EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

BY AND AMONG

PAINCARE HOLDINGS, INC.,

AND

THE CENTER FOR PAIN MANAGEMENT, LLC

AND ITS

MEMBERS

EFFECTIVE DATE: DECEMBER 1, 2004.

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into effective the 1^st day of December, 2004 (the “Execution Date”), by and among The Center for Pain Management, LLC, an Maryland limited liability company (the "Company"), and Marc A. Loev, M.D., Lester A. Zuckerman, M.D., P. Bobby Dey, M.D., Mark H. Coleman, M.D., Michael J. Daly, M.D. and Ali El-Mohandes, M.D.(hereinafter collectively the "Members") and PainCare Holdings, Inc., a Florida corporation (hereinafter referred to as “PainCare”) and PainCare Acquisition Company XV, Inc., a Florida corporation (hereinafter called “Subsidiary”). The Company and the Members are sometimes referred to herein as the “Sellers” and PainCare and the Subsidiary are sometimes referred to herein as the “Acquiring Companies.” The Acquiring Companies and the Sellers are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

W I T N E S S E T H:

WHEREAS, the Members are licensed medical providers who reside and practice medicine in the State of Maryland and who own one hundred percent (100%) of the membership interest in the Company (the “Membership Interests”);

WHEREAS, the Company through its Members, physician employees and other personnel provide pain medicine, pain management procedures and other ancillary services (the “Business”) at the following locations: 11921 Rockville Pike, Ste. 505, Rockville, Maryland 20852, 3901 Greenspring Avenue, Ste. 304, Baltimore, Maryland 21211, 1150 Professional Court, Ste. L, Hagerstown, Maryland 21740, and 305 Hospital Drive, Ste. 304, Glen Burnie, Maryland 21061 (the “Business Locations”); and

WHEREAS, the Sellers are desirous of selling certain non-medical assets of the Company; and

WHEREAS, the Acquiring Companies are desirous of buying certain non-medical assets of the Company all on the following terms and conditions; and

WHEREAS,  as a material inducement for the Acquiring Companies to purchase such assets the Company will enter into a Management Services Agreement with the Subsidiary.

NOW THEREFORE, in consideration of the mutual promises and covenants herein con­tained and the sum of $10.00 and other good and valuable consideration paid by the Acquiring Companies to the Sellers, receipt of which is hereby acknowledged by the Sellers, it is mutually covenanted and agreed by the parties hereto as follows:

1.

PURCHASE AND SALE OF ASSETS

1.1   Assets to be Transferred.  Subject to the terms and conditions of this Agreement, on the Closing Time (as hereinafter defined), and except as otherwise stated, PainCare shall purchase on behalf of the Subsidiary and the Members shall cause the Company to sell, transfer, convey, assign, and deliver to Subsidiary all of the Company’s non-medical Business rights, claims and assets (of every kind, nature, character and description, whether real, personal or mixed, tangible or intangible, accrued, contingent or otherwise, and wherever situated other than the Excluded Assets specified in Section 1.2 below) which are used, held for use or acquired or developed for use by the Company in the Business, or developed in the course of conducting the Business or by persons employed by the Company in the Business (collectively the "Purchased Assets").  The Purchased Assets shall include, without limitation, all the following assets or rights of the Company, to the extent so used, held, acquired or developed in the Business:

(a)  Cash and Cash Equivalents and Accounts Receivable. All cash, cash equivalents, and the Accounts Receivable of the Company as of the Closing Time which are described in Disclosure Schedule 1.1.(a).

(b)  Personal Property.  All of  the Company's rights in, to and under all, instruments, equipment, furniture, machinery and other items of tangible personal property including, without limitation, the personal property leases described in the Disclosure Schedule 1.1(b);

(c)   Inventory.  All inventories including, without limitation, supplies, merchandise and durable medical equipment, together with related packaging and delivery materials (collectively the "Inventory").

(d)   Books and Records.  All books and records of the Company, including without limitation, all credit records, payroll records, computer records, computer programs, contracts, agreements, operating manuals, schedules of assets, correspondence, books of account, files, papers, books and all other public and confidential business records but excluding the Company's corporate minute books and tax records (together the "Business Records"), whether such Business Records are in hard copy form or are electronically or magnetically stored;.

(e)   Intellectual Property.  The Company’s interest in all of its Intellectual Property.  As used herein, the term "Intellectual Property" shall mean and include: (i) all trademark rights, business identifiers, trade dress, logos, service marks, trade names and brand names, all registrations thereof and applications therefore and all goodwill associated with the foregoing; (ii) all copyrights, copyright registrations and copyright applications, and all other rights associated with the foregoing and the underlying works of authorship; (iii) all patents and patent applications, and all international proprietary rights associated therewith; (iv) all contracts or agreements granting any right, title, license or privilege under the intellectual property rights of any third party; (v) all inventions, mask works and mask work registrations, know-how, discoveries, improvements, designs, trade secrets, shop and royalty rights, employee covenants and agreements respecting intellectual property and non-competition and all other types of intellectual property; (vi) all computer software (including all data and related documentation); (vii) all other proprietary rights; (viii) all copies and tangible

embodiments of the foregoing (in whatever form or medium); and (ix) all claims for infringement or breach of any of the foregoing.

(f)   Contracts.  All of the Company’s rights in, to and under all contracts, agreements, license agreements, purchase orders and sales orders (hereinafter "Contracts") of the Company as it relates to the Business (third party payors, licenses, etc.).  To the extent that any Contract for which assignment to Subsidiary is provided herein is not assignable without the consent of another party, this Agreement shall not constitute an assignment or an attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof. The Sellers and the Acquiring Companies agree to use their reasonable best efforts (without any requirement on the part of the Acquiring Companies to pay any money or agree to any change in the terms of any such Contract) to obtain the consent of such other Party to the assignment of any such Contract to the Subsidiary in all cases in which such consent is or may be required for such assignment.  If any such consent shall not be obtained, the Sellers agree to cooperate with the Acquiring Companies in any reasonable arrangement designed to provide for the Acquiring Companies the benefits intended to be assigned to Subsidiary under the relevant Contract, including enforcement at the cost and for the account of the Acquiring Companies of any and all rights of the Sellers against the other Party thereto arising out of the breach or cancellation thereof by such other Party or otherwise.  If and to the extent that such arrangement cannot be made, the Acquiring Companies, upon notice to the Sellers, shall have no obligation pursuant to Section 2.1 or otherwise with respect to any such Contract and any such Contract shall not be deemed to be a Purchased Asset hereunder.

(g)   Computer Software.  All computer programs and other software, documentation and related property and information of the Company.

(h)  Licenses; Permits. All franchises, licenses, permits, certificates, approvals and other governmental authorizations necessary to own and operate any of the Purchased Assets, a complete and correct list of which is set forth in the Disclosure Schedule 1.1(h) (the "Licenses");

(i)  General Intangibles.  All causes of action arising out of occurrences before or after the Closing Time, and other intangible rights and assets.

(j)

Telephone Numbers.  All of the Company's right, title and interest in, to and under all telephone numbers used in connection with its Business, including all extensions thereto;

(k)

 Warranties.  All rights in, to and under all representations, warranties, covenants and guaranties made or provided by third parties to or for the benefit of the Company with respect to any of the Purchased Assets;

(l)  Prepaids.  All of the Company's prepaid expenses, prepaid insurance, deposits and other similar items ("Prepaid Items");

(m) Leasehold Improvements. All rights, titles and interests in, to and under all structures, fixtures, landings, constructions in progress, improvements, betterments, installations, and additions constructed or located on or attached or affixed to the leasehold estates conferred on the Company under or by virtue of, all real property lease and sublease agreements (such real property lease and sublease agreements are hereinafter referred to as "Real Property Leases" which are described on the Disclosure Schedule 1.1(m)).

1.2   Excluded Assets.  Section 1.1 notwithstanding, the Company shall not sell, transfer, assign, convey or deliver to Subsidiary, and the Acquiring Companies will not purchase or accept the following assets of the Company:

(a)  Tax Credits and Records.  Federal, state and local income and franchise tax credits and tax refund claims and associated returns and records. PainCare shall have reasonable access to such records and may make excerpts therefrom and copies thereof.

(b)   Personal Assets.  The personal assets of the Members described in Disclosure Schedule 1.2(b).

(c)  Pharmaceuticals.

  Any of the Company's right, title and interest in, to or under, or possession of, all drugs, pharmaceuticals, products, substances, items or devices whose purchase, possession, maintenance, administration, prescription or security requires the authorization or order of a licensed health care provider or requires a permit, registration, certification or any other governmental authorization held by a licensed health care provider as specified under any federal or state law, or both.

(d)  Patient Records.  Any of the Company's right, title and interest in and to records of identity, diagnosis, evaluation or treatment of patients.

(e)  Medical Policies. Any of the Company's right, title and interest in, to and under insurance policies covering or relating to medical malpractice.

(f)  Names and Marks. The name “The Center for Pain Management, LLC” and its associated logos and any trade name or service mark or registrations related thereto.

(g)  Medical License. Any franchises, licenses, permits, certificates, approvals and other governmental authorizations necessary or desirable to own and operate the medical Business of the Company.

(h)  Medical Contracts.  Any of the Company's right, title or interest in, to or under any contract or agreement that requires performance by a licensed health care provider under federal or applicable state law ("Medical Contracts").

2.

ASSUMPTION OF LIABILITIES

2.1   Liabilities to be Assumed.  As used in this Agreement, the term "Liability" shall mean and include any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated, secured or unsecured.  Subject to the terms and conditions of this Agreement, on the Closing Time, Subsidiary shall assume or take subject to, as the case may be, and agrees to perform and discharge the following, and only the following, Liabilities of the Sellers:

(a)   Certain Liabilities.  Those certain accounts payable and accrued Liabilities listed in Disclosure Schedule 2.1(a).

(b)   Contractual Liabilities.  Liabilities that relate to periods, events or circumstances occurring on or after the Closing Time under and pursuant to the Contracts described in Section 1.1(f).

The Liabilities described in subsections 2.1.(a), and  2.1.(b) above are hereinafter collectively described as the "Assumed Liabilities."

2.2   Liabilities Not to be Assumed.  Except as and to the extent specifically set forth in Section 2.1 above, the Acquiring Companies are not assuming nor buying the Purchased Assets subject to any Liabilities of the Sellers and all such Liabilities shall be and remain the responsibility of the Sellers.

2.3   Taxes Arising from Transaction.  The Acquiring Companies are not assuming nor shall they be responsible for any taxes applicable to, imposed upon or arising out of the sale or transfer of the Purchased Assets to the Acquiring Companies and the other transactions contemplated by this Agreement, including but not limited to any income, transfer, sales, use, gross receipts or documentary stamp taxes.

2.4    Income and Franchise Taxes. The Acquiring Companies are not assuming nor shall they be responsible for any Liability of the Sellers for Federal income taxes and any state or local income, profit or franchise taxes (and any penalties or interest due on account thereof).

2.5   Product, Medical  Malpractice and Service Liability.  The Acquiring Companies are not assuming nor shall they be responsible for any Liability of the Sellers arising out of or in any way relating to or resulting from, either directly or indirectly, any medical negligence, malpractice or professional or personal liability or pharmaceutical, medication or product manufactured, formulated, mixed, compounded, assembled or sold or any service performed by the Sellers, its physicians, contractors or any of its employees whether prior to, on, or after the Closing Time (including any Liability of the Sellers or any of its physicians, employees, contractors or agents for claims made for injury to person, damage to property or other damage, whether made in product liability, tort, negligence, breach of warranty or otherwise).

2.6   Litigation Matters.  The Acquiring Companies are not assuming nor shall they be responsible for any Liability of the Sellers with respect to any action, claim, suit, proceeding, arbitration, investigation or inquiry, whether civil, criminal or administrative whether same shall occur or arise from matters prior to, on, or after the Closing Time ("Litigation").

2.7   Infringements.  The Acquiring Companies are not assuming nor shall they be responsible for any Liability of the Sellers with respect to a third party for infringement of such third party's Intellectual Property whether same shall occur or arise from matters prior to, on, or after the Closing Time.

2.8  Transaction Expenses. The Acquiring Companies are not assuming nor shall they be responsible for any Liabilities incurred by the Sellers in connection with this Agreement and the transactions contemplated herein except as provided in that certain Joint Engagement of Tax Counsel Letter Agreement entered into between the Parties on November 11, 2004.

2.9  Liability For Breach.  The Acquiring Companies are not assuming nor shall they be responsible for any Liabilities of the Sellers for any breach or failure to perform any of the Sellers’ covenants and agreements contained in, or made pursuant to, this Agreement, or, prior to the Closing, any other contract or agreement, whether or not assumed hereunder, including breach arising from assignment of contracts hereunder without consent of third parties.

2.10   Liabilities to Affiliates.  The Acquiring Companies are not assuming nor shall they be responsible for any Liabilities of the Sellers to its present or former Affiliates.

2.11  Violation of Laws or Orders. The Acquiring Companies are not assuming nor shall they be responsible for any Liabilities of the Sellers for any violation of or failure to comply with any statute, law, ordinance, rule or regulation (collectively, "Laws") or any order, writ, injunction, judgment, plan or decree (collectively, "Orders") of any court, arbitrator, department, commission, board, bureau, agency, authority, instrumentality or other body, whether federal, state, municipal, foreign or other (collectively, "Government Entities") whether same shall occur or arise from matters prior to, on, or after the Closing Time.

3.

PURCHASE PRICE - PAYMENT

3.1

Purchase Price Consideration. The aggregate purchase price consideration (the “Purchase Price Consideration”) shall consist of (i) the Closing Consideration (the “Closing Consideration”) as hereafter defined, and (ii) the Intended Installment Payments as determined under Section 3.4 below.  Subject to the provisions set forth in Section 3.2 below, the adjustment as provided in Section 3.3 below and the provisions set forth in Section 10, PainCare shall deliver the Closing Consideration to the Company (which will immediately be distributed to the Members as provided in Section 3.1 of the Disclosure Schedules) as indicated below subject to the satisfaction of the Closing Conditions. The “Closing Consideration,” as such phrase is used herein, shall be comprised of: (i) Six Million Three Hundred Seventy Five Thousand and 00/100 Dollars

($6,375,000) (the “Closing Cash”), plus (ii) Three Million Six Hundred Eighty Seven Thousand Five Hundred (3,687,500) PainCare Shares (the “Closing Shares”).

3.2

Payment of Closing Consideration.  The Closing Consideration shall be payable as follows:

(a)

Subject to adjustment as provided in Section 3.3 below and the provisions set forth in Section 10, PainCare shall deliver the Closing Cash to the Company via wire transfer on the Closing Time to a bank account(s) designated by the Company. The Company shall notify PainCare in writing of the bank account(s) to which the Closing Cash shall be wired.

(b)

Subject to adjustment as provided in Section 3.3 below and the provisions set forth in Section 10, PainCare shall deliver the Closing Shares to the Company or alternatively, to the Members as indicated in an instruction letter from the Company delivered to PainCare.

3.3

Closing Time Adjustments.  The Closing Consideration shall be subject to adjustment as follows:

(a)

Transaction Related Adjustments. The Closing Cash shall be reduced by the amount of any cash payments made by the Acquiring Companies with respect to any expenses which the Sellers request in writing to be paid and the Acquiring Companies agree to pay on behalf of the Sellers.

(b)

Accounts Receivable Adjustment.  If the Subsidiary, within the six (6) month calendar period immediately following the Closing Time, does not collect an amount equal to at least 30% of the accounts receivable (the “Required A/R Collections”) purchased pursuant to this Agreement as indicated on that certain accounts receivable aging report dated as of the Closing Time which is attached hereto as Disclosure Schedule 3.3(b)(the “Acquired Accounts Receivable”), then the Closing Cash shall be reduced dollar for dollar by the A/R Adjustment.  The “A/R Adjustment” shall equal the difference between the Required A/R Collections and the amount of the Acquired Accounts Receivable actually collected by the Subsidiary during such six (6) month period. PainCare shall receive payment for the A/R Adjustment through a lump sum cash payment from the Members (and not from the Company) within seven (7) days of the Members receiving written demand for same after the end of the six (6) month period.  

3.4

Intended Installment Payment.  

(a)

General.  Subject to the satisfaction of all of the Installment Payment Conditions (as defined in 3.4(f)(iii) below), PainCare will pay to the Company a total amount of additional consideration of Thirteen Million Seven Hundred Fifty Thousand and 00/100 Dollars ($13,750,000), payable in three equal annual installments of Four Million Five Hundred Eighty Three Thousand Three Hundred Thirty Three and 33/100 Dollars ($4,583,333.33) (each an “Intended Installment Payment”) in the form of consideration as provided in Section 3.4(d) below and subject to adjustment as provided in Sections 3.4(b) and (c) below. The Parties hereby acknowledge and agree that the Intended Installment Payments to be made by PainCare, if earned, are expressly

 subordinate to the rights and obligations to the Laurus Master Fund, Ltd. (“Laurus”) as provided in those certain Securities Purchase Agreements, Security Agreements and Pledge Agreements between PainCare and Laurus dated February 27, 2004, May 22, 2004 and July 1, 2004. Payment of the In­tended Installment Payment shall be secured by a pledge of Subsidiary’s stock to the Company pursuant to a Stock Pledge Agreement (the “PainCare Stock Pledge Agreement”) the form of which is attached hereto as Exhibit 3.4.

(b)

Adjusted Installment Payment.  Notwithstanding Section 3.4(a) above, if the consolidated Formula Period Profits (as defined in Section 3.4(f)(ii) below) of the Company and the Subsidiary for any Formula Period are less than the Earnings Threshold (as defined in Section 3.4(f)(iv) below, the amount of the Intended Installment Payment for such Formula Period shall be recalculated to equal the product of the Intended Installment Payment, multiplied by the applicable Installment Payment percentage discount as provided below (the “Adjusted Installment Payment”).  The “Adjusted Installment Payment” shall equal (i) the Formula Period Profits (as defined in Section 3.4(f)(ii) below) for such Formula Period divided by the Earnings Threshold; multiplied by: (ii) ninety percent (90%) if such Formula Period Profits are $4,812,500 or more but less than the Earnings Threshold; or (iii) seventy percent (70%) if such Formula Period Profits are $4,125,000 or more but less than $4,812,500,000; (iv) fifty percent (50%) if such Formula Period Profits are $3,437,500 or more but less than $4,125,000, or (v) no Installment Payment if such Formula Period Profits are less than $3,437,500.

(c)

Installment Payment Premium.  Notwithstanding Section 3.4(b), if (i) the Company receives an Adjusted Installment Payment from PainCare in a Formula Period rather than the Intended Installment Payment as a result of the Formula Period Profits equaling less than the Earnings Threshold for such Formula Period, and (ii) the Company's Formula Period Profits exceed the Earnings Threshold in the Formula Period immediately subsequent to the Formula Period for which the Adjusted Installment Payment corresponded, and (iii)  the Installment Payment Conditions are satisfied, then PainCare shall pay to the Company the Installment Payment Premium (as defined below). The “Installment Payment Premium” shall equal the product of (A) the Formula Period Profits for the Formula Period in which the Installment Payment Premium is calculated less the Earnings Threshold, multiplied by (B) Seventy-five percent (75%).  The Installment Payment Premium shall be paid to the Company in the same form and time as the Installment Payments (as defined in Subsection (d) below) are due for the Formula Period for which the Installment Payment Premium is calculated.  

(d)

Manner of Payment.  Within sixty (60) days after the end of each Formula Period, PainCare or its Affiliate shall prepare and deliver to the Members a financial statement presenting the Formula Period Profits for the Company for the applicable Formula Period (the “Formula Period Profits Statement”).  Ten (10) business days after delivery of the Formula Period Profits Statement, the Members shall in a written notice to PainCare either accept or describe in reasonable detail any proposed adjustments to the Formula Period Profits Statement and the reasons therefore, and shall include pertinent calculations. If the Members fail to deliver notice of acceptance or objection to the Formula Period Profits Statement within such ten (10) business day period, the Members shall be deemed to have accepted the Formula Period Profits Statement.

(e)

If the Members

accept or fail to object to the Formula Period Profits Statement within the ten (10) business day period set forth above, then within ninety (90) days after the end of the Formula Period, PainCare shall pay to the Members the Intended Installment Payment or the Adjusted Installment Payment (each an “Installment Payment”, and collectively, the “Installment Payments”) along with any Installment Payment Premium owed in accordance with Subsection (c) above as follows: (i) fifty percent (50%) of the Installment Payment shall be made in cash via wire transfer to a bank account(s) designated by the Company at least ten (10) business days prior to the end of the Formula Period; and (ii) fifty percent (50%) of the Installment Payment shall be made in PainCare Shares priced at Fair Market Value (as defined below) per one share of PainCare common stock for all Formula Periods.  In the event PainCare and the Members are not able to agree on the Formula Period Profits Statement within thirty (30) days from and after the receipt by PainCare of any objections raised by the Members, PainCare and the Members shall each have the right to require that such disputed determinations be submitted to an independent certified public accountant or accounting firm that PainCare shall select, for computation or verification in accordance with the provisions of this Agreement, and the Installment Payment shall be paid by PainCare to the Members within fifteen (15) days after receipt of the accountant's computation or verification.  The foregoing provisions for certified public accounting firm review shall be final and binding upon the Parties and there shall be no right of appeal from such decision.

(f)

Installment Payment Cap.  Notwithstanding anything to the contrary in this Section 3, in no event whatsoever shall the aggregate amount of the Installment Payments (including Installment Payment Premiums) paid to the Company from PainCare in cash, in PainCare Shares or any other form of consideration exceed Thirteen Million Seven Hundred Fifty Thousand and 00/100 Dollars ($13,750,000).

(g)

Definitions for Purposes of Section 3.  For purposes of Section 3 of this Agreement:

(i)

“Fair Market Value” shall mean the value of the PainCare Shares determined as follows:

(1)

if the principal market for the PainCare Shares is a national securities exchange, then the “Fair Market Value” of the PainCare Shares shall equal the thirty  (30) day trailing average of the closing prices of the PainCare Shares ending on the last day of the first, second or third Formula Period, as applicable, as reported by such exchange or on a composite tape reflecting transactions on such exchange; or

(2)

if the principal market for the PainCare Shares is not a national securities exchange, but the price of the PainCare Shares is quoted on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) Stock Market, and (A) actual closing price information is available with respect to the PainCare Shares, then the “Fair Market Value of the PainCare Shares shall equal the thirty  (30) day trailing average of the closing prices of such stock ending on the last day of the first, second or third Formula Period, as applicable, on the NASDAQ Stock Market; or (B) actual closing price information is not available with respect to the PainCare

Shares, then the “Fair Market Value” of the PainCare Shares shall equal the thirty (30) day trailing average of the bid prices per share of such stock ending on the last day of the first, second or third Formula Period, as applicable, on the NASDAQ Stock Market; or

(3)

if the principal market for the PainCare Shares is neither a national securities exchange and such stock is not quoted on NASDAQ, then the “Fair Market Value” of the PainCare Shares shall equal the thirty (30) day trailing average of the closing ask prices of the PainCare Shares ending on the last day of the first, second or third Formula Period, as applicable, as reported by the OTC Bulletin Board Service or by National Quotation Bureau, Incorporated, or a comparable service selected by PainCare; or

(4)

if subsections (f)(i)(1)-(3) above are inapplicable or if no trades have been made or no quotes are available for such day with respect to the PainCare Shares, then the “Fair Market Value” of the PainCare Shares shall be determined by an independent third party appraiser selected by PainCare.  Within ten (10) days after the effective date of the appraiser's appointment, the appraiser shall deliver an appraisal of the Fair Market Value of the PainCare Shares, which shall be binding and conclusive on the Parties.  The cost of any appraisal hereunder shall be shared equally by the Parties, and each Party shall be responsible and financially liable for its or his own attorneys' fees; and

(5)

with the understanding that notwithstanding the Fair Market Value ascribed to the PainCare Shares pursuant to subsections 3.4(f)(1), (2), (3) or (4) above in no event shall the Fair Market Value of the PainCare Shares ever be less than One Dollar and 75/00 Dollars ($1.75) per share.

(ii)

 “Formula Period Profits” shall mean the consolidated earnings before deductions for interest, taxes, depreciation and amortization (“EBITDA”) of the Subsidiary and the Company as calculated utilizing GAAP in accordance with EITF No. 97-2 (which shall not include as a cost or expense the Base Management and the Bonus Management Fee as those terms are defined in the Management Agreement but will include all other expenses of the Subsidiary and the Company (except as provided below) including, without limitation, the Operations Fee as defined in the Management Agreement) by PainCare’s independent certified public accountants for the applicable Formula Period where possible, and as calculated by PainCare for quarterly and less than quarterly periods for such Formula Period.  Notwithstanding the foregoing, the calculation of the Formula Period Profits shall not include any (a) income of the Company related to: (i)  the payment of the Purchase Price Consideration, or (ii) income derived from Ancillary Services Revenues (as defined in Section 3.4(f)(v) below), or  (b) costs or expenses related to: (i) the corporate overhead of PainCare or other administrative or similar charges that PainCare might impose upon the Subsidiary, except those charges for services provided directly to and for the benefit of the Subsidiary and the Company, as the case may be, which will be disclosed in the Company’s interim financial statements; (ii) any non-recurring charges, losses, profits, gains, or non-cash adjustments not related to the ongoing operations of the Subsidiary or the Company, as the case may be, including but not limited to discontinued operations, extraordinary items, acquisition costs and goodwill charges incurred in connection with the transactions contemplated hereby (excluding the write-off of any

goodwill with respect to the Purchased Assets in accordance with FASA 142), or unusual or infrequent items as such terms are defined pursuant to generally accepted accounting principles, (iii) direct and indirect expenses incurred by the Company with respect to Ancillary Services, or (iv) the cost and expense incurred by the Company with respect to the Required Bonus as defined in Section 5.2 of those certain Employment Agreements by and between the Company and each Member of even date herewith.

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