Red Oak Drive,
Ste. 110
 Houston, TX 77090

		
	 If to the Company:
	 	 Kenneth M. Alo, M.D., P.A.
 17270 Red Oak
Drive, Ste. 110
 Houston, TX 77090

		
	 With a copy in each case to:
	 	 Arthur A. Graves, III, Esq.
 The Oxford
Law Firm
 P.O. Box 8708 – Dept. #621
 Newport Beach, CA
92660

  
 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, including allocated costs of in-house counsel, to be included in any judgment recovered. In addition, the prevailing Party shall be entitled to recover reasonable attorney’s fees and costs, including allocated costs of in-house
counsel, incurred in enforcing any judgment arising from a suit under this Agreement. This post-judgment attorney’s fees and costs provision shall be severable from the other provisions of this Agreement and shall survive any judgment on such
suit and is not to be deemed merged into the judgment. 
  
 12.7
Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent
such occurrence and all waivers must be in writing, signed by the waiving Party, to be effective. 
  
 12.8 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 
  
 12.9 Expenses. Except as set forth herein, Shareholder shall
bear and be responsible and shall pay for all costs and expenses (including, but not limited to, legal and accounting fees and expenses) incurred by Shareholder, the Company and the New PC in connection with this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, the Company shall be solely responsible for the cost of the GAAP Financial Statements prepared 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. 
  
 12.11
Construction. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word
“including” shall mean including without limitation. Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, unless the Disclosure Schedule identifies the exception
with reasonable particularity. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from nor mitigate the fact
that the Party is in breach of the first representation, warranty, or covenant. 
  

 12.12 Survival. All of the representations, warranties, covenants and agreements including
but not limited to Articles VI and VII made by the Parties in this Agreement or pursuant hereto in any certificate, instrument or document shall survive the consummation of the transactions described herein shall survive for all applicable statute
of limitations, and may be fully and completely relied upon by Sellers and the Acquiring Companies, as the case may be, notwithstanding any investigation heretofore or hereafter made by any of them or on behalf of any of them, and shall not be
deemed merged into any instruments or agreements delivered at Closing or thereafter. 
  
 12.13 Incorporation of Exhibits and Schedules. The 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
Harris 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] 
  

 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 IX, INC., a Florida corporation
		
	By:	 	/s/ Mark Szporka
	 	

	 Print:
	 	Mark Szporka
	 Its:
	 	CFO

  

	 COMPANY:

	
	KENNETH M. ALO, M.D., P.A.
		
	By:	 	/s/ Kenneth M. Alo
	 	

	 Print:
	 	Kenneth M. Alo
	 Its:
	 	President

  

	SHAREHOLDERS:
	
	/s/ Kenneth M. Alo
	

	Kenneth M. Alo, M.D.

  

	 ALPHA THREE, FLP,
 a
Nevada Limited Partnership
	 	 	 	 NCCCK CHILDREN’S TRUST
 a Non-Grantor’s Trust

					
	By	 	/s/  Kenneth M. Alo	 	 	 	By	 	/s/ Robert C. San Luis
	 	
	 	 	 	 	

	 	 	Kenneth Mark Alo, Manager
Of ALPHA TWO, LLC, as 
General Partner	 	 	 	 	 	Robert C. San Luis, as TrusteeLoan Agreement dated 12/15/2003

  
 Exhibit 10.01

  
 LOAN AGREEMENT 
  
 Dated as of December 15, 2003 
  
 by and between 
  
 COLONIAL BANK, 
  
 as the lender, 
  
 ARCHON CORPORATION, a Nevada corporation, 
  
 as the borrower, and 
  
 SAHARA LAS VEGAS CORP., a Nevada corporation, 
  
 as a guarantor 

 INDEX 
  

	 Section

	  	Page
Number

		
	 Section 1 – Definitions
	  	Page 3  
		
	 Section 2 – Description of Property and Loan
	  	Page 5  
		
	 Section 3 – Loan Proceeds
	  	Page 5  
		
	 Section 4 – Disbursement Procedures and Amounts
	  	Page 5  
		
	 Section 5 – Disbursement Conditions
	  	Page 6  
		
	 Section 6 – Right to Inspect Property
	  	Page 8  
		
	 Section 7 – Representations and Warranties of Borrower
	  	Page 8  
		
	 Section 8 – Covenants of Borrower
	  	Page 10
		
	 Section 9 – Default by Borrower
	  	Page 13
		
	 Section 10 – Remedies
	  	Page 14
		
	 Section 11 – Miscellaneous
	  	Page 15
		
	 Section 12 – Release Price
	  	Page 18

  

 2 

 LOAN AGREEMENT 
  
 This LOAN AGREEMENT (“Agreement”) is dated and effective as of December 15, 2003, between ARCHON
CORPORATION, a Nevada corporation (the “Borrower”), SAHARA LAS VEGAS CORP., a Nevada corporation (“Sahara Las Vegas”), and COLONIAL BANK (“Lender”). 
  
 WITNESSETH: 
  
 A. Pursuant to the terms of this Agreement, Lender has agreed to make
an acquisition Loan to Borrower in the principal amount of EIGHTEEN MILLION AND NO/100 DOLLARS ($18,000,000.00) or so much thereof as may be advanced (the “Loan”). 
  
 B. The Borrower’s obligations to pay the Loan shall be evidenced by a promissory note (“Note”),
executed in favor of Lender by Borrower, payable to the order of Lender, and secured by a Deed of Trust and Security Agreement With Assignment of Rents and Fixture Filing (“Deed of Trust”) on the real property
(“Property”) described on attached Exhibit “A”, executed in favor of Lender by Sahara Las Vegas, and the personal property now or in the future located on the Property that is owned by Sahara Las Vegas, all
of even date herewith (The Deed of Trust and all financing statements, this Loan Agreement, any guaranties of payment or completion required by Lender, and any other collateral documents required by Lender in connection with the Loan (defined below)
are collectively called the “Security Documents”). 
  
 C. The terms and conditions of the Note and all Security Documents shall be in form and substance satisfactory to Lender. 
  
 NOW, THEREFORE, for valuable consideration, Borrower and Lender agree that the following terms and conditions govern the Loan: 
  
 1. Definitions. The following definitions shall be used in this
Agreement: 
  
 “Agreement” shall mean this
Acquisition Loan Agreement, by and between the Lender and the Borrower, of even date herewith. 
  
 “Lender” shall mean COLONIAL BANK. 
  
 “Borrower” shall mean ARCHON CORPORATION, a Nevada corporation. 
  
 “DCR” shall have the meaning for that term set forth in Section 8 of this Agreement. 
  
 “Deed of Trust” shall have the meaning for that term set
forth in Paragraph B of the Recitals of this Agreement. 
  

 3 

 “Environmental Laws” means all applicable federal, state and local laws pertaining to
air and water quality, hazardous waste, waste disposal, underground storage tanks and other environmental matters, including, but not limited to, the Clean Water, Clean Air, Federal Water Pollution Control, Solid Waste Disposal, Resource
Conservation Recovery and Comprehensive Environmental Response, Compensation and Liability Acts, and any applicable laws of the State of Nevada, and the rules, regulations and ordinances of Clark County, the agencies of the government of the State
of Nevada, the Environmental Protection Agency, the U.S. Fish and Wildlife Service and all applicable federal, state and local agencies and bureaus. 
  
 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

  
 “Event of Default” shall have the meaning for
that term set forth in Section 9 of this Agreement. 
  
 “Guarantor” shall have the meaning for that term set forth in Section 5. 
  
 “Hazardous Materials” means any substance, material, or waste which is or becomes regulated by any local governmental authority, the
State of Nevada, or the United States Government or agency or instrumentality thereof, or which is otherwise regulated or defined as a “hazardous waste”, “extremely hazardous waste”, or such other similar classification under any
Environmental Law. 
  
 “Loan” shall have the
meaning set forth for that term in Paragraph A of the Recitals of this Agreement. 
  
 “Loan Proceeds” shall have the meaning for that term set forth in Section 3 of this Agreement. 
  
 “Maturity Date” shall have the meaning for that term set forth in Section 4.2 of this Agreement. 
  
 “Note” shall have the meaning set forth for that term in
Paragraph B of the Recitals of this Agreement. 
  
 “Property” shall have the meaning set forth for that term in Paragraph B of the Recitals of this Agreement. 
  
 “Security Documents” shall have the meaning set forth for that term in Paragraph B of the Recitals of this Agreement. 
  
 “Title Company” shall have the meaning for that term set
forth in Section 5.1(b) of this Agreement. 
  

 4 

 “Title Policy” shall have the meaning for that term set forth in Section 5.1(c) of this
Agreement. 
  
 2. Description of Property and Loan.
Borrower will use the Loan Proceeds to acquire certain assets. 
  
 3. Loan Proceeds. The proceeds of the Loan available to be advanced to Borrower (the “Loan Proceeds”) are the original principal amount of the Note less closing costs and expenses set forth in a loan closing
statement prepared in connection with the Loan (as agreed by and between the Lender and the Borrower). The Loan Proceeds will be disbursed to Borrower subject to the terms of this Agreement. 
  
 4. Disbursement Procedures and Amounts. 
  
 4.1 Interest on Loan. Interest on the Loan shall accrue at the
non-default rate specified in the Note. At maturity or the acceleration of the Loan, or upon the occurrence of an Event of Default, interest on the then outstanding principal balance of the Loan shall accrue at the default rate specified in the
Note. 
  
 4.2 Principal. Borrower shall pay the outstanding
principal amount of the Loan in accordance with the Note. The entire outstanding principal amount of the Loan, together with all accrued and unpaid interest and all other amounts owed by Borrower to Lender in connection with the Loan, shall be due
and payable in full on the maturity date stated in the Note (the “Maturity Date”), unless sooner payable pursuant to the terms of this Agreement, by reason of acceleration of the Maturity Date or otherwise. Notwithstanding anything
herein to the contrary, if Borrower sells or conveys any interest in that certain real property owned by Borrower and generally located at the corner of Rainbow Boulevard and Loan Mountain Road, Las Vegas, Nevada, all of the proceeds from such sale
and/or conveyance shall be applied by Borrower to the principal balance of the Note, net of reasonable and customary sales commissions and expenses associated with such transactions in Clark County, Nevada. 
  
 4.3 Additional Security. Borrower unconditionally and absolutely
assigns and grants to Lender, as additional security for the performance of Borrower’s obligations under this Agreement, a security interest in the proceeds of the Note and each Security Document, Borrower’s interest in all Loan funds held
by the Lender, whether or not disbursed, all further unconditionally and absolutely assigns to Lender all funds deposited by Borrower with Lender in the Interest Account and all other funds deposited by Borrower with Lender under this Agreement and
all reserves, deferred payments, deposits, refunds, cost savings, and payments of any kind, relating to the Property. Upon any default of Borrower, Lender may use any of the foregoing for any purpose for which Borrower could have used them under
this Agreement or with respect to the financing of the Property. Lender will also have all other rights and remedies as to any of the foregoing that are provided under applicable law or in equity. 
  

 5 

 5. Disbursement Conditions. Prior to the advance of any part of the Loan hereunder, Borrower
and/or Sahara Las Vegas, as the case may be, shall, upon request, be required to submit to Lender the following each in form and content approved by Lender (unless Lender has waived any such consent in writing): 
  
 (a) This Agreement (executed by both Borrower and Sahara Las Vegas), the Note
(executed by Borrower), the Deed of Trust (executed by Sahara Las Vegas, and which must be duly recorded), any financing statements required by Lender (which must be duly filed) and all other Security Documents and appropriate resolutions to borrow
executed by Borrower, Sahara Las Vegas and the non-individual Guarantors, all duly executed by the respective parties. 
  
 (b) A preliminary title report, issued by a title insurance company acceptable to Lender (“Title Company”) relating to the Property and
showing all exceptions to title. 
  
 (c) An ALTA Lender’s
extended coverage policy of title insurance (“Title Policy”) issued by Title Company at Borrower’s expense upon recordation of the Deed of Trust (or assurance satisfactory to Lender from the Title Company that the Title Policy
will be issued), which Title Policy shall be in liability amount and form satisfactory to Lender. This Title Policy must show the Deed of Trust as first lien on the Property, subject only to exceptions approved in writing by Lender, and shall have
attached any endorsements required by Lender. 
  
 (d) An
assignment of all tenant leases, equipment leases and management contracts for the Property, if any. Sahara Las Vegas acknowledges and agrees that all tenant leases are subject to the Lender’s prior written approval, as to form, substance and
credit worthiness of the prospective tenant. Sahara Las Vegas further acknowledges and agrees that Sahara Las Vegas will not agree to any material amendment to any existing or future tenant lease without the prior written approval of Lender.

  
 (e) Evidence satisfactory to Lender that all required
approvals pertaining to the Property, including all necessary permits, licenses, or consents of governmental authorities having jurisdiction over the Property have been obtained and remain in force and effect, and that the Property is suitably zoned
for its intended use. 
  
 (f) Guarantees of the Loan, in such form
and content as Lender may require in the sole and absolute exercise of its discretion, executed by Sahara Las Vegas, LICO, a Nevada corporation, PAUL W. LOWDEN, and SUE LOWDEN (collectively, the “Guarantor”). 
  
 (g) Payment by Borrower of a “loan fee” in the amount of
$180,000.00, which fee is payable as a condition precedent to the making of the Loan. All such loan fees shall be deemed fully earned when paid and shall be non-refundable. 
  
 (h) A Phase 1 environmental assessment of the Property, an environmental use questionnaire relating to the Property, other
data, materials and information relating to the 

  

 6 

 
environmental condition and status of the Property, and such further environmental assessments, soils reports, investigations, reviews and studies as may be
reasonably necessary to verify that the Property is free from Hazardous Materials (defined below) contamination. 
  
 (i) An appraisal of the Property, satisfactory to Lender in the sole and absolute exercise of its discretion, showing the value of the Property to be at
least an amount sufficient to maintain a stabilized “loan to value ratio” of no more than 35%. 
  
 (j) There shall have been recorded in the Official Records of Clark County, Nevada, with respect to the Property, all subdivision and parcel maps required
by Nevada law with respect to the Property. 
  
 (k) Lender shall
have approved the form and substance of all conditions, covenants and restrictions, recorded or to be recorded in the Official Records of Clark County, Nevada, that govern the Property (Borrower and Sahara Las Vegas further agree that no conditions,
covenants and restrictions shall be so recorded without Lender’s prior written consent). 
  
 (l) A soils report, prepared by an environmental consultant or engineer acceptable to Lender, stating that the condition of the soils in and on the Property is acceptable for the improvements located on the Property.

  
 (m) Certification from the appropriate governmental agency as
to the propensity for flooding on and around the Property. 
  
 (n)
Issuance by the Title Company of a title policy and reasonable endorsement(s), at Borrower’s/Sahara Las Vegas’ expense, with the Borrower/Sahara Las Vegas and the Lender to agree to such endorsements as part of escrow instructions to be
given by them at such time as the Deed of Trust is recorded in the official records of the Clark County, Nevada, recorder. 
  
 (o) A certificate of an architect or other consultant for the Property acceptable to Lender that the improvements located on the Property (if any) have
been completed in accordance with all applicable laws, ordinances and regulations and that all required utilities, services, streets and other off-site improvements are complete and adequate to service the Property as completed. 
  
 (p) Copies of Borrower’s, Sahara Las Vegas’ and each non-individual
Guarantor’s articles of incorporation and bylaws, and evidence of their respective good standing to do business in the State of Nevada. 
  
 (q) Legal opinions, issued by counsel for Borrower, Sahara Las Vegas and each Guarantor, respectively, in such form and content as Lender may require,
providing i) that neither the Borrower nor the Guarantors have any personal liability for the obligations of Borrower that are secured by real property located in Massachusetts or Maryland, ii) that the execution of the Deed of Trust and the
conveyance made thereby are fully enforceable and do no create a fraudulent transfer 

  

 7 

 
on the part of Sahara Las Vegas, iii) that the transaction evidenced by this Agreement and the other Security Documents has been authorized by the respective
governing organizational documents for Borrower, Sahara Las Vegas and each non-individual Guarantor, and that the persons signing on behalf of each such entity are duly authorized to do so, and iv) for such other matters as Lender may require.

  
 (r) Such other information and documents as Lender may require
from Borrower. 
  
 6. Right to Inspect Property. Lender, or
parties designated by Lender, shall have the right to enter upon and inspect the Property from time to time at all reasonable times, upon reasonable notice, for the purpose of determining that the terms and conditions of this Agreement are being
observed. Lender is under no obligation to construct or supervise the Property and any inspection by Lender of the Property is for the sole purpose of protecting the security of Lender. Borrower will make or cause to be made such other independent
inspections as it may desire for its own protection and Borrower will rely on its own judgment with respect to the Property. 
  
 7. Representations and Warranties of Borrower. Borrower and Sahara Las Vegas, in addition to all other representations made and warranties given
herein, each represents and warrants to Lender as follows: 
  
 (a)
No condemnation or eminent domain proceeding has been commenced or, to the knowledge of Borrower and/or Sahara Las Vegas, threatened against the Property. 
  
 (b) Neither Sahara Las Vegas nor Borrower have no knowledge of any notices or violations of federal or state law or municipal ordinances, including
without limitation any Environmental Laws (defined below), or orders or requirements of any governmental body or authority to whose jurisdiction the Property is subject. 
  
 (c) The execution, delivery and performance of the transactions contemplated by this Agreement, the Note and the Security
Documents will not conflict with or result in a breach of the terms or provisions of any existing law, regulation or order of any court or governmental body or authority, or any other document, instrument or agreement to which Borrower or Sahara Las
Vegas is a party or is bound. 
  
 (d) This Agreement, the Note and
the Security Documents to which Borrower and/or Sahara Las Vegas is a party will be validly executed and delivered by Borrower and Sahara Las Vegas, respectively, and will constitute the legal, valid and binding obligations of Borrower and Sahara
Las Vegas, respectively, enforceable against it in accordance with their respective terms. 
  
 (e) There are no actions or proceedings pending or threatened against Borrower or Sahara Las Vegas, any real property or project owned by Borrower or Sahara Las Vegas, or the Property, other than such as may arise in
the ordinary course of business, which may in any manner whatsoever 

  

 8 

 
substantially affect the validity, priority or enforceability of the Agreement, the Note or the Security Documents or the construction, use, occupancy and
operation of the Property or any part thereof. 
  
 (f) Except as
otherwise disclosed by Borrower or Sahara Las Vegas to Lender, neither Borrower nor Sahara Las Vegas, nor to the best of Borrower’s and Sahara Las Vegas’ knowledge, any previous owner, tenant, occupant or user of the Property used,
generated, released, discharged, stored or disposed of any Hazardous Materials (defined below) on, under, in or about the Property, or transported any Hazardous Materials to or from the Property. 
  
 (g) The Property complies with or shall comply with, as required, the federal
Endangered Species Act and all Environmental Laws, and the Americans With Disability Act. 
  
 (h) To the best of Borrower’s and Sahara Las Vegas’ knowledge, there is no fact which Borrower has not disclosed to Lender in writing which materially adversely affects or, so far as Borrower can now
foresee, will materially adversely affect the Property or the ability of Borrower or Sahara Las Vegas, respectively, to perform any of their obligations arising under this Agreement. 
  
 (i) All financial information furnished to Lender by Borrower and Sahara Las Vegas, or their representatives with respect to
Borrower and Sahara Las Vegas in connection with the Loan (i) is complete and correct in all materials respects, (ii) accurately represents the financial condition of Borrower and Sahara Las Vegas, respectively, at the date of issuance and (iii) has
been prepared in accordance with generally accepted accounting principles, consistently applied. Neither Borrower nor Sahara Las Vegas have any material or contingent liability not disclosed to Lender in writing and there is no material lien, claim,
charge or other right of others of any kind (including liens or retained security titles of conditional vendors) or any property of Borrower or Sahara Las Vegas not disclosed in such financial statements or otherwise disclosed to Lender in writing.

  
 (j) There has been no material adverse change in the
condition, financial or otherwise, of Borrower and Sahara Las Vegas since the dates of the latest financial statements furnished to Lender by Borrower. Since those dates, neither Borrower nor Sahara Las Vegas have entered into any material
transaction not disclosed in such financial statements or otherwise disclosed to Lender in writing. 
  
 (k) Borrower and Sahara Las Vegas, respectively, have filed all required federal, state and local tax returns and has paid all property taxes and other
taxes due (including interest and penalties, but subject to lawful extensions disclosed to Lender) with respect to Borrower, Sahara Las Vegas or the Property, other than taxes being promptly and actively contested in good faith and by appropriate
proceedings. Sahara Las Vegas is maintaining adequate reserves for tax liabilities (including contested liabilities). 
  
 (l) Neither Borrower nor Sahara Las Vegas currently use any trade name other than their actual name. For purposes of this Agreement, Borrower’s and
Sahara Las Vegas’ principal place of business is at its address shown below. 
  

 9 

 (m) Sahara Las Vegas has good and marketable title to the Property, and the lien of the Deed, of Trust
shall be a first position lien, with the exception of those encumbrances disclosed by the Title Company to Lender. 
  
 (n) Borrower and Sahara Las Vegas shall each maintain their status as a corporation organized, in good standing and qualified to do business in the State
of Nevada. 
  
 The above representations and warranties and any
representations and warranties made by Borrower and Sahara Las Vegas in Borrower’s application for the Loan or any loan commitment issued by Lender shall survive the making and repayment of the Loan. 
  
 8. Covenants of Borrower. In addition to any other obligations and
duties of Borrower and Sahara Las Vegas hereunder, Borrower and Sahara Las Vegas, respectively, each covenants as follows: 
  
 (a) Borrower and Sahara Las Vegas shall give notice immediately to Lender of any notice of any claim made by any party arising in connection with or
against the Property, Sahara Las Vegas or Borrower. 
  
 (b) Unless
Lender otherwise agrees in writing, Borrower shall use all Loan Proceeds solely for expenditures relating to term financing secured by the Property. 
  
 (c) Sahara Las Vegas shall comply with, and keep in effect, all permits and approvals obtained from any governmental bodies that relate to the lawful use
of the Property and to comply with all existing and future laws, regulations, orders and requirements of all governmental, judicial, or other legal authorities having jurisdiction over the Property, and with all recorded restrictions affecting the
Property. 
  
 (d) Sahara Las Vegas shall not, without
Lender’s prior written consent, purchase or install materials, equipment, fixtures, or articles or personal property placed in or on the Property under any security agreement or other agreement in which the seller reserves or purports to
reserve title or the right of removal or repossession, or the right to consider them personal property after their incorporation in the work of construction, unless authorized by Lender in writing. 
  
 (e) Upon Lender’s demand, Borrower and/or Sahara Las Vegas shall pay and
discharge all claims and liens for labor done and materials and services furnished in connection with the Property. Sahara Las Vegas will have the right to contest in good faith any claim or lien, provided that it does so diligently and without
prejudice to Lender. Upon Lender’s request, Sahara Las Vegas will promptly provide a bond, cash deposit, or other security reasonably satisfactory to Lender to protect Lender’s interest and security should the contest be unsuccessful.

  
 (f) In addition to any insurance requirements set forth in the
Deed of Trust (which shall control in the event of a conflict between the terms of this Agreement and the Deed of Trust), 

  

 10 

 
Borrower and Sahara Las Vegas (with respect to personal property owned by Borrower and/or Sahara, Las Vegas) shall maintain in force, until full payment of
the Loan, all insurance required by law or the lender, flood insurance, business interruption insurance, worker’s compensation insurance public liability insurance (in an amount of not less than the amount Lender may require in the reasonable
exercise of its discretion), and builder’s all risk insurance with course of construction endorsement (in an amount of not less than the amount Lender may require in the reasonable exercise of its discretion). The policies must be approved by
Lender as to amounts, form, risk coverage, deductibles, insurer, and loss payable and cancellation provisions. Lender’s approval, however, shall not be a representation of the solvency of any insurer or the sufficiency of any amount of
insurance. All such policies shall, in Lender’s sole and absolute discretion, name the Lender as an additional loss payee or shall include a mortgagee endorsement acceptable to Lender. The Lender may, in the reasonable exercise of discretion,
alter the insurance required under the terms of this Agreement, the Deed of Trust or the Security Documents pursuant to the terms of such reports. Sahara Las Vegas shall also maintain workmen’s compensation insurance in adequate amounts to the
extent required by Nevada law. 
  
 (g) Sahara Las Vegas shall
comply with, and cause the use and operation of the Property, and all activities on the Property or with respect to the Property, at all times, to comply with all applicable Environmental Laws. Neither Borrower nor Sahara Las Vegas shall cause or
permit the presence, use, generation, release, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any Hazardous Materials to or from, the Property, except for any such Hazardous Materials, the
use or presence of which are necessary or customary in projects similar to the Property, provided that and such use or presence shall occur only under and in compliance with any required governmental permits and otherwise fully comply at all times
with all applicable local, state and federal laws and regulations relating to such use or presence. 
  
 (h) Sahara Las Vegas shall at all times comply with the provisions of the federal Endangered Species Act and the Americans with Disabilities Act, as the
application of such Acts may affect the development and use of the Property. 
  
 (i) Borrower shall pay Lender on demand any expenses suffered, incurred or paid by Lender which relate to the negotiation, preparation, execution, delivery, administration, modification, performance, enforcement and
interpretation of the Loan, this Agreement and any related matters or the exercise or defense of Lender’s rights and actions hereunder, or which relate to the Note or the Security Documents, including without limitation, any charges for
surveys, appraisals and inspections, and reasonable attorneys’ fees, costs or expenses arising out of any of the foregoing. 
  
 (j) Borrower shall comply in all material respects with all laws, regulations and ordinances and requirements of all government agencies and all third
parties relating to Borrower, the Property or Borrower’s business thereon. 
  

 11 

 (k) Borrower and/or Sahara Las Vegas shall promptly pay prior to delinquency all general and special real
property taxes and assessments imposed against the Property and all other taxes, license fees and assessments imposed on Borrower, Sahara Las Vegas or the Property. 
  
 (l) Sahara Las Vegas shall maintain complete books of account and other records reflecting its operations (in connection
with any other businesses as well as with respect to the Property). 
  
 (m) Borrower and Sahara Las Vegas shall each execute and acknowledge, or cause to be executed and acknowledged, and delivered to Lender all documents, and take all actions, reasonably required by Lender from time to time to confirm the
rights created or now or hereafter intended to be created under this Agreement, the Note or any other Security Document, to protect and further the validity, priority and enforceability of the Security Documents, to subject to the Security Documents
any property intended by the terms of this Agreement, the Note or any Security Document to be covered by the Security Documents, or otherwise to carry out the purposes of this Agreement and the transactions contemplated hereunder. 
  
 (n) Borrower and Sahara Las Vegas shall each give notice to Lender, within
ten (10) days of Borrower’s learning thereof, of each of the following: 
  
 (i) any litigation or claim affecting or relating to the Property (which materially and adversely affects the Borrower’s or Sahara Las Vegas’ ability to perform its obligations under this Agreement, the Note
or the other Security Documents) and involving an amount in excess of $10,000.00; and any litigation or claim that would materially and adversely affect the Borrower’s or Sahara Las Vegas’ ability to perform its obligations under this
Agreement, the Note or the other Security Documents; 
  
 (ii) any
dispute between Borrower or Sahara Las Vegas and any governmental agency relating to the Property, the adverse determination of which might materially affect the Property; 
  
 (iii) any trade name hereafter used by Borrower or Sahara Las Vegas and any change in Borrower’s or Sahara Las
Vegas’ principal place of business; 
  
 (iv) the creation or
imposition of any mechanic’s lien or any other lien against the Property; 
  
 (v) any Event of Default or event which, with the giving of notice or the passage of time or both, would constitute an Event of Default; 
  
 (vi) any material default by Borrower Sahara Las Vegas or any other party under any contract or Agreement with respect to
the Property; and 
  

 12 

 (vii) any material adverse change in the financial condition of Borrower from the most recent financial
statements of Borrower delivered to Lender. 
  
 (o)
Borrower’s Financial Statements. Borrower shall furnish to Lender, within one hundred twenty (120) days following the close of each fiscal year of Borrower, a copy of the annual audited financial statement of Borrower, prepared in such
form and substance as Lender may require, and (if required by Lender) audited by an accountant or accountants acceptable to Lender. Borrower agrees and authorizes Lender and such accountant or accountants to, if Borrower is unable to provide Lender
information concerning Borrower’s financial statements that Lender deems necessary, communicate directly with respect to Borrower’s records, audits and financial statements. In addition, Borrower shall furnish to Lender, within ninety (90)
days of the end of each fiscal quarter, an interim financial statement, prepared in such form and content as Lender may require. 
  
 (p) Guarantor’s Financial Statements. Borrower shall furnish to Lender, within one hundred twenty (120) days following the close of each
calendar year, a copy of the then-current financial statement for each Guarantor, prepared in such form and substance as Lender may require. 
  
 (q) PHI Financial Statements. Borrower shall furnish to Lender, within one hundred twenty (120) days following the close of each fiscal year, a
copy of the then-current financial statement for Pioneer Hotel Inc., a Nevada corporation (“PHI”), prepared in such form and substance as Lender may require. In addition, Borrower shall furnish to Lender, within ninety (90) days of
the end of each fiscal quarter, an interim financial statement for PHI, prepared in such form and content as Lender may require. 
  
 (r) Borrower’s/Guarantors’ Tax Returns. Borrower and each Guarantor, respectively, shall furnish to Lender, within thirty (30) days of
filing, copies of its Federal tax returns, along with all schedules and attachments thereto, and extensions relating thereto (as applicable). 
  
 (s) Debt Coverage Ratio. The Borrower’s DCR shall not be less than 1.25 to 1.0. For purposes of this Agreement, the term “DCR”
shall mean the ratio of earnings (before interest, taxes, depreciation and amortization, and net of investment properties distribution) to the current portion of long term debt plus interest (net of investment properties). The DCR shall be
measured quarterly, on a rolling four-quarter basis. 
  
 (t)
Other information. In addition to the information required above, Borrower and Sahara Las Vegas shall each provide to Lender such other information or documents as Lender may reasonably require. 
  
 (u) No Additional Borrowing. Neither Borrower nor any subsidiary of
Borrower shall incur any additional indebtedness, outside the ordinary course and scope of such entity’s business, without the prior written consent of Lender. 
  

 13 

 9. Default by Borrower. The occurrence of any of the following events shall constitute an Event
of Default under this Agreement: 
  
 (a) Borrower fails to
make any payment of interest or principal when due under the Note. 
  
 (b) Borrower or Sahara Las Vegas fails to make any deposit of funds required under this Agreement within ten (10) days after written notice from Lender. 
  
 (c) Borrower or Sahara Las Vegas fails to comply with any other covenants contained in this Agreement that calls for the
payment of money and does not cure that failure within ten (10) days after notice from Lender. 
  
 (d) Borrower or Sahara Las Vegas fails to comply with any covenant contained in this Agreement, and does not cure that failure within ten (10) days after notice from Lender. 
  
 (e) A petition in bankruptcy is filed by or against Borrower, Sahara Las
Vegas or any Guarantor, or a receiver or trustee of any property of Borrower or any guarantor is appointed, or Borrower, Sahara Las Vegas or any Guarantor files a petition for an arrangement under any provisions of federal, or state bankruptcy or
receivership laws, or any other law, state or federal (unless, in any such case, such petition is dismissed within ninety (90) days of filing), or makes an assignment for the benefit of creditors or is adjudged insolvent by any state or federal
court. 
  
 (f) A default occurs under the Note and/or any other
Security Documents. 
  
 (g) All or any material portion of the
Property is condemned, seized or appropriated by any governmental agency. 
  
 (h) The Property is materially damaged or destroyed by fire or other casualty to such an extent that Lender reasonably concludes that funds derived from insurance proceeds, if any (collectively, “Available
Proceeds”), will not be sufficient to pay in full the costs of repair, reconstruction and completion (if applicable) of the Property and Borrower fails to deposit with Lender within twenty (20) days after written request therefor, an amount
sufficient to pay the difference between estimated costs of repair, reconstruction and completion (if applicable) and the Available Proceeds. 
  
 (i) Borrower, Sahara Las Vegas or any Guarantor is dissolved, liquidated or terminated, or Borrower or any Guarantor is sold or otherwise transferred (or
all of substantially all of the assets of Borrower or any Guarantor) are sold or otherwise transferred without Lender’s prior written consent. 
  
 (j) Any guaranty of Borrower’s or obligations hereunder is repudiated, revoked or terminated without Lender’s prior written consent, or any
Guarantor claims that its guaranty is ineffective or unenforceable, in whole or in part, and for any reason, with respect to amounts then 

  

 14 

 
outstanding or amounts that might in the future be outstanding, and Borrower fails to provide Lender, within sixty (60) days thereafter, with a substitute
guaranty reasonably acceptable to Lender. 
  
 (k) Any individual
Guarantor of any of Borrower’s obligations hereunder dies and Borrower fails to provide Lender, within sixty (60) days thereafter, with a substitute guaranty reasonably acceptable to Lender. 
  
 (l) Borrower or any Guarantor defaults in any obligation to Lender, other
than in connection with the Loan, subject to any applicable cure period. 
  
 (m) Any representation or warranty made by Borrower or Sahara Las Vegas in connection with this Agreement, or any document or agreement made or submitted in connection with this Agreement, is materially false or
misleading. 
  
 10. Remedies. If any one or more Events of
Default shall have occurred and shall continue beyond the expiration of the applicable cure period, if any, specified for such Event of Default, Lender shall have the right and power, all in the sole discretion of Lender, to exercise one or more of
the following remedies. 
  
 (a) To declare the entire principal
balance of the Note then due and payable. 
  
 (b) To enter upon
the Property, in its own right or by court appointed receiver, and operate the Property. 
  
 These remedies are in addition to any other remedies which Lender may have hereunder or under the Note, the Deed of Trust or any other Security Documents, at law or in equity, including the right to foreclose any
security for Borrower’s obligations under this Agreement, all in such order and manner as Lender may determine in its sole and absolute discretion. 
  
 In connection with any construction undertaken pursuant to the provisions of this section, Lender may (i) engage builders, contractors, architects,
engineers and others for the purpose of furnishing labor, materials and equipment in connection with the Property; (ii) pay, settle or compromise all bills or claims which are or may become liens against the Property or which have been or shall be
incurred in any manner in connection with equipping the Property; and (iii) take such action hereunder, or refrain from acting hereunder, as Lender may, in its sole discretion, from time to time, determine to be necessary or desirable to carry out
the intent of this section. All sums paid or incurred by Lender directly or indirectly in connection with equipping the Property, however incurred, shall be repaid by Borrower and Sahara Las Vegas to Lender upon demand, with interest at the same
rate as is provided in the Note to the date of payment, and until so repaid shall be secured by the Deed of Trust and other Security Documents. 
  

 15 

 11. Miscellaneous. 
  
 (a) Waiver of Breach. Lender’s rights and remedies under this Agreement, the Note and the Security Documents are
cumulative and in addition to all rights and remedies provided by law or in equity from time to time. The exercise by Lender of any right or remedy shall not constitute a cure or waiver of any default, nor invalidate any notice of default or any act
done pursuant to any such notice, nor prejudice Lender in the exercise of any other right or remedy. No waiver of any action shall be implied from any omission by Lender to take action on account of such default if such default persists or is
repeated. No waiver of any default shall affect any default other than the default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of this Agreement, the Note or any
Security Document shall be construed as a waiver of any subsequent breach of the same provision. Lender’s consent to or approval of any act by Borrower or Sahara Las Vegas requiring further consent or approval shall not be deemed to waive or
render unnecessary Lender’s consent to or approval of any subsequent act. Lender’s acceptance of a late performance of any obligation shall not constitute a waiver by Lender of the right to require prompt performance of all further
obligations; Lender’s acceptance of any performance following the sending or filing of any notice of default shall not constitute a waiver of Lender’s right to proceed with the exercise of its remedies for any unfulfilled obligations; and
Lender’s acceptance of any partial performance shall not constitute a waiver by Lender of any rights relating to the unfulfilled portion of the applicable obligation. 
  
 (b) Notices. Except as otherwise provided by law, any notice, request, demand, consent, approval or other
communication (“Notice”) provided or permitted under this Agreement, or any other instrument contemplated hereby, shall be in writing, signed by the party giving such Notice and shall be given by personal delivery to the other party
or by United States certified or registered mail, postage prepaid, return receipt requested, addressed to the party for whom it is intended at its address as set forth in the Deed of Trust. Unless otherwise specified, Notice shall be deemed given
when received, but if delivery is not accepted, on the earlier of the date delivery is refused or the third day after same is deposited in any official United States Postal Depository. Any party from time to time, by Notice to the other parties
given as above set forth, may change its address for purpose of receipt of any such communication. 
  
 (c) Assignment. The provisions hereof shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs,
administrators, executors, successors, and assignees; PROVIDED, HOWEVER, that this Agreement shall be personal to Borrower and Sahara Las Vegas, respectively, and no assignment by Borrower or Sahara Las Vegas of any of their rights under this
Agreement is permitted and no such assignment shall be binding upon Lender or of any effect unless the prior written consent of Lender to such assignment has first been procured and payment of such assumption fees as Lender may require. 

 
 (d) Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations, understandings and agreements between the parties hereto. 
  

 16 

 (e) Severability. It is understood and agreed by the parties hereto that if any part, term or
provision of this Agreement is held by any court to be illegal or invalid, the legality and validity of the remaining portions or provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if
the Agreement did not contain the particular part, term or provision held to be illegal or invalid. 
  
 (f) Interpretation. The section headings set forth in this Agreement are for the purpose of convenience to and ready reference by the parties. It
is agreed and understood by the parties that such headings shall not be deemed to define, limit or extend the scope or intent of the sections to which they pertain. Whenever the context requires, all words used in the singular will be construed to
have been used in the plural and vice versa, and each gender will include any other gender. 
  
 (g) Incorporation. The preamble, exhibits and schedules attached hereto are hereby incorporated into this Agreement and made a part hereof. 
  
 (h) Performance By Lender. If Borrower or Sahara Las Vegas, as the case may be, shall fail to perform any obligation
hereunder that requires the payment of money, Lender may perform such obligation upon fifteen (15) days’ written notice to Borrower and Sahara Las Vegas (unless Lender shall in its sole discretion determine that the security for the Loan is
imminently threatened or impaired by such failure, in which case no such prior notice is required), and any sums expended by Lender pursuant to this subsection shall be deemed to be advances under the Loan and shall bear interest until repaid at the
default rate of interest specified in the Note. 
  
 (i) Costs
and Expenses. If any lawsuit is commenced to enforce or interpret any of the terms of this Agreement, the prevailing party shall have the right to recover its reasonable attorneys’ fees and costs of suit from the other party. 
  
 (j) Consistency. The terms of this Agreement, the Note and the
Security Documents supersede any inconsistent terms of Lender’s loan commitment to Borrower, if any; provided, that all obligations of Borrower under the commitment to pay any fees to Lender or any costs and expenses relating to the Loan or the
commitment shall survive the execution and delivery of this Agreement, the Note and the Security Documents. The terms of this Agreement supersede any inconsistent terms of the Note or the Security Documents. 
  
 (k) Third Party Consultants. If there is an Event of Default, and if
reasonably required by Lender, Lender may hire such third-party consultants as it deems reasonably necessary, the costs of which shall be paid by Borrower, to perform such other services contemplated by this Agreement as may, from time to time, be
required by Lender. 
  
 (l) No Third Party Beneficiaries.
This Agreement is made for the sole protection and benefit of Lender and Borrower and their successors __d assigns. No trust fund is created by this Agreement and no other persons or entities will have any right of action under this Agreement or any
right to the Loan funds. 
  

 17 

 (m) Relationship. Nothing herein shall be construed to constitute Lender and Borrower a
partnership or joint venture, or Lender an agent of Borrower, it being agreed that the sole relationship between Lender and Borrower shall be that of lender and borrower. 
  
 (n) Governing Law. It is understood and agreed by the parties that this Agreement is made in the State of Nevada and
that the laws of the State of Nevada shall govern the legality, validity, construction, interpretation and effect of this Agreement. 
  
 (o) Participations. Lender may grant participations in the Loan and the Note and Security Documents at any one time and may furnish any participant
or prospective participant with all documents and information relating to Borrower and the Loan that Lender deems advisable in connection therewith. Borrower’s and Sahara Las Vegas’ indemnity obligations under this Agreement, the Note and
the Security Documents shall also apply with respect to any participant and the directors, officers, agents and employees of any participant. 
  
 (p) Cure Periods. All cure periods provided for herein or in the Note, the Deed of Trust or the Security Documents, shall run concurrently with any
statutory cure periods. 
  
 (q) Jury Trial Waiver.
Borrower and Lender hereby waive their respective rights to a trial by jury in any action or proceeding based upon, or related to, the subject matter of the Note, the Deed of Trust, this Agreement or the other Security Documents. This waiver is a
knowing, intentional and voluntary waiver made by Borrower and Lender, and Borrower acknowledges that neither Lender nor any person acting on behalf of Lender has made any representations of fact to induce this waiver of trial by jury on in any way
to modify or nullify its effect. Borrower and Lender acknowledge that this waiver is a material inducement to enter into a business relationship, that each of them has already relied on this waiver and that each of them will continue to rely on this
waiver. 
  
 (r) Waivers. To the extent permitted by
law, Borrower and Sahara Las Vegas each hereby waives and relinquishes: (i) the defense of the statute of limitations in any action hereunder or in any action for the collection of any indebtedness or the performance of any obligation arising in
connection with the Note; (ii) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other person or persons; (iii) demand, protest and notice of any kind; (iv) any defense based upon an election of remedies by Lender, including, without limitation, the marshaling of assets (or any defense
based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal); (v) any defense arising because of Lender’s election, in
any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111 (b) of the Federal Bankruptcy Code; (vi) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy
Code; (vii) any defense based upon an election of remedies by Lender, including, without limitation, any election to proceed by judicial or non-judicial foreclosure of any security, whether real property or personal 

  

 18 

 
property security, or by deed in lieu thereof, and whether or not every aspect of any foreclosure sale is commercially reasonable, or any election of
remedies. 
  
 IN WITNESS WHEREOF, the parties hereto have
executed this Agreement in duplicate as of the day and year first above written. 
  

	 BORROWER:
  
 ARCHON CORPORATION, a Nevada corporation

		
	By:	 	/s/    PAUL W. LOWDEN        
	 	

	 	 	Paul W. Lowden, President

		
	 Address:
	 	 3993 Howard Hughes Parkway, Suite #630
 Las Vegas, Nevada 89109
 Attention: President

  

	SAHARA LAS VEGAS CORP., a Nevada corporation
		
	By:	 	/s/    PAUL W. LOWDEN        
	 	

	 	 	Paul W. Lowden, President

		
	 Address:
	 	 3993 Howard Hughes Parkway, Suite #630
 Las Vegas, Nevada 89109
 Attention: President

  

	 LENDER:
  
 COLONIAL BANK

		
	By:	 	/s/    TIM KINSEY        
	 	

	 Name:
	 	Tim Kinsey
	 Its:
	 	Vice President

		
	 Address:
	 	 4670 South Forth Apache, Suite #250
 Las
Vegas, Nevada 89147

  

 19 

 EXHIBIT “A” 
  
 Legal Description of Property 
  

The land referred to herein is situated in the State of Nevada, County of CLARK, described as follows: 
  
 Being a portion of the Northeast Quarter (NE 1/4) of Section 9 and a portion of the Northwest (NW 1/4) of the Northwest Quarter (NW 1/4) of
Section 10, Township 21 South, Range 61 East, M.D.M., Clark County, Nevada, described as follows: 
  
 COMMENCING at the Northeast Corner (NE Cor) of the Northeast Quarter (NE 1/4) of said Section 9; thence South 04°43’06” East along the East Line of said Section 9, a distance of 896.80 feet to a point,
said point being the Northeast Corner (NE Cor) of that certain parcel of land conveyed by HOTEL SECURITIES CO. to EL RANCHO VEGAS by Corporation Deed recorded March 20, 1945 shown as Document No. 194417, Clark County, Nevada Official Records, said
point also being the POINT OF BEGINNING; thence South 87°12’23” East parallel to the North Line of said Section 9 a distance of 342.86 feet to the West Line of Paradise Road; thence South 00°14’47” West along said West
Line of Paradise Road, a distance of 868.44 feet; thence North 87°12’23” West parallel to the North Line of said Section 9, a distance of 1572.55 feet to the East line of Las Vegas Boulevard South; thence North 28°00’00”
East along said East line of Las Vegas Boulevard South, a distance of 958.89 feet; thence South 87°12’23” East parallel to the North Line of said Section 9, a distance of 782.72 feet to the POINT OF BEGINNING. 
  

 20

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