Document:

EX-10.4

 

    Exhibit 10.4

 

    NOTE PURCHASE
    AGREEMENT

 

    THIS NOTE 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 between ORION
    HEALTHCORP, INC., a Delaware corporation (the
    “Company”), and PHOENIX LIFE INSURANCE
    COMPANY, a New York corporation
    (“Investor”).

 

    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 class of its common
    stock (the “Equity Investment”) and $3,350,000
    in subordinated debt (the “Note Purchase”).

 

    3. Investor desires to make an investment in the Company in
    the form of a senior subordinated unsecured promissory note (the
    “Note”) in the aggregate original principal
    amount of $3,350,000 on the terms and conditions hereinafter set
    forth, and for the purpose hereinafter set forth.

 

    AGREEMENT:

 

    NOW, THEREFORE, in consideration of the agreement of Investor to
    make the Note Purchase, 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 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 5.1.  

 

    “Closing Date” has the meaning set forth
    in Section 5.1.  

 

    “Class A Common Stock” means the
    Class A Common Stock, par value $0.001, of the Company.

 

    “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” means the
    Class D Common Stock, par value $0.001, of the Company to
    be created and issued as part of the Equity Investment.

 

    “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(bb).  

 

    “Company SEC Documents” has the meaning
    set forth in Section 3.1(g).  

 

    “Default” means any event or condition
    that constitutes an Event of Default or that with the giving of
    notice, the passage of time, or both, would be an Event of
    Default.

 

    “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.

 

    “Event of Default” means the events
    specified in Section 6.1.  

 

    “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.

 

    “Guaranty Obligations” means, without
    duplication, any obligations of the Company (other than
    endorsements in the ordinary course of business of negotiable
    instruments for deposit or collection) guaranteeing or intended
    to guarantee any Indebtedness of any other Person in any manner,
    whether direct or indirect, and including without limitation any
    obligation, whether or not contingent, (i) to purchase any
    such Indebtedness or any property constituting security
    therefor, (ii) to advance or provide funds or other support
    for the payment or purchase of any such Indebtedness or to
    maintain working capital, solvency or other balance sheet
    condition of such other Person (including without limitation
    keep well agreements, maintenance agreements, comfort letters or
    similar agreements or arrangements) for the benefit of any
    holder of Indebtedness of such other Person, (iii) to lease
    or purchase property, securities or services primarily for the
    purpose of assuring the holder of such Indebtedness, or
    (iv) to otherwise assure or hold harmless the holder of
    such Indebtedness against loss in respect thereof.

 

    “Indebtedness” means, without
    duplication, (a) all obligations of the Company for
    borrowed money, (b) all obligations of the Company
    evidenced by bonds, debentures, notes or similar instruments, or
    upon which interest payments are customarily made, (c) all
    obligations of the Company under conditional sale or other title
    retention agreements relating to property purchased by the
    Company (other than customary reservations or retentions of
    title under agreements with suppliers entered into in the
    ordinary course of business), (d) all obligations of the
    Company issued or assumed as the deferred purchase price of
    property or services purchased by such Person which appear as
    liabilities on the balance sheet of the Company (other than
    trade debt incurred in the ordinary course of business),
    (e) all obligations of the Company under any take or pay or
    similar arrangements or under commodities agreements,
    (f) the implied principal component of all obligations of
    the Company under capitalized leases, (g) all obligations
    of the Company under any interest rate protection agreement or
    foreign currency exchange agreement, (h) the principal
    portion of all obligations of the Company as an account party in
    respect of letters of credit (other than trade letters of
    credit) and bankers’ acceptances, including, without
    duplication, all unreimbursed drafts drawn thereunder (less the
    amount of any cash collateral securing any such letters of
    credit and bankers’ acceptances), (i) the

    

 

    principal portion of all obligations of the Company under
    synthetic leases, (j) all obligations of the Company to
    repurchase any securities issued by the Company at any time
    prior to
    51/2
    years from the Closing Date which repurchase obligations are
    related to the issuance thereof, including, without limitation,
    obligations commonly known as residual equity appreciation
    potential shares, (k) the aggregate amount of uncollected
    accounts receivable of the Company subject at such time to a
    sale of receivables (or similar transaction) to the extent such
    transaction is effected with recourse to the Company (whether or
    not such transaction would be reflected on the balance sheet of
    the Company in accordance with GAAP), (l) all Indebtedness
    of others secured by (or for which the holder of such
    Indebtedness has an existing right, contingent or otherwise, to
    be secured by) any Lien on, or payable out of the proceeds of
    production from, property owned or acquired by the Company,
    whether or not the obligations secured thereby have been
    assumed, (m) all Guaranty Obligations of the Company with
    respect to Indebtedness of another Person, (n) all accounts
    payable to trade creditors which are more than 60 days past
    due, other than those being Properly Contested, and (o) the
    Indebtedness of any partnership or unincorporated joint venture
    in which the Company is a general partner or a joint venturer to
    the extent such Indebtedness is recourse to the Company.

 

    “Indemnified Party” has the meaning set
    forth in Section 7.1(a).  

 

    “Intercreditor Agreement” means one or
    more agreements among the Company, the Senior Lenders, the
    Investor and the holders of certain Junior Indebtedness setting
    forth the subordination of the Obligations to the Senior
    Indebtedness and the priority of the Obligations to such Junior
    Indebtedness.

 

    “Investor” has the meaning set forth in
    the Preamble.

 

    “Junior Indebtedness” shall mean the
    following Indebtedness (i) all amounts owed to
    U.S. Bank Portfolio Services, as successor to DVI Financial
    Services, Inc., pursuant to that certain Restated Loan
    Agreement, dated June 18, 2004, as amended and as may be
    amended from time to time, (ii) all amounts owed under the
    various Subordinated Notes Due December 15, 2007 issued by
    the Company to the former owners of Medical Billing Solutions,
    Inc. and Dennis Cain Physician Solutions, Ltd and (iii) any
    amounts that may be owed by the Company pursuant to any notes
    issued by the Company to the sellers of any businesses acquired
    by the Company between the date hereof and the Closing Date.

 

    “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).

 

    “Loan Document(s)” has the meaning set
    forth in Section 2.1(b).  

 

    “Losses” has the meaning set forth in
    Section 7.1(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 Loan 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 Loan Document (other than Uniform Commercial
    Code filing statements) to which it is a party.

 

    “Note” has the meaning set forth in the
    Recitals, together with any replacement or substitution thereof,
    any addition or allonge thereto and any amendment, restatement
    or other modification thereto from time to time.

 

    “Note Purchase” has the meaning set
    forth in the Recitals.

 

    “Obligations” has the meaning set forth
    in Section 2.1(b).  

 

    “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 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 shares of Class D
    Common Stock to be issued as part of the Equity Investment 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.

 

    “Properly Contested” means, in the case
    of any Indebtedness of the Company (including any taxes) that is
    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
    Indebtedness is 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 Indebtedness will not have a
    Material Adverse Effect on the Company; (iv) if the
    Indebtedness results from, or is 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
    Indebtedness and all penalties, interest and other amounts due
    in connection therewith.

 

    “Proxy Statement” has the meaning set
    forth in Section 2.7(a).  

 

    “Registration Rights Agreement” has the
    meaning set forth in Section 2.6.  

 

    “Required Company Stockholder Approval”
    has the meaning set forth in
    Section 3.1(bb).  

 

    “Securities Act” means the Securities
    Act of 1933, as amended, and the rules and regulations of the
    Commission thereunder.

 

    “Senior Indebtedness” has the meaning to
    be set forth in the Intercreditor Agreement to be executed
    between Senior Lender(s) and Investor at the Closing.

 

    “Senior Lender” means any Person that
    holds Senior Indebtedness.

 

    “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.

 

    “Warrant” has the meaning set forth in
    Section 2.4.  

 

    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.

 

    1.3  Accounting
    Principles.  Unless otherwise specified
    herein, all accounting terms used herein shall be interpreted,
    all accounting determinations hereunder shall be made, and all
    financial statements required to be

    

 

    delivered hereunder after the Closing Date shall be prepared in
    accordance with GAAP applied on a basis consistent with the most
    recent audited financial statements of the Company delivered to
    Investor.

 

    ARTICLE 2

    

 

    NOTE PURCHASE;
    STOCKHOLDER APPROVAL

 

    2.1  Evidence of Investment and
    Repayment.

 

    (a) Subject to the terms contained herein and the
    satisfaction of the conditions precedent set forth in
    Section 5.2 or elsewhere herein or in the other Loan
    Documents, on the Closing Date Investor shall purchase the Note
    from the Company by wire transfer of immediately available funds
    in the amount of Three Million Three Hundred Fifty Thousand
    Dollars ($3,350,000) to an account designated by the Company
    prior to Closing and, subject to the satisfaction of the
    conditions precedents set forth in Section 5.3
    hereof, the Company shall sell the Note to the Investor and
    issue the Warrant to the Investor. The Note shall be in the
    original principal amount of Three Million Three Hundred Fifty
    Thousand Dollars ($3,350,000), executed by the Company in favor
    of Investor, substantially in the form of Exhibit A
    attached hereto.

 

    (b) The Note, this Agreement, and any Intercreditor
    Agreement to which the Company and Investor are parties, and any
    other instruments and documents executed by the Company, now or
    hereafter evidencing or in any way related to the Indebtedness
    evidenced by the Note are herein individually referred to as a
    “Loan Document” and collectively referred to as
    the “Loan Documents”. The term
    “Obligations” as used herein shall refer to
    (i) the Note, and any renewals or extensions thereof,
    (ii) the full and prompt payment and performance of any and
    all other Indebtedness and other obligations of the Company to
    Investor under the Loan Documents, direct or contingent
    (including but not limited to obligations incurred as endorser,
    guarantor or surety and including, without limitation, accrued
    and unpaid interest, capitalized interest, prepayment premiums
    and all costs, fees and expenses provided for hereunder),
    however evidenced or denominated, and however and whenever
    incurred, including but not limited to Indebtedness incurred
    pursuant to any present or future commitment of Investor to the
    Company under the Loan Documents and (iii) all future
    advances made by Investor for taxes, levies, and insurance and
    all reasonable attorneys’ fees, court costs and expenses of
    whatever kind incident to the collection of any of said
    Indebtedness or other obligations and the enforcement and
    protection of the security interest created hereby or by the
    other Loan Documents.

 

    (c) All payments of principal and interest due from the
    Company hereunder shall be due, without any presentment thereof,
    directly to Investor, at Investor’s address set forth in
    Section 8.9 or such other address as Investor may
    from time to time designate in writing to the Company or, if a
    bank account with a United States bank is designated Investor
    for or in any written notice to the Company from Investor, the
    Company will make such payments in immediately available funds
    to such bank account, no later than 2:00 p.m. New York City
    local time on the date due, marked for attention as indicated,
    or in such other manner or to such other account in any United
    States bank as Investor may from time to time direct in writing.

 

    2.2  Optional Prepayment of
    Notes.  Subject to any terms as may be set
    forth in an Intercreditor Agreement from time to time, on and
    after the second
    (2nd)
    anniversary of the Closing Date the Company shall have the right
    at any time and from time to time, upon the notice provided for
    below, to prepay the Note in whole or in part (and, if prepaid
    in part, in a minimum amount of $500,000). In the event of an
    optional prepayment made under this Section 2.2, the
    Company shall give Investor written notice of such prepayment
    not less than 30 nor more than 60 days prior to the
    prepayment date, specifying (i) such prepayment date,
    (ii) the principal amount of the Note to be prepaid on such
    date, and (iii) the accrued interest applicable to the
    prepayment, and stating that such prepayment is to be made
    pursuant to this Section 2.2. The price of the Note
    payable upon an optional prepayment pursuant to this
    Section 2.2 shall be an amount, as determined on the
    date of prepayment, equal to (x) the then-outstanding
    principal

    

 

    amount of the Note being redeemed multiplied by (y) the
    applicable price percentage set forth below, as such amount may
    be reduced by Investor, plus (z) all accrued and unpaid
    interest on the principal redeemed:

 

	 	 	 	 	 
	
 
	
 
	
    Prepayment

    
	
 

	

    Date of Prepayment

	
 
	
    Price Percentage
	
 

	 

	

    The second
    (2nd)
    anniversary of the Closing Date through, but not including the
    third
    (3rd)
    anniversary of the Closing Date
    

	
 
	
 
	
    103
	
    %

	

    The third
    (3rd)
    anniversary of the Closing Date through, but not including the
    fourth
    (4th)
    anniversary of the Closing Date
    

	
 
	
 
	
    102
	
    %

	

    The fourth
    (4th)
    anniversary of the Closing Date through, but not including the
    fifth
    (5th)
    anniversary of the Closing Date
    

	
 
	
 
	
    101
	
    %

	

    The fifth
    (5th)
    anniversary of the Closing Date and thereafter
    

	
 
	
 
	
    100
	
    %

 

    All optional prepayments under this Section 2.2
    shall be applied first to all costs, expenses, indemnities and
    other amounts payable hereunder and under the Note, then to
    payment of default interest, if any, then to payment of accrued
    interest and thereafter to payment of principal. Any portion of
    the Note which has been prepaid may not be reborrowed.

 

    2.3  Purpose of Note Purchase and Use of
    Proceeds.  The purpose of the
    Note Purchase and the use of proceeds shall be to finance
    the acquisition of the Acquisition Targets (to be consummated
    contemporaneously or substantially contemporaneously with the
    Closing) and for working capital purposes and related closing
    costs.

 

    2.4  Issuance of Warrant.  On
    the Closing Date, the Company shall issue to Investor the right
    to purchase at any time within five years of the Closing Date,
    for a purchase price of $0.01 per share, such number of
    shares of the Class A Common Stock equal to one and one
    hundred seventeen one-thousandths percent (1.117%) of the
    Outstanding Class A Common Stock on the Closing Date,
    pursuant to the terms of a Common Stock Purchase Warrant,
    substantially in the form of Exhibit B attached
    hereto (the “Warrant”). The Warrant is fully
    detachable from this Agreement and the Note and may be
    transferred separately pursuant to the terms thereof.

 

    2.5  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 exercise of the Warrant, the maximum number of
    shares of Class A Common Stock that may be issuable or
    deliverable thereupon.

 

    2.6  Registration Rights.  On
    the Closing Date, the Company shall grant to Investor the right
    to have the Class A Common Stock issuable upon exercise of
    the Warrant registered under the Securities Act, pursuant to the
    terms of a Registration Rights Agreement, substantially in the
    form of Exhibit C attached hereto (the
    “Registration Rights Agreement”).

 

    2.7  Stockholder Approval.

 

    (a) To the extent that stockholder approval of the issuance
    of the Warrant
    and/or the
    issuance of the Class D Common Stock as part of the Equity
    Investment 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 Investor
    such recommendation only if the Special Committee of the Company
    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.

 

    2.8  Purchase Price
    Allocation.  On the Closing Date, or within
    sixty (60) days thereafter, the Company and Investor shall
    mutually agree upon an allocation of the $3,350,000 purchase
    price for the Note and the Warrant as

    

 

    between the Note and the Warrant. The Company and Investor will
    report the purchase and sale of the Note and the Warrant in
    accordance with such allocation for all federal, state and local
    tax purposes.

 

    ARTICLE 3

    

 

    REPRESENTATIONS
    AND WARRANTIES

 

    3.1  The Company’s
    Representations.  In order to induce Investor
    to enter into this Agreement, the Company hereby represents and
    warrants to Investor that as of the date hereof, and,
    immediately after giving effect to the transactions contemplated
    by this Agreement and the other Loan Documents, 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 other Loan Documents to which it is a
    party. 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 the Loan Documents and the
    Warrant, without the consent or approval of any other person,
    firm, governmental agency or other legal entity. Except for
    obtaining the Required Company Stockholder Approval, the
    execution and delivery of this Agreement, the borrowing
    hereunder, the execution and delivery of each Loan Document to
    which the Company is a party and the Warrant, 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, the Note, the Warrant and all of the other documents
    to be delivered pursuant to the Loan Documents to which the
    Company is a party are duly authorized to act on behalf of the
    Company.

 

    (c) Validity and Binding
    Effect.  This Agreement, the Warrant and the
    other Loan Documents 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 Note 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 performance of the
    Obligations of the Company under and by virtue of the Loan

    

 

    Documents and the Warrant do not conflict with, and will not
    result in any breach of, or constitute a default or trigger a
    Lien under, any mortgage, security deed or agreement, deed of
    trust, lease, bank loan or credit agreement, corporate charter
    or bylaws, agreement or certificate of limited partnership,
    limited liability company agreement, license, franchise or any
    other material instrument or agreement to which the Company or
    any of its 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.

 

    (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, 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 Loan
    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), except for the
    Loan Documents, 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 and the other Loan
    Documents, 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 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) Margin Regulations.  The
    Company is not engaged in the business of extending credit for
    the purpose of purchasing or carrying margin stock. No proceeds
    received pursuant to this Agreement will be used to purchase or
    carry any equity security of a class which is registered
    pursuant to Section 12 of the Exchange Act.

 

    (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
    Note.  Assuming the accuracy of the
    representations and warranties of Investor contained in
    Section 3.2 hereof, the offer and sale of the Note
    and the Warrant 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 Note or
    Warrant, to any Person so as to bring the sale of the Note
    and/or the
    Warrant 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 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 carry or are 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) 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
    Warrant pursuant to this Agreement (the “Company Board
    Recommendation”).

 

    (ii) The affirmative vote of holders of a majority of the
    voting power of the outstanding shares of the Company’s
    common stock present at such meeting, voting together as a
    single class (the “Required Company Stockholder
    Approval”), is the only vote of the holders of any
    class or series of Capital Stock of the Company necessary to
    approve the issuance of the Warrant pursuant to this Agreement.

 

    (cc) Foreign Assets Control Regulations, Etc.

 

    (i) Except as a result of the identity or status of
    Investor, neither the sale of the Note 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.

 

    (dd) Status under 1940 Act.  The
    Company is not subject to regulation under the Investment
    Company Act of 1940, as amended.

 

    3.2  Investor’s
    Representations.  Investor represents and
    warrants to the Company that as of the date hereof, and,
    immediately after giving effect to the transactions contemplated
    by this Agreement and the other Loan Documents, as of the
    Closing Date:

 

    (a) Legal Status;
    Authorization.  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 other
    Loan Documents and to consummate the transactions contemplated
    by this Agreement and the other Loan Documents. The execution,
    delivery and performance by it of this Agreement and the other
    Loan Documents (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 other Loan
    Documents are the legal, valid and binding obligations of
    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.  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 Note Purchase or other transactions contemplated
    hereunder.

 

    (d) Accredited Investor; Purchase Entirely for Own
    Account.  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 Investor is
    acquiring the Note 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.  Investor understands that the
    Note will not be registered under the Securities Act, by reason
    of its issuance by the Company in a transaction exempt from the
    registration requirements of the

    

 

    Securities Act, and that it must hold the Note 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.  Investor has received all the
    information it considers necessary or appropriate for deciding
    whether to purchase the Note. 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 Note, 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 Investor to rely thereon. 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.  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 Note. Investor also represents that it has not
    been organized for the purpose of purchasing the Note.

 

    ARTICLE 4

    

 

    POST
    CLOSING COVENANTS AND AGREEMENTS

 

    The Company hereby covenants and agrees, that on the Closing
    Date and thereafter for so long as this Agreement is in effect
    and until the payment in full of all principal and interest
    under the Note together with all other Obligations under the
    Loan Documents:

 

    4.1  Payment of
    Obligations.  The Company shall pay the
    Indebtedness evidenced by the Note according to the terms
    thereof, and shall timely pay or perform, as the case may be,
    all of the other Obligations of the Company to Investor,
    together with interest thereon, and any extensions,
    modifications, consolidations
    and/or
    renewals thereof and any notes given in payment thereof.

 

    4.2  Financial Statements and Other
    Reports.  The Company shall furnish to
    Investor (a) not later than such time as provided to the
    Senior Lenders, such reports delivered by the Company to the
    Senior Lenders and (b) a copy of each financial statement
    and report that the Company files with the Commission or any
    stock exchange. The Company shall furnish to Investor, with
    reasonable promptness, such other data and information relating
    to the business, operations, affairs, financial condition,
    assets or properties of the Company and its Subsidiaries or
    relating to the ability of the Company to perform its
    obligations hereunder, under the Note or under the other Loan
    Documents, as from time to time may be reasonably requested, in
    writing, by the Investor.

 

    4.3  Maintenance of Books and Records;
    Inspection.  The Company shall, and shall
    cause each of its Subsidiaries to, maintain its books, accounts
    and records in accordance with GAAP, and after reasonable notice
    from Investor, permit Investor, its officers and employees and
    any professionals designated by Investor in writing, at the
    Company’s expense, to visit and inspect any of its or its
    Subsidiaries’ properties, corporate books and financial
    records, and to discuss its and its Subsidiaries’ accounts,
    affairs and finances with the Company or the principal officers
    of the Company or any Subsidiary during reasonable business
    hours, all at such times as Investor may reasonably request;
    provided that no such inspection shall materially
    interfere with the conduct of the Company’s or any
    Subsidiary’s business, and that prior to an Event of
    Default, the Company shall not be responsible for the expenses
    of more than two such audits each Fiscal Year.

 

    4.4  Insurance.  Without
    limiting any of the requirements of any of the other Loan
    Documents, the Company shall, and shall cause each of its
    Subsidiaries to, maintain, in such form, written by such
    companies, in such amounts, for such period, and against such
    risks as is customary for entities engaged in comparable
    business activities or as otherwise may be reasonably acceptable
    to Investor, including, without limitation, (a) to the
    extent required by applicable law, worker’s compensation
    insurance (or a legally sufficient amount of

    

 

    self insurance against worker’s compensation liabilities,
    with adequate reserves, under a plan approved by Investor, such
    approval not to be unreasonably withheld or delayed),
    (b) fire and “all risk” casualty insurance on all
    its real and personal property, (c) public liability
    insurance, and (d) business interruption insurance. At the
    request of Investor, the Company will deliver forthwith a
    certificate specifying the details of such insurance in effect.
    The Company shall promptly provide written notice, in reasonable
    detail, to Investor whenever there is any material change to the
    Company’s or any Subsidiary’s insurance coverage.

 

    4.5  Taxes and
    Assessments.  The Company shall, and shall
    cause each of its Subsidiaries to, (a) file all tax returns
    and appropriate schedules thereto that are required to be filed
    under applicable law, prior to the date of delinquency,
    (b) pay and discharge all taxes, assessments and
    governmental charges or levies imposed upon the Company or any
    Subsidiary upon its income and profits or upon any properties
    belonging to it, prior to the date on which penalties attach
    thereto, and (c) pay all taxes, assessments and
    governmental charges or levies that, if unpaid, would reasonably
    be expected to result in a lien or charge upon any of its
    properties; provided, however, that the Company or
    any Subsidiary in good faith may Properly Contest any such tax,
    assessment, governmental charge or levy described in the
    foregoing clauses (b) and (c).

 

    4.6  Corporate Existence.  The
    Company shall, and shall cause each of its Subsidiaries to,
    maintain its legal existence and good standing in the state of
    its formation, and its qualification and good standing as a
    foreign entity in each jurisdiction in which such qualification
    is necessary pursuant to applicable law except where the failure
    to be qualified and in good standing as a foreign corporation
    would not reasonably be expected to result in a Material Adverse
    Change to the Company.

 

    4.7  Compliance with Law and Other
    Agreements.  Except where the failure to do so
    would not reasonably be expected to have a Material Adverse
    Effect on the Company, the Company shall, and shall cause each
    of its Subsidiaries to, maintain its business operations and
    property owned or used in connection therewith in compliance
    with (a) all applicable federal, state and local laws,
    regulations and ordinances governing such business operations
    and the use and ownership of such property, and (b) all
    agreements, licenses, franchises, indentures and mortgages to
    which the Company or any of its Subsidiaries is a party or by
    which the Company, any of its Subsidiaries or any of their
    respective properties is bound.

 

    4.8  Notice of Default.  The
    Company shall give written notice to Investor of the occurrence
    of any Default or Event of Default under this Agreement or any
    default or event of default under any other Loan Document
    promptly upon the occurrence thereof.

 

    4.9  Notice of
    Litigation.  The Company shall give notice, in
    writing, to Investor of (a) any actions, suits or
    proceedings, instituted by any Person against the Company or any
    of its Subsidiaries or affecting any of the assets of the
    Company of any of its Subsidiaries wherein the amount at issue
    is in excess of $500,000 and after any such action, suit or
    proceeding is instituted, information reasonably related thereto
    as reasonably requested from time to time by Investor, and
    (b) any dispute, investigation, claim, imposition of
    criminal or civil fines and penalties or civil investigative
    demands, not resolved within 30 days of the commencement
    thereof, between the Company or any of its Subsidiaries on the
    one hand and any governmental regulatory body on the other hand,
    which dispute would reasonably be expected to materially
    interfere with the normal operations of the Company and its
    Subsidiaries.

 

    4.10  Debt.  Without the prior
    written consent of Investor, the Company shall not create,
    incur, assume or suffer to exist Indebtedness of any description
    whatsoever, excluding:

 

    (a) the Indebtedness evidenced by the Note and the other
    Loan Documents;

 

    (b) the endorsement of negotiable instruments payable to
    the Company for deposit or collection in the ordinary course of
    business;

 

    (c) trade payables incurred in the ordinary course of
    business;

 

    (d) the Indebtedness listed on Schedule 3.1(l)
    hereto and any refinancings, refundings, renewals or extensions
    thereof, which do not increase the principal amount or shorten
    the maturity thereof, and the interest thereon;

    

 

    (e) purchase money Indebtedness hereafter incurred by the
    Company to finance the purchase of fixed assets used in the
    Company’s business; provided that (i) the total
    of all such Indebtedness for all such Persons taken together
    shall not exceed an aggregate principal amount of $250,000 at
    any one time outstanding; (ii) such Indebtedness when
    incurred shall not exceed the purchase price of the asset(s)
    financed; and (iii) no such Indebtedness shall be
    refinanced for a principal amount in excess of the principal
    balance outstanding thereon at the time of such
    refinancing; and

 

    (f) other Indebtedness relating to capitalized leases,
    financing of insurance premiums, capital expenditures and other
    unsecured Indebtedness incurred in the ordinary course of
    business, in an aggregate amount not to exceed, at any time,
    $500,000.

 

    Without the prior written consent of Investor, the Company shall
    not permit any of its Subsidiaries to create, incur, assume or
    suffer to exist indebtedness of any description whatsoever.

 

    4.11  Inconsistent
    Agreements.  Without the prior written consent
    of Investor, the Company shall not enter into, or permit any of
    its Subsidiaries to enter into, any agreement material in amount
    containing any provision which would be violated or breached by
    the performance by the Company of its respective Obligations
    hereunder or under any of the Loan Documents.

 

    4.12  Modification of
    Charter.  Without the prior written consent of
    Investor, the Company will not amend, modify or change any
    provision of its certificate of incorporation, bylaws, or the
    terms of any class or series of its Capital Stock, other than in
    a manner that could not reasonably be expected to adversely
    affect Investor in its capacity as a holder of the Note.

 

    4.13  Limitations on
    Layering.  Notwithstanding the provisions of
    Section 4.10, the Company shall not incur, or permit
    to exist, any Indebtedness that is subordinate or junior in
    right of payment to any Senior Indebtedness and senior in any
    respect in right of payment to any Indebtedness arising under
    this Agreement and the Note.

 

    4.14  Distributions.  Except
    for the acquisition of the Brantley Capital Shares, the Company
    will not, at any time, declare or make or incur any liability to
    declare or make any Distribution and will not permit any of its
    Subsidiaries to incur any liability with respect to any such
    Distributions. “Distribution” means (a) dividends
    or other distributions or payments on Capital Stock of the
    Company or (b) the redemption or acquisition of such
    Capital Stock (except when solely in exchange for such Capital
    Stock), unless made, contemporaneously, from the net cash
    proceeds of a sale of such Capital Stock; provided,
    however, that nothing herein shall prevent or prohibit the
    payment of “payable in kind” distributions on the
    Capital Stock of the Company as set forth in the Company’s
    certificate of incorporation. The Company will not permit any of
    its Subsidiaries to declare or pay dividends or other
    distributions or payments on its Capital Stock except to the
    Company. The Company will not permit any of its Subsidiaries to
    redeem or otherwise acquire any of its Capital Stock.

 

    4.15  Affiliates.  The Company
    will not, and will not permit any of its Subsidiaries to,
    directly or indirectly enter into any material transaction or
    material group of related transactions (including, without
    limitation, the purchase, lease, sale or exchange of properties
    of any kind or the rendering of any service) with any affiliate,
    except in the ordinary course and pursuant to the reasonable
    requirements of the Company’s and such Subsidiary’s
    business and upon fair and reasonable terms no less favorable to
    the Company or such Subsidiary than would be obtainable in a
    comparable arm’s-length transaction with a Person not an
    affiliate.

 

    ARTICLE 5

    

 

    CLOSING;
    CONDITIONS TO CLOSING

 

    5.1  Closing.  The purchase
    and sale of the Note 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 5 (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 5.2 below may be waived solely by the
    Investor in its sole discretion.

    

 

    Conditions precedent set forth in Section 5.3 below
    may be waived solely by the Company in its sole discretion. If
    the Agreement shall have been terminated pursuant to
    Section 8.1 hereof prior to the Closing Date, no
    Closing shall occur.

 

    5.2  Conditions to Investor’s
    Obligations.  Investor’s obligations to
    purchase and pay for the Note at the Closing are subject to
    Investor determining, in its good faith discretion, that the
    following conditions have been satisfied (or Investor waiving in
    its sole discretion in writing the conditions that it has
    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
    the Investor 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 Equity Investment and the acquisition of the
    Acquisition Targets, and such revisions shall be in form and
    substance satisfactory to the Investor in its 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. No Default or Event of Default occurring as
    a result of a breach of any covenant set forth in
    Article 4 shall exist as of the Closing Date
    determined as if this Agreement had been in full force and
    effect at all times from and after June 30, 2006.

 

    (c) Consummation of the Equity Investment and the
    Acquisitions.  On or prior to the Closing
    Date, the Equity Investment and the acquisition of the
    Acquisition Targets shall have been consummated in accordance
    with the terms and conditions of the Equity Investment
    Documents, the applicable acquisition agreements and all
    applicable laws. On or prior to the Closing Date, the Company
    shall have delivered to the 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 Indebtedness, 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 the
    Investor.

 

    (d) Consent of Third Parties, Governmental
    Authorities, etc.  The Company shall have
    presented evidence satisfactory to Investor 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 other Loan Documents and the transactions
    contemplated hereby and thereby have been obtained,
    (ii) the transactions related to the Loan Documents 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 consummation of the Note Purchase 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) Senior Financing and Intercreditor
    Agreements.  On or prior to the Closing Date,
    the Company shall have consummated a transaction with one or
    more Senior Lenders for the provision of not less than
    $6,500,000 of senior secured financing. The Company and Investor
    shall have entered into one or more Intercreditor Agreements
    with the Senior Lenders and the holders of certain Junior
    Indebtedness, on terms satisfactory to Investor, and each of the
    same shall be in full force and effect.

 

    (g) Conversions; Repurchase.  On or
    before Closing, Brantley Partners IV, L.P. 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.

 

    (h) Certain Documents.  Investor
    shall have received the following closing documents, in form and
    substance satisfactory to Investor, all of which shall, except
    as specified below, be fully executed originals, and shall be in
    full force and effect:

 

    (i) the Note, duly executed by the Company, in form and
    substance satisfactory to the Investor; 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 the Note;

 

    (ii) the Warrant, duly executed by the Company; 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 the Warrant;

 

    (iii) the Registration Rights Agreement, duly executed by
    the Company;

 

    (iv) an opinion of the Company’s counsel, dated the
    Closing Date, as to the Loan Documents, in form and substance
    reasonably satisfactory to Investor;

 

    (v) 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;

 

    (vi) 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 each of the Loan Documents
    (including the issuance of the Note) are true, complete and
    correct, (C) as to the incumbency of each Person executing
    this Agreement and each of the Loan Documents on behalf of the
    Company, and (D) as to any other matters reasonably
    requested by Investor;

 

    (vii) a certificate from an officer of the Company, in form
    and substance satisfactory to the Investor, with respect to the
    satisfaction of the requirements under Sections 5.2(a),
    (b), (c), (e), (f) and (g) above; and

 

    (vii) such other documents as Investor may reasonably
    request in connection with this Agreement, and each such
    document shall be in form and substance reasonably satisfactory
    to Investor. All fees and expenses of Investor required to be
    paid pursuant to Section 9.2 hereof shall have been
    paid and all actions required under Section 2.5
    hereof shall have been undertaken and completed. Any withdrawals
    or modifications referred to in Section 2.7(b)
    hereof shall be satisfactory to the Investor in its sole
    discretion.

 

    5.3  Conditions to the Company’s
    Obligations.  The Company’s obligations
    to issue and sell the Note 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 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, Investor 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.

 

    (b) Consummation of the Equity
    Investment.  On or prior to the Closing Date,
    the Equity Investment shall have been consummated in all
    material respects in accordance with the terms and conditions of
    the Equity Investment 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 other Loan Documents and the
    transactions contemplated hereby and thereby have been obtained,
    (ii) the transactions related to the Loan Documents 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 consummation of the Note Purchase 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) Conversions; Repurchase.  On or
    before Closing, Brantley Partners IV, L.P. 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.

 

    (f) 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 the
    Investor; 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 6

    

 

    DEFAULT
    AND REMEDIES

 

    6.1  Events of Default.  The
    occurrence of any of the following shall constitute an Event of
    Default hereunder:

 

    (a) Default in the payment of:

 

    (i) Any principal of or premium on the Note when and as the
    same shall become due and payable, whether at the due date
    thereof or at a date fixed for prepayment thereof or by
    acceleration thereof or otherwise, and such Default continues
    unremedied for a period of three (3) Business Days; or

 

    (ii) Any interest on the Note or any other amount (other
    than an amount referred to in (i) above) due under any of
    the Loan Documents, when and as the same becomes due and
    payable, and such Default continues unremedied for a period of
    three (5) Business Days;

 

    (b) Any representation or warranty by the Company as to any
    matter hereunder or under any of the other Loan Documents, or
    delivery by any of the Company of any schedule, statement,
    resolution, report, certificate, notice, instruction or writing
    to or furnished to Investor is untrue in any material respect on
    the date as of which the facts set forth therein are stated or
    certified;

 

    (c) Default shall occur in the performance of (i) any
    of the covenants or agreements of the Company contained in
    Sections 4.2, 4.6, 4.8, or 4.12 or
    (ii) any other covenants or agreements of the Company
    contained herein or in any of the other Loan Documents and, in
    the case of clause (ii) above, such failure shall continue

    

 

    for 30 days after the earlier of (a) written notice
    thereof has been given by Investor to the Company and
    (b) any officer of the Company knows or reasonably should
    have known of such failure;

 

    (d) Any of the following events shall have occurred with
    respect to the Company or any of its Subsidiaries: (i) the
    Company or any of its Subsidiaries shall have made an assignment
    for the benefit of its creditors; (ii) the Company or any
    of its Subsidiaries shall have admitted in writing its inability
    to pay its debts as they become due; (iii) the Company or
    any of its Subsidiaries shall have filed a voluntary petition in
    bankruptcy; (iv) the Company or any of its Subsidiaries
    shall have been adjudicated bankrupt or insolvent; (v) the
    Company or any of its Subsidiaries shall have filed any petition
    or answer seeking for itself any reorganization, arrangement,
    composition, readjustment, liquidation, dissolution or similar
    relief under any present or future applicable law pertinent to
    such circumstances; (vi) the Company or any of its
    Subsidiaries shall have filed or shall file any answer admitting
    or not contesting the material allegations of a bankruptcy,
    insolvency or similar petition filed against the Company;
    (vii) the Company or any of its Subsidiaries shall have
    sought or consented to, or acquiesced in, the appointment of any
    trustee, receiver, or liquidator of it or of all or any
    substantial part of its properties; (viii) 60 days
    shall have elapsed after the commencement of an action against
    the Company or any of its Subsidiaries seeking reorganization,
    arrangement, composition, readjustment, liquidation, dissolution
    or similar relief under any present or future applicable law
    without such action having been dismissed or without all orders
    or proceedings thereunder affecting the operations or the
    business of the Company or such Subsidiary having been stayed,
    or if a stay of any such order or proceedings shall thereafter
    be set aside and the action setting it aside shall not be timely
    appealed; or (ix) 60 days shall have expired after the
    appointment, without the consent or acquiescence of the Company
    or any of its Subsidiaries, of any trustee, receiver or
    liquidator of the Company or such Subsidiary or of all or any
    substantial part of the assets and properties of the Company or
    such Subsidiary without such appointment having been vacated.

 

    (e) The occurrence with respect to the Company or any of
    its Subsidiaries of any action initiating, or any event that
    results in, the dissolution, liquidation, winding up or
    termination of the Company or such Subsidiary;

 

    (f) Any judgment in excess of $500,000, to the extent not
    fully paid or discharged (excluding any portion thereof that is
    covered by an insurance policy issued by an insurance company of
    recognized standing and creditworthiness which has acknowledged
    the coverage of such policy with respect to such judgment) is
    rendered against the Company or any of its Subsidiaries, and the
    same shall remain undischarged for a period of 21 consecutive
    days during which execution is not effectively stayed, or any
    action is legally taken by a judgment creditor to levy upon
    assets or properties of the Company or any of its Subsidiaries
    to enforce any such judgment;

 

    (g) Any event of default shall occur under the documents
    evidencing the Senior Indebtedness, where such event of default
    results in the acceleration of the Senior Indebtedness; any
    default in the performance of or compliance with any term of any
    evidence of any documents or instruments evidencing the Junior
    Indebtedness or any other Indebtedness (other than Senior
    Indebtedness), which Junior Indebtedness or other Indebtedness
    has an aggregate outstanding principal amount of at least
    $250,000, and such default shall have continued beyond the
    expiration of any applicable grace period provided for in the
    documents evidencing such Junior Indebtedness or such other
    Indebtedness.

 

    6.2  Acceleration of Maturity;
    Remedies.  Upon the occurrence and during the
    continuance of any Event of Default (a) specified in
    Sections 6.1(d) or 6.1(e), the Note shall
    automatically become immediately due and payable, together with
    interest accrued thereon, without presentment, demand, protest
    or notice of any kind, all of which are hereby waived by the
    Company, (b) specified in Section 6.1(a),
    Investor may, at its option, declare by notice in writing to the
    Company that the Note to be, and the Note shall thereupon be and
    become, immediately due and payable, together with interest
    accrued thereon without presentment, demand, protest or other
    notice of any kind, all of which are hereby waived by the
    Company and (c) if such event is an Event of Default (other
    than under an Event of Default under any of
    Sections 6.1(a), 6.1(d) or 6.1(e)), Investor
    may, at its option, declare by notice in writing to the Company
    the Note to be, and the Note shall thereupon be and become,
    immediately due and payable, together with interest accrued
    thereon without presentment, demand, protest or other notice of
    any kind, all of which

    

 

    are hereby waived by the Company. Upon the occurrence of any
    such Event of Default and the acceleration of the maturity of
    the Indebtedness evidenced by the Note:

 

    (a) Investor shall be immediately entitled to exercise any
    and all rights and remedies possessed by Investor pursuant to
    the terms of the Note and all of the other Loan
    Documents; and

 

    (b) Investor shall have any and all other rights and
    remedies that Investor may now or hereafter possess at law, in
    equity or by statute.

 

    6.3  Remedies Cumulative; No
    Waiver.  No right, power or remedy conferred
    upon or reserved to Investor by this Agreement or any of the
    other Loan Documents is intended to be exclusive of any other
    right, power or remedy, but each and every such right, power and
    remedy shall be cumulative and concurrent and shall be in
    addition to any other right, power and remedy given hereunder,
    under any of the other Loan Documents or now or hereafter
    existing at law, in equity or by statute. No delay or omission
    by Investor to exercise any right, power or remedy accruing upon
    the occurrence and during the continuance of any Event of
    Default shall exhaust or impair any such right, power or remedy
    or shall be construed to be a waiver of any such Event of
    Default or an acquiescence therein, and every right, power and
    remedy given by this Agreement and the other Loan Documents to
    Investor may be exercised from time to time and as often as may
    be deemed expedient by Investor.

 

    6.4  Proceeds of
    Remedies.  Any or all proceeds resulting from
    the exercise of any or all of the foregoing remedies shall be
    applied as set forth in the Loan Document(s) providing the
    remedy or remedies exercised, if none is specified, or if the
    remedy is provided by this Agreement, then as follows:

 

    First, to the costs and expenses, including without limitation
    reasonable attorneys’ fees and disbursements, incurred by
    Investor in connection with the exercise of its remedies;

 

    Second, to the reasonable expenses of curing the Default that
    has occurred, in the event that Investor elects, in its sole
    discretion, to cure the Default that has occurred;

 

    Third, to the payment of the Obligations under the Loan
    Documents of the Company, including but not limited to the
    payment of the principal of and interest on the Indebtedness
    evidenced by the Notes, in such order of priority as Investor
    shall determine in its sole discretion; and

 

    Fourth, the remainder, if any, to the Company or to any other
    Person lawfully thereunto entitled.

 

    ARTICLE 7

    

 

    INDEMNIFICATION;
    SURVIVAL

 

    7.1  General Indemnification.

 

    (a) The Company, without limitation as to time, will defend
    and indemnify Investor and its 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, agreement or Obligation of
    the Company contained in any of the Loan Documents, 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 Note 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. The 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 all
    Indemnified Parties. The Company shall be liable only for
    settlement of any claim against an Indemnified Party made with
    the Company’s written consent. Nothing in this
    Section 7.1 shall affect, limit or prejudice the
    obligations, undertakings and liabilities of the Company to pay
    all amounts owing under the Note and all other Obligations under
    this Agreement and the other Loan Documents in accordance with
    the terms thereof and hereof.

 

    7.2  Limitation of
    Damages.  Neither Investor nor the Company
    shall in any event be liable to the other party for special or
    consequential damages arising from this Agreement or otherwise
    related to the Obligations under the Loan Documents.

 

    7.3  Survival.  All
    representations, warranties, covenants and agreements contained
    herein or made in writing by the Company or Investor in
    connection herewith (except as specifically set forth herein)
    shall survive the execution and delivery of this Agreement and
    other Loan Documents.

 

    ARTICLE 8

    

 

    TERMINATION

 

    8.1  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
    Investor;

 

    (b) (i) by the 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 5.2
    hereof, or (ii) by the Company if there has been a breach
    of any covenant of the Investor hereunder, a breach of any of
    the representations and warranties of the Investor made in
    Section 3.2 of this Agreement or a failure of any of
    the conditions to Closing set forth in Section 5.3
    hereof;

 

    (c) by Investor, if Investor shall have determined, in its
    good faith discretion, in connection with the completion of its
    due diligence review of the Company and the Acquisition Targets
    that the Company, after giving effect to such acquisitions and
    the Equity Investment, is not creditworthy;

 

    (d) by the Company or 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

 

    (e) by the Investor if the Closing shall have not occurred
    on or prior to December 31, 2006 for any reason whatsoever
    other than Investor breaching any of its undertakings hereunder
    or acting in bad faith.

    

 

    8.2  Effect of
    Termination.  In the event of the termination
    of this Agreement pursuant to Section 8.1, this
    Agreement, except for the provisions of this
    Section 8.2, Article 7 and
    Section 9.2, 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 8.2 shall relieve any party to this
    Agreement of liability for willful breach; provided,
    however, that if it shall be finally 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, fees 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. The Company
    agrees that any determination by the Investor to terminate this
    Agreement by virtue of the Investor’s determination, in
    good faith, that the Company is not creditworthy shall not give
    rise to any action by the Company for wrongful termination of
    this Agreement.

 

    ARTICLE 9

    

 

    MISCELLANEOUS

 

    9.1  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 Investor shall bind and inure to the benefit of
    their respective heirs, legal representatives, successors in
    title and assigns, whether so expressed or not.

 

    9.2  Costs and Expenses.  The
    Company agrees (a) to pay upon demand all reasonable
    out-of-pocket
    costs and expenses of Investor in connection with
    (i) Investor’s due diligence investigation in
    connection with, and the preparation, negotiation, execution,
    delivery of, this Agreement and the other Loan Documents, and
    any amendment, modification or waiver hereof or thereof or
    consent with respect hereto or thereto and (ii) the
    administration, monitoring and review of the Note (including,
    without limitation, reasonable
    out-of-pocket
    expenses for travel, meals, long distance telephone calls, wire
    transfers, facsimile transmissions and copying and with respect
    to the engagement of appraisers, consultants, auditors or
    similar Persons by Investor at any time, whether before or after
    the Closing Date, to render opinions concerning the
    Company’s financial condition), (b) to pay upon demand
    all reasonable out of pocket costs and expenses of Investor in
    connection with (x) any refinancing or restructuring of the
    Note Purchase, whether in the nature of a “work
    out,” in any insolvency or bankruptcy proceeding or
    otherwise and whether or not consummated, and (y) any
    amendments, waivers, or extensions and (z) the enforcement,
    attempted enforcement or preservation of any rights or remedies
    under this Agreement or any of the other Loan Documents, whether
    in any action, suit or proceeding (including any bankruptcy or
    insolvency proceeding) or otherwise, and (c) to pay and
    hold Investor harmless from and against all liability for any
    intangibles, documentary, stamp or other similar taxes, fees and
    excises, if any, including any interest and penalties, and any
    finder’s or brokerage fees, commissions and expenses (other
    than any fees, commissions or expenses of finders or brokers
    engaged by Investor), that may be payable in connection with the
    transactions contemplated by this Agreement and the other Loan
    Documents. All such costs or expenses shall constitute a part of
    the Obligations under the Loan Documents.

 

    9.3  Assignment.  

 

    (a) Investor may not assign this Agreement or any rights or
    obligations hereunder, other than to affiliates of 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 Investor. The Company may not
    assign this Agreement or any rights or obligations hereunder
    without the prior written consent of Investor, except pursuant
    to a merger, recapitalization or other business combination
    transaction in which the surviving entity is a United States
    entity and agrees in writing to assume all of the covenants,
    liabilities and obligations of the Company hereunder and with

    

 

    respect to which the Investor shall have reasonably determined
    that such surviving entity has the same or better credit
    standing than the Company and provided that, in any case, no
    other Default or Event of Default shall then exist and no
    blockage, standstill or other similar event shall have been
    thereby triggered and still exist in any Intercreditor Agreement
    with respect to any Senior Indebtedness. 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.

 

    (b) The Company shall keep at its principal executive
    office a register for the registration of transfers of the Note.
    The name and address of the holder of the Note, each transfer
    thereof and the name and address of each transferee thereof
    shall be registered in such register. Prior to due presentment
    for registration of transfer, the Person in whose name the Note
    shall be registered shall be deemed and treated as the owner and
    holder thereof for all purposes hereof, and the Company shall
    not be affected by any notice or knowledge to the contrary.
    Subject to compliance with applicable restrictions on transfer
    pursuant to federal and state securities laws, upon surrender of
    the Note at the principal executive office of the Company for
    registration of transfer (duly endorsed or accompanied by a
    written instrument of transfer duly executed by the registered
    holder of such Note or its attorney duly authorized in writing
    and accompanied by the address for notices of the transferee of
    such Note or part thereof), the Company shall execute and
    deliver, at the Company’s expense (except as provided
    below), a new Note (as requested by the holder thereof) in
    exchange therefor, in an aggregate principal amount equal to the
    unpaid principal amount of the surrendered Note (which shall
    include all capitalized interest with respect thereto to the
    extent such interest has not already been represented by the
    issuance of a new Note). Subject to the requirements set forth
    above in this Section 9.3, each such new Note shall
    be payable to such Person as such holder may request and shall
    be substantially in the form of the old Note being so replaced.
    Each such new Note shall be dated and bear interest from the
    date to which interest shall have been paid on the surrendered
    Note or dated the date of the surrendered Note if no interest
    shall have been paid thereon. The Company may require payment of
    a sum sufficient to cover any stamp tax or governmental charge
    imposed in respect of any such transfer of the Note.

 

    9.4  Time of the
    Essence.  Time is of the essence with respect
    to each and every covenant, agreement and Obligation of the
    Company hereunder and under all of the other Loan Documents.

 

    9.5  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.

 

    9.6  Interest and Charges Not to Exceed Maximum
    Allowed by Law.  Anything in this Agreement,
    the Note or any of the other Loan Documents to the contrary
    notwithstanding, in no event whatsoever, whether by reason of
    advancement of proceeds of the Note, acceleration of the
    maturity of the unpaid balance of the Note or otherwise, shall
    the interest and other charges agreed to be paid to Investor for
    the use of the money advanced or to be advanced hereunder exceed
    the maximum amounts collectible under applicable laws in effect
    from time to time. It is understood and agreed by the parties
    that, if for any reason whatsoever the interest or loan charges
    paid or contracted to be paid by the Company in respect of the
    Indebtedness evidenced by the Note shall exceed the maximum
    amounts collectible under applicable laws in effect from time to
    time, then ipso facto, the obligation to pay such
    interest
    and/or loan
    charges shall be reduced to the maximum amounts collectible
    under applicable laws in effect from time to time, and any
    amounts collected by Investor that exceed such maximum amounts
    shall be applied to the reduction of the principal balance of
    the Indebtedness evidenced by the Note
    and/or
    refunded to the Company so that at no time shall the interest or
    loan charges paid or payable in respect of the Indebtedness
    evidenced by the Note exceed the maximum amounts permitted from
    time to time by applicable law.

 

    9.7  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.

 

    9.8  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 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 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

 

    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

 

    9.9  Entire Agreement.  This
    Agreement and the other written agreements between the Company
    and Investor 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 Obligations under
    the Loan Documents, the provision of this Agreement shall
    control. The execution and delivery of this Agreement and the
    other Loan Documents by the Company were not based upon any fact
    or material provided by Investor, nor was the Company induced or
    influenced to enter into this Agreement or the other Loan
    Documents by any representation, statement, analysis or promise
    by Investor.

 

    9.10  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.

 

    (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 Investor to such amendment, action or
    omission to act.

    

 

    9.11  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.

 

    9.12  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, Investor and their
    respective agents have participated in the preparation hereof.

 

    9.13  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 INVESTOR MAY BE A PARTY AND WHICH CONCERNS THIS AGREEMENT
    OR THE OBLIGATIONS UNDER THE LOAN DOCUMENTS. IT IS FURTHER
    AGREED THAT VENUE FOR ANY SUCH ACTION SHALL LIE EXCLUSIVELY WITH
    COURTS SITTING IN NEW YORK CITY, UNLESS 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
    INVESTOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
    LAW, OR TO PRECLUDE THE ENFORCEMENT BY 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.

 

    9.14  Waiver of Trial by
    Jury.  INVESTOR 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 OR THE LOAN DOCUMENTS.

 

    9.15  No Setoffs, etc.  All
    payments hereunder and under the Note shall be made by the
    Company without setoff, offset, deduction or counterclaim, free
    and clear of all taxes, levies, imports, duties, fees and
    charges, and without any withholding, restriction or conditions
    imposed by any governmental authority. If the Company shall be
    required by any law to deduct, setoff or withhold any amount
    from or in respect of any payment to Investor hereunder or under
    the Notes, then the amount so payable to Investor shall be
    increased as may be necessary so that, after making all required
    deductions, setoffs and withholdings, Investor shall receive an
    amount equal to the sum it would have received had no such
    deductions, setoffs or withholding been made.

 

    [Signature
    Page to Follow]

    

 

    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

 

    INVESTOR:

 

    PHOENIX LIFE INSURANCE

    COMPANY, a New York corporation

 

			
	 	    By: 
	
    /s/  John
    H. Beers

    Name: John H. Beers

    Title: Vice PresidentEX-10.5

 

Exhibit 10.5

PURCHASE AGREEMENT

     THIS
PURCHASE AGREEMENT (this “Agreement”) is made and entered
into as of this
8th day of
September, 2006, by and between Orion HealthCorp, Inc., a Delaware corporation (the “Corporation”),
and Brantley Capital Corporation, a Maryland corporation and a stockholder of the Corporation (the
“Seller”).

R E C I T A L S:

     WHEREAS, the Seller owns One Million Seven Hundred and Twenty-two Thousand Nine Hundred and
Eighty-three (1,722,983) shares of Class B Common Stock of the Corporation (the “Seller’s Class B
Stock”); and

     WHEREAS, the Corporation desires to purchase and the Seller desires to transfer to the
Corporation all of the shares of the Seller’s Class B Stock (the “Purchased Stock”) in exchange for
the consideration and upon the terms and conditions hereinafter set forth.

     NOW,
THEREFORE, in consideration of the mutual promises contained herein and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:

1. Delivery of the Purchased Stock. The Seller hereby agrees to convey, transfer, assign
and deliver to the Corporation all of the Purchased Stock on the Closing Date (as hereinafter
defined), free and clear of all pledges, claims, liens, charges, security interests and
encumbrances whatsoever in consideration for the Corporation’s payment to the Seller of Four
Hundred Eighty-Two Thousand Four Hundred Thirty-Five and 24/100 Dollars ($482,435.24) (the
“Purchase Price”). Upon the date of the Closing of the financing related to the transaction
contemplated by the Corporation and as detailed in Section 3(d) below, the Corporation shall
simultaneously pay the purchase price to the Seller. The Seller shall deliver to the Corporation
simultaneously upon receipt of the Purchase Price the certificates representing the Purchased Stock
duly endorsed in blank or accompanied by appropriate stock powers effective for transfer of the
Purchased Stock to the Corporation.

2. The Closing. The closing of the transactions contemplated under this Agreement shall be
conditioned on (a) receipt of all requisite approvals and consents; (b) satisfaction of all
covenants and obligations, unless waived, (c) the guarantee agreement, attached hereto, executed on
March 22, 2005 by the Seller for the benefit of Healthcare Business Credit Corporation and in
surety of the Corporation, shall be terminated and the Seller is released of all obligations under
the guarantee agreement and (c) all representations and warranties are true and correct in all
material respects as of the Closing Date, unless waived.. Notwithstanding the foregoing, in the
event that the closing of the transactions contemplated hereunder have not occurred on or before
December 31, 2006, this Agreement shall be terminated and of no further force and effect.

 

 

3. Representations and Warranties of the Seller. The Seller hereby represents and warrants
to the Corporation as follows:

	 	(a)	 	Ownership. The Seller is the sole record and beneficial owner of the
Purchased Stock, and such Purchased Stock is held by the Seller free and clear of any
and all liens, claims, pledges and encumbrances whatsoever.
	 
	 	(b)	 	Valid and Binding Obligation. The Seller has full power and
authority to execute, deliver and perform its obligations under this Agreement and no
further action is necessary to make this Agreement valid and binding upon the Seller
or enforceable against the Seller in accordance with its terms. Specifically, the
Seller represents that its board of directors has approved this Agreement and
authorized the Seller to execute, deliver and perform its obligations under this
Agreement.
	 
	 	(c)	 	Consents. The execution, delivery and consummation of this Agreement
by the Seller does not now and will not, with the passage of time, the giving of
notice or otherwise, result in a violation or breach of, or constitute a default
under, any term or provision of any indenture, mortgage, deed of trust, lease,
instrument, order, judgment, decree, regulation, law, contract or any other
restriction to which the Seller is a party or to which the Seller or any of its assets
are subject or bound, and no consent or approval of any person, firm or other entity
or governmental body is or was required to be obtained by the Seller for the
authorization or the consummation by the Seller of the transactions contemplated in
this Agreement.
	 
	 	(d)	 	Information. The Seller has had access to all information requested
by it from the Corporation or its representatives, as well as the opportunity to
obtain additional information to verify the accuracy of the information so provided,
respecting the financial condition and business operations of the Corporation in order
to enable the Seller to make an informed decision respecting the transfer of the
Purchased Stock to the Corporation and the Purchase Price. The Seller has availed
itself of such information to its full satisfaction. The Seller acknowledges that the
Corporation has answered all inquiries that the Seller has made of the Corporation
concerning the Corporation and its business and financial condition or any other
matter relating to the Corporation and that no valid request to the Corporation or its
representatives by or on behalf of the Seller for information of any kind about the
Corporation has been refused or denied by the Corporation or remains unfulfilled as of
the date hereof. The Seller is aware of the Corporation’s proposed acquisitions of
the outstanding capital stock of Rand Medical Billing, Inc., On Line Payroll Services,
Inc. and On Line Alternatives, Inc. and the related financing, all as more fully
described in the draft of the Corporation’s Preliminary Proxy Statement anticipated to
be filed with the Securities and Exchange Commission on or about September 7, 2006, a
copy of which has been provided to the Seller.
	 
	 	(e)	 	Investment Experience. The Seller is experienced in evaluating and
investing in securities of companies in the development stage and acknowledges that it
is able

 

	 	 	 	to fend for itself and has such knowledge and experience in financial and business
matters that it is capable of evaluating the risks and merits of the sale of the
Purchased Stock.

4. Representations and Warranties of the Corporation. The Corporation hereby represents
and warrants to the Seller as follows:

	 	(a)	 	Valid and Binding Obligation. The Corporation has full power and
authority to execute, deliver and perform its obligations under this Agreement and no
further corporate action is necessary to make this Agreement valid and binding upon
the Corporation or enforceable against the Corporation in accordance with its terms.
	 
	 	(b)	 	Consents. All approvals and consents of any person, firm or other
entity required to be obtained by the Corporation for the authorization of this
Agreement or the consummation by the Corporation of the transactions contemplated by
this Agreement have been obtained or will be obtained as of the Closing Date.

5. Survival of Representations and Warranties. All representations, warranties, covenants
and conditions of the parties shall survive the execution and delivery of this Agreement. All
claims for breach of representations or warranties must be presented by delivery of a notice in
writing in accordance with the notice provisions set forth herein.

6. Waiver. Except for the rights and obligations of the parties hereto, on the Closing
Date, the Seller waives any rights it may have with respect to the Purchased Stock and any other
rights of any nature whatsoever with respect to the Purchased Stock including, but not limited to,
the adequacy of the Purchase Price.

7. Indemnification.

	 	(a)	 	The Seller shall indemnify and hold harmless the Corporation and its
stockholders, directors, officers, employees, representatives, agents, successors and
assigns from any and all costs, expenses, losses, damages and liabilities incurred or
suffered, directly or indirectly, by any of them (including, without limitation,
reasonable legal fees and expenses) resulting from or attributable to (i) the breach
of, or misstatement in, any one or more of the representations or warranties of the
Seller made in this Agreement, or (ii) the failure of the Seller to perform any
covenant, agreement or obligation of the Seller made in this Agreement.
	 
	 	(b)	 	The Corporation shall indemnify and hold harmless the Seller and its
stockholders, directors, officers, employees, representatives, agents, successors and
assigns from any and all costs, expenses, losses, damages and liabilities incurred or
suffered, directly or indirectly, by any of them (including, without limitation,
reasonable legal fees and expenses) resulting from or attributable to (i) the breach
of, or misstatement in, any one or more of the representations or warranties of the
Corporation made in this Agreement, or (ii) the failure of the Corporation to perform
any covenant, agreement or obligation of the Corporation made in this Agreement.

 

8. Binding Effect. All covenants and agreements of the parties contained herein shall be
binding upon and inure to the benefit of the Seller and the Corporation and their respective
stockholders, directors, officers, employees, representatives, agents, successors and assigns.

9. Counterparts. This Agreement may be executed in one or more counterparts, including by
facsimile signature, each of which shall be deemed to be an original but all of which together
shall constitute one and the same instrument.

10. Captions and Section Headings. Captions and section headings used herein are for
convenience only and are not a part of this Agreement and shall not be used in construing it.

11. Waivers. Any failure by a party hereto to comply with any of the obligations,
agreements or conditions set forth herein may be waived by the other party or parties; provided,
however, that any such waiver shall not be deemed a waiver of any other obligation, agreement or
condition contained herein.

12. Cooperation. Each of the parties hereto agrees to cooperate in the effectuation of the
transactions set forth in this Agreement and to execute and deliver any and all additional
documents and instruments, and take such additional action, as shall be reasonably necessary or
appropriate for such purpose.

13. Entire Agreement. This Agreement embodies the entire understanding and agreement among
the parties, and supersedes all prior discussions, understandings, and agreements, written or oral,
express or implied, between the parties relating to the subject matter hereof.

14. Amendment. This Agreement may only be amended or modified in a writing which is signed
by all parties hereto.

15. Interpretation. The provisions of this Agreement, and of each separate article and
section, are severable, and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions, and any unenforceable
provision to the extent enforceable in any jurisdiction, shall nevertheless be binding and
enforceable.

16. Expenses. Notwithstanding any other provision in this Agreement, each party hereto
shall bear its own costs and expenses incurred in connection with the transactions contemplated by
this Agreement.

17. Applicable Law and Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

18. Notices. All notices, requests, demands and other communications that are required or
may be given pursuant to the terms of this Agreement shall be in writing and shall be deemed to
have been duly given (i) when personally delivered or sent by facsimile transmission (the receipt
of which is confirmed in writing), (ii) one business day after being sent by a nationally or
regionally recognized overnight courier service, or (iii) five business days after having been
deposited in the United States mail, postage prepaid, addressed to the party or their permitted

 

assignees, at the following addresses or at such other address as shall be given in writing by one
party to the other party:

	 	 	 
	If to Seller:

	 	Brantley Capital Corporation

c/o MVC Capital, Inc.

ATTN: Ben Harris

287 Bowman Ave., 2nd Floor

Purchase, NY 10577
	 
	 	 
	If to the Corporation:

	 	Orion HealthCorp, Inc.

1805 Old Alabama Road

Suite 350

Roswell, GA 30076

Attention:      Terrence L. Bauer, President
	 

	 	and
Chief Executive Officer

[Signature Page to Follow]

 

          IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	 	 	ORION HEALTHCORP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 	 	/s/ Terrence L. Bauer	 	 
	 

	 	 
	 	 
	 

	 	 	 	Terrence L. Bauer	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	BRANTLEY CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Philip Goldstein	 	 
	 

	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	Print Name:   Philip Goldstein	 	 
	 	 	 
	 	 
	 
	 	 	 	 	 	 
	 

	 	Its:   Chairman	 	 	 	 
	 

	 	 
	 	 

6

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