Document:

Securities Purchase Agreement for secured convertible term note due June 2007

 EXHIBIT 4.2 
  

PAINCARE HOLDINGS, INC. 
  
 SECURITIES PURCHASE AGREEMENT 
  
 June 30, 2004 
  

 TABLE OF CONTENTS 
  

							
	 	 	 	  	 	  	Page

			
	 1.
	 	Agreement to Sell and Purchase	  	1
			
	 2.
	 	Fees and Warrant	  	1
			
	 3.
	 	Closing, Delivery and Payment	  	2
	 	 	 3.1
	  	Closing	  	2
	 	 	 3.2
	  	Delivery	  	2
			
	 4.
	 	Representations and Warranties of the Company	  	2
	 	 	 4.1
	  	Organization, Good Standing and Qualification	  	2
	 	 	 4.2
	  	Subsidiaries	  	3
	 	 	 4.3
	  	Capitalization; Voting Rights	  	3
	 	 	 4.4
	  	Authorization; Binding Obligations	  	4
	 	 	 4.5
	  	Liabilities	  	4
	 	 	 4.6
	  	Agreements; Action	  	4
	 	 	 4.7
	  	Obligations to Related Parties	  	5
	 	 	 4.8
	  	Changes	  	5
	 	 	 4.9
	  	Title to Properties and Assets; Liens, Etc.	  	7
	 	 	 4.10
	  	Intellectual Property	  	7
	 	 	 4.11
	  	Compliance with Other Instruments	  	7
	 	 	 4.12
	  	Litigation	  	8
	 	 	 4.13
	  	Tax Returns and Payments	  	8
	 	 	 4.14
	  	Employees	  	8
	 	 	 4.15
	  	Registration Rights and Voting Rights	  	9
	 	 	 4.16
	  	Compliance with Laws; Permits	  	9
	 	 	 4.17
	  	Environmental and Safety Laws	  	9
	 	 	 4.18
	  	Valid Offering	  	10
	 	 	 4.19
	  	Full Disclosure	  	10
	 	 	 4.20
	  	Insurance	  	10
	 	 	 4.21
	  	SEC Reports	  	10
	 	 	 4.22
	  	Listing	  	10
	 	 	 4.23
	  	No Integrated Offering	  	11
	 	 	 4.24
	  	Stop Transfer	  	11
	 	 	 4.25
	  	Dilution	  	11
			
	 5.
	 	Representations and Warranties of the Purchaser	  	12
	 	 	 5.1
	  	No Shorting	  	12
	 	 	 5.2
	  	Requisite Power and Authority	  	12
	 	 	 5.3
	  	Investment Representations	  	12
	 	 	 5.4
	  	Purchaser Bears Economic Risk	  	13
	 	 	 5.5
	  	Acquisition for Own Account	  	13
	 	 	 5.6
	  	Purchaser Can Protect Its Interest	  	13
	 	 	 5.7
	  	Accredited Investor	  	13
	 	 	 5.8
	  	Legends	  	13
			
	 6.
	 	Covenants of the Company	  	15
	 	 	 6.1
	  	Stop-Orders	  	15

  

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	 	 	 6.2
	  	Listing	  	15
	 	 	 6.3
	  	Market Regulations	  	15
	 	 	 6.4
	  	Reporting Requirements	  	15
	 	 	 6.5
	  	Use of Funds	  	16
	 	 	 6.6
	  	Access to Facilities	  	16
	 	 	 6.7
	  	Taxes	  	16
	 	 	 6.8
	  	Insurance	  	16
	 	 	 6.9
	  	Intellectual Property	  	17
	 	 	 6.10
	  	Properties	  	18
	 	 	 6.11
	  	Confidentiality	  	18
	 	 	 6.12
	  	Required Approvals	  	18
	 	 	 6.13
	  	Reissuance of Securities	  	19
	 	 	 6.14
	  	Opinion	  	19
			
	 7.
	 	Covenants of the Purchaser	  	19
	 	 	 7.1
	  	Confidentiality	  	19
	 	 	 7.2
	  	Non-Public Information	  	19
			
	 8.
	 	Covenants of the Company and Purchaser Regarding Indemnification	  	19
	 	 	 8.1
	  	Company Indemnification	  	19
	 	 	 8.2
	  	Purchaser’s Indemnification	  	19
	 	 	 8.3
	  	Procedures	  	20
			
	 9.
	 	Conversion of Convertible Note	  	20
	 	 	 9.1
	  	Mechanics of Conversion	  	20
	 	 	 9.2
	  	Maximum Conversion	  	21
			
	 10.
	 	Registration Rights.	  	22
	 	 	 10.1
	  	Registration Rights Granted	  	22
	 	 	 10.2
	  	Indemnification	  	23
	 	 	 10.3
	  	Offering Restrictions	  	24
			
	 11.
	 	Miscellaneous	  	25
	 	 	 11.1
	  	Governing Law	  	25
	 	 	 11.2
	  	Survival	  	25
	 	 	 11.3
	  	Successors	  	25
	 	 	 11.4
	  	Entire Agreement	  	26
	 	 	 11.5
	  	Severability	  	26
	 	 	 11.6
	  	Amendment and Waiver	  	26
	 	 	 11.7
	  	Delays or Omissions	  	26
	 	 	 11.8
	  	Notices	  	26
	 	 	 11.9
	  	Attorneys’ Fees	  	27
	 	 	 11.10
	  	Titles and Subtitles	  	27
	 	 	 11.11
	  	Facsimile Signatures; Counterparts	  	28
	 	 	 11.12
	  	Broker’s Fees	  	28
	 	 	 11.13
	  	Construction	  	28

  

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 LIST OF EXHIBITS 
  

			
	 Form of Convertible Term Note
	  	Exhibit A
	 Form of Warrant
	  	Exhibit B
	 Form of Opinion
	  	Exhibit C
	 Form of Escrow Agreement
	  	Exhibit D

  

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 SECURITIES PURCHASE AGREEMENT 
  
 THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of June 30, 2004, by and between
PAINCARE HOLDINGS, INC., a Florida corporation (the “Company”), and Laurus Master Fund, Ltd., a Cayman Islands company (the “Purchaser”). 
  
 RECITALS 
  
 WHEREAS, the Company has authorized the sale to the Purchaser of a Convertible Term Note in the aggregate principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000.00) (the “Note”), which Note is convertible into shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”) at a fixed conversion price of $3.15 per share of Common
Stock (“Fixed Conversion Price”); 
  
 WHEREAS, the
Company wishes to issue a warrant to the Purchaser to purchase up to 165,000 shares of the Company’s Common Stock in connection with Purchaser’s purchase of the Note; 
  
 WHEREAS, Purchaser desires to purchase the Note and Warrant on the terms and conditions set forth herein; and 
  
 WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein. 
  
 AGREEMENT 
  
 NOW, THEREFORE, in consideration of
the foregoing recitals and the mutual promises, representations, warranties and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows: 
  
 1. Agreement to Sell and Purchase. Pursuant to
the terms and conditions set forth in this Agreement, on the Closing Date (as defined in Section 3), the Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Company a Note in the amount of $1,500,000
convertible in accordance with the terms thereof into shares of the Company’s Common Stock in accordance with the terms of the Note and this Agreement. The Note purchased on the Closing Date shall be known as the “Offering.” A form of
the Note is annexed hereto as Exhibit A. The Note will have a Maturity Date (as defined in the Note) thirty six (36) months from the date of issuance. Collectively, the Note and Warrant (as defined in Section 2) and Common Stock issuable in payment
of the Note, upon conversion of the Note and upon exercise of the Warrant are referred to as the “Securities.” 
  
 2. Fees and Warrant. On the Closing Date: 
  
 (a) The Company will issue and deliver to the Purchaser a Warrant to purchase up to 165,000 shares of Common Stock in connection with the
Offering (the “Warrant”) pursuant to Section 1 hereof. The Warrant must be delivered on the Closing 

  

 
Date. A form of Warrant is annexed hereto as Exhibit B. All the representations, covenants, warranties, undertakings, and indemnification, and other rights
made or granted to or for the benefit of the Purchaser by the Company are hereby also made and granted in respect of the Warrant and shares of the Company’s Common Stock issuable upon exercise of the Warrant (the “Warrant Shares”).

  
 (b) Subject to the terms of Section 2(d)
below, the Company shall pay to Laurus Capital Management, LLC, manager of Purchaser a closing payment in an amount equal to three and six tenths percent (3.60%) of the aggregate principal amount of the Note. The foregoing fee is referred to herein
as the “Closing Payment.” 
  
 (c) The
Company shall reimburse the Purchaser for its reasonable legal fees for services rendered to the Purchaser in preparation of this Agreement and the Related Agreements (as hereinafter defined), and expenses in connection with the Purchaser’s due
diligence review of the Company and relevant matters. Amounts required to be paid hereunder will be paid at the Closing and shall be $10,000 (for legal expenses and for performing due diligence inquiries on the Company. 
  
 (d) The Closing Payment, legal fees and due diligence fees
(net of deposits previously paid by the Company shall be paid at closing out of funds held pursuant to a Funds Escrow Agreement of even date herewith among the Company, Purchaser, and an Escrow Agent (the “Funds Escrow Agreement”) and a
disbursement letter (the “Disbursement Letter”). 
  
 3.
Closing, Delivery and Payment. 
  
 3.1 Closing. Subject to the terms and conditions herein, the closing of the transactions contemplated hereby (the “Closing”), shall take place on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the “Closing Date”). 
  
 3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form attached hereto as Exhibit C, at the Closing on the Closing Date,
the Company will deliver to the Purchaser, among other things, a Note in the form attached as Exhibit A representing the principal amount of $1,500,000 and a Warrant in the form attached as Exhibit B in the Purchaser’s name representing 165,000
Warrant Shares and the Purchaser will deliver to the Company, among other things, the amounts set forth in the Disbursement Letter by certified funds or wire transfer. 
  
 4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser as of
the date of this Agreement as set forth below which disclosures are supplemented by, and subject to the Company’s filings under the Securities Exchange Act of 1934 (collectively, the “Exchange Act Filings”), copies of which have been
provided to the Purchaser. 
  
 4.1
Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Company has the corporate power and authority to own and operate its
properties and assets, to execute and deliver this Agreement, and the Note and the Warrant to be issued in 

  

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connection with this Agreement, the Security Agreement relating to the Note dated as of June 30, 2004 between the Company and the Purchaser, the Registration
Rights Agreement relating to the Securities dated as of June 30, 2004 between the Company and the Purchaser and all other agreements referred to herein (collectively, the “Related Agreements”), to issue and sell the Note and the shares of
Common Stock issuable upon conversion of the Note (the “Note Shares”), to issue and sell the Warrant and the Warrant Shares, and to carry out the provisions of this Agreement and the Related Agreements and to carry on its business as
presently conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business. 
  
 4.2 Subsidiaries. The Company owns all of the issued and outstanding capital stock of each subsidiary set forth on Schedule 4.2
attached hereto. The Company does not own or control any equity security or other interest of any other corporation, limited partnership or other business entity. 
  
 4.3 Capitalization; Voting Rights. 
  
 (a) The authorized capital stock of the Company, as of the date hereof consists of 85,000,000 shares, of
which 75,000,000 are shares of Common Stock, par value $0.0001 per share, 29,248,192 shares of which are issued and outstanding, and 10,000,000 are shares of “blank check” preferred stock, par value $0.0001 per share of which no shares are
issued and outstanding. 
  
 (b) Except as
disclosed on Schedule 4.3, other than: (i) the shares reserved for issuance under the Company’s stock option plans; and (ii) shares which may be granted pursuant to this Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or arrangements or agreements of any kind for the purchase or acquisition from the Company of any of its securities. Except as
disclosed on Schedule 4.3, neither the offer, issuance or sale of any of the Note or Warrant, or the issuance of any of the Note Shares or Warrant Shares, nor the consummation of any transaction contemplated hereby will result in a change in the
price or number of any securities of the Company outstanding, under anti-dilution or other similar provisions contained in or affecting any such securities. 
  
 (c) All issued and outstanding shares of the Company’s Common Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. 
  
 (d) The rights, preferences, privileges and restrictions of the shares of the Common Stock are as stated in the Company’s Certificate
of Incorporation (the “Charter”). The Note Shares and Warrant Shares have been duly and validly reserved for issuance. When issued in compliance with the provisions of this Agreement and the Company’s Charter, the Securities will be
validly issued, fully paid and nonassessable, 

  

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and will be free of any liens or encumbrances; provided, however, that the Securities may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. 
  
 4.4 Authorization; Binding Obligations. All corporate action on the part of the Company, its officers and directors necessary for
the authorization of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder at the Closing and, the authorization, sale, issuance and delivery of the Note and Warrant has been taken or will be taken
prior to the Closing. The Agreement and the Related Agreements, when executed and delivered and to the extent it is a party thereto, will be valid and binding obligations of the Company enforceable in accordance with their terms, except: 

 
 (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and 
  
 (b) general principles of equity that restrict the availability of equitable or legal remedies. 
  
 The sale of the Note and the subsequent conversion of the Note into Note Shares are not and
will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with. The issuance of the Warrant and the subsequent exercise of the Warrant for Warrant Shares are not and will not be subject to
any preemptive rights or rights of first refusal that have not been properly waived or complied with. 
  
 4.5 Liabilities. The Company, to the best of its knowledge, has no material contingent liabilities, except current liabilities
incurred in the ordinary course of business and liabilities disclosed in any Exchange Act Filings. 
  
 4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as disclosed in any Exchange Act Filings: 
  
 (a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or to its knowledge by which it is bound which may involve: (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of
$50,000 (other than obligations of, or payments to, the Company arising from purchase or sale agreements entered into in the ordinary course of business); or (ii) the transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of “off the shelf” or other standard products); or (iii) provisions restricting the development, manufacture or distribution of the Company’s products or
services; or (iv) indemnification by the Company with respect to infringements of proprietary rights. 
  
 (b) Since March 31, 2004, the Company has not: (i) declared or paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock; (ii) incurred any indebtedness for money borrowed or any other liabilities (other than ordinary course obligations) individually in excess of $50,000 or, in 

  

 4 

 
the case of indebtedness and/or liabilities individually less than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans or advances to any
person not in excess, individually or in the aggregate, of $100,000, other than ordinary advances for travel expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary
course of business. 
  
 (c) For the purposes of
subsections (a) and (b) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections. 
  
 4.7 Obligations to Related Parties. Except as set forth on Schedule 4.7, there are no obligations of the Company to officers,
directors, stockholders or employees of the Company other than: 
  
 (a) for payment of salary for services rendered and for bonus payments; 
  
 (b) reimbursement for reasonable expenses incurred on behalf of the Company; 
  
 (c) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of the Company); and 
  

(d) obligations listed in the Company’s financial statements or disclosed in any of its Exchange Act Filings. 
  
 Except as described above or set forth on Schedule 4.7, none of the officers, directors or,
to the best of the Company’s knowledge, key employees or stockholders of the Company or any members of their immediate families, are indebted to the Company, individually or in the aggregate, in excess of $50,000 or have any direct or indirect
ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may compete with the Company. Except as described above, no officer, director or, to the best of the Company’s knowledge, stockholder, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with the Company and no agreements, understandings or proposed transactions are contemplated between the Company and any such person. Except as set forth on Schedule 4.7, the
Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 
  
 4.8 Changes. Since March 31, 2004, except as disclosed in any Exchange Act Filing or in any Schedule to this Agreement or to any of
the Related Agreements, there has not been: 
  
 (a) Any change in the assets, liabilities, financial condition, prospects or operations of the Company, other than changes in the ordinary course of business, none 

  

 5 

 
of which individually or in the aggregate has had or is reasonably expected to have a material adverse effect on such assets, liabilities, financial
condition, prospects or operations of the Company; 
  
 (b) Any resignation or termination of any officer, key employee or group of employees of the Company; 
  
 (c) Any material change, except in the ordinary course of business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise; 
  
 (d) Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or prospects or financial condition of the Company; 
  
 (e) Any waiver by the Company of a valuable right or of a
material debt owed to it; 
  
 (f) Any direct or
indirect material loans made by the Company to any stockholder, employee, officer or director of the Company, other than advances made in the ordinary course of business; 
  
 (g) Any material change in any compensation arrangement or agreement with any employee, officer, director or
stockholder; 
  
 (h) Any declaration or payment
of any dividend or other distribution of the assets of the Company; 
  
 (i) Any labor organization activity related to the Company; 
  
 (j) Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business; 
  
 (k) Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; 
  
 (l) Any change in any material agreement to which the Company is a party or by which it is bound which may materially and adversely affect
the business, assets, liabilities, financial condition, operations or prospects of the Company; 
  
 (m) Any other event or condition of any character that, either individually or cumulatively, has or may materially and adversely affect
the business, assets, liabilities, financial condition, prospects or operations of the Company; or 
  
 (n) Any arrangement or commitment by the Company to do any of the acts described in subsection (a) through (m) above. 
  

 6 

 4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on Schedule
4.9, the Company has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than: 
  
 (a) those resulting from taxes which have not yet become
delinquent; 
  
 (b) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company; and 
  
 (c) those that have otherwise arisen in the ordinary course of business. 
  
 All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating
condition and repair and are reasonably fit and usable for the purposes for which they are being used. Except as set forth on Schedule 4.9, the Company is in compliance with all material terms of each lease to which it is a party or is otherwise
bound. 
  
 4.10 Intellectual Property.

  
 (a) The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary for its business as now conducted and to the Company’s knowledge as
presently proposed to be conducted (the “Intellectual Property”), without any known infringement of the rights of others. Except as set forth on Schedule 4.10, there are no outstanding options, licenses or agreements of any kind relating
to the foregoing proprietary rights, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products. 
  
 (b) The Company has not received any communications alleging that the Company has violated any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity, nor is the Company aware of any basis therefor. 
  
 (c) The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been rightfully assigned to the Company. 
  
 4.11 Compliance with Other Instruments. Except as set
forth on Schedule 4.11, the Company is not in violation or default of any term of its Charter or Bylaws, or of any material provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is
bound or of any judgment, decree, order or writ. The execution, delivery and performance of and compliance with this Agreement and the Related 

  

 7 

 
Agreements to which it is a party, and the issuance and sale of the Note by the Company and the other Securities by the Company each pursuant hereto, will
not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term or provision, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or
any of its assets or properties. 
  
 4.12
Litigation. Except as set forth on Schedule 4.12 hereto, there is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company that prevents the Company to enter into this
Agreement or the Related Agreements, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any material adverse change in the assets, condition, affairs or prospects of
the Company, financially or otherwise, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for any of the foregoing. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate. 
  
 4.13 Tax Returns and Payments. The Company has timely
filed all tax returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to the Company’s knowledge all other taxes due and payable by the Company on or
before the Closing, have been paid or will be paid prior to the time they become delinquent. Except as set forth on Schedule 4.13, the Company has not been advised: 
  
 (a) that any of its returns, federal, state or other, have been or are being audited as of the date hereof;
or 
  
 (b) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes. 
  
 The Company has no
knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 
  
 4.14 Employees. Except as set forth on Schedule 4.14, the Company has no collective bargaining agreements with any of its
employees. There is no labor union organizing activity pending or, to the Company’s knowledge, threatened with respect to the Company. Except as disclosed in the Exchange Act Filings or on Schedule 4.14, the Company is not a party to or bound
by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement. To the Company’s knowledge, no employee
of the Company, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by,
or to contract with, the Company because of the nature of the business to be conducted by the Company; and to the Company’s 

  

 8 

 
knowledge the continued employment by the Company of its present employees, and the performance of the Company’s contracts with its independent
contractors, will not result in any such violation. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with their duties to the Company. The Company has not received any notice alleging that any such violation has occurred. Except for employees who have a current effective
employment agreement with the Company, no employee of the Company has been granted the right to continued employment by the Company or to any material compensation following termination of employment with the Company. Except as set forth on Schedule
4.14, the Company is not aware that any officer, key employee or group of employees intends to terminate his, her or their employment with the Company, nor does the Company have a present intention to terminate the employment of any officer, key
employee or group of employees. 
  
 4.15
Registration Rights and Voting Rights. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, the Company is presently not under any obligation, and has not granted any rights, to register any of the
Company’s presently outstanding securities or any of its securities that may hereafter be issued. Except as set forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, to the Company’s knowledge, no stockholder of the
Company has entered into any agreement with respect to the voting of equity securities of the Company. 
  
 4.16 Compliance with Laws; Permits. Except as set forth on Schedule 4.16, to its knowledge, the Company is not in violation in any
material respect of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement and the issuance of any of the Securities, except such as has been duly and validly obtained or filed, or with respect to
any filings that must be made after the Closing, as will be filed in a timely manner. The Company has all material franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the
lack of which would materially and adversely affect the business, properties, prospects or financial condition of the Company. 
  

 9 

 4.17 Environmental and Safety Laws. The Company is not in violation in any
material respect of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute,
law or regulation. Except as set forth on Schedule 4.17, no Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or, to the Company’s knowledge, by any other person or entity on any property
owned, leased or used by the Company. For the purposes of the preceding sentence, “Hazardous Materials” shall mean: 
  
 (a) materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state,
federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous
substances, including building materials; or 
  
 (b) any petroleum products or nuclear materials. 
  
 4.18 Valid Offering. Assuming the accuracy of the representations and warranties of the Purchaser contained in this Agreement, the offer, sale and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”), and will have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. 
  
 4.19
Full Disclosure. The Company has provided the Purchaser with all information requested by the Purchaser in connection with its decision to purchase the Note and Warrant, including all information the Company believes is reasonably necessary
to make such investment decision. Neither this Agreement, the exhibits and schedules hereto, the Related Agreements nor any other document delivered by the Company to Purchaser or its attorneys or agents in connection herewith or therewith or with
the transactions contemplated hereby or thereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they are
made, not misleading. Any financial projections and other estimates provided to the Purchaser by the Company were based on the Company’s experience in the industry and on assumptions of fact and opinion as to future events which the Company, at
the date of the issuance of such projections or estimates, believed to be reasonable. 
  
 4.20 Insurance. The Company has general commercial, product liability, fire and casualty insurance policies with coverages which
the Company believes are customary for companies similarly situated to the Company in the same or similar business. 
  
 4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company has filed all proxy statements, reports and other documents
required to be filed by it under the Exchange Act. The Company has furnished the Purchaser with copies of: (i) its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003; and (ii) its Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, 2004, and the Form 8-K filings which it has made during 2004 to date (collectively, the “SEC Reports”). Except as set forth on Schedule 4.21, each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 
  
 4.22 Listing. The Company’s Common Stock is
listed for trading on the American Stock Exchange and satisfies, to the best of the Company’s knowledge, all 

  

 10 

 
requirements for the continuation of such listing. The Company has not received any notice that its Common Stock will be delisted from American Stock
Exchange or that its Common Stock does not meet all requirements for continued listing. 
  
 4.23 No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the
Company for purposes of the Securities Act which would prevent the Company from selling the Securities pursuant to Rule 506 under the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the offering of the Securities to be integrated with other offerings. 
  
 4.24 Stop Transfer. The Securities are restricted securities as of the date of this Agreement. The Company will not issue any stop
transfer order or other order impeding the sale and delivery of any of the Securities at such time as the Securities are registered for public sale or an exemption from registration is available, except as required by state and federal securities
laws. 
  
 4.25 Dilution. The Company
specifically acknowledges that its obligation to issue the shares of Common Stock upon conversion of the Note and exercise of the Warrant is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company. 
  
 4.26 Patriot Act. If the Company is a corporation, trust, partnership, limited liability Purchaser or other organization, the Company certifies that, to the best of Company’s knowledge, the Company has not been designated, and
is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply with all applicable laws concerning money laundering and related activities. In
furtherance of those efforts, the Company hereby represents, warrants and agrees that: (i) none of the cash or property that the Company will pay or will contribute to the Purchaser has been or shall be derived from, or related to, any activity that
is deemed criminal under United States law; and (ii) no contribution or payment by the Company to the Purchaser, to the extent that they are within the Company’s control shall cause the Purchaser to be in violation of the United States Bank
Secrecy Act, the United States International Money Laundering Control Act of 1986 or the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001. The Company shall promptly notify the Purchaser if any of these
representations ceases to be true and accurate regarding the Company. The Company agrees to provide the Purchaser any additional information regarding the Company that the Purchaser deems necessary or convenient to ensure compliance with all
applicable laws concerning money laundering and similar activities. The Company understands and agrees that if at any time it is discovered that any of the foregoing representations are incorrect, or if otherwise required by applicable law or
regulation related to money laundering similar activities, the Purchaser may undertake appropriate actions to ensure compliance with applicable law or regulation, including but not limited to segregation and/or redemption of the Company’s
investment in the Purchaser. The Company further understands that the Purchaser if 

  

 11 

 
required by law, may release confidential information about the Company and, if applicable, any underlying beneficial owners, to proper authorities if the
Purchaser, in its sole discretion, determines that it is in the best interests of the Purchaser in light of relevant rules and regulations under the laws set forth in subsection (ii) above. 
  
 5. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows (such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement) 
  
 5.1 No Shorting. The Purchaser or any of its
affiliates and investment partners has not, will not and will not cause any person or entity, directly or indirectly, to engage in “short sales” of the Company’s Common Stock or any other hedging strategies as long as the Note shall
be outstanding. 
  
 5.2 Requisite Power and
Authority. Purchaser has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and the Related Agreements and to carry out their provisions. All corporate action on Purchaser’s part
required for the lawful execution and delivery of this Agreement and the Related Agreements have been or will be effectively taken prior to the Closing. Upon their execution and delivery, this Agreement and the Related Agreements will be valid and
binding obligations of Purchaser, enforceable in accordance with their terms, except: 
  
 (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement
of creditors’ rights; and 
  
 (b) as limited
by general principles of equity that restrict the availability of equitable and legal remedies. 
  
 5.3 Investment Representations. Purchaser understands that the Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser’s representations contained in the Agreement, including, without limitation, that the Purchaser is an “accredited investor” within the meaning of Regulation D
under the Securities Act of 1933, as amended (the “Securities Act”). The Purchaser confirms that it has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision
with respect to the Note and the Warrant to be purchased by it under this Agreement and the Note Shares and the Warrant Shares acquired by it upon the conversion of the Note and the exercise of the Warrant, respectively. The Purchaser further
confirms that it has had an opportunity to ask questions and receive answers from the Company regarding the Company’s business, management and financial affairs and the terms and conditions of the Offering, the Note, the Warrant and the
Securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Purchaser or to which the
Purchaser had access. 
  

 12 

 5.4 Purchaser Bears Economic Risk. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests.
Purchaser must bear the economic risk of this investment until the Securities are sold pursuant to: (i) an effective registration statement under the Securities Act; or (ii) an exemption from registration is available with respect to such sale.

  
 5.5 Acquisition for Own Account.
Purchaser is acquiring the Note and Warrant and the Note Shares and the Warrant Shares for Purchaser’s own account for investment only, and not as a nominee or agent and not with a view towards or for resale in connection with their
distribution. 
  
 5.6 Purchaser Can Protect
Its Interest. Purchaser represents that by reason of its, or of its management’s, business and financial experience, Purchaser has the capacity to evaluate the merits and risks of its investment in the Note, the Warrant and the Securities
and to protect its own interests in connection with the transactions contemplated in this Agreement, and the Related Agreements. Further, Purchaser is aware of no publication of any advertisement in connection with the transactions contemplated in
the Agreement or the Related Agreements. 
  
 5.7
Accredited Investor . Purchaser represents that it is an accredited investor within the meaning of Regulation D under the Securities Act. 
  
 5.8 Legends. 
  
 (a) The Note shall bear substantially the following legend: 
  
 “THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PAINCARE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 (b) The Note Shares and the Warrant Shares, if not issued by
DWAC system (as hereinafter defined), shall bear a legend which shall be in substantially the following form until such shares are covered by an effective registration statement filed with the SEC: 
  
 “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. 

  

 13 

 
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PAINCARE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.” 
  
 (c) The Warrant shall bear substantially the following legend: 
  
 “THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO PAINCARE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.” 
  
 5.9 Closing Payment. The
receipt by Laurus Capital Management LLC of the Closing Payment complies with all applicable federal and state securities laws. 
  
 5.10 General Solicitation. Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. 
  
 5.11 Principal Market Representations. Purchaser represents
that no director, officer or general partner of the Purchaser, beneficial owner of 10 percent or more of any class of its equity securities, any promoter of the Purchaser presently connected with it in any capacity: 
  
 (i) has been convicted within 10 years prior to the date
hereof of any felony or misdemeanor in connection with the purchase or sale of any security, involving the making of a false filing with the Commission, or arising out of the conduct of the business of an underwriter, broker, dealer, municipal
securities dealer, or investment adviser; 
  
 (ii) is subject to any order, judgment, or decree of any court of competent jurisdiction temporarily or preliminarily enjoining or restraining, or is subject to any order, judgment, or_decree of any court of competent jurisdiction, entered
within 5 years prior to the filing of such offering statement, permanently enjoining or restraining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security, involving the making of a
false filing with the 

  

 14 

 
Commission, or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, or investment adviser;

  
 (iii) is subject to an order of the
Commission entered pursuant to section 15(b), 15B(a), or 15B(c) of the Exchange Act, or section 203(e) or (f) of the Investment Advisers Act of 1940 [15, U.S.C. 80b-1 et seq.]; 
  
 (iv) is suspended or expelled from membership in, or
suspended or barred from association with a member of, a national securities exchange registered under section 6 of the Exchange Act or a national securities association registered under section 15A of the Exchange Act for any act or omission to act
constituting conduct inconsistent with just and equitable principles of trade; or 
  
 (v) is subject to a United States Postal Service false representation order entered under 39 U.S.C. § 3005 within 5 years prior to
the filing of the offering statement required by § 230.252, or is subject to a restraining order or preliminary injunction entered under 39 U.S.C. § 3007 with respect to conduct alleged to have violated 39 U.S.C. § 3005. 

 
 6. Covenants of the Company. Until irrevocable payment in full by
the Company of all amounts due Purchaser under the Note and/or the Related Agreements has been made, the Company covenants and agrees with the Purchaser, as follows: 
  
 6.1 Stop-Orders. The Company will advise the Purchaser, promptly after it receives notice of issuance
by the Securities and Exchange Commission (the “SEC”), any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the
suspension of the qualification of the Common Stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose. 
  
 6.2 Listing. The Company shall promptly secure the listing of the shares of Common Stock issuable
upon conversion of the Note and upon the exercise of the Warrant on the American Stock Exchange (the “Principal Market”) upon which shares of Common Stock are listed (subject to official notice of issuance) and shall maintain such listing
so long as any other shares of Common Stock shall be so listed. The Company will maintain the listing of its Common Stock on the Principal Market, and will comply in all material respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities Dealers (“NASD”) and such exchanges, as applicable. 
  
 6.3 Market Regulations. The Company shall notify the SEC and applicable state authorities, in accordance with their requirements,
of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be reasonably required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to
Purchaser and promptly provide copies thereof to Purchaser. 
  
 6.4 Reporting Requirements. The Company will timely file with the SEC all reports required to be filed pursuant to the Exchange Act and for so long as the Securities are held by the Purchaser, refrain from
terminating its status as an issuer required by the Exchange 

  

 15 

 
Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination. 
  
 6.5 Use of Funds/Acceleration of Note. The Company
agrees that it will use the proceeds of the sale of the Note and Warrant solely for the acquisition of Ben Zolper, M.D. LLC and Richard Derby, M.D. P.C. and related expenses (the “Acquisition”) provided, however, that if (i) the
Acquisition or (ii) another acquisition of a physician practice, the terms of which are approved by Purchaser in writing, is not consummated within seventy (70) days after the date hereof (the “Funding Expiration Date”), the entire
outstanding unpaid balance of the Note (including all unpaid interest and fees accruing thereon to up to and including the Funding Expiration Date)(the “Note Balance”) shall be, without further action by any party hereto, deemed
accelerated and immediately due and payable. The Company shall on such Funding Expiration Date pay the Note Balance to Purchaser by wire transfer of immediately available funds to an account designated by Purchaser. Purchaser shall be entitled to
retain as fully earned all fees and expenses paid to Laurus on the date hereof (including all legal and due diligence fees) but shall within one (1) business day of such Funding Expiration Date surrender the Warrant to the Company unexercised in
whole or in part. 
  
 6.6 Access to
Facilities. The Company will permit any representatives designated by the Purchaser (or any successor of the Purchaser), upon reasonable prior written notice and during normal business hours, at such person’s expense and accompanied by a
representative of the Company, to: 
  
 (a) visit
and inspect any of the properties of the Company; 
  
 (b) examine the corporate and financial records of the Company (unless such examination is not permitted by federal, state or local law or by contract) and make copies thereof or extracts therefrom; and 
  
 (c) discuss the affairs, finances and accounts of the
Company with the directors, officers and independent accountants of the Company. 
  
 Notwithstanding the foregoing, the Company will not provide any material, non-public information to the Purchaser unless the Purchaser signs a confidentiality agreement and otherwise complies with Regulation FD, under the federal securities
laws. 
  
 6.7 Taxes. The Company will
promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that any
such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company will pay all such taxes, assessments, charges or levies forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor. 
  
 6.8 Insurance. The Company will keep its assets which
are of an insurable character insured by financially sound and reputable insurers against loss or damage by fire, 

  

 16 

 
explosion and other risks customarily insured against by companies in similar business similarly situated as the Company; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and risks and liability to persons and property to the extent and in the manner which the Company reasonably believes is customary for companies in similar business similarly
situated as the Company and to the extent available on commercially reasonable terms. The Company and each of its subsidiaries set forth in Section 4.2 hereof (the “Subsidiaries”) will jointly and severally bear the full risk of loss from
any loss of any nature whatsoever with respect to the assets pledged to the Purchaser as security for its obligations hereunder and under the Related Agreements. At the Company’s own cost and expense in amounts and with carriers reasonably
acceptable to Purchaser, the Company and each of the Subsidiaries shall (i) keep all its insurable properties and properties in which it has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary in the case of companies engaged in businesses similar to the Company’s or the respective Subsidiary’s including business interruption insurance; (ii)
maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others; (iii) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which the Company or the Subsidiary is engaged in business; and (iv) furnish Purchaser with (x) copies of all policies and evidence of the maintenance of such policies at least thirty (30) days before any expiration date, (y)
excepting the Company’s workers’ compensation policy, endorsements to such policies naming Purchaser as “co-insured” or “additional insured” and appropriate loss payable endorsements in form and substance satisfactory
to Purchaser, naming Purchaser as loss payee, and (z) evidence that as to Purchaser the insurance coverage shall not be impaired or invalidated by any act or neglect of the Company or any Subsidiary and the insurer will provide Purchaser with at
least thirty (30) days notice prior to cancellation. The Company and each Subsidiary shall instruct the insurance carriers that in the event of any loss thereunder, the carriers shall make payment for such loss to the Company and/or the Subsidiary
and Purchaser jointly. In the event that as of the date of receipt of each loss recovery upon any such insurance, the Purchaser has not declared an event of default with respect to this Agreement or any of the Related Agreements, then the Company
shall be permitted to direct the application of such loss recovery proceeds toward investment in property, plant and equipment that would comprise “Collateral” secured by Purchaser’s security interest pursuant to its security
agreement, with any surplus funds to be applied toward payment of the obligations of the Company to Purchaser. In the event that Purchaser has properly declared an event of default with respect to this Agreement or any of the Related Agreements,
then all loss recoveries received by Purchaser upon any such insurance thereafter may be applied to the obligations of the Company hereunder and under the Related Agreements, in such order as the Purchaser may determine. Any surplus (following
satisfaction of all Company obligations to Purchaser) shall be paid by Purchaser to the Company or applied as may be otherwise required by law. Any deficiency thereon shall be paid by the Company or the Subsidiary, as applicable, to Purchaser, on
demand. 
  
 6.9 Intellectual
Property. The Company shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use Intellectual Property owned or possessed by it and reasonably deemed to be necessary to the
conduct of its business. 
  

 17 

 6.10 Properties. The Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements, additions and improvements thereto; and the Company will at all times comply with each provision of all leases
to which it is a party or under which it occupies property if the breach of such provision could reasonably be expected to have a material adverse effect. 
  
 6.11 Confidentiality. The Company agrees that it will not disclose, and will not include in any public announcement, the name of
the Purchaser, unless expressly agreed to by the Purchaser or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement. The Company may disclose Purchaser’s identity and the
terms of this Agreement to its current and prospective debt and equity financing sources. 
  
 6.12 Required Approvals. For so long as twenty-five percent (25%) of the principal amount of the Note is outstanding, the Company,
without the prior written consent of the Purchaser ( which consent shall not be unreasonably withheld), shall not: 
  
 (a) directly or indirectly declare or pay any dividends, other than dividends with respect to its preferred stock; 
  
 (b) liquidate, dissolve or effect a material reorganization;

  
 (c) become subject to (including, without
limitation, by way of amendment to or modification of) any agreement or instrument which by its terms would (under any circumstances) restrict the Company’s right to perform the provisions of this Agreement or any of the agreements contemplated
thereby; 
  
 (d) materially alter or change the
scope of the business of the Company; 
  
 (e) (i)
create, incur, assume or suffer to exist any indebtedness (exclusive of trade debt and debt incurred to finance the purchase of equipment whether secured or unsecured other than the Company’s indebtedness to Laurus and as set forth on
Exhibit 6.12(e) attached hereto and made a part hereof or any refinancings or replacements thereof or any debt incurred in connection with the purchase of assets (including indebtedness incurred or assumed in connection with the acquisition
of physician practices and businesses (“Physician Acquisition Indebtedness”) (provided that such Physician Acquisition Indebtedness shall be expressly subordinated to Purchaser, secured solely by the assets of the acquisition target
(including for this purpose the shares of stock or limited liability company interests of the Company subsidiary formed to hold the Acquisition Assets (“Acquisition Assets”) and shall not be secured by a lien on any other assets of
PainCare Inc. and PainCare Holdings, Inc (to the extent that such assets are not Acquisition Assets.)), or in connection with operating lines of credit as necessary to operate such assets, or any refinancings or replacements thereof; (ii) cancel any
debt owing to it in excess of $50,000 in the aggregate during any 12 month period; (iii) assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person, except the endorsement of
negotiable instruments by a Company for deposit or collection or similar transactions in 

  

 18 

 
the ordinary course of business or guarantees provided to any of the lenders set forth in subparagraph (i) immediately above. 
  
 6.13 Reissuance of Securities. The Company agrees to
reissue certificates representing the Securities without the legends set forth in Section 5.7 above at such time as: 
  
 (a) the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k) under the Securities Act; or 
  
 (b) upon resale subject to an effective registration
statement after such Securities are registered under the Securities Act. 
  
 The Company agrees to cooperate with the Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Company and its counsel receive reasonably
requested representations from the selling Purchaser and broker, if any. 
  
 6.14 Opinion. On the Closing Date, the Company will deliver to the Purchaser an opinion acceptable to the Purchaser from the Company’s legal counsel. The Company will provide, at the Company’s
expense, such other legal opinions in the future as are reasonably necessary for the conversion of the Note and exercise of the Warrant. 
  
 7. Covenants of the Purchaser. The Purchaser covenants and agrees with the Company as follows: 
  
 7.1 Confidentiality. The Purchaser agrees that it
will not disclose, and will not include in any public announcement, the name of the Company, unless expressly agreed to by the Company or unless and until such disclosure is required by law or applicable regulation, and then only to the extent of
such requirement. 
  
 7.2 Non-Public
Information. The Purchaser agrees not to effect any sales in the shares of the Company’s Common Stock while in possession of material, non-public information regarding the Company if such sales would violate applicable securities law.

  
 8. Covenants of the Company and Purchaser Regarding
Indemnification. 
  
 8.1 Company
Indemnification. The Company agrees to indemnify, hold harmless, reimburse and defend Purchaser, each of Purchaser’s officers, directors, agents, affiliates, control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser which results, arises out of or is based upon: (i) any misrepresentation by Company or breach of any warranty by Company
in this Agreement or in any exhibits or schedules attached hereto or any Related Agreement; or (ii) any breach or default in performance by Company of any covenant or undertaking to be performed by Company hereunder, or any other agreement entered
into by the Company and Purchaser relating hereto. 
  
 8.2 Purchaser’s Indemnification. Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, 

  

 19 

 
agents, affiliates, control persons and principal shareholders, at all times against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the Company which results, arises out of or is based upon: (i) any misrepresentation by Purchaser or breach of any warranty by Purchaser in this Agreement or in any
exhibits or schedules attached hereto or any Related Agreement; or (ii) any breach or default in performance by Purchaser of any covenant or undertaking to be performed by Purchaser hereunder, or any other agreement entered into by the Company and
Purchaser relating hereto. 
  
 8.3
Procedures. The procedures and limitations set forth in Section 10.2(c) and (d) shall apply to the indemnifications set forth in Sections 8.1 and 8.2 above. 
  
 9. Conversion of Convertible Note. 
  
 9.1 Mechanics of Conversion. 
  
 (a) Provided the Purchaser has notified the Company of the Purchaser’s intention to sell the Note
Shares and the Note Shares are included in an effective registration statement or are otherwise exempt from registration when sold: (i) Upon the conversion of the Note or part thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel) to assure that the Company’s transfer agent shall issue shares of the Company’s Common Stock in the name of the Purchaser (or its nominee) or such other persons as
designated by the Purchaser in accordance with Section 9.1(b) hereof and in such denominations to be specified representing the number of Note Shares issuable upon such conversion; and (ii) The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the Company’s Common Stock and that after the Effectiveness Date (as defined in the Registration Rights Agreement) the Note Shares issued will be freely transferable subject to
the prospectus delivery requirements of the Securities Act and the provisions of this Agreement, and will not contain a legend restricting the resale or transferability of the Note Shares. 
  
 (b) Purchaser will give notice of its decision to exercise
its right to convert the Note or part thereof by telecopying or otherwise delivering an executed and completed notice of the number of shares to be converted to the Company (the “Notice of Conversion”). The Purchaser will not be required
to surrender the Note until the Purchaser receives a credit to the account of the Purchaser’s prime broker through the DWAC system (as defined below), representing the Note Shares or until the Note has been fully satisfied. Each date on which a
Notice of Conversion is telecopied or delivered to the Company in accordance with the provisions hereof shall be deemed a “Conversion Date.” Pursuant to the terms of the Notice of Conversion, the Borrower will issue instructions to the
transfer agent accompanied by an opinion of counsel within one (1) business day of the date of the delivery to Borrower of the Notice of Conversion and shall cause the transfer agent to transmit the certificates representing the Conversion Shares to
the Holder by crediting the account of the Purchaser’s prime broker with the Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system within three (3) business days after receipt by
the Company of the Notice of Conversion (the “Delivery Date”). 
  

 20 

 (c) The Company understands that a delay in the delivery of the Note Shares in the form
required pursuant to Section 9 hereof beyond the Delivery Date could result in economic loss to the Purchaser. In the event that the Company fails to direct its transfer agent to deliver the Note Shares to the Purchaser via the DWAC system within
the time frame set forth in Section 9.1(b) above and the Note Shares are not delivered to the Purchaser by the Delivery Date, as compensation to the Purchaser for such loss, the Company agrees to pay late payments to the Purchaser for late issuance
of the Note Shares in the form required pursuant to Section 9 hereof upon conversion of the Note in the amount equal to the greater of: (i) $500 per business day after the Delivery Date; or (ii) the Purchaser’s actual damages from such delayed
delivery. Notwithstanding the foregoing, the Company will not owe the Purchaser any late payments if the delay in the delivery of the Note Shares beyond the Delivery Date is solely out of the control of the Company and the Company is actively trying
to cure the cause of the delay. The Company shall pay any payments incurred under this Section in immediately available funds upon demand and, in the case of actual damages, accompanied by reasonable documentation of the amount of such damages. Such
documentation shall show the number of shares of Common Stock the Purchaser is forced to purchase (in an open market transaction) which the Purchaser anticipated receiving upon such conversion, and shall be calculated as the amount by which (A) the
Purchaser’s total purchase price (including customary brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (B) the aggregate principal and/or interest amount of the Note, for which such Conversion Notice was not
timely honored. 
  
 Nothing contained herein or in any document referred to herein
or delivered in connection herewith shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest or dividends required to be
paid or other charges hereunder exceed the maximum amount permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to a Purchaser and thus refunded to the Company. 
  
 9.2 Maximum Conversion. The Purchaser shall not be
entitled to convert on a Conversion Date, that amount of a Note in connection with that number of shares of Common Stock which would be (a) in excess of the sum of: (i) the number of shares of Common Stock beneficially owned by the Purchaser on a
Conversion Date; and (ii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this proviso is being made on a Conversion Date, which would result in beneficial ownership by the
Purchaser of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date and (b) (ii) exceed twenty five percent (25%) of the aggregate dollar trading volume of the Common Stock for the ten (10) day trading
period immediately preceding delivery of a Notice of Conversion to the Borrower. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Regulation
13d-3 thereunder. Upon an Event of Default under the Note or seventy days prior written notice, the conversion limitation in this Sections 9.2(a) and 9.2(b) shall become null and void. If the Company has not obtained Shareholder Approval (as defined
below), if required by the applicable rules and regulations of the Principal Market (or any successor entity), then the Company may not issue upon conversion of the Note, in the aggregate, in excess of (1) 19.999% of the number of shares of Common

  

 21 

 
Stock outstanding on the trading day immediately preceding the original issue date, (2) less any shares of Common Stock issued as payment of interest or upon
exercise of the Warrants issued to the Holder of the Note on the original issue date pursuant to this Agreement (such number of shares, the “Issuable Maximum”). “Shareholder Approval” means such approval as may be required by the
applicable rules and regulations of the Principal Market (or any successor entity) from the shareholders of the Company with respect to the transactions contemplated by this Agreement, including the issuance of all of the Underlying Shares and
shares of Common Stock issuable upon exercise of the Warrants in excess of 19.9% of the Company’s issued and outstanding Common Stock on the Closing Date. 
  

10. Registration Rights, Indemnification. 
  
 10.1 Registration Rights Granted. The Company hereby grants registration rights to the Purchaser pursuant to a Registration Rights
Agreement dated as of even date herewith between the Company and the Purchaser. 
  

 22 

 10.2 Indemnification. (a) In the event of a registration of any Registrable
Securities under the Securities Act pursuant to the Registration Rights Agreement, the Company will indemnify and hold harmless the Purchaser, and its officers, directors and each other person, if any, who controls the Purchaser within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Purchaser, or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Registrable Securities were registered under the Securities Act
pursuant to the Registration Rights Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Purchaser, and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by or on behalf of the Purchaser or any such person in writing specifically for use in any such document. 
  
 (b) In the event of a registration of the Registrable
Securities under the Securities Act pursuant to the Registration Rights Agreement, the Purchaser will indemnify and hold harmless the Company, and its officers, directors and each other person, if any, who controls the Company within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the Securities Act
pursuant to the Registration Rights Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however, that the Purchaser will be liable in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing to the Company by or on behalf of the Purchaser specifically for use in any such document. 
  

 23 

 (c) Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to such indemnified party other than under this Section 10.2(c) and shall only relieve it from any liability which it may have to such indemnified party under this Section 10.2(c) if and to
the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled
to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume
and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 10.2(c) for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof; if the
indemnified party retains its own counsel, then the indemnified party shall pay all fees, costs and expenses of such counsel, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. 
  
 (d) In order to provide for just and equitable contribution in the event of joint liability under the
Securities Act in any case in which either: (i) the Purchaser, or any controlling person of the Purchaser, makes a claim for indemnification pursuant to this Section 10.2 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 10.2 provides for indemnification
in such case; or (ii) contribution under the Securities Act may be required on the part of the Purchaser or controlling person of the Purchaser in circumstances for which indemnification is provided under this Section 10.2; then, and in each such
case, the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Purchaser is responsible only for the portion
represented by the percentage that the public offering price of its securities offered by the registration statement bears to the public offering price of all securities offered by such registration statement, provided, however, that, in any such
case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10 of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. 
  
 10.3 Offering Restrictions. Except as previously disclosed in the SEC Reports or in the Exchange Act
Filings, or stock or stock options granted to employees or directors of the 

  

 24 

 
Company; or shares of preferred stock issued to pay dividends in respect of the Company’s preferred stock; or equity or debt issued in connection with
an acquisition of a business or assets by the Company; or the issuance by the Company of stock in connection with the establishment of a joint venture partnership or licensing arrangement (these exceptions hereinafter referred to as the
“Excepted Issuances”), the Company will not issue any securities with a continuously variable/floating conversion feature (e.g., securities with a “floorless conversion” feature, but excluding customary antidilution protection)
that are or could be (by conversion or registration) free-trading securities (i.e. common stock subject to a registration statement) prior to the full repayment or conversion of the Note (the “Exclusion Period”). 
  
 11. Miscellaneous. 
  
 11.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION OF
SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY OTHER AGREEMENT DELIVERED IN CONNECTION HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF LAW, THEN SUCH PROVISION SHALL BE
DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER ANY LAW SHALL NOT AFFECT THE VALIDITY OR
ENFORCEABILITY OF ANY OTHER PROVISION OF ANY AGREEMENT. 
  
 11.2 Survival. The representations, warranties, covenants and agreements made herein shall survive any investigation made by the Purchaser and the closing of the transactions contemplated hereby to the extent
provided therein. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of such certificate or instrument. 
  
 11.3 Successors. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the parties hereto and shall inure to the benefit of and be enforceable by each person who shall be a holder of the Securities from time to time, other than the holders of Common Stock
which has been sold by the Purchaser pursuant to Rule 144 or an effective registration statement. Purchaser may not assign its rights hereunder to a competitor of the Company. 
  

 25 

 11.4 Entire Agreement. This Agreement, the exhibits and schedules hereto, the
Related Agreements and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as specifically set forth herein and therein. 
  
 11.5 Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 
  
 11.6 Amendment and Waiver. 
  
 (a) This Agreement may be amended or modified only upon the written consent of the Company and the Purchaser. 
  
 (b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written consent of the Purchaser. 
  
 (c) The obligations of the Purchaser and the rights of the Company under this Agreement may be waived only with the written consent of the
Company. 
  
 11.7 Delays or Omissions. It
is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement or the Related Agreements, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement, the
Note or the Related Agreements, by law or otherwise afforded to any party, shall be cumulative and not alternative. 
  
 11.8 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: 
  
 (a) upon personal delivery to the party to be notified;

  
 (b) when sent by confirmed facsimile if sent
during normal business hours of the recipient, if not, then on the next business day; 
  
 (c) three (3) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or

  
 (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. 
  

 26 

 All communications shall be sent as follows: 
  

			
	If to the Purchaser, to:	  	 PainCare Holdings, Inc.
 37 North Orange
Avenue
 Suite 500
 Orlando, FL 32801
 Attention: Chief Financial Officer
 Facsimile:
407-926-6616

		
	 	  	 with a copy to:
 Cloverleaf Capital Advisors,
LLC
 12200 W. Colonial
 Suite 303
 Winter Garden, FL 34787
 Attention:   E. Nicholas Davis
III
 Facsimile:  (407) 905-9695

		
	If to the Company, to:	  	 Laurus Master Fund, Ltd.
 c/o Ironshore Corporate
Services ltd.
 P.O. Box 1234 G.T.
 Queensgate House, South Church
Street
 Grand Cayman, Cayman Islands
 Facsimile:
345-949-9877

		
	 	  	with a copy to:
		
	 	  	 John E. Tucker, Esq.
 825 Third Avenue 14th
Floor
 New York, NY 10022
 Facsimile:
212-541-4434

  
 or at such other address as the
Company or the Purchaser may designate by written notice to the other parties hereto given in accordance herewith. 
  
 11.9 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including, without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 
  
 11.10 Titles and Subtitles. The titles of the sections and subsections of the Agreement are for convenience of reference only and
are not to be considered in construing this Agreement. 
  

 27 

 11.11 Facsimile Signatures; Counterparts. This Agreement may be executed by
facsimile signatures and in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 
  
 11.12 Broker’s Fees. Except as set forth on Schedule 11.12 hereof, Each party hereto represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the
transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this Section 11.12 being untrue. 
  
 11.13 Construction. Each party acknowledges that its
legal counsel participated in the preparation of this Agreement and the Related Agreements and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other. 
  
 [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK 
  

 28 

 IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE AGREEMENT as of the date set
forth in the first paragraph hereof. 
  

									
	 COMPANY:
	 	 	 	 PURCHASER:

			
	 PAINCARE HOLDINGS, INC.
	 	 	 	 LAURUS MASTER FUND, LTD.

					
	By:	 	 	 	 	 	By:	 	 
	 Name:
	 	 	 	 	 	 Name:
	 	 
	 Title:
	 	 	 	 	 	 Title:
	 	 

  

 29Form of 2007 Debenture

 Exhibit 4.3 
  
 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED
BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES. 
  
 Date of Issuance: July 1, 2004 
  
 $1,500,000 

 
 7.5% CONVERTIBLE DEBENTURE 
 DUE JULY 1, 2007 
  
 THIS DEBENTURE is one of a series of duly authorized and issued 7.5% Convertible Debentures of PainCare Holdings, Inc., a Florida corporation, having a
principal place of business at 37 North Orange Avenue, Suite 500, Orlando, FL 32801 (the “Company”), designated as its 7.5% Convertible Debenture, due July 1, 2007(the “Debentures”). 
  
 FOR VALUE RECEIVED, the Company promises to pay to Midsummer Investment, Ltd.
or its registered assigns (the “Holder”), the principal sum of $1,500,000 on July 1, 2007 or such earlier date as the Debentures are required or permitted to be repaid as provided hereunder (the “Maturity Date”),
and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 7.5% per annum, payable quarterly on March 1, June 1, September 1 and December 1, beginning on the first such date
after the Original Issue Date and on each Conversion Date (as to that principal amount then being converted) and on the Maturity Date (except that, if any such date is not a Business Day, then such payment shall be due on the next succeeding
Business Day) (each such date, an “Interest Payment Date”), in cash or shares of Common Stock at the Interest Conversion Rate, or a combination thereof; provided, however, payment in shares of Common Stock may only
occur if 

  

 1 

 
during the 20 Trading Days immediately preceding the Interest Payment Date all of the Equity Conditions have been met and the Company shall have given the
Holder notice in accordance with the notice requirements set forth below. Subject to the terms and conditions herein, the decision whether to pay interest hereunder in shares of Common Stock or cash shall be at the discretion of the Company. Not
less than 20 Trading Days prior to each Interest Payment Date, the Company shall provide the Holder with written notice of its election to pay interest hereunder either in cash or shares of Common Stock (the Company may indicate in such notice that
the election contained in such notice shall continue for later periods until revised). Within 20 Trading Days prior to an Interest Payment Date, the Company’s election (whether specific to an Interest Payment Date or continuous) shall be
irrevocable as to such Interest Payment Date. Subject to the aforementioned conditions, failure to timely provide such written notice shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash. Interest
shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest and other amounts which may become due
hereunder, has been made. Payment of interest in shares of Common Stock shall otherwise occur pursuant to Section 4(b) and only for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date.
Interest shall cease to accrue with respect to any principal amount converted, provided that the Company in fact delivers the Underlying Shares within the time period required by Section 4(b)(i). Interest hereunder will be paid to the Person in
whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures (the “Debenture Register”). Except as otherwise provided herein, if at anytime the Company pays interest
partially in cash and partially in shares of Common Stock, then such payment shall be distributed ratably among the Holders based upon the principal amount of Debentures held by each Holder. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at the rate of 18% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) (“Late Fee”) which will accrue daily, from the date such interest is due
hereunder through and including the date of payment. Notwithstanding anything to the contrary contained herein, if on any Interest Payment Date the Company has elected to pay interest in Common Stock and is not able to pay accrued interest in the
form of Common Stock because it does not then satisfy the conditions for payment in the form of Common Stock set forth above, then, at the option of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this
Section 4 or paying the regularly scheduled cash interest payment, shall deliver, within three Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of the number of shares of Common Stock otherwise
deliverable to the Holder in connection with the payment of interest due on such Interest Payment Date and the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is
made. The Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder. 
  

 2 

 This Debenture is subject to the following additional provisions: 
  
 Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange. 
  
 Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. 
  
 Section 3. Events of Default. 
  
 a) “Event of Default”, wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

  
 i) any default in the payment of the
principal of, interest (including Late Fees) on, or liquidated damages in respect of, any Debentures, free of any claim of subordination, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default is not cured, if possible to cure, within 10 days of notice of such default sent by the Holder; 
  
 ii) the Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of
any of the Transaction Documents (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion or interest payment which breach is addressed in clause (x) below) which is not cured, if
possible to cure, within 10 days of notice of such default sent by the Holder; 
  
 iii) the Company or any of its subsidiaries shall commence, or there shall be commenced against the Company or any such subsidiary a case
under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary thereof or there is commenced against the Company or any subsidiary thereof any such bankruptcy, 

  

 3 

 
insolvency or other proceeding which remains undismissed for a period of 60 days; or the Company or any subsidiary thereof is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or the Company or any subsidiary thereof makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or the Company or any subsidiary thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary
thereof shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary thereof for the purpose of effecting any of
the foregoing; 
  
 iv) the Company shall default
in any of its obligations under any other Debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company in an amount exceeding $200,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in
such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 
  
 v) the Common Stock shall not be eligible for quotation on or quoted for trading on a Principal Market and shall not again be eligible for
and quoted or listed for trading thereon within 45 Trading Days so long as the Common Stock is quoted on the OTCBB during any such period; 
  
 vi) the Company shall be a party to any Change of Control Transaction, shall agree to sell or dispose of all or in excess of 33% of its
assets in one or more transactions (whether or not such sale would constitute a Change of Control Transaction) or shall redeem or repurchase more than a de minimis number of its outstanding shares of Common Stock or other equity securities of the
Company (other than redemptions of Underlying Shares and repurchases of shares of Common Stock or other equity securities of departing officers and directors of the Company; provided no repurchase shall exceed $100,000 for any officer or director);

  

 4 

 vii) a Registration Statement shall not have been declared effective by the Commission on
or prior to the 210th calendar day after the Original Issue Date; 
  
 viii) if, during the Effectiveness Period (as defined in the Registration Rights Agreement), the effectiveness of the Registration Statement lapses for any reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement, in either case, for more than 15 consecutive Trading Days or 30 non-consecutive Trading Days during any 12 month period; provided,
however, that in the event that the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and in the written opinion of counsel to the Company, the Registration
Statement, would be required to be amended to include information concerning such transactions or the parties thereto that is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 60 consecutive
Trading Days during any 12 month period relating to such an event; 
  
 ix) Intentionally Omitted. 
  
 x) the Company shall fail for any reason to deliver certificates to a Holder prior to the tenth Trading Day after a Conversion Date pursuant to and in accordance with Section 4(b) or the Company shall provide notice
to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions of any Debentures in accordance with the terms hereof; 
  
 (xi) the Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined
herein) within five days after notice thereof is delivered hereunder; or 
  
 (xii) any officer, director or shareholder holding more than 10% of the issued and outstanding shares of Common Stock shall breach the agreements delivered to the initial Holders pursuant to Section 2.2(a)(v) of the
Purchase Agreement and the Company does not obtain Shareholder Approval. 
  
 b) If any Event of Default occurs and is continuing, the full principal amount of this Debenture then outstanding, together with interest and other amounts owing in respect thereof, to the date of acceleration shall
become at the Holder’s election, immediately due and payable in cash. The aggregate amount payable upon an Event of Default shall be equal to the Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any Event of Default that
results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at the rate of 15% per annum 

  

 5 

 
(or such lower maximum amount of interest permitted to be charged under applicable law. All Debentures for which the full prepayment price hereunder shall
have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior
to payment hereunder and the Holder shall have all rights as a Debenture holder until such time, if any, as the full payment under this Section shall have been received by it. No such rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon. 
  
 Section
4. Conversion. 
  
 a) i) At any time
after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time (subject to the
limitations on conversion set forth in Section 4(a)(ii) hereof). The Holder shall effect conversions by delivering to the Company the form of Notice of Conversion attached hereto as Annex A (a “Notice of Conversion”), fully
executed and completed in its entirety, including specifying therein the principal amount of Debentures to be converted and the date on which such conversion is to be effected, which never shall be a date earlier than the date such Notice of
Conversion is deemed received by the Company (a “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed received by the
Company. To effect conversions hereunder, the Holder shall not be required to physically surrender Debentures to the Company unless the entire principal amount of this Debenture plus all accrued and unpaid interest thereon has been so converted.
Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and
the date of such conversions. The Company shall deliver any objection to any Notice of Conversion within 1 Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof. 
  

 6 

 ii) Conversion Limitations. 
  
 (A) Notwithstanding anything herein to the contrary, if the
Company has not obtained Shareholder Approval (as defined below), if required by the applicable rules and regulations of the Principal Market (or any successor entity), then the Company may not issue upon conversion of the Debentures, in the
aggregate, in excess of (1) 19.999% of the number of shares of Common Stock outstanding on the Trading Day immediately preceding the Original Issue Date, (2) less any shares of Common Stock issued as payment of interest or upon exercise of the
Warrants issued to Holders of the Debentures on the Original Issue Date pursuant to the Purchase Agreement (such number of shares, the “Issuable Maximum”). Each Holder shall be entitled to a portion of the Issuable Maximum equal to
the quotient obtained by dividing (x) the aggregate principal amount of the Debenture(s) issued and sold to such Holder on the Original Issue Date by (y) the aggregate principal amount of all Debentures issued and sold by the Company on the Original
Issue Date. If any Holder shall no longer hold the Debenture(s), then such Holder’s remaining portion of the Issuable Maximum shall be allocated pro-rata among the remaining Holders. If on any Conversion Date: (1) the applicable Set Price then
in effect is such that the shares issuable under this Debenture on any Conversion Date together with the aggregate number of shares of Common Stock that would then be issuable upon conversion in full of all then outstanding Debentures would exceed
the Issuable Maximum, and (2) the Company’s shareholders shall not have previously approved the transactions contemplated by the Transaction Documents, as may be required by the applicable rules and regulations of the Principal Market (or any
successor entity), if any (the “Shareholder Approval”), then the Company shall issue to the Holder requesting a conversion a number of shares of Common Stock equal to such Holder’s pro-rata portion (which shall be calculated
pursuant to the terms hereof) of the Issuable Maximum and, with respect to the remainder of the aggregate principal amount of the Debentures (including any accrued interest) then held by such Holder for which a conversion in accordance with the
applicable conversion price would result in an issuance of shares of Common Stock in excess of such Holder’s pro-rata portion (which shall be calculated pursuant to the terms hereof) of the Issuable Maximum (the “Excess
Principal”), the Company shall be prohibited from converting such Excess Principal, and shall notify the Holder of the reason therefor. This Debenture shall thereafter be unconvertible to such extent until and unless Shareholder Approval is
subsequently obtained or is otherwise not required, but this Debenture shall otherwise remain in full force and effect. 
  

 7 

 (B) The Company shall not effect any conversion of this Debenture, and the Holder shall
not have the right to convert any portion of this Debenture, pursuant to Section 4(a)(i) or otherwise, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which the determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Debenture beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation, any other Debentures or the Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or
any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(a)(ii), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. To the extent that the limitation contained
in this section applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder) and of which a portion of this Debenture is convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company
shall have no obligation to verify or confirm the accuracy of such determination. For purposes of this Section 4(a)(ii), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Company’s Transfer Agent setting
forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its affiliates since the date as of which such

  

 8 

 
number of outstanding shares of Common Stock was reported. The provisions of this Section 4(a)(ii) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days’ prior notice to the Company, and the provisions of this Section 4(a)(ii)(B) shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). 
  
 iii) Underlying Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a
conversion shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Set Price. 
  
 (b) i) Subject to the receipt of a fully completed and executed Notice of Conversion, not later than three
Trading Days after any Conversion Date, the Company will deliver to the Holder a certificate or certificates representing the Underlying Shares which shall be free of restrictive legends and trading restrictions (other than those required by law or
the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of Debentures (including, if so timely elected by the Company, shares of Common Stock representing the payment of accrued interest) and (B)
a Company check in the amount of accrued and unpaid interest (if the Company is required to pay accrued interest in cash). The Company shall, if available and if allowed under applicable securities laws, use its reasonable best efforts to deliver
any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. If in the case of any Notice
of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the fifth Trading Day after a Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the principal amount of Debentures tendered for conversion. 
  
 ii) If the Company fails for any reason to deliver to the
Holder such certificate or certificates pursuant to Section 4(b)(i) by the third Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $5,000 of principal amount
being converted, $25 per Trading Day (increasing to $50 per Trading Day after 3 Trading Days after such damages begin to accrue and increasing to $200 per Trading Day 6 Trading Days after such after such damages begin to accrue) for each Trading Day
after such third Trading Day until such certificates are delivered. The Company’s obligations to issue and deliver the Underlying Shares upon conversion of this Debenture in accordance with the terms hereof are 

  

 9 

 
absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the
Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such
Underlying Shares; provided, however, such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event a Holder of this Debenture shall elect to convert any or all of
the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or any one associated or affiliated with the Holder of has been engaged in any violation of law, agreement or for any other reason,
unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained and the Company posts a surety bond for the benefit of the Holder in the amount of 100% of
the Mandatory Prepayment Amount, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of an injunction precluding the same, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. Nothing herein shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 3 herein for the Company’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holders from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

  
 (iii) In addition to any other rights
available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(b)(i) by the third Trading Day after the Conversion Date, and if after such third Trading Day the Holder is
required by its brokerage firm to purchase (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if
any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by 

  

 10 

 
(2) the actual sale price of the Common Stock at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation and
(B) at the option of the Holder, either reissue Debentures in principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely
complied with its delivery requirements under Section 4(b)(i). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures with respect to which
the actual sale price of the Underlying Shares at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall
be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. Notwithstanding anything contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure to timely deliver certificates hereunder and the Company timely pays in full such payment, the Company shall not be required to pay such Holder liquidated damages under Section 4(b)(ii)
in respect of the certificates resulting in such Buy-In. 
  
 (c) i) The conversion price in effect on any Conversion Date shall be equal to $3.15 (subject to adjustment herein)(the “Set Price”). 
  
 ii) If the Company, at any time while the Debentures are
outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall
not include any shares of Common Stock issued by the Company pursuant to this Debenture, including as interest thereon), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Set Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of
a subdivision, combination or re-classification. 
  
 iii) If the Company or any subsidiary thereof, as applicable, at any time while Debentures are outstanding, shall offer, sell, grant any option to purchase or offer, 

  

 11 

 
sell or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Capital Shares or Capital Shares Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Set Price (“Dilutive Issuance”), as adjusted hereunder (if the holder
of the Capital Shares or Capital Shares Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or
rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Set Price, such issuance shall be deemed to have occurred for less than the Set
Price), then the Set Price shall be reduced to equal the effective conversion, exchange or purchase price for such Capital Shares or Capital Shares Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever
such Capital Shares or Capital Shares Equivalents are issued. The Company shall notify the Holder in writing, no later than the business day following the issuance of any Capital Shares or Capital Shares Equivalents subject to this section,
indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms. 
  
 iv) If the Company, at any time while Debentures are outstanding, shall distribute to all holders of Common Stock (and not to Holders)
evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security, then in each such case the Set Price shall be determined by multiplying such price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the
then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the record date mentioned above. 
  
 v) All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 4, the number of shares of Common Stock outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) outstanding. 
  

 12 

 vi) Whenever the Set Price is adjusted pursuant to any of Section 4(c)(ii)—(v), the
Company shall promptly mail to each Holder a notice setting forth the Set Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to have issued Capital Shares or Capital Shares Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a
Variable Rate Transaction (as defined in the Purchase Agreement), or the lowest possible adjustment price in the case of an MFN Transaction (as defined in the Purchase Agreement). 
  
 vii) If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the
Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the Debentures, and shall cause to be mailed to the Holders at
their last addresses as they shall appear upon the stock books of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such
notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Holders are entitled to convert Debentures during the 20-day period commencing the date of such
notice to the effective date of the event triggering such notice. 
  

 13 

 viii) If, at any time while this Debenture is outstanding, (A) the Company effects any
merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then upon any subsequent conversion of this
Debenture, the Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any
such conversion, the determination of the Set Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Set Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and
evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to
comply with the provisions of this paragraph (c) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. 
  
 (ix) Notwithstanding the foregoing, no adjustment will be
made under this paragraph (c) in respect of (A) the granting or issuance of shares of capital stock or of options to employees, officers, directors and consultants of the Company pursuant to any stock option plan agreement or arrangement duly
adopted or approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (B) upon the exercise of this Debenture or

  

 14 

 
any other Debenture of this series or of any other series or security issued by the Company in connection with the offer and sale of this Company’s
securities pursuant to the Purchase Agreement, or (C) upon the exercise of or conversion of any Capital Shares Equivalents, rights, options or warrants issued and outstanding on the Original Issue Date, provided such securities have not been amended
since the date of the Purchase Agreement except as a result of the Purchase Agreement, or (D) issuance of securities in connection with acquisitions, strategic investments, or strategic partnering arrangements, the primary purpose of which is not to
raise capital. 
  
 (d) The Company covenants that
it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Debentures and payment of interest on the Debenture, each as herein provided, free
from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of shares of the Common Stock as shall (subject to any additional requirements of the Company as to reservation of
such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 4(b)) upon the conversion of the outstanding principal amount of the Debentures and payment of interest hereunder. The
Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Registration Statement is then effective under the Securities Act,
registered for public sale in accordance with such Registration Statement. 
  
 (e) Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the VWAP at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

  
 (f) The issuance of certificates for shares
of the Common Stock on conversion of the Debentures shall be made without charge to the Holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of such Debentures so converted and the Company
shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that
such tax has been paid. 
  

 15 

 (g) Any and all notices or other communications or deliveries to be provided by the
Holders hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth
above, facsimile number (407) 926-6616 Attn: Randy Lubinsky or such other address or facsimile number as the Company may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any and all notices or
other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone
number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date
after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. 
  
 Section 5. Definitions. For the purposes hereof, in addition to
the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein have the meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the following meanings: 
  
 “Business Day” means any day except
Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. 
  
 “Change of Control Transaction” means the
occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through
legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 33% of the voting securities of the Company, or (ii) a replacement at one time or within a three year period of more than one-half of the
members of the Company’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on
any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (iii) the execution by 

  

 16 

 
the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i) or (ii).

  
 “Commission” means the
Securities and Exchange Commission. 
  
 “Common Stock” means the common stock, $.0001 par value per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed. 
  
 “Conversion Date” shall have the meaning
set forth in Section 4(a)(i) hereof. 
  
 “Equity Conditions” shall mean (i) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Conversion Notices, if any, (ii) all liquidated damages and other
amounts owing in respect of the Debentures shall have been paid; (iii) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future), (iv) the Common Stock is trading on the Principal Market and all of the shares issuable pursuant to the
Transaction Documents are listed for trading on a Principal Market (and the Company believes, in good faith, that trading of the Common Stock on a Principal Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient
number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (vi) there is then existing no Event of Default or event which, with the passage
of time or the giving of notice, would constitute and Event of Default and (vii) all of the shares issued or issuable pursuant to the transaction documents in full, ignoring for such purposes any conversion or exercise limitation therein, would not
violate the limitations set forth in Sections 4(a)(ii)(A) and 4(a)(ii)(B) and (ix) no public announcement of a pending or proposed Fundamental Transaction or acquisition transaction has occurred that has not been consummated. 
  
 “Exchange Act” means the Securities
Exchange Act of 1934, as amended. 
  
 “Interest Conversion Rate” means the lesser of (i) the Set Price and (ii) 90% of the lesser of (a) the average of the 20 VWAPs immediately prior to the applicable Interest Payment Date or (b) the average of the 20 VWAPs
immediately prior to the date the applicable interest payment shares are issued and delivered if after the Interest Payment Date. 
  
 “Late Fees” shall have the meaning set forth in the second paragraph to this Debenture. 
  

 17 

 “Mandatory Prepayment Amount” for any Debentures shall equal the sum of
(i) the greater of: (A) 120% of the principal amount of Debentures then outstanding to be prepaid, plus all accrued and unpaid interest thereon and all other accrued and unpaid amounts due hereunder, or (B) the principal amount of Debentures then
outstanding to be prepaid, plus all other accrued and unpaid interest hereon and other amounts due hereunder, divided by the Set Price on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever is greater, and (ii)
all other amounts, costs, expenses and liquidated damages due in respect of such Debentures. 
  
 “Original Issue Date” shall mean the date of the first issuance of the Debentures regardless of the number of transfers
of any Debenture and regardless of the number of instruments which may be issued to evidence such Debenture. 
  
 “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or
political subdivision thereof or a governmental agency. 
  
 “Purchase Agreement” means the Securities Purchase Agreement, dated as of July 1, 2004, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time
in accordance with its terms. 
  
 “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, to which the Company and the original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms. 
  
 “Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a
“selling stockholder” thereunder. 
  
 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 
  
 “Set Price” shall have the meaning set forth in Section 4(c)(i). 
  
 “Trading Day” means (a) a day on which the
shares of Common Stock are traded on a Principal Market on which the shares of Common Stock are then listed or quoted, or (b) if the shares of Common Stock are not quoted on a Principal Market, a day on which the shares of Common Stock are quoted in
the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency 

  

 18 

 
succeeding its functions of reporting prices); provided, that in the event that the shares of Common Stock are not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean a Business Day. 
  
 “Transaction Documents” shall have the meaning set forth in the Purchase Agreement. 
  
 “Underlying Shares” means the shares of Common Stock issuable upon conversion of Debentures or as payment of interest in
accordance with the terms hereof. 
  
 “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Principal Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Principal Market on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern
Time); (b) if the Common Stock is not then listed or quoted on a Principal Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Purchasers and reasonably acceptable to the Company. 
  
 Section 6. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein. As long as this Debenture is outstanding, the Company shall not and shall cause it subsidiaries not to, without the
consent of the Holder, (a) amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder; (b) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de
minimis number of shares of its Common Stock or other equity securities other than as to the Underlying Shares to the extent permitted or required under the Transaction Documents or as otherwise permitted by the Transaction Documents; or (c)
enter into any agreement with respect to any of the foregoing. 
  
 Section 7. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated 

  

 19 

 
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company. 
  
 Section 8. So long as any portion of this Debenture is outstanding,
the Company will not and will not permit any of its subsidiaries to, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness or liens of any kind, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom that is senior to, or pari passu with, in any respect, the Company’s obligations under the Debentures, except for indebtedness or liens that are in
existence as of the date of this Debenture, without the prior consent of the Holder, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the consent of the Holders shall not be required for the incurrence by the Company
of any indebtedness (the “Permitted Indebtedness”), with respect to which the Company becomes directly or indirectly liable and which represents the deferred purchase price (or a portion thereof) of any property or service or
business acquired by the Company, whether, by purchase, consolidation, merger or otherwise; and the granting by the Company of any liens, claims or encumbrances on the Company’s assets in order to secure repayment of the Permitted Indebtedness.
Permitted Indebtedness shall not include the borrowing of money by the Company or any Subsidiary from any Person. Any Permitted Indebtedness incurred by the Company or any Subsidiary for the purchase of any property, service or business not
constituting a “business” for purposes of Section 11-01(d) of SEC Regulation S-X may only be secured by the assets purchased, and not by any general lien or encumbrance on the Company’s, or any Subsidiary’s, assets generally.

  
 Section 9. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service 

  

 20 

 
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding. 
  
 Section 10. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of
any other provision of this Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing. 
  
 Section 11. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable
laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this
Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no
such law has been enacted. 
  
 Section 12. Whenever any
payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. 
  
 ********************* 
  

 21 

 IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to be duly executed by a duly
authorized officer as of the date first above indicated. 
  

			
	PAINCARE HOLDINGS, INC.
		
	 By:
	 	 
	 	 	 Name:

	 	 	 Title:

  
 ANNEX A 
  
 NOTICE OF CONVERSION 
  
 The undersigned hereby elects to convert principal under the 7.5% Convertible Debenture of
PainCare Holdings, Inc. (the “Company”), due on July 1, 2007, into shares of common stock, $         par value per share (the “Common Stock”), of the Company according to the
conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. 
  
 By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Company’s
Common Stock does not exceed the amounts determined in accordance with Section 13(d) of the Exchange Act, specified under Section 4 of this Debenture. 
  
 The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of
Common Stock. 
  
 Conversion calculations: 
  

									
	 	 	 	 	Date to Effect Conversion:
			
	 	 	 	 	Principal Amount of Debentures to be Converted:
			
	 	 	 	 	Payment of Interest in Common Stock  ̈ yes  ̈ no
			
	 	 	 	 	 If yes, $         of Interest Accrued on Account of Conversion at Issue.

			
	 	 	 	 	Number of shares of Common Stock to be issued:
					
	 	 	 	 	 	 	Signature:	 	 
	 	 	 	 	 	 	Name:	 	 
	 	 	 	 	 	 	Address:	 	 

  

 22 

 Schedule 1 
  

CONVERSION SCHEDULE 
  
 7.5% Convertible Debentures due on July 1, 2007, in the aggregate principal amount of
$                     issued by PainCare Holdings, Inc. This Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture. 
  
 Dated: 
  

							
	 Date of Conversion
 (or for first entry, Original Issue
Date)

	 	 Amount of Conversion

	 	 Aggregate Principal Amount
Remaining Subsequent to Conversion
 (or original Principal Amount)

	  	Company Attest

	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 
	 	 	 	 	 	  	 

  

 23

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