Exhibit
4.3


 


EXECUTION
VERSION


 


AMENDMENT NO. 2

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT


 


AMENDMENT
NO. 2 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of April 6,
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 exist under (a) Section 9.1 and Section 9.2 of the Loan
Agreement as a result of a breach of Section 2.1(c) and Section 2.6(a)(i) of the Loan Agreement, (b) Section 9.2 of
the Loan Agreement as a result of a breach of Section 7.20(d) of the
Loan Agreement for the month of February 2010, and (c) Section 9.2
of the Loan Agreement as a result of a breach of Section 7.20(a) of
the Loan Agreement for the Three Month Measurement Period ending December 2009;
such Events of Default described in clauses (a), (b) and (c) are
herein 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) of the Loan Agreement for the
Measurement Period ending February 28, 2010 (such anticipatory default
hereinafter referred to as the “Specified Anticipatory Default”).


 


WHEREAS, Borrowers
have requested that Lender provide a Term Loan C to Borrowers in an original
principal amount of $1,350,000, the proceeds of which shall be used to repay,
in part, outstanding Overadvances on the date of
funding such Term Loan C.


 


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)           Other than the
Specified Events of Default and the Specified Anticipatory Default, after
taking into account this Amendment, no Event 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.


 


§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 April 6, 2010:


 


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


 


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


 


(c)           Lender shall have
received a duly executed registration rights agreement by Parent Borrower in
favor of Lender in the form of Exhibit B attached hereto.


 


(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)           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.


 


(f)            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 or the Specified Anticipatory Default.  Nothing contained in this Amendment shall be
construed to constitute a waiver or forbearance of the Specified Events of
Default or the Specified Anticipatory 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. 2 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 T. 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/ Scott H.
  Harvey

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
  Scott H. Harvey

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Legal
  Officer

  
					



 

















 


Exhibit A


 


(Please see attached)


 
















 


EXECUTION
VERSIONExhibit A
to


Amendment No. 2 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


 

















 


F.             Lender is willing to amend and
restate the Existing Agreement and restructure the Existing Term and Existing
Revolving Commitments as herein provided on the terms and conditions set forth
in this Agreement.


 


AGREEMENT


 


NOW, THEREFORE, each Borrower and Lender
agree as follows:


 


SECTION 1.         DEFINITIONS, RULES OF
CONSTRUCTION AND ACKNOWLEDGMENTS


 


1.1.          Definitions. 
Unless otherwise defined herein, the following capitalized terms shall
have the following meanings:


 


“90-Day VWAP Price” means, as of the date of determination, the
ninety (90) day volume weighted average price per share of Parent Borrower’s
common Capital Stock, determined by reference to the closing price on an
Approved Exchange of such common Capital Stock during such period.


 


“2009 Recapitalization” means the recapitalization of the Parent
Borrower’s Capital Stock pursuant to that certain Debt Conversion Agreement.


 


“Account Control Agreement(s)” means any agreement in form,
scope and substance satisfactory to Lender entered into by Lender, any Borrower
and a third party bank or other institution (including a securities
intermediary) in which such Borrower maintains a deposit account or securities
account and which grants Lender a perfected first priority security interest in
the subject account or accounts.


 


“ACH Authorization” means the ACH Debit Authorization Agreement
in substantially the form of Exhibit I.


 


“Acquisition Agreement” means the acquisition agreement entered
into in connection with a Permitted Acquisition.


 


“Acquisition Documents” means the Acquisition Agreement and each
other agreement, instrument, side letter or other document executed and
delivered in connection with a Permitted Acquisition.


 


“Adjusted 30-Day VWAP Price” means, as of the date of
determination, the price per share of common Capital Stock of Parent Borrower
equal to: (A) the thirty (30) day volume weighted average price of Parent
Borrower’s common Capital Stock, determined by reference to: the closing price
of such common Capital Stock as listed on the Approved Exchange during such
period, multiplied by eighty percent (80%), so long as, as of the date
of determination, the common Capital Stock of the Parent Borrower is listed an
Approved Exchange or (B) in accordance with the Valuation Procedures, in
the event the common Capital Stock of Parent Borrower has ceased to be listed
on an Approved Exchange.


 


“Advance(s)” means a Revolving Loan Advance.


 


2

















 


“Adjusted 60-Day Average
Price” means, as of the date of determination, the price per share of common
Capital Stock of Parent Borrower equal to: (A) the sixty (60) day average
price of Parent Borrower’s common Capital Stock, determined by reference to:
the closing price of such common Capital Stock as listed on the Approved
Exchange during such period, multiplied by seventy percent (70%), so long as,
as of the date of determination, the common Capital Stock of the Parent
Borrower is listed an Approved Exchange or (B) in accordance with the
Valuation Procedures, in the event the common Capital Stock of Parent Borrower
has ceased to be listed on an Approved Exchange.


 


“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.


 


3

















 


Notwithstanding the foregoing, the 2009
Recapitalization, the election of a new board of directors of Parent Borrower
in connection with the 2009 Recapitalization or any change in the board of
directors of Parent Borrower pursuant to Section 3.1 of the Debt
Conversion Agreement that arises as a direct result of any action taken or
inaction by Hercules LLC shall not constitute a Change in Control hereunder.


 


“Claims” has the meaning given to it in Section 11.10.


 


“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) non-recurring 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


 


5

















 


case, of or by Parent Borrower and its Subsidiaries
on a consolidated basis for the most recently completed Measurement Period.  For purposes of calculating the Consolidated
Interest Coverage Ratio, interest shall be included herein to the extent paid
in cash or required to be paid in cash.


 


“Consolidated Interest Coverage Ratio” means, as of the date of
determination, the ratio of (a) Consolidated Adjusted EBITDA for the most
recently completed Three Month Measurement Period to (b) Consolidated
Interest Expense for such Three Month Measurement Period.


 


“Consolidated Total Leverage Ratio” means, as of the date of
determination, the ratio of (a) Consolidated Funded Indebtedness as of
such date to (b) Consolidated Adjusted EBITDA for the most recently
completed Twelve Month Measurement Period.


 


“Contingent Obligation” means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, letter of credit or other obligation of
another, including any such obligation directly or indirectly guaranteed,
endorsed, co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit, corporate credit cards
or merchant services issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; provided, however,
that the term “Contingent Obligation” shall not include endorsements for
collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determined amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith; provided, however,
that such amount shall not in any event exceed the maximum amount of the
obligations under the guarantee or other support arrangement.


 


“Converted Adjusted Debt Amount” means, as of the date of
determination, an amount equal to fifty percent (50%) of the aggregate
outstanding principal amount of the Term Loan B.


 


“Converted Debt Amount” means, as of the date of determination,
the aggregate outstanding principal amount of the Term Loan B.


 


“Converted Term Loan C Debt
Amount” means, as of the date of determination, the aggregate outstanding
principal amount of the Term Loan C.


 


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


 


“Copyright
Security Agreement” means a collateral grant of security interest in
copyrights executed and delivered by the Borrowers and Lender, as such may be
amended, restated or otherwise modified from time to time.


 


7

















 


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


 


“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.


 


10

















 


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


 


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


 


“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.


 


11

















 


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 AdvancesRevolving Loan, the Term Loans and the Equipment
Term Loan made under this Agreement.


 


“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, the Term Notes C 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.


 


13
















 


“Permitted Indebtedness”
means: (i) Indebtedness of Borrowers in favor of Lender arising under this
Agreement or any other Loan Document; (ii) Indebtedness existing on the
Closing Date which is disclosed in Schedule 1A; (iii) Indebtedness
of up to $750,000 outstanding at any time secured by a lien described in clause
(vii) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or
fair market value of the Equipmentequipment
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


 


16

















 


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 Equipmentequipment 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 2.6(a)(v) herein, in
the amounts by which the fair market value of any transfers of assets
contemplated by clause (iv) herein exceed $250,000 in the aggregate
in any fiscal year.


 


“Person” means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, other entity or government.


 


“Pledge Agreements”
means, collectively, (a) that certain Pledge Agreement, dated as of May 1,
2008, executed and delivered by each Borrower pledging its respective interest
as applicable, in DDMS, ISC, Embedded and Opt and (b) any other pledge
agreement executed and delivered pursuant to the terms hereof, as each such
agreement may be amended, restated or otherwise modified from time to time.


 


“Preferred Stock”
means at any given time any equity security issued by Parent Borrower that has
any rights, preferences or privileges senior to Parent Borrower’s common stock.


 


“Proposed Share Price”
has the meaning given to such term in the definition of “Valuation Procedures”.


 


“Reaffirmation Agreement”
means that certain Reaffirmation Agreement dated as of the Closing Date among
Borrowers and Lender.


 


“Refinancing Event”
means the closing of a loan with a lender other than Lender or the making of an
equity contribution by a shareholder other than Lender or any other Lender’s
affiliates, the proceeds of which are applied to pay in full in cash the
aggregate outstanding principal amount of the Term LoansLoan A and the Term Loan B, together with all
accrued interest thereon (including interest accrued but not yet capitalized)
and all other Secured Obligations arising in respect thereof (including,
without limitation the Term Loan Prepayment Charge (if applicable)).


 


“Registration Rights
Agreement” means the registration rights agreement substantially in the
form of Exhibit K duly executed by Parent Borrower in favor of
Lender.


 


“Revolving Interest Rate”
shall equal twelve percent (12%) per annum, provided that upon a
Refinancing Event the “Revolving Interest Rate” shall be reduced to the prime
rate as reported in The Wall Street Journal plus 4.0% per annum; provided,
however, any Revolving Loan constituting an Overadvance shall bear
interest at the rate equal to fifteen percent (15%) per annum.


 


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


 


18

















 


“Revolving Loan Advance”
means any Revolving Loan funds advanced under this Agreement.


 


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


 


“Revolving Loan Maturity
Date” means May 1, 2011, provided that in the event Borrowers
notify Lender in writing not more than 30 days and not less than 15 days prior
to such 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).


 


“Second Amendment” means
Amendment No. 2 to Amended and Restated Loan and Security Agreement, dated
as of April 6, 2010, among Borrowers and Lender.


 


“Second Amendment Effective
Date” means April 6, 2010.


 


“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 bankruptcyany 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, (iii) the Term Loan C and (iv) the
shares of common Capital Stock of Parent Borrower issued to Lender pursuant to Section 2.10
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


 


19

















 


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.


 


“Subsidiary” means an
entity, whether corporate, partnership, limited liability company, joint
venture or otherwise, in which Parent Borrower owns or controls, directly or
indirectly, 50% or more of the outstanding voting securities, including each
entity listed on Schedule 1 hereto.


 


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


 


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


 


“Term Loan A Interest
Rate” means, for any day, (i) for the period commencing on the Closing
Date and continuing through but not including the first anniversary of the
Closing Date, twelve percent (12%) per annum, (ii) for the period
commencing on the date which is the first anniversary of the Closing Date and
continuing through but not including the second anniversary of the Closing
Date, eighteen percent (18%) per annum, and (iii) thereafter, fifteen
percent (15%) per annum.


 


“Term Loan A Maturity
Date” means November 1, 2013.


 


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


 


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


 


“Term Loan B Conversion
Notice” has the meaning ascribed to such term in Section 2.9(a)


 


“Term Loan B Conversion Opt
Out Fee” means $12,500,000.


 


“Term Loan B Conversion
Price” means $0.0743, provided that, if at any time while this
Agreement is outstanding the common Capital Stock of the Parent Borrower is
subdivided or combined the “Term Loan B Conversion Price” shall be
proportionately adjusted.


 


20

















 


“Term Loan B Conversion
Right Termination Date” means the date which is one hundred and eighty
(180) days following the Closing Date.


 


“Term Loan B Interest
Rate” means, for any day, (i) for the period commencing on the Closing
Date and continuing through but not including the first anniversary of the
Closing Date, fourteen and one half percent (14.5%) per annum, (ii) for
the period commencing on the date which is the first anniversary of the Closing
Date and continuing through but not including the second anniversary of the
Closing Date, twenty and one half percent (20.5%) per annum, and (iii) thereafter,
seventeen and one half percent (17.5%) per annum.


 


“Term Loan B Maturity
Date” means November 1, 2014.


 


“Term Loan B Conversion Opt Out Fee” means $12,500,000.


 


“Term Loan C” means the term
loan made to the Borrowers on the Second Amendment Effective Date in the
original principal amount of $1,350,000.


 


“Term Loan C Commitment”
means $1,350,000.


 


“Term Loan C Conversion
Notice” has the meaning ascribed to such term in Section 2.10(a)


 


“Term Loan C Conversion
Price” means $3.276, provided that, if at any time while this Agreement is
outstanding the common Capital Stock of the Parent Borrower is subdivided or
combined the “Term Loan C Conversion Price” shall be proportionately adjusted.


 


“Term Loan C Interest Rate”
means, for any day, eight percent (8.0%) per annum.


 


“Term Loan C Maturity Date”
means April 1, 2013.


 


“Term Loan Prepayment
Charge” means the prepayment charges described in Section 2.6(c) hereof.


 


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


 


“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.


 


“Term Note C” means a
promissory note in substantially the form of Exhibit B-5.


 


“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.


 


21

















 


“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 PartiesBorrowers
and the Lender.


 


“Yield Revenue Amount”
means, (A) with respect to the Term Loan A, an amount equal to (i) the
interest that would have accrued and been payable on the principal balance of
the Term Loan A assuming that the Term Loan A had accrued interest at a rate
per annum of 18% from the date which is six month following the Closing Date to
the date of repayment, prepayment or acceleration (such date herein referred to
as the “Determination Date”), minus (ii) the amount of
interest actually paid by the Borrowers on account of the Term Loan A from the
date which is six months following the Closing Date to the Determination Date;
and (B) with respect to the Term Loan B, an amount equal to (i) the
interest that would have accrued and been payable on the principal balance of
the Term Loan B assuming that the Term Loan B had accrued interest at a rate
per annum of 18% in cash plus 2.5% interest in kind (by adding such amount to
the outstanding principal amount of the Term Loan B as if such payment in kind
interest had been added to the outstanding principal amount of the Term Loan B
on the applicable interest date)


 


22

















 


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 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.


 


24
















 


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 Loan A and the Term Loan B.


 


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.


 


(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


 


25

















 


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.


 


(e)           Term
Loan C.


 


i.              Term Loan C.  Subject to the terms and conditions of this
Agreement, on the Second Amendment Effective Date, the Lender shall fund the
Term Loan C in the amount of the Term Loan C Commitment, the proceeds of which
shall be used to repay, in part, outstanding Overadvances on such date.  Upon the funding of the Term Loan C
hereunder, the Term Loan C Commitment shall be permanently terminated.


 


ii.             Interest on the Term
Loan C.  Subject to the provisions of Section 2.3
and Section 2.4, the principal balance of the Term Loan C shall bear
interest thereon from the Second Amendment Effective Date at the Term Loan C
Interest Rate based on a year consisting of 360 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 principal outstanding on the
Term Loan C, eighth, to the payment of any and all other Secured
Obligations; and seventhninth,
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),
Section 2.2(d)(iii) or Section 2.2(ce)(ii), as applicable, plus
three percent


 


26

















 


(3%) per annum (the “Default
Rate”). and shall be payable upon
demand.  In the event any interest is
not paid when due hereunder, at the Lender’s
option, in its sole discretion, delinquent interest shall be added to principal
and shalland interest accruing at the
Default Rate: (x) shall be paid in cash on demand thereof, and/or (y) shall
be paid in kind by adding such amounts to the principal amount of the Term Loan
B, notwithstanding on which Loan such delinquent interest and interest accruing
at the Default Rate has accrued, and shall thereafter bear interest on
interest, compounded at the rate set forth in Section 2.1(d),
Section 2.2(c) or Section 2.4, as applicable.2.2(c)(ii) and be subject to the conversion
rights of the Lender set forth in Section 2.9 and/or (z) through the
issuance of additional shares of 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
60-Day Average Price, determined by Lender as of the date of Lender’s election
for the issuance of additional shares as provided in this Section 2.4.  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 the original date of demand therefor.  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 date of demand
therefor 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 2.4.  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


 


27

















 


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 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 3060-Day VWAPAverage 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.            Notwithstanding
subparagraph (a)(i) to the contrary and solely with respect to interest
payments on the Term Loan C, 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 C, in whole or in part as determined by
Lender in its sole discretion, by paying such accrued interest (x) in
cash, and/or


 


28

















 


(y) in kind by adding such amounts to the principal amount of the
Term Loan C as of such interest payment date.


 


v.             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.


 


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.


 


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


 


29

















 


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, the Term Loan B and the
Term Loan BC 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 RevolvingTerm
Loan AdvancesC; sixth, to the
payment of accrued interest on the RevolvingTerm Loan Advances;C,  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, after all Secured Obligations areon 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 sentence, no Term Loan Prepayment Charge
shall be required for any prepayment of the Term Loans under this Section 2.6(a)(iv).


 


30

















 


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, sixth, to the payment of accrued interest on the
Equipment Term Loan, seventh, to the payment of principal outstanding on the
Term Loan C and eighth, to the payment of accrued interest on the Term Loan C.  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.


 


31
















 


(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.


 


iv.                                  Upon
at least five (5) Business Days prior written notice to Lender, Borrowers
may prepay, in whole (or in part with the prior consent of Lender in its sole
and absolute discretion), the Term Loan C, together with all accrued and unpaid
interest thereon.  No Term Loan
Prepayment Charge shall be required for any prepayment of the Term Loan C under
this Section 2.6(b)(iv).


 


(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 LoansLoan
A and/or the Term Loan B, 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


 


32

















 


impracticality of
determining actual damages resulting from an early repayment of the applicable
Term Loan.


 


(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


 


33

















 


Parent Borrower shall have
the right to pay cash in lieu of any fractional shares to be issued pursuant to
this Section 2.9(b).


 


(c)                                 Term Loan B as
Secured Obligations.  Until such
time as Lender has received the duly executed stock certificates evidencing the
shares of common Capital Stock of Parent Borrower described in paragraphs (a) and
(b) of this Section 2.9, the Converted Debt Amount and
the Converted Adjusted Debt Amount shall constitute Secured Obligations
hereunder for all purposes, and upon delivery of such stock certificates, the
applicable portion of the Converted Debt Amount or the Converted Adjusted Debt
Amount shall be cancelled.


 


(d)                                Termination of
Conversion Rights. 
Notwithstanding the foregoing in this Section 2.9 to the
contrary, in the event that a Refinancing Event occurs prior to the Term Loan B
Conversion Right Termination Date, the rights granted to Lender under this Section 2.9
shall thereafter automatically terminate, provided that, and for the
avoidance of doubt, the termination of the rights granted to Lender under this Section 2.9
shall not abrogate or limit in any manner (i) any voluntary conversion
demand of Lender arising under paragraph (a) hereof and/or any
mandatory conversion obligation of Borrowers arising under paragraph (b) hereof,
in either case, that arose prior to the Term Loan B Conversion Right
Termination Date, and (ii) the prior issuance of any common Capital Stock
of Parent Borrower to Lender or its designee pursuant to the terms of this Section 2.9.


 


2.10.                       Term Loan C Equity Conversion Right.


 


(a)                                 Voluntary
Conversion.  At Lender’s option, in its
sole discretion, Lender may, at any time and from time to time, elect to
convert, in whole or in part, the Converted Term Loan C Debt Amount into common
Capital Stock of Parent Borrower.  In the
event Lender so elects to convert all or any portion of the Converted Term Loan
C Debt Amount into common Capital Stock of Parent Borrower, Lender will provide
Parent Borrower ten (10) Business Days advance written notice thereof
(such notice to state that it is a “Term Loan C Conversion Notice”).  Prior to the date identified in such Term
Loan C Conversion Notice, Parent Borrower (A) shall deliver to Lender or
any designee of Lender identified in such Term Loan C Conversion Notice one or
more stock certificates, which stock certificates may include appropriate
restrictive legends to the extent applicable, evidencing the shares of common
Capital Stock of Parent Borrower that are to be issued to Lender or its
designee as provided in such Term Loan C Conversion Notice, and (B) pay
Lender in cash with respect to that portion of the Converted Term Loan C Debt
Amount identified in the Term Loan C Conversion Notice to be converted into
shares of common Capital Stock of Parent Borrower all accrued and unpaid
interest on the Converted Term Loan C Debt Amount and all other fees and
Secured Obligations outstanding with respect thereto; provided, that such date
for delivery of the stock certificates and payments of amounts herein shall be
no earlier than ten (10) Business Days prior to the date identified for
the effectiveness of such conversion in the Term Loan C Conversion Notice.  The determination of the number of shares of
common Capital Stock of Parent Borrower to be issued and delivered to Lender or
its designee as provided herein shall initially be


 


38

















 


calculated by Lender and identified in such Term Loan C Conversion
Notice as follows: (i) the Converted Term Loan C Debt Amount identified by
Lender in such Term Loan C Conversion Notice to be converted into common
Capital Stock of Parent Borrower, divided by (ii) the Term Loan C
Conversion Price.  In the event of any
dispute in the calculation of the number of shares of common Capital Stock of
Borrower to be issued and delivered to Lender or its designee as identified in
such Term Loan C Conversion Notice, Borrowers and Lender agree to review Lender’s
calculation and determine such number of shares in good faith and without
delay.  Parent Borrower shall have the
right to pay cash in lieu of any fractional shares to be issued pursuant to
this Section 2.10(a).


 


(b)                                Term
Loan C as Secured Obligations.  Until
such time as Lender has received the duly executed stock certificates
evidencing the shares of common Capital Stock of Parent Borrower described in
paragraph (a) of this Section 2.10, the Converted Term Loan C Debt
Amount shall constitute Secured Obligations hereunder for all purposes, and
upon delivery of such stock certificates, the applicable portion of the
Converted Term Loan C Debt Amount shall be cancelled.


 


SECTION 3.                           SECURITY INTEREST


 


3.1.                             Collateral Grant.  As security for the prompt, complete and
indefeasible payment when due (whether on the payment dates or otherwise) of
all the Secured Obligations, each Borrower hereby reaffirms its grant to Lender
of, and hereby grants to Lender, a security interest in all of such Borrower’s
personal property, wherever located, now owned or hereafter acquired, including
the following, and all proceeds and products thereof (collectively, the “Collateral”):  (a) accounts (including health-care
insurance receivables); (b) chattel paper (whether tangible or
electronic); (c) fixtures; (d) general intangibles (including without
limitation all Intellectual Property and payment intangibles); (e) instruments
(including promissory notes); (f) documents (including, if applicable,
electronic documents); (g) securities and all other investment property
(but excluding thirty-five percent (35%) of the Capital Stock of any foreign
Subsidiary); (h) deposit accounts excluding payroll and trust accounts; (i) Cash;
(j) commercial tort claims; (k) goods (including inventory, equipment
and any accessions thereto); (l) letter-of-credit rights (whether or not
the letter of credit is evidenced by a writing); (m) supporting obligations;
and (n) any other contract rights or rights to the payment of money,
insurance claims and proceeds. 
Notwithstanding the foregoing, it is the intention of the parties to the
Agreement that the term “Collateral” shall exclude (1) “intent-to-use”
trademarks until such time as a Borrower begins to use such trademarks; and (2) any
item of general intangibles that is now or hereafter held by a Borrower, solely
in the event and to the extent that: (i) the grant of such security
interest shall constitute or result in (A) the abandonment, invalidation
or unenforceability of any right, title or interest of any Borrower therein or
result in any Borrower’s loss of use of such asset or (B) a breach or
termination pursuant to the terms of, or a default under, any such investment
property or general intangible, in each case other than (i) to the extent
that any such term would be rendered ineffective pursuant to Sections 9-406,
9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of
any relevant jurisdiction or any other applicable Law (including the Bankruptcy
Code) or principles of equity or (ii) with respect to 


 


39

















 


(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.


 


(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.


 


45

















 


(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 or the funding of any Loans 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 or fund any Loans 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 or fund any other Loan, 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 or the funding of any Loan 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 written notice (including any Compliance Certificate) 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).


 


5.2.                             Collateral.  Such Borrower owns the Collateral, free of
all Liens, except for Permitted Liens. 
Such Borrower has the power and authority to grant to Lender a Lien in
the Collateral as security for the Secured Obligations.


 


46

















 


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 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.


 


49






 












 


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 and shareholders harmless
from and against any and all claims, costs, expenses, damages and liabilities
(including such claims, costs, expenses, damages and liabilities based on
liability in tort, including strict liability in tort), including reasonable
attorneys’ fees and disbursements and other costs of investigation or defense (including
those incurred upon any appeal), that may be instituted or asserted against or
incurred by Lender or any such Person as the result of credit having been
extended, suspended or terminated under this Agreement and the other Loan
Documents or the administration of such credit, or in connection with or
arising out of the transactions contemplated hereunder and thereunder, or any
actions or failures to act in connection therewith, or
arising out of the handling, disposition or utilization of the Collateral, or
Lender relying on any instruction of a Borrower, or any other actions taken or
not taken by 


 


50

















 


Lender hereunder or under any Loan Document,
excluding in all cases claims resulting solely from Lender’s gross negligence
or willful misconduct. Each Borrower agrees to pay, and to save Lender harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all excise, sales or other similar taxes (excluding taxes
imposed on or measured by the net income of Lender) that may be payable or
determined to be payable with respect to any of the Collateral or this
Agreement.


 


SECTION 7.         COVENANTS OF BORROWER


 


Each Borrower agrees as
follows:


 


7.1.          Financial Reports and Compliance Certificate.
Borrowers shall furnish to Lender the following documents and financial reports
(the “Financial Statements”), with delivery of the Financial Statements
described in subsections (a), (b) and (c), in each case to
be accompanied by the Compliance Certificate in the form attached as Exhibit F:


 


(a)           as soon as practicable (and in any event within thirty
(30) days) after the end of each month, unaudited interim financial statements
as of the end of such month (prepared on a consolidated and consolidating
basis, if applicable), including balance sheet and related statements of income
and cash flows, all certified by Parent Borrower’s Chief Executive Officer or
Chief Financial Officer to the effect that they have been prepared in
accordance with GAAP, except (i) for the absence of footnotes, (ii) that
they are subject to normal quarter end and year end adjustments, and (iii) they
do not contain certain non-cash items that are customarily included in
quarterly and annual financial statements;


 


(b)           as soon as practicable (and in any event within forty-five
(45) days) after the end of each fiscal quarter, unaudited interim and
year-to-date financial statements as of the end of such fiscal quarter
(prepared on a consolidated and consolidating basis, if applicable), including
balance sheet and related statements of income and cash flows, all certified by
Parent Borrower’s Chief Executive Officer or Chief Financial Officer to the
effect that they have been prepared in accordance with GAAP, except (i) for
the absence of footnotes, and (ii) that they are subject to normal year
end adjustments;


 


(c)           as soon as practicable (and in any event within ninety
(90) days) after the end of each fiscal year, (i) unqualified audited
consolidated financial statements as of the end of such year, including balance
sheet and related statements of income and cash 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 


 


51

















 


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.


 


7.2.          Other Notices. 
Parent Borrower shall deliver to Lender, in form and detail reasonably
satisfactory to Lender:


 


(a)           promptly (but in any event within two (2) Business
Days after receipt or delivery thereof) all material notices and instructions
made under any Acquisition Documents;


 


(b)           promptly (but in any event within two
(2) Business Days after receipt or delivery thereof or knowledge thereof)
copies of all written notices or claims challenging or questioning any Borrower’s
ownership in any material Intellectual Property (or written notice of any claim
challenging or questioning the ownership in any material licensed 


 


52

















 


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)           7.5.
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.


 


7.7.          Collateral; Prohibition of Liens. Each Borrower
shall at all times keep the Collateral and all other property and assets used
in such Borrower’s business or in which such Borrower now or hereafter holds
any interest free and clear from any legal process or Liens whatsoever (except
for Permitted Liens), and shall give Lender prompt written notice of any legal
process affecting the Collateral or any Liens thereon.  Parent Borrower shall cause its Subsidiaries
to protect and defend such Subsidiary’s title to its assets from and against
all Persons claiming any interest adverse to such Subsidiary, and Parent
Borrower shall cause its Subsidiaries at all times to keep such Subsidiary’s
property and assets free and clear from any legal process or Liens whatsoever
(except for Permitted Liens), and shall give Lender prompt


 


54

















 


(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 LoansLoan A, the Term Loan B 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.  Borrowers will solely use the proceeds from
the Term Loan C to repay, in part, outstanding Overadvances on the date of
funding of the Term Loan C.


 


59

















 


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, and shall, at all times
after the Second Amendment Effective Date, in addition to the foregoing (and
not in lieu thereof) reserve for the issuance of additional shares of common
Capital Stock pursuant to the terms of Section 2.4 and Section 2.10.  In addition to the foregoing, Parent Borrower
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 2.4, Section 2.5(a)(iii), Section 2.9 and Section 2.9.2.10.


 


7.23.        Post Closing Requirements.


 


(e)           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.


 


(f)            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


 


60
















 


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, 7.227.22, 7.23,
7.24, 7.25 or 7.237.26)
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, 7.227.22, 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


 


61

















 


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 LenderBorrower’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 


 


62

















 


any part thereof is rescinded, avoided or
avoidable, reduced in amount, or must otherwise be restored or returned by, or
is recovered from, Lender or by any obligee of the Secured Obligations, whether
as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though
such payment, performance, or transfer of Collateral had not been made.  In the event that any payment, or any part
thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or
recovered, the Loan Documents and the Secured Obligations shall be deemed,
without any further action or documentation, to have been revived and
reinstated except to the extent of the full and final payment to Lender in
Cash.


 


11.15.      Counterparts.  This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.


 


11.16.      No Third Party Beneficiaries.  No provisions of the Loan Documents are
intended, nor will be interpreted, to provide or create any third-party
beneficiary rights or any other rights of any kind in any person other than
Lender and Borrowers unless specifically provided otherwise herein, and, except
as otherwise so provided, all provisions of the Loan Documents will be personal
and solely among Lender and the Borrowers.


 


11.17.      Publicity.  With Parent Borrower’s prior consent, which
shall not be unreasonably withheld or delayed, Lender may use any Borrower’s
name and logo, and include a brief description of the relationship between any
Borrower and Lender, in Lender’s marketing materials.


 


11.18.      Representations and Warranties of
Lender.  Solely in respect of the Securities described in clause (i) and
clause (ii) of the definition of “Securities,” Lender represents and
warrants the following, each as of the date hereof as of the Closing Date; and, solely in respect of the Securities
described in clause (iii) and clause (iv) of the definition of “Securities,”
Lender represents and warrants the following as of the Second Amendment
Effective Date:


 


(a)           Investment Intent. 
Lender understands that the Securities it receives hereunder are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law.  Lender
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 Lender’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.  Lender does not have any agreement or
understanding, directly or indirectly, with any person or entity to distribute
the Securities.


 


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


 


68

















 


Table of Exhibits and Schedules


 


	
  Exhibit A:

  	
  Advance
  Request

  Attachment to Advance Request

  
	
   

  	
   

  
	
  Exhibit B-1:

  	
  Term
  Note A Note

  
	
   

  	
   

  
	
  Exhibit B-2:

  	
  Term
  B Note B

  
	
   

  	
   

  
	
  Exhibit B-3:

  	
  Revolving
  Note

  
	
   

  	
   

  
	
  Exhibit B-4       

  	
  Equipment Term Loan Note

  
	
   

  	
   

  
	
  Exhibit B-5       

  	
  Term Note C

  
	
   

  	
   

  
	
  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 1C

  	
  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:


 


	
  (a)

  	
   

  	
  Issue a check payable to
  Parent Borrower

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  or

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Wire Funds to Parent
  Borrower’s account

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Bank:

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ABA
  Number:

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  Number:

  	
   

  	
   

  
	
   

  	
   

  	
  Account
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  or

  
							



 


(c)                                  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 Events of Default, each as defined in the Second 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.


 


75

















 


ATTACHMENT TO ADVANCE REQUEST


 


Dated:                             


 


Each Borrower hereby
represents and warrants to Lender that such Borrower’s current name and
organizational status is as follows:


 


	
  Name:

  	
  [                                                                            ]

  
	
   

  	
   

  
	
  Type
  of organization:

  	
  [                                                                            ]

  
	
   

  	
   

  
	
  State
  of organization:

  	
  [                                                                            ]

  
	
   

  	
   

  
	
  Organization
  file number:

  	
  [                                                                            ]

  



 


Each Borrower hereby
represents and warrants to Lender that the street addresses, cities, states and
postal codes of its current locations are as follows:


 


76
















 


EXHIBIT B-4


 


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

  
			



 


85

















 


EXHIBIT B-5


 


FORM OF
TERM NOTE C


 


THIS TERM NOTE C AND THE
COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) NOR UNDER ANY STATE SECURITIES
LAW AND MAY NOT BE SOLD, ASSIGNED (OTHER THAN BY COLLATERAL ASSIGNMENT) OR
OTHERWISE TRANSFERRED (OTHER THAN BY COLLATERAL ASSIGNMENT OR PLEDGE) UNTIL (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR (2) PARENT BORROWER RECEIVES AN OPINION
OF COUNSEL TO PARENT BORROWER OR OTHER COUNSEL TO THE HOLDER OF SUCH NOTE WHICH
OTHER COUNSEL IS SATISFACTORY TO PARENT BORROWER THAT SUCH NOTE AND/OR COMMON
STOCK MAY BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED, WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.


 


$1,350,000                                                                                                                                              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 Term Note B (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo
Alto, CA 94301 or such other place of payment as the holder of this Term Note B
(this “Note”) may specify from time to time in writing, in lawful money of the
United States of America, the principal amount of One Million Three Hundred
Fifth Thousand Dollars ($1,350,000) or such other principal amount as Lender
has advanced to Borrowers, together with interest thereon (whether as cash
interest or payment in kind interest), all as provided in the Loan Agreement
referred to below.


 


This Note is a Term Note C
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.  The obligations
evidenced by this Note may be converted into shares of common Capital Stock as
provided by the terms of the Loan Agreement.


 


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

  



 

















 


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 #1516)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  17.18.   LOAN VALUE OF ACCOUNTS (85% of #1617)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.19.   Maximum Revolving Loan Amount ($12,000,000)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  19.20.   Total Funds Available (Lesser of #1819 or #1718)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  20.21.   Present balance of Revolving Loans

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  21.22.   RESERVE POSITION (#1920
  minus #2021)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  



 


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

  	
   

  



 

















 


Exhibit B


 


(Omitted for Filing)