EXHIBIT 4.1


 


[EXECUTION
COPY]


 


AMENDMENT
NO. 1

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT


 


AMENDMENT
NO. 1 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of February 19, 2010
(this “Amendment”), among InfoLogix, Inc., a Delaware corporation
(“Parent Borrower”), InfoLogix Systems Corporation, a Delaware
corporation (“ISC”), Embedded Technologies, LLC, a Delaware limited
liability company (“Embedded”), Opt Acquisition LLC, a Pennsylvania
limited liability company (“Opt”), and InfoLogix—DDMS, Inc., a
Delaware corporation (“DDMS”) (Parent Borrower, ISC, Embedded, Opt and
DDMS are each referred to herein as a “Borrower” and collectively as “Borrowers”)
and Hercules Technology Growth Capital, Inc., a Maryland corporation (“Lender”).  Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms in the Loan Agreement referred
to below.


 


RECITALS


 


WHEREAS, on November 20, 2009, Borrowers
and Lender entered into that certain Amended and Restated Loan and Security Agreement
(as amended, restated, supplemented or otherwise modified and in effect from
time to time, the “Loan Agreement”), pursuant to which, subject to the
terms and conditions set forth therein, Lender made advances and other
extensions of credit available to Borrowers.


 


WHEREAS, Events of Default under
Section 9.1 and Section 9.2 of the Loan Agreement exist as a result
of a breach of Section 2.1(c) and Section 2.6(a)(i) of the
Loan Agreement (such Events of Default hereinafter referred to as the “Specified
Events of Default”).


 


WHEREAS, Borrowers anticipate being in default
under Section 9.2 of the Loan Agreement as a result of a breach of
Section 7.20(a) for the Measurement Period ending December 31,
2009 and January 31, 2010 (such anticipatory defaults hereinafter referred
to as the “Specified Anticipatory Defaults”).


 


WHEREAS, Borrowers have requested that Lender
provide a multiple advance term loan to Borrowers, the proceeds of which shall
be used to purchase equipment from suppliers acceptable to Lender and subject
to purchase orders to such suppliers that are approved by Lender in its sole
discretion.


 


WHEREAS, Lender is agreeable to amend the terms
of the Loan Agreement as herein provided, subject to the terms and conditions
of this Amendment.


 


NOW,
THEREFORE, in
consideration of the mutual agreements contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:


 


AGREEMENTS


 


§1.          Amendments
to Loan Agreement and Exhibits Thereto.  The Loan
Agreement and Exhibits thereto are hereby amended as provided in the marked
pages of the Loan Agreement and such Exhibits attached hereto as Exhibit A.


 


§2.          Ratification
of Loan Documents, Etc.  Each Borrower
hereby adopts again, ratifies and confirms in all respects, as its own act and
deed: (i) each of the Loan Agreement and the other Loan Documents to which
such Borrower is a party; (ii) the grant of a security interest under the
Loan 


 

















 


Agreement and the other
Loan Document in the Collateral, together with any and all UCC financing
statements, United States Patent and Trademark Office recordings, United States
Copyright Office recordings, and other instruments or documents previously
executed in connection therewith to create, evidence, perfect or preserve the
priority of such security interest and Lien in favor of Lender; (iii) each
of the other instruments or documents delivered in connection with the Loan
Agreement or any of the Loan Documents and purported to be executed by it and
acknowledges that all of the foregoing Loan Documents and other instruments,
documents, filings and recordings shall continue in full force and effect.  Each pledgor under a Pledge Agreement hereby
adopts again, ratifies and confirms in all respects, as its own act and deed,
each pledge granted by such pledgor thereunder. 
By its signature below, each Borrower hereby consents to this Amendment,
and after taking into account this Amendment, acknowledges that this Amendment
shall not alter, release, discharge or otherwise affect any of its obligations
under any Loan Document under which such Borrower acts as a secondary obligor,
if any.


 


§3.          Representations
and Warranties.  Each
Borrower hereby represents and warrants to Lender as follows:


 


(a)           The execution and delivery of this
Amendment and the performance of the Loan Agreement, as amended by this
Amendment, by the Borrowers and the transactions contemplated hereby
(i) are within the corporate or company authority of each Borrower, as
applicable, (ii) have been duly authorized by all necessary corporate and
company proceedings, as applicable, (iii) do not and will not contravene
with (A) any provision of law, statute, rule, regulation, order, writ,
judgment, injunction, decree or award binding on such Borrower or any of its
Subsidiaries or (B) such Borrower’s certificate or articles of
incorporation or formation, other charter documents, by-laws or limited
liability company agreements, other company agreements, or any stock or membership
provision or any amendment thereof or (C) the provisions of any contract
or agreement binding upon such Borrower.


 


(b)           The execution and delivery of this
Amendment and performance of the Loan Agreement, as amended by this Amendment,
by the Borrowers and the transactions contemplated hereby are valid and legally
binding obligations of each Borrower, enforceable against each such Borrower in
accordance with the respective terms and provisions hereof.


 


(c)           No order, consent, adjudication,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of any
governmental or public body or authority, or subdivision thereof, is required
to be obtained in connection with the execution and delivery of this Amendment,
the performance by Borrowers and their Subsidiaries of their obligations under
this Amendment and the Loan Agreement as amended hereby or the legality,
validity, binding effect or enforceability of any of the Loan Documents.


 


(d)           Each of the representations and
warranties of such Borrower contained in the Loan Agreement as amended hereby
or in any document or instrument delivered pursuant to or in connection with
the Loan Agreement as amended hereby are true and correct in all material
respects (other than to the extent that any representation and warranty is
already qualified by materiality, in which case, such representation and
warranty shall be true and correct) as of the date hereof.


 


(e)           After taking into account this Amendment,
no Event of Default (other than the Specified Events of Default) has occurred
and is continuing, and no event has occurred and is continuing that, with the
passage of time or giving of notice, or both, would constitute an Event of
Default (other than the Specified Anticipatory Defaults); and


 

















 


§4.          Conditions
to Effectiveness.  This Amendment shall become effective upon
the receipt by Lender of each of the following items, provided that each of the
following items are delivered or performed on or before February 19, 2010:


 


(a)           Lender shall have received a duly
executed copy of this Amendment by Borrowers.


 


(b)           Lender shall have received a duly
executed Equipment Term Loan Note by Borrowers.


 


(c)           Lender shall have received financial
and business projections for the remainder of the 2010 calendar year, which
financial and business projections shall be determined after taking into effect
this Amendment and shall have been approved by each Borrower’s board of
directors and be in form and substance reasonably acceptable to Lender.


 


(d)           Lender shall have received copies,
certified by the Secretary or Assistant Secretary (or the equivalent thereof)
of each Borrower, in each case, of its certificate of incorporation or
formation, as applicable (each certified by the Secretary of State of the State
of such Borrower’s incorporation or formation, as applicable, as of a recent
date), its by-laws or limited liability company agreement, as applicable, (or,
to the extent that there have been no amendments or modifications to such
documents since the date such documents were last delivered to Lender, and such
documents remain in full force and effect, Lender shall have received a
certification with respect thereto), its Board of Directors’ resolutions and of
resolutions or actions of any other body authorizing the execution of the Loan
Documents to which such Borrower is a party, the incumbency of its officers
authorized to sign the Loan Documents (which shall identify by name and title
and bear the signatures of the authorized officers and any other officers of
such Borrower authorized to sign the Loan Documents to which such Borrower is a
party (or, to the extent that the authorized officers of the applicable Person
remains the same as the certification received as of the Closing Date, Lender
shall have received a certification with respect thereto), which such documents
shall be in form and substance reasonably satisfactory to Lender and upon which
certificate Lender shall be entitled to rely until informed of any change in
writing by such Borrower.


 


(e)           Lender shall have received
certificates of good standing in each Borrower’s jurisdiction of incorporation
or formation.


 


(f)            Borrowers shall have paid in
immediately available funds (i) all costs, internal charges and out-of-pocket
expenses (including reasonable attorneys’ fees and expenses) of Lender and
(ii) all reasonable fees and expenses of Morgan, Lewis & Bockius
LLP, counsel to Lender.


 


(g)           Lender shall have received such other
documents as Lender or its counsel may have reasonably requested.


 


§5.          Effect
of Amendment.  Except as expressly set forth herein, this
Amendment does not constitute an amendment of any term or condition of the Loan
Agreement or any other Loan Document, and all such terms and conditions shall
remain in full force and effect and are hereby ratified and confirmed in all
respects.  Nothing contained in this
Amendment shall be construed to imply a willingness on the part of Lender to
grant any similar or other future amendments of any of the terms and conditions
of the Loan Agreement or the other Loan Documents.  Nothing contained in this Amendment shall in
any way prejudice, impair or otherwise adversely affect any rights or remedies
of Lender under the Loan Agreement, as amended, or any other Loan Document
generally and specifically in respect of the Specified Events of Default and/or
the Specified Anticipatory 


 

















 


Defaults.  Nothing contained in this Amendment shall be
construed to constitute a waiver or forbearance of the Specified Anticipatory
Defaults or the Specified Events of Default, which, shall continue to exist
following the effectiveness of this Amendment and for which Lender shall
continue to have all rights and remedies of Lender under the Loan Documents in
respect thereof.  This Amendment shall
constitute a Loan Document.


 


§6.          Release. 
Each Borrower, on behalf of itself and its affiliates, and its or their
successors, assigns and agents, hereby expressly forever waives, releases and
discharges any and all claims (including, without limitation, cross-claims,
counterclaims, and rights of setoff and recoupment), causes of action (whether
direct or derivative in nature), demands, suits, costs, liabilities,
responsibilities, disputes, obligations, expenses and damages (collectively, the
“Claims”) any of them may have or allege to have as of the date of this
Amendment (and all defenses that may arise out of any of the foregoing) of any
nature, description, or kind whatsoever, based in whole or in part on facts,
whether actual, contingent or otherwise, now known, unknown, or subsequently
discovered, whether arising in law, at equity or otherwise, against either
Lender or Holder, or any of their respective subsidiaries, affiliates, agents,
principals, managers, managing members, members, stockholders, “controlling
persons” (within the meaning of the United States federal securities laws),
directors, officers, employees, attorneys, consultants, advisors, agents,
trusts, trustors, beneficiaries, heirs, executors and administrators of each of
the foregoing (collectively, the “Released Parties”) arising out of the
Existing Loan Agreement, the Existing Loan Documents, the Existing Warrant
Agreement, the Loan Agreement, the Loan Documents and any or all of the actions
and transactions contemplated hereby or thereby, including any actual or
alleged performance or non-performance of any of the Released Parties under the
Existing Loan Agreement, the Existing Loan Documents, the Existing Warrant
Agreement, the Loan Agreement and the Loan Documents; provided that
nothing in this Amendment shall be deemed to release Lender from any of its
obligations under the Loan Agreement or Holder from any of its obligations
under the Existing Warrant Agreement. 
Each Borrower hereby acknowledges that the agreements in this Section 6
are intended to be in full satisfaction of all or any alleged injuries or
damages arising in connection with the Claims. 
In entering into this Amendment, each Borrower expressly disclaims any
reliance on any representations, acts, or omissions by any of the Released
Parties and hereby agrees and acknowledges that the validity and effectiveness
of the releases set forth above does not depend in any way on any such
representation, acts and/or omissions or the accuracy, completeness, or validity
thereof.  The provisions of this Section 6
shall survive (i) the entry into the Loan Agreement and the Loan
Documents, the payment in full of all Secured Obligations of Borrowers under or
in respect of the Loan Agreement and the other Loan Documents and all other
amounts owing thereunder and the termination of all such Loan Documents and
(ii) the exercise by Holder of any and all of its rights under the
Existing Warrant Agreement.


 


§7.          Miscellaneous.


 


(a)           Governing Law.  This Amendment has been negotiated and
delivered to Lender in the State of California, and shall have been accepted by
Lender in the State of California.  This
Amendment shall be governed by, and construed and enforced in accordance with,
the laws of the State of California, excluding conflict of laws principles that
would cause the application of laws of any other jurisdiction.


 


(b)           Consent to Jurisdiction and Venue.  All judicial proceedings (to the extent that
the reference requirement of Section 7(c) is not applicable)
arising in or under or related to this Amendment may be brought in any state or
federal court located in the State of California.  By execution and delivery of this Amendment,
each party hereto generally and unconditionally: (a) consents to
nonexclusive personal jurisdiction in Santa Clara County, State of California;
(b) waives 


 

















 


any objection as to
jurisdiction or venue in Santa Clara County, State of California;
(c) agrees not to assert any defense based on lack of jurisdiction or
venue in the aforesaid courts; and (d) irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Amendment.  Service of process on any party hereto in any
action arising out of or relating to this Amendment shall be effective if given
in accordance with the requirements for notice set forth in Section 11.2
of the Loan Agreement, and shall be deemed effective and received as set forth
in Section 11.2 of the Loan Agreement. 
Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of either party to bring
proceedings in the courts of any other jurisdiction.


 


(c)           Mutual Waiver of Jury Trial /
Judicial Reference.


 


(i)            Because
disputes arising in connection with complex financial transactions are most
quickly and economically resolved by an experienced and expert person and the
parties wish applicable state and federal laws to apply (rather than
arbitration rules), the parties desire that their disputes be resolved by a
judge applying such applicable laws. 
EACH OF BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT
MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS CLAIM,
COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “SECTION 7
CLAIMS”) ASSERTED BY BORROWER AGAINST LENDER OR ITS ASSIGNEE OR BY LENDER
OR ITS ASSIGNEE AGAINST BORROWER.  This
waiver extends to all such Section 7 Claims, including Section 7
Claims that involve Persons other than Borrowers and Lender; Section 7
Claims that arise out of or are in any way connected to the relationship
between any Borrower and Lender; and any Section 7 Claims for damages,
breach of contract, tort, specific performance, or any equitable or legal
relief of any kind, arising out of this Amendment.


 


(ii)           If
the waiver of jury trial set forth in Section 7(c)(i) is
ineffective or unenforceable, the parties agree that all Section 7 Claims
shall be resolved by reference to a private judge sitting without a jury,
pursuant to Code of Civil Procedure Section 638, before a mutually
acceptable referee or, if the parties cannot agree, a referee selected by the
Presiding Judge of the Santa Clara County, California.  Such proceeding shall be conducted in Santa
Clara County, California, with California rules of evidence and discovery
applicable to such proceeding.


 


(iii)          In
the event Section 7 Claims are to be resolved by judicial reference,
either party may seek from a court identified in Section 7(b), any
prejudgment order, writ or other relief and have such prejudgment order, writ
or other relief enforced to the fullest extent permitted by law notwithstanding
that all Section 7 Claims are otherwise subject to resolution by judicial
reference.


 


(d)           Counterparts.  This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.  Delivery of an executed counterpart of a
signature page of this Amendment by facsimile shall be effective as
delivery of a manually executed counterpart of this Amendment.


 


(e)           Payment of Fees.  Each Borrower hereby agrees to pay Lender, on
demand by Lender, all Lender Expenses and all other professional fees set forth
in Section 11.11 of the Loan Agreement.


 


[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]


 

















 


IN
WITNESS WHEREOF,
Borrowers and Lender have duly executed and delivered this Amendment No. 1
to Amended and Restated Loan and Security Agreement as of the day and year
first above written.


 


	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  INFOLOGIX,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David T. Gulian

  
	
   

  	
   

  	
  David T. Gulian, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
  INFOLOGIX
  SYSTEMS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David T. Gulian

  
	
   

  	
   

  	
  David T. Gulian, President

  
	
   

  	
   

  	
   

  
	
   

  	
  OPT
  ACQUISITION LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: InfoLogix Systems
  Corporation, its sole Member

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David T. Gulian

  
	
   

  	
   

  	
  David Gulian, President

  
	
   

  	
   

  	
   

  
	
   

  	
  EMBEDDED
  TECHNOLOGIES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: InfoLogix Systems
  Corporation, its sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David T. Gulian

  
	
   

  	
   

  	
  David T. Gulian, President

  
	
   

  	
   

  	
   

  
	
   

  	
  INFOLOGIX
  — DDMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David T. Gulian

  
	
   

  	
   

  	
  David T. Gulian, President

  



 

















 


	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HERCULES
  TECHNOLOGY GROWTH CAPITAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature: 

  	
  /s/ K. Nicholas
  Martitsch

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
  K. Nicholas Martitsch

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Associate General
  Counsel

  
				



 

















 


Exhibit A


 


(Please see
attached)


 
















 


[EXECUTION
VERSION]Exhibit A to Amendment No. 1 to Amended and Restated
Loan and Security Agreement


 


AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT


 


THIS AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT is made and dated as of November 20, 2009 and
is entered into by and among InfoLogix, Inc., a Delaware corporation (“Parent
Borrower”), InfoLogix Systems Corporation, a Delaware corporation (“ISC”),
Embedded Technologies, LLC, a Delaware limited liability company (“Embedded”),
Opt Acquisition LLC, a Pennsylvania limited liability company (“Opt”),
and InfoLogix—DDMS, Inc., a Delaware corporation (“DDMS”) (Parent
Borrower, ISC, Embedded, Opt and DDMS are each referred to herein as a “Borrower”
and collectively as “Borrowers”) and Hercules Technology Growth Capital, Inc.,
a Maryland corporation (“Lender”).


 


RECITALS


 


A.                                   Under the Existing Agreement (as defined
below), Borrowers requested Lender to make available to them (i) a term
loan (the “Existing Term Loan”) in an initial aggregate principal amount
of $12,500,000 (the “Existing Term Loan Commitment”) and (ii) a
revolving facility (the “Existing Revolving Loan”) in an initial
aggregate principal amount of $12,500,000 (the “Existing Revolving Loan
Commitment”); and


 


B.                                     Under the First Amendment to Existing Agreement,
dated as of November 19, 2008, the Existing Revolving Loan Commitment
Amount was reduced to an aggregate principal amount of $9,000,000; and


 


C.                                     As of the date hereof and immediately
prior to giving effect to this Agreement, the Existing Secured Obligations
equal $22,725,811.89, of which (i) $9,102,836 constitutes the aggregate
principal amount of all Existing Revolving Loans, (ii) $11,768,582 constitutes
the aggregate principal amount of the Existing Term Loan, (iii) $68,422
constitutes the aggregate accrued and unpaid interest on all Existing Revolving
Loans, (iv) $98,521 constitutes the aggregate accrued and unpaid interest
on the Existing Term Loan, (v) $160,000 constitutes that unpaid portion of
the Restructuring Fee under and as defined in the Existing Agreement and
(vi) $1,527,450.89 constitutes all other outstanding Existing Secured
Obligations; and


 


D.                                    As of the date hereof and immediately
prior to giving effect to this Agreement, Lender assigned to Hercules
Technology I, LLC a portion of its interest in the Existing Term Loan equal to
$5,000,000, and substantially contemporaneously therewith, Hercules Technology
I, LLC cancelled such $5,000,000 in exchange for 67,294,751 shares of common
Capital Stock of Parent Borrower at par $0.00001; and


 


E.                                      In connection with the negotiations to
restructure the Existing Agreement, Borrowers have requested that Lender amend
and restate the Existing Agreement and restructure the Existing Term Loan and
the Existing Revolving Commitments and continue such loans hereunder as
follows: (i) a term loan A(the “Term Loan A”) in an initial
aggregate principal amount of $5,500,000 (the “Term Loan A Commitment”),
(ii) a term loan B(the “Term Loan B”) in an initial aggregate
principal amount of $5,000,000 (the “Term Loan B Commitment”)  and
(iii) a revolving facility (the “Revolving Loan”) in an initial
aggregate principal of $12,000,000 (the “Revolving Loan Commitment”);
and


 

















 


“Advance(s)”
means, as of the Closing Date, a Revolving Loan Advance and, as of
the First Amendment Effective Date, a Revolving Loan Advance or an Equipment
Term Loan Advance, as applicable.


 


“Advance Date”
means the funding date of any Advance.


 


“Advance Request”
means a request for an Advance submitted by Parent Borrower on behalf of itself
and of each Borrower to Lender in substantially the form of Exhibit A
and in form and substance satisfactory to Lender.


 


“Affiliate” means,
with respect to a specified Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified. “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise. “Controlling”
and “Controlled” have meanings correlative thereto.


 


“Agreement” means
this Amended and Restated Loan and Security Agreement, as amended from time to
time.


 


“Amended Side Letter
Agreement” means that certain Amended Side Letter Agreement dated as of
November 20, 2009, among the Borrowers and the Lender.


 


“Approved Exchange”
means any of Nasdaq, the New York Stock Exchange or the American Stock
Exchange, to the extent that the common Capital Stock of the Parent Borrower
shall at the date of determination be then traded and subject to an effective
listing on such exchange.


 


“Approved Projections”
means those projections of the annual operational budget of the Parent Borrower
and its Subsidiaries on a consolidated basis, balance sheets and cash flow
statements through the Term Loan B Maturity Date, delivered from time to time
in accordance with the terms of this Agreement, all in form and substance, and
with such supporting documentation and underlying assumptions, as reasonably
acceptable to Lender and approved by Lender in writing.


 


“Assignee” has the
meaning given to it in Section 11.13.


 


“Borrower” or “Borrowers”
has the meaning ascribed to such terms in the Preamble hereto.


 


“Borrower Products”
means all products, software, service offerings, technical data or technology
currently being designed, manufactured or sold by any Borrower or which any
Borrower intends to sell, license, or distribute in the future including any
products or service offerings under development, collectively, together with
all service offerings that have been licensed or distributed by any Borrower
since its respective incorporation or formation.


 


“Borrowing Base”
means 85% of Eligible Accounts.


 


3

















 


“Closing Date”  means
the date of this Agreement. 


 


“Collateral” means
the property described in Section 3.1.


 


“Collateral
Assignments of Acquisition Documents” means those certain Collateral
Assignments of Acquisition Documents dated as of the closing date of any
Permitted Acquisition, among the applicable Borrowers and Lender, providing for
collateral assignment of the applicable Borrower’s or Borrower’s respective
rights and interests, but not obligations, under the applicable Acquisition
Documents to Lender, a form of which document is attached hereto as Exhibit J.


 


“Confidential
Information” has the meaning given to it in Section 11.12.


 


“Consolidated Adjusted
EBITDA” means, at any date of determination, an amount equal to consolidated
net income of Parent Borrower and its Subsidiaries for the most recently
completed applicable Measurement Period, plus (a) the following to
the extent deducted in calculating such consolidated net income:
(i) Consolidated Interest Expenses paid or accrued in such applicable
Measurement Period, (ii) the provision for Federal, state, local and
foreign income taxes payable, (iii) depreciation and amortization expense,
(iv) other non-recurring expenses reducing such consolidated net income
which do not represent a cash item in such period or any future period, in each
case of or by Parent Borrower and its Subsidiaries for such applicable
Measurement Period, (v) non-cash charges for stock based compensation,
(vi) nonrecurring cash fees, costs, charges and expenses paid during such
period incurred in connection with a Permitted Acquisition,
(vii) non-recurring non-cash write-offs or write-downs of demo Equipment
not to exceed $750,000 in the aggregate (in each case of or by the Parent
Borrower and its Subsidiaries for such applicable Measurement Period),
(viii) cash severance expenses in such amounts as are consistent with
Parent Borrower’s severance plan as approved by Parent Borrower’s board of
directors and otherwise mutually agreed upon by Parent Borrower and Lender, in
Lender’s reasonable discretion, and (ix) fees, legal fees and expenses
incurred and paid in connection with the preparation and negotiation of this
Agreement[and], the 2009 Recapitalization and the First
Amendment; and minus (b) the following, to the extent included
in calculating such consolidated net income: (i) Federal, state, local and
foreign income tax credits and (ii) all non-cash items increasing
consolidated net income (in each case of or by Parent Borrower and its Subsidiaries
for such applicable Measurement Period). For purposes of this calculation and
without duplication, with respect to any period of determination, the
consolidated adjusted EBITDA of a wholly-owned Subsidiary acquired as a result
of a Permitted Acquisition, which shall be calculated in a manner consistent
with the methodology set forth for Consolidated Adjusted EBITDA herein, may be
included in the calculation of Consolidated Adjusted EBITDA as though such
Permitted Acquisition was consummated on the first day of the applicable
Measurement Period (the “Acquired Entity EBITDA”). The Acquired Entity
EBITDA shall be calculated by reference to the audited financial results of the
acquired entity, if available for such applicable Measurement Period, or if
such audited financial results are not available for such Measurement Period,
any unaudited financial results or management-prepared results as are approved
by Lender in respect of such acquired entity.


 


“Consolidated Excess
Cash Flow” means, as any date of determination, an amount equal to
Consolidated Adjusted EBITDA of Parent Borrower and its Subsidiaries for the
most recently


 


5

















 


(f)                                    Accounts arising out of deferred revenue;


 


(g)                                 Accounts owing by an Affiliate of a Borrower;


 


(h)                                 Accounts that are the obligation of an
account debtor that is the United States government or a political subdivision
thereof, or any state, county or municipality or department, agency or
instrumentality thereof unless the applicable Borrower, if necessary, has
complied with respect to such obligation with the Federal Assignment of Claims
Act of 1940, or any applicable Federal, state, county or municipal law
restricting assignment thereof;


 


(i)                                     Accounts that arise with respect to goods
that are delivered on a bill-and-hold, cash-on-delivery basis or placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor is or may be conditional;


 


(j)                                     Accounts upon which the respective
Borrower’s right to receive payment is not absolute or is contingent;


 


(k)                                  Accounts owing from any Person that
(i) has disputed liability for any account owing from such Person, or
(ii) has otherwise asserted any claim, demand or liability against the
Parent Borrower or any of its Subsidiaries, whether by action, suit,
counterclaim or otherwise; provided, however that for purposes of this clause
(k), such accounts shall be excluded only to the extent of the amounts
being disputed by such Person at any date of determination;


 


(l)                                     Accounts that do not arise out of the
sales of goods or rendering of services in the ordinary course of the
applicable Borrower’s business;


 


(m)                               Accounts payable other than in U.S.
Dollars or that are otherwise on terms other than those normal or customary in
the applicable Borrower’s business;


 


(n)                                 Accounts owing from any Person that shall
take or be the subject of any action or proceeding of a type described in Section 9.6
of this Agreement;


 


(o)                                 Accounts as to which a consent has not
been obtained or maintained as required by Lender;


 


(p)                                 Accounts not owned by the applicable
Borrower free and clear of all Liens of any other Person other than the Liens
in favor of Lender;


 


(q)                                 Accounts not subject to a first priority
Lien in favor of Lender;


 


(r)                                    Equipment Accounts unless otherwise
consented to by Lender in writing in its sole discretion as being “Eligible
Accounts” for purposes hereof; and


 


(s)                                  Accounts the collection of which Lender
determines in its good faith credit judgment to be doubtful.


 


9

















 


“Embedded”  has
the meaning ascribed to such term in the Preamble hereof.


 


“ERISA” is the
Employee Retirement Income Security Act of 1974, and its regulations.


 


“Equipment Accounts”
means accounts (accounts receivable) arising from the sale or other transfer of
equipment that was financed (in whole or in part) by one or more Equipment Term
Loan Advance(s).


 


“Equipment Purchase
Orders” means the purchase orders for equipment to be purchased by a Borrower
from JACO, PowerUp or such other equipment supplier(s) acceptable to
Lender in its sole discretion.


 


“Equipment Term Loan”
means the multiple advance term loan permitted under this Agreement as of the
First Amendment Effective Date, subject to the terms and conditions hereof.


 


“Equipment Term Loan
Advance” means an advance of funds under the Equipment Term Loan.


 


“Equipment Term Loan
Availability Period” means the period commencing on the First Amendment
Effective Date and continuing through and including April 30, 2010.


 


“Equipment Term Loan
Commitment” means, as of the First Amendment Effective Date, Three Million
Dollars ($3,000,000), as such commitment may be reduced from time to time
pursuant to the terms hereof.


 


“Equipment Term Loan Fee”
means three percent (3%) of the purchase price identified in the Equipment
Purchase Orders approved by Lender in its sole discretion for purposes of
funding one or more Equipment Term Loan Advance, as determined by Lender.


 


“Equipment Term Loan
Interest Rate” means one and one-half percent (1.5%) per month.


 


“Equipment Term Loan
Lockbox” means a lockbox maintained with a financial institution acceptable to
Lender in its sole discretion and in the name of Lender.


 


“Equipment Term Loan
Maturity Date” means December 31, 2010.


 


“Equipment Term Loan
Note” means a promissory note in substantially the form of Exhibit B-4.


 


“Event of Default”
has the meaning given to it in Section 9.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended.


 


10

















 


“Existing Agreement”
means that certain Loan and Security Agreement dated as of May 1, 2008
among the Borrowers and Lender, as amended prior to the date hereof and as
further amended and restated by this Agreement.


 


“Existing Loan Documents”
means those certain “Loan Documents” executed and delivered in connection with
the Existing Agreement from time to time.


 


“Existing Revolving
Loan” has the meaning ascribed to such term in the Recitals hereto.


 


“Existing Revolving
Loan Commitment” has the meaning ascribed to such term in the Recitals
hereto.


 


“Existing Secured
Obligations” means all “Secured Obligations” arising under the Existing
Agreement.


 


“Existing Term Loan”
has the meaning ascribed to such term in the Recitals hereto.


 


“Existing Term Loan
Commitment” has the meaning ascribed to such term in the Recitals hereto.


 


“Facility Charge”
means an amount equal to $450,000. 


 


“Financial Statements”
has the meaning given to it in Section 7.1.


 


“First Amendment” means
Amendment No. 1 to Amended and Restated Loan and Security Agreement, dated
as of February 19, 2010, among Borrowers and Lender.


 


“First Amendment
Effective Date” means February 19, 2010.


 


“GAAP” means
generally accepted accounting principles in the United States of America, as in
effect from time to time.


 


“Hercules LLC”
means Hercules Technology I, LLC, a Delaware limited liability company.


 


“HIA” means
Healthcare Informatics Associates, Inc., a Delaware corporation.


 


“HIA Indebtedness”
means the obligations of ISC to HIA pursuant to the Subordinated Note and the
Earn Out Agreement, each as defined in the HIA Subordination Agreement.


 


“HIA Subordination
Agreement” means that certain Subordination Agreement executed and
delivered by and among Lender, ISC and HIA dated as of May 1, 2008, as the
same may be amended pursuant to the terms thereof from time to time.


 


“HIA Transaction”
means the acquisition by Parent Borrower and ISC of certain assets of
Healthcare Informatics Associates, Inc. pursuant to that certain Asset
Purchase Agreement, dated as of September 30, 2007, among Parent Borrower,
ISC, Heathcare Informatics Associates, Inc. and the stockholders
identified therein of Heathcare Infomatics Associates, Inc.


 


11

















 


“Indebtedness” means
indebtedness of any kind, including (a) all indebtedness for borrowed
money or the deferred purchase price of property or services (excluding trade
credit entered into in the ordinary course of business), including
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all
Contingent Obligations.


 


“Insolvency Proceeding”
is any proceeding by or against any Person under the United States Bankruptcy
Code, or any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, compositions, or proceedings seeking reorganization,
arrangement, or other similar relief.


 


“Intellectual Property”
means all of Borrowers’ Copyrights, Trademarks, Patents, Licenses, trade
secrets and inventions, mask works, Borrowers’ applications therefor and
reissues, extensions, or renewals thereof; and Borrowers’ goodwill associated
with any of the foregoing, together with Borrowers’ rights to sue for past,
present and future infringement of Intellectual Property and the goodwill
associated therewith.


 


“Investment” means
any beneficial ownership (including stock, partnership or limited liability
company interests) of or in any Person, or any loan, advance or capital
contribution to any Person or the acquisition of all, or substantially all, of
the assets of another Person.


 


“ISC” has the
meaning ascribed to such term in the Preamble hereof.


 


“Joinder Agreements”
means for each Subsidiary not then a Borrower, a completed and executed Joinder
Agreement in substantially the form attached hereto as Exhibit G.


 


“Lender” has the
meaning ascribed to such term in the Preamble hereof.


 


“Lender Expenses”
are all out-of-pocket audit fees and expenses, costs, and expenses (including
reasonable fees and expenses of attorneys, financial advisors and other
professionals) for preparing, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in
connection with appeals or Insolvency Proceedings) or otherwise incurred by
Lender with respect to any Borrower.


 


“License” means
any Copyright License, Patent License, Trademark License or other license of
rights or interests.


 


“Lien” means any
mortgage, deed of trust, pledge, hypothecation, assignment for security,
security interest, encumbrance, levy, lien or charge of any kind, whether
voluntarily incurred or arising by operation of law or otherwise, against any
property, any conditional sale or other title retention agreement, and any
lease in the nature of a security interest, and any filing of any financing
statement (other than a precautionary financing statement with respect to a
lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.


 


“Loan” or “Loans”
means, collectively, the [Advances]Revolving Loan, the Term Loans and
the Equipment Term Loan made under this Agreement.


 


12

















 


“Loan Documents”
means this Agreement, the Notes, the ACH Authorization, the Security Documents,
the Reaffirmation Agreement, the Amended Side Letter Agreement, the Waiver and
Release Agreement, the HIA Subordination Agreement, any intercreditor agreements,
any subordination agreements and any other documents executed or to be executed
in connection with the Secured Obligations or the transactions contemplated
hereby, as the same may from time to time be amended, modified, supplemented or
restated.


 


“Mandatory Conversion
Event” shall have the meaning assigned to such term in Section 2.9(b).


 


“Material Adverse
Effect” means a material adverse effect upon: (i) the business,
operations, properties, assets, or financial condition of Parent Borrower and its
Subsidiaries taken as a whole; or (ii) the ability of any Borrower to
perform the Secured Obligations in accordance with the terms of the Loan
Documents, or the ability of Lender to enforce any of its rights or remedies
with respect to the Secured Obligations; or (iii) the Collateral or
Lender’s Liens on the Collateral or the priority of such Liens.


 


“Material Agreements”
means the Acquisition Documents, the charter documents (including, as
applicable and without limitation, articles of formation and by-laws) of each
of the Parent Borrower and its Subsidiaries, and the Subordinated Indebtedness
Documents.


 


“Maximum Rate”
shall have the meaning assigned to such term in Section 2.3. 


 


“Maximum Revolving
Loan Amount” means $12,000,000.


 


“Maximum Term Loan A
Amount” means $5,500,000.


 


“Maximum Term Loan B
Amount” means $5,000,000.


 


“Measurement Period”
means, at any date of determination, the most recently completed Twelve Month
Measurement Period or Three Month Measurement Period, of Borrowers, as
applicable.


 


“Nasdaq” means The
Nasdaq Stock Market, LLC.


 


“Note(s)” means,
collectively, the Revolving Notes, the Term Notes A[  and/or],Term Notes B and/or
the Equipment Term Loan Note.


 


“Opt” has the
meaning ascribed to such term in the Preamble hereof.


 


“Overadvance” or “Overadvances”
has the meaning ascribed to such terms in Section 2.1(c) hereof.


 


“Overadvance Period”
means a period of up to twenty-eight (28) consecutive calendar days following
the making of an Overadvance under Section 2.1(c) hereof.


 


“Overadvance Clean
Down Period” means, with respect to any Overadvance and as of the date of
determination, a period of fourteen (14) consecutive calendar days following
the date


 


13

















 


the [Equipment] equipment
financed with such Indebtedness; (iv) Indebtedness incurred in the
ordinary course of business with corporate credit cards that also constitutes a
Permitted Investment pursuant to clause (viii) of such definition;
(v) Subordinated Indebtedness; (vi) reimbursement obligations in
connection with letters of credit that are secured by cash or Cash Equivalents
and issued on behalf of the Parent Borrower or a Subsidiary thereof in an
amount not to exceed $350,000 at any time outstanding; (vii) other
Indebtedness in an amount not to exceed $250,000 at any time outstanding; and
(viii) extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the
terms modified to impose materially more burdensome terms upon Parent Borrower
or its Subsidiary, as the case may be.


 


“Permitted Investment” means:
(i) Investments of a Borrower in any other Person existing on the Closing
Date which are disclosed in Schedule 1B; (ii) (a) marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one year from the
date of acquisition thereof, (b) commercial paper maturing no more than
one year from the date of creation thereof and currently having a rating of at
least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s
Investors Service, (c) certificates of deposit issued by any bank with
assets of at least $500,000,000 maturing no more than one year from the date of
investment therein and (d) money market accounts; (iii) repurchases
of stock from former employees, directors, or consultants of Parent Borrower
under the terms of applicable repurchase agreements at the original issuance
price of such securities in an aggregate amount not to exceed $250,000 in any
fiscal year, provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the repurchases;
(iv) Investments accepted in connection with Permitted Transfers;
(v) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of each respective Borrower’s business;
(vi) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business, provided that this subparagraph
(vi) shall not apply to Investments of any Borrower in any Subsidiary;
(vii) Investments consisting of loans not involving the net transfer on a
substantially contemporaneous basis of cash proceeds to employees, officers or
directors relating to the purchase of Capital Stock of Parent Borrower pursuant
to employee stock purchase plans or other similar agreements approved by Parent
Borrower’s Board of Directors, and loans to any employees, officers or
directors of any Borrower, or the guarantee by any Borrower of any such loans
made by a third party permitted pursuant to Section 7.9(c); (viii) Investments
consisting of travel advances in the ordinary course of business;
(ix) Investments in newly-formed Subsidiaries organized in the United
States, provided that such Subsidiaries enter into a Joinder Agreement
promptly after their formation by Parent Borrower (or applicable Subsidiary)
and execute such other documents as shall be reasonably requested by Lender;
(x) Investments in subsidiaries organized outside of the United States
approved in advance in writing by Lender; (xi) joint ventures or strategic
alliances in the ordinary course of each respective Borrower’s business
consisting of the nonexclusive licensing of technology, the development of
technology or the providing of technical support, provided that any cash
Investments by Borrowers with respect to such joint ventures or strategic
alliances do not exceed $250,000 in the aggregate in any fiscal year; (xii)
additional Investments that do not exceed $250,000 in the aggregate; and (xiii)
Investments that result in or that constitute Permitted Acquisitions.


 


16
















 


“Permitted Liens”
means any and all of the following: (i) Liens in favor of Lender;
(ii) Liens existing on the Closing Date which are disclosed in Schedule
1C; (iii) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided, that Borrowers maintain adequate
reserves therefor in accordance with GAAP; (iv) Liens securing claims or
demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords
and other like Persons arising in the ordinary course of each respective
Borrower’s business and imposed without action of such parties, provided,
that the payment thereof is not yet required; (v) Liens arising from
judgments, decrees or attachments in circumstances which do not constitute an
Event of Default hereunder; (vi) the following deposits, to the extent
made in the ordinary course of business: deposits under worker’s compensation,
unemployment insurance, social security and other similar laws, or to secure
the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure indemnity, performance or other similar bonds for
the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations (other than liens arising
under ERISA or environmental liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds; (vii) Liens on equipment or
software or other intellectual property constituting purchase money liens and
liens in connection with capital leases securing Indebtedness permitted in clause
(iii) of “Permitted Indebtedness”; (viii) Liens incurred in
connection with Subordinated Indebtedness; (ix) leasehold interests in
leases or subleases and licenses granted in the ordinary course of business and
not interfering in any material respect with the business of the licensor;
(x) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of custom duties that are promptly paid on or before
the date they become due; (xi) Liens on insurance proceeds securing the payment
of financed insurance premiums that are promptly paid on or before the date
they become due (provided that such Liens extend only to such insurance
proceeds and not to any other property or assets); (xii) statutory and common
law rights of set-off and other similar rights as to deposits of cash and
securities in favor of banks, other depository institutions and brokerage firms;
(xiii) easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business
so long as they do not materially impair the value or marketability of the
related property; (xiv) Liens on cash or Cash Equivalents securing obligations
permitted under clause (vii) of the definition of Permitted
Indebtedness; and (xv) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in clauses
(i) through (xi) above, provided, that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced (as may have been reduced by any payment thereon) does
not increase.


 


“Permitted Transfers”
means (i) sales of inventory in the ordinary course of business,
(ii) non-exclusive licenses and similar arrangements for the use of
Intellectual Property in the ordinary course of business and licenses that
could not result in a legal transfer of title of the licensed property but that
may be exclusive in respects other than territory and that may be exclusive as
to territory only as to discreet geographical areas outside of the United
States in the ordinary course of business, (iii) dispositions of worn-out,
obsolete or surplus [Equipment]equipment at fair market value in
the ordinary course of business, and (iv) other transfers of assets having
a fair market value of not more than $500,000 in the aggregate in any fiscal
year, provided, that Borrowers shall be required to make mandatory
prepayments of the Term Loans and the Equipment Term Loan, in accordance
with the provisions of Section


 


17

















 


date requesting that
Lender extend the “Revolving Loan Maturity Date” to November 1, 2011 (such
written notification to state that such notice is a “Request for Extension of
Revolving Loan Maturity Date,”), then following Lender’s written confirmation
thereof to Borrowers, the Revolving Loan Maturity Date shall be extended to
November 1, 2011, provided that no Event of Default exists at the
time of delivery of such “Request for Extension of Revolving Loan Maturity
Date” or shall exist at the time of the extension thereof by Lender.


 


“Revolving Note”
means a promissory note in substantially the form of Exhibit B-3.


 


“SEC Reports”
means the reports, forms or other information required to be filed by Parent
Borrower 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 Parent Borrower was required by law
to file such reports).


 


“Secured Obligations”
means each Borrower’s obligations under this Agreement and any Loan Document,
including any obligation, of any kind or nature, to pay any amount now owing or
later arising to Lender (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable), whether or not
evidenced by any note, agreement or other instrument. This term includes all
principal, interest (including all interest that accrues after the commencement
of any case or proceeding by or against any Borrower, in [bankruptcy]any
Insolvency Proceeding, whether or not allowed in such case or proceeding),
fees, attorneys’ fees and any other sum chargeable to any Borrower under this
Agreement or any of the other Loan Documents.


 


“Securities”
means, collectively, (i) the Term Loan B and (ii) the shares of
common Capital Stock of Parent Borrower issued to Lender pursuant to Section 2.5(a)(iii) and
Section 2.9 hereof.


 


“Securities Act”
refers to the Securities Act of 1933, as amended.


 


“Security Documents”
means, collectively, Section 3 of this Agreement, the Patent
Security Agreement, the Trademark Security Agreement, the Copyright Security
Agreement, the Pledge Agreements, the Account Control Agreements, the
Collateral Assignments of Acquisition Documents, the Reaffirmation Agreement,
all UCC Financing Statements and any other documents executed or to be executed
in connection with the foregoing or purporting to grant security interests and
Liens on the assets of the applicable Borrower in favor of Lender, as the same
may from time to time be amended, modified, supplemented or restated.


 


“Subordinated
Indebtedness” means Indebtedness subordinated to the Secured Obligations in
amounts and on terms and conditions satisfactory to Lender in its discretion
and subject to subordination provisions or agreements satisfactory to Lender in
its discretion, including without limitation, the HIA Indebtedness.


 


“Subordinated
Indebtedness Documents” means any and all documents executed by Parent
Borrower or any of its Subsidiaries giving rise to or otherwise executed in
connection with the Subordinated Indebtedness, including without limitation,
any and all promissory notes, loan agreements, security agreements, and any and
all collateral and ancillary documents.


 


19

















 


“Term Loans”
means, collectively, the Term Loan A and the Term Loan B.


 


“Term Note A”
means a promissory note in substantially the form of Exhibit B-1. 


 


“Term Note B”
means a promissory note in substantially the form of Exhibit B-2.


 


“Three Month
Measurement Period” means, at any date of determination, the most recently
completed three fiscal months of Borrowers.


 


“Trademark License”
means any written agreement granting any right to use any Trademark or
Trademark registration, now owned or hereafter acquired by any Borrower or in
which Borrower now holds or hereafter acquires any interest.


 


“Trademark Security
Agreement” means a trademark security agreement executed and delivered by
the Borrowers and Lender as such may be amended, restated or otherwise modified
from time to time.


 


“Trademarks” means
all trademarks (registered, common law or otherwise) and any applications in
connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof.


 


“Twelve Month
Measurement Period” means, at any date of determination, the most recently
completed twelve consecutive calendar months of Borrowers.


 


“UCC” means the
Uniform Commercial Code as the same is, from time to time, in effect in the
State of California, provided, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Lender’s Lien on any Collateral is
governed by the Uniform Commercial Code as the same is, from time to time, in
effect in a jurisdiction other than the State of California, then the term
“UCC” shall mean the Uniform Commercial Code as in effect, from time to time,
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions.


 


“Valuation Procedures”,
when used in reference to determining the price per share of Parent Borrower’s
common Capital Stock, means, initially, the determination thereof in good faith
by the Board of Directors of Parent Borrower (such price per share herein referred
to as the “Proposed Share Price”) and approved by Lender, in its
reasonable business judgment. In the event Lender does not accept the Proposed
Share Price, then Parent Borrower and Lender shall, in good faith and at
Borrowers’ expense, select an independent valuation firm mutually acceptable to
each such Person to conduct a valuation of the share price of the Parent
Borrower. The determination of such independent valuation firm shall be
conclusive, absent manifest error, as between the Parent Borrower and Lender
for purposes herein and all costs and expenses incurred in connection with such
valuation shall be borne by the Borrowers.


 


“Waiver and Release
Agreement” means that certain Waiver and Release Agreement, dated as of
November 20, 2009, among the [Loan Parties]Borrowers and the
Lender.


 


21

















 


SECTION 2. THE LOANS


 


2.1.                                   Revolving Loan.


 


(a)                                  Advances. Subject to the terms and conditions of this
Agreement, Borrowers may, jointly and severally, draw Revolving Loan Advances
on or before the Revolving Loan Maturity Date in an aggregate principal amount
of up to the lesser of the Borrowing Base or the Maximum Revolving Loan Amount,
provided Borrowers shall request only one (1) such Revolving Loan
Advance per week, and each Revolving Loan Advance shall be in a minimum amount
of $100,000 or if the amount available to be borrowed under the Maximum
Revolving Loan Amount is less than $100,000, then such lesser amount. Revolving
Loan Advances may be repaid and reborrowed at any time, without premium or
penalty. Existing Revolving Loans outstanding as of the Closing Date shall be
deemed Revolving Loans and Revolving Loan Advances pursuant to this Agreement
and shall be continued hereunder as Revolving Loans and Revolving Loan
Advances.


 


(b)                                 Advance Request. To obtain a Revolving Loan Advance, at least two
(2) Business Days prior to the requested Advance Date, Parent
Borrower, on its own behalf and on behalf of each Borrower, shall complete,
sign and deliver an Advance Request and a Borrowing Base Certificate (with such
Borrowing Base Certificate reflecting any adjustments in eligibility criteria
requested by Lender whether or not any notice period in respect of such
adjustment shall have then elapsed); provided, however that if
Borrowers have submitted a Borrowing Base Certificate dated as of a date not
more than 3 Business Days prior to the submission of the Advance Request, then
the Parent Borrower shall not be required to submit a new Borrowing Base
Certificate in connection with such Advance Request unless adjustments are
required to reflect any adjustments in the eligibility criteria requested by
Lender whether or not any notice period in respect of such adjustments shall
have then elapsed. Lender shall fund the Revolving Advance in the manner
requested by the Advance Request, provided that each of the conditions
precedent to such Revolving Advance is satisfied as of the requested Advance
Date.


 


(c)                                  Overadvance Facility. Anything in this Agreement to the contrary notwithstanding,
at the request of Parent Borrower, Lender shall make or expressly permit to
remain outstanding any Revolving Loan Advance to Borrowers in amounts that
cause the aggregate outstanding principal balance of the Revolving Loans to
exceed the Borrowing Base (any such excess Revolving Loan Advance are herein
referred to individually as an “Overadvance” and collectively as “Overadvances”),
provided that (i) the aggregate principal amount of all such
Overadvances outstanding shall not exceed $500,000 at any time; (ii) an
Overadvance may be outstanding for no more than twenty-eight (28) consecutive
calendar days; and (iii) no Overadvance shall be made or permitted to
exist at any time (A) during the Overadvance Clean Down Period (and Borrower
shall repay such Overadvances no later than the Business Day immediately
preceding the first day of each Overadvance Clean Down Period as provided in Section 2.6(a)(iii))
or (B) that an Event of Default then exists or would arise as a result of
such Overadvance. Overadvances may be made even if the conditions to lending
set forth in


 


23

















 


Section 4 have not been met. All Overadvances
shall constitute Revolving Loans and bear interest at the Revolving Interest
Rate applicable for Overadvances. For purposes of this Section 2.1(c),
(x) the aggregate principal amount of all Overadvances shall not exceed
$500,000 at any time; and (y) no Overadvance shall cause the aggregate
principal amount of all Revolving Loans to exceed the Revolving Loan Maximum
Amount.


 


(d) Interest.
Subject to the provisions of Section 2.1(c) Section 2.3
and Section 2.4, the principal balance of the Revolving Loan shall
bear interest thereon from the initial Revolving Loan Advance Date for such
Revolving Loan Advance, calculated at the floating Revolving Interest Rate
based upon a year consisting of 360 days, as applicable, and payable for the
actual number of days elapsed.


 


2.2. Term Loans;
Equipment Term Loan.


 


(a) Term
Loan A. On the Closing Date, a portion of the Existing Term Loan in the
amount of the Maximum Term Loan A Amount shall be continued hereunder as the
Term Loan A.


 


(b) Term
Loan B. On the Closing Date, a portion of the Existing Term Loan in the
amount of the Maximum Term Loan B Amount shall be continued hereunder as the
Term Loan B.


 


(c)                                     Interest on the Term Loans.


 


i.                                          Subject to the provisions of Section 2.3
and Section 2.4, the principal balance of the Term Loan A shall
bear interest thereon from the Closing Date at the Term Loan A Interest Rate
based on a year consisting of 360 days with interest computed daily based on
the actual number of days elapsed.


 


ii.                                       Subject to the provisions of Section 2.3
and Section 2.4, the principal balance of the Term Loan B shall
bear interest thereon from the Closing Date at the Term Loan B Interest Rate
based on a year consisting of 360 days with interest computed daily based on
the actual number of days elapsed.


 


(d) Equipment
Term Loan.


 


(i) Advances.
Subject to the terms and conditions of this Agreement, Borrowers may, jointly
and severally, draw Equipment Term Loan Advances on or before the last day of
the Equipment Term Loan Availability Period, in one or more Equipment Term Loan
Advances, in an aggregate principal amount of up to the Equipment Term Loan
Commitment then outstanding, provided, Borrowers may request up to twelve (12)
Equipment Term Loan Advances during the Equipment Term Loan Availability
Period, and each Equipment Term Loan Advance shall be in a minimum amount of
$250,000 or if the amount available to be borrowed under the Equipment Term
Loan Commitment is less than $250,000, then such lesser amount. Upon the
funding of any Equipment Term Loan Advance hereunder, the Equipment Term Loan
Commitment shall be permanently terminated by an amount equal to such Equipment
Term Loan Advance so funded. On the last day of the Equipment Term Loan
Availability Period, all outstanding Equipment Term Loan Commitments shall be
permanently terminated.


 


24

















 


(ii)                                       Advance Request. To obtain an Equipment
Term Loan Advance, at least two (2) Business Days prior to the requested
Advance Date, Parent Borrower, on its own behalf and on behalf of each
Borrower, shall complete, sign and deliver an Advance Request and the Equipment
Purchase Orders for which such Advance Request is being made. Lender shall have
the right, in its sole discretion, to approve such Equipment Purchase Orders
for which an Equipment Term Loan Advance is being requested (each such request
to be only for the amounts then proposed to be paid in respect of any such
approved Equipment Purchase Orders and not for any amounts to be applied to
future payment obligations thereunder), and in the event Lender does not
approve any such Equipment Purchase Order(s), the amount of the then requested
Equipment Term Loan Advance shall automatically be reduced by the purchase
price amount (or portion thereof that is the subject of the requested Equipment
Term Loan Advance) identified in the Equipment Purchase Order(s) not
approved by Lender or as Lender may otherwise determine in its sole discretion.
Lender shall fund the Equipment Term Loan Advance requested as herein provided,
provided that each of the conditions precedent to such Equipment Term Loan Advance
is satisfied as of the requested Advance Date, unless otherwise agreed to in
writing by Lender.


 


(iii)                                    Interest. Subject to the provisions of
Section 2.3 and Section 2.4, the outstanding principal balance of the
Equipment Term Loan shall bear interest thereon from the First Amendment
Effective Date at the Equipment Term Loan Interest Rate based on a month
consisting of 30 days with interest computed daily based on the actual number
of days elapsed.


 


2.3. Maximum Interest.
Notwithstanding any provision in this Agreement, the Notes, or any other Loan
Document, it is the parties’ intent not to contract for, charge or receive
interest at a rate that is greater than the maximum rate permissible by law
that a court of competent jurisdiction shall deem applicable hereto (which
under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the “Maximum
Rate”). If a court of competent jurisdiction shall finally determine that
Borrowers have actually paid to Lender an amount of interest in excess of the
amount that would have been payable if all of the Secured Obligations had at
all times borne interest at the Maximum Rate, then such excess interest
actually paid by Borrowers shall be applied as follows: first, to the payment
of all Lender Expenses; second, to the payment of accrued and unpaid
interest on the Loans, to be apportioned pro rata amongst the Loans; third,
to the payment of principal outstanding on the Term Loan A to be applied pro
rata to remaining installments of such Term Loan, fourth, to the payment
of principal outstanding on the Term Loan B, fifth, to the payment of
principal outstanding on the Revolving Loans, sixth, to the payment
of principal outstanding on the Equipment Term Loan, seventh, to the
payment of any and all other Secured Obligations; and [seventh]  eighth,
following the payment in full in cash of all Secured Obligations, the excess
(if any) shall be refunded to Borrowers or as a court of competent
jurisdiction may direct.


 


2.4. Default Interest.
In the event any payment is not paid on the scheduled payment date, an amount
equal to five percent (5%) of the past due amount shall be payable on demand.
In addition, upon the occurrence and during the continuation of an Event of
Default hereunder, all Secured Obligations (including, without limitation,
principal, interest, compounded interest and professional fees) shall bear
interest at a rate per annum equal to the rate set forth in Section 2.1(d),
Section 2.2(c) or Section 2.2([c]d)(iii), as
applicable, plus three percent (3%) per annum (the “Default Rate”).
In the event any interest is not paid when due hereunder, delinquent interest
shall be added to principal and shall bear interest on interest, compounded at
the rate set forth in


 


25

















 


Section 2.1(d), Section 2.2(c),
Section 2.2(d)(iii) or Section 2.4, as applicable.
For the avoidance of doubt, interest on an Overadvance made in accordance with Section 2.1(c) shall
not bear interest at the Default Rate as a result of a breach of Section 2.6(a)(ii) due
to such Overadvance being made or permitted to remain outstanding so long as
such Overadvance remains outstanding in compliance with the terms of Section 2.1(c).


 


2.5.                              Payments.


 


(a)                                     Interest; Payments Generally.


 


i.                                          Borrowers will pay cash interest on the
Loans on the first Business Day of each calendar month, commencing
December 1, 2009.


 


ii.                                       Notwithstanding subparagraph (a)(i) to
the contrary and solely with respect to interest payments on the Term Loan B,
(A) for the period commencing on the Closing Date and continuing through
but not including the first anniversary of the Closing Date, on the applicable
interest payment date for the Term Loan B, Borrowers will pay accrued and unpaid
interest as follows: (1) twelve percent (12%) on the Term Loan B in cash
and (2) two and one half percent (2.5%) interest in kind by adding such
amount to the outstanding principal amount of the Term Loan B on the applicable
interest payment date; (B) for the period commencing on the first
anniversary of the Closing Date and continuing through but not including the
second anniversary of the Closing Date, on the applicable interest payment date
for the Term Loan B, Borrowers will pay accrued and unpaid interest as follows:
(1) eighteen percent (18%) on the Term Loan B in cash and (2) two and
one half percent (2.5%) interest in kind by adding such amount to the
outstanding principal amount of the Term Loan B on the applicable interest
payment date; and (C) commencing on the second anniversary of the Closing
Date and thereafter, on the applicable interest payment date for the Term Loan
B, Borrowers will pay accrued and unpaid interest as follows: (1) fifteen
percent (15%) interest on the Term Loan B in cash and (2) two and one half
percent (2.5%) interest in kind by adding such amount to the outstanding
principal amount of the Term Loan B on the applicable interest payment date.


 


iii.                                    Notwithstanding subparagraph (a)(i) or
subparagraph (a)(ii) to the contrary and solely with respect to
interest payments on the Term Loan B, at any time that Borrowers either
(A) fail to maintain a Consolidated Interest Coverage Ratio equal to or
greater than 2.50 to 1.00 as of the last day of the calendar month for which
financial statements have been delivered under Section 7.1(a) hereof
or (B) fail to deliver the financial statements required under Section 7.1(a) hereof
as required under such Section, then on the applicable interest payment date
and at Lender’s election in its sole discretion by written notice to Borrowers
at least one (1) Business Day prior to such interest payment date,
Borrowers will pay interest on the Term Loan B, in whole or in part as
determined by Lender in its sole discretion, by paying such accrued interest
(x) in cash, and/or (y) in kind by adding such amounts to the
principal amount of the Term Loan B as of such interest payment date and/or
(z) through the issuance of additional shares of


 


26

















 


common Capital Stock of
Parent Borrower to Lender or any designee of Lender, the number of such
additional shares to be determined by Lender by dividing the amount of the
accrued interest to be converted into common Capital Stock of the Parent
Borrower by the Adjusted 30-Day VWAP Price. In the event that the Parent
Borrower and Lender do not agree on the Proposed Share Price, Lender in its
sole discretion may, by a subsequent written notice to Borrowers, elect to
receive payment in cash and/or in kind by adding such amounts to the principal
amounts of the Term Loan B as of such interest payment date. The issuance of
such common Capital Stock of Parent Borrower to Lender or any designee of
Lender, which stock certificates may include appropriate restrictive legends to
the extent applicable, shall be made no more than ten (10) Business Days
following the applicable interest payment date or, as applicable, ten
(10) Business Days following the final determination of the share price as
a result of the Valuation Procedures. Parent Borrower shall have the right to
pay cash in lieu of any fractional shares to be issued pursuant to this Section 2.5(a)(iii).
In the event that Lender has not delivered a notice as provided herein
selecting the method of payment for any interest payment, Borrowers shall pay
Lender accrued interest in cash on the applicable interest payment date.


 


iv.                                   Borrowers shall make all payments under
this Agreement without setoff, recoupment or deduction and regardless of any
counterclaim or defense. Lender will initiate debit entries to the relevant
Borrower’s account as authorized on the ACH Authorization on each payment date
of all scheduled obligations payable to Lender under the Revolving Loan[and
under], the Term Loans and the Equipment Term
Loan.


 


(b)                                 Revolving Loan Maturity Date. The entire principal balance of the
Revolving Loan, together with all accrued interest, fees and other Secured
Obligations on or relating to the Revolving Loan, shall be repaid in full on
the Revolving Loan Maturity Date.


 


(c)                                  Term Loan Amortization[and];
Term Loan Maturity Date; Equipment Term Loan Maturity Date.


 


i.                                          Borrowers shall repay the outstanding
principal under the Term Loan A on the first Business Day of each calendar
month, commencing December 1, 2010, in equal monthly installments equal to
$152,777.78.


 


ii.                                       The entire principal balance of the Term
Loan A, together with all accrued interest, fees and other Secured Obligations
on or relating to the Term Loan A, shall be repaid in full on the Term Loan A
Maturity Date.


 


iii.                                    The entire principal balance of the Term
Loan B, together with all accrued interest, fees and other Secured Obligations
on or relating to the Term Loan B, shall be repaid in full on the Term Loan B
Maturity Date.


 


27

















 


iv. The
entire principal balance of the Equipment Term Loan, together with all accrued
interest, fees and other Secured Obligations on or relating to the Equipment
Term Loan, shall be repaid in full on the Equipment Term Loan Maturity Date.


 


2.6.                              Prepayments.


 


(a)                                  Mandatory Prepayments.


 


i.                                     In the event the aggregate Revolving Loan
Advances at any time exceed the Maximum Revolving Loan Amount, Borrowers shall
repay the amount of that excess to Lender within three (3) Business Days
of the date such excess arose.


 


ii.                                  Subject to Section 2.1(c), in
the event the aggregate Revolving Loan Advances at any time exceed the then
current Borrowing Base, Borrowers shall repay the amount of that excess to
Lender within three (3) Business Days of the date such excess arose.


 


iii.                               The entire principal balance of the
Revolving Loan constituting an Overadvance and all accrued interest and fees on
or relating to such Revolving Loan shall be repaid in full in cash on the
Business Day immediately preceding the first day of each Overadvance Clean Down
Period.


 


iv.                              On or prior to the forty-fifth (45th) day
of each fiscal quarter, commencing with the fiscal quarter ending
March 31, 2010, Borrowers shall prepay the principal amount of the Term
Loans and accrued and unpaid interest thereon in an amount equal to
(A) seventy five percent (75%) of Consolidated Excess Cash Flow in the
event that the Consolidated Total Leverage Ratio as at such fiscal quarter end
date, calculated based on a Twelve Month Measurement Period, is equal to or
greater than 3.0 to 1.0 and (B) fifty percent (50%) of Consolidated Excess
Cash Flow in the event that the Consolidated Total Leverage Ratio as at such
fiscal quarter end date, calculated based on a Twelve Month Measurement Period,
is less than 3.0 to 1.0. Such prepayments to be applied to the Term Loan A and
the Term Loan B as follows: first, to the payment of principal outstanding on
the Term Loan A to be applied pro rata to installments of such Term Loan A; second,
to the payment of accrued interest on the Term Loan A; third, to the
payment of principal outstanding on the Term Loan B; fourth, to the
payment of accrued interest on the Term Loan B; fifth, [to the payment of
principal outstanding on the Revolving Loan Advances; sixth, to the payment
of accrued interest on the Revolving Loan Advances; seventh,]to
the payment of Lender’s accrued costs, expenses, professional fees (including,
without limitation, all Lender Expenses) and any other Secured Obligations on
or relating to the Term Loans; and [eighth]sixth,
after all Secured Obligations [are]on or relating to the Term Loans
have been repaid, the excess (if any) shall be refunded to the Borrowers or
as a court of competent jurisdiction may direct. Notwithstanding Section 2.6(c) and
except as otherwise provided in the immediately preceding


 


28

















 


sentence, no Term Loan
Prepayment Charge shall be required for any prepayment of the Term Loans under
this Section 2.6(a)(iv).


 


v.                                      On the date of any Permitted Transfer
that results in a required prepayment pursuant to clause (iv) of
the definition of “Permitted Transfer”, Borrowers shall prepay the principal
amount of the Term Loans and the Equipment Term Loan and accrued and
unpaid interest thereon as follows: first, to the payment of principal
outstanding on the Term Loan A to be applied pro rata to installments of such
Term Loan A, second, to the payment of accrued interest on the Term Loan
A, third, to the payment of principal outstanding on the Term Loan B,[and]
fourth, to the payment of accrued interest on the Term Loan B, fifth,
to the payment of principal outstanding on the Equipment Term Loan, and sixth,
to the payment of accrued interest on the Equipment Term Loan. No Term Loan
Prepayment Charge shall be required for any prepayment of the Term Loans under
this Section 2.6(a)(v).


 


vi.                                   Notwithstanding anything to the contrary
contained in this Agreement but subject to Section 10.2, Lender shall
apply one hundred and three percent (103%) of the purchase price identified in
the Equipment Purchase Orders relating to each item for which payment has been
received in the Equipment Term Loan Lockbox or in respect of the equipment and
any other items purchased from the proceeds of the Equipment Term Loan, as
determined by Lender, to the prepayment of the Equipment Term Loan and other
Secured Obligations on or relating to the Equipment Term Loan, as follows:
first, to the payment of any outstanding Equipment Term Loan Fee, second, to
the payment of the outstanding principal amount of the Equipment Term Loan, and
third, to all other Secured Obligations on or relating to the Equipment Term
Loan. Of the amounts not applied to the Equipment Term Loan and such other
Secured Obligations as hereinabove provided, such amounts shall be returned to
Borrowers (or as a court of competent jurisdiction otherwise directs) so long
as no Event of Default then exists or could reasonably be expected (with the
passage of time or the giving of notice, or both) to exist. In the event any
amounts constituting the payment of any Equipment Accounts are received by a
Borrower, one hundred percent (100%) of such amounts shall promptly (but in any
event within one (1) Business Day of receipt thereof by such Borrower) be
wired to Lender in immediately available funds for application to the Equipment
Term Loan and other Secured Obligations as provided in this paragraph (a)(vi).
The receipt and transfer of such amounts by a Borrower under this paragraph in
violation of Section 7.25 shall not be deemed a waiver of any Event of
Default arising as a result of the breach of such Section 7.25. Upon
payment in full in cash of all Secured Obligations on or relating to the
Equipment Term Loan, amounts received in the Equipment Term Loan Lockbox by Lender
shall be returned by Lender to Borrowers (or as a court of competent
jurisdiction otherwise directs) so long as no Event of Default then exists or
could reasonably be expected (with the passage of time or the giving of notice,
or both) to exist.


 


29
















 


(b)                                 Voluntary Prepayments.


 


i.                                          Borrowers may prepay the Revolving Loan in
whole or in part from time to time without premium or penalty.


 


ii.                                       Without limiting the obligations of Borrowers under Section 2.9(b)(iii) and
Section 2.9(b)(iv), Borrowers may prepay, in whole (or in part with
the prior consent of Lender in its sole and absolute discretion), the Term Loan
A and the Term Loan B at Borrowers’ option upon at least five (5) Business
Days prior written notice to Lender, together with all accrued and unpaid
interest thereon and the Term Loan Prepayment Charge on the amount so prepaid.


 


iii.                                    Upon at least five (5) Business Days prior written notice to
Lender, Borrowers may prepay the Equipment Term Loan in whole or in part from
time to time without premium or penalty, together with all accrued and unpaid
interest thereon.


 


(c)                                  Term Loan Prepayment Charge.


 


i.                                          Upon any repayment, prepayment or acceleration of either the Term Loan
A and/or the Term Loan B pursuant to Section 2.6(b), Section 2.9(b) and
Section 10.1, as applicable, Borrowers shall pay a prepayment
charge equal to the following percentage of the Term Loan A and the Term Loan B
being prepaid: (A) five percent (5.0%) if such payment is made or required
to be made prior to the date that is the first anniversary of the Closing Date;
(B) three percent (3.0%) if such payment is made or required to be made on
or after the date that is the first anniversary of the Closing Date but prior
to the date that is the second anniversary of the Closing Date; and (C) one
percent (1.0%) thereafter.


 


ii.                                       In the event the Borrowers repay or prepay in full the aggregate
outstanding principal amount of the Term Loan A and/or the Term Loan B,
together with all accrued interest thereon and all other Secured Obligations
arising in respect thereof, or upon acceleration of the Term Loans, in each
case, at any time on or after the date which is six (6) months following
the Closing Date and on or prior to the first anniversary of the Closing Date,
Borrowers shall pay a prepayment charge equal to the Yield Revenue Amount. The
prepayment charged described in this clause (c)(ii) of this Section 2.6
is in additional to, and not in lieu of, any prepayment charge arising under clause
(c)(i) of this Section 2.6.


 


iii.                                    Borrowers agree that the Term Loan Prepayment
Charge is a reasonable calculation of Lender’s lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early repayment of the applicable Term Loan.


 


30

















 


(d)                                   Revolving Loan Commitment Reduction and
Termination.


 


i.                                          Borrowers may, at any time upon at least five
(5) Business Days’ notice to Lender, voluntarily terminate, in whole (or
in part solely with the consent of Lender) the Revolving Loan Commitment.


 


ii.                                       Upon any termination of the Revolving Loan
Commitment, including, without limitation, a voluntary termination or reduction
of the Revolving Loan Commitment, if required pursuant to Section 10.01
or upon the Revolving Loan Maturity Date, all Revolving Loan Advances, together
with all accrued but unpaid interest thereon, shall be immediately due and
payable in full.


 


(e) Equipment Term Loan
Commitment Reduction and Termination. Borrowers may, at any time upon at least
five (5) Business Days’ notice to Lender, voluntarily terminate, in whole
or in part the Equipment Term Loan Commitment.


 


2.7.                              Fees.


 


(a)                                  Facility Charge. The Facility
Charge shall be fully earned and due on the Closing Date. Commencing on April 1,
2010 and on the first Business Day of each calendar month thereafter, Borrowers
shall pay in cash to Lender a portion of the Facility Charge equal to $37,500
until such Facility Charge is paid in full in cash, provided, that (i) in
the event the Loans are accelerated pursuant to the terms hereof, the Facility
Charge shall become payable on the date such Loans are accelerated and (ii) so
long as no Event of Default then exists or is continuing, interest shall not
accrue against the amount of the Facility Charge due but not yet paid in
accordance with the terms hereof.


 


(b)                                 Equipment Term Loan Fee. On the date of funding any Equipment Term Loan
Advance, the Equipment Term Loan Fee shall be fully earned and due. The
Equipment Term Loan Fee shall be paid as provided in Section 2.6(a)(vi) or
Section 10.2, as applicable.


 


2.8. Joint and Several Liability of Borrowers.
Each Borrower is accepting joint and several liability hereunder and under the
other Loan Documents in consideration of the financial accommodations to be
provided by Lender under this Agreement, for the mutual benefit, directly and
indirectly, of each Borrower and in consideration of the undertakings of the
other Borrowers to accept joint and several liability for the Secured
Obligations. Each Borrower, jointly and severally, hereby irrevocably,
absolutely and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrowers, with respect
to the payment and performance of all of the Secured Obligations (including,
without limitation, any Secured Obligations arising under this Section 2.8),
it being the intention of Borrowers that all the Secured Obligations shall be
the joint and several obligations of Borrowers without preferences or
distinction among them. If and to the extent that any of Borrowers shall fail
to make any payment with respect to any of the Secured Obligations as and when
due or to perform any of the Secured Obligations in accordance with the terms
thereof, then in each such event, the other Persons composing Borrowers will
make such payment with respect to, or perform, such Secured Obligation. Each
Borrower hereby agrees that it will not enforce any of its rights of


 


31

















 


(h)                                 an Advance Request in respect of the Revolving Loan Advance (if any)
duly executed by each Borrower’s Chief Executive Officer, Chief Financial
Officer or President or equivalent position;


 


(i)                                     [Intentionally Omitted];


 


(j)                                     [Intentionally Omitted]


 


(k)                                  (i) evidence satisfactory to Lender in its discretion that all
earn-out obligations of Borrowers and seller notes issued by Borrowers arising
in connection with the Delta Acquisition Documents have been restructured in a
manner and subject to terms and conditions and documentation satisfactory to
Lender; and (ii) an officer’s certificate, duly executed by the Chief
Executive Officer, Chief Financial Officer or President or equivalent position,
dated as of the Closing Date, certifying and attaching, true, correct and
complete copies of the documents evidencing such restructuring, such documents
to include, without limitation, the Earn Out Agreement, dated as of May 2,
2008 (as amended) between ISC and Delta Health Systems, Inc.


 


(l)                                     evidence satisfactory to Lender that the Debt Conversion Agreement
dated as of November 20, 2009, between Parent Borrower and Hercules LLC
has been duly executed by the parties thereto and the transactions described
therein have closed and been effectuated substantially contemporaneously with
this Agreement;


 


(m)                               executed original of the Registration Rights
Agreement duly executed by an authorized officer of the Parent Borrower; and


 


(n)                                 such other documents as Lender may reasonably
request. 


 


4.2. All Advances. On
each Advance Date:


 


(a)                                  Lender shall have received an Advance Request for the relevant Advance
as required by Section 2.1(b) or Section 2.2(d), as
applicable, duly executed by each Borrower’s Chief Executive Officer, Chief
Financial Officer or equivalent position.


 


(b)                                 The representations and warranties set forth in this Agreement and each
other Loan Document shall be true and correct in all material respects on and
as of the Advance Date (other than to the extent that any representation and
warranty is already qualified by materiality, in which case, such
representation and warranty shall be true and correct as of such date) with the
same effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.


 


(c)                                  Each Borrower and the Borrowers, collectively
shall be in compliance in all material respects with all the terms and
provisions set forth herein and in each other Loan Document on its part to be
observed or performed, and at the time of and immediately after such Advance no
Event of Default shall have occurred and be continuing.


 


42

















 


(d)                                 Each Advance Request shall be deemed to
constitute a representation and warranty by each Borrower on the relevant
Advance Date as to the matters specified in paragraphs (b) and (c) of
this Section 4.2 and as to the matters set forth in the Advance
Request.


 


(e)                                  In connection with any Advance Request for a
Revolving Loan Advance, Lender shall have received the documents
required pursuant to Section 2.1(b) hereof.


 


(f)                                    In connection with any Advance Request for am
Equipment Term Loan Advance, Lender shall have received the documents required
pursuant to Section 2.2(d) hereof.


 


4.3. No Default. As of the Closing Date and
each Advance Date, (i) no fact or condition exists that would (or would,
with the passage of time, the giving of notice, or both) constitute an Event of
Default and (ii) no event that has had or could reasonably be expected to
have a Material Adverse Effect has occurred and is continuing.


 


4.4. Acknowledgment of Discretionary Lending.
Borrowers acknowledge and agree that any Advance made while an Event of Default
is then continuing (or while a condition exists that would, or would with the
passage of time, the giving of notice or both, constitute an Event of Default)
is made at the sole discretion of Lender, and any willingness on the part of
Lender to make any Advance while an Event of Default is then continuing (or
while a condition exists that would, or would with the passage of time, the
giving of notice or both, constitute an Event of Default) shall not constitute
a course of dealing or a willingness on the part of Lender to make any
subsequent Advance, and shall not constitute a waiver or forbearance of such
Event of Default (or such condition). Lender shall continue to have all rights
and remedies under the Loan Documents in respect of such Event of Default (or
such condition that could constitute an Event of Default), notwithstanding any
funding of an Advance made by Lender during the continuance of an Event of
Default (or the continuance of such condition that could constitute an Event of
Default).


 


SECTION 5. REPRESENTATIONS
AND WARRANTIES OF BORROWERS


 


Each Borrower represents and warrants that:


 


5.1. Corporate Status. Such Borrower (other
than Opt) is a corporation or limited liability company duly organized, legally
existing and in good standing under the laws of the State of Delaware, and is
duly qualified in all jurisdictions in which the nature of its business or location
of its properties require such qualifications and where the failure to be
qualified could reasonably be expected to have a Material Adverse Effect. Opt
is a limited liability company duly organized and subsisting under the laws of
the Commonwealth of Pennsylvania, and is duly qualified in all jurisdictions in
which the nature of its business or location of its properties require such
qualifications and where the failure to be qualified could reasonably be
expected to have a Material Adverse Effect. Such Borrower’s present name,
former names (if any), locations, place of formation, tax identification
number, organizational identification number and other information are
correctly set forth in Exhibit C(as may be updated by Borrowers in
a


 


43

















 


such Borrower or Borrower Products. Such Borrower has not received any
written notice or claim challenging or questioning such Borrower’s ownership in
any material Intellectual Property (or written notice of any claim challenging
or questioning the ownership in any licensed material Intellectual Property of
the owner thereof) or suggesting that any third party has any claim of legal or
beneficial ownership with respect thereto nor, to such Borrower’s knowledge, is
there a reasonable basis for any such claim. Neither such Borrower’s use of its
material Intellectual Property nor the production and sale of Borrower Products
infringes the Intellectual Property or other rights of others.


 


5.12. Financial Accounts.
Exhibit E(as may be updated by the Borrowers in a written notice
provided to Lender after the Closing Date, provided that no such update
shall be deemed a waiver of any Event of Default resulting from matters
disclosed therein), is a true, correct and complete list of (a) all banks
and other financial institutions at which Parent Borrower or any Subsidiary
maintains Deposit Accounts and (b) all institutions at which Parent
Borrower or any Subsidiary maintains an account holding Investment Property,
and such exhibit correctly identifies the name, address and telephone number of
each bank or other institution, the name in which the account is held, a
description of the purpose of the account, and the complete account number
therefor.


 


5.13. Intentionally Deleted.


 


5.14. Capitalization and
Subsidiaries. Such Borrower’s capitalization as of the Closing Date is set
forth on Schedule 5.14 annexed hereto. Such Borrower does not own any
stock, partnership interest or other securities of any Person, except for
Permitted Investments. Attached as Schedule 5.14 (as may be updated by
Borrowers in a written notice provided to Lender after the Closing Date, provided
that no such update shall be deemed a waiver of any Event of Default resulting
from matters disclosed therein) is a true, correct and complete list of each
Subsidiary and each other Person in which a Borrower owns any stock or other
equity interests.


 


5.15. Eligible Accounts.
For any Eligible Account in any Borrowing Base Certificate, all statements made
and all unpaid balances appearing in all Borrowing Base Certificates, invoices,
instruments and other documents evidencing such Eligible Accounts are and shall
be true and correct (except for any good faith immaterial errors promptly
corrected when discovered) and all such Borrowing Base Certificates, invoices,
instruments and other documents, and all of each Borrower’s books are genuine
and in all respects what they purport to be. All sales and other transactions
underlying or giving rise to each Eligible Account shall comply in all material
respects with all applicable laws and governmental rules and regulations.
Such Borrower has no knowledge of any actual or imminent insolvency proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. To the best of such Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Eligible Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their terms.


 


5.16. Equipment Purchase Orders and Equipment
Accounts. All statements made in all Equipment Purchase Orders and any
invoices, instruments or other documents relating thereto are and shall be true
and correct (other than good faith immaterial errors in the general description
of the items to be purchased (e.g., the part number) promptly


 


46

















 


corrected when discovered). All sales or other transfers of equipment
financed in whole or in part by one or more Equipment Term Loan Advance(s) have
been made in the ordinary course of business of the applicable Borrower,
without any discount or reduction on the purchase price of such equipment and
on terms for payment thereof in full in cash on or before a date which is the
earlier of sixty (60) days following the date of invoice or the date of
delivery of such equipment to such account debtor. All sales and other
transactions underlying or giving rise to each Equipment Account shall comply in
all material respects with all applicable laws and governmental rules and
regulations. Such Borrower has no knowledge of any actual or imminent
insolvency proceeding of any account debtor whose accounts constitute Equipment
Accounts. To the best of such Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Equipment Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their terms.


 


SECTION 6. INSURANCE; INDEMNIFICATION


 


6.1. Coverage. Each
Borrower shall cause to be carried and maintained commercial general liability
insurance, on an occurrence form, against risks customarily insured against in
each Borrower’s line of business. Such risks shall include the risks of bodily
injury, including death, property damage, personal injury, advertising injury,
and contractual liability. Each Borrower must maintain a minimum of $2,000,000
of commercial general liability insurance for each occurrence. Each Borrower
has and agrees to maintain a minimum of $2,000,000 of directors and officers’
insurance for each occurrence and $5,000,000 in the aggregate. So long as
Lender has any commitment to make any Advances to the Borrowers or there are
any Secured Obligations outstanding, each Borrower shall also cause to be
carried and maintained insurance upon the Collateral, insuring against all
risks of physical loss or damage howsoever caused, in an amount not less than
the full replacement cost of the Collateral, provided that such
insurance may be subject to standard exceptions and deductibles. Each Borrower
shall also carry and maintain a fidelity insurance policy in an amount not less
than $100,000.


 


6.2. Certificates.
Each Borrower shall deliver to Lender certificates of insurance in form and
substance reasonably satisfactory to Lender that evidence such Borrower’s
compliance with its insurance obligations in Section 6.1 and the
obligations contained in this Section 6.2. Each Borrower’s
insurance certificate shall state Lender is an additional insured for
commercial general liability, an additional insured and a lender’s loss payee
for all risk property damage insurance, subject to the insurer’s approval, a
lender’s loss payee for fidelity insurance, and a lender’s loss payee for
property insurance and additional insured for liability insurance for any
future insurance that such Borrower may acquire from such insurer. The
Borrowers shall deliver to Lender additional insured endorsements for liability
and lender’s loss payable endorsements for all risk property damage insurance
and fidelity, each in form and substance reasonably satisfactory to Lender. All
certificates of insurance will provide for a minimum of thirty (30) days
advance written notice to Lender of cancellation or any other change adverse to
Lender’s interests. Any failure of Lender to scrutinize such insurance
certificates for compliance is not a waiver of any of Lender’s rights, all of
which are reserved.


 


6.3. Indemnity. Each Borrower hereby agrees
to and does indemnify and hold Lender and its officers, directors, employees,
agents, attorneys, representatives, professional advisors


 


47

















 


flows, and setting forth in comparative form the
corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Parent Borrower and
reasonably acceptable to Lender, accompanied by any management report from such
accountants;


 


(d)                                 so long as Lender has any commitment to make any Advances to the
Borrowers or there are any Secured Obligations outstanding, as soon as
practicable (and in any event within five (5) days after the end of each
calendar week (each calendar week deemed, for purposes hereof, to end on a
Friday), (i) a Borrowing Base Certificate and agings of accounts
receivable and accounts payable and (ii) a schedule of Equipment
Accounts, identifying each account debtor’s name and contact details, the
serial number (or other applicable identifying number) for the equipment sold
to such account debtor, the original amount of the Equipment Account of such
account debtor, the then outstanding amount of the Equipment Account of such
account debtor, the date of invoice of such Equipment Account, the date of
delivery of the equipment giving rise to such Equipment Account and such other
information and documentation reasonably requested by Lender from time to time,
provided that upon payment in full in cash of all Secured Obligations on or
related to the Equipment Term Loan, the obligation of the Borrowers to deliver
the Schedule described in this clause (d)(ii) shall terminate;


 


(e)                                  promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports that any
Borrower has made available to holders of its Preferred Stock and copies of any
regular, periodic and special reports or registration statements that any
Borrower files with the Securities and Exchange Commission or any Governmental
Authority that may be substituted therefor, or any national securities
exchange;


 


(f)                                    promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports that any
Borrower has made available to holders of its Capital Stock and copies of any
regular, periodic and special reports or registration statements that any
Borrower files with the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or any national securities
exchange; and


 


(g)                                 financial and business projections promptly following their approval by
a Borrower’s board of directors, as well as budgets, operating plans and other
financial information reasonably requested by Lender.


 


The executed Compliance Certificate may be sent via facsimile to Lender
at (650) 473-9194 or via e-mail to rliu@herculestech.com. All Financial
Statements required to be delivered pursuant to clauses (a), (b) and
(c) shall be sent via e-mail to financialstatements@herculestech.com
with a copy to rliu@herculestech.com, provided, that if e-mail is
not available or sending such Financial Statements via e-mail is not possible,
they shall be sent via facsimile to Lender at: (866) 468-8916, attention Chief
Credit Officer.


 


49

















 


applicable Subsidiary). All
such collateral value reports shall be conducted and made at the Borrowers’
expense.


 


7.4. Further Assurances. Each Borrower shall
from time to time execute, deliver and file, alone or with Lender, any
financing statements, security agreements, collateral assignments, notices,
control agreements, or other documents to perfect or give a first priority Lien
to Lender on the Collateral, subject to Permitted Liens which were as of the
Closing Date unavoidable and senior under applicable law to Lender’s liens and
security interest (other than Liens under clause  (vii) of
the definition of Permitted Liens which may be permitted to remain senior to
Lender’s Liens). Each Borrower shall from time to time procure any instruments
or documents as may be requested by Lender, and take all further action that
may be necessary or desirable, or that Lender may reasonably request, to
perfect and protect the Liens granted hereby and thereby. In addition, and for
such purposes only, each Borrower hereby authorizes Lender to execute and
deliver on behalf of such Borrower and to file such financing statements,
collateral assignments, notices, control agreements, security agreements and
other documents without the signature of such Borrower either in Lender’s name
or in the name of Lender as agent and attorney-in-fact for such Borrower.
Borrowers shall protect and defend each Borrower’s title to the Collateral and
Lender’s Lien thereon against all Persons claiming any interest adverse to each
Borrower or Lender other than Permitted Liens.


 


7.5. Compromise of
Agreements.


 


(a)                                       [Compromise of Agreements.] Accounts Generally. With
respect to Accounts (other than Equipment Accounts) with a combined
value in excess of ten percent (10%) of all of Borrowers’ Accounts (other
than Equipment Accounts) then outstanding, no Borrower shall (a) grant
any material extension of the time of payment thereof, (b) to any material
extent, compromise, compound or settle the same for less than the full amount
thereof, (c) release, wholly or partly, any Person liable for the payment
thereof, or (d) allow any credit or discount whatsoever thereon other than
trade discounts granted by such Borrower in the ordinary course of business of
such Borrower.


 


(b)                                      Equipment Accounts. With respect to Equipment Accounts, no Borrower
shall (without the prior written consent of Lender, in its sole
discretion):  (a) grant any
extension of the time of payment thereof, (b) to any extent, compromise,
compound or settle the same for less than the full amount thereof, (c) release,
wholly or partly, any Person liable for the payment thereof, or (d) allow
any credit or discount whatsoever thereon.


 


7.6. Indebtedness. Parent Borrower shall not
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness, or prepay any Indebtedness or take any actions which impose on
any Borrower an obligation to prepay any Indebtedness, except for (a) the
conversion of Indebtedness into equity securities and the payment of cash in
lieu of fractional shares in connection with such conversion and (b) the
Permitted Subordinated Debt Payments under the HIA Indebtedness in accordance
with the HIA Subordination Agreement, so long as no Event of Default shall have
occurred or would result therefrom, or any event that, with the passage of time
or giving of notice, or both, would constitute an Event of Default or would
result therefrom.


 


51

















 


(b)                                 Consolidated Total Leverage Ratio. The Borrowers shall not permit the
Consolidated Total Leverage Ratio for any Twelve Month Measurement Period
ending during any fiscal quarter, commencing with the quarter ending June 30,
2010, to be greater than the ratio set forth below opposite such Measurement
Period ending date:


 


	
  Measurement Period Ending

  	
   

  	
  Consolidated Total

  Leverage Ratio

  	
   

  
	
  June 30, 2010

  	
   

  	
  6.00:1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  6.00:1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  5.00:1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  4.00:1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  3.00:1.00

  	
   

  
	
  September 30, 2011

  	
   

  	
  2.50:1.00

  	
   

  
	
  December 31, 2011

  	
   

  	
  2.00:1.00

  	
   

  
	
  March 31, 2012

  	
   

  	
  1.75:1.00

  	
   

  
	
  June 30, 2012 and
  thereafter

  	
   

  	
  1.50:1.00

  	
   

  



 


(c)                                  Consolidated Fixed Charge Coverage Ratio. The Borrowers shall not permit the
Consolidated Fixed Charge Coverage Ratio for any Twelve Month Measurement
Period ending during any fiscal quarter, commencing with the quarter ending June 30,
2010, to be less than the ratio set forth below opposite such Measurement
Period ending date:


 


	
  Measurement Period Ending

  	
   

  	
  Consolidated Fixed

  Charge Coverage

  Ratio

  	
   

  
	
  June 30, 2010

  	
   

  	
  0.75:1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  0.75:1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  1.00:1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  1.00:1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  1.25:1.00

  	
   

  
	
  September 30, 2011

  	
   

  	
  1.25:1.00

  	
   

  
	
  December 31, 2011

  	
   

  	
  1.50:1.00

  	
   

  
	
  March 31, 2012

  	
   

  	
  1.50:1.00

  	
   

  
	
  June 30, 2012 and
  thereafter

  	
   

  	
  2.00:1.00

  	
   

  



 


(d)                                 Minimum Cash On Hand. The Borrowers shall not permit at any time
its unrestricted Cash on hand to be less than $1,000,000.


 


7.21. Use of Proceeds. Borrowers will use the
proceeds from each of the Term Loans and the Revolving Loan (i) to
continue existing debt of the Parent Borrower on the Closing Date, (ii) to
fund Permitted Acquisitions and (iii) for general corporate and working
capital purposes. Borrowers will use the proceeds from the Equipment Term
Loan solely to purchase equipment subject to Equipment Purchase Orders approved
by Lender in its sole discretion.


 


56

















 


7.22. Reservation of
Capital Stock. Parent Borrower shall, at all times after January 31,
2010, reserve for the issuance of additional shares of common Capital Stock
pursuant to the terms of Section 2.5(a)(iii) and Section 2.9
hereof and shall, at all times, have a sufficient number of authorized shares
so as to permit the issuance of the shares of common Capital Stock as provided
under Section 2.5(a)(iii) and Section 2.9.


 


7.23. Post Closing Requirements.


 


(a)                                  Budget. On or before a date which is ninety (90) days following the Closing
Date, Borrowers shall deliver to Lender a budget for the 2010 fiscal year, such
budget to be in form and substance, and with such supporting documentation and
underlying assumptions, as reasonably acceptable to Lender.


 


(b)                                 TD Bank Accounts. On or before January 15, 2010,
Borrowers shall enter into, and cause TD Bank to enter into, an Account Control
Agreement with Lender or deliver to Lender, evidence satisfactory to Lender,
that all TD Bank accounts have been closed.


 


7.24. Equipment Term Loan Lockbox.
On or before March 1, 2010, Borrowers shall establish a lockbox with a
financial institution acceptable to Lender in its sole discretion and in the
name of Lender, and Borrowers shall enter into, and cause the financial
institution where such lockbox is maintained to enter into, a control agreement
in form, scope and substance acceptable to Lender with respect to such lockbox.
At all times the Equipment Term Loan Lockbox shall be subject to a control
agreement acceptable to Lender, and Borrowers shall have no right to terminate
such lockbox arrangements without the prior written consent of Lender.


 


7.25. Equipment Accounts;
Invoices for Equipment Accounts. All payments on Equipment Accounts shall be
made to the Equipment Term Loan Lockbox. All invoices for equipment giving rise
to Equipment Accounts shall clearly direct all account debtors to remit all
payments in respect of such equipment to the Equipment Term Loan Lockbox.


 


7.26. Equipment Account
Factoring. At Lender’s request, Borrowers shall promptly enter into one or more
factoring arrangement(s) acceptable to Lender with respect to some or all
of the Equipment Accounts. Amounts received from such factoring arrangements
shall be paid directly to Lender as Lender directs and applied by Lender to Secured
Obligations on or relating to the Equipment Term Loan as determined by Lender
in its sole discretion.


 


SECTION 8. INTENTIONALLY DELETED.


 


SECTION 9. EVENTS OF DEFAULT


 


The occurrence of any one or more of the following
events shall be an Event of Default:


 


9.1. Payments. Any Borrower fails to pay any
amount due under this Agreement, the Notes or any of the other Loan Documents
on the due date; or


 


57
















 


9.2. Covenants. Any
Borrower breaches or defaults in the performance of any covenant or Secured
Obligation under this Agreement, the Notes, or any of the other Loan Documents,
and (a) with respect to a default under any covenant under this Agreement
(other than under Sections 2.6(a)(vi), 6, 7.1, 7.2, 7.3, 7.5, 7.6, 7.7,
7.8, 7.9, 7.14, 7.17, 7.19, 7.20, 7.21, [7.22] 7.22, 7.23,
7.24, 7.25 or [7.23] 7.26) such default continues for more
than fifteen (15) days after the earlier of the date on which (i) Lender
has given notice of such default to Parent Borrower and (ii) Parent
Borrower has actual knowledge of such default, or (b) with respect to a
default under Section 7.20(d) arising solely as a result of an
ACH debit entry by Lender the sole purpose of which is to pay out of pocket
expenses of Lender, such default continues for more than five (5) days
after the earlier of the date on which (i) Lender has given notice of such
default to Parent Borrower and (ii) Parent Borrower has actual knowledge
of such default, or (c) with respect to a default under any of Sections
2.6(a)(vi), 6, 7.1, 7.2, 7.3, 7.5, 7.6, 7.7, 7.8, 7.9, 7.14, 7.17, 7.19,
7.20 (other than as expressly provided in clause (b) of this Section 9.2),
7.21, [7.22] 7.22, 7.23, 7.24, 7.25 or [7.23] 7.26,
the occurrence of such default; or


 


9.3. Material Adverse
Effect. A circumstance has occurred that has had a Material Adverse Effect;
or


 


9.4. Other Loan
Documents. The occurrence of any default under any Loan Document or any
other agreement between any Borrower and Lender and such default continues for
more than fifteen (15) days after the earlier of (a) Lender has given
notice of such default to Parent Borrower, or (b) Parent Borrower has
actual knowledge of such default; or


 


9.5. Representations.
Any representation or warranty made by any Borrower in any Loan Document shall
have been false or misleading in any material respect; or


 


9.6. Insolvency. Any Borrower (A) (i) shall make an
assignment for the benefit of creditors; or (ii) shall be unable to pay
its debts as they become due, or be unable to pay or perform under the Loan
Documents; or (iii) shall file a voluntary petition in bankruptcy; or (iv) shall
file any petition, answer, or document seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation pertinent to such
circumstances; or (v) shall seek or consent to or acquiesce in the
appointment of any trustee, receiver, or liquidator of such Borrower or of all
or any substantial part of the assets or property of such Borrower; or (vi) cease
operations of its business, or shall terminate substantially all of its
employees; or (vii) any Borrower or its directors or majority shareholders
(or equivalent position) shall or majority members or equivalent position, take
any action initiating any of the foregoing actions described in clauses (A)(i) through
(A)(vi); or (B) either (i) sixty (60) days shall have expired
after the commencement of an involuntary action against such Borrower seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, without such action being dismissed or all orders or proceedings
thereunder affecting the operations or the business of such Borrower being
stayed; or (ii) 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 (iii) any
Borrower shall file any answer admitting or not contesting the material
allegations of a petition filed against such Borrower in any such proceedings;
or (iv) the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or (v) thirty
(30) days shall have expired after


 


58

















 


the
appointment, without the consent or acquiescence of Borrower, of any trustee,
receiver or liquidator of Borrower or of all or any substantial part of the
properties of Borrower without such appointment being vacated; or (C) shall
take any action in furtherance or preparation of any of the foregoing.


 


9.7. Attachments;
Judgments. Any portion of any Borrower’s assets is attached or seized, or a
levy is filed against any such assets, or a judgment or judgments is/are
entered for the payment of money, individually or in the aggregate, of at least
$100,000 which judgment is not covered by insurance and such judgment is not bonded,
appealed or otherwise stayed for 30 consecutive days, or any Borrower is
enjoined or in any way prevented by court order from conducting any material
part of its business; provided, however, that any such attachment, seizure,
levy or judgment in excess of $750,000, individually or in the aggregate, shall
constitute an Event of Default hereunder not withstanding such insurance
coverage, bonding, appeals or stay; or


 


9.8. Other Obligations. The occurrence of any default under any
agreement or obligation of any Borrower involving any Indebtedness in excess of
$100,000; or


 


9.9. Change in Control. A Change in Control shall occur. 


 


SECTION 10.
REMEDIES


 


10.1. General. Upon
and during the continuance of any one or more Events of Default, (i) Lender
may, at its option, terminate any of the commitments evidenced hereunder,
accelerate and demand payment of all or any part of the Secured Obligations
together with a Term Loan Prepayment Charge and the amounts referenced pursuant
to Section 2.7 herein, and declare the Secured Obligations to be
immediately due and payable (provided, that upon the occurrence of an
Event of Default of the type described in Section 9.6 and Section 9.9,
the Loans and all of the Secured Obligations shall automatically be accelerated
and made due and payable and the commitments terminated, in each case without
any further notice or act), and (ii) Lender may, at its option, notify any
of Borrower’s account debtors or any Borrower to make payment directly to
Lender, compromise the amount of any such account on such Borrower’s behalf [and],
enter into factoring arrangements in respect of any such account on such
Borrower’s behalf and/or endorse [Lender]Borrower’s name
without recourse on any such payment for deposit directly to Lender’s account.
Lender may, at its option, exercise all rights and remedies with respect to the
Collateral under the Loan Documents or otherwise available to it under the UCC
and other applicable law, including the right to release, hold, sell, lease,
liquidate, collect, realize upon, or otherwise dispose of all or any part of
the Collateral and the right to occupy, utilize, process and commingle the
Collateral. All Lender’s rights and remedies shall be cumulative and not
exclusive.


 


10.2. Collection; Foreclosure. Upon the occurrence and during
the continuance of any Event of Default, Lender may, at any time or from time
to time, apply, collect, liquidate, sell in one or more sales, lease or
otherwise dispose of, any or all of the Collateral, in its then condition or following
any commercially reasonable preparation or processing, in such order as Lender
may elect. Any such sale may be made either at public or private sale at its
place of business or elsewhere. Each Borrower agrees that any such public or
private sale may occur upon ten (10)


 


59

















 


Table of Exhibits and Schedules


 


	
  Exhibit A:

  	
   

  	
  Advance Request

  
	
   

  	
   

  	
  Attachment to Advance
  Request

  
	
   

  	
   

  	
   

  
	
  Exhibit B-1:

  	
   

  	
  Term A Note

  
	
   

  	
   

  	
   

  
	
  Exhibit B-2:

  	
   

  	
  Term B Note

  
	
   

  	
   

  	
   

  
	
  Exhibit B-3:

  	
   

  	
  Revolving Note

  
	
   

  	
   

  	
   

  
	
  Exhibit B-4

  	
   

  	
  Equipment Term Loan Note

  
	
   

  	
   

  	
   

  
	
  Exhibit C:

  	
   

  	
  Name,
  Locations, and Other Information for Borrowers

  
	
   

  	
   

  	
   

  
	
  Exhibit D:

  	
   

  	
  Borrowers’
  Patents, Trademarks, Copyrights and Licenses

  
	
   

  	
   

  	
   

  
	
  Exhibit E:

  	
   

  	
  Borrowers’
  Deposit Accounts and Investment Accounts

  
	
   

  	
   

  	
   

  
	
  Exhibit F:

  	
   

  	
  Compliance
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit G:

  	
   

  	
  Joinder Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit H:

  	
   

  	
  Borrowing Base Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit I:

  	
   

  	
  ACH Debit Authorization
  Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit J:

  	
   

  	
  Form of
  Collateral Assignment of Acquisition Documents

  
	
   

  	
   

  	
   

  
	
  Exhibit K

  	
   

  	
  Form of
  Registration Rights Agreement

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
   

  	
  Subsidiaries

  
	
  Schedule 1A

  	
   

  	
  Existing Permitted
  Indebtedness

  
	
  Schedule 1B

  	
   

  	
  Existing Permitted
  Investments

  
	
  Schedule 1 C

  	
   

  	
  Existing Permitted Liens

  
	
  Schedule 5.3

  	
   

  	
  Consents, Etc.

  
	
  Schedule 5.5

  	
   

  	
  Actions Before
  Governmental Authorities

  
	
  Schedule 5.8

  	
   

  	
  Tax Matters

  
	
  Schedule 5.9

  	
   

  	
  Intellectual Property
  Claims

  
	
  Schedule 5.10

  	
   

  	
  Intellectual Property

  
	
  Schedule 5.11

  	
   

  	
  Borrower Products

  
	
  Schedule 5.14

  	
   

  	
  Capitalization and
  Subsidiaries

  
	
  Schedule 7.14

  	
   

  	
  Deposit Accounts

  



 

















 


EXHIBIT A


 


ADVANCE REQUEST


 


	
  To:

  	
  Lender:

  	
  Date:
                      ,
  20         

  
	
   

  	
   

  	
   

  
	
   

  	
  Hercules
  Technology Growth Capital, Inc.

  400
  Hamilton Avenue, Suite 310

  Palo Alto, CA 94301

  Facsimile:  650-473-9194

  Attn:

  	
   

  



 


Infologix, Inc.,
on behalf of itself and InfoLogix Systems Corporation, Embedded Technologies,
LLC, Opt Acquisition LLC and InfoLogix-DDMS, Inc. (collectively, the “Borrowers”)
hereby request from Hercules Technology Growth Capital, Inc. (“Lender”) [a [[]Revolving Loan Advance] [an Equipment Term Loan Advance] in the amount of
                                          
Dollars
($                                )
on                             ,
20     (the “Advance Date”)[ pursuant to the], [which is at least two (2) Business Days
following the date hereof for any Revolving Loan Advance] [which is at least
two (2) Business Days following the date hereof for any Equipment Term
Loan Advance], pursuant to the Amended and Restated Loan and Security
Agreement, dated as of November 20, 2009
among Borrowers and Lender (as amended and in
effect from time to time, the “Agreement”). Capitalized words and other
terms used but not otherwise defined herein are used with the same meanings as
defined in the Agreement.


 


Please:


 


Issue a check payable to
Parent Borrower


 


or


 


Wire Funds to Parent
Borrower’s account


 


Bank:


Address:


 


 


ABA Number:


Account Number:


Account Name:


 


or


 


With respect to any Equipment Term Loan Advance, wire Funds to the
account of [Name of Equipment Supplier]:


 


Bank:


Address:


 


 


ABA
Number:


Account
Number:


Account
Name:


 

















 


[Each][(Other than the
continuation of the Specified Anticipatory Defaults and the Specified Events of
Default, each as defined in the First Amendment),](1) each Borrower
represents that the conditions precedent to the Advance set forth in the
Agreement are satisfied and shall be satisfied upon the making of such Advance,
including but not limited to:  (i) that
no event that has had a Material Adverse Effect has occurred and is continuing;
(ii) that the representations and warranties set forth in the Agreement
are and shall be true and correct in all material respects on and as of the
Advance Date (other than to the extent that any representation and warranty is
already qualified by materiality, in which case, such representation and
warranty shall be true and correct as of such date) with the same effect as
though made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date; (iii) that each
Borrower is in compliance in all material respects with all the terms and
provisions set forth in each Loan Document on its part to be observed or
performed; and (iv) that as of the Advance Date, no fact or condition
exists that would (or would, with the passage of time, the giving of notice, or
both) constitute an Event of Default under the Loan Documents.  Each Borrower understands and acknowledges
that Lender has the right to review the financial information supporting this
representation and, based upon such review in its reasonable discretion, Lender
may decline to fund the requested Advance.


 


Each
Borrower hereby represents that no Borrower’s corporate and limited liability
company status and locations have changed since the date of this Agreement or,
if the Attachment to this Advance Request is completed, are as set forth in the
Attachment to this Advance Request Borrower agrees to notify Lender promptly
before the funding of the Loan if any of the matters which have been
represented above shall not be true and correct on the Borrowing Date and if
Lender has received no such notice before the Advance Date then the statements
set forth above shall be deemed to have been made and shall be deemed to be
true and correct as of the Advance Date.


 


Executed
as of
[                                                        ],
20[    ].


 


	
  BORROWERS:

  	
  INFOLOGIX,
  INC., ON BEHALF OF ITSELF AND

  
	
   

  	
  INFOLOGIX
  SYSTEMS CORPORATION

  
	
   

  	
  OPT
  ACQUISITION LLC

  
	
   

  	
  EMBEDDED
  TECHNOLOGIES, LLC

  
	
   

  	
  INFOLOGIX
  — DDMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 






(1) To be included
to the extent applicable.


 


72

















 


FORM OF EQUIPMENT TERM
LOAN NOTE


 


	
  $3,000,000

  	
   

  	
  Date:                                 ,
  20[     ]

  



 


FOR VALUE RECEIVED, each
of InfoLogix, Inc., a Delaware corporation, InfoLogix System Corporation,
a Delaware corporation, Embedded Technologies, LLC a Delaware Limited Liability
Company, Opt Acquisition LLC a Pennsylvania limited liability company, and
InfoLogix-DDMS, Inc, a Delaware corporation, jointly and severally (each a”Borrower” and collectively,
the “Borrowers”) hereby promises to pay to the order of Hercules
Technology Growth Capital, Inc., a Maryland corporation or the holder of
this Equipment Term Loan Note (the “Lender”) at 400 Hamilton
Avenue, Suite 310, Palo Alto, CA 94301 or such other place of payment as
the holder of this Equipment Term Loan Note (this “Note”) may
specify from time to time in writing, in lawful money of the United States of
America, the principal amount of Three Million Dollars ($3,000,000) or such
other principal amount as Lender has advanced to Borrowers, together with
interest thereon, all as provided in the Loan Agreement referred to below.


 


This Note is an Equipment
Term Loan Note referred to in, and is executed and delivered in connection
with, that certain Amended and Restated Loan and Security Agreement dated
November 20, 2009, by and among Borrowers and Lender (as the same may from
time to time be amended, modified or supplemented in accordance with its terms,
the “Loan Agreement”),
and is entitled to the benefit and security of the Loan Agreement and the other
Loan Documents (as defined in the Loan Agreement), to which reference is made
for a statement of all of the terms and conditions thereof. All payments shall
be made in accordance with the Loan Agreement. All terms defined in the Loan
Agreement shall have the same definitions when used herein, unless otherwise
defined herein. An Event of Default under the Loan Agreement shall constitute a
default under this Note.


 


Each Borrower waives
presentment and demand for payment, notice of dishonor, protest and notice of
protest under the UCC or any applicable law. Each Borrower agrees to make all
payments under this Note without setoff, recoupment or deduction and regardless
of any counterclaim or defense. This Note has been negotiated and delivered to
Lender and is payable in the State of California. This Note shall be governed
by and construed and enforced in accordance with, the laws of the State of
California, excluding any conflicts of law rules or principles that would
cause the application of the laws of any other jurisdiction.


 


[Remainder
of Page Intentionally Left Blank]


 

















 


	
   

  	
  INFOLOGIX, INC.

  	 

	
   

  	
   

  	
   

  	 

	 
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  David T. Gulian, President and CEO

  	 

	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	
   

  	
  INFOLOGIX
  SYSTEMS CORPORATION

  	 

	
   

  	
   

  	
   

  	 

	 
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  David T. Gulian, President

  	 

	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	
   

  	
  OPT ACQUISITION LLC

  	 

	 
	
   

  	
  By: InfoLogix Systems Corporation, its sole Member

  
	
   

  	
   

  	
   

  	 

	 
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  David T. Gulian, President

  	 

	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	
   

  	
  EMBEDDED TECHNOLOGIES, LLC

  	 

	 
	
   

  	
  By: InfoLogix Systems Corporation, its sole Member

  
	
   

  	
   

  	
   

  	 

	 
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  David T. Gulian, President

  	 

	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	 
	
   

  	
  INFOLOGIX — DDMS, INC.

  
	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	 

	
   

  	
   

  	
  David T. Gulian, President

  	 

					



 


82

















 


EXHIBIT H


 


BORROWING BASE CERTIFICATE


 


Borrower:
InfoLogix, Inc. et al


Revolving
Loan Commitment Amount:  $12,000,000.00


 


	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.            Accounts Receivable Book Value as of

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  2.            Additions (please explain on reverse)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  3.            TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  ACCOUNTS RECEIVABLE DEDUCTIONS (without
  duplication)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.            Amounts over 90 days due

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  5.            Balance of 35% over 90 day accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  6.            Concentration Limits

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  7.            Foreign Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  8.            Deferred Revenue

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  9.            Contra Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  10.          Affiliate Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  11.          Governmental Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  12.          Conditional Payment

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  13.          Disputed Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  14.          Equipment Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  [14.]15.          Other (please explain on reverse)

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
  [15.]16.          TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  [16.]17.          Eligible Accounts (#3 minus #[15]16)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  [17.]18.          LOAN VALUE OF ACCOUNTS (85% of #[16]17)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [18.]19.          Maximum Revolving Loan Amount
  ($12,000,000)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  [19.]20.          Total Funds Available (Lesser of #[18]19 or #[17]18)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  [20.]21.          Present balance of Revolving Loans

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  [21.]22.          RESERVE POSITION (#[19]20 minus #[20]21)

  	
   

  	
   

  	
   

  	
  $

  	
   

  



 


The
undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Amended and
Restated Loan and Security Agreement between the undersigned and Hercules
Technology Growth Capital, Inc.


 


INFOLOGIX, INC.


 


 


	
  By:

  	
   

  	
   

  
	
  Authorized Signer