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.


 

















 


“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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