Exhibit 10.3
 
STOCK PURCHASE AGREEMENT
 
THIS STOCK PURCHASE AGREEMENT (“Agreement”), dated as of the 8th day of
September, 2006, is made and entered into on the terms and conditions
hereinafter set forth, by and among ORION HEALTHCORP, INC., a Delaware
corporation (the “Company”), PHOENIX LIFE INSURANCE COMPANY, a New York
corporation (“Phoenix”) and BRANTLEY PARTNERS IV, L.P., a Delaware limited
partnership (“Brantley” and together with Phoenix, “Investors”).
 
RECITALS:
 
1. The Company is a healthcare services organization that provides outsourced
business services to physicians.
 
2. The Company intends to raise capital in the amount of $8,000,000 by issuing
$4,650,000 of a new series of its common stock (the “Equity Investment”) and
$3,350,000 in subordinated debt (the “Note Purchase”).
 
3. Investors desire to acquire an aggregate of $4,650,000 of a new series of
Class D Common Stock of the Company, par value $0.001 per share (the “Class D
Common Stock”) on the terms and conditions hereinafter set forth, and for the
purpose hereinafter set forth.
 
AGREEMENT:
 
NOW, THEREFORE, in consideration of the agreement of Investors to make the
Equity Investment, the mutual covenants and agreements hereinafter set forth,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto covenant and agree as follows:
 
ARTICLE 1

 
DEFINITIONS
 
1.1  Defined Terms.  As used in this Agreement, the following terms have the
meanings specified below:
 
“Acquisition Targets” shall mean Rand Medical Billing, Inc., On Line
Alternatives, Inc. and On Line Payroll Services, Inc.
 
“Agreement” has the meaning set forth in the Preamble.
 
“Brantley” has the meaning set forth in the Preamble.
 
“Brantley Capital Shares” means 1,722,983 shares of Class B Common Stock issued
in the name of Brantley Capital Corporation.
 
“Brantley Notes” means (i) that certain Convertible Subordinated Promissory Note
dated June 1, 2005 in the original principal amount of $225,000, as amended on
May 9, 2006 and August 8, 2006, and (ii) that certain Convertible Subordinated
Promissory Note dated June 1, 2005 in the original principal amount of
$1,025,000, as amended on May 9, 2006 and August 8, 2006.
 
“Business Day” means any day other than a Saturday, Sunday or day on which banks
in New York City are authorized or required by law to close.
 
“Capital Stock” means any and all shares, interests or equivalents in capital
stock (whether voting or nonvoting, and whether common or preferred) of a
Person, including any and all warrants, rights or options to purchase any of the
foregoing.
 
“Closing” has the meaning set forth in Section 4.1.  
 
“Closing Date” has the meaning set forth in Section 4.1.  
 
“Class A Common Stock” means the Class A Common Stock, par value $0.001, of the
Company.

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“Class B Common Stock” means the Class B Common Stock, par value $0.001, of the
Company.
 
“Class C Common Stock” means the Class C Common Stock, par value $0.001, of the
Company.
 
“Class D Common Stock” has the meaning set forth in the Recitals.
 
“Class D Shares” has the meaning set forth in Section 2.1.  
 
“Commission” means the Securities and Exchange Commission or any similar agency
then having jurisdiction to enforce the Securities Act or the Exchange Act.
 
“Company Board Recommendation” has the meaning set forth in Section 3.1(cc).  
 
“Company SEC Documents” has the meaning set forth in Section 3.1(g).  
 
“Equity Investment” has the meaning set forth in the Recitals.
 
“Equity Investment Documents” means the documents and agreements entered into in
connection with the Equity Investment.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
 
“Financial Statements” has the meaning set forth in Section 3.1(g).  
 
“Fiscal Year” means the Company’s Fiscal Year, which is the period of twelve
consecutive calendar months ending on December 31.
 
“GAAP” means generally accepted accounting principles in the United States
applied on a consistent basis.
 
“Governmental Authority” means any federal, state, municipal, national, foreign
or other governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States, the District of Columbia or a
foreign entity or government.
 
“Indemnified Party” has the meaning set forth in Section 5.1(a).  
 
“Investors” has the meaning set forth in the Preamble.
 
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform Commercial Code
as adopted and in effect in the relevant jurisdiction or other similar recording
or notice statute, and any lease in the nature thereof).
 
“Losses” has the meaning set forth in Section 5.1(a).  
 
“Material Adverse Change” or “Material Adverse Effect” means (a) a material
adverse change in, or a material adverse effect upon, the business, assets,
liabilities (actual or contingent), operations or financial condition of a
Person and its Subsidiaries, taken as a whole; (b) a material adverse change in,
or a material adverse effect upon, the ability of a Person and its Subsidiaries,
taken as a whole, to perform the material obligations under any Equity
Investment Document; or (c) a material adverse change in, or a material adverse
effect upon the legality, validity, binding effect or enforceability against
such Person of any Equity Investment Document to which it is a party.
 
“Note Purchase” has the meaning set forth in the Recitals.
 
“Note Purchase Documents” means the documents and agreements entered into in
connection with the Note Purchase.
 
“Outstanding Class A Common Stock” means, as of the close of business on the
Business Day that immediately precedes the Closing Date, the sum of (i) the
then-outstanding shares of Class A Common Stock, (i) the number of shares of
Class A Common Stock into which the then-outstanding shares of Class B Common

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Stock are convertible (excluding the Brantley Capital Shares), (iii) the number
of shares of Class A Common Stock into which the then-outstanding shares of
Class C Common Stock are convertible, (iv) the number of shares of Class A
Common Stock into which the Class D Shares would be convertible, assuming that
such shares were issued as of such date, (v) the number of shares of Class A
Common Stock into which the Brantley Notes are convertible, (vi) the number of
shares of Class A Common Stock issuable upon exercise of the warrants and
options of the Company specified on Schedule 1.1, solely to the extent that the
exercise price of such warrants or options are equal to or less than the closing
price of the Class A Common Stock as listed on the American Stock Exchange as of
such date and (vii) the total number of shares of Class A Common Stock that have
been granted as restricted stock units of the Company as specified on
Schedule 1.1.  
 
“Person” means any corporation, association, joint venture, partnership, limited
liability company, organization, business, individual, trust, government or
agency or political subdivision thereof or any other legal entity.
 
“Phoenix” has the meaning set forth in the Preamble.
 
“Properly Contested” means, in the case of any taxes that are not paid as and
when due or payable by reason of the Company’s bona fide dispute concerning its
liability to pay same or concerning the amount thereof, (i) such taxes are being
properly contested in good faith by appropriate proceedings promptly instituted
and diligently conducted; (ii) the Company has established appropriate reserves
as shall be required in conformity with GAAP; (iii) the non-payment of such
taxes will not have a Material Adverse Effect on the Company; (iv) if the taxes
result from, or are determined by the entry, rendition or issuance against the
Company or any of its assets of a judgment, writ, order or decree, execution on
such judgment, writ, order or decree is stayed pending a timely appeal or other
judicial review; and (vi) if such contest is abandoned, settled or determined
adversely (in whole or in part) to the Company, the Company forthwith pays such
taxes and all penalties, interest and other amounts due in connection therewith.
 
“Proxy Statement” has the meaning set forth in Section 2.4(a).  
 
“Registration Rights Agreement” has the meaning set forth in Section 2.3.  
 
“Required Company Stockholder Approval” has the meaning set forth in
Section 3.1(bb).  
 
“Second Amended and Restated Certificate” has the meaning set forth in
Section 2.1.  
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
 
“Significant Contracts” has the meaning set forth in Section 3.1(s).  
 
“Special Committee” has the meaning set forth in Section 3.1(bb).  
 
“Subsidiary” means any corporation or other entity of which more than fifty
percent (50%) of the issued and outstanding Capital Stock entitled to vote for
the election of directors or persons performing similar functions (other than by
reason of default in the payment of dividends or other distributions) is at the
time owned directly or indirectly by a Person and/or any Subsidiary of such
Person.
 
1.2  Terms Generally.  The definitions in Section 1.1 apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. The words “include,” “includes” and “including” are deemed to be followed
by the phrase “without limitation.” All references herein to Articles, Sections,
Exhibits and Schedules are deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, any reference in this
Agreement to any Loan Document means such document as amended, restated,
supplemented or otherwise modified from time to time.

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ARTICLE 2

 
PURCHASE AND SALE; STOCKHOLDER APPROVAL
 
2.1  Sale and Issuance of the Class D Shares.  Subject to the terms and
conditions contained herein, on the Closing Date:
 
(a) Phoenix will pay to the Company Three Million Dollars ($3,000,000) and the
Company will issue and sell to Phoenix that number of shares of Class D Common
Stock representing twelve and one half percent (12.5%) of the Outstanding
Class A Common Stock; and
 
(b) Brantley will pay to the Company One Million Six Hundred Fifty Thousand
Dollars ($1,650,000) and the Company will issue and sell to Brantley that number
of shares of Class D Common Stock representing six and eight hundred seventy
five one-thousandths percent (6.875%) of the Outstanding Class A Common Stock.
 
The shares of Class D Common Stock being issued and sold to Phoenix and Brantley
are collectively referred to in this Agreement as the “Class D Shares”. The
voting powers, preferences and other rights of the Class D Common Stock, and the
qualifications, limitations or restrictions thereof, are set forth in the
proposed Second Amended and Restated Certificate of Incorporation of the Company
(the “Second Amended and Restated Certificate”), a draft copy of which is
attached as Exhibit A to this Agreement.
 
2.2  Reservation of Shares.  The Company shall at all times reserve and keep
available out of its authorized shares of Class A Common Stock, solely for the
purpose of the issuance and delivery of the shares of Class A Common Stock
issuable upon conversion of the Class D Shares, the maximum number of shares of
Class A Common Stock that may be issuable or deliverable thereupon.
 
2.3  Registration Rights.  On the Closing Date, the Company shall grant to
Investor the right to have the Class A Common Stock issuable upon conversion of
the Class D Shares registered under the Securities Act, pursuant to the terms of
a Registration Rights Agreement, substantially in the form of Exhibit B attached
hereto (the “Registration Rights Agreement”).
 
2.4  Stockholder Approval.
 
(a) To the extent that stockholder approval of the issuance of the Class D
Shares and/or the issuance of the warrants as part of the Note Purchase is
required by the rules of the American Stock Exchange, as promptly as practicable
after the execution of this Agreement, the Company will prepare and file with
the Commission a proxy statement setting forth the time and place for holding of
a special meeting of the stockholders of the Company for the purpose of
obtaining the Required Company Stockholder Approval (the “Proxy Statement”). The
Company will respond promptly to any comments of the Commission and will use all
reasonable efforts to cause the Proxy Statement to be mailed to the Company’s
stockholders at the earliest practicable time.
 
(b) The Company Board Recommendation shall be included in the Proxy Statement,
except that the Board of Directors of the Company may withdraw or modify in a
manner adverse to Investors such recommendation only if the Special Committee
determines, in good faith, after consultation with outside legal counsel, that
such action is required in order for the directors of the Company to comply with
their fiduciary duties to the stockholders of the Company.
 
2.5  Termination of Purchase Right.  Upon Closing and sale and issuance of the
Class D Shares, the right of Brantley to purchase shares of Class A Common Stock
for cash in an amount up to an aggregate of $3,000,000, as set forth in more
detail in Section 2.4 of that certain Amended and Restated Stock Subscription
Agreement, dated February 9, 2004, between the Company and Brantley, as amended,
shall terminate.

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ARTICLE 3

 
REPRESENTATIONS AND WARRANTIES
 
3.1  The Company’s Representations.  In order to induce Investors to enter into
this Agreement, the Company hereby represents and warrants to Investors that as
of the date hereof and as of the Closing Date:
 
(a) Legal Status.  The Company is a corporation duly formed and validly existing
under the laws of the State of Delaware. The Company has the corporate power to
own and operate its properties, to carry on its business as now conducted and to
enter into and to perform its obligations under this Agreement and the
Registration Rights Agreement. The Company is duly qualified to do business and
in good standing in each state in which a failure to be so qualified would
reasonably be expected to have a Material Adverse Effect on the Company.
 
(b) Authorization.  The Company has the requisite corporate power and authority
to conduct its business and affairs as currently conducted. Except for obtaining
the Required Company Stockholder Approval, the Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, without the consent or approval of any other person, firm,
governmental agency or other legal entity. Except for obtaining the Required
Company Stockholder Approval and any notices of sale required to be filed with
the Commission under Regulation D of the Securities Act, or such post-closing
filings as may be required under applicable federal or state securities laws,
which will be timely filed within the applicable periods therefor, the execution
and delivery of this Agreement, the issuance, sale and delivery of the Class D
Shares, the execution and delivery of the Registration Rights Agreement, and the
performance by the Company of its obligations thereunder are within the
corporate powers of the Company and have been duly authorized by all necessary
corporate action properly taken, and the Company has received all necessary
governmental approvals, if any, that are required. The officer(s) executing this
Agreement and the Registration Rights Agreement are duly authorized to act on
behalf of the Company.
 
(c) Validity and Binding Effect.  This Agreement and the Registration Rights
Agreement are the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject to limitations
imposed by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally or the application of general equitable
principles.
 
(d) Capitalization.  Attached hereto as Schedule 3.1(d) is a table showing the
authorized and issued Capital Stock of the Company, as of the date hereof, on a
fully diluted basis. As of the date hereof, the Company does not have
outstanding any interests or securities convertible or exchangeable for any of
its Capital Stock or containing any profit participation features, and does not
have outstanding any rights or options to subscribe for or to purchase its
Capital Stock or any stock appreciation rights or phantom stock plans, except as
set forth on Schedule 3.1(d). Schedule 3.1(d) accurately sets forth the
following with respect to all outstanding options and rights to acquire any of
the Company’s Capital Stock: (i) the total number of shares (or equivalent)
issuable upon exercise of all outstanding options; (ii) the range of exercise
prices for all such outstanding options; (iii) the number of shares (or
equivalent) issuable, the exercise price and the expiration date for each such
outstanding option; and (iv) with respect to all outstanding options, warrants
and rights to acquire the Company’s Capital Stock, the number of shares (or
equivalent) covered, the exercise price and the expiration date. The Company is
not subject to any obligation (contingent or otherwise) to repurchase, redeem,
retire or otherwise acquire any of its Capital Stock or any warrants, options or
other rights to acquire its Capital Stock, except as set forth on
Schedule 3.1(d). The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
Capital Stock, and the offer, sale and issuance of the Class D Shares hereunder
do not require registration under the Securities Act of 1933, as amended, or any
applicable state securities laws.
 
(e) No Conflicts.  Except as set forth on Schedule 3.1(e) hereto, consummation
of the transactions contemplated hereby and the issuance of the Class D Shares
do not conflict with, and will not result in any breach of, or constitute a
default or trigger a Lien under, (i) the certificate of incorporation or bylaws
of the Company, (ii) any mortgage, security deed or agreement, deed of trust,
lease, bank loan or credit agreement, license, franchise or any other material
instrument or agreement to which the Company or any of its

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Subsidiaries is a party or by which the Company, any of its Subsidiaries or
their respective properties may be bound or affected or to which the Company or
any of its Subsidiaries has not obtained an effective waiver, except where such
event would not reasonably be expected to have a Material Adverse Effect on the
Company or (iii) any federal or state judgment, order, writ, decree, statute,
rule or regulation applicable to the Company.
 
(f) Litigation.  Except as set forth on Schedule 3.1(f) hereto, there are no
actions, suits, investigations, criminal prosecutions, civil investigative
demands, impositions of civil fines or penalties, arbitrations, administrative
hearings or other proceedings pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any of the Company’s property,
any of its Subsidiaries or any property of any of such Subsidiaries, which, if
adversely determined, would reasonably be expected to have a Material Adverse
Effect on the Company, or involving the validity or enforceability of any of the
Equity Investment Documents at law or in equity, or before any Governmental
Authority. Neither the Company nor any Subsidiary is subject to any order, writ,
injunction, decree or demand of any court or any Governmental Authority.
 
(g) SEC Filings.  The Company has furnished or made available to Investor true
and complete copies of all reports or registration statements it has filed with
the Commission under the Securities Act and the Exchange Act for all periods
subsequent to December 14, 2004, all in the form so filed (collectively, the
“Company SEC Documents”). As of their respective filing dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and, as of its respective
filing date, no Company SEC Document filed under the Exchange Act 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 made therein, in the
light of the circumstances in which they were made, not misleading, except to
the extent corrected by a subsequently filed document with the Commission. No
Company SEC Document filed under the Securities Act contained an untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading at the
time such Company SEC Documents became effective under the Securities Act. The
Company’s financial statements, including the notes thereto, included in the
Company SEC Documents (the “Financial Statements”) comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, have been prepared
in accordance with GAAP and present fairly the Company’s consolidated financial
position at the dates thereof and of its operations and cash flows for the
periods specified (subject, in the case of unaudited statements, to normal audit
adjustments and footnote disclosures). Since the date of the most recent Company
SEC Document, the Company has not effected any change in any method of
accounting or accounting practice, except for any such change required because
of a concurrent change in GAAP.
 
(h) Other Agreements; No Defaults.  Except as set forth in the Company SEC
Documents or on Schedule 3.1(h), neither the Company nor any of its Subsidiaries
is a party to any indenture, loan or credit agreement, lease or other agreement
or instrument, or subject to any charter or corporate restriction, that, if a
default occurs thereunder, such default would reasonably be expected to result
in a Material Adverse Change to the Company. Except as set forth in the Company
SEC Documents or on Schedule 3.1(h), neither the Company nor any of its
Subsidiaries is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party, including but not
limited to this Agreement, which would reasonably be expected to result in a
Material Adverse Change to the Company, and no other default or event has
occurred and is continuing that with notice or the passage of time or both would
constitute a default or event of default under any of the same.
 
(i) Compliance With Law.  The Company and each of its Subsidiaries have obtained
all licenses, permits, approvals and authorizations necessary or required in
order to conduct their respective business and affairs as heretofore conducted
(other than where the failure to so obtain would not reasonably be expected to
have a Material Adverse Effect on the Company) and has ensured that all required
licenses are in full force and effect on the Closing Date and have not been
revoked, suspended or otherwise limited. The Company and each of its
Subsidiaries is in compliance with all laws, regulations, decrees and orders
applicable to it (including but not limited to laws, regulations, decrees and
orders relating to environmental, occupational, and health standards and
controls, antitrust, monopoly, restraint of trade or unfair competition), except
to the extent that

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any noncompliance, in the aggregate, cannot reasonably be expected to have a
Material Adverse Effect on the Company.
 
(j) Statements Not False or Misleading.  No representation or warranty given as
of the date hereof by the Company contained in this Agreement or any schedule
attached hereto or any statement in any document, certificate or other
instrument furnished or to be furnished by the Company to Investor pursuant
hereto, taken as a whole, contains or will (as of the time so furnished) contain
any untrue statement of a material fact, or omits or will (as of the time so
furnished) omit to state any material fact which is necessary in order to make
the statements contained therein not misleading.
 
(k) Valid Issuance of Class D Shares.  The Class D Shares that are being
purchased and acquired by Investors hereunder, when issued, sold and delivered
by the Company in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under applicable state and federal securities laws,
including containing the restrictive legend set forth in Section 3.2(i) hereof.
 
(l) Fees/Commissions.  Except for fees and expenses that may be owed to
Stephens, Inc., the Company has not agreed to pay any finder’s fee, commission,
origination fee or other fee or charge to any person or entity with respect to
the Note Purchase or other transactions contemplated hereunder.
 
(m) Limited Offering of Shares.  Assuming the accuracy of the representations
and warranties of Investors contained in Section 3.2 hereof, the offer and sale
of the Class D Shares is not required to be registered pursuant to the
provisions of Section 6 of the Securities Act or the registration or
qualification provisions of the blue sky laws of any state. Neither the Company
nor any agent on its behalf has solicited or will solicit any offers to sell or
has offered to sell or will offer to sell all or any part of the Class D Shares
or any other similar securities to any Person so as to bring the sale of the
Class D Shares by the Company within the registration provisions of the
Securities Act or any state securities laws.
 
(n) Subsidiaries.  Schedule 3.1(n) hereto is a complete list of each
corporation, partnership, joint venture, limited liability company, or other
business organization in which the Company or any Subsidiary of the Company
owns, directly or indirectly, any Capital Stock or other equity interest, or
with respect to which the Company or any Subsidiary of the Company, alone or in
combination with others, is in a control position, which list shows the
jurisdiction of incorporation or other organization and the percentage of stock
or other equity interest of each Subsidiary owned by the Company or such
Subsidiary. Each Subsidiary of the Company is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
is duly qualified to transact business as a foreign corporation (or other
entity) and is in good standing (or equivalent) in the jurisdictions listed on
Schedule 3.1(n), which are the only jurisdictions where the properties owned or
leased or the business transacted by it makes such licensing or qualification to
do business as a foreign corporation (or other entity) necessary, and no other
jurisdiction has demanded, requested or otherwise indicated that (or inquired
whether) it is required so to qualify. The outstanding Capital Stock of each
Subsidiary of the Company is validly issued, fully paid and nonassessable.
Except as set forth on Schedule 3.1(n), the Company and the Subsidiaries have
good and valid title to the equity interests in the Subsidiaries shown as owned
by each of them on Schedule 3.1(n), free and clear of all liens, claims,
charges, restrictions, security interests, equities, proxies, pledges or
encumbrances of any kind. Except where otherwise indicated herein or unless the
context otherwise requires, any reference to the Company herein shall include
the Company and all of its Subsidiaries.
 
(o) Trademarks, Patents, Etc.  Schedule 3.1(o) is an accurate and complete list
of all patents, trademarks, trade names, trademark registrations, service names,
service marks, copyrights, licenses, formulae and applications therefor owned by
the Company or any of its Subsidiaries or used or required by the Company or any
of its Subsidiaries in the operation of its business, title to each of which is,
except as set forth on Schedule 3.1(o) hereto, held by the Company or a
Subsidiary of the Company free and clear of all adverse claims, liens, security
agreements, restrictions or other encumbrances. Except as set forth on
Schedule 3.1(o), the Company and its Subsidiaries own or possess adequate (and
will use their best efforts to obtain as expediently as possible any additional)
licenses or other rights to use all patents, trademarks, trade names, service
marks, trade secrets or other intangible property rights and know how necessary
to entitle the Company

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or such Subsidiary to conduct its business as presently being conducted. There
is no pending infringement action, lawsuit, claim or complaint which asserts
that the Company’s or any such Subsidiary’s operations violate or infringe the
rights or the trade names, trademarks, trademark registrations, service names,
service marks or copyrights of others with respect to any apparatus or method of
the Company, any of its Subsidiaries or any adversely held trademarks, trade
names, trademark registrations, service names, service marks or copyrights, and
neither the Company nor any of its Subsidiaries is in any way making use of any
confidential information or trade secrets of any person, except with the consent
of such person. Except as set forth on Schedule 3.1(o), the Company and each of
its Subsidiaries have taken reasonable steps to protect its proprietary
information (except disclosure of source codes pursuant to licensing agreements)
and is the lawful owner of the proprietary information free and clear of any
claim of any third party. As used herein, “proprietary information” includes
without limitation, (i) any computer programming language, software, hardware,
firmware or related documentation, inventions, technical and nontechnical data
related thereto and (ii) other documentation, inventions and data related to
patterns, plans, methods, techniques, drawings, finances, customer lists,
suppliers, products, special pricing and cost information, designs, processes,
procedures, formulas, research data owned or used by the Company or any of its
Subsidiaries or marketing studies conducted by the Company or any of its
Subsidiaries, all of which the Company considers to be commercially important
and competitively sensitive and which generally has not been disclosed to third
parties.
 
(p) Debt.  Schedule 3.1(p) is a complete and correct list of all credit
agreements, indentures, purchase agreements, promissory notes and other
evidences of indebtedness, guaranties, capital leases and other instruments,
agreements and arrangements presently in effect providing for or relating to
extensions of credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of which the Company,
any of its Subsidiaries or any of their respective properties is in any manner
directly or contingently obligated, and the maximum principal or face amounts of
the credit in question that are outstanding and that can be outstanding are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated on Schedule 3.1(p).  
 
(q) Taxes.  The Company and each of its Subsidiaries has filed or caused to be
filed all tax returns that are required to be filed (except for returns that
have been appropriately extended by it), and has paid, or will pay when due, all
taxes shown to be due and payable on said returns and all other taxes,
impositions, assessments, fees or other charges imposed on it by any
Governmental Authority, prior to any delinquency with respect thereto (other
than taxes, impositions, assessments, fees and charges currently being Properly
Contested).
 
(r) Certain Transactions.  Except as set forth on Schedule 3.1(r) hereto, no
officer, director or, to the knowledge of the Company, any member of their
immediate families, nor any Subsidiary or affiliate of the Company is, directly
or indirectly, interested in any material contract or agreement with the Company
or any Subsidiary. Except as set forth on Schedule 3.1(r) hereto, the Company is
not indebted, directly or indirectly, to any of its equityholders, officers or
directors or, to the knowledge of the Company, their respective spouses or
children, in any amount whatsoever, and none of said equityholders, officers or
directors or, to the knowledge of the Company, any members of their immediate
families, are indebted to any of the Company or any of its Subsidiaries or have
any direct or indirect ownership interest in any firm or corporation with which
the Company or any of its Subsidiaries has a business relationship. Neither the
Company nor any of its Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other person, firm, corporation or other legal entity.
 
(s) Significant Contracts.  Schedule 3.1(s) is a complete and correct list of
all contracts, agreements and other documents pursuant to which the Company or
any of its Subsidiaries receives revenues in excess of $500,000 per Fiscal Year
or has committed to make expenditures in excess of $500,000 per Fiscal Year
(collectively, the “Significant Contracts”). Each such Significant Contract is
in full force and effect as of the date hereof and the Company does not know of
any reason why any such Significant Contract would not remain in full force and
effect pursuant to the terms thereof.
 
(t) Environmental.  Except as set forth on Schedule 3.1(t) or the reports listed
therein, the Company and each of its Subsidiaries has duly complied with, and
its business, operations, assets, equipment, property, leaseholds or other
facilities are in material compliance with, the provisions of all applicable
federal, state and

--------------------------------------------------------------------------------

 

local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder. Except as set forth on
Schedule 3.1(t) or the reports listed therein, neither the Company nor any
Subsidiary has received written notice of, or knows of, any violations by the
Company or any of its Subsidiaries of any federal, state or local environmental,
health or safety laws, codes or ordinances, and any rules or regulations
promulgated thereunder with respect to its businesses, operations, assets,
equipment, property, leaseholds, or other facilities.
 
(u) ERISA.  Neither the Company nor any Subsidiary of the Company has any
pension plan that is sponsored, maintained or contributed to by the Company and
that is subject to the requirements of Title IV of the Employee Retirement
Income Security Act of 1974, 29 U.S.C. §§ 1001-1461, as amended from time to
time. The Company and each of its Subsidiaries have operated and administered
each of its welfare and pension plans in compliance with all requirements of the
Employee Retirement Income Security Act of 1974, as amended from time to time,
except for such instances of noncompliance as have not resulted in and could not
reasonably be expected to have a Material Adverse Effect on the Company.
 
(v) Title to Properties.  The Company and each of its Subsidiaries have good and
marketable title to, or valid leasehold interests in, all its real properties
and good title to its other assets, free and clear of all liens other than those
liens set forth on Schedule 3.1(v).  
 
(w) Registration Rights.  Except as set forth on Schedule 3.1(w) hereto, except
as described in the Registration Rights Agreement, the Company is not under any
obligation to register under the Securities Act, or the Trust Indenture Act of
1939, as amended, any of its presently outstanding securities or any of its
securities that may subsequently be issued.
 
(x) Employees.  Neither the Company nor any of its Subsidiaries has had any
current strikes, work stoppages or similar disputes which have resulted in or
which the Company reasonably believes would be expected to have a Material
Adverse Effect on the Company.
 
(y) Location of Properties, Places of Business.  The only jurisdictions in which
the Company or any of its Subsidiaries maintains any tangible personal property
or carries on business are as listed on Schedule 3.1(y) hereto. All billings for
the supply of goods and services by the Company and its Subsidiaries are made
from, and require payment to be made to, the chief executive office of the
Company. Except as set forth on Schedule 3.1(y), neither the Company nor any of
its Subsidiaries has, during the five years preceding the date of this
Agreement, been known as or used any other corporate, trade or fictitious name,
or acquired all or substantially all of the assets, Capital Stock or operating
units of any Person. Neither the Company nor any of its Subsidiaries has, during
the five years preceding the date of this Agreement, had a business location at
any address other than addresses set forth on Schedule 3.1(y).  
 
(z) Insurance.  The Company and each of its Subsidiaries carries or is covered
by insurance in such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties and as is customary for
companies engaged in similar businesses in similar industries.
 
(aa) Real Properties.  Schedule 3.1(aa) hereof sets forth, the address or tax
parcel number of each parcel of real property in which the Company or any of its
Subsidiaries has any estate or interest, together with a description of the
estate or interest (e.g., fee simple, leasehold, etc.) held by the Company or
such Subsidiary. The Company further represents and warrants that with respect
to each parcel of such real property, neither it nor any of its Subsidiaries has
entered into any leases, subleases or other arrangements for occupancy of space
within such parcel, other than the leases described in Schedule 3.1(aa) hereof,
and (v) each lease, sublease, or other arrangement in Schedule 3.1(aa) hereof,
is in full force and effect, and, except as disclosed in Schedule 3.1(aa)
hereof, or as otherwise disclosed to Investor in writing after the date hereof,
there is not continuing any material default on the part of the Company or any
of its Subsidiaries with respect to each lease, sublease, or other arrangement.
 
(bb) Fairness Opinion.  The Special Committee of the Company has received the
written opinion of Valuation Research Corporation, an independent financial
advisor to the Company, to the effect that, as of the date of this Agreement,
the price to be paid for the Class D Shares is fair, from a financial point of
view, to the

--------------------------------------------------------------------------------

 

Company’s stockholders. The Company has provided a copy of such opinion to
Investors, and such opinion has not been withdrawn or revoked or otherwise
modified in any material respect.
 
(cc) Special Committee; Board Recommendation; Required Vote.  
 
(i) The special committee of independent directors of the Board of Directors of
the Company (the “Special Committee”), at a meeting duly called and held, has,
by unanimous vote of its members, (A) determined that this Agreement and the
transactions contemplated by this Agreement are advisable and fair to and in the
best interests of the stockholders of the Company, and (B) resolved to recommend
that the stockholders of the Company approve the issuance of the Class D Shares
pursuant to this Agreement (the “Company Board Recommendation”).
 
(ii) The affirmative vote of (x) holders of (1) a majority of the voting power
of the outstanding shares of the Company’s common stock, voting together as a
single class, and (2) a majority of the voting power of the outstanding shares
of the Class B Common Stock and Class C Common Stock, voting as separate
classes, to approve filing of the Second Amended and Restated Certificate and
(y) holders of a majority of the voting power of the outstanding shares of the
Company’s common stock, voting together as a single class to approve the
issuance of the Class D Shares (collectively, the “Required Company Stockholder
Approval”), are the only votes of the holders of any class or series of Capital
Stock of the Company necessary to approve the issuance of the Class D Shares
pursuant to this Agreement.
 
(dd) Foreign Assets Control Regulations, Etc.  
 
(i) Except as a result of the identity or status of Investors, neither the sale
of the Class D Shares by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or
executive order relating thereto.
 
(ii) Neither the Company nor any of its Subsidiaries is a Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of Executive Order No. 13,224
of September 24, 2001, Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg.
49, 079 (2001), as amended and is not a Person that, to its knowledge, engages
in any dealings or transactions with any such Person.
 
(ee) Status under 1940 Act.  The Company is not subject to regulation under the
Investment Company Act of 1940, as amended.
 
3.2  Representations of Each Investor.  Each Investor represents and warrants to
the Company (as to itself only) that as of the date hereof and as of the Closing
Date:
 
(a) Legal Status; Authorization.  Such Investor is (a) a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and (b) has the full power and authority to
execute, deliver and perform its obligations under this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated by
this Agreement and the Registration Rights Agreement. The execution, delivery
and performance by it of this Agreement and the Registration Rights Agreement
and (a) has been duly authorized by all necessary action and (b) does not
contravene the terms of its organizational documents, or any amendment thereof.
 
(b) Validity and Binding Effect.  This Agreement and the Registration Rights
Agreement are the legal, valid and binding obligations of such Investor
enforceable in accordance with their respective terms, subject to limitations
imposed by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally or the application of general equitable
principles.
 
(c) Fees/Commissions.  Such Investor has not agreed to pay any finder’s fee,
commission, origination fee or other fee or charge to any person or entity with
respect to the Equity Investment or other transactions contemplated hereunder.

--------------------------------------------------------------------------------

 

(d) Accredited Investor; Purchase Entirely for Own Account.  Such Investor is an
“accredited investor” as that term is defined in Rule 501 of the Securities Act
and, in making the purchase contemplated herein, it is specifically understood
and agreed that such Investor is acquiring the Class D Shares for the purpose of
investment and not with a view towards the sale or distribution thereof within
the meaning of the Securities Act.
 
(e) Restricted Securities.  Such Investor understands that the Class D Shares
will not be registered under the Securities Act, by reason of their issuance by
the Company in a transaction exempt from the registration requirements of the
Securities Act, and that it must hold the Class D Shares indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from registration.
 
(f) Receipt of Information.  Such Investor has received all the information it
considers necessary or appropriate for deciding whether to purchase the Class D
Shares. Such Investor further represents that it has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Class D Shares, the business, properties,
prospects and financial condition of the Company 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 the
accuracy of any information furnished to it or to which it had access. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 3.1 of this Agreement or the right of such Investor to
rely thereon. Such Investor learned of this investment opportunity as a result
of direct contact by the Company or an agent of the Company and not by means of
advertising, publication or other written materials.
 
(g) Investment Experience.  Such Investor is experienced in evaluating and
investing in securities, of companies in the development state and acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Class D Shares. Such Investor also represents that it has not been
organized for the purpose of purchasing the Class D Shares.
 
(h) Reliance Upon Investor’s Representations.  Such Investor understands that
the Class D Shares are not registered under the Securities Act on the ground
that the sale provided for in this Agreement and the issuance of the Class D
Shares hereunder is exempt from registration under the Securities Act pursuant
to Section 4(2) thereof and/or Regulation D thereunder, and that the Company’s
reliance on such exemption is based on the representations of Investors set
forth herein. Such Investor realizes that the basis for the exemption may not be
present if, notwithstanding such representations, such Investor has in mind
merely purchasing the Class D Shares being purchased by it for a fixed or
determinable period in the future, or for a market rise, or for sale if the
market does not rise. Such Investor does not have any such intention.
 
(i) Legends.  The certificate evidencing the Class D Shares shall be endorsed
with the legend substantially in the form set forth below, and such Investor
covenants that, except to the extent such restrictions are waived by the
Company, such Investor shall not transfer the securities represented by any such
certificate without complying with the restrictions on transfer described in the
legend endorsed on such certificate:
 
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE,
AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS
PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY (WHICH IN THE CASE OF
ANY FINANCIAL INSTITUTIONAL HOLDER HEREOF MAY BE ITS INTERNAL COUNSEL) THAT
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT
REQUIRED.”

--------------------------------------------------------------------------------

 

ARTICLE 4

 
CLOSING; CONDITIONS TO CLOSING
 
4.1  Closing.  The purchase and sale of the Class D Shares shall take place at
the offices of the Company, 1805 Old Alabama Road, Suite 350, Roswell, Georgia
33076 (the “Closing”) on the third (3rd) Business Day after the satisfaction or
waiver of the conditions set forth in this Article 4 (other than any such
conditions that by their terms cannot be satisfied until the Closing Date, which
conditions shall be required to be so satisfied or waived on the Closing Date),
unless another time or date is agreed to in writing by the parties hereto (the
“Closing Date”). Conditions precedent set forth in Section 4.2 below may be
waived solely by both Investors in their sole discretion. Conditions precedent
set forth in Section 4.3 below may be waived solely by the Company in its sole
discretion. If the Agreement shall have been terminated pursuant to Section 6.1
hereof prior to the Closing Date, no Closing shall occur.
 
4.2  Conditions to Investors’ Obligations.  Investors’ obligations to purchase
and pay for the Class D Shares at the Closing are subject to Investors
determining, in their good faith discretion, that the following conditions have
been satisfied (or Investors waiving, in their sole discretion, in writing the
conditions that they have determined have not been satisfied), on or before the
Closing Date:
 
(a) No Material Adverse Change.  Since June 30, 2006, there has not occurred a
Material Adverse Change to the Company or any Acquisition Target.
 
(b) Representations, Warranties and Covenants.  Subject to the second sentence
of this clause (b), the representations and warranties of the Company contained
in Article 3 shall be true and correct in all material respects (without
duplication of materiality qualifiers) on and as of the date when made and on
and as of the Closing Date. The Company shall have delivered to each of the
Investors all revisions to the representations in Sections 3.1(d), (g), (n),
(o), (p), (q), (r), (s), (t), (v), (x), (y), and (aa) to give effect to the
consummation of the Note Purchase and the acquisition of the Acquisition
Targets, and such revisions shall be in form and substance satisfactory to the
Investors in their good faith discretion. In addition, the Company will have
performed, or shall have caused to be performed, all agreements, obligations and
covenants required herein to be performed by it on or prior to the Closing Date.
 
(c) Consummation of the Note Purchase and the Acquisitions.  On or prior to the
Closing Date, the Note Purchase and the acquisition of the Acquisition Targets
shall have been consummated in accordance with the terms and conditions of the
Note Purchase Documents, the applicable acquisition agreements and all
applicable laws. On or prior to the Closing Date, the Company shall have
delivered to each Investor pro forma financial statements of the Company and its
Subsidiaries giving effect to the acquisition of the Acquisition Targets, the
consummation of the Equity Investment and the Note Purchase, the closing of the
senior financing provided for in Section 4.2(h) below, the retirement of the
Brantley Capital Shares and the conversion of the Brantley Notes, the Class B
Common Stock and the Class C Common Stock, and such pro forma financial
statements shall be satisfactory to each Investor.
 
(d) Consent of Third Parties, Governmental Authorities, etc.  The Company shall
have presented evidence satisfactory to Investors to the effect that (i) all
consents, waivers and amendments required in connection with the consummation of
the transactions related to this Agreement and the transactions contemplated
hereby have been obtained, (ii) the transactions related to issuance of the
Class D Shares shall not violate, or constitute or trigger the occurrence of a
default or an event of default with respect to, any contractual obligations of
the Company or any of its Subsidiaries and (iii) neither the Company nor any of
its Subsidiaries is in violation of or default under or with respect to any of
its material contractual obligations.
 
(e) Stockholder Approval.  The Company shall have received the Required Company
Stockholder Approval for the filing of the Second Amended and Restated
Certificate and the consummation of the Equity Investment and the transactions
contemplated by this Agreement on the terms and conditions approved by the
Company Board Recommendation and such Company Stockholder Approval shall not be
subject to any injunction or court, stock exchange or administrative proceeding
challenging its legality, validity or effectiveness.

--------------------------------------------------------------------------------

 

(f) Filing of Charter.  The Company shall have filed the Second Amended and
Restated Certificate with, and it shall have been accepted by, the Secretary of
State of Delaware.
 
(g) Reservation of Shares.  The Company shall have taken all corporate actions
to reserve a sufficient number of shares of the Class A Common Stock for
issuance on conversion of the Class D Shares.
 
(h) Senior Financing.  On or prior to the Closing Date, the Company shall have
consummated a transaction with one or more lenders for the provision of not less
than $6,500,000 of senior secured financing.
 
(i) Conversions; Repurchase.  On or before Closing, Brantley shall have
converted the entire unpaid principal amount of, and any accrued but unpaid
interest on, the Brantley Notes into shares of Class A Common Stock. On or
before Closing, the Company shall have acquired all of the Brantley Capital
Shares and have retired the same and/or all of the outstanding shares of Class B
Common Stock and Class C Common Stock shall have been either converted into
shares of Class A Common Stock or otherwise redeemed, repurchased or purchased
by the Company.
 
(j) Equity Investment.  Contemporaneously with Closing, each other Investor
shall have consummated the Equity Investment in all material respects in
accordance with the terms and conditions of the Equity Investment Documents and
all applicable laws.
 
(k) Certain Documents.  Each of the Investors shall have received the following
closing documents, in form and substance satisfactory to such Investor, all of
which shall, except as specified below, be fully executed originals, and shall
be in full force and effect:
 
(i) stock certificates representing the Class D Shares to be acquired by such
Investor hereunder; a Private Placement Number issued by Standard & Poor’s CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
each such stock certificate;
 
(ii) the Registration Rights Agreement, duly executed by the Company;
 
(iii) a certificate of the Secretary of State of Delaware as to the good
standing of the Company in such jurisdiction dated as of a date within five
(5) Business Days prior to the Closing Date;
 
(iv) a certificate, dated as of the Closing Date, of the secretary of the
Company certifying (A) that the copies of the certificate of incorporation and
the bylaws of the Company, attached thereto and as amended to date, are true,
complete and correct, (B) that the copies of the resolutions of the directors of
the Company, authorizing the transactions contemplated by this Agreement and
issuance of the Class D Shares are true, complete and correct, (C) as to the
incumbency of each Person executing this Agreement, and (D) as to any other
matters reasonably requested by Investors;
 
(v) a certificate from an officer of the Company, in form and substance
satisfactory to Investors, with respect to the satisfaction of the requirements
under Sections 4.2(a), (b), (c), (e), (f), (g), (h) and (i) above;
 
(vi) a legal opinion of the Company’s counsel, in form and substance
satisfactory to Investors; and
 
(vii) such other documents as such Investor may reasonably request in connection
with this Agreement, and each such document shall be in form and substance
reasonably satisfactory to such Investor. All fees and expenses of such Investor
required to be paid pursuant to Section 7.2 hereof shall have been paid. Any
withdrawals or modifications referred to in Section 2.4(b) hereof shall be
satisfactory to such Investor in its sole discretion.
 
4.3  Conditions to the Company’s Obligations.  The Company’s obligations to
issue and sell the Class D Shares at the Closing are subject to the Company
determining, in its reasonable discretion, that the following conditions have
been satisfied (or the Company waiving in writing the conditions that it has
determined have not been satisfied), on or before the Closing Date:
 
(a) Representations, Warranties and Covenants.  The representations and
warranties of each Investor contained in Article 3 shall be true and correct in
all material respects (without duplication of materiality

--------------------------------------------------------------------------------

 

qualifiers) on and as of the Closing Date. In addition, Investors will have
performed, or shall have caused to be performed, all agreements, obligations and
covenants required herein to be performed by them on or prior to the Closing
Date.
 
(b) Consummation of the Note Purchase.  On or prior to the Closing Date, the
Note Purchase shall have been consummated in all material respects in accordance
with the terms and conditions of the Note Purchase Documents and all applicable
laws.
 
(c) Consent of Third Parties, Governmental Authorities, etc.  The Company shall
have received evidence reasonably satisfactory to it to the effect that (i) all
material consents, waivers and amendments required in connection with the
consummation of the transactions related to this Agreement and the transactions
contemplated hereby have been obtained, (ii) the transactions related to
issuance of the Class D Shares shall not violate, or constitute or trigger the
occurrence of an event of default with respect to, any contractual obligations
of the Company or any of its Subsidiaries and (iii) neither the Company nor any
of its Subsidiaries is in violation of or default under or with respect to any
of its material contractual obligations.
 
(d) Stockholder Approval.  The Company shall have received the Required Company
Stockholder Approval for the filing of the Second Amended and Restated
Certificate and the consummation of the Equity Investment and the transactions
contemplated by this Agreement on the terms and conditions approved by the
Company Board Recommendation and such Company Stockholder Approval shall not be
subject to any injunction or court, stock exchange or administrative proceeding
challenging its legality, validity or effectiveness.
 
(e) Filing of Charter.  The Company shall have filed the Second Amended and
Restated Certificate with, and it shall have been accepted by, the Secretary of
State of Delaware.
 
(f) Conversions; Repurchase.  On or before Closing, Brantley shall have
converted the entire unpaid principal amount of, and any accrued but unpaid
interest on, the Brantley Notes into shares of Class A Common Stock. On or
before Closing, the Company shall have acquired all of the Brantley Capital
Shares and have retired the same and/or all of the outstanding shares of Class B
Common Stock and Class C Common Stock shall have been either converted into
shares of Class A Common Stock or otherwise redeemed, repurchased or purchased
by the Company.
 
(g) Certain Documents.  The Company shall have received the following closing
documents, in form and substance satisfactory to the Company, all of which
shall, except as specified below, be fully executed originals, and shall be in
full force and effect:
 
(i) the Registration Rights Agreement, duly executed by Investors; and
 
(ii) such other documents as the Company may reasonably request in connection
with this Agreement, and each such document shall be in form and substance
reasonably satisfactory to the Company.
 
ARTICLE 5

 
INDEMNIFICATION; SURVIVAL
 
5.1  General Indemnification.
 
(a) The Company, without limitation as to time, will defend and indemnify each
of the Investors and their respective officers, directors, managers, employees,
attorneys and agents (each, an “Indemnified Party”) against, and hold each
Indemnified Party harmless from, all losses, claims, damages, liabilities, costs
(including the costs of preparation and attorneys’ fees and expenses)
(collectively, the “Losses”) incurred by any Indemnified Party as a result of,
or arising out of, or relating to (A) any misrepresentation or breach of any
representation or warranty made by the Company herein or (B) any breach of any
covenant or agreement of the Company contained in this Agreement, other than in
either case any Losses resulting from action on the part of such Indemnified
Party to the extent they are a result of such party’s gross negligence or
willful misconduct. The Company agrees to reimburse each Indemnified Party
promptly for all such Losses as they are incurred by such Indemnified Party in
connection

--------------------------------------------------------------------------------

 

with the investigation of, preparation for or defense of any pending or
threatened claim or any action or proceeding arising therefrom. The obligations
of the Company under this paragraph will survive any transfer of the Class D
Shares and the termination of this Agreement. In the event that the foregoing
indemnity is unavailable or insufficient to hold an Indemnified Party harmless,
then the Company will contribute to amounts paid or payable by such Indemnified
Party in respect of such Indemnified Party’s Losses in such proportions as
appropriately reflect the relative benefits received by and fault of the Company
and such Indemnified Party in connection with the matters as to which such
Losses relate and other equitable considerations.
 
(b) If any action, proceeding or investigation is commenced, as to which any
Indemnified Party proposes to demand indemnification, it shall notify the
Company with reasonable promptness; provided, however, that any failure by such
Indemnified Party to notify the Company shall not relieve the Company from its
obligations hereunder except to the extent the Company is prejudiced thereby.
The Company shall be entitled to assume the defense of any such action,
proceeding or investigation, including the employment of counsel and the payment
of all fees and expenses. Any Indemnified Party shall have the right to employ
separate counsel in connection with any such action, proceeding or investigation
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be paid by the Indemnified Party, unless (A) the Company has
failed to assume the defense and employ counsel as provided herein, (B) the
Company has agreed in writing to pay such fees and expenses of separate counsel
or (C) an action, proceeding, or investigation has been commenced against both
the Indemnified Party and/or the Company and representation of both the Company
and the Indemnified Party by the same counsel would be inappropriate because of
actual or potential conflicts of interest between the parties. In the case of
any circumstance described in clauses (A), (B) or (C) of the immediately
preceding sentence, the Company shall be responsible for the reasonable fees and
expenses of such separate counsel; provided, however, that the Company shall not
in any event be required to pay the fees and expenses of more than one separate
counsel (and, if deemed necessary by such separate counsel, appropriate local
counsel who shall report to such separate counsel) for any related Indemnified
Parties. The Company shall be liable only for settlement of any claim against an
Indemnified Party made with the Company’s written consent.
 
5.2  Limitation of Damages.  Neither Investors nor the Company shall in any
event be liable to the other party for special or consequential damages arising
from this Agreement.
 
5.3  Survival.  All representations, warranties, covenants and agreements
contained herein or made in writing by the Company or Investors in connection
herewith (except as specifically set forth herein) shall survive the execution
and delivery of this Agreement and consummation of the Equity Investment.
 
ARTICLE 6

 
TERMINATION
 
6.1  Termination.  This Agreement and the transactions contemplated under it may
be terminated and abandoned at any time prior to the Closing (notwithstanding
the Company’s receipt of the Required Company Stockholder Approval):
 
(a) by mutual consent in writing of the Company and each Investor;
 
(b) (i) by any Investor, if there has been a breach of any covenant of the
Company hereunder, or a breach of any of the representations and warranties of
the Company made in Section 3.1 of this Agreement, or the failure of any
condition to Closing set forth in Section 4.2 hereof, or (ii) by the Company, if
there has been a breach of any covenant of any Investor hereunder, a breach of
any of the representations and warranties of any Investor made in Section 3.2 of
this Agreement or a failure of any of the conditions to Closing set forth in
Section 4.3 hereof;
 
(c) by the Company or any Investor, if there shall be any law of any competent
Governmental Authority that makes consummation of the transactions contemplated
hereby, illegal or otherwise prohibited or if any order of any competent
Governmental Authority prohibiting such transactions is entered and such order
shall become final and non-appealable; and

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(e) by any Investor, if the Closing shall have not occurred on or prior to
December 31, 2006 for any reason whatsoever other than Investors breaching any
of their undertakings hereunder or acting in bad faith.
 
6.2  Effect of Termination.  In the event of the termination of this Agreement
pursuant to Section 6.1, this Agreement, except for the provisions of this
Section 6.2, Article 5, and Section 7.2, shall become void and have no effect,
without any liability on the party of any party to this Agreement or their
respective directors, officers, or stockholders. Notwithstanding the foregoing,
nothing in this Section 6.2 shall relieve any party to this Agreement of
liability for willful breach; provided, however, that if it shall be judicially
determined that termination of this Agreement was caused by a willful breach of
this Agreement, then, as the sole remedy of any party aggrieved by such breach
(all other liability being hereby irrevocably waived by such aggrieved party and
such aggrieved party hereby agrees not to assert any such other liability or any
claim in connection therewith), the party to this Agreement found to have
intentionally breached this Agreement shall indemnify and hold harmless such
aggrieved party for the out-of-pocket costs, feels and expenses of its counsel,
accountants, financial advisors and other experts and advisors incurred in
connection with, as well as its other out-of-pocket fees and expenses directly
incident to, the negotiation, preparation and execution of this Agreement and
related documentation and the stockholders’ meeting.
 
ARTICLE 7

 
MISCELLANEOUS
 
7.1  Successors and Assigns Included in Parties.  Whenever in this Agreement one
of the parties hereto is named or referred to, the heirs, legal representatives,
successors, successors in title and assigns of such parties shall be included,
and all covenants and agreements contained in this Agreement by or on behalf of
the Company or by or on behalf of each Investor shall bind and inure to the
benefit of their respective heirs, legal representatives, successors in title
and assigns, whether so expressed or not.
 
7.2  Costs and Expenses.  The Company agrees to pay upon demand all reasonable
out-of-pocket costs and expenses of each of the Investors in connection with
such Investor’s due diligence investigation in connection with, and the
preparation, negotiation, execution, delivery of, this Agreement, and any
amendment, modification or waiver hereof or thereof or consent with respect
hereto or thereto.
 
7.3  Assignment.  No Investor may assign this Agreement or any rights or
obligations hereunder, other than to affiliates of such Investor, without the
prior written consent of the Company, such consent not to be unreasonably
withheld, conditioned or delayed, provided that any permitted transferee shall
agree in writing to be bound, with respect to the transferred securities, by the
provisions hereof that apply to Investors. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Investor, except pursuant to a merger, recapitalization or other
business combination transaction in which the surviving entity agrees in writing
to assume all of the covenants, liabilities and obligations of the Company
hereunder. Any assignment contrary to the terms hereof is null and void and of
no force and effect. Notwithstanding the foregoing, nothing in this Agreement is
intended to give any person not named herein the benefit of any legal or
equitable right, remedy or claim under this Agreement, except as expressly
provided herein.
 
7.4  Severability.  If any provision(s) of this Agreement or the application
thereof to any Person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other Persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
 
7.5  Article and Section Headings; Defined Terms.  Numbered and titled article
and section headings and defined terms are for convenience only and shall not be
construed as amplifying or limiting any of the provisions of this Agreement.
 
7.6  Notices.  Any and all notices, elections or demands permitted or required
to be made under this Agreement shall be in writing, signed by the party giving
such notice, election or demand and shall be delivered personally, telecopied,
or sent by certified mail or overnight via nationally recognized courier service
(such as Federal Express), to the other party at the address set forth below, or
at such other address as may be supplied in writing and of which receipt has
been acknowledged in writing. The date of personal delivery or telecopy
(delivery

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receipt confirmed) or two (2) Business Days after the date of mailing (or the
next Business Day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Agreement:
 
The address of each Investor is:
 
Phoenix Life Insurance Company
c/o Phoenix Investment Management, LLC
56 Prospect Street
Hartford, CT 06115
Attention: Paul Chute, Managing Director
Facsimile: (860) 403-7248

 
Brantley Partners IV, L.P.
Lakepoint
3201 Enterprise Parkway, Suite 350
Beachwood, Ohio 44122
Attention: Paul H. Cascio
Facsimile: (216) 464-8405
 
in either case, with a copy to:
 
Ober Kaler Grimes & Shriver, P.C.
120 East Baltimore Street
Baltimore, Maryland 21202
Attention: Jeffrey S. Kuperstock, Esq.
Facsimile: (410) 547-0699
 
The address of the Company is:
 
Orion HealthCorp, Inc.
1805 Old Alabama Road, Suite 350
Roswell, Georgia 33076
Attention: Terrence L. Bauer
Facsimile: (678) 832-1888
 
with a copy to:
 
Benesch Friedlander Coplan & Aronoff LLP
2300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Attention: Ira C. Kaplan, Esq.
Facsimile: (216) 363-4588
 
7.7  Entire Agreement.  This Agreement and the other written agreements between
the Company and Investors represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed contemporaneously herewith with
respect to the Class D Shares, the provision of this Agreement shall control.
The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company were not based upon any fact or material provided by
Investors, nor was the Company induced or influenced to enter into this
Agreement or the Registration Rights Agreement by any representation, statement,
analysis or promise by Investors.
 
7.8  Governing Law; Amendment or Waiver.
 
(a) This Agreement shall be construed and enforced under the laws of the State
of New York without regard to conflicts of laws.

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(b) This Agreement may be amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it, if
the Company shall obtain the prior written consent of Investors to such
amendment, action or omission to act.
 
7.9  Counterparts  This Agreement may be executed in any number of counterparts
(including by facsimile and by PDF transmission), each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same Agreement.
 
7.10  Construction and Interpretation.  Should any provision of this Agreement
require judicial interpretation, the parties hereto agree that the court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against one party by reason of the rule
of construction that a document is to be more strictly construed against the
party that itself or through its agent prepared the same, it being agreed that
the Company, Investors and their respective agents have participated in the
preparation hereof.
 
7.11  Consent to Jurisdiction; Exclusive Venue.  THE COMPANY HEREBY IRREVOCABLY
CONSENTS TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND ALL STATE COURTS SITTING IN NEW YORK CITY FOR
THE PURPOSE OF ANY LITIGATION TO WHICH ANY INVESTOR MAY BE A PARTY AND WHICH
CONCERNS THIS AGREEMENT. IT IS FURTHER AGREED THAT VENUE FOR ANY SUCH ACTION
SHALL LIE EXCLUSIVELY WITH COURTS SITTING IN NEW YORK CITY, UNLESS SUCH INVESTOR
AGREES TO THE CONTRARY IN WRITING. THE COMPANY WAIVES ANY OBJECTION BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY COMPLYING WITH THE
PROVISIONS FOR GIVING NOTICE AS SET FORTH IN THIS AGREEMENT. NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF ANY INVESTOR TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY SUCH INVESTOR OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR
THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.
 
7.12  Waiver of Trial by Jury.  EACH OF THE INVESTORS AND THE COMPANY HEREBY
KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY
ACTIONS, PROCEEDINGS, CLAIMS OR COUNTERCLAIMS, WHETHER IN CONTRACT OR TORT OR
OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT.
 
[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers, as of the day and year first above written.
 
THE COMPANY:
 
ORION HEALTHCORP, INC., a Delaware corporation
 

  By: 
/s/  Terrence L. Bauer

Name: Terrence L. Bauer
Title: President and Chief Executive Officer
 
INVESTORS:
 
PHOENIX LIFE INSURANCE COMPANY,
a New York corporation
 

  By: 
/s/  John H. Beers

Name: John H. Beers
Title: Vice President
 
BRANTLEY PARTNERS IV, L.P., a Delaware limited partnership
 

  By:  Brantley Venture Management IV, L.P., its general partner

 

  By: 
/s/  Paul H. Cascio

Name: Paul H. Cascio

Title: General Partner