Exhibit 10.1


 


DEBT
CONVERSION AGREEMENT


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE I

PURCHASE AND SALE


 


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


 


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


 

















 


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


 


ARTICLE II

REPRESENTATIONS AND WARRANTIES


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE III

OTHER AGREEMENTS AND ACKNOWLEDGMENTS


OF THE PARTIES


 


The
parties hereto further agree and acknowledge as follows:


 


3.1                                                 Board of Directors.


 


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


 


8

















 


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


 


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


 


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


 


(d)                                 HTI Board Seats.


 


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


 


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


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


10
















 


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


 


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


 


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


 


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


 


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


 


11

















 


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


 


3.5                                                 Securities Laws Matters.


 


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


 


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


 


3.6                                                 Deliveries to be Made at the Closing.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE IV

CONDITIONS PRECEDENT TO CLOSING


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


14

















 


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


 


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


 


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


 


ARTICLE V

TERMINATION


 


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


 


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


 


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


 


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


 


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


 


15

















 


ARTICLE VI

MISCELLANEOUS


 


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


 


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


 


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


 


	
  if
  to the Company:

  	
   

  	
  Infologix, Inc.

  
	
   

  	
   

  	
  Attention:
  John A. Roberts, Chief Financial Officer

  
	
   

  	
   

  	
  101
  E. County Line Road

  
	
   

  	
   

  	
  Hatboro,
  PA

  
	
   

  	
   

  	
  Tel:
  (215) 604-0691

  
	
   

  	
   

  	
  Fax:
  (215) 604-0695

  
	
   

  	
   

  	
   

  
	
  and,
  if to HTI:

  	
   

  	
  Hercules
  Technology I, LLC

  
	
   

  	
   

  	
  Attention:
  Chief Legal Officer and Roy Liu, Managing Director

  
	
   

  	
   

  	
  400
  Hamilton Avenue, Suite 310

  
	
   

  	
   

  	
  Palo
  Alto, California 94301

  
	
   

  	
   

  	
  Tel:
  (650) 289-3060

  
	
   

  	
   

  	
  Fax:
  (650) 473-9194

  



 


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


 


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


 


16

















 


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


 


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


 


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


 


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


 


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


 


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


 


17

















 


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


 


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


 


[Signature Page to Follow]


 


18

















 


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


 


 


	
   

  	
  INFOLOGIX,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David T. Gulian

  
	
   

  	
  Name:

  	
  David
  T. Gulian

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer and President

  



 

















 


[HTI SIGNATURE PAGES TO

DEBT CONVERSION AGREEMENT]


 


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


 


	
  Name
  of Purchaser: Hercules Technology I, LLC

  
	
  Signature
  of Authorized Signatory of Purchaser: 

  	
  /s/
  K. Nicholas Martitsch

  
	
  Name
  of Authorized Signatory: 

  	
  K.
  Nicholas Martitsch

  
	
  Title
  of Authorized Signatory: 

  	
  Assistant
  General Counsel

  
	
  Telephone
  Number of Purchaser:

  
	
  Facsimile
  Number of Purchaser:

  
	
  Email
  Address of Purchaser:

  
	
  EIN
  Number: