Exhibit 10.1
THIS CONVERTIBLE SUBORDINATED PROMISSORY
NOTE AND THE INDEBTEDNESS EVIDENCED
HEREBY ARE SUBORDINATE IN THE MANNER AND TO
THE EXTENT SET FORTH HEREIN TO
CERTAIN INDEBTEDNESS OWED BY ORION
HEALTHCORP, INC. TO HEALTHCARE BUSINESS
CREDIT CORPORATION
The securities represented by this
Convertible Subordinated Promissory Note and
the securities issuable upon conversion
hereof have not been registered or
qualified under the Securities Act of 1933,
as amended (the "Securities Act"),
or under the provisions of any applicable
state or foreign securities laws, but
have been, and will be, acquired by the
Holder hereof for purposes of investment
and in reliance on statutory exemptions
under the Securities Act and under any
applicable state securities laws. These
securities and the securities issued
upon conversion hereof may not be sold,
pledged, transferred or assigned, nor
may this Convertible Subordinated
Promissory Note be converted, except in a
transaction which is exempt under
provisions of the Securities Act and any
applicable state or foreign securities laws
or pursuant to an effective
registration statement; and in the case of
an exemption, only if the Company has
received an opinion of counsel satisfactory
to the Company that such transaction
does not require registration of any such
securities.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
Up to $1,025,000.00
June 1, 2005
FOR VALUE
RECEIVED, ORION HEALTHCORP, INC., a Delaware corporation (the
"Company"), hereby promises to pay to the
order of BRANTLEY PARTNERS IV, L.P.
("Payee") and any other person who becomes
a holder of this Convertible
Subordinated Promissory Note (being
referred to hereinafter as the "Holder"),
without grace, at the Holder's address or
at such other place as the Holder may
designate to the Company in writing (unless
this Convertible Subordinated
Promissory Note shall have been converted
as set forth herein), on April 19,
2006 (the "Maturity Date"), the sum of One
Million Twenty-Five Thousand Dollars
($1,025,000.00); provided, however, that if
the Maturity Date is not a day on
which banks are open for business (a
"Business Day"), the Maturity Date shall be
the next succeeding Business Day. This
Convertible Subordinated Promissory Note
and any note issued in substitution for
this note in accordance with the
provisions hereof are referred to herein as
the "Note." The unpaid principal
amount actually outstanding under this Note
shall accrue from and after March
16, 2005 (the date the monies were
originally advanced to the Company by Payee)
and bear simple interest at a per annum
rate equal to nine percent (9%) from
such date, with interest payable in arrears
on the Maturity Date. The interest
shall not compound. Interest shall be
calculated on the basis of actual days
elapsed over a 365-day year. Payment of the
outstanding principal and interest
accrued and unpaid on the Note shall be
made in lawful tender of the United
States. Payments shall be credited first to
accrued and unpaid interest and the
remainder to outstanding principal.
I.
Prepayment
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The indebtedness
evidenced by this Note may be prepaid, in full or in part,
at any time; provided that the Company
shall pay all accrued but unpaid interest
on the indebtedness evidenced hereby
concurrently with its prepayment of the
outstanding principal balance of such
indebtedness. In the event that the
Company elects to prepay all or part of the
unpaid principal balance evidenced
hereby, such payment shall be made in
cash.
<PAGE>
II. Events of Default
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An Event of
Default shall be deemed to have occurred in the event that (A)
the Company defaults in the payment of
principal or interest on this Note when
the same becomes due and payable, which
failure has continued unremedied for a
period of fifteen (15) days after receipt
of written notice of such failure; (B)
the Company shall commence a voluntary case
or other proceeding seeking
liquidation, reorganization or other relief
with respect to it or its debts
under the federal bankruptcy laws, as now
constituted or hereafter amended, or
under any other bankruptcy, insolvency, or
similar law now or hereafter in
effect; (C) the Company shall suffer the
commencement of an involuntary case or
other proceeding seeking liquidation,
reorganization or other relief with
respect to it or its debts under the
federal bankruptcy laws, as now constituted
or hereafter amended, or under any other
bankruptcy, insolvency or similar law
now or hereafter in effect, and such case
or other proceeding shall not be
vacated or dismissed within sixty (60) days
after its commencement; (D) the
Company shall suffer the entry of an order
for relief by any court having
jurisdiction in the premises in any
involuntary bankruptcy case under the
federal bankruptcy laws, as now constituted
or hereafter amended; or (E) the
Company shall suspend business, or consent
to or suffer a receiver, trustee,
liquidator or custodian to be appointed for
it or for all or a significant
portion of any of their respective assets
or affairs (each, an "Event of
Default"). Upon and after an Event of
Default, or should the Company fail to pay
any principal amount hereunder or to make
any interest payment hereunder when
due, the outstanding principal balance
hereunder shall continue to bear interest
at a per annum interest rate equal to nine
percent (9%) per annum
(non-compounding).
III. Acceleration
------------
If an Event of
Default occurs and is continuing, the Holder by notice to
the Company may declare the principal of
this Note to be due and payable
immediately. Upon such declaration, such
principal shall be due and payable
immediately.
IV. Exchange; Conversion
--------------------
A. Conversion Option
-----------------
Notwithstanding
anything to the contrary herein, and subject to the
approval of the Board of Directors of the
Company, including a majority of the
directors who are not affiliates of the
Holder, and such other approvals as may
be required, the principal and interest on
this Note may be exchanged for other
subordinated debt, obligations or equity
securities of the Company. Without
limiting the generality of the foregoing,
and subject to the approval of the
Board of Directors of the Company,
including a majority of the directors who are
not affiliates of the Holder, and such
other approvals as may be required, on or
after the Maturity Date the Holder shall
have the right to convert (the
"Conversion Option") all, or any portion,
of the outstanding principal balance
of this Note, plus interest thereon accrued
and unpaid to and including the
Conversion Date (as defined below), into
shares of the Company's Class A common
stock (the "Class A Common Stock"). The
number of shares of Class A Common Stock
issuable upon conversion of this Note shall
be equal to the number obtained by
dividing (x) the aggregate amount of
principal and interest to be converted by
(y) the Conversion Price (as defined
below); provided, however, the number of
shares issuable upon conversion of this
Note shall not exceed the lesser of: (i)
1,159,830 shares of Class A Common Stock,
or (ii) 16.3% of the then outstanding
Class A Common Stock. The shares of Class A
Common Stock issuable upon
conversion of this Note are referred to
hereinafter as the "Conversion
Securities." In order to exercise its
Conversion Option, which exercise shall be
irrevocable, the Holder shall surrender
this Note to the Company, accompanied by
a written statement indicating that the
Holder is exercising its Conversion
Option (the "Conversion Notice") and
stating the aggregate amount of principal
and interest under this Note to be
converted. The date that the Company receives
the Conversion Notice shall be the
"Conversion Date." If the Holder exercises
its Conversion Option, the Holder shall
receive a certificate for the number of
full shares of Conversion Securities
issuable upon conversion of this Note in
accordance with this section.
<PAGE>
Any conversion
hereunder shall be deemed to have been made at the close of
business on the Conversion Date, so that
the rights of the Holder as the Note
holder shall cease at such time and the
Note shall thereafter represent the
right to receive a certificate representing
the Conversion Securities. The
Holder shall not have any rights as a
holder of the Conversion Securities, other
than as provided herein, until such time as
such holder has surrendered the
Note. Further, no dividends or other
distributions declared or made after the
Conversion Date, with respect to the shares
of Class A Common Stock with a
record date after the Conversion Date,
shall be paid to the Holder until the
Holder shall surrender this Note to the
Company and the Conversion Securities
shall have been issued. Subject to
applicable law, following surrender of this
Note, there shall be paid to the record
holder of the certificates representing
whole shares of the Class A Common Stock
issued in conversion therefor, without
interest, at the time of such surrender,
the amount of dividends or other
distributions with a record date after the
Conversion Date theretofore paid with
respect to such whole shares of the
Conversion Securities.
B. Conversion Price.
----------------
The "Conversion
Price" shall be $1.042825 per share. If the Company shall
at any time or from time to time after the
date of this Note, and prior to the
Maturity Date or Conversion Date, effect a
subdivision or combination of the
outstanding shares of its Class A Common
Stock, the Conversion Price then in
effect with respect to this Note
immediately before that subdivision or
combination shall be proportionately
adjusted by multiplying the then Conversion
Price by a fraction, (i) the numerator of
which shall be the number of shares of
Class A Common Stock issued and outstanding
immediately prior to such
subdivision or combination, and (ii) the
denominator of which shall be the
number of shares of Class A Common Stock
issued and outstanding immediately
after such subdivision or combination. Any
adjustment under this subparagraph
(B) shall become effective at the close of
business on the date the subdivision
or combination becomes effective.
C. Fractional Shares
-----------------
The Company
shall not be required to issue any fraction of a share in
connection with the conversion of this
Note, but in any case where the Holder of
this Note would, except for the provisions
of this paragraph, be entitled under
the terms of this Note to receive a
fraction of a share upon the conversion of
this Note, the Company shall pay a sum in
cash in respect of any fraction of a
share that would otherwise be issuable upon
the surrender of this Note. The
amount of such cash payable shall be based
upon the fair market value of the
Class A Common Stock, as determined in good
faith by the Company's Board of
Directors, including a majority of the
directors who are not affiliates of the
Holder.
D. Shares Issuable Upon
Conversion.
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<PAGE>
The Company
covenants and agrees that all Conversion Securities that may be
issued upon the conversion of this Note
will, upon issuance in accordance with
the terms hereof, be duly and validly
issued and fully paid and nonassessable.
The Ho
