Exhibit 10.5

 

THIRD AMENDMENT TO CREDIT AGREEMENT

 

This Third Amendment to Credit Agreement (“Amendment”) is made as of this
    day of November, 2009, by and among Gemino Healthcare Finance, LLC
(“Lender”) and Clarient, Inc., Clarient Diagnostic Services, Inc. and
ChromaVision International, Inc.  (collectively, the “Borrowers”).

 

BACKGROUND

 

A.            Borrowers and Lender are parties to a certain Credit Agreement
dated July 31, 2008 (as modified and amended from time to time, the “Credit
Agreement”), pursuant to which Borrowers established certain financing
arrangements with Lender.  The Credit Agreement and all instruments, documents
and agreements executed in connection therewith, or related thereto are referred
to herein collectively as the “Existing Credit Documents.”  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement.

 

B.            Borrowers have informed Lender that an Event of Default has
occurred under the Credit Agreement due to Borrowers’ failure to comply with
Section 6.06(a) of the Credit Agreement for the fiscal quarter ending September
30, 2009 (“Existing Default”).

 

C.            Borrowers have requested and Lender has agreed to waive the
Existing Default and amend the terms and conditions of the Existing Credit
Documents, pursuant to the terms and conditions of this Amendment.

 

D.            Borrowers and Lender desire to set forth their agreement in
writing.

 

NOW THEREFORE, with the foregoing Background deemed incorporated by reference
and for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto, intending to be legally bound, covenant
and agree as follows:

 

1.             Waiver of Existing Default.  Borrowers acknowledge and agree that
as of this date, the Existing Default has occurred and remains outstanding under
the Existing Credit Documents.  Upon the effectiveness of this Amendment, Lender
hereby waives the Existing Default.  Such waiver shall in no way constitute a
waiver of any other Event of Default or Unmatured Event of Default which may
have occurred but which is not specifically referenced as an “Existing Default”
nor shall it obligate Lender to provide any further waiver of any other Event of
Default or Unmatured Event of Default (whether similar or dissimilar, including
any further Events of Default resulting from a failure to comply with Sections
6.06(a) of the Credit Agreement).

 

2.             Amendment.  Upon the effectiveness of this Amendment, the Credit
Agreement is hereby amended in the following manner:

 

(a)           The definitions of “Advance Rate” and “Fixed Charge Coverage
Ratio” set forth in Annex I to the Credit Agreement are hereby by amended and
restated as follows:

 

“Advance Rate” means eighty-five percent (85%) or such other percentage(s)
resulting from an adjustment pursuant to Section 2.01(e) hereof.

 

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“Fixed Charge Coverage Ratio” means the ratio of (A) EBITDA, to (B) the sum of
(i) interest expense paid in cash with respect to Senior Debt, plus (ii)
 interest expense paid in cash on Subordinated Debt, plus (iii) payments made
under Capital Leases, plus (iv) fees paid to Safeguard pursuant to the Safeguard
Indemnity, plus (v) unfinanced capital expenditures, plus (vi) taxes paid in
cash, all as determined for Borrowers on a consolidated basis in accordance with
GAAP, on a rolling four (4) quarter basis; provided, however, that such
calculation as of the fiscal quarter ending March 31, 2010 shall be for the most
recent fiscal quarterly period ending on such date on a cumulative, annualized
basis; such calculation for the fiscal quarter ending June 30, 2010 shall be for
the two (2) most recent fiscal quarterly periods ending on such date on a
cumulative, annualized basis and such calculation for the fiscal quarter ending
September 30, 2010 shall be for the three (3) most recent fiscal quarterly
periods ending on such date on a cumulative, annualized basis.

 

(B)           SECTION 2.01(D) OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND
RESTATED AS FOLLOWS:

 

(D)           THE INITIAL TERM OF THE CREDIT FACILITY (“INITIAL TERM”) SHALL
EXPIRE ON JANUARY 31, 2011.  ALL REVOLVING LOANS SHALL BE REPAID ON OR BEFORE
THE EARLIER OF THE LAST DAY OF THE INITIAL TERM OR UPON TERMINATION OF THE
CREDIT FACILITY OR TERMINATION OF THIS AGREEMENT (“MATURITY DATE”).  AFTER THE
MATURITY DATE NO FURTHER REVOLVING LOANS SHALL BE AVAILABLE FROM LENDER.

 

(C)           SECTION 2.03(C) OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND
RESTATED AS FOLLOWS:

 

(C)           SHOULD THE CREDIT FACILITY BE TERMINATED FOR ANY REASON PRIOR TO
THE LAST DAY OF THE INITIAL TERM, IN ADDITION TO REPAYMENT OF ALL OBLIGATIONS
THEN OUTSTANDING AND TERMINATION OF LENDER’S COMMITMENT HEREUNDER, BORROWERS
SHALL UNCONDITIONALLY BE OBLIGATED TO PAY AT THE TIME OF SUCH TERMINATION, A FEE
(“TERMINATION FEE”) IN AN AMOUNT EQUAL TO ONE PERCENT (1.0%) OF THE REVOLVING
LOAN COMMITMENT.

 

BORROWERS ACKNOWLEDGE THAT THE TERMINATION FEE IS AN ESTIMATE OF LENDER’S
DAMAGES IN THE EVENT OF EARLY TERMINATION AND IS NOT A PENALTY.  IN THE EVENT OF
TERMINATION OF THE CREDIT FACILITY, ALL OF THE OBLIGATIONS SHALL BE IMMEDIATELY
DUE AND PAYABLE UPON THE TERMINATION DATE STATED IN ANY NOTICE OF TERMINATION. 
ALL UNDERTAKINGS, AGREEMENTS, COVENANTS, WARRANTIES AND REPRESENTATIONS OF
BORROWERS CONTAINED IN THE LOAN DOCUMENTS SHALL SURVIVE ANY SUCH TERMINATION,
AND LENDER SHALL RETAIN ITS SECURITY INTERESTS IN THE COLLATERAL AND ALL OF ITS
RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS NOTWITHSTANDING SUCH TERMINATION
UNTIL BORROWERS HAVE PAID THE OBLIGATIONS TO LENDER, IN FULL, IN IMMEDIATELY
AVAILABLE FUNDS, TOGETHER WITH THE APPLICABLE TERMINATION FEE, IF ANY. 

 

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NOTWITHSTANDING THE PAYMENT IN FULL OF THE OBLIGATIONS, LENDER SHALL NOT BE
REQUIRED TO TERMINATE ITS SECURITY INTERESTS IN THE COLLATERAL UNLESS, WITH
RESPECT TO ANY LOSS OR DAMAGE LENDER MAY INCUR AS A RESULT OF DISHONORED CHECKS
OR OTHER ITEMS OF PAYMENT RECEIVED BY LENDER FROM BORROWERS OR ANY OBLIGOR AND
APPLIED TO THE OBLIGATIONS, LENDER SHALL, AT ITS OPTION, (I) HAVE RECEIVED A
WRITTEN AGREEMENT EXECUTED BY BORROWERS AND BY ANY PERSON WHOSE LOANS OR OTHER
ADVANCES TO BORROWERS ARE USED IN WHOLE OR IN PART TO SATISFY THE OBLIGATIONS,
INDEMNIFYING LENDER FROM ANY SUCH LOSS OR DAMAGE; (II) HAVE RETAINED SUCH
MONETARY RESERVES AND SECURITY INTERESTS ON THE COLLATERAL FOR SUCH PERIOD OF
TIME AS LENDER, IN ITS REASONABLE DISCRETION, MAY DEEM NECESSARY TO PROTECT
LENDER FROM ANY SUCH LOSS OR DAMAGE; OR (III) HAVE RECEIVED SUCH OTHER WRITTEN
AGREEMENTS AND/OR ARRANGEMENTS SATISFACTORY TO LENDER, IN ITS SOLE DISCRETION,
WITH RESPECT TO SUCH MATTERS.

 

(D)           EFFECTIVE AS OF DECEMBER 1, 2009, SECTION 2.03(D) OF THE CREDIT
AGREEMENT IS HEREBY AMENDED AND RESTATED AS FOLLOWS:

 

(D)           BORROWERS SHALL UNCONDITIONALLY PAY TO LENDER A FEE (“UNUSED LINE
FEE”) EQUAL TO ONE-HALF OF ONE PERCENT (0.50%) PER ANNUM OF THE UNUSED PORTION
OF THE CREDIT FACILITY.  THE UNUSED PORTION OF THE CREDIT FACILITY SHALL BE THE
DIFFERENCE BETWEEN THE REVOLVING LOAN COMMITMENT AND THE AVERAGE DAILY
OUTSTANDING BALANCE OF THE REVOLVING LOANS DURING EACH MONTH (OR PORTION
THEREOF, AS APPLICABLE), WHICH FEES SHALL BE CALCULATED AND PAYABLE MONTHLY, IN
ARREARS, AND SHALL BE DUE AND PAYABLE ON THE FIRST CALENDAR DAY OF EACH MONTH.

 

(E)           SECTION 6.06 OF THE CREDIT AGREEMENT IS HEREBY AMENDED AND
RESTATED AS FOLLOWS:

 

6.06         Financial Covenants.  Borrowers shall perform and comply with each
of the following financial covenants as reflected and computed from their
financial statements:

 

(a)           Borrowers shall maintain a Loan Turn Days of not greater than
thirty-five (35) days, measured as of December 31, 2009.

 

(B)           RESERVED

 

(C)           BORROWERS SHALL MAINTAIN, AT ALL TIMES, A FIXED CHARGE COVERAGE
RATIO, MEASURED QUARTERLY AT THE END OF EACH FISCAL QUARTER, OF NOT LESS THAN
(I) 1.00 TO 1.0 AS OF THE FISCAL QUARTER ENDING MARCH 31, 2010, (II) 1.10 TO 1.0
AS OF THE FISCAL QUARTER ENDING JUNE 30, 2010, AND (III) 1.20 TO 1.0 AS OF THE
FISCAL QUARTER ENDING SEPTEMBER 30, 2010 AND EACH FISCAL QUARTER THEREAFTER.

 

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3.             REPRESENTATIONS AND WARRANTIES.  EACH BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT:

 

(A)           ALL WARRANTIES AND REPRESENTATIONS MADE TO LENDER UNDER THE CREDIT
AGREEMENT AND THE EXISTING CREDIT DOCUMENTS ARE TRUE AND CORRECT AS OF THE DATE
HEREOF (EXCEPT AS TO SUCH WARRANTIES AND REPRESENTATIONS WHICH ARE AS OF A
SPECIFIC DATE, WHICH WARRANTIES AND REPRESENTATIONS ARE TRUE AND CORRECT AS OF
SUCH DATE).

 

(B)           THE EXECUTION AND DELIVERY BY SUCH BORROWER OF THIS AMENDMENT AND
THE PERFORMANCE BY IT OF THE TRANSACTIONS HEREIN CONTEMPLATED (I) ARE AND WILL
BE WITHIN ITS POWERS, (II) HAVE BEEN AUTHORIZED BY ALL NECESSARY ORGANIZATIONAL
ACTION, AND (III) ARE NOT AND WILL NOT BE IN CONTRAVENTION OF ANY ORDER OF ANY
COURT OR OTHER AGENCY OF GOVERNMENT, OF LAW OR ANY OTHER INDENTURE, AGREEMENT OR
UNDERTAKING TO WHICH ANY BORROWER IS A PARTY OR BY WHICH THE PROPERTY OF SUCH
BORROWER IS BOUND, OR BE IN CONFLICT WITH, RESULT IN A BREACH OF, OR CONSTITUTE
(WITH DUE NOTICE AND/OR LAPSE OF TIME) A DEFAULT UNDER ANY SUCH INDENTURE,
AGREEMENT OR UNDERTAKING OR RESULT IN THE IMPOSITION OF ANY LIEN, CHARGE OR
ENCUMBRANCE OF ANY NATURE ON ANY OF THE PROPERTIES OF SUCH BORROWER.

 

(C)           THIS AMENDMENT AND ANY ASSIGNMENT, INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, IS VALID, BINDING AND
ENFORCEABLE IN ACCORDANCE WITH ITS RESPECTIVE TERMS.

 

(D)           NO EVENT OF DEFAULT OR UNMATURED EVENT OF DEFAULT, OTHER THAN THE
EXISTING DEFAULT, HAS OCCURRED AND IS CONTINUING UNDER THE CREDIT AGREEMENT OR
ANY OF THE OTHER EXISTING CREDIT DOCUMENTS.

 

(E)           THE COMERICA SUBORDINATED DEBT HAS BEEN PAID IN FULL (OTHER THAN
WITH RESPECT TO THE COMERICA LETTER OF CREDIT (AS DEFINED IN THE COMERICA LETTER
AGREEMENT (AS DEFINED BELOW))) AND THE COMERICA LOAN DOCUMENTS HAVE BEEN
TERMINATED PURSUANT TO THE TERMS OF THE CERTAIN LETTER AGREEMENT DATED MARCH 26,
2009 AMONG BORROWERS AND LENDER AND ACKNOWLEDGED BY COMERICA (“COMERICA LETTER
AGREEMENT”).

 

(F)            THE SAFEGUARD SUBORDINATED DEBT HAS BEEN PAID IN FULL (EXCEPT
CERTAIN OBLIGATIONS WITH RESPECT TO THAT CERTAIN AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT DATED FEBRUARY 27, 2009 AMONG CLARIENT, SAFEGUARD,
SAFEGUARD SCIENTIFICS, INC. AND SAFEGUARD DELAWARE (“SAFEGUARD REGISTRATION
RIGHTS AGREEMENT”) AND THE SAFEGUARD LOAN DOCUMENTS HAVE BEEN TERMINATED (OTHER
THAN CERTAIN WARRANTS (AS DEFINED IN THE SAFEGUARD SUBORDINATION AGREEMENT) AND
THE SAFEGUARD REGISTRATION RIGHTS AGREEMENT), PURSUANT TO THE TERMS OF THAT
CERTAIN LETTER AGREEMENT DATED MAY 14, 2009 AMONG BORROWERS AND LENDER.

 

4.             AMENDMENT FEE.  PRIOR THE TO THE EFFECTIVENESS OF THIS AMENDMENT,
BORROWERS SHALL PAY TO LENDER A NONREFUNDABLE AMENDMENT FEE (“AMENDMENT FEE”)
EQUAL TO $5,000, WHICH AMENDMENT FEE SHALL BE FULLY EARNED UPON EXECUTION OF
THIS AMENDMENT.

 

5.             EFFECTIVENESS CONDITIONS.  THIS AMENDMENT SHALL BE EFFECTIVE UPON
COMPLETION OF THE FOLLOWING CONDITIONS PRECEDENT (ALL DOCUMENTS AND OTHER ITEMS
TO BE IN FORM AND SUBSTANCE SATISFACTORY TO LENDER AND LENDER’S COUNSEL):

 

(A)           EXECUTION AND DELIVERY BY BORROWERS OF THIS AMENDMENT;

 

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(B)           DELIVERY BY BORROWERS OF CERTIFIED COPIES OF RESOLUTIONS OF EACH
BORROWER’S BOARD OF DIRECTORS, GENERAL PARTNERS, MEMBERS OR MANAGERS, AS
APPLICABLE, AUTHORIZING THE EXECUTION OF THIS AMENDMENT AND EACH DOCUMENT
REQUIRED TO BE DELIVERED BY ANY SECTION HEREOF;

 

(C)           NO UNMATURED EVENT OF DEFAULT OR EVENT OF DEFAULT, OTHER THAN THE
EXISTING DEFAULT, SHALL HAVE OCCURRED AND BE CONTINUING UNDER THE EXISTING
CREDIT DOCUMENTS;

 

(D)           PAYMENT BY BORROWERS OF ANY AND ALL COSTS, FEES AND EXPENSES OF
LENDER (INCLUDING, THE AMENDMENT FEE AND ATTORNEYS’ FEES) IN CONNECTION WITH
THIS AMENDMENT AND THE TRANSACTION CONTEMPLATED HEREBY; AND

 

(E)           EXECUTION AND/OR DELIVERY BY BORROWERS OF ALL AGREEMENTS,
INSTRUMENTS AND DOCUMENTS REQUESTED BY LENDER TO EFFECTUATE AND IMPLEMENT THE
TERMS HEREOF AND THE EXISTING CREDIT DOCUMENTS.

 

6.             CONFIRMATION OF INDEBTEDNESS.  BORROWERS HEREBY ACKNOWLEDGE AND
CONFIRM THAT AS OF THE CLOSE OF BUSINESS ON NOVEMBER 10, 2009, BORROWERS ARE
INDEBTED TO LENDER, WITHOUT DEFENSE, SETOFF, CLAIM OR COUNTERCLAIM, UNDER THE
EXISTING CREDIT DOCUMENTS, IN THE AGGREGATE PRINCIPAL AMOUNT OF $5,968,656.59
PLUS ALL FEES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) INCURRED TO DATE
IN CONNECTION WITH THE EXISTING CREDIT DOCUMENTS.

 

7.             RATIFICATION OF EXISTING CREDIT DOCUMENTS.  EXCEPT AS EXPRESSLY
SET FORTH HEREIN, ALL OF THE TERMS AND CONDITIONS OF THE CREDIT AGREEMENT AND
EXISTING CREDIT DOCUMENTS ARE HEREBY RATIFIED AND CONFIRMED AND CONTINUE
UNCHANGED AND IN FULL FORCE AND EFFECT.  ALL REFERENCES TO THE CREDIT AGREEMENT
SHALL MEAN THE CREDIT AGREEMENT AS MODIFIED BY THIS AMENDMENT.

 

8.             SECURITY INTEREST.  BORROWERS HEREBY CONFIRM AND AGREE THAT ALL
SECURITY INTERESTS AND LIENS GRANTED TO LENDER CONTINUE TO BE PERFECTED, FIRST
PRIORITY LIENS AND REMAIN IN FULL FORCE AND EFFECT AND SHALL CONTINUE TO SECURE
THE OBLIGATIONS.  ALL COLLATERAL REMAINS FREE AND CLEAR OF ANY LIENS OTHER THAN
LIENS IN FAVOR OF LENDER AND PERMITTED LIENS.  NOTHING HEREIN CONTAINED IS
INTENDED TO IN ANY WAY IMPAIR OR LIMIT THE VALIDITY, PRIORITY, AND EXTENT OF
LENDER’S EXISTING SECURITY INTEREST IN AND LIENS UPON THE COLLATERAL.

 

9.             GOVERNING LAW.  THIS AMENDMENT, AND ALL MATTERS ARISING OUT OF OR
RELATING TO THIS AMENDMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS, AND SHALL BE CONSTRUED WITHOUT THE AID OF ANY
CANON, CUSTOM OR RULE OF LAW REQUIRING CONSTRUCTION AGAINST THE DRAFTSMAN.

 

10.           RELEASE. AS FURTHER CONSIDERATION FOR LENDER’S AGREEMENT TO GRANT
THE ACCOMMODATIONS SET FORTH HEREIN, EACH BORROWER HEREBY WAIVES AND RELEASES
AND FOREVER DISCHARGES LENDER AND ITS OFFICERS, DIRECTORS, ATTORNEYS, AGENTS AND
EMPLOYEES FROM ANY LIABILITY, DAMAGE, CLAIM, LOSS OR EXPENSE OF ANY KIND THAT
BORROWERS, OR ANY OF THEM, MAY HAVE AGAINST LENDER ARISING OUT OF OR RELATING TO
THE OBLIGATIONS, THIS AMENDMENT OR THE EXISTING CREDIT DOCUMENTS.

 

11.           COUNTERPARTS.  THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH WHEN SO EXECUTED SHALL BE DEEMED TO BE AN ORIGINAL,
AND SUCH COUNTERPARTS TOGETHER SHALL CONSTITUTE ONE AND THE SAME RESPECTIVE
AGREEMENT.  SIGNATURE BY FACSIMILE OR PDF SHALL BIND THE PARTIES HERETO.

 

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IN WITNESS WHEREOF, the parties have executed this Amendment the day and year
first above written.

 

BORROWERS:

CLARIENT, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

CLARIENT DIAGNOSTIC SERVICES, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

CHROMAVISION INTERNATIONAL, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

LENDER:

GEMINO HEALTHCARE FINANCE, LLC

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

[SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT]

 

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