Exhibit 10.1

 

DEBT CONVERSION AGREEMENT

 

This Debt Conversion Agreement (this “Agreement”) is dated November 20, 2009, by
and between Infologix, Inc., a Delaware corporation (the “Company”), and
Hercules Technology I, LLC, a Delaware limited liability company (“HTI”).

 

WHEREAS, Hercules Technology Growth Capital, Inc., a Maryland Corporation
(“Hercules”),  and the Company are parties to that certain Loan and Security
Agreement, dated as of May 1, 2008, as amended on November 19, 2008 and May 31,
2009, by and among the Company, InfoLogix Systems Corporation, Embedded
Technologies, LLC, Opt Acquisition LLC and Infologix-DDMS, Inc. (each a
subsidiary of the Company and collectively, the “Subsidiaries”) and Hercules
(the “Original Loan Agreement”).

 

WHEREAS, Hercules has assigned its rights to Five Million Dollars ($5,000,000)
(the “Conversion Amount”) of the principal amount of a Twelve Million Dollar
($12,000,000) term loan (the “Loan”) arising under the Original Loan Agreement
to HTI (such documentation having been provided to the Company before the date
hereof).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company and HTI desire to exchange the Conversion Amount
for the issuance to HTI of shares of the Company’s common stock, par value
$0.00001 per share (“Common Stock”) and a warrant (the “Warrant”) exercisable
for shares of the Company’s Common Stock, as more particularly described herein.

 

WHEREAS, in connection with the transactions contemplated by this Agreement, the
Company, the Subsidiaries and Hercules entered into that certain Amended and
Restated Loan and Security Agreement (as amended, restated, supplemented,
modified or otherwise in effect from time to time, the “A/R Loan Agreement”) of
even date herewith, which amended and restated the Original Loan Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company and HTI agree as
follows:

 

ARTICLE I
PURCHASE AND SALE

 

1.1                                                 Purchase and Sale.  On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company hereby agrees to issue to HTI
at the Closing (as defined below) (i) 67,294,751 shares of Common Stock (the
“Conversion Shares”) and (ii) the Warrant exercisable for 16,823,688 shares of
Common Stock (the “Warrant Shares”) in the form attached as Exhibit A hereto in
exchange for the cancellation and release at the Closing by HTI of that portion
of the Loan equal to the Conversion Amount.  The Conversion Shares, the Warrant
and the Warrant Shares are referred to herein as the “Securities.”

 

1.2                                                 Closing.  The cancellation
of the Conversion Amount and the issuance of the Securities to HTI is referred
to herein as the “Closing”.  The time and date of the Closing (the “Closing
Date”) shall be the tenth (10th) calendar day following the Company’s mailing of
a letter to its stockholders pursuant to The Nasdaq Stock Market LLC (“Nasdaq”)
Listing Rule 5635(f) (the “Stockholder Notification Letter”), provided that all
other conditions to Closing set forth in Article IV of this Agreement have been
satisfied or waived.  The Closing shall take place at the offices of Morgan,

 

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Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178 at 9:00 a.m.
local time on the Closing Date or at such other place as the parties may
mutually agree in writing.  For purposes of this Agreement, “Business Day” means
any day except Saturday, Sunday and any day which is a federal holiday or a day
on which banking institutions in the State of New York and the State of
California are authorized or required by law or other governmental action to
close.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES

 

2.1                                                 Representations and
Warranties of the Company.  The Company hereby represents and warrants to HTI
that as of the date hereof and as of the Closing, the representations and
warranties made by the Company and each Subsidiary in Section 5 of the A/R Loan
Agreement and the Warrant are true and correct as of the date hereof and shall
be true and correct in all material respects (except for any such representation
and warranty that is already qualified as to materiality, which shall be true
and correct in all respects) as of the Closing.  The Company hereby further
represents and warrants to HTI as of the date hereof and, in all material
respects, as of the Closing (except for any such representation and warranty
that is already qualified as to materiality, which shall be true and correct in
all respects) as follows:

 

(a)                                  Authorization; Enforcement.  The Company
has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder.  The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company or its stockholders in connection
therewith.  This Agreement has been duly executed by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.

 

(b)                                 No Conflicts.  Except as provided on
Section 2.1(b) of the Disclosure Statement, the execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, license, franchise, lease,
permits (including, but not limited to, any consents or permits, approvals or
authorizations of any governmental authority), credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.  For
purposes of this Agreement, “Material Adverse Effect” means with respect to the
Company and its Subsidiaries, any event, change or effect that is materially
adverse, individually or in the aggregate, to the condition (financial or
otherwise), properties, assets, liabilities, revenues, income, business
operations or results of operations taken as a whole.

 

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(c)                                  Filings, Consents and Approvals.  Except as
provided on Section 2.1(c) of the Disclosure Statement, the Company is not
required to obtain any consent, waiver, authorization, permit or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other person in
connection with the execution, delivery and performance by the Company of this
Agreement, other than (i) the filing with the U.S. Securities and Exchange
Commission (the “SEC”) of one or more registration statements in accordance with
the requirements of the Registration Rights Agreement (as defined below)
(ii) filings required under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) or by state securities laws  and (iii) the Nasdaq Waiver (as
defined below) and the Stockholder Notification Letter required by Nasdaq.

 

(d)                                 Issuance of the Securities.  The Conversion
Shares are duly authorized, validly issued, fully paid and non-assessable and
free and clear of all liens and encumbrances.  Subject to Section 3.4 in respect
of the Warrant Shares, the Company has reserved from its duly authorized capital
shares the maximum number of shares of Common Stock issuable pursuant to this
Agreement.  When the Warrant is exercised in accordance with its terms, and the
Warrant Shares are issued, subject to obtaining the Charter Amendment Approval
(as defined below), the Warrant Shares will be duly authorized, validly issued,
fully paid and non-assessable and free and clear of all liens and encumbrances.

 

(e)                                  Capitalization.  The Company’s
capitalization as of the date of this Agreement is set forth on
Section 2.1(e) of the Disclosure Statement.  No shares of the Company’s capital
stock are entitled to preemptive or similar rights, and no person has any right
of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by this Agreement or the
Registration Rights Agreement.  Except as specified on Section 2.1(e) of the
Disclosure Statement, there are no outstanding options, warrants, scrip rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire, any shares of capital
stock of the Company, or contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to issue
additional shares of capital stock of the Company, or securities or rights
convertible or exchangeable into shares of capital stock of the Company.

 

(f)                                    SEC Reports; Financial Statements.  The
Company has filed all reports, forms or other information required to be filed
by the Company under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the twelve months preceding the date hereof (or such shorter
period as the Company was required by law to file such reports) (the “SEC
Reports”) on a timely basis or has timely filed a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the SEC with respect thereto as in effect at
the time of filing.  Such financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto or in the case of
unaudited interim statements, to the extent they may not include footnotes, and
fairly present in all material respects the financial position of the Company
and its Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

 

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(g)                                 Material Changes.  Since the date of the
latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities
(not to exceed $100,000) not required to be reflected in the Company’s financial
statements pursuant to GAAP or required to be disclosed in filings made with the
SEC, (iii) the Company has not altered its method of accounting or the identity
of its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities, except pursuant
to existing Company stock option and incentive plans and consistent with past
practice.

 

(h)                                 Litigation.  There are no actions, suits,
arbitrations, or similar proceedings by or before any governmental authority or
arbitrator (an “Action”), which adversely affects or challenges the legality,
validity or enforceability of any of this Agreement or the issuance of the
Securities.  Neither the Company nor any Subsidiary, nor any director or officer
thereof (in his or her capacity as such), is or has been the subject of any
action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the reports, forms or other information, including the SEC Reports,
that the Company has filed under the Exchange Act and which are actually
available for public review through the SEC’s EDGAR system (the “Disclosure
Documents”).  To the Company’s knowledge,  there has not been and there is not
pending any investigation by the SEC involving the Company or any current or
former director or officer of the Company (in his or her capacity as such).  The
SEC has not issued any stop order or other order suspending the effectiveness of
any registration statement filed by the Company under the Exchange Act or the
Securities Act.

 

(i)                                     Labor Relations.  No material labor
dispute exists or is imminent with respect to any of the employees of the
Company.

 

(j)                                     Compliance.  Except as provided on
Section 2.1(j) of the Disclosure Statement,  neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental authority, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.  The Company is in compliance with all
applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations thereunder, applicable to it, except where such
noncompliance could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(k)                                  Regulatory Permits.  The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the Disclosure Documents,
except where the failure to possess such certificates, authorizations and
permits could not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, and neither the

 

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Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificates, authorizations and
permits.

 

(l)                                     Transactions with Affiliates and
Employees.  Except as set forth in the Disclosure Documents, none of the
officers or directors of the Company and none of the employees of the Company is
presently a party to any material transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or otherwise requiring payments to or from any officer, director or
such employee or any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner, of
the nature or amount that would require disclosure in the Disclosure Documents.

 

(m)                               Internal Accounting Controls.  The Company and
its Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s Form 10-K or Form 10-Q, as
the case may be, is being prepared.  The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the
last day of the period covered by the Company’s most recently filed Form 10-Q
(such date, the “Evaluation Date”).  The Company presented in its most recently
filed Form 10-K or Form 10-Q the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls (as described in
Item 308(c) of Regulation S-K under the Exchange Act) or in other factors that
could significantly and adversely affect the Company’s internal controls.  The
Company’s auditors have not identified any control deficiency, significant
deficiency or material weakness in the Company’s system of internal controls for
the 2007 and 2008 fiscal years.

 

(n)                                 Certain Fees.  No brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
person with respect to the transactions contemplated by this Agreement.  Neither
HTI nor any of its affiliates shall have any obligation with respect to any fees
or with respect to any claims made by or on behalf of other persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated hereby.

 

(o)                                 Certain Registration Matters.  Assuming the
accuracy of HTI’s representations and warranties set forth in Section 2.2, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to HTI hereunder.  As of the date of this Agreement,
the Company is eligible to register the resale of the Conversion Shares and the
Warrant Shares on a registration statement on Form S-3 promulgated under the
Securities Act.  The Company has not granted or agreed to grant to any person
any rights (including “piggy-back” registration rights) to have any securities
of the Company registered with the SEC or any other governmental authority that
have not been satisfied or exercised.

 

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(p)                                 Listing and Maintenance Requirements. 
Except as specified in Section 2.1(p) of the Disclosure Statement or in the
Disclosure Documents, the Company has not, in the two years preceding the date
hereof, received notice from any trading market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof.  By
letter dated, October 30, 2009, Nasdaq granted the Company a financial viability
exception pursuant to Nasdaq Rule 5635(f) waiving the requirement that the
Company obtain stockholder approval for the sale of securities in excess of
twenty percent (20%) of its outstanding Common Stock at a price less than the
greater of book or market value and for sale of securities which would result in
a change of control of the Company (the “Nasdaq Waiver”).  The Nasdaq Waiver is
in full force and effect as of the date hereof and the issuance and sale of the
Securities hereunder does not contravene Nasdaq Rules.  The Company has provided
true and correct copies of the Nasdaq Waiver to HTI.

 

(q)                                 Investment Company.  The Company is not, and
is not an affiliate of, and immediately following the Closing will not have
become, an “investment company” within the meaning of the Investment Company Act
of 1940, as amended.

 

(r)                                    Application of Takeover Protections.  The
Company has not adopted any poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to HTI or stockholders
of the Company prior to the Closing as a result of HTI and the Company
fulfilling their obligations or exercising their rights hereunder.  The Board of
Directors of the Company (the “Board”) has taken all action necessary such that
Section 203 of the Delaware General Corporation Law (the “DGCL”) shall not be
applicable to the transactions contemplated hereby.

 

(s)                                  Stockholder Notification Letter.  The
Company mailed the Stockholder Notification Letter, in the form attached hereto
as Exhibit B, to its stockholders on November 10, 2009.

 

2.2                                                 Representations and
Warranties of HTI.  HTI hereby represents and warrants to the Company as of the
date hereof and as of the Closing as follows:

 

(a)                                  Organization; Enforcement.  HTI is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization.  HTI has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder.  The execution
and delivery of this Agreement by HTI and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of HTI and no further action is required by HTI in connection
therewith.  This Agreement has been duly executed by HTI and constitutes the
valid and binding obligation of HTI enforceable against HTI in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application.

 

(b)                                 Filings, Consents and Approvals.  HTI is not
required to obtain any consent, waiver, authorization, permit or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other person in
connection with its execution, delivery and performance of this Agreement.

 

(c)                                  No Conflicts.  The execution, delivery and
performance of this Agreement by HTI of the transactions contemplated hereby do
not and will not (i) conflict with or violate any provision of HTI’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or

 

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(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, license, franchise, lease,
permits (including, but not limited to, any consents or permits, approvals or
authorizations of any governmental authority), credit facility, debt or other
instrument or other understanding to which HTI is a party or by which any
property or asset of HTI is bound or affected, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which HTI is subject
(including federal and state securities laws and regulations), or by which any
property or asset of HTI is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect with
respect to HTI taken as a whole.

 

(d)                                 Litigation.  There are no Actions in respect
of HTI which adversely affect or challenge the legality, validity or
enforceability of any of this Agreement or the issuance of the Securities.

 

(e)                                  Ownership of the Loan.  HTI is, or will be
at the Closing, the sole owner of the right to the portion of the Loan
representing the Conversion Amount.  No other party has any right to payment for
the Conversion Amount or to receive the benefits therefrom.

 

(f)                                    Investment Intent.  HTI understands that
the Securities are “restricted securities” and have not been registered under
the Securities Act or any applicable state securities law.  HTI is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to HTI’s right at all times to sell or
otherwise dispose of all or any part of such securities in compliance with
applicable federal and state securities laws.  HTI does not have any agreement
or understanding, directly or indirectly, with any person or entity to
distribute the Securities.

 

(g)                                 HTI Status.  At the time HTI was offered the
Securities, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.  HTI is not a registered
broker-dealer or agent thereof under Section 15 of the Exchange Act.

 

(h)                                 General Solicitation.  HTI is not purchasing
the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

 

(i)                                     Access to Information.  HTI acknowledges
that it has reviewed the Disclosure Documents and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities, (ii) access to information about the Company and its Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment.

 

(j)                                     Independent Investment Decision.  HTI
has independently evaluated the merits of its decision to purchase the
Securities pursuant to this Agreement, and confirms that it has not relied on
the advice of the Company or any of its advisors.  HTI has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.  HTI

 

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understands that it must bear the economic risk of this investment in the
Securities indefinitely, and it is able to bear such risk and is able to afford
a complete loss of such investment.

 

(k)                                  HTI acknowledges that the certificates
evidencing the Securities will be imprinted with a legend in substantially the
following form:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
TO THE COMPANY FROM COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

(l)                                     HTI understands that nothing in this
Agreement, or any other materials presented to HTI by the Company in connection
with the transaction contemplated hereby constitutes legal, tax, accounting or
investment advice.  HTI has consulted such legal, tax, accounting and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Securities.

 

(m)                               HTI understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act, and (ii) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the representations, warranties and covenants of HTI set forth in this
Section 2.2, and HTI hereby consents to such reliance.

 

(n)                                 Certain Fees.  HTI acknowledges that the
Company is not responsible to pay and will not pay any brokerage or finder’s
fees or commissions incurred by HTI to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this Agreement.

 

ARTICLE III
OTHER AGREEMENTS AND ACKNOWLEDGMENTS

OF THE PARTIES

 

The parties hereto further agree and acknowledge as follows:

 

3.1                                                 Board of Directors.

 

(a)                                  Board Reconstitution.  Prior to or
simultaneous with the Closing, three of the Company’s seven incumbent directors
shall have resigned from the Board and the size of the Board shall be fixed at
eight directors, including the non-voting position of “Chairman Emeritus” which
shall be held by the incumbent Chairman of the Board for one year from the
Closing Date, after which time such position shall cease to exist and the size
of the Board shall be fixed at seven directors.  The four remaining incumbent
members of the Board, which shall include the Company’s chief executive officer,
are referred to herein as the “Incumbent Directors.”  Simultaneous with the
Closing, the Board shall fill the remaining three vacancies on the Board with
three nominees nominated by HTI (the “HTI

 

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Nominees”).  Within 90 days following the Closing Date, the Board shall cause
one of the Incumbent Directors, other than the Company’s chief executive
officer, to resign and shall replace such Incumbent Director with a nominee who
is mutually acceptable to HTI and the Incumbent Directors (such director, the
“Joint Director”), who is “independent” as such term is defined under the Nasdaq
Listing Rules and the SEC rules applicable to audit committees, and who has
knowledge of the Company’s industry.  HTI and the Incumbent Directors shall
cooperate in good faith in the identification and selection of the Joint
Director.  If the Joint Director has not been elected to the Board within 90
days following the Closing Date, the size of the Board shall be increased by one
position, and HTI shall have the right to designate an additional director to
fill such position; provided, however, that upon the election of the Joint
Director in accordance with this section, HTI shall cause such additional
director to resign and the size of the Board shall be reduced to seven
directors.  The composition of the Board and the committees of the Board as
described herein (the “Board Reconstitution”) shall comply in all respects with
applicable Nasdaq Listing Rules.

 

(b)                                 Nominating and Governance Committee.  Unless
the Nasdaq Listing Rules require otherwise, until HTI, pursuant to
Section 3(d)(ii), no longer has the right to designate a nominee to serve on the
Board, the Board shall have a Nominating and Governance Committee (the
“Nominating Committee”) composed of the Joint Director, an Incumbent Director
who is not a member of the Company’s management, and an HTI Nominee.

 

(c)                                  Voting.  For so long as HTI, together with
any of its affiliates, owns at least 25% of the issued and outstanding shares of
the Company’s Common Stock, HTI hereby agrees that it shall vote or cause to be
voted all of the shares of the Company’s Common Stock owned by HTI or any of its
affiliates at any regular or special meeting of Company’s stockholders called
for the purpose of filling positions on the Board, or shall execute a written
consent in lieu of such meeting of stockholders for the purpose of filling
positions on the Board, and shall take all actions necessary or desirable in its
reasonable control, in each case, to ensure that the Board is comprised of the
Joint Director, the Company’s chief executive officer, the HTI Nominees and such
other persons who are “independent” as such term is defined under the Nasdaq
Listing Rules and the SEC rules applicable to audit committees, that are
nominated for election by the affirmative vote of all of the members of the
Nominating Committee to fill the remaining Board positions.

 

(d)                                 HTI Board Seats.

 

(i)                                     HTI hereby agrees to and shall cause one
HTI Nominee to not stand for reelection for any additional term following the
completion of a directorship term during which (and following the delivery of
evidence satisfactory to HTI that) the Company has achieved a Consolidated Total
Leverage Ratio (as defined in the A/R Loan Agreement) of less than 1.5 to 1.0
for the Twelve Month Measurement Period (as defined in the A/R Loan Agreement)
ending on each of four consecutive fiscal quarters.  HTI hereby further agrees
to and shall cause one HTI Nominee to not stand for reelection for any
additional term following the completion of a directorship term during which the
Company causes the irrevocable repayment in full in cash of the Term Loans (as
defined in the A/R Loan Agreement), together with all accrued interest thereon
and other obligations arising in respect thereof.

 

(ii)                                  If, at the conclusion of any directorship
term, (A) the Company has fully satisfied all of its obligations under the A/R
Loan Agreement and (B) HTI, together with any affiliate, owns less than 10% of
the issued and outstanding Common Stock of the Company, HTI shall cause all HTI
Nominees to not stand for reelection for any additional directorship term.

 

(iii)                               Upon the occurrence of the events described
in clauses (i) and (ii) of this Section 3.1(d), the Nominating Committee shall,
as promptly as reasonably practicable, nominate, by the

 

9

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affirmative vote of all of the members of the Nominating Committee, replacements
to fill the Board positions previously held by HTI Nominees.

 

(e)                                  Vacancies.  In the event that a vacancy
shall be created on the Board at any time by the death, disability, retirement,
resignation or removal of a member of the Board who is not (i) an HTI Nominee or
(ii) the Joint Director, such vacancy may be filled only by those directors who
were not nominated by HTI.  For this purpose, the non-HTI nominated directors
shall include the Joint Director.  In the event that a vacancy shall be created
on the Board at any time by the death, disability, retirement, resignation or
removal of a member of the Board who was an HTI Nominee, such vacancy shall be
filled by a nominee of HTI.  In the event that a vacancy shall be created on the
Board at any time by the death, disability, retirement, resignation or removal
of the Joint Director, such vacancy shall be filled as provided in
Section 3.1(a).

 

(f)                                    Board Committees.  Except for the Audit
Committee of the Board, which shall be comprised of all independent directors,
and unless the Nasdaq Listing Rules require otherwise, the Committees of the
Board shall include (i) at least one Incumbent Director and (ii) subject to
Section 3.1(d)(ii), at least one HTI Nominee.

 

(g)                                 Indemnification Agreements.  The Company
hereby agrees to and shall enter into a director indemnification agreement, in
the form of Exhibit C, with each HTI Nominee elected to the Board.

 

(h)                                 Block Transfers.  If at any time during
which an HTI Nominee is entitled to serve on the Board, HTI, or any of its
affiliates, transfers to any party or group as defined under Section 13(d) of
the Exchange Act (a “Block Transferee”) shares of the Company’s Common Stock
constituting at least 20% of the issued and outstanding shares of the Company’s
Common Stock, it may cause one HTI Nominee to resign from the Board and, in such
event, the Board shall fill the vacancy caused by such HTI Nominee’s resignation
with a person who is nominated by the Block Transferee and who meets all
necessary qualifications to serve as a member of the Board; provided, that the
Block Transferee has agreed in writing to comply with the voting obligations
applicable to HTI and its affiliates as set forth in Section 3.1(c) and such
Block Transferee is not a competitor of the Company (as determined by the Board
in its reasonable discretion).  The parties agree that a Block Transferee shall
be a third-party beneficiary of this Agreement for purposes of this Section 3.1.

 

3.2                                                 Option Plan Amendment. 
Promptly following, but not prior to, the effectiveness of the amendment to the
Company’s Certificate of Incorporation as provided in Section 3.4, the Company
shall amend its existing equity compensation plan (a) such that the Company
shall have in the aggregate a stock option pool (the “Option Pool”) with capital
stock eligible for issuance in an amount not to exceed twenty percent (20%) of
the Company’s issued and outstanding capital stock on a fully diluted basis
immediately after the Closing and giving effect to the Charter Amendment and
(b) to permit the repricing of outstanding stock options at the discretion of
the Board’s compensation committee (the “Option Plan Amendment”).  As required
by applicable Nasdaq Listing Rules, the Company shall, in accordance with
applicable law and its certificate of incorporation and bylaws, duly call, give
notice of, convene and hold a meeting of its stockholders for the purpose of
obtaining approval of the Option Plan Amendment.  HTI shall vote, and will cause
its affiliates to vote, in favor of the Option Plan Amendment as described in
this Section 3.2.  Subject to any required stockholder approval, the Company may
increase the shares of capital stock eligible for issuance under the Option Pool
up to, but not in excess of, twenty-five percent (25%) of the Company’s issued
and outstanding capital stock on a fully diluted basis in the event that: 
(i) the Company’s Consolidated Adjusted EBITDA (as defined in the A/R Loan
Agreement) for the twelve month period ended December 31, 2010 is at least Nine
Million Five Hundred Thousand Dollars ($9,500,000) and (ii) the Company’s
Consolidated Adjusted EBITDA for the twelve month period ended

 

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December 31, 2011 is at least Thirteen Million Five Hundred Thousand Dollars
($13,500,000) (evidence of such Consolidated Adjusted EBITDA to have been
delivered to and be satisfactory to HTI in its reasonable discretion).  For so
long as it is a stockholder, HTI shall vote, and will cause its affiliates to
vote, in favor of any amendments to the Company’s equity compensation plan that
are reasonably necessary to achieve the purposes described in this Section 3.2.

 

3.3                                                 Replacement of Existing
Warrants.  As of the Closing, the Company intends to cancel existing warrants to
purchase an aggregate of 2,425,000 shares of Common Stock for $2.00 per share,
or $0.42 per share (the “Existing Warrants”) and to issue, to the holders set
forth in Section 2.1(e) of the Disclosure Statement of such warrants,
replacement warrants to purchase an aggregate of 2,425,000 shares of Common
Stock for $0.0743 per share (the “Replacement Warrants”).  Excluding the
Replacement Warrant to be issued to Hercules, which shall be immediately
exercisable, the Replacement Warrants shall be exercisable upon the filing of
the Charter Amendment (as defined below) with the Delaware Secretary of State in
accordance with the DGCL.  The cancellation of the Existing Warrants and the
issuance of the Replacement Warrants shall be performed by the Company upon the
receipt, on or after the Closing Date, of an Existing Warrant, or an affidavit
of such warrant having been lost, from a warrant holder.

 

3.4                                                 Charter Amendment Approval;
Filing of the Certificate of Incorporation.

 

(a)                                  Subject to Section 3.4(b), the Company
hereby agrees that it will not amend its Certificate of Incorporation or Bylaws
as in effect as of the date hereof without the prior written consent of HTI
provided that HTI, together with any affiliate owns, as defined in the
Securities Act or the Exchange Act, at least twenty five percent (25%) of the
Company’s issued and outstanding Common Stock.

 

(b)                                 As promptly as practicable following the
Closing, the Company shall, in accordance with applicable law and its
certificate of incorporation and bylaws, duly call, give notice of, convene and
hold a meeting of its stockholders for the purpose of obtaining approval of an
amendment to its Certificate of Incorporation, in a form reasonably acceptable
to HTI (the “Charter Amendment”), to (i) increase its authorized Common Stock to
250,000,000, or (ii) to implement a reverse stock split so that the Company has
a number of unissued authorized shares of Common Stock that will allow it to
fulfill its obligations under this Agreement, the Warrant and any other
agreement (the “Charter Amendment Approval”).  In no event shall the record date
for such meeting be a date prior to one day following the Closing Date.  As
promptly as reasonably practicable following the Charter Amendment Approval, the
Company shall duly execute and file the Charter Amendment with the Delaware
Secretary of State in accordance with the DGCL.  The preliminary proxy statement
for such stockholders’ meeting will be filed with the SEC no later than
January 11, 2010 and thereafter each of the Company and HTI shall use their
reasonable best efforts to respond to any comments of the SEC or its staff, and
to any request by the SEC or its staff for amendments or supplements to such
proxy statement or for additional information.  Such proxy statement and any
amendments or supplements to such proxy statement will, when filed, comply as to
form in all material respects with the applicable requirements of the Exchange
Act.  If at any time prior to the stockholders’ meeting called to obtain the
Charter Amendment Approval there shall occur any event that is required to be
set forth in an amendment or supplement to such proxy statement, the Company
shall promptly prepare, and, after consultation with HTI, mail to its
stockholders such an amendment or supplement.  HTI and its counsel shall be
given a reasonable opportunity to review and comment upon such proxy statement
and related proxy materials and any proposed amendment or supplement to such
proxy statement prior to its filing with the SEC or dissemination to the
Company’s stockholders, and the Company shall accept all comments reasonably
made by HTI and its counsel.  HTI shall vote, and will cause its affiliates to
vote, in favor of the provisions of the Charter Amendment as described in clause
(i) or (ii) of this Section 3.4(b).  Except if the Charter Amendment Approval is
not

 

11

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approved due to HTI’s failure to vote in favor of it, it shall be a breach of
this Agreement if the Charter Amendment is not effective prior to January 31,
2010.

 

3.5                                                 Securities Laws Matters.

 

(a)                                  Resale of the Securities.  Subject to the
terms of this Agreement, the Securities may be disposed of in compliance with
state and federal securities laws.  In connection with any transfer of the
Securities other than pursuant to an effective registration statement, HTI may
require the Company, at its expense, to provide to HTI an opinion of counsel to
the effect that such transfer does not require registration of such transferred
Securities under the Securities Act.

 

(b)                                 Furnishing of Information.  As long as HTI
or any of its affiliates owns any of the Company’s outstanding Common Stock, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act.  The Company further
covenants that, to the extent permitted by law, the Company will take, at its
sole expense, such further action, including the provision of a legal opinion,
as any holder of Securities may reasonably request from time to time to enable
such person to sell the Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.

 

3.6                                                 Deliveries to be Made at the
Closing.

 

(a)                                  Company Deliverables.  At the Closing, the
Company shall deliver to HTI the following:

 

(i)                                     original certificates in such
denominations as HTI informs the Company at least forty-eight (48) hours prior
to the Closing, evidencing the Conversion Shares registered in the name of HTI
or if so indicated on the signature page hereto, in the name of a nominee
designated by HTI with any transfer, stamp or other taxes payable in connection
with the issuance of the Conversion Shares duly paid by or on behalf of the
Company;

 

(ii)                                  the Warrant registered in the name of HTI
or if so indicated on the signature page hereto, in the name of a nominee
designated by HTI with any transfer, stamp or other taxes payable in connection
with the issuance of the Warrant duly paid by or on behalf of the Company;

 

(iii)                               a legal opinion of counsel to the Company in
the form attached hereto as Exhibit D;

 

(iv)                              certificates of good standing for the Company
and each of its Subsidiaries, issued by the Secretary of State or similar
official of the state of incorporation;

 

(v)                                 the Registration Rights Agreement in the
form attached hereto as Exhibit E duly executed by the Company;

 

(vi)                              each of the Director Indemnification
Agreements, in the form attached as Exhibit C, as  dated of even date herewith
by and between the Company and each of Mark Denomme, Roy Liu and Manuel
Henriquez (the “Director Indemnification Agreements”) duly executed by the
Company;

 

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(vii)                           a certificate of the Secretary of the Company
stating that the Company has received the Nasdaq Waiver and attaching a copy of
such Nasdaq Waiver and the Company is compliance with the stockholder
notification requirements of the Nasdaq Listing Rules;

 

(viii)                        a certificate of the Chairman and Secretary of the
Company to the effect that the Audit Committee of the Company’s Board of
Directors has approved the transaction pursuant to the DGCL and Nasdaq Listing
Rules (if applicable);

 

(ix)                                a certificate of the Secretary of the
Company stating that the conditions specified in Section 4.2(a) have been
satisfied; and

 

(x)                                   evidence that Nasdaq has completed its
review of the Company’s Listing of Additional Shares form.

 

(b)                                 HTI Deliverables.  At the Closing, HTI shall
deliver to the Company the following:

 

(i)                                     the Registration Rights Agreement in the
form attached hereto as Exhibit E duly executed by HTI;

 

(ii)                                  each of the Director Indemnification
Agreements dated of even date herewith by and between the Company and each of
Mark Denomme, Roy Liu and Manuel Henriquez (the “Director Indemnification
Agreements”) duly executed by each of Mark Denomme, Roy Liu and Manuel
Henriquez; and

 

(iii)                               the original note evidencing the Conversion
Amount for cancellation.

 

ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING

 

4.1                                 Conditions to Obligations of Each Party
Under this Agreement.  The respective obligations of each party to this
Agreement to effect the transaction shall be subject to the satisfaction at or
prior to the Closing of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by applicable law:

 

(a)                                  Approval by Nasdaq.  Nasdaq shall have
approved a financial viability exception under Nasdaq Listing Rule 5635(f) for
the transaction, which approval shall not have been revoked or expired;

 

(b)                                 Stockholder Notification Letter Period.  The
ten (10) calendar day waiting period following the mailing of the Stockholder
Notification Letter required by Nasdaq Listing Rule 5635(f) shall have elapsed;

 

(c)                                  Proceedings.  There shall not be any
(i) proceedings which have been commenced against any of the parties hereto by
any person involving or affecting in any way the consummation of the
transaction, or (ii) applicable laws, orders or injunctions restraining or
enjoining the consummation of the transaction; and

 

(d)                                 A/R Loan Agreement.  Hercules and the
Company shall have entered into the A/R Loan Agreement and the transactions
contemplated to have occurred thereunder on the Closing Date (as defined
therein) shall have occurred prior to or simultaneously with the Closing.

 

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4.2                                 Conditions Precedent to the Obligations of
HTI.  The obligations of HTI to effect the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Closing of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:

 

(a)                                  Representations and Warranties.  The
representations and warranties of the Company contained herein and in the
Warrant shall be true and correct in all material respects as of the date when
made and as of the Closing as though made on and as of such date;

 

(b)                                 Board Reconstitution.  The Company shall
have effectuated the Board Reconstitution;

 

(c)                                  Performance.  The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by it at or prior to the Closing;

 

(d)                                 No Injunction.  No statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the this Agreement;

 

(e)                                  Adverse Changes.  Since the date of
execution of this Agreement, no event or series of events shall have occurred
that reasonably could have or result in a Material Adverse Effect;

 

(f)                                    No Suspensions of Trading in Common
Stock; Listing.  Trading in the Common Stock shall not have been suspended by
the SEC or Nasdaq (except for any suspensions of trading of not more than one
Business Day solely to permit dissemination of material information regarding
the Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
Nasdaq;

 

(g)                                 Section 203.  The Board will take any action
necessary to ensure that the restrictions contained in Section 203 of the DGCL
applicable to a “business combination” (as defined in such Section 203), and any
other applicable law, will not apply to HTI or its affiliates with respect to
the execution and delivery of this Agreement and consummation of the
transactions contemplated hereby, or to any transfer of shares of the Company’s
Common Stock by HTI or its affiliates to a Block Transferee; and

 

(h)                                 Company Deliverables.  The Company shall
have delivered the Company Deliverables in accordance with Section 3.6(a).

 

4.3                                 Conditions Precedent to the Obligations of
the Company.  The obligations of the Company to effect the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable law:

 

(a)                                  Representations and Warranties.  The
representations and warranties of HTI contained herein shall be true and correct
in all material respects as of the date when made and as of the Closing as
though made on and as of such date;

 

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(b)                                 Performance.  HTI shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the this Agreement to be performed, satisfied or
complied with by HTI at or prior to the Closing;

 

(c)                                  No Injunction.  No statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the this Agreement;

 

(d)                                 HTI Deliverables.  HTI shall have delivered
the HTI Deliverables in accordance with Section 3.6(b).

 

ARTICLE V
TERMINATION

 

5.1                                 Termination of Agreement.  The parties may
terminate this Agreement as provided below:

 

(a)                                  HTI or the Company may terminate this
Agreement without liability by giving written notice to the other party prior to
the Closing if the consummation of the transaction is permanently prohibited by
any applicable law, injunction or order; provided that the party seeking to
terminate this Agreement shall not have proximately contributed to the issuance
of such injunction or order by breach of the terms of this Agreement or by a
violation of applicable law, or (ii) the Closing shall not have occurred on or
before November 20, 2009; provided, however, no such right of the terminating
party shall exist in the event that the parties’ failure to consummate the
Closing by November 20, 2009 results primarily from a breach of any
representation, warranty or covenant contained in this Agreement by the
terminating party;

 

(b)                                 HTI may terminate this Agreement by giving
written notice to the Company at any time prior to the Closing in the event the
Company has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, HTI has notified the Company of the breach,
and the breach has continued without cure (such cure to be to the reasonable
satisfaction of HTI) for a period of thirty (30) days after the notice of breach
and results in a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole; and

 

(c)                                  The Company may terminate this Agreement by
giving written notice to HTI at any time prior to the Closing in the event
(i) HTI has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, the Company has notified HTI of the breach,
and the breach has continued without cure (such cure to be to the reasonable
satisfaction of the Company) for a period of thirty (30) days after the notice
of breach.

 

5.2                                 Effect of Termination.  If this Agreement is
terminated by either the Company or HTI in accordance with Section 5.1, this
Agreement shall become void and there shall be no liability on the part of the
Company or HTI hereunder; provided that nothing contained in this Section 5.2
shall relieve any party for liability arising out of its breach of its
representations, warranties, covenants or undertakings set forth in this
Agreement.

 

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ARTICLE VI
MISCELLANEOUS

 

6.1                                                 Fees and Expenses.  The
Company shall pay the fees and expenses of both its and HTI’s advisers, counsel,
accountants and other experts, if any, incident to the negotiation, preparation,
execution, delivery and performance of this Agreement as set forth in the Fee
Letter dated as of October 14, 2009 by and between the Company and Hercules (the
“Fee Letter”) in addition to any fees and expenses of HTI’s advisers, counsel,
accountants and other experts, if any, incident to the review of the
registration statement filed by the Company with the SEC to register the resale
of the Conversion Shares and the Warrant Shares (the “Additional Fees and
Expenses”) provided, however, that if the registration statement shall be on
Form S-3, the Company shall not be required to pay or reimburse HTI any amount
of Additional Fees and Expenses that would cause the total amount of fees and
expenses paid by the Company pursuant hereto and the Fee Letter to exceed the
Fee Cap (as defined in the Fee Letter).

 

6.2                                                 Entire Agreement.  This
Agreement, together with the Exhibits hereto, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements, understandings, discussions and representations, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents.

 

6.3                                                 Notices.  Except as
otherwise expressly specified herein, all notices, requests and other
communications required or permitted hereunder shall be in writing and shall be
sent by a recognized overnight courier service; by certified or registered mail,
return receipt requested; by facsimile transmission, by e-mail or by hand
delivery.

 

if to the Company:

 

Infologix, Inc.

 

 

Attention: John A. Roberts, Chief Financial Officer

 

 

101 E. County Line Road

 

 

Hatboro, PA

 

 

Tel: (215) 604-0691

 

 

Fax: (215) 604-0695

 

 

 

and, if to HTI:

 

Hercules Technology I, LLC

 

 

Attention: Chief Legal Officer and Roy Liu, Managing Director

 

 

400 Hamilton Avenue, Suite 310

 

 

Palo Alto, California 94301

 

 

Tel: (650) 289-3060

 

 

Fax: (650) 473-9194

 

Any party may designate a different notice address, contact person, telephone
number, facsimile number or e-mail address with respect to such party by
providing a notice describing such changes to the other party hereto in
accordance with the provisions of this Section 6.3.  Any notice sent by
facsimile transmission or by e-mail shall be deemed delivered as of the open of
business on the Business Day following the date on which sent and shall also be
sent by United States mail to the appropriate address set forth in this
Section 6.3.  Any notice sent by hand delivery shall be deemed delivered as of
the date of delivery.

 

6.4                                                 Amendments; Waivers; No
Additional Consideration.  No provision of this Agreement may be waived or
amended, and no consent may be given, except in a written instrument signed by
the Company and HTI; provided, that no waiver or amendment, or consent in
respect of, any provision in Sections 3.1, 3.2, 3.3, 3.4, 6.1 or 6.4 shall be
effective unless such waiver, amendment or consent was approved by the
affirmative vote of the majority of the following directors: (a) the independent
Incumbent

 

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Directors (including any independent replacements thereof in accordance with
Section 3.1(e)), other than the Company’s chief executive officer and (b) the
Joint Director.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.

 

6.5                                                 Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.  No party may assign the rights and obligations of
this Agreement without the prior written consent of the other party.

 

6.6                                                 No Third-Party
Beneficiaries.  Except as provided herein, this Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

6.7                                                 Governing Law.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.  Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, stockholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the County of New Castle.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the County of New Castle for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  The parties hereby waive all
rights to a trial by jury.  If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

 

6.8                                                 Execution.  This Agreement
may be executed in two or more counterparts, all of which when taken together
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart.  In the
event that any signature is delivered by facsimile or by email via .pdf
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.

 

6.9                                                 Severability.  If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

 

17

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6.10                                           Specific Performance.  The
parties hereto agree that if any of the provisions of this Agreement or any
other document contemplated by this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage would
occur, no adequate remedy at law would exist and damages would be difficult to
determine, and, therefore, the parties shall be entitled to seek specific
performance of the terms hereof and thereof, in addition to any other remedy at
law or in equity.

 

6.11                           Disclosure Statement.  Concurrently with the
execution and delivery of this Agreement, the Company has delivered a
“Disclosure Statement,” which is incorporated into this Agreement by reference. 
Any disclosure by the Company with respect to a Section of this Agreement shall
be deemed to be disclosed for all other Sections of this Agreement to the extent
that it is reasonably apparent from the face of such disclosure that such
disclosure applies to such other Section.  No reference to or disclosure of any
item or other matter in any Section of this Agreement shall be construed as an
admission or indication that such item or other matter is material or that such
item or other matter is required to be referred to or disclosed in this
Agreement.

 

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Debt Conversion
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

 

 

INFOLOGIX, INC.

 

 

 

 

 

By:

/s/ David T. Gulian

 

Name:

David T. Gulian

 

Title:

Chief Executive Officer and President

 

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[HTI SIGNATURE PAGES TO
DEBT CONVERSION AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned has caused this Debt Conversion Agreement to
be duly executed by their respective authorized signatories as of the date first
indicated above.

 

Name of Purchaser: Hercules Technology I, LLC

Signature of Authorized Signatory of Purchaser:

/s/ K. Nicholas Martitsch

Name of Authorized Signatory:

K. Nicholas Martitsch

Title of Authorized Signatory:

Assistant General Counsel

Telephone Number of Purchaser:

Facsimile Number of Purchaser:

Email Address of Purchaser:

EIN Number:

 

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