Exhibit 10.2


EARN OUT AGREEMENT


This
EARN OUT AGREEMENT (this “Agreement”) is
made and entered into as of September 30, 2007, by and between Healthcare
Informatics Associates, Inc., a Delaware corporation (“Seller”),
and InfoLogix Systems Corporation, a Delaware corporation (the “Company”).


WHEREAS,
pursuant to an Asset Purchase Agreement (the “Purchase
Agreement”), dated as of the date hereof, among InfoLogix, Inc., a
Delaware corporation, the Company, Seller, and the stockholders of Seller
(together, the “Stockholders”), Seller is selling
the Purchased Assets to the Company;


WHEREAS,
the Purchase Agreement provides that Seller shall be eligible to receive
additional consideration based upon the financial performance of the Business
(as defined in Section 1), to be calculated based upon Net Contribution
Amount (as defined in Section 1) generated by the Business during each
Earn Out Period (as defined in Section 1); and


WHEREAS,
Seller and the Company have agreed that determination and payment of the
additional consideration contemplated by the Purchase Agreement is to be in
accordance with the terms of this Agreement.


NOW,
THEREFORE, in consideration of the premises and of the respective covenants and
provisions contained in this Agreement, the parties hereby agree as follows:


1.             Definitions.           For purposes of this Agreement, the terms
listed below have the following meanings. 
Capitalized terms used and not otherwise defined in this Agreement have
the meanings given to such terms in the Purchase Agreement.


“Business” shall mean the business of providing software
implementation and consulting services to the healthcare industry, as conducted
by the Seller as of the Closing Date. 
Any businesses providing similar services that are acquired by the
Company after the date hereof shall not be considered part of the “Business”
hereunder unless otherwise expressly agreed by Seller and Company in writing.


“Closing Date” shall mean the date of the closing of the
transactions contemplated by the Purchase Agreement.


“Dispute Auditors” shall have the meaning set forth in Section
3(b)(ii).


“Earn Out Amount” shall have the meaning set forth in Section
2(b).


“Earn Out Period” shall mean each 12 calendar month period
during the 24 month calendar period beginning with the first calendar month
immediately following the month in which the Closing Date occurs and ending on
the 24th calendar month immediately following the month in which the Closing
Date occurs.













“Earn Out Ratio” shall mean, for any Earn Out Period, the
quotient of (a) the Net Contribution Amount for such Earn Out Period divided
by (b) the Earn Out Target for such Earn Out Period.  The Earn Out Ratio shall be calculated to six
decimal places and shall be subject to standard rounding provisions.


“Earn Out Statement” 
shall have the meaning set forth in Section 3(b)(i).


“Earn Out Target” shall mean (a) for the first Earn Out
Period, $3,000,000, and (b) for the second Earn Out Period, $3,600,000.


“GAAP” shall mean generally accepted accounting principles in
the Unites States as in effect from time to time, applied consistently.


“Net Contribution Amount” shall mean, for any Earn Out Period
or Quarterly Performance Period, an amount determined in accordance with Exhibit
A to this Agreement.


“Person” shall mean any individual, corporation (including
any non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or other
entity.


“Quarterly Performance Milestone” shall have the meaning set
forth in Section 4(e)(i).


“Quarterly Performance Period” shall have the meaning set
forth in Section 4(e).


2.             Earn Out Amount.


(a)           For each Earn Out Period, the Company shall, pursuant to Section 3,
calculate Net Contribution Amount for such period.


(b)           Based upon the Earn Out Ratio with respect to each Earn Out Period, the
Purchaser shall be entitled to receive a payment (the “Earn Out
Amount”) for each Earn Out Period pursuant to Section 3,
which shall be calculated as set forth below.


(i)            The Earn Out Amount for the first Earn Out
Period shall be calculated as follows:


	
  Earn Out Ratio

  	
   

  	
  Earn Out Amount

  
	
  Less than 0.700000

  	
   

  	
  $0

  
	
  Between 0.700000 and 1.000000

  	
   

  	
  Earn Out Ratio x
  $2,000,000

  
	
  Greater than 1.000000

  	
   

  	
  $2,000,000 +
  .25(Net Contribution Amount – Earn Out Target)

  



 


(ii)           The Earn Out Amount for the second Earn Out Period shall be calculated
as follows:



 2
 









 


	
  Earn Out Ratio

  	
   

  	
  Earn Out Amount

  
	
  Less than 0.700000

  	
   

  	
  $0

  
	
  Between 0.700000 and 1.000000

  	
   

  	
  Earn Out Ratio x
  $2,500,000

  
	
  Greater than 1.000000

  	
   

  	
  $2,500,000 +
  .25(Net Contribution Amount – Earn Out Target)

  



 


3.             Computation of Net Contribution
Amount.


(a)           Calculation of Net Contribution Amount.  The
components of Net Contribution Amount for any Earn Out Period shall be determined
in accordance with GAAP and shall be calculated as set forth on Exhibit A.


(b)           Time of Determination.


(i)            The Company shall prepare or cause to be
prepared and delivered to Seller, within 45 days after the end of each Earn Out
Period, a written statement setting forth the computation of Net Contribution
Amount and the Earn Out Ratio for the applicable Earn Out Period in sufficient
detail to permit Seller to confirm that such calculations have been made in
accordance with this Agreement (the “Earn Out Statement”).  Seller may provide written notice of
objection to the Company’s determination of Net Contribution Amount and\or the
Earn Out Ratio within 30 days after receipt of the Earn Out Statement by
Seller, which notice shall state in reasonable detail the specific reasons for
its objection.  If Seller does not
provide timely notice of objection as provided above, then Net Contribution
Amount and the Earn Out Ratio for the applicable Earn Out Period calculated by
the Company as set forth in the Earn Out Statement shall be binding and
conclusive on the parties.  During such
30 day period and during any period in which the calculation of Net
Contribution Amount and\or the Earn Out Ratio for the applicable Earn Out Period
and payment of the Earn Out Amount is in dispute between Seller and the
Company, Seller, or its agents, upon reasonable written notice to the Company,
shall have reasonable access during regular business hours, to inspect and
audit all records of the Business used by the Company in calculating Net
Contribution Amount and the Earn Out Ratio for the applicable Earn Out Period.


(ii)           If Seller provides the Company with notice of objection pursuant to (i)
above within 30 days after receipt of the Earn Out Statement by Seller, the
Company and Seller shall attempt in good faith to reach an agreement as to the
issues in dispute.  If the parties fail
to resolve all such disagreements within 15 Business Days after the Company’s
receipt of the notice of objection (or such longer period as mutually agreed upon
by the parties), then any issues remaining in dispute may thereafter be
submitted by either Seller or the Company to a nationally recognized
independent accounting firm mutually agreed upon by the parties (the “Dispute Auditors”). 
The Company and Seller shall take, or cause to be taken, all actions and
do, or cause to be done, all things necessary to cooperate with the Dispute
Auditors in its resolution of the issues remaining in dispute, including
furnishing to the Dispute Auditors such work papers and other documents and
information relating to the disputed issues as the Dispute Auditors may
reasonably request.  The determination of
Net Contribution Amount and the Earn Out Ratio for the applicable Earn Out Period
by the Dispute Auditors shall be set forth in a notice to be delivered to
Seller and the Company within 45 days of the



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submission
to the Dispute Auditors of the issues remaining in dispute, and such
determination shall be binding and conclusive on the parties as to the amount
of Net Contribution Amount and the Earn Out Ratio for the applicable Earn Out
Period.  The fees and expenses of the
Dispute Auditors incurred for such determination shall be equitably apportioned
based upon the extent to which Seller or the Company is determined by the Dispute
Auditors to be the prevailing party in such determination.


(c)           Right of Set Off. 
Subject to the terms of the Purchase Agreement, the Company shall have
the right to withhold and set off any amount due Seller under this Agreement
against any amount owed by Seller or the Stockholders to the Company, including
pursuant to any claim for indemnification or payment of Damages to which the
Company may be entitled under the Purchase Agreement or any other agreement
entered into pursuant to the Purchase Agreement, or otherwise.


(d)           Payment of Earn Out Amount.


(i)            The Company shall, at the same time that the
Earn Out Statement is delivered by the Company to Seller, pay the Earn Out
Amount, if any, for the applicable Earn Out Period.  Such payment shall be by wire transfer of
immediately available funds to an account or accounts designated in writing by
Seller.


(ii)           If Seller provides the Company with timely notice of objection to the
Company’s calculation of Net Contribution Amount and/or the Earn Out Ratio for
an Earn Out Period pursuant to Section 3(b) and if it is finally
determined that an initial or additional payment of the Earn Out Amount is
required under this Agreement, then within five days of such final
determination, the Company shall pay to Seller any remaining portion of the
Earn Out Amount for the applicable Earn Out Period by wire transfer of
immediately available funds to an account or accounts designated in writing by
Seller.


4.             Operation of the Company and
Business.


(a)           During the term of this Agreement, the Company shall operate the
Business in the ordinary course of business, in good faith, and in a
commercially reasonable manner, and shall not take any action or omit to take
any action during any Earn Out Period that is intended to impede Seller’s
ability to earn the Earn Out Amount.


(b)           The Company acknowledges and agrees that the Earn Out Amount is a
material part of the purchase price under the Purchase Agreement and the
ability to receive the Earn Out Amount is a material inducement for Seller to
enter into the Purchase Agreement.  The
Company further acknowledges and agrees that achieving Net Contribution Amounts
at levels sufficient for Seller to earn the Earn Out Amount is a desirable
outcome for the Company and the ability of the Business to achieve sufficient
Net Contribution Amounts depends to a significant degree upon the provision of
adequate support and resources to the Business, as well as appropriate
management of the Business.    Immediately
after the date hereof, Seller, or its agents, upon reasonable written notice to
the Company, shall have reasonable access during regular business hours, to
inspect all records of the Business used by the Company in calculating Net
Contribution Amount and the Earn Out Ratio for the applicable Earn Out Period.



 4
 









(c)           During the term of this Agreement, while employed pursuant to, and
subject to the terms and conditions of, his Employment Agreement with the
Company dated as of the date hereof (the “Employment Agreement”),
Gerry Bartley (“Bartley”) shall devote his full
working time, energy, skill and best efforts to the operation of the Business
in a manner that faithfully and diligently furthers the business and interests
of the Company and its affiliates as a whole, and is consistent with the Company’s
overall performance goals and strategic objectives as established from time to
time.  Without limiting the foregoing,
Bartley shall engage in such review and planning activities with respect to the
Business as are customary for an executive in his position, and shall report to
the Company on the operations and results of the Business as requested by the
Company’s management.   Subject to the
Employment Agreement, if the Company and Bartley agree that Bartley is to
become substantially involved in the operations of the Company beyond the
operation of the Business, Seller and the Company shall discuss in good faith
whether any adjustment to the Earn Out Amount, Earn Out Ratio or Earn Out
Target are desirable and in the best interest of the Company and its stockholders.


(d)           During the term of this Agreement, the Business shall be operated
subject to the resource budget as mutually agreed to by the parties within 60
days of the Closing Date (the “Resource Budget”).  Annually during the term of this Agreement,
the Company and Bartley (or such other representative as shall be appointed by
the Seller) shall meet to discuss such adjustments to the Resource Budget as
may be reasonably necessary or desirable, taking into consideration (i) the
achievement of a sufficient Net Contribution Amount by the Business and (ii)
the overall long-term performance goals and other strategic objectives of the
Business and the Company.  The Company
and Bartley (or such other representative as shall be appointed by the Seller)
shall also meet to discuss adjustments to the Resource Budget at the reasonable
request of the Company.  Any
modifications to the Resource Budget are subject to final approval by the
Company and may only be made by mutual written agreement of the Company and Seller.


(e)           During the term of this Agreement, while Bartley is employed by the
Company pursuant to the Employment Agreement, within 30 days following the last
day of each fiscal quarter starting with the first full fiscal quarter
immediately following the Closing Date (each a “Quarterly
Performance Period”), the Company shall provide Bartley with a
statement setting forth the Net Contribution Amount for such completed
Quarterly Performance Period. 
Notwithstanding anything to the contrary contained in this Agreement, if
the Net Contribution Amount for such Quarterly Performance Period:


(i)            is greater than or equal to 75% but less than
100% of the Net Contribution Amount milestone for such Quarterly Performance
Period as mutually agreed to by the parties (each, a “Quarterly
Performance Milestone”), Bartley shall promptly provide the Company
with a remediation plan acceptable to the Company and reasonably designed to
allow the Business to achieve future Quarterly Performance Milestones in a
manner consistent with the Company’s overall performance goals and other
strategic objectives;


(ii)           is greater than or equal to 50% but less than 75% of the applicable
Quarterly Performance Milestone, the Company and Bartley shall work together in
good faith to prepare a remediation plan reasonably designed to allow the
Business to achieve future Quarterly Performance Milestones in a manner
consistent with the Company’s overall performance goals and other strategic
objectives; provided, however, that if the Net Contribution Amount for each of
two consecutive Quarterly Performance Periods is greater than or equal to 50%
but less than 75% of the applicable Quarterly Performance Milestones for such
periods, then the Company shall be entitled,



 5
 









subject
to Section 4(a), to take such actions as it deems reasonably necessary
to allow the Business to achieve future milestones in a manner consistent with
the Company’s overall performance goals and other strategic objectives; and


(iii)          is less than 50% of the applicable Quarterly Performance Milestone, the
Company shall be entitled, subject to Section 4(a), to take such actions
as it deems reasonably necessary to allow the Business to achieve future
milestones in a manner consistent with the Company’s overall performance goals
and other strategic objectives.


(f)            Notwithstanding anything to the contrary
contained in this Agreement, until all obligations of the Company hereunder are
completed, the Company will use its reasonable efforts to require any successor
(whether direct or indirect, by purchase, merger, sale of stock or assets,
consolidation or otherwise) to assume and agree, in writing, to perform this
Agreement, in the same manner and to the same extent that the Company would
have been required to perform as if no such succession had taken place and
shall provide written evidence to Seller of such successor’s assumption of the
obligations hereunder no later than two Business Days following the closing of
the transaction which results in a successor being established.


5.             Miscellaneous.


(a)           Entire Agreement.  This
Agreement supersedes all prior agreements, whether written or oral, between the
parties with respect to its subject matter and constitutes a complete and
exclusive statement of the terms of the agreement between the parties with respect
to its subject matter.


(b)           Succession and Assignment.  This
Agreement shall be binding upon and inure to the benefit of the parties named
in this Agreement, their respective successors, and permitted assigns.  No party may assign this Agreement or any of
its rights, interests, or obligations under this Agreement without the prior
written approval of the other parties, provided that the Company may assign
this Agreement or any of its rights, interests, or obligations under this
Agreement to any of its Affiliates without approval of the other parties.


(c)           Counterparts.  This
Agreement may be executed in one or more counterparts, including by facsimile
transmission, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.


(d)           Headings.  The section headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.


(e)           Governing Law.  This
Agreement shall be governed by and construed in accordance with the domestic
substantive laws of the State of Delaware without giving effect to any choice
or conflict of law provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware. 
All judicial proceedings brought against any party arising out of or
relating to this Agreement or any obligation hereunder shall exclusively be brought
in any state court of competent jurisdiction in the State of Delaware and each
party irrevocably accepts generally and unconditionally the exclusive
jurisdiction and venue of such court, waives any defense of forum non
conveniens and agrees that service of process in any such proceeding in any
such court may be made by registered or certified mail, return receipt
requested, to such party at the address specified in this Agreement.



 6
 









(f)            Amendments and Waivers.  This
Agreement may not be amended, supplemented, or otherwise modified except by an
instrument in writing signed by each of the parties to this Agreement.  The failure of any party to this Agreement to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part thereof or the right of any party
thereafter to enforce each and every such provision.  No waiver of any breach of this Agreement
shall be held to be a waiver of any other or subsequent breach.


(g)           Severability.  The
invalidity or unenforceability of any particular provision, or part of any
provision, of this Agreement shall not affect the other provisions or parts
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions or parts were omitted.


(h)           Notices.  All notices, consents,
waivers, and other communications required or permitted by this Agreement shall
be in writing and shall be deemed given to a party when (i) delivered to the
appropriate address by hand or by nationally recognized courier service (costs
prepaid); (ii) sent by facsimile with confirmation of transmission by the
transmitting equipment; or (iii) received or rejected by the addressee, if sent
by certified mail, return receipt requested; in each case to the following
addresses or facsimile numbers and marked to the attention of the Person (by
name or title) designated below (or to such other address or facsimile number,
or Person as a party may designate in writing to the other parties):


If
to the Company:


InfoLogix Systems Corporation


101 East County Line Road


Suite 210


Hatboro, PA 19040


Attention:  Chief
Financial Officer


Telephone:  (215)
604-0691


Fax:  (267) 681-0682


With
a copy to (which shall not constitute notice):


Drinker Biddle & Reath LLP


18th and Cherry Streets


One Logan Square


Philadelphia, PA 19103-6996


Attention: Stephen T.
Burdumy and Scott B. Connolly


Telephone:  (215) 988-2700


Fax:  (215) 988-2757


If
to Seller:


Healthcare Informatics Associates, Inc.


16306 Agate Point Road


Bainbridge Island, WA 98110


Attention:  Gerry Bartley


Telephone:  (206) 842-6797



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Fax:  (206) 842-6672


With a copy to (which shall not constitute notice):


The James Law Group


121 SW Morrison Street, Suite 900


Portland, Oregon 97204


Attention:  Ronald J. Miller


Telephone: (503) 228-5380


Fax:  (503) 228-5381


A copy of any and all
notices, consents, and other communications sent by facsimile pursuant to this
Agreement shall also be sent by United States certified mail to the appropriate
address in accordance with this Agreement.


(i)            Expenses.  Except as otherwise expressly
provided in this Agreement, each party shall bear its own expenses in
connection with this Agreement.


(j)            Construction.  Within this Agreement, the singular shall
include the plural and the plural shall include the singular, and any gender
shall include all other genders, all as the meaning and the context of this
Agreement shall require.  Except as
otherwise indicated, all agreements defined in this Agreement refer to the same
as from time to time amended or supplemented. 
The parties have participated jointly in the negotiation and drafting of
this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as having been drafted jointly by the parties and no presumption
or burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement.  The word “including” shall mean including
without limitation.  All references to
Sections refer to the Sections of this Agreement, and all references to
Exhibits refer to Exhibits attached to this Agreement, each of which is made a
part of this Agreement for all purposes. 
Any reference in this Agreement to wire transfers or other payments
requires payment in dollars of the United States of America unless some other
currency is expressly stated in that reference.



 8














IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the date first written above.


	
  

  	
   

  	
  INFOLOGIX SYSTEMS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ David T. Gulian

  	
   

  
	
   

  	
   

  	
  Name:
  

  	
  David T. Gulian

  
	
   

  	
   

  	
  Title:

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HEALTHCARE INFORMATICS
  ASSOCIATES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Gerry Bartley

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Gerry Bartley

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged and agreed:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Gerry Bartley

  	
   

  	
   

  	
   

  
	
  Gerry Bartley

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Mary Ann Bartley

  	
   

  	
   

  	
   

  
	
  Mary Ann Bartley