Exhibit 10.1


 


CREDIT
AGREEMENT


 


between


 


CLARIENT, INC.

CLARIENT DIAGNOSTIC SERVICES, INC.

CHROMAVISION INTERNATIONAL, INC.


 


and


 


such other
Persons joined hereto as Borrowers from time to time,


 


as Borrowers,


 


with


 


GEMINO
HEALTHCARE FINANCE, LLC,


 


as Lender


 





















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  PAGE

  
	
  ARTICLE 1

  	
   

  	
  DEFINITIONS, ACCOUNTING
  TERMS AND PRINCIPLES OF CONSTRUCTION

  	
  1

  
	
  1.01

  	
  Terms Defined

  	
  1

  
	
  1.02

  	
  Matters of Construction

  	
  1

  
	
  1.03

  	
  Accounting Principles

  	
  1

  
	
  1.04

  	
  Fiscal Quarters

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
   

  	
  THE LOANS

  	
  2

  
	
  2.01

  	
  Credit Facility - Description

  	
  2

  
	
  2.02

  	
  Funding Procedures

  	
  3

  
	
  2.03

  	
  Interest and Fees

  	
  3

  
	
  2.04

  	
  Additional Interest Provisions

  	
  4

  
	
  2.05

  	
  Payments

  	
  5

  
	
  2.06

  	
  Use of Proceeds

  	
  5

  
	
  2.07

  	
  Lockboxes and Collections

  	
  5

  
	
  2.08

  	
  Application of Proceeds of Collateral

  	
  7

  
	
  2.09

  	
  Fees

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  	
  COLLATERAL

  	
  7

  
	
  3.01

  	
  Description

  	
  7

  
	
  3.02

  	
  Extent of Security Interests

  	
  8

  
	
  3.03

  	
  Lien Documents

  	
  8

  
	
  3.04

  	
  Other Actions

  	
  8

  
	
  3.05

  	
  Searches

  	
  8

  
	
  3.06

  	
  Good Standing Certificates

  	
  9

  
	
  3.07

  	
  Filing Security Agreement

  	
  9

  
	
  3.08

  	
  Power of Attorney

  	
  9

  
	
  3.09

  	
  [Reserved]

  	
  9

  
	
  3.10

  	
  Limited License

  	
  9

  
	
  3.11

  	
  Credit Balances; Additional Collateral

  	
  9

  
	
  3.12

  	
  Reference to Other Loan Documents

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  	
  CLOSING AND CONDITIONS
  PRECEDENT TO ADVANCES

  	
  10

  
	
  4.01

  	
  Resolutions, Opinions, and Other Documents

  	
  10

  
	
  4.02

  	
  Additional Preconditions to Revolving Loans

  	
  11

  
	
  4.03

  	
  Absence of Certain Events

  	
  12

  
	
  4.04

  	
  Compliance with this Agreement

  	
  12

  
	
  4.05

  	
  Closing Certificate

  	
  12

  
	
  4.06

  	
  Closing

  	
  12

  
	
  4.07

  	
  Non-Waiver of Rights

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  12

  
	
  5.01

  	
  Organization and Validity

  	
  12

  
	
  5.02

  	
  Places of Business

  	
  13

  
	
  5.03

  	
  Healthcare Matters

  	
  13

  
	
  5.04

  	
  Pending Litigation

  	
  15

  
	
  5.05

  	
  [Reserved]

  	
  15

  
	
  5.06

  	
  Title to Collateral

  	
  15

  
	
  5.07

  	
  Governmental Consent

  	
  16

  
	
  5.08

  	
  Taxes

  	
  16

  
	
  5.09

  	
  Financial Statements

  	
  16

  
	
  5.10

  	
  Full Disclosure

  	
  16

  
	
  5.11

  	
  Guarantees, Contracts, etc.

  	
  16

  
	
  5.12

  	
  Compliance with Laws

  	
  17

  
	
  5.13

  	
  Other Associations

  	
  17

  



 


i





















 


	
  5.14

  	
  Environmental Matters

  	
  17

  
	
  5.15

  	
  Capital Stock

  	
  17

  
	
  5.16

  	
  Lockboxes

  	
  18

  
	
  5.17

  	
  Borrowing Base Reports

  	
  18

  
	
  5.18

  	
  Security Interest

  	
  18

  
	
  5.19

  	
  Accounts

  	
  18

  
	
  5.20

  	
  ERISA

  	
  18

  
	
  5.21

  	
  Representations and Warranties for each Revolving Loan

  	
  18

  
	
  5.22

  	
  Interrelatedness of Borrowers

  	
  20

  
	
  5.23

  	
  Commercial Tort Claims

  	
  20

  
	
  5.24

  	
  Letter-of-Credit Rights

  	
  20

  
	
  5.25

  	
  Intellectual Property

  	
  20

  
	
  5.26

  	
  Solvency

  	
  20

  
	
  5.27

  	
  Schedules

  	
  21

  
	
  5.28

  	
  Comerica Loan Documents

  	
  21

  
	
  5.29

  	
  Safeguard Loan Documents

  	
  21

  
	
  5.30

  	
  Services Agreements

  	
  21

  
	
  5.31

  	
  Foreign Subsidiaries

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  	
  AFFIRMATIVE COVENANTS

  	
  21

  
	
  6.01

  	
  Payment of Taxes and Claims

  	
  21

  
	
  6.02

  	
  Maintenance of Insurance, Financial Records and Existence

  	
  21

  
	
  6.03

  	
  Business Conducted

  	
  22

  
	
  6.04

  	
  Litigation

  	
  22

  
	
  6.05

  	
  Taxes

  	
  22

  
	
  6.06

  	
  Financial Covenants

  	
  22

  
	
  6.07

  	
  Financial and Business Information

  	
  22

  
	
  6.08

  	
  Officer’s Certificate

  	
  23

  
	
  6.09

  	
  Inspection

  	
  24

  
	
  6.10

  	
  Tax Returns and Reports

  	
  24

  
	
  6.11

  	
  Material Adverse Developments

  	
  24

  
	
  6.12

  	
  Places of Business

  	
  24

  
	
  6.13

  	
  Notice of Action

  	
  24

  
	
  6.14

  	
  Verification of Information

  	
  24

  
	
  6.15

  	
  Accounts Receivables Monitoring System

  	
  25

  
	
  6.16

  	
  Commercial Tort Claim

  	
  25

  
	
  6.17

  	
  Compliance with Laws

  	
  25

  
	
  6.18

  	
  Collateral Reporting

  	
  25

  
	
  6.19

  	
  Collateral

  	
  25

  
	
  6.20

  	
  Intellectual Property

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
   

  	
  NEGATIVE COVENANTS

  	
  26

  
	
  7.01

  	
  Merger, Consolidation, Dissolution or Liquidation

  	
  26

  
	
  7.02

  	
  Liens and Encumbrances

  	
  27

  
	
  7.03

  	
  Negative Pledge

  	
  27

  
	
  7.04

  	
  Transactions With Affiliates or Subsidiaries

  	
  27

  
	
  7.05

  	
  Guarantees

  	
  27

  
	
  7.06

  	
  Investments

  	
  27

  
	
  7.07

  	
  Loans to Other Persons

  	
  28

  
	
  7.08

  	
  Change in Ownership/Management

  	
  28

  
	
  7.09

  	
  Subordinated Debt Payments

  	
  28

  
	
  7.10

  	
  Distributions

  	
  28

  
	
  7.11

  	
  No Change in Business

  	
  28

  
	
  7.12

  	
  Indebtedness

  	
  29

  
	
  7.13

  	
  Capital Expenditures

  	
  29

  
	
  7.14

  	
  Services Agreement

  	
  29

  
	
  7.15

  	
  Foreign Subsidiaries

  	
  30

  



 


ii





















 


	
  ARTICLE 8

  	
   

  	
  DEFAULT

  	
  30

  
	
  8.01

  	
  Events of Default

  	
  30

  
	
  8.02

  	
  Cure

  	
  32

  
	
  8.03

  	
  Rights and Remedies on Default

  	
  32

  
	
  8.04

  	
  WARRANT OF ATTORNEY TO CONFESS JUDGMENT

  	
  34

  
	
  8.05

  	
  Nature of Remedies

  	
  35

  
	
  8.06

  	
  Set-Off

  	
  35

  
	
  8.07

  	
  Application of Proceeds

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  	
  MISCELLANEOUS

  	
  36

  
	
  9.01

  	
  GOVERNING LAW

  	
  36

  
	
  9.02

  	
  Integrated Agreement

  	
  36

  
	
  9.03

  	
  Waiver and Indemnity

  	
  36

  
	
  9.04

  	
  Time

  	
  37

  
	
  9.05

  	
  Expenses of Lender

  	
  37

  
	
  9.06

  	
  Confidentiality

  	
  37

  
	
  9.07

  	
  Notices

  	
  37

  
	
  9.08

  	
  Brokerage

  	
  38

  
	
  9.09

  	
  Headings

  	
  38

  
	
  9.10

  	
  Survival

  	
  38

  
	
  9.11

  	
  Successors and Assigns

  	
  38

  
	
  9.12

  	
  Duplicate Originals

  	
  38

  
	
  9.13

  	
  Modification

  	
  38

  
	
  9.14

  	
  Signatories

  	
  38

  
	
  9.15

  	
  Third Parties

  	
  38

  
	
  9.16

  	
  Waivers

  	
  38

  
	
  9.17

  	
  CONSENT TO JURISDICTION

  	
  39

  
	
  9.18

  	
  WAIVER OF JURY TRIAL

  	
  39

  
	
  9.19

  	
  Publication

  	
  39

  
	
  9.20

  	
  Discharge of Taxes, Borrowers’ Obligations, Etc.

  	
  39

  
	
  9.21

  	
  Injunctive Relief

  	
  39

  
	
  9.22

  	
  Assignment or Syndication by Lender

  	
  40

  
	
  9.23

  	
  Severability

  	
  40

  
	
  9.24

  	
  Authority

  	
  40

  
	
  9.25

  	
  Usury Limit

  	
  40

  
	
  9.26

  	
  Termination

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  SPECIAL INTER-BORROWER
  PROVISIONS

  	
  41

  
	
  10.01

  	
  Certain Borrower Acknowledgments and Agreements

  	
  41

  
	
  10.02

  	
  Maximum Amount of Joint and Several Liability

  	
  41

  
	
  10.03

  	
  Authorization of Borrower Representative by Borrowers

  	
  42

  
	
  10.04

  	
  Joint and Several Liability

  	
  42

  



 


iii





















 


LIST OF EXHIBITS AND ANNEXES


 


	
  Exhibit 2.01(b)

  	
   

  	
  Form of Revolving Note

  
	
  Exhibit 2.02(b)

  	
   

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit 2.02(c)

  	
   

  	
  Loan Request

  
	
  Exhibit 4.02(c)

  	
   

  	
  Notice Letter Re: Commercial Obligors

  
	
  Exhibit 4.02(d)

  	
   

  	
  Notice Letter Re: Government Obligors

  
	
  Exhibit 6.08

  	
   

  	
  Officer’s Certificate

  
	
   

  	
   

  	
   

  
	
  Annex I

  	
   

  	
  Definitions

  



 


iv





















 


LIST OF SCHEDULES


 


	
  Schedule 1.01

  	
   

  	
  Ineligible Obligors and Concentration Limits

  
	
  Schedule 2.01

  	
   

  	
  Borrowers’ States of Qualifications/ Jurisdictions of Organization

  
	
  Schedule 2.02

  	
   

  	
  Chief Executive Office/Other Locations of Collateral

  
	
  Schedule 2.03

  	
   

  	
  Places of Business/Other Names

  
	
  Schedule 2.04

  	
   

  	
  Provider Identification Numbers

  
	
  Schedule 2.05

  	
   

  	
  Pending Litigation

  
	
  Schedule 2.06

  	
   

  	
  Permitted Liens

  
	
  Schedule 2.07

  	
   

  	
  Fiscal Year End

  
	
  Schedule 2.08

  	
   

  	
  Organization Number/Tax I.D. Numbers

  
	
  Schedule 2.09

  	
   

  	
  Existing Guaranties, Investments and Borrowings

  
	
  Schedule 2.10

  	
   

  	
  Other Associations

  
	
  Schedule 2.11

  	
   

  	
  Environmental Matters

  
	
  Schedule 2.12

  	
   

  	
  Capital Stock

  
	
  Schedule 2.13

  	
   

  	
  Commercial Tort Claims

  
	
  Schedule 2.14

  	
   

  	
  Letter-of-Credit Rights

  
	
  Schedule 2.15

  	
   

  	
  Intellectual Property

  
	
  Schedule 2.16

  	
   

  	
  Investments

  
	
  Schedule 2.17

  	
   

  	
  Indebtedness

  
	
  Schedule 7.04(a)

  	
   

  	
  Transactions with Affiliates or Subsidiaries

  



 


v





















 


CREDIT AGREEMENT


 


THIS CREDIT AGREEMENT (“Agreement”)
is dated this 31st day of July 2008, by and among CLARIENT, INC., a
Delaware corporation (“Clarient”), CLARIENT DIAGNOSTIC SERVICES, INC., a
Delaware corporation (“Clarient Diagnostics”), CHROMAVISION
INTERNATIONAL, INC., a Delaware corporation (“ChromaVision”) and such
other Persons joined hereto as a Borrower from time to time (together
with Clarient, Clarient Diagnostics and ChromaVision, “Borrowers”
and each individually a “Borrower”) and GEMINO HEALTHCARE FINANCE, LLC,
a Delaware limited liability company, as lender (“Lender”).


 


RECITALS


 


WHEREAS, Borrowers have requested
that Lender make available to them, on a joint and several basis, a Credit
Facility in the maximum amount of $8,000,000 which will be secured by a first
priority perfected security interest in the Collateral of Borrowers, including,
without limitation, the Accounts and other Collateral of Borrowers; and


 


WHEREAS, Lender is willing to
make the Credit Facility available to Borrowers pursuant to the terms and
provisions hereinafter set forth; and


 


WHEREAS, the parties desire to
set forth the terms and conditions of their relationship to writing.


 


NOW, THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:


 


ARTICLE 1


 


DEFINITIONS, ACCOUNTING TERMS AND

PRINCIPLES OF CONSTRUCTION


 


1.01         Terms Defined.  As used in this
Agreement, those terms set forth in Annex I shall have the respective meanings
set forth therein.


 


1.02         Matters of Construction.  The terms “herein,”
“hereof” and “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision.  The words “include”, “includes”
and “including” when used in any Loan Document, shall be deemed to be followed
by the phrase “without limitation”. Any pronoun used shall be deemed to cover
all genders.  Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa.  All references to statutes and
related regulations shall include any amendments of same and any successor
statutes and regulations.  Unless
otherwise provided, all references to any instruments or agreements to which
Lender and/or, where applicable, a Borrower, is a party, including, without
limitation, references to any of the Loan Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.


 


1.03         Accounting Principles.  Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, this shall be done
in accordance with GAAP, to the extent applicable, except as otherwise
expressly provided in this Agreement.


 


1.04         Fiscal Quarters.  For the
purposes hereof, “fiscal quarter” shall mean each quarterly accounting period
during any fiscal year; provided, that, all references to the fiscal quarter
ending March 31, June 30, September 30 or December 31 shall
mean the first, second, third or fourth fiscal quarter of the applicable fiscal
year, respectively, irrespective of the actual date on which such fiscal
quarter may end.


 





















 


ARTICLE 2


 


THE LOANS


 


2.01                           Credit
Facility - Description


 


(a)           Subject to the terms and conditions
of this Agreement, Lender hereby establishes for the joint and several benefit
of Borrowers, a credit facility (“Credit Facility”) which shall include
Advances which may be extended by Lender to or for the benefit of Borrowers
from time to time hereunder in the form of revolving loans (“Revolving Loans”).  The aggregate outstanding amount of all
Advances shall not at any time exceed the Borrowing Base.  In no event shall the initial principal
amount of any Revolving Loan be less than $25,000.00.  Subject to such limitation, the outstanding
balance of all Revolving Loans may fluctuate from time to time, to be reduced
by repayments made by Borrowers, to be increased by future Revolving Loans which
may be made by Lender.  If the aggregate
outstanding amount of all Advances (whether in the form of Revolving Loans or
otherwise) exceeds the Borrowing Base, Borrowers shall immediately repay such
excess in full.  Lender has the right at
any time, and from time to time, to set aside reasonable reserves against the
Borrowing Base in such amounts as it may deem appropriate.  The Obligations of Borrowers under the Credit
Facility and this Agreement are joint and several and shall at all times be
absolute and unconditional.


 


(b)           At Closing, Borrowers shall execute
and deliver a promissory note to Lender in the principal amount of Eight
Million Dollars ($8,000,000) (as may be amended, modified or replaced from time
to time, the “Revolving Note”). 
The Revolving Note shall evidence Borrowers joint and several, absolute
and unconditional obligation to repay Lender for all Revolving Loans made by
Lender under the Credit Facility, with interest as herein and therein
provided.  Each and every Revolving Loan
under the Credit Facility shall be deemed evidenced by the Revolving Note,
which is deemed incorporated herein by reference and made a part hereof.  The Revolving Note shall be substantially in
the form set forth in Exhibit 2.01(b) attached hereto and made
a part hereof.


 


(c)           [Reserved.]


 


(d)           The initial term of the Credit
Facility (“Initial Term”) shall expire on January 31, 2009; provided
that, (i) so long as (A) no Unmatured Event of Default or Event of
Default has occurred and is continuing,  (B) no
later than thirty (30) days prior to the last day of the Initial Term,
Borrowers have delivered to Lender evidence, in form and substance satisfactory
to Lender, that the First SubDebt Extension has occurred and (C) Borrowers
shall have executed and delivered to Lender such amendments and other documents
required by Lender to amend Section 6.06 hereof, such amendment to include
financial covenants for the period from January 1, 2009 through January 31,
2010, in form and substance satisfactory to Lender in its sole discretion, and
such other terms and conditions required by Lender, all in form and substance
satisfactory to Lender, the Initial Term shall be automatically extended to January 31,
2010 and (ii) so long as (A) no Unmatured Event of Default or Event
of Default has occurred and is continuing, (B) no later than thirty (30)
days prior to the last day of the Initial Term (as extended pursuant to Section 2.01(d)(i) above),
Borrowers have delivered to Lender evidence, in form and substance satisfactory
to Lender, that the Second SubDebt Extension has occurred, and (C) Borrowers
shall have executed and delivered to Lender such amendments and other documents
required by Lender to amend Section 6.06 hereof, such amendment to include
financial covenants for the period from January 1, 2010 through January 31,
2011, in form and substance satisfactory to Lender in its sole discretion, and
such other terms and conditions required by Lender, all in form and substance
satisfactory to Lender, such Initial Term shall be automatically extended to 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.


 


(e)           From time to time, upon not less than
three (3) Business Days notice to Borrowers, Lender may adjust the Advance
Rate in order to reflect, in Lender’s reasonable judgment, the experience with Borrowers
(including by way of illustration, to adjust for any known or potential offsets
by Medicare or Medicaid) or the aggregate amount or percentage of the
Collections with respect to the Accounts.


 


2





















 


2.02                           Funding
Procedures.


 


(a)           Subject to the terms and conditions
of this Agreement and so long as no Event of Default or Unmatured Event of
Default has occurred and is continuing hereunder, Lender will make Revolving
Loans to Borrowers upon request. Borrowers shall provide Lender with a signed
Borrowing Base Certificate on a specified Business Day of each week (such day
to be mutually agreeable to Borrowers and Lender (such date shall be referred
to herein as the “Settlement Date”, whether or not Borrowers have
requested a Revolving Loan to be made on such date)). Borrowers may request a
Revolving Loan on the Settlement Date or any other day of the week (such day
along with the Settlement Date are referred to herein as the “Funding Date”).  Whether or not Borrowers have requested a
Revolving Loan to be made on such date, Lender may at any time deduct from the
Borrowing Base an amount equal to all fees, Expenses, principal, interest or
other amounts due and payable to Lender hereunder, and such deduction shall be
deemed to be a Revolving Loan and an Advance hereunder.


 


(b)           Not later than 11:00 A.M.
(Eastern Time) two (2) Business Days prior to each Settlement Date (“Download
Date”), Borrowers will deliver to Lender the computer file data associated
with the Accounts, which shall include without limitation, the information
(including changes in the Obligor reimbursement rates and changes in federal or
state laws or regulations affecting payment for medical services), required by
Lender to enable Lender to process and value the outstanding Accounts of
Borrowers, as well as bill and collect such Accounts following an Event of
Default (“Accounts Detail File”). 
Upon completion of the processing of the data with respect to such
Accounts, Lender or its agent will prepare and deliver to Borrowers by no later
than 10:00 A.M. (Eastern Time) on the second Business Day following the
Download Date (or if such Accounts Detail File is not delivered until after
1:00 P.M. (Eastern Time) on the Download Date, the third Business Day
following the Download Date), a report regarding the Borrowing Base then in
effect, which shall be substantially in the form of Exhibit 2.02(b) hereto
(a “Borrowing Base Report”).


 


(c)           If Borrowers request that a Revolving
Loan be made on any date other than the Settlement Date, Borrowers shall
deliver to Lender an executed Borrowing Base Report and a written request for
such Revolving Loan substantially in the form of Exhibit 2.02(c) hereto
(a “Loan Request”).  The Borrowing
Base Report and Loan Request may be delivered via telecopy and Borrowers
acknowledge that Lenders may rely on Borrowers signatures by facsimile, which
shall be legally binding upon Borrowers.


 


(d)           Subject to the terms and conditions
of this Agreement, if the Borrowing Base Report (if applicable) and Loan
Request are delivered to Lender before 12:00 P.M. (Eastern Time) on the
Funding Date, Lender will advance on the Funding Date (or the next Business Day
if the Borrowing Base Report and Loan Request are delivered after 12:00 P.M.
(Eastern Time)) to Borrowers a Revolving Loan in the amount equal to the lesser
of (i) the amount of the Revolving Loan requested by Borrowers in the Loan
Request, or (ii) the Borrowing Base Excess as of such date.  Any Advances made by Lender hereunder shall be
treated for all purposes as, and shall accrue interest at the same rate
applicable to, Revolving Loans.


 


(e)           Lender’s determination of the
Estimated Net Value of the Eligible Accounts and other amounts to be determined
or calculated under this Agreement shall, in the absence of manifest error, be
binding and conclusive.


 


2.03                           Interest
and Fees.


 


(a)           Each Revolving Loan shall bear interest on the
outstanding principal amount thereof from the date made until such Revolving
Loan is paid in full, at a rate per annum equal to the LIBOR Rate plus the
Applicable Margin (“Interest Rate”); provided  that,
notwithstanding any provision of any Loan Document, for the purposes of
calculating interest hereunder, the LIBOR Rate shall at no time be less than
two and one-half percent (2.50%).  The Interest Rate on all amounts outstanding
under the Credit Facility shall be adjusted daily based on the LIBOR Rate.  In the event that any financial statement
delivered pursuant to Section 6.07 hereof or covenant compliance certificate
delivered pursuant to Section 6.08 hereof is shown to be inaccurate
(regardless of whether this Agreement is in effect when such inaccuracy is
discovered), and such inaccuracy, if corrected, would have led to the
application of a higher Applicable Margin for any period (an “Applicable Period”)
than the Applicable Margin applied for such Applicable Period, and only in such
case, then Borrowers shall immediately (i) deliver to Lender a corrected
covenant compliance certificate for such Applicable Period, (ii) determine
the Applicable Margin for such 


 


3





















 


Applicable Period based upon
the corrected covenant compliance certificate, and (iii) immediately pay
to Lender the accrued additional interest owing as a result of such increased
Applicable Margin for such Applicable Period.


 


(b)           If any Event of Default shall occur
and be continuing, the rate of interest applicable to each Revolving Loan then
outstanding shall be the Default Rate. 
The Default Rate shall apply from the date of the Event of Default until
the date such Event of Default is waived, and interest accruing at the Default
Rate shall be payable upon demand.


 


(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 the following percentage of the Revolving Loan Commitment: two
percent (2%), if such early termination occurs on or prior to the first
anniversary of the date of this Agreement; one percent (1%) if such early
termination occurs after the first anniversary date of this Agreement but on or
prior to the second anniversary of the date of this Agreement.


 


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. 
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)           Borrowers shall unconditionally pay
to Lender a fee (“Unused Line Fee”) equal to three-quarters of one
percent (0.75%) 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)           Borrowers shall unconditionally pay
to Lender a collateral monitoring fee (“Collateral Monitoring Fee”) equal to
four tenths of one percent (0.40%) per annum of the average daily outstanding
balance of the Revolving Loans during each month (or portion thereof, as
applicable), which Collateral Monitoring Fee shall be calculated and payable
monthly, in arrears, and shall be due and payable on the first calendar day of
each month.


 


2.04                           Additional
Interest Provisions.


 


(a)           Calculation of Interest.  Interest on the Revolving Loans shall be
based on a year of three hundred sixty (360) days and charged for the actual
number of days elapsed.


 


(b)           Continuation of Interest Charges.  All contractual rates of interest chargeable
on outstanding Revolving Loans shall continue to accrue and be paid even after
default, maturity, acceleration, termination of the Credit Facility, judgment,
bankruptcy, insolvency proceedings of any kind or the happening of any event or
occurrence similar or dissimilar.


 


4
















 


(c)                                 Applicable
Interest Limitations.  In no
contingency or event whatsoever shall the aggregate of all amounts deemed
interest hereunder and charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto.  In the event that such court
determines Lender has charged or received interest hereunder in excess of the
highest applicable rate, Lender shall, in its sole discretion, apply and set
off such excess interest received by Lender against other Obligations due or to
become due and such rate shall automatically be reduced to the maximum rate
permitted by such law.


 


2.05                          Payments.


 


(a)                                 All accrued
interest on the Revolving Loans shall be due and payable monthly on the first
calendar day of each month.  Any accrued
Unused Line Fees and Collateral Monitoring Fees shall be due and payable
monthly on the first calendar day of the following calendar month.


 


(b)                                If at any time
the aggregate principal amount of all Advances outstanding exceeds the
Borrowing Base then in effect, Borrowers shall immediately make such principal
prepayments of the Revolving Loans (subject to the terms of Sections 2.03(c) and
(d) hereof) as is necessary to eliminate such excess.


 


(c)                                 The entire
principal balance of all of the Advances, together with all unpaid accrued
interest thereon and the Termination Fee, if any, and any unpaid Unused Line
Fees and Collateral Monitoring Fees, shall be due and payable on the Maturity
Date.


 


(d)                                Subject to the
terms of Sections 2.03(c) and 2.03(d) hereof, and in addition to any
repayment of Advances pursuant to Section 2.07(f), Borrowers may prepay
the principal of the Revolving Loans on any Settlement Date by giving Lender
written notice of the proposed prepayment at least  two (2) Business Days prior to such
Settlement Date.


 


(e)                                 [Reserved.]


 


(f)                                   If any Borrower
sells any of the Collateral or if any of the Collateral is lost or destroyed or
taken by condemnation, such Borrower shall pay to Lender a sum equal to the
proceeds (including insurance proceeds) received by such Borrower from such
sale, loss or destruction unless otherwise agreed to by Lender, or as otherwise
expressly authorized by this Agreement, as and when received by such Borrower
and as a mandatory prepayment of the outstanding Revolving Loans, until all
Obligations are paid and satisfied in full.


 


(g)                                Monthly, on the
first calendar day of each month, all payments and prepayments shall be applied
first to any unpaid interest, fees, and thereafter to the principal of the
Revolving Loans and to other amounts due Lender, in the order provided in Section 2.07(f) hereof.  Except as otherwise provided herein, all
payments of principal, interest, fees, or other amounts payable by Borrowers
hereunder shall be remitted to Lender in immediately available funds not later
than 11:00 a.m. (Eastern Time) on the day due.  In addition, Borrower authorizes Lender to
charge interest, principal, fees and all other amounts due to Lender, against
the Borrowing Base with respect to any such payments due and payable under the
Revolving Loans, and such charge shall be deemed to be a Revolving Loan and an
Advance hereunder, as of the first calendar day of the calendar month in which
such payment is due.


 


2.06                          Use of Proceeds.  The extensions of credit under
and proceeds of the Credit Facility shall be used to repay existing
Indebtedness of Borrowers and for working capital and general business
purposes.


 


2.07                          Lockboxes and
Collections.


 


(a)                                 Borrowers will
enter into Depository Agreements in respect of the Government Lockbox and
Commercial Lockbox in such form and with the Lockbox Bank or such other bank as
is acceptable to Lender.  Borrowers shall
instruct the Lockbox Bank maintaining the Government Lockbox that all
collections sent to the Government Lockbox shall be deposited into a bank
account at the Lockbox Bank in which Lender has the only security interest,
provided that, subject to the terms hereof and terms of the Depository
Agreements, such bank 


 


5





















 


account
is subject to the sole dominion and control of the respective Borrower(s).  Borrower shall instruct the Lockbox Bank
maintaining the Commercial Lockbox that all Collections sent to the Commercial
Lockbox shall be deposited into a bank account at the Lockbox Bank in which
Lender has a first priority perfected security interest or, in the case of
Citizens Bank, which is in the name of Lender. 
Borrower shall also instruct the Lockbox Bank as described further in
the Depository Agreements to initiate a daily transfer of all available funds
to an account of Lender to be designated by Lender (“Collection Account”).


 


(b)                                Borrowers will
cause all Collections with respect to all of the Accounts, other than
Government Accounts, to be sent directly to the Commercial Lockbox, and will
cause all Collections with respect to all of the Government Accounts to be sent
directly to the Government Lockbox (which may be effectuated by electronic
transfer directly to the Government Lockbox). 
In the event that any Borrower receives any Collections that should have
been sent to the Commercial Lockbox or the Government Lockbox, such Borrower
will, promptly upon receipt and in any event within one Business Day of
receipt, forward such Collections directly to the Commercial Lockbox or
Government Lockbox, as applicable, in the form received, and if requested by
Lender, promptly notify Lender of such event. 
Until so forwarded, such Collections not generated from Government
Accounts shall be held in trust for the benefit of Lender.


 


(c)                                 No Borrower
shall withdraw any amounts from the accounts into which the Collections
remitted to the Commercial Lockbox are deposited nor shall any Borrower change
the procedures under the agreements governing the Commercial Lockbox and
related accounts.


 


(d)                                Borrowers will
cooperate with Lender in the identification and reconciliation on a weekly
basis of all amounts received in the Commercial Lockbox and the Government Lockbox.  If more than five percent (5%) of the
Collections since the most recent Settlement Date is not identified or
reconciled to the satisfaction of Lender within ten (10) Business Days of
receipt, Lender may utilize its own staff or, if it deems necessary, engage an
outside auditor, in either case at Borrowers’ expense (which in the case of
Lender’s own staff shall be in accordance with Lender’s then prevailing
customary charges (plus expenses), to make such examination and report as may
be necessary to identify and reconcile such amount.  If after Lender and/or its auditors are
unable to identify the unreconciled Collections, then Lender shall not be
obligated to make further Revolving Loans until such amount is identified or is
reconciled to the reasonable satisfaction of Lender.


 


(e)                                 No Borrower
will send to or deposit in the Commercial Lockbox or the Government Lockbox any
funds other than payments made with respect to Accounts.


 


(f)                                   Prior to the
occurrence of an Event of Default, on each Settlement Date, Lender shall cause
all Collections deposited and/or transferred to the Collection Account since
the last Settlement Date to be disbursed in the following order of priority:


 


(i)                                     to Lender, any
costs and Expenses of Lender required to be paid or reimbursed by Borrowers
under this Agreement or under any of the other Loan Documents;


 


(ii)                                  to Lender, the
amount of any Borrowing Base Deficiency, if any;


 


(iii)                               subject to Section 2.03(c),
to Lender, the amount of any prepayment of principal of which Borrowers have
given notice to Lender in accordance with Section 2.05(d) hereof; and


 


(iv)                              to Lender, to
be applied to any Advances outstanding under the Revolving Loans.


 


In addition, promptly upon request of
Borrowers, so long as no Event of Default shall have occurred and be
continuing, Lender shall disburse to Borrowers the amount, if any, by which the
collected balance in the Collection Account exceeds the aggregate outstanding
principal amount of the Advances and all interest and other amounts that will
be payable on or before the next Settlement Date.


 


6

















 


2.08                          Application of
Proceeds of Collateral.


 


(a)                                 Unless this
Agreement expressly provides otherwise, so long as no Event of Default shall
have occurred and remain outstanding, Lender agrees to apply all Collections as
set forth in Section 2.07(f) hereof.


 


(b)                                If an Event of
Default shall have occurred and remain outstanding, Lender may apply
Collections, any other proceeds of Collateral and all other payments received
by Lender to the payment of the Obligations in such manner and in such order as
Lender may elect in its sole discretion.


 


2.09                          Fees.  Lender has fully earned a non-refundable
commitment fee (“Commitment Fee”) equal to Eighty Thousand Dollars
($80,000), which Commitment Fee shall be payable on or before the Closing Date.


 


ARTICLE 3


 


COLLATERAL


 


3.01                          Description.


 


To secure the prompt payment and performance
in full when due, whether by lapse of time, acceleration, mandatory prepayment
or otherwise, of the Obligations, each Borrower hereby grants to the Lender a
continuing security interest in, and a right to set off against, any and all
right, title and interest of such Borrower in and to all of the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the “Collateral”): (a) all accounts, Payment
Intangibles, Instruments and other rights to receive payments of Borrowers
(including without limitation the Accounts), whether now existing or hereafter
arising or acquired, (b) all General Intangibles (including without
limitation, contract rights and Intellectual Property), Chattel Paper,
Documents, Supporting Obligations, Letter of Credit Rights, Commercial Tort
Claims set forth on Schedule 2.13 hereto, remedies, guarantees and
collateral evidencing, securing or otherwise relating to or associated with the
property in subpart (a) above, including without limitation all rights of
enforcement and collection, (c) all Commercial Lockboxes, all Government
Lockboxes, all Collection Accounts and other deposit accounts into which any of
the Collections or Advances are deposited, all funds received thereby or
deposited therein, and any checks or instruments from time to time representing
or evidencing the same, (d) all books and records of Borrowers evidencing
or relating to or associated with any of the foregoing, (e) all
information and data compiled or derived by Borrowers with respect to any of
the foregoing (other than any such information and data subject to legal
restrictions of patient confidentiality), (f) all collections, Accessions,
receipts and Proceeds derived from any of the foregoing.


 


All capitalized terms in this Section 3.01
shall have the meanings set forth in the Uniform Commercial Code unless
otherwise defined herein.


 


Notwithstanding anything to the contrary
contained herein, the security interests granted under this Agreement shall not
extend to any lease, license or other contract of a Borrower if the grant of a
security interest in such lease, license or contract in the manner contemplated
by this Agreement is prohibited by the terms of such lease, license or contract
or by Applicable Law and would result in the termination of such lease, license
or contract or give the other parties thereto the right to terminate,
accelerate or otherwise adversely alter such Borrower’s rights, titles and
interests thereunder (including upon the giving of notice or the lapse of time
or both); provided that (i) any such limitation described in the
foregoing on the security interests granted hereunder shall only apply to the
extent that any such prohibition could not be rendered ineffective or
unenforceable pursuant to the UCC or any other Applicable Law (including Debtor
Relief Laws) or principles of equity and (ii) in the event of the
termination or elimination of any such prohibition or the requirement for any
consent contained in such lease, license or contract or in any Applicable
Law,  to the extent sufficient to permit
any such item to become Collateral hereunder, or upon the granting of any such
consent, or waiving or terminating any requirement for such consent, a security
interest in such lease, license or contract shall be automatically and
simultaneously granted hereunder and shall be included as Collateral hereunder.


 


Borrowers and the Lender hereby acknowledge
and agree that the security interest created hereby in the Collateral (i) constitutes
continuing collateral security for all of the Obligations, whether now existing
or hereafter 


 


7

















 


arising and (ii) is not to be construed
as an assignment of any copyrights, copyright licenses, patents, patent
licenses, trademarks or trademark licenses.


 


3.02                          Extent of
Security Interests.    The security interest granted in Section 3.01
hereof shall extend and attach to all Collateral which is presently in
existence or hereafter acquired and which is owned by any Borrower or in which
any Borrower has any interest, whether held by such Borrower or by others for
such Borrower’s account, and wherever located, and, if any of the Collateral is
Equipment, whether such Borrower’s interest in such Equipment is as owner,
lessee or conditional vendee.


 


3.03                          Lien Documents.  At Closing and thereafter as
Lender deems necessary, each Borrower shall execute (if required) and deliver
to Lender, or shall have executed (if required) and delivered (all in form and
substance reasonably satisfactory to Lender):


 


(a)                                 Financing
Statements.  Financing
statements pursuant to the UCC, which Lender may file in the jurisdiction where
any Borrower is organized and in any other jurisdiction that Lender deems
appropriate; and


 


(b)                                Other
Agreements.  Any other agreements, documents, instruments
and writings, including, without limitation, security agreements, deposit
account control agreements, deeds of trust, mortgages, and assignment
agreements, reasonably required by Lender to evidence, perfect or protect
Lender’s liens and security interest in the Collateral or as Lender may
reasonably request from time to time, including, without limitation, a waiver
agreement from each landlord with respect to any real property of any Borrower,
in form and substance satisfactory to Lender.


 


3.04                          Other Actions.


 


(a)                                 In addition to
the foregoing, each Borrower shall do anything further that may be lawfully and
reasonably required by Lender to perfect its security interests and to
effectuate the intentions and objectives of this Agreement, including, but not
limited to, the execution (if required) and delivery of continuation statements,
amendments to financing statements, security agreements, contracts and any
other documents required hereunder. At Lender’s request, each Borrower shall
also immediately deliver (with execution by such Borrower of all necessary
documents or forms to reflect Lender’s security interest therein) to Lender,
all items for which Lender must or may receive possession to obtain a perfected
security interest.


 


(b)                                Lender is
hereby authorized to file financing statements naming any Borrower as debtor,
in accordance with the Uniform Commercial Code, and if necessary, to the extent
applicable, to otherwise file financing statements without any Borrower’s
signature if permitted by law.  Each
Borrower hereby authorizes Lender to file all financing statements and amendments
to financing statements describing the Collateral in any filing office as
Lender, in its reasonable discretion may determine, including financing
statements describing the Collateral and containing language indicating that
the acquisition by a third party of any right, title or interest in or to the
Collateral without Lender’s consent shall be a violation of Lender’s
rights.  Borrowers agree to comply with
the requirements of all federal and state laws and requests of Lender in order
for Lender to have and maintain a valid and perfected first priority security
interest in the Collateral including, without limitation, executing and causing
any other Person to execute such documents as Lender may require to obtain
Control (as defined in the UCC) over all Deposit Accounts, Electronic Chattel
Paper, Letter-of-Credit Rights and Investment Property (each as defined in the
UCC) constituting, in each case, Collateral.


 


3.05                          Searches.  Lender shall, prior to or at
Closing, and thereafter as Lender may reasonably determine from time to time,
at Borrowers’ expense, obtain the following searches (the results of which are
to be consistent with the warranties made by Borrowers in this Agreement):


 


(a)                                 UCC Searches.  With respect to each Borrower, UCC searches
with the Secretary of State and local filing office of each state where such
Borrower maintains its chief executive office, its jurisdiction of organization
and/or a place of business or assets;


 


8





















 


(b)                                Judgments, Etc.  Judgment, federal tax lien and corporate tax
lien searches against each Borrower, in all applicable filing offices of each
state searched under Section 3.04(a) hereof.


 


3.06                          Good Standing
Certificates.  Borrowers shall, prior to or at Closing and
at its expense, obtain and deliver to Lender good standing or equivalent
certificates showing each Borrower to be in good standing in its state of
incorporation or organization and authorized to transact business as a foreign
corporation or entity in each other state or foreign country in which it is
doing and presently intends to do business for which such Borrower’s failure to
be so qualified could reasonably be expected to cause a Material Adverse
Effect.


 


3.07                          Filing Security
Agreement.  A carbon, photographic or other reproduction
or other copy of this Agreement or of a financing statement is sufficient as
and may be filed in lieu of a financing statement.


 


3.08                          Power of
Attorney.  Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
each Borrower (without requiring any of them to act as such) with full power of
substitution to do the following (such power to be deemed coupled with an
interest):  (a) endorse the name of
such Borrower upon any and all checks, drafts, money orders and other
instruments for the payment of monies that are payable to such Borrower and
constitute collections on the Collateral; (b) execute in the name of such
Borrower any financing statements, schedules, assignments, instruments,
documents and statements that such Borrower is obligated to give Lender
hereunder or is necessary to perfect Lender’s security interest or lien in the
Collateral; (c) to verify validity, amount or any other matter relating to
the Collateral by mail, telephone, telecopy or otherwise; and (d) upon and
after the occurrence of an Unmatured Event of Default or Event of Default, do
such other and further acts and deeds in the name of such Borrower that Lender
may reasonably deem necessary or desirable to enforce its right with respect to
any Collateral.


 


3.09                          [Reserved].


 


3.10                          Limited License.  Regardless of whether Lender’s
security interests in any of the General Intangibles has attached or is
perfected, each Borrower hereby irrevocably grants to Lender a royalty-free,
non-exclusive license to use such Borrower’s Trademarks, Copyrights, Patents
and other proprietary and intellectual property rights, in connection with the
advertisement for sale, and the sale or other disposition of, any Collateral by,
or on behalf of, Lender in accordance with the provisions of this Agreement.


 


3.11                          Credit
Balances; Additional Collateral.


 


(a)                                 The rights and
security interests granted to the Lender hereunder shall continue in full force
and effect, notwithstanding the termination of this Agreement or the fact that
the Revolving Loans may from time to time be temporarily in a credit position,
until the termination of this Agreement and the full and final payment and
satisfaction of the Obligations.  Any
reserves or balances to the credit of the Borrowers, and any other Property of
the Borrowers (or any of them) in the possession of Lender, may be held by
Lender, and applied in whole or partial satisfaction of such Obligations when
due, subject to the terms of this Agreement. 
The liens and security interests granted to Lender herein and any other
lien or security interest which Lender may have in any other assets of the
Borrowers secure payment and performance of all present and future Obligations.


 


(b)                                Notwithstanding
Lender’s security interests in the Collateral, to the extent that the
Obligations are now or hereafter secured by any assets or Property other than
the Collateral, or by the guaranty, endorsement, assets or property of any
other Person, Lender shall have the right in its sole discretion to determine
which rights, security, liens, security interests or remedies Lender shall at
any time pursue, foreclose upon, relinquish, subordinate, modify or take any
other action with respect to, without in any way modifying or affecting any of
such rights, security, liens, security interests or remedies, or any of Lenders’
rights under this Agreement


 


3.12                          Reference to
Other Loan Documents.  Reference is hereby made to the other Loan
Documents for additional representations, covenants and other agreements of the
Borrowers regarding the Collateral covered by such Loan Documents.


 


9





















 


ARTICLE 4


 


CLOSING AND CONDITIONS PRECEDENT TO ADVANCES


 


Closing under this Agreement and the making
of each Revolving Loan are subject to the following conditions precedent (all
documents to be in form and substance satisfactory to Lender and Lender’s
counsel):


 


4.01                          Resolutions,
Opinions, and Other Documents.  Prior to the Closing, Borrowers shall have
delivered to Lender the following:


 


(a)                                 this Agreement,
the Revolving Note, and  the
Perfection Certificate, each properly executed;


 


(b)                                any other Loan
Document and each document and agreement required to be executed under any
provision of this Agreement or any of the other Loan Documents;


 


(c)                                 certified
copies of (i) resolutions of each Borrower’s board of director(s), or
manager(s), as applicable authorizing the execution of this Agreement, the
Revolving Note, the other Loan Documents and each other document to which it is
a party, required to be delivered by any Section hereof and (ii) each
Borrower’s Organizational Documents;


 


(d)                                incumbency
certificates identifying all Authorized Officers of each Borrower, with
specimen signatures;


 


(e)                                 a written opinion
of Borrowers’ independent counsel addressed to Lender which shall include,
without limitation, an opinion that Lender has a perfected security interest in
the Collateral;


 


(f)                                   payment by
Borrowers of all Expenses associated with the Credit Facility incurred to the
Closing Date and the Commitment Fee;


 


(g)                                the Business
Associate Agreement properly executed;


 


(h)                                the Depository
Agreements required pursuant to Section 2.07 hereof;


 


(i)                                    Uniform
Commercial Code, judgment, federal and state tax lien searches pursuant to Section 3.05
hereof, which searches shall verify that Lender will have a first priority
security interest in the Collateral, subject to Permitted Liens;


 


(j)                                    an initial
borrowing base certificate dated the Closing Date evidencing Borrower’s availability
under the Borrowing Base;


 


(k)                                 to the extent
applicable, payoff letters and releases from all Persons having a security
interest or other interest in the Collateral, together with all UCC-3
terminations or partial releases necessary to terminate such Persons’ interests
in the Collateral;


 


(l)                                    certification
by Borrowers that all past due payroll and unemployment taxes have been paid in
full and that Borrowers remain current on such taxes;


 


(m)                              copies of each
of the accreditations, licenses, permits and certifications related to the
representations in Section 5.03 hereof, and all Contracts requested by
Lender;


 


(n)                                the fully
executed Subordination Agreements;


 


(o)                                monthly and
year to date consolidated financial statements for the most recent month end
prior to Closing (within fifteen (15) days prior to closing or such shorter
period as Lender may determine);


 


10





















 


(p)                                background
checks on the senior management of Borrowers;


 


(q)                                Landlord
Waivers with respect to the location of Borrowers’ chief executive office and
each other location where any books and records of Borrowers may be kept; and


 


(r)                                   evidence
satisfactory to Lender that the Required Insurance is in full force and effect
and that Lender has been named as a lender’s loss payee or additional insurer
with respect to such Required Insurance in a manner satisfactory to Lender;


 


(s)                                 all UCC
financing statements and similar documents required to be filed in order to
create in favor of Lender a first priority and exclusive (except for Permitted
Liens) perfected security interest in the Collateral (to the extent that such a
security interest may be perfected by a filing under the UCC or Applicable
Law), shall have been properly filed in each office in each jurisdiction
required;


 


(t)                                   all information
necessary for Lender to issue wire transfer instructions on behalf of each
Borrower for the initial and subsequent Revolving Loans and/or Advances,
including disbursement authorizations in form acceptable to Lender;


 


(u)                                true and
correct copies of the Comerica Loan Documents and Safeguard Loan Documents; and


 


(v)                                all other
documents, information and reports required or requested to be executed and/or
delivered by Borrowers under any provision of this Agreement or any of the Loan
Documents.


 


4.02                          Additional
Preconditions to Revolving Loans.  Lender’s obligation to make the initial
Revolving Loan and each subsequent Revolving Loan shall be subject to the
satisfaction of each of the following conditions:


 


(a)                                 After giving
effect to each such Revolving Loan:


 


(i)                                     the aggregate
principal amount of all Advances outstanding shall not exceed the Borrowing
Base then in effect; and


 


(ii)                                  the ENV of all
Eligible Accounts shall not exceed any of the Concentration Limits.


 


(b)                                All
representations and warranties of Borrowers shall be deemed reaffirmed as of
the making of such Revolving Loan and shall be true both before and after
giving effect to such Revolving Loan; provided that Borrowers shall be
permitted, so long as the disclosures set forth therein do not constitute an
Unmatured Event of Default or Event of Default, to update Schedules 2.01, 2.05,
2.12 (solely with respect to the outstanding Capital Stock of Clarient), 2.13,
2.14 and 2.15; provided that the updating of any such Schedules shall not
constitute a waiver of any Event of Default indicated by such disclosure.  No Event of Default or Unmatured Event of
Default shall have occurred and be continuing, Borrowers shall be in compliance
with this Agreement and the other Loan Documents, and Borrowers shall have
certified such matters to Lender.


 


(c)                                 Each Borrower
shall have signed and delivered to Lender notices, in the form of Exhibit 4.02(c),
directing the Obligors (other than Obligors with respect to Government Accounts)
to make payment to the Commercial Lockbox at Citizens Bank, except with respect
to Obligors existing on the Closing Date for which such notice shall have been
signed and delivered within 60 days of the Closing Date.


 


(d)                                Each Borrower
shall have signed and delivered to Lender notices, in the form of Exhibit 4.02(d),
directing the Obligors with respect to Government Accounts to make payment to
the Government Lockbox at Citizens Bank, except with respect to Obligors
existing on the Closing Date for which such notice shall have been signed and
delivered within 60 days of the Closing Date.


 


11





















 


(e)                                 Borrowers shall
have taken all actions necessary to permit Lender to record all of the Eligible
Accounts in Lender’s accounts receivable monitoring system.


 


(f)                                   The lockbox
arrangements required by Section 2.07 hereof shall be in effect, and the
amounts received in the lockboxes shall have been identified or reconciled to
Lender’s satisfaction, as required by Section 2.07(e) hereof.


 


(g)                                Borrowers shall
have taken such other actions, including the delivery of such other documents
and opinions as Lender may reasonably request.


 


4.03                          Absence of
Certain Events.  As of the Closing Date and prior to each
Revolving Loan, no Event of Default or Unmatured Event of Default hereunder
shall have occurred and be continuing.


 


4.04                          Compliance with
this Agreement.  Borrowers shall have performed and complied
with all agreements, covenants and conditions contained herein including, without
limitation, the provisions of Sections 6 and 7 hereof, which in each case are
required to be performed or complied with by Borrowers before or at the Closing
Date and as of the date of each Advance.


 


4.05                          Closing
Certificate.  Lender shall have received a certificate
dated the Closing Date and signed by the chief financial officer of Borrowers
certifying that all of the conditions specified in this Section have been
fulfilled and that there has not occurred any material adverse change in the
operations and conditions (financial or otherwise) of Borrowers since  December 31, 2007.


 


4.06                          Closing.  Subject to the conditions of
this Article 4, the Credit Facility shall be made available on the date (“Closing
Date”) this Agreement is executed and all of the conditions contained in Section 4.01
hereof are completed (“Closing”).


 


4.07                          Non-Waiver of
Rights.  By completing the Closing
hereunder, or by making Advances hereunder, Lender does not thereby waive a
breach of any warranty, representation or covenant made by Borrowers hereunder
or under any agreement, document, or instrument delivered to Lender or
otherwise referred to herein, and any claims and rights of Lender resulting
from any breach or misrepresentation by Borrowers are specifically reserved by
Lender.


 


ARTICLE 5


 


REPRESENTATIONS AND WARRANTIES


 


To induce Lender to complete the Closing and
make the Revolving Loans under the Credit Facility to Borrowers, Borrowers
warrant and represent to Lender that:


 


5.01                          Organization
and Validity.


 


(a)                                 Each Borrower
is duly organized as either a partnership, corporation or limited liability
company and validly existing or subsisting under the laws of its state of
organization, incorporation or formation, is duly qualified, validly existing
and, to the extent applicable, in good standing and has lawful power and
authority to engage in the business it conducts in each state and other
jurisdiction where the nature and extent of its business requires
qualification, except where the failure to so qualify could not reasonably be
expected to cause a Material Adverse Effect. 
A list of all states and other jurisdictions where each Borrower is
qualified to do business is attached hereto as Schedule 2.01 and made a
part hereof.


 


(b)                                The making and
performance of this Agreement and related agreements, and each document
required by any Section hereof, do not violate (i) any law,
government rule, regulation, order, judgment or award applicable to such
Borrower or its Property, (ii) any provision of such Borrower’s
Organizational Documents, or (iii) violate or result in a default
(immediately, with the passage of time or with the giving of notice) under any
contract, agreement or instrument to which such Borrower is a party, or by
which such Borrower is bound.  No 


 


12





















 


Borrower
is in violation of, nor has knowingly caused any other Person to violate any
term of any agreement or instrument to which it or such other Person is a party
or by which it may be bound or of its Organizational Documents or minutes,
which violation could reasonably be expected to cause a Material Adverse
Effect.


 


(c)                                 Each Borrower
has all requisite power and authority to enter into and perform this Agreement
and the other Loan Documents and to incur the Obligations herein provided for,
and has taken all proper and necessary action to authorize the execution,
delivery and performance of this Agreement and the other Loan Documents to
which such Borrower is a party.


 


(d)                                This Agreement,
the Revolving Note and the other Loan Documents required to be executed and
delivered by any Borrower hereunder, when delivered, will be valid and binding
upon all such Borrowers a party thereto and enforceable in accordance with
their respective terms.


 


5.02                          Places of
Business.  Each Borrower’s jurisdiction of organization
is set forth in Schedule 2.01 hereto and (a) each Borrower’s chief
executive office, (b) all other places of business of each such Borrower
and (c) any other locations of any Collateral are located at the
corresponding addresses set forth on Schedule 2.02 hereto.  Except as disclosed on Schedule 2.03
hereto:  (a) no Borrower has been
organized in any other jurisdiction nor changed any such location in the last
five (5) years, (b) no Borrower has changed its name in the last five
(5) years, and (c) during such period no Borrower used, nor does any
Borrower now use, any fictitious or trade name.


 


5.03                          Healthcare
Matters.


 


(a)                                 Operation of
Facilities. Each Borrower that provides health care services
owns or leases the facilities in which it provides health care services and (i) maintains
Medicare and Medicaid provider status and is the holder of the provider
identification numbers identified on Schedule 2.04 hereto, all of which
are current and valid and such Borrower has not allowed, permitted, authorized
or caused any other Person to use any such provider identification number, and (ii) has
obtained all material Permits necessary for such Borrower to own its assets, to
carry on its business, to execute, deliver and perform the Loan Documents, and
to receive payments from the Obligors and, if organized as a not-for-profit
entity, has and maintains its status, if any, as an organization exempt from
federal taxation under Section 501(c)(3) of the Internal Revenue
Code.  No Borrower has been notified by
any such Governmental Authority or other Person during the immediately
preceding 24 month period that such party has rescinded, limited or not
renewed, or intends to rescind, limit or not renew, any such license or
approval.


 


(b)                                Healthcare
Permits. Each Borrower has (i) each Permit and other rights from, and
have made all declarations and filings with, all applicable Governmental
Authorities, all self regulatory authorities and all courts and other tribunals
necessary to engage in the ownership and operation of its business and the
Healthcare Facilities, and (ii) no knowledge that any Governmental
Authority is considering limiting, suspending or revoking any such Permit.  All such Permits are valid and in full force
and effect and each Borrower is in material compliance with the terms and
conditions of all such Permits except where failure to be in such compliance or
for a Permit to be valid and in full force and effect could not reasonably be
expected to have a Material Adverse Effect.


 


(c)                                 Specific
Licensing.  Each
Borrower and Healthcare Facility is duly licensed under the Applicable Laws of
the states where such Borrower conducts any business and where any Healthcare
Facility is located.


 


(d)                                Participation
Agreements/Provider Status/Cost Reports.


 


(i)                                     Each Borrower
has the requisite participation agreement or provider number or other Permit to
bill the respective Medicaid program in the state or states in which such
Borrower operates (to the extent such Borrower participates in the Medicare or
Medicaid program in such state or states) and all other Third Party Payor
Programs (including Medicare) which have historically accounted for any portion
of the revenues of such Healthcare Facility.


 


(ii)                                  There is no
investigation, audit, claim review, or other action pending or, to the
knowledge of any Borrower, threatened which could reasonably be expected to
result in a revocation, suspension, 


 


13





















 


termination,
probation, restriction, limitation, or non-renewal of any participation
agreements with Third Party Payors with respect to the business of each
Borrower (collectively, “Participation Agreements”) or provider number
or other Permit or result in a Borrower’s exclusion from any Third Party Payor
Program, nor, to the knowledge of such Borrower, has any Third Party Payor
Program made any decision not to renew any Participation Agreement or provider
agreement or other Permit related to any Healthcare Facility or any business
conducted by a Borrower, nor has any Borrower made any decision not to renew
any Participation Agreement or provider agreement or other Permit, nor is there
any action pending or threatened to impose material intermediate or alternative
sanctions with respect to any Healthcare Facility or any Borrower.


 


(iii)                               Each Borrower,
and, to the knowledge of such Borrower, its contractors, have properly and
legally billed all intermediaries and Third Party Payors for services rendered
with respect to the Healthcare Facilities and the business conducted by
Borrowers and have maintained their records to reflect such billing
practices.  No funds relating to any
Borrower are now, or, to the knowledge of any Borrower will be, withheld by any
Third Party Payor.


 


(iv)                              There are no
current, pending or outstanding Medicare, Medicaid or Third Party Payor Program
reimbursement audits or appeals pending with respect to the Healthcare
Facilities or any Borrower.


 


(e)                                 No Violation of
Healthcare Laws.


 


(i)                                     None of the
Healthcare Facilities or any Borrower is in violation of any Healthcare Laws,
except where any such violation could not reasonably be expected to have a
Material Adverse Effect.


 


(ii)                                  Each Borrower
is in compliance with HIPAA.


 


(iii)                               No Healthcare
Facility or Borrower has received a statement of deficiencies or survey
violation or any other correspondence that sets forth any fine or penalty or
restriction or limitation on any Borrower’s participation in Medicare, Medicaid
or other Third Party Payor Programs, within the past three years for which a
plan of correction has not been filed with the applicable state authority.  No Healthcare Facility or Borrower is
currently subject to any plan of correction that has not been accepted by or is
currently the subject of a review by the applicable state authority.  No Borrower has received notice of any
charges of patient abuse.


 


(f)                                   Proceedings. No Borrower
or Healthcare Facility is subject to any proceeding, suit or, to Borrowers’
knowledge, investigation by any federal, state or local government or quasi-governmental
body, agency, board or authority or any other administrative or investigative
body (including the Office of the Inspector General of the United States
Department of Health and Human Services): 
(i) which may result in the imposition of a fine, alternative,
interim or final sanction, a lower reimbursement rate for services rendered to
eligible patients which has not been provided for on their respective financial
statements, or which could reasonably be expected to have a Material Adverse Effect
on any Borrower or Borrowers or the operation of any individual Healthcare
Facility; (ii) which could reasonably be expected to result in the
revocation, transfer, surrender, suspension or other impairment of the
operating certificate provider agreement or Permits of any Borrower or any
Healthcare Facility; (iii) which pertains to any state or federal Medicare
or Medicaid cost reports or claims filed by any Borrower (including, but not
limited to, any reimbursement audits), or any disallowance by any commission,
board or agency in connection with any audit of such cost reports; or (iv) which
pertains to or requests any voluntary disclosure pertaining to a potential
overpayment matter involving the submission of claims to such payor by any
Borrower.


 


(g)                                Fraud &
Abuse.


 


(i)                                     No Borrower
has, or to its knowledge has been threatened to have, and no officer, manager,
or employee of any Borrower and, to Borrowers’ knowledge, no person with a “direct
or indirect ownership interest” (as that phrase is defined in 42 C.F.R.
§420.201) of 5% or more of the equity securities of Clarient, has, engaged in
any of the following:  (A) knowingly
and willfully making or causing to be made a false statement or representation
of a material fact in any application for any benefit or payment under any
Healthcare Laws; (B) knowingly and willfully making or causing to be made
any false statement or representation of a material 


 


14





















 


fact
for use in determining rights to any benefit or payment under any Healthcare
Laws; (C) failing to disclose knowledge by a claimant of the occurrence of
any event affecting the initial or continued right to any benefit or payment
under any Healthcare Laws on its own behalf or on behalf of another, with intent
to secure such benefit or payment fraudulently; (D) knowingly and
willfully soliciting or receiving any remuneration (including any kickback,
bribe or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay such remuneration (1) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by any
Healthcare Laws, or (2) in return for purchasing, leasing or ordering or
arranging for or recommending the purchasing, leasing or ordering of any good,
facility, service, or item for which payment may be made in whole or in part by
any Healthcare Laws; (E) presenting or causing to be presented a claim for
reimbursement for services that is for an item or services that was known or
should have been known to be (1) not provided as claimed, or (2) false
or fraudulent; or (E) knowingly and willfully making or causing to be made
or inducing or seeking to induce the making of any false statement or
representation (or omitting to state a fact required to be stated therein or
necessary to make the statements contained therein not misleading) of a
material fact with respect to (1) a facility in order that the facility
may qualify for Governmental Authority certification, or (2) information
required to be provided under 42 U.S.C. § 1320a-3.


 


(ii)                                  No Borrower has
been, or to its knowledge has been threatened to be, and no owner, officer,
manager or employee of any Borrower and, to Borrowers’ knowledge, no person
with a “direct or indirect ownership interest” (as that phrase is defined in 42
C.F.R. §420.201) of 5% or more of the equity securities of Clarient: (A) has
had a civil monetary penalty assessed against him or her pursuant to 42 U.S.C.
§1320a-7a or is the subject of a proceeding seeking to assess such penalty; (B) has
been excluded from participation in a Federal Health Care Program (as that term
is defined in 42 U.S.C. §1320a-7b) or is the subject of a proceeding seeking to
assess such penalty, or has been “suspended” or “debarred” from selling
products to the U.S. government or its agencies pursuant to the Federal
Acquisition Regulation, relating to debarment and suspension applicable to
federal government agencies generally (48 C.F.R. Subpart 8.4), or other
Applicable Laws or regulations; (C) has been convicted (as that term is
defined in 42 C.F.R. §1001.2) of any of those offenses described in 42 U.S.C.
§1320a-7b or 18 U.S.C. §§669, 1035, 1347, 1518 or is the subject of a
proceeding seeking to assess such penalty; (D) has been involved or named
in a U.S. Attorney complaint made or any other action taken pursuant to the
False Claims Act under 31 U.S.C. §§3729-3731 or qui tam action brought pursuant
to 31 U.S.C. §3729 et seq.; (E) has been made a party to any other action
by any governmental authority that may prohibit it from selling products to any
governmental or other purchaser pursuant to any law; or (F) was or has
become subject to any federal, state, local governmental or private payor civil
or criminal investigations or inquiries, proceedings, validation review,
program integrity review or statement of charges involving and/or related to
its compliance with Healthcare Laws or involving or threatening its participation
in Medicare, Medicaid or other Third Party Payor Programs or its billing
practices with respect thereto.


 


5.04                          Pending
Litigation.  There are no judgments or judicial or
administrative orders, proceedings or investigations (civil or criminal)
pending, or to the knowledge of any Borrower, threatened, against any Borrower
in any court or before any governmental authority or arbitration board or
tribunal, other than as set forth on Schedule 2.05 hereto (as amended
from time to time pursuant to Section 4.02(b)), none of which, if
adversely determined could reasonably be expected to cause a Material Adverse
Effect.  No Borrower is in default with
respect to any order of any court, governmental authority, regulatory agency or
arbitration board or tribunal.  No Shareholder
of any Borrower (other than Clarient), nor any executive officer of any
Borrower has been indicted or convicted in connection with or is engaging in
any criminal conduct, or is currently subject to any lawsuit or proceeding or,
to Borrower’s knowledge, under investigation in connection with any
anti-racketeering or other criminal conduct or activity or any conduct or
activity referenced in Section 5.03 hereof.  To Borrowers’ knowledge, no Shareholder of
Clarient owning 5% or more of the equity securities of Clarient has been
indicted or convicted in connection with or is engaging in any criminal
conduct, or is currently subject to any lawsuit or proceeding or, to Borrowers’
knowledge, under investigation in connection with any anti-racketeering or
other criminal conduct or activity or any conduct or activity referenced in Section 5.03
hereof.


 


5.05                          [Reserved].


 


5.06                          Title to
Collateral.  Each Borrower has good and marketable title
to all the Collateral it respectively purports to own, free from co-owners,
liens, claims and encumbrances, except those of Lender.  The 


 


15





















 


possession and use of the
Collateral does not and will not infringe, misappropriate or otherwise violate
the intellectual property rights of any property of any other Person.


 


5.07                          Governmental
Consent.  Neither the nature of any Borrower or of any
Borrower’s business or Property, nor any relationship between any Borrower and
any other Person, nor any circumstance affecting any Borrower in connection
with the execution, issuance and/or delivery of this Agreement or the Revolving
Note, is such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of any
such Borrower in connection with the execution and delivery of this Agreement
or the issuance or delivery of the Revolving Note or other Loan Documents other
than filings in connection with the perfection of security interests granted
hereunder.


 


5.08                          Taxes.  All tax returns required to be
filed by Borrowers, or any of them, in any jurisdiction have in fact been
filed, and all Taxes, assessments, fees and other governmental charges upon
Borrowers, or any of them, or upon any of their respective Property, income or
franchises, which are shown to be due and payable on such returns have been
paid, except for those Taxes being contested in good faith with due diligence
by appropriate proceedings and for which appropriate reserves have been
maintained under GAAP.  No Borrower is
aware of any proposed additional tax assessment or tax to be assessed against
or applicable to any Borrower that could reasonably be expected to cause a
Material Adverse Effect.


 


5.09                          Financial
Statements.


 


(a)                                 Borrowers’
annual audited consolidated balance sheet as of December 31, 2007,
accompanied by reports thereon from Borrowers’ independent certified public
accountants, and the unaudited quarterly consolidated balance sheet as of March 31,
2008  and the related income
statements and statements of cash flows as of such dates (complete copies of
which have been delivered to Lender), have been prepared in accordance with
GAAP and present fairly, accurately and completely in all material respects the
financial position of Borrowers as of such dates and the results of their
operations for such periods (subject, in the case of unaudited financial
statements, to normal, year-end adjustments).


 


(b)                                Since the date
of the last annual audited consolidated balance sheet, accompanied by reports
thereon from Borrowers’ independent certified public accountants and related
income statements and statements of cash flows, there has been no event or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect.


 


(c)                                 The fiscal year
for each Borrower currently ends on the date set forth on Schedule 2.07
hereto.  Each Borrower’s federal tax
identification number and organization number are as set forth on Schedule
2.08 hereto.


 


5.10                          Full Disclosure.  Neither the financial statements
referred to in Section 5.09 hereof, nor this Agreement or related
agreements and documents or any written statement furnished by any Borrower to
Lender in connection with the negotiation of the Credit Facility, pursuant to
the terms hereof or otherwise, and contained in any financial statements or
documents relating to any Borrower contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading.


 


5.11                          Guarantees,
Contracts, etc.


 


(a)                                 No Borrower
owns nor holds partnership interests or equity or long term debt investments
in, has any outstanding advances to, or serves as guarantor, surety or
accommodation maker for the obligations of, or has any outstanding borrowings
from, any Person except as described in Schedule 2.09 hereto.


 


(b)                                No Borrower is
a party to any contract or agreement, or subject to any charter or other entity
restriction which could reasonably be expected to cause a Material Adverse
Effect.


 


(c)                                 Except as otherwise
specifically provided in this Agreement, no Borrower has agreed or consented to
cause or permit any of the Collateral whether now owned or hereafter acquired
to be subject in the 


 


16





















 


future
(upon the happening of a contingency or otherwise) to a lien or encumbrance not
permitted by this Agreement.


 


5.12                          Compliance with
Laws.


 


(a)                                 No Borrower is
in violation of, has received written notice that it is in violation of, or has
knowingly caused any Person to violate, any applicable statute, regulation or
ordinance of the United States of America, or of any state, city, town,
municipality, county or of any other jurisdiction, or of any agency, or
department thereof, (including, without limitation, environmental laws and
regulations), which could reasonably be expected to cause a Material Adverse
Effect.


 


(b)                                Each Borrower
is current with all reports and documents required to be filed with any state
or federal securities commission (if any) or similar agency and is in full
compliance with all applicable rules and regulations of such commissions,
except where such failure to file or to so comply could not reasonably be
expected to cause a Material Adverse Effect.


 


5.13                          Other
Associations.  No Borrower is engaged in nor has an interest
in any joint venture or partnership with any other Person or has any
Subsidiaries or Affiliates, except as described on Schedule 2.10 hereto.


 


5.14                          Environmental
Matters.  Except as disclosed on Schedule 2.11
hereto, no Borrower has knowledge:


 


(a)                                 of violations
of any Environmental Laws on any of the real property where any Borrower
maintains operations or has its personal property, or where any Collateral is
located, where such violation could reasonably be expected to have a Material
Adverse Effect;


 


(b)                                of any claims
or actions pending or threatened, or claims or actions in the past during
Borrower’s period of ownership, against Borrower or any of such real property
by any governmental entity or agency or by any other person or entity relating
to Hazardous Substances or pursuant to any Environmental Laws;


 


(c)                                 of the presence
of any Hazardous Substances on any of such real property in violation of
Environmental Laws;


 


(d)                                of any such
real property ever having been used by any of the Borrowers or, to the best of
Borrowers’ knowledge any other person, to refine, produce, store, handle,
transfer, process, transport, or dispose of Hazardous Substances other than in
full compliance with Environmental Laws;


 


(e)                                 of storage
tanks (including, without limitation, petroleum or heating oil storage tanks),
underground or above-ground, present on or under any of such real property, or
that have been on or under any such real property but removed therefrom, in
each case in violation of Environmental Laws;


 


(f)                                   of any on-site
spills, releases, discharges, disposal, or storage of Hazardous Substances that
have occurred or are presently occurring on any of such real property, in each
case in violation of Environmental Laws; or


 


(g)                                of any spills,
releases, discharges, disposal, or storage of Hazardous Substances that have
occurred or are presently occurring on any other real property as a result of
the conduct, action, or activities of any Borrower in violation of
Environmental Laws.


 


5.15                          Capital Stock.  The authorized and outstanding
Capital Stock of each Borrower is as set forth on Schedule 2.12
hereto.  Except with respect to Clarient,
the identity of the holder of the Capital Stock of each Borrower is set forth
on Schedule 2.12.  The identity of
the holders of at least five percent (5%) of the Capital Stock of Clarient and
the percentage of their fully-diluted ownership of the Capital Stock of
Clarient as of April 30, 2008 is set forth on Schedule 2.12.  All of the Capital Stock and equity interests
of each Borrower have been duly and validly authorized and issued and are fully
paid and non-assessable and have been sold and delivered to the holders 


 


17





















 


thereof in compliance with,
or under valid exemption from, all Federal and state laws and the rules and
regulations of all regulatory bodies thereof governing the sale and delivery of
securities.  Except for the rights and
obligations set forth in Schedule 2.12 hereto, there are no
subscriptions, warrants, options, calls, commitments, rights or agreements by
which any Borrower or any of the Shareholders of any Borrower is bound relating
to the issuance, transfer, voting or redemption of its Capital Stock or any
preemptive rights held by any Person with respect to the Capital Stock of any
such Borrower.  Except as set forth in Schedule
2.12 hereto, no Borrower has issued any securities convertible into or
exchangeable for its Capital Stock or any options, warrants or other rights to
acquire such Capital Stock or securities convertible into or exchangeable for
such Capital Stock.


 


5.16                          Lockboxes.  The Government Lockbox and the Commercial
Lockbox are the only lockbox accounts maintained by Borrowers, and each Obligor
of an Eligible Account has been directed, and is required to remit all payments
with respect to such Account for deposit in the Commercial Lockbox (other than
the Obligors of Government Accounts which have been directed to remit all
payments with respect to such Accounts for deposit in the Government
Lockbox).  Within one hundred and eighty
days of the Closing Date, each Obligor of an Eligible Account has been directed
by the noticed attached as Exhibit 4.02(c) to this Agreement
to remit all payments with respect to such Accounts for deposit in the
Commercial Lockbox at Citizens Bank (other than the Obligors of Government
Accounts which have been directed by the notice attached as Exhibit 4.02(d) to
this Agreement to remit all payments with respect to such Accounts for deposit
in the Government Lockbox at Citizens Bank.


 


5.17                          Borrowing Base
Reports.  Each Borrowing Base Report signed by
Borrowers, on behalf of Borrowers, contains and will contain an accurate
summary of all Eligible Accounts of Borrowers contained in the Borrowing Base
as of its date.


 


5.18                          Security
Interest.  The Borrowers represent and warrant to Lender
that except for the Permitted Liens, (a) upon the filing of UCC financing
statements covering the Collateral in all required jurisdictions, this
Agreement creates a valid, perfected, first priority and exclusive security
interest in all Collateral of the Borrowers as to which perfection may be
achieved by filing, (b) Lender’s security interests in the Collateral
constitute, and will at all times constitute, first priority and exclusive
liens on the Collateral, and (c) each Borrower is, or will be at the time
additional Collateral is acquired by such Borrower, the absolute owner of such
additional Collateral with full right to pledge, sell, transfer and create a
security interest therein, free and clear of any and all claims or liens other
than Permitted Liens.


 


5.19                          Accounts.


 


(a)                                 No Borrower has
done nor shall do anything to interfere with the collection of the Accounts and
no Borrower shall amend or waive the terms or conditions of any Account or any
related Contract in any material adverse manner without Lender’s prior written
consent except that Borrower may continue to adjust and write off Accounts in
the normal course of business consistent with the reserve policy of
Borrowers.  On each Download Date,
Borrowers shall deliver a report to Lender identifying Accounts which have been
adjusted or written off since the last Download Date along with such
information regarding such Accounts as Lender may request.


 


(b)                                Each Borrower
has made and will continue to make all payments to Obligors necessary to
prevent any Obligor from offsetting any earlier overpayment to such Borrower
against any amounts such Obligor owes on an Account.


 


5.20                          ERISA.  Borrowers and each other
member of its Controlled Group has fulfilled its obligations under the minimum
funding standards of, and is in compliance in all material respects with, ERISA
and the Code to the extent applicable to it and, other than a liability for
premiums under Section 4007 of ERISA, has not incurred any liability to
the PBGC or a Plan under Title IV of ERISA. 
Borrowers and their Subsidiaries and/or Affiliates have no contingent
liabilities with respect to any post-retirement benefits under a welfare plan,
as defined in Section 3(1) of ERISA, other than liability for
continuation coverage described in Article 6 of Title 1 of ERISA.


 


5.21                          Representations
and Warranties for each Revolving Loan.  As of each date that Borrowers
shall request any Revolving Loan, each Borrower shall be deemed to make, with
respect to each Eligible Account included in the Borrowing Base, each of the
following representations and warranties:


 


18
















 


(a)                                 Such Account
satisfies each of the conditions of an Eligible Account.


 


(b)                                All information
relating to such Account that has been delivered to Lender is true, complete
and correct in all material respects. 
The corresponding Borrower has delivered to the Obligor all requested
supporting claim documents and all information set forth in the bill and
supporting claim documents is true, complete and correct in all material
respects.


 


(c)                                 There is no
lien or adverse claim in favor of any third party (except for statutory rights
of setoff and recoupment of Governmental Authorities the exercise of which are
not pending or threatened), nor any filing against any Borrower, as debtor,
covering or purporting to cover any interest in such Account.


 


(d)                                Such Account is
(i) payable in an amount not less than its Estimated Net Value by the
Obligor identified by Borrowers as being obligated to do so, and is recognized
as such by the Obligor, (ii) the legally enforceable obligation of such
Obligor, and (iii) an Account or General Intangible within the meaning of
the UCC, or is a right to payment under a policy of insurance or proceeds
thereof, and is not evidenced by any instrument or chattel paper.  There is no payor other than the Obligor
identified by Borrowers as the payor primarily liable on such Account.


 


(e)                                 No such Account
(i) requires the approval of any third person for such Account to be
assigned to Lender hereunder, (ii) is subject to any legal action,
proceeding or investigation (pending or threatened), dispute, set-off,
counterclaim, defense, abatement, suspension, deferment, deductible, reduction
or termination by the Obligor (except for statutory rights of setoff and
recoupment of Governmental Authorities the exercise of which are not pending or
threatened), or (iii) is past, or within one hundred eighty (180) days of,
the statutory limit for collection applicable to the Obligor.


 


(f)                                   Such Borrower
does not have any guaranty of, letter of credit support for, or collateral
security for, such Account, other than any such guaranty, letter of credit or
collateral security as has been assigned to Lender.


 


(g)                                The services
constituting the basis of such Account (i) were medically necessary for
the patient and (ii) at the time such services were rendered, were fully (except
for applicable co-payment and deductibles) covered by the insurance policy or
Contract obligating the applicable Obligor to make payment with respect to such
Account (and the corresponding Borrower has verified such determination), and (iii) the
patient received such services in the ordinary course of such Borrower’s
business.


 


(h)                                The fees and
charges charged for the services constituting the basis for such Account were
when rendered and are currently consistent with (i) the usual, customary
and reasonable fees charged by Borrowers or (ii) pursuant to negotiated
fee contracts, or imposed fee schedules, with or by the applicable Obligors.


 


(i)                                    The Obligor
with respect to such Account is located in the United States, and is (i) a
party which in the ordinary course of its business or activities agrees to pay
for healthcare services received by individuals, including, commercial
insurance companies and non-profit insurance companies issuing health, or other
types of insurance, employers or unions, self-insured healthcare organizations,
preferred provider organizations, and health insured, prepaid maintenance
organizations, (ii) a state, an agency or instrumentality of a state or a
political subdivision of a state, or (iii) the United States or an agency
or instrumentality of the United States.


 


(j)                                    The insurance
policy or Contract obligating an Obligor to make payment on an Account (i) does
not prohibit the transfer of such payment obligation from the patient to the
corresponding Borrower and (ii) is and was in full force and effect and
applicable to the patient at the time the services constituting the basis for
such Account were performed.


 


(k)                                 The
representations and warranties made by Borrowers in the Loan Documents and all
financial or other information delivered to Lender with respect to such Account
do not contain any untrue statement of material fact or omit to state a
material fact necessary to make the statement made not misleading.


 


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(l)                                    If requested by
Lender, a copy of each related Contract to which each Borrower is a party has
been delivered to Lender unless any such Borrower shall have, prior to the
related Funding Date, certified in an Officer’s Certificate that such delivery
is prohibited by the terms of the Contract or by law, and the circumstances of
such prohibition.


 


(m)                              The services
giving rise to such Account have been properly recorded in the corresponding
Borrower’s accounting system.


 


(n)                                Such Account
was billed no later than ten (10) days after the date the services or
goods giving rise to such Account were rendered as provided, as applicable, and
each bill contains an express direction requiring the Obligor to remit payments
to either the Government Lockbox or Commercial Lockbox, as applicable.


 


(o)                                Such Account
has an Estimated Net Value which, when added to the Estimated Net Value of all
other Accounts owing by the same Obligor and which constitute Eligible Accounts
hereunder, does not exceed any applicable Concentration Limit.


 


(p)                                Neither such
Account nor the related Contract contravenes any laws, rules or
regulations applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth-in-lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and no Borrower a party to such related
Contract, and, to Borrowers’ knowledge, no other party to such related
Contract, is in violation of any such law, rule or regulation in
connection with such Contract.


 


(q)                                As of the
applicable Funding Date, to the best of Borrowers’ knowledge, no Obligor on
such Account is bankrupt, insolvent, or is unable to make payment of its
obligations when due, and no other fact exists which would cause any Borrower
reasonably to expect that the amount billed to the related Obligor for such
Account will not be paid in full when due.


 


5.22                          Interrelatedness
of Borrowers.  The business operations of each Borrower are
interrelated and complement one another, and such companies have a common
business purpose, with intercompany bookkeeping and accounting adjustments used
to separate their respective Properties, liabilities and transactions.  To permit their uninterrupted and continuous
operation, such companies now require and will from time to time hereafter
require funds for general business purposes. 
The proceeds of Advances under the Credit Facility will directly or
indirectly benefit each Borrower hereunder severally and jointly, regardless of
which Borrower requests or receives part or all of the proceeds of such
Revolving Loan.


 


5.23                          Commercial Tort
Claims.  Borrowers have no commercial tort claims
against any third parties, except as shown on Schedule 2.13 hereto.


 


5.24                          Letter-of-Credit
Rights.  Borrowers have no letter-of-credit rights (as
defined in the UCC) with respect to the Collateral except as shown on Schedule
2.14 hereto.


 


5.25                          Intellectual
Property.  Except as shown on Schedule 2.15
hereto and made part hereof, (a) Borrowers do not require any copyrights,
patents, trademarks, other intellectual property or other general intangibles
(as defined in the UCC), or any license(s) to use any patents, trademarks
or other intellectual property in order to (i) provide services to their
customers, (ii) bill Obligors and collect therefrom, in the ordinary
course of business or (iii) otherwise conduct Borrowers’ business as
presently conducted, and (b) Borrowers have not granted an exclusive
license to any party that relates to Borrower’s owned intellectual
property.  All of Borrower’s rights in
its intellectual property are enforceable, valid and subsisting.  No action, suit, demand, charge or claim has
been made or, to any Borrower’s knowledge, threatened which challenges the
enforceability or validity of Borrower’s intellectual property.


 


5.26                          Solvency.  On the Closing Date and
immediately prior to and after giving effect to each borrowing hereunder and
the use of the proceeds thereof and after taking into consideration all rights
of contribution and reimbursement by and among the Borrowers, with respect to
each Borrower (a) the fair value of its assets is greater than the amount
of its liabilities (including disputed, contingent and unliquidated
liabilities) as such value is 


 


20





















 


established and liabilities
evaluated, (b) the present fair saleable value of its assets is not less
than the amount that will be required to pay the probable liability on its
debts as they become absolute and matured, (c) it is able to realize upon
its assets and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal course of
business, (d) it does not intend to, and does not believe that it will,
incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature, and (e) it is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
its property would constitute unreasonably small capital.


 


5.27                          Schedules.  Each of the Schedules attached
to this Agreement set forth a true, correct and complete description of the
matter or matters covered thereby.


 


5.28                          Comerica Loan
Documents.  Lender has
received true, correct and complete copies of the Comerica Loan Documents
(including all exhibits, schedules and disclosure schedules referred to therein
or delivered pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms
thereof.  No such documents or agreements
have been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Lender.


 


5.29                          Safeguard Loan
Documents.  Lender has
received true, correct and complete copies of the Safeguard Loan Documents
(including all exhibits, schedules and disclosure schedules referred to therein
or delivered pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms
thereof.  No such documents or agreements
have been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Lender.


 


5.30                          Services
Agreements.  Lender has
received true, correct and complete copies of the Services Agreements
(including all exhibits and schedules thereto and other agreements referred to
therein or delivered pursuant thereto, if any) and all amendments thereto,
waivers relating thereto and other side letters or agreements affecting the
terms thereof.  No such documents or
agreements have been amended or supplemented, nor have any of the provisions
thereof been waived.


 


5.31                          Foreign
Subsidiaries.  Borrowers
represent and warrant to Lender that ChromaVision SARL and ChromaVision
International GmbH have no assets having an aggregate value in excess of
$15,000 and conduct no business.


 


ARTICLE 6


 


AFFIRMATIVE COVENANTS


 


Each Borrower covenants that until all of
Borrowers’ Obligations to Lender are paid and satisfied in full and the Credit
Facility has been terminated:


 


6.01                          Payment of
Taxes and Claims.  Each Borrower shall pay, before they become
delinquent, all Taxes, assessments and governmental charges or levies imposed
upon it or upon such Borrower’s Property, except for those being contested in
good faith with due diligence by appropriate proceedings and for which
appropriate reserves have been maintained under GAAP.


 


6.02                          Maintenance of
Insurance, Financial Records and Existence.


 


(a)                                 Required
Insurance - Borrowers shall maintain or cause to be
maintained insurance on its Property against fire, flood, casualty, public
liability, business interruption and such other hazards, as well as general
liability, medical malpractice insurance and other liability insurance related
to the business of the Borrowers required by the Lender, all in such amounts,
with such deductibles and with such insurers as are at all times reasonably
satisfactory to Lender (the “Required Insurance”).  All of the policies relating to the Required
Insurance shall contain standard “lender loss payable” and “additional insured”
clauses issued in favor of Lender pursuant to 


 


21





















 


which
all losses thereunder shall be paid to Lender as Lender’s interests may
appear.  Such policies (or endorsements
thereto) shall expressly provide that the Required Insurance cannot be canceled
without thirty (30) days prior written notice to Lender and shall insure Lender
notwithstanding the act or neglect of the insured.  At or prior to Closing, Borrowers shall
furnish Lender with insurance certificates certified as true and correct and being
in full force and effect as of the Closing Date or such other evidence of the
Required Insurance as Lender may require. 
In the event Borrowers fail to procure or cause to be procured any of
the Required Insurance or to timely pay or cause to be paid the premium(s) on
any of the Required Insurance, Lender may do so for Borrowers, but Borrowers
shall continue to be liable for the same. 
Borrowers further covenant that all insurance premiums owing under its
current casualty policy have been paid. 
Borrowers also agree to notify Lender, promptly, upon any Borrower’s
receipt of a notice of termination, cancellation or non-renewal from its
insurance company of any of the Required Insurance.  Each Borrower hereby appoints Lender as its
attorney-in-fact, exercisable at Lender’s option, to endorse any check which
may be payable to such Borrower in order to collect the proceeds of the
Required Insurance.


 


(b)                                Financial
Records - Borrowers shall keep current and accurate books of records and
accounts in which full and correct entries will be made of all of its business
transactions, and will reflect in its financial statements adequate accruals
and appropriations to reserves, all in accordance with GAAP.  No Borrower shall change its respective
fiscal year end date without prior written notice thereof to Lender.


 


(c)                                 Existence and
Rights - Each Borrower shall do (or cause to be done) all things necessary to
preserve and keep in full force and effect its legal existence, good standing,
rights and franchises, except foreign qualifications where failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect.


 


6.03                          Business
Conducted.  Each Borrower shall continue in the business
presently operated by it using its best efforts to maintain its customers.  No Borrower shall engage, directly or
indirectly, in any line of business substantially different from the businesses
conducted by it immediately prior to the Closing Date.


 


6.04                          Litigation.  Borrowers shall give prompt
notice to Lender of any litigation claiming in excess of $50,000.00 from
Borrowers, or any of them, or which could reasonably be expected to cause a
Material Adverse Effect.


 


6.05                          Taxes.  Borrowers shall pay all Taxes
when due (other than taxes based upon or measured by Lender’s income or
revenues), if any, in connection with the Revolving Loans and/or the recording
of any financing statements or other Loan Documents.  The Obligations of Borrowers under this
section shall survive the payment of Borrowers’ Obligations under this
Agreement and the termination of this Agreement.


 


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)                                 Commencing with
the calendar month ending May 31, 2008 and continuing through and
including the calendar month ending January 31, 2009, Borrowers shall
maintain a Loan Turn Days of not greater than fifty (50) days, in each case
measured monthly at the end of each such calendar month.


 


(b)                                Borrowers shall
maintain EBITDA, on a cumulative, year to date basis, of at least (i) $2,000,000
for the fiscal quarters ending March 31, 2008, June 30, 2008 and September 30,
2008 combined and (ii) $2,900,000 for the fiscal quarters ending March 31,
2008, June 30, 2008, September 30, 2008 and December 31, 2008
combined, in each case measured quarterly at the end of each such fiscal
quarter.


 


(c)                                 Borrowers shall
maintain at all times a minimum Excess Liquidity of not less than $2,000,000.


 


6.07                          Financial and
Business Information.  Borrowers shall deliver to Lender the
following (all to be in form and substance satisfactory to Lender):


 


22





















 


(a)                                 Financial
Statements and Collateral Reports.


 


(i)                                     as soon as
available but in any event, within one hundred twenty (120) days after the end
of each fiscal year of Borrowers, deliver financial statements of Borrowers for
such year which present fairly Borrowers’ financial condition, including the
balance sheet of Borrowers as at the end of such fiscal year and a statement of
cash flows and income statement for such fiscal year, all on a consolidated
basis, setting forth in the consolidated statements in comparative form, the
corresponding figures as at the end of and for the previous fiscal year, all in
reasonable detail, including all supporting schedules, and audited by
independent public accountants of recognized standing, selected by Borrowers
and reasonably satisfactory to Lender, and prepared in accordance with GAAP;


 


(ii)                                  as soon as
available but in any event within forty-five (45) days after the end of each
fiscal quarter, deliver to Lender Borrowers’ internally prepared quarterly
consolidated financial statements, along with year to date information,
including a balance sheet, income statement and statement of cash flows with
respect to the periods measured;


 


(iii)                               promptly upon
request, deliver such other information concerning Borrowers as Lender may from
time to time request, including Medicare and Medicaid audits, annual reports,
security law filings and reports to any security holders;


 


(iv)                              at least thirty
(30) days prior to the first day of each fiscal year, preliminary annual
consolidated projections for Borrowers for such year, including a balance
sheet, income statement and statement of cash flow and Borrowing Base
Availability projections, all prepared on a monthly basis;


 


(v)                                 thirty (30)
days after the first day of each fiscal year, final annual consolidated
projections for Borrowers for such year, including a balance sheet, income
statement and statement of cash flow and Borrowing Base Availability
projections, all prepared on a monthly basis;


 


(vi)                              contemporaneously
with delivery of the annual financial statements referred to in clause (i) above,
delivery of Borrowers’ internally prepared management reports with operating
data and “Performance Indicators” used by Borrowers to operate their respective
businesses, and a good standing certificate from each Borrower’s jurisdiction
of organization evidencing that such Borrower remain in good standing in, and
continue to be organized under the laws of, such jurisdiction; and


 


(vii)                           such other
data, reports, statements and information (financial or otherwise), as Lender
may reasonably request.


 


(b)                                Notice of Event
of Default or Unmatured Event of Default- promptly (but at least
within 2 calendar days) upon becoming aware of the existence of any condition
or event which constitutes an Event of Default or Unmatured Event of Default
under this Agreement, a written notice specifying the nature and period of existence
thereof and what action Borrowers are taking (and propose to take) with respect
thereto;


 


(c)                                 Notice of
Claimed Default - promptly upon receipt by any Borrower, notice of
default, oral or written, given to such Borrower by any creditor for borrowed
money in excess of $50,000.00;


 


(d)                                Securities and
Other Reports - if any Borrower shall be required to file reports
with the Securities and Exchange Commission pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, promptly upon
its becoming available, one copy of each financial statement, report, notice or
proxy statement sent by such Borrower to stockholders generally, and, a copy of
each regular or periodic report, and any registration statement, or prospectus
in respect thereof, filed by such Borrower with any securities exchange or with
federal or state securities and exchange commissions or any successor agency.


 


6.08                          Officer’s
Certificate.  Along with the set of financial statements
delivered to Lender at the end of each fiscal quarter and fiscal year pursuant
to Section 6.07(a) hereof, deliver to Lender a certificate (in the form of Exhibit 6.08
hereto and made a part hereof) from the chief financial officer of Borrowers
setting forth:


 


23





















 


(a)                                 Covenant
Compliance - the information (including detailed calculations)
required in order to establish whether Borrowers are in compliance with the
requirements of Sections 6.06 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 6.07(a) hereof; and


 


(b)                                Event of
Default - that the signer in his capacity as an officer of Borrowers has
reviewed the relevant terms of this Agreement, and has made (or caused to be
made under his supervision) a review of the transactions and conditions of
Borrowers from the beginning of the accounting period covered by the financial
statements being delivered therewith to the date of the certificate, and that
such review has not disclosed the existence during such period of any condition
or event which constitutes an Event of Default or Unmatured Event of Default or
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action Borrowers have taken or propose to
take with respect thereto.


 


6.09                          Inspection.  Borrowers will permit any of
Lender’s officers or other representatives to visit and inspect any Borrower’s
location(s) or where any Collateral is kept during regular business hours
to examine and audit all of such Borrower’s books of account, records, reports
and other papers, to make copies and extracts therefrom and to discuss its
affairs, finances and accounts with its officers, employees and independent
certified public accountants and attorneys. 
Borrowers shall pay to Lender all reasonable fees based on standard
rates for such inspections, currently at the rate of $1,000 per day, per person
(plus out-of-pocket expenses); provided that, so long as no Unmatured Event of
Default or Event of Default has occurred, Borrower shall only be obligated to
reimburse Lender for two (2) such inspections per calendar year.. All
costs, fees and expenses incurred by Lender and payable by Borrower in
connection with such inspections shall constitute Expenses for purposes of this
Agreement.


 


6.10                          Tax Returns and
Reports.  At Lender’s request from time to time,
Borrowers shall promptly furnish Lender with copies of any annual federal and
state income tax returns, any other tax returns of Borrowers or any other
documents related to Taxes of the Borrowers


 


6.11                          Material
Adverse Developments.  Each Borrower agrees that immediately (but at
least within 2 calendar days) upon it or any of its officers becoming aware of
any development or other information which would reasonably be expected to have
a Material Adverse Effect, it shall give to Lender telephonic or facsimile
notice specifying the nature of such development or information and such
anticipated effect.  In addition, such
verbal communication shall be confirmed by written notice thereof to Lender on
the next Business Day after such verbal notice is given.


 


6.12                          Places of
Business.  Each
Borrower shall give thirty (30) days prior written notice to Lender of any
changes to (a) its jurisdiction of organization, (b) the location of
any of its chief executive office or any other places of business, or the
establishment of any new, or the discontinuance of any existing place of
business, and (c) its name.


 


6.13                          Notice of
Action.  Each Borrower will promptly notify Lender in
the event of any legal action, dispute, setoff, counterclaim, defense or
reduction that is or may be asserted by an Obligor with respect to any Account
that could reasonably be expected to have a material adverse effect on the
collectibility of such Account or all Accounts collectively.


 


6.14                          Verification of
Information.  At the request of Lender, Borrowers will
promptly provide and verify the accuracy of information concerning Borrowers
and their Affiliates of the type provided to Lender in connection with Lender’s
decision to enter into this Agreement and such other information concerning
Borrowers and their Affiliates as Lender may reasonably request in connection
with any offering documents with respect to the contemplated securitization of,
and sale of securities backed by, the Eligible Accounts (the “Securities”),
including, without limitation, all information necessary to provide full and
complete disclosure of all material facts pertaining to an investment in the Securities
in compliance with federal and state securities and blue sky laws, and such
information may be published in such offering documents and relied upon by
Lender and any party arranging the offering of such Securities by Lender or its
assignee.  Such information will be true
and complete in all material respects and will not omit to state a material
fact necessary to make the statements contained in such information, in light
of the circumstances under which they were made, not misleading.


 


24





















 


6.15                          Accounts
Receivables Monitoring System.  Borrowers shall permit Lender or its agents
to interface its accounts receivables monitoring system to Borrowers’ data
files and will assist Lender or its agent in completing and maintaining such
interface such that the interface can interpret, track and reconcile the
Accounts Detail File provided by Borrowers.


 


6.16                          Commercial Tort
Claim.  Borrowers shall provide written notice to
Lender of any commercial tort claim to which a Borrower is or becomes a party
or which otherwise inures to the benefit of a Borrower. Such notice shall
contain a sufficient description of such commercial tort claim including the
parties, the court in which the claim was commenced (if applicable), the docket
number assigned to the case (if applicable), and a detailed explanation of the
events giving rise to such claim.  To the
extent otherwise constituting Collateral, Borrowers shall grant Lender a
security interest in such commercial tort claim to secure payment of the
Obligations.  Borrowers shall execute and
deliver such instruments, documents and agreements as Lender may require in
order to obtain and perfect such security interest including, without limitation,
a security agreement or amendment to this Agreement all in form and substance
satisfactory to Lender.  Each Borrower
authorizes Lender to file (without such Borrower’s signature) financing
statements or amendments to existing financing statements as Lender deems
necessary to perfect the security interest in such commercial tort claim.


 


6.17                          Compliance with
Laws.


 


(a)                                 Borrowers agree
to comply with all Applicable Laws, and all orders of any federal, state or
local legislative, administrative or judicial body or official, provided
that Borrowers may contest any acts, rules, regulations, orders and directions
of such bodies or officials in any reasonable manner which Lender determines
will not materially and adversely effect Lender’s rights or priorities in the
Collateral.


 


(b)                                Without limiting
the generality of the foregoing, each Borrower agrees to comply with all
environmental statutes, acts, rules, regulations or orders, as presently
existing or as adopted or amended in the future, applicable to the ownership
and/or use of such Borrower’s real property and operation of its business, if
the failure to so comply could reasonably be expected to have a Material
Adverse Effect.  No Borrower shall be
deemed to have breached any provision of this Section 6.17(b) if (i) the
failure to comply with the requirements of this Section 6.17(b) resulted
from good faith error or innocent omission, (ii) such Borrower promptly
commences and diligently pursues a cure of such breach and (iii) such
failure is cured within thirty (30) days following such Borrower’s receipt of
notice from Lender of such failure, or if such breach cannot in good faith be
cured within thirty (30) days following such Borrower’s receipt of such notice,
then such breach is cured within a reasonable time frame based on the extent
and nature of the breach and the necessary remediation, and in conformity with
any applicable consent order, consensual agreement and Applicable Law.


 


(c)                                 Borrowers will (i) maintain
in full force and effect, and free from restrictions, probations, conditions or
known conflicts which would materially impair the use or operation of its
business or any Healthcare Facility for its current use, all Permits necessary
under Healthcare Laws to continue to receive reimbursement under all Third
Party Payor Programs in which any Borrower or any Healthcare Facility
participates as of the date of this Agreement, and (ii) provide to Lender
upon request, an accurate, complete and current list of all participation
agreements with Third Party Payors with respect to the business of each
Borrower (collectively, “Participation Agreements”).  Borrowers will at all times comply with all
requirements, contracts, conditions and stipulations applicable to such
Borrower in order to maintain in good standing and without default or
limitation all such Participation Agreements.


 


6.18                          Collateral
Reporting.   Borrowers agree to furnish to Lender such
information as Lender reasonably requires in connection with monitoring the
Collateral, at the times and in the manner determined by Lender, including
Medicare and Medicaid cost reports and audits.


 


25





















 


6.19                          Collateral.


 


(a)                                 [Reserved].


 


(b)                                If any Borrower
becomes a beneficiary under any letter of credit not shown on Schedule 2.14
hereto, such Borrower agrees to promptly notify Lender, and upon request by
Lender, such Borrower agrees to either (i) cause the issuer of such letter
of credit to consent to the assignment of the proceeds of such letter of credit
to Lender, pursuant to an agreement in form and substance satisfactory to
Lender, or (ii) cause the issuer of such letter of credit to name Lender,
as the transferee beneficiary of such letter of credit.


 


(c)                                 Each Borrower
agrees to maintain such Borrower’s rights in, and the value of, all copyrights,
patents, trademarks, other intellectual property and General Intangibles shown
on Schedule 2.15 hereof, and to pay when due all payments required to
maintain in effect any licensed rights; provided that, Borrowers shall not be
required to maintain rights in intellectual property no longer used or useful
in Borrowers’ business if the failure to maintain such rights could not
reasonably be expected to have or result in a Material Adverse Effect.  Borrowers shall provide Lender with adequate
notice of the acquisition of rights with respect to any additional patents,
trademarks and copyrights so that Lender may, to the extent permitted under the
documentation granting such rights or Applicable Law, perfect Lender’s security
interest in such rights in a timely manner.


 


(d)                                Borrowers, at
their expense, agree to forever warrant and defend the Collateral from any and
all claims and demands of any other person, other than holders of Permitted
Liens.


 


6.20                          Intellectual
Property.  Borrower shall make all appropriate filings
and do all things necessary to maintain their rights under the intellectual
property owned and used by the Borrowers, including the filing of registrations
and continuations thereof, execution license agreements, etc.  Further, no Borrower shall grant to any
person an exclusive license to use any of such Borrower’s intellectual
property.  In the event that an action,
suit, demand, charge or claim that is made or threatened which challenges the
enforceability or validity of any Borrower’s intellectual property, Borrowers
shall give Lender immediate notice of such fact, including a detailed
description of the issue as well as the Borrowers’ plans to resolve it.


 


ARTICLE 7


 


NEGATIVE COVENANTS


 


Each Borrower covenants that until all of
Borrowers’ Obligations to Lender are paid and satisfied in full and the Credit
Facility has been terminated:


 


7.01                          Merger,
Consolidation, Dissolution or Liquidation.


 


(a)                                 No Borrower
shall sell, lease, license, transfer or otherwise dispose of its Property,
without Lender’s prior written consent, other than (i) inventory sold to
patients/customers in the ordinary course or ordinary operation of such
Borrower’s business, (ii) to another Borrower, and (iii) disposition
of obsolete and worn out equipment and equipment no longer used or useful in
Borrowers’ business with an aggregate fair market value not to exceed $250,000
in the aggregate in any fiscal year, provided that the proceeds of such
disposition are used within six calendar months of such disposition to replace
such equipment.


 


(b)                                No Borrower
shall merge or consolidate with, or acquire, any other Person or commence a
dissolution or liquidation, other than through a merger with another Borrower,
without Lender’s prior written consent, provided  however that,
upon prior written notice to Lender, so long as (i) no Event of Default or
Unmatured Event of Default has occurred and is continuing and (ii) after
giving effect to such acquisition(s), no Event of Default or Unmatured Event of
Default will result, Borrowers may make acquisitions of all or substantially
all of the assets or stock of a Person (in a business similar or related) so
long as (a) the purchase price of any such acquisition (or series of
related acquisitions) does not exceed $5,000,000 in the aggregate during the term
of the Credit Facility and (b) any seller financing in connection with
such acquisition is unsecured and subordinated to the Obligations in form and
substance satisfactory to Lender in its sole discretion (“Permitted Acquisition”);
provided that (A) Borrowers shall have provided Lender no later than
thirty (30) days prior to the consummation of any such acquisition with at
least the following: (i) a pro forma historical balance sheet and income
statement of the business being acquired for the four fiscal quarters most
recently ended and the fiscal year most recently ended; (ii) full
disclosure of the acquisition terms and conditions including but not limited to
the total purchase price for the business, Borrowers’ projected allocation of
the purchase price, and purchase agreements and related documents; 


 


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(iii) Borrowers’
projected pro forma pre and post-closing balance sheets, including adjusting
entries, reflecting the completion of the acquisition and any additional debt
incurred to complete the acquisition; and (iv) projections of Borrowers,
including pro forma balance sheet, income statement, cash flows and covenants
compliance certificates (all on a consolidated basis if the business is to be
merged into or become a subsidiary of a Borrower) reflecting the effects of the
acquisition for at least two fiscal year ends (on a monthly basis) following
the closing of such acquisition and (B) Borrowers will have Borrowing Base
Excess after giving effect to such acquisition(s) necessary to support the
working capital needs of Borrowers (without the deferral of expenses).  In addition to the foregoing and in any
event, Borrowers shall permit and assist Lender in completing the due diligence
audit of the business to be acquired (the result of such audit to be
satisfactory to Lender in its sole discretion) prior to the inclusion of any
Accounts generated by the acquired business through any Permitted Acquisition,
into the Borrowing Base as Eligible Accounts. 
In conjunction with any Permitted Acquisition, Borrowers agree to
execute (or cause to be executed) and deliver (or cause to be delivered) any
and all instruments, agreements and documents as Lender may reasonably deem
necessary to join any acquired entity as a “Borrower” hereunder and to evidence
and/or perfect the security interests granted and/or contemplated hereby and to
effectuate the terms of this Agreement.


 


7.02                          Liens and
Encumbrances.  No Borrower shall: (a) execute a
negative pledge agreement with any Person (other than Lender) covering any of
the Collateral, or (b) cause or permit or agree or consent to cause or
permit in the future (upon the happening of a contingency or otherwise) any
Property of Borrowers, including; without limitation, the Collateral, whether
now owned or hereafter acquired, to be subject to any lien, claim or
encumbrance other than those of Lender and Permitted Liens.


 


7.03                          Negative Pledge.  No Borrower (other than
Clarient) shall permit a lien or security interest to exist on its Capital
Stock.  No Borrower shall permit, pledge
or grant a lien or security interest to exist on the Capital Stock of its
Subsidiaries.


 


7.04                          Transactions
With Affiliates or Subsidiaries.


 


(a)                                 No Borrower
shall enter into any transaction with any Subsidiary or other Affiliate (other
than another Borrower) including, without limitation, the purchase, sale, lease
or exchange of Property, or the loaning, capitalization or giving of funds to
any such Affiliate or any Subsidiary, unless (i) such Subsidiary or
Affiliate is engaged in a business substantially related to the business
conducted by such Borrower, (ii) the transaction is in the ordinary course
of and pursuant to the reasonable requirements of such Borrower’s business and
upon terms substantially the same and no less favorable to such Borrower as it
would obtain in a comparable arm’s length transactions with any Person not an
Affiliate or a Subsidiary, and (iii) such transaction is not prohibited
hereunder.  Notwithstanding the
foregoing, Borrowers may engage in each of the transactions noted on Schedule
7.04(a) hereto, in each case to the extent (as applicable) not
prohibited under the Subordination Agreements and not otherwise prohibited
hereunder.


 


(b)                                Except with the
prior written consent of Lender and except with respect to the Subsidiaries
listed on Scheduled 2.10 hereto, no Borrower shall create or acquire any
Subsidiary or own any Capital Stock in any Person  In the event that Lender permits the
foregoing, Lender may, in its sole discretion, require that such Person becomes
a Borrower hereunder.


 


7.05                          Guarantees.  No Borrower shall become or be
liable, directly or indirectly, primary or secondary, matured or contingent, in
any manner, whether as guarantor, surety, accommodation maker, or otherwise,
for the existing or future indebtedness of any kind of any other Person, except
(a) endorsements in the ordinary course of business of negotiable
instruments for deposit or collection and (b) pursuant to the Safeguard
Indemnity.


 


7.06                          Investments.                            Without Lender’s prior written consent, no Borrower shall make any
Investments, except:


 


(a)                                 Investments
consisting of cash or Cash Equivalents;


 


27





















 


(b)                                Investments
consisting of Accounts and promissory notes created, acquired or made and trade
credit extended in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms;


 


(c)                                 Investments
consisting of Capital Stock, obligations, securities or other property received
in settlement of Accounts from financially troubled obligors in the ordinary
course of business;


 


(d)                                Investments
existing as of the Closing Date and set forth on Schedule 2.16 hereto;


 


(e)                                 Guarantees
permitted by Section 7.05 hereof;


 


(f)                                   Investments in
any other Borrower that is a Borrower prior to giving effect to such
Investment;


 


(g)                                Investments
permitted under Section 7.04;


 


(h)                                Loans to
employees in the ordinary course of business consistent with past practices and
not to exceed $150,000 in the aggregate to any employee or $300,000 in the
aggregate to all employees; and


 


(i)                                    Investments
consisting of the purchase or acquisition of Capital Stock otherwise permitted
under Section 7.01(b).


 


7.07                          Loans to Other
Persons.  No Borrower shall make or be permitted to
have outstanding any loans, advances or extensions of credit to any Person
(other than as permitted under Sections 7.06(f) and 7.06(h)).  Borrowers may make intercompany loans to
other Borrowers pursuant to Section 7.06(f), but such loans shall be documented
prior to the disbursement of the loan proceeds with such promissory notes, loan
agreements and collateral documents as Lender may require in its reasonable
discretion.


 


7.08                          Change in
Ownership/Management.


 


(a)                                 No Borrower
(other than Clarient) shall permit Clarient to at any time own, legally or
beneficially, less than one hundred percent (100%) of the aggregate voting
interest of all classes of Capital Stock of such Borrower entitled to vote
generally.


 


(b)                                Unless
consented to by Lender, or if a replacement acceptable to Lender is employed
within ninety (90) days of any termination, Ron A. Andrews shall continue as
Chief Executive Officer of Borrowers actively involved in the day-to-day
management of such Borrowers.


 


7.09                          Subordinated
Debt Payments.  No Borrower shall make any payment in
contravention of the terms and conditions of the Subordination Agreements.


 


7.10                          Distributions.  Borrowers shall not declare or
pay or make any forms of Distributions to its Shareholders, Affiliates,
officers or directors or their respective successors or assigns, nor may any
Borrower declare to pay or make any form of Distribution, other than (i) to
another Borrower, (ii) dividends or distributions paid in stock or in
rights to buy stock, (iii) to the extent applicable, issuance of shares
upon the proper exercise of warrants and stock options, together with payment
to non-Affiliates of customary costs (if any) incurred in connection with such
issuance, (iv) repurchases of stock from terminated employees or employees
no longer employed due to death or disability not to exceed $50,000 in the
aggregate in any fiscal year, and (v) to the extent applicable, loans to
employees solely to the extent expressly permitted under Section 7.06(h).


 


7.11                          No Change in
Business.  No Borrower shall engage in any line of
business which (a) is not reasonably related to Borrower’s respective
healthcare businesses conducted as of the Closing Date (including expansion of
product lines) or (b) has not otherwise been disclosed in writing to Lender
prior to the date hereof, in each case without Lender’s prior written consent.


 


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7.12                          Indebtedness. 
Without Lender’s prior written consent, Borrower shall not create,
incur, assume or suffer to exist any Indebtedness (exclusive of trade debt)
except (subject to compliance with Section 6.06 hereof):


 


(a)                                 Indebtedness to Lender,


 


(b)                                Indebtedness specifically identified on Schedule 2.17 hereto
(but excluding any refinancings, refundings, renewals, or extensions thereof);


 


(c)                                 Indebtedness constituting purchase money indebtedness for the financing
of capital expenditures and capital leases so long as such Indebtedness is
secured only by a security interest in the equipment being financed and so long
as such Indebtedness does not cause, or result in, an Event of Default or
Unmatured Event of Default;


 


(d)                                Indebtedness of Borrower to any other Borrower;


 


(e)                                 Unfunded pension or employment benefit plan obligations not constituting
an Event of Default;


 


(f)                                   Indebtedness resulting from judgments not otherwise constituting an
Event of Default;


 


(g)                                Indebtedness arising from the honoring by a bank of checks or similar
instruments against insufficient funds;


 


(h)                                Indebtedness in respect of taxes, assessments, governmental charges or
levies or claims of customs authorities and claims for labor, worker’s
compensation, materials and supplies;


 


(i)                                    Short-term unsecured trade credit incurred in the ordinary course of
business (other than for borrowed money);


 


(j)                                    Credit card debt incurred by or on behalf of Borrowers’ directors,
managers, members, officers, employees or agents in connection with their duties
on behalf of Borrowers in the ordinary course of business, provided all such
credit card debt together shall not exceed $150,000 outstanding the aggregate
in any two-month period;


 


(k)                                 Other unsecured indebtedness not to exceed $150,000 in aggregate principal
amount outstanding;


 


(l)                                    Indebtedness constituting Comerica Subordinated Debt;


 


(m)                              Indebtedness constituting Safeguard Subordinated Debt; and


 


(n)                                Upon the prior written consent of Lender, Indebtedness in an aggregate
amount not to exceed $30,000,000 pursuant to convertible notes purchased by
investors reasonably acceptable to Lender which shall have closed on or before December 31,
2008 and which shall be on terms and conditions, and subject to documentation,
in form and substance satisfactory to Lender in its sole discretion and subject
to an intercreditor and/or  subordination
agreement in favor of Lender in form and substance satisfactory to Lender in
its sole discretion.   Borrowers shall
provide such information, data, reports, statements and information (financial
or otherwise) as Lender may request in its review of any such proposed
transaction.


 


7.13                          Capital
Expenditures.  No Borrower shall contract for, purchase or
make any expenditure or commitments for fixed or capital assets (including capitalized
leases) in any fiscal year in an aggregate amount for all Borrowers in excess
of $4,000,000.


 


7.14                          Services
Agreement.  Without Lender’s prior written consent,
Borrowers shall not amend or modify the terms and conditions of, or terminate,
the Services Agreement.


 


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7.15                          Foreign
Subsidiaries.  Borrowers shall not permit ChromaVision SARL
or ChromaVision International GmbH to own any assets having an aggregate value
in excess of $15,000 or conduct any business.


 


ARTICLE 8


 


DEFAULT


 


8.01                          Events of
Default.  Each of the following events shall constitute
an event of default (“Event of Default”) and Lender shall thereupon have the
option to declare the Obligations immediately due and payable, all without
demand, notice, presentment or protest or further action of any kind (it also
being understood that the occurrence of any of the events or conditions set
forth in Sections 8.01(i), (j), (k), (l) or (q) shall automatically
cause an acceleration of the Obligations without notice or demand):


 


(a)                                 Payments.  if Borrowers fail to make any payment of
principal, interest, or any other charges, fees, Expenses or other monetary
obligations owing to Lender, arising out of or incurred in connection with this
Agreement on the date when such payment is due and payable and such failure
continues for a period of one (1) Business Day; provided, however,
that the one (1) Business Day grace period shall not be applicable if such
payments are due and payable due to maturity, acceleration or demand, whether
following an Event of Default or otherwise;


 


(b)                                Particular
Covenant Defaults.  (i) if
any Borrower fails to perform, comply with or observe any covenant or
undertaking contained in Section 6.06 of this Agreement, or (ii) if
any Borrower fails to perform, comply with or observe any covenant or
undertaking contained in this Agreement not otherwise described in this Section 8.01,
and such failure continues for a period of five (5) Business Days after
the earlier of a Borrower becoming aware of such failure or a Borrower
receiving written notice of such failure;


 


(c)                                 Financial
Information.  if any
statement, report, financial statement, or certificate made or delivered by a
Borrower or any of their officers, employees or agents, to Lender is not true
and correct, in all material respects, when made;


 


(d)                                Uninsured Loss.  if there shall occur any uninsured damage to
or loss, theft, or destruction in excess of $50,000.00 with respect to any
portion of any Borrower’s Property;


 


(e)                                 Warranties or
Representations.  if any
warranty, representation or other statement by or on behalf of Borrowers, or
any of them, contained in or pursuant to this Agreement, any Loan Document, or
in any document, agreement or instrument furnished in compliance with, relating
to, or in reference to this Agreement, is false, erroneous, or misleading in
any material respect when made;


 


(f)                                   Agreements with
Others.  if Borrowers, or any of them,
shall default beyond any grace period under any agreement with respect to any
Indebtedness or Subordinated Debt and (i) in the case of Indebtedness in
excess of $100,000, such default consists of the failure to pay any principal,
premium or interest with respect to such Indebtedness or (ii) such default
consists of the failure to perform any covenant or agreement with respect to
such Indebtedness, if the effect of such default is to cause or permit such
Indebtedness to become due prior to its maturity date or prior to its regularly
scheduled date of payment;


 


(g)                                Other Agreements
with Lender.


 


(i)                                     the occurrence
of any default or event of default under any of the other Loan Documents;


 


(ii)                                  any of the
other Loan Documents ceases to be valid, binding and enforceable in accordance
with its terms; and


 


(iii)                               Borrowers, or any
of them, breach or violate the terms of, or if a default or an event of
default, occurs under, any other existing or future agreement (related or
unrelated) between or among 


 


30





















 


Borrowers,
or any of them and Lender, including, without limitation, any lease agreements
or finance agreements with any affiliate of Lender;


 


(h)                                Judgments.  if any final judgment for the payment of
money in excess of $50,000.00 shall be rendered against Borrowers, or any of
them, which is not fully and unconditionally covered by insurance (and such
coverage is provided by a financially sound and reputable insurance company
that has not disclaimed such coverage in writing) or an appeal bond, or for
which such Person has not established a cash or cash equivalent reserve in the
amount of such judgment each in the form, substance and amount satisfactory to
Lender in its sole discretion;


 


(i)                                    Assignment for
Benefit of Creditors, etc.  if
Borrowers, or any of them, call a meeting of the creditors of any Borrower for
the purpose of compromising such Borrower’s debts or obligations, or make or
propose an assignment for the benefit of creditors generally, offers a
composition or extension to creditors generally, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter owned or
conducted by any Borrower which might materially and adversely affect such
Person;


 


(j)                                    Bankruptcy,
Dissolution, etc.  upon the
commencement of any action for the bankruptcy, insolvency, receivership,
assignment for the benefit of creditors, dissolution or liquidation, or similar
proceeding under any federal or state law, of Borrowers, or any of them, or the
commencement of any proceeding to avoid any transaction entered into by Borrowers,
or any of them, or the commencement of any case or proceeding for
reorganization or liquidation of Borrowers’, or any of their debts under the
United States Bankruptcy Code or any other state or federal law now or
hereafter enacted for the relief of debtors, whether instituted by or against
any Borrower; provided, however, that Borrowers shall have ten (10) days
to contest such proceeding and thirty (30) days from the commencement of the
action to obtain the dismissal or discharge of involuntary proceedings filed
against a Borrower, it being understood that during such ten (10) and
thirty (30) day periods, respectively, Lender shall be not obligated to make
Advances hereunder and Lender may seek adequate protection, stay relief, right
to setoff or recoupment, and/or any other right or remedy deemed necessary in
the sole discretion of Lender in any bankruptcy proceeding;


 


(k)                                 Receiver.   upon the appointment of a receiver,
liquidator, custodian, trustee or similar official or fiduciary for Borrowers,
or any of them, or for any of any such Borrower’s Property;


 


(l)                                    Execution
Process, Seizure, etc.   the
issuance of any execution or distraint process against any Borrower, or any of
them, or any Property of any such Borrower is seized by any governmental entity,
federal, state or local;


 


(m)                              Termination of
Business.  if
Borrowers, or any of them, cease any material portion of their business
operations as presently conducted or any Borrower fails to generally meet its
debts as those debts mature;


 


(n)                                Plans, etc.  any Borrower or ERISA Affiliate shall (i) engage
in any “prohibited transaction” as defined in ERISA, (ii) incur any “accumulated
funding deficiency” as defined in ERISA, (iii) incur any “reportable event”
as defined in ERISA, (iv) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan or Multiemployer Plan, (v) become
subject to the assertion of a material claim (other than routine claims for
benefits) against any “plan” (as defined in ERISA) or against any Borrower or
ERISA Affiliate in connection with any such plan, (vi) receive from the
Internal Revenue Service notice of the failure of any “plan” (as defined in
ERISA) intended to be qualified under Section 401(a) of the Code to
qualify under such section or (vii) the imposition of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007
of ERISA, upon any Borrower or ERISA Affiliate, and with respect to this Section 8.01(n),
such event or condition either (i) remains uncured for a period of thirty
(30) days from date of occurrence or (ii) could, in Lender’s reasonable
business judgment, subject any Borrower to any tax, penalty or other liability
having a Material Adverse Effect;


 


(o)                                Investigations.  any indication or evidence received by Lender
that reasonably leads it to believe Borrowers, or any of them, may have
directly or indirectly been engaged in any type of activity which would 


 


31





















 


be
reasonably likely to result in the forfeiture of any Property of Borrowers, or
any of them, to any governmental entity, federal, state or local;


 


(p)                                Material
Adverse Events.


 


(i)                                     Lender
reasonably determines that an event which adversely affects the collectibility
of a material portion of the Accounts has occurred; and


 


(ii)                                  a Material
Adverse Effect has occurred;


 


(q)                                Lockbox
Instructions.  any
instruction or agreement regarding the Commercial Lockbox or the Government
Lockbox or the bank accounts related thereto, including the Depository
Agreements and any standing transfer instructions, is amended or terminated
without the written consent of Lender, or if any Borrower fails, within one (1) Business
Day of receipt, to forward Collections it receives with respect to any Accounts
to the Commercial Lockbox or the Government Lockbox, as the case may be;


 


(r)                                   Modification of
Subordinated Debt.  Borrowers
(or any of them) shall modify the terms or provisions of any agreement,
instrument or other document relating to any Subordinated Debt without Lender’s
prior written consent, unless such modification is permitted by the applicable
Subordination Agreement;


 


(s)                                 Change in
Ownership/Management.  any
Borrower fails to perform, comply with or observe the covenants and
undertakings contained in Section 7.08 hereof;


 


(t)                                   Restraint on
Business.  any
Borrower shall be prohibited or otherwise restrained from conducting the
business theretofore conducted by it at any of the Healthcare Facilities in any
manner that has or could reasonably be expected to have or result in a Material
Adverse Effect by virtue of any determination, ruling, decision, decree,
ordinance, or order of any court of competent jurisdiction, Governmental Authority,
or municipality;


 


(u)                                Revocation of
Permits.  a Governmental Authority shall
have revoked any material Permit, including any license, permit, certificate or
Medicaid or Medicare qualification pertaining to the business of any Borrower
or any Healthcare Facility, regardless of whether such material Permit was held
by or originally issued for the benefit of any Borrower;


 


(v)                                any breach,
default or event of default occurs under any of the Comerica Loan Documents or
any of the Comerica Loan Documents are terminated; or


 


(w)                              any breach,
default or event of default occurs under any of the Safeguard Loan Documents or
any of the Safeguard Loan Documents are terminated; or


 


(x)                                  any breach,
default or event of default occurs under any of the Services Agreements or any
of the Services Agreements are terminated.


 


8.02                          Cure.  Nothing contained in this
Agreement or the Loan Documents shall be deemed to compel Lender to accept a
cure of any Event of Default hereunder.


 


8.03                          Rights and
Remedies on Default.


 


(a)                                 In addition to
all other rights, options and remedies granted or available to Lender under
this Agreement or the Loan Documents, or otherwise available at law or in
equity, upon or at any time after the occurrence of an Event of Default or
Unmatured Event of Default, Lender may, in its discretion, charge the Default
Rate on all then outstanding or thereafter incurred Obligations and/or withhold
or cease making Advances under the Credit Facility, unless such Event of
Default or Unmatured Event of Default is cured to Lender’s satisfaction or
waived in accordance herewith.


 


32





















 


(b)                                In addition to
all other rights, options and remedies granted or available to Lender under
this Agreement or the Loan Documents (each of which is also then exercisable by
Lender), Lender may, in its   discretion,
upon or at any time after the occurrence of an Event of Default, terminate the
Credit Facility (it also being understood that the occurrence of any of the
events or conditions set forth in Sections 8.01(i), (j), (k) or (q) hereof
shall automatically cause a termination of the Credit Facility without notice
or demand).


 


(c)                                 The Lender will
be entitled to take any and all actions to enforce its claims against  Borrowers to recover the balance of the
Obligations, including, without limitation, being entitled to pursue all
remedies provided for by law, equity, or otherwise, and to exercise the
warrants of attorney to confess judgment against Borrowers, or any of them,
contained in this Agreement or the other Loan Documents;


 


(d)                                The Lender will
be entitled to take any and all actions permitted by this Agreement, the other
Loan Documents, and/or by law, equity or otherwise;


 


(e)                                 In addition to
all other rights, options and remedies granted or available to Lender under
this Agreement or the Loan Documents (each of which is also then exercisable by
Lender), Lender may, upon or at any time after the occurrence of an Event of
Default, exercise all rights under the UCC and any other applicable law or in
equity, by contract or otherwise, and under all Loan Documents permitted to be
exercised after the occurrence of an Event of Default, including the following
rights and remedies (which list is given by way of example and is not intended
to be an exhaustive list of all such rights and remedies):


 


(i)                                     Subject to all
applicable laws and regulations governing payment of Medicare and Medicaid
receivables, the right to “take possession” of or foreclose on the Collateral
(including removing from any premises where same may be located any and all
books and records, computers, electronic media and software programs associated
with any Collateral (including electronic records, contracts and signatures
pertaining thereto), documents, instruments and files, and any receptacles or
cabinets containing same, relating to the Accounts) by any available judicial
procedure, or without judicial process, and to enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same, and notify all Obligors of Lender’s security interest in the
Collateral and require payment under the Accounts to be made directly to Lender
and Lender may, in its own name or in the name of the applicable Borrower,
exercise all rights of a secured party with respect to the Collateral and
collect, sue for and receive payment on all Accounts, and settle, compromise
and adjust the same on any terms as may be satisfactory to Lender, in its sole
and absolute discretion for any reason or without reason and Lender may do all
of the foregoing with or without judicial process (including, without
limitation, notifying the United States postal authorities to redirect mail
addressed to Borrowers, or any of them, to an address designated by Lender) and
may use, at Borrowers’ expense, such of the Borrowers’ personnel, supplies or
space as may be necessary to manage such Accounts;


 


(ii)                                  Require
Borrowers, at Borrowers’ expense, to assemble all or any part of the Collateral
and make it available to Lender at any place designated by Lender, which may
include providing Lender or any entity designated by Lender with access (either
remote or direct) to Borrowers’ information system for purposes of monitoring,
posting payments and rebilling Accounts to the extent deemed desirable by
Lender in its sole discretion;


 


(iii)                               The right to
reduce or modify the Revolving Loan Commitment, Borrowing Base or any portion
thereof or the Advance Rates or to modify the terms and conditions upon which
Lender may be willing to consider making Advances under the Credit Facility or
to take additional reserves in the Borrowing Base for any reason; or


 


(iv)                              The right to
sell, assign and deliver all or any part of the Collateral and any returned,
reclaimed or repossessed merchandise, in the name of the Borrowers (or any of
them) or Lender, or in the name of such other party as Lender may designate,
with or without advertisement, at public or private sale, for cash, on credit
or otherwise, at Lender’s sole 
discretion, with or without warranties or representations (including
warranties of title, possession, quiet enjoyment and the like), and upon such
other terms and conditions as Lender in its sole discretion may deem advisable,
and Lender may bid or become a purchaser at any such sale, free from any right
of redemption, which right is hereby expressly waived by the Borrowers.  If any Inventory and Equipment shall require
rebuilding, repairing, maintenance or preparation, Lender shall have the right,
at its sole discretion, to 


 


33





















 


do
such of the aforesaid as is necessary, for the purpose of putting the Inventory
and Equipment in such saleable form as Lender shall deem appropriate.


 


(f)                                   Borrowers
hereby agree that a notice received by them at least ten (10) days before
the time of any intended public sale or of the time after which any private
sale or other disposition of the Collateral is to be made, shall be deemed to
be reasonable notice of such sale or other disposition.  If permitted by applicable law, any
Collateral which threatens to speedily decline in value or which is sold on a
recognized market may be sold immediately by Lender without prior notice to
Borrowers.  Each Borrower covenants and
agrees not to interfere with or impose any obstacle to Lender’s exercise of its
rights and remedies with respect to the Collateral.


 


(g)                                Lender is
hereby granted, until the Obligations are paid in full and all obligations of
Lender hereunder are terminated, a worldwide license to use, after the
occurrence and during the continuance of an Event of Default and without
charge, all of Borrowers’ labels, trademarks (and associated goodwill),
copyrights, patents and advertising matter, and any other form of intellectual
property, as they pertain to the Collateral, in completing production of,
advertising for sale and selling of any Collateral.


 


8.04                          WARRANT OF
ATTORNEY TO CONFESS JUDGMENT.


 


(a)                                 Acknowledgment
of Warrant of Attorney.  THE
FOLLOWING PARAGRAPH SETS FORTH A GRANT OF AUTHORITY FOR ANY ATTORNEY TO CONFESS
JUDGMENT AGAINST THE BORROWERS.  IN
GRANTING THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST THE BORROWERS,
FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR
THE BORROWERS AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, THE BORROWERS
HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY
WAIVE ANY AND ALL RIGHTS ANY OF THEM HAS OR MAY HAVE TO PRIOR NOTICE AND
AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE
UNITED STATES OF AMERICA, COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE INCLUDING,
WITHOUT LIMITATION, A HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF THE
BORROWERS’ BANK ACCOUNTS AND OTHER ASSETS. 
THE BORROWERS ACKNOWLEDGE AND UNDERSTAND THAT BY ENTERING INTO THIS
AGREEMENT CONTAINING A CONFESSION OF JUDGMENT CLAUSE THAT THE BORROWERS ARE
EACH VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL RIGHTS,
INCLUDING CONSTITUTIONAL RIGHTS, THAT ANY BORROWER HAS OR MAY HAVE TO
NOTICE AND A HEARING BEFORE JUDGMENT CAN BE ENTERED AGAINST ANY BORROWER AND
BEFORE THE BORROWERS’ ASSETS, INCLUDING, WITHOUT LIMITATION, THEIR BANK
ACCOUNTS, MAY BE GARNISHED, LEVIED, EXECUTED UPON AND/OR ATTACHED.  THE BORROWERS UNDERSTAND THAT ANY SUCH
GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL RENDER THE PROPERTY
GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY UNAVAILABLE TO THE
OBLIGORS.  IT IS SPECIFICALLY
ACKNOWLEDGED BY THE BORROWERS THAT THE LENDER HAS RELIED ON THIS WARRANT OF
ATTORNEY AND THE RIGHTS WAIVED BY THE OBLIGORS HEREIN IN CONSENTING TO THIS
AGREEMENT AND AS AN INDUCEMENT TO GRANT THE ACCOMMODATIONS OUTLINED HEREIN TO
THE BORROWERS.


 


(b)                                WARRANT OF
ATTORNEY TO CONFESS JUDGMENT - Money.  THE BORROWERS, AND EACH OF THEM, HEREBY
AUTHORIZE AND EMPOWER, UPON AN EVENT OF DEFAULT HEREUNDER, AND/OR UNDER THE
OTHER LOAN DOCUMENTS, ANY ATTORNEY OF ANY COURT OF RECORD OR THE PROTHONOTARY
OR CLERK OF ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA, OR IN ANY
JURISDICTION WHERE PERMITTED BY LAW, OR THE CLERK OF ANY UNITED STATES DISTRICT
COURT, TO APPEAR FOR THE BORROWERS IN ANY AND ALL ACTIONS WHICH MAY BE
BROUGHT HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS, AND ENTER AND CONFESS
JUDGMENT AGAINST THE BORROWERS, JOINTLY AND SEVERALLY, IN FAVOR OF THE LENDER
OR ITS ASSIGNEE FOR THE ENTIRE AMOUNT OF THE INDEBTEDNESS THEN DUE AND
OUTSTANDING UNDER THE TERMS OF THIS AGREEMENT, AND/OR UNDER THE TERMS OF THE
OTHER LOAN DOCUMENTS, TOGETHER WITH ATTORNEYS’ FEES EQUAL TO FIFTEEN PERCENT
(15%) OF THE FOREGOING SUMS THEN DUE AND OWING, BUT IN NO EVENT LESS THAN FIVE
THOUSAND ($5,000.00) DOLLARS, ALL WITH OR WITHOUT DECLARATION, 


 


34





















 


WITHOUT
PRIOR NOTICE, WITHOUT STAY OF EXECUTION AND WITH RELEASE OF ALL PROCEDURAL
ERRORS AND THE RIGHT TO ISSUE EXECUTIONS FORTHWITH.  TO THE EXTENT PERMITTED BY LAW, EACH OF THE
BORROWERS WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON,
VOLUNTARILY CONDEMNS THE SAME, AUTHORIZES THE PROTHONOTARY OR CLERK TO ENTER
UPON THE WRIT OF EXECUTION THIS VOLUNTARY CONDEMNATION AND AGREES THAT SUCH
REAL ESTATE MAY BE SOLD ON A WRIT OF EXECUTION; AND ALSO WAIVES ANY RELIEF
FROM ANY APPRAISEMENT, STAY OR EXEMPTION LAW OF ANY STATE NOW IN FORCE OR
HEREAFTER ENACTED.  IF COPIES OF THIS
AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS VERIFIED BY AFFIDAVIT OF ANY
REPRESENTATIVE OF THE LENDER SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT
BE NECESSARY TO FILE THE ORIGINALS THEREOF AS A WARRANT OF ATTORNEY, ANY
PRACTICE OR USAGE TO THE CONTRARY NOTWITHSTANDING.  THE AUTHORITY HEREIN GRANTED TO CONFESS
JUDGMENT SHALL NOT BE EXHAUSTED BY ANY SINGLE EXERCISE THEREOF, BUT SHALL
CONTINUE AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE LENDER
SHALL FIND IT NECESSARY AND DESIRABLE AND AT ALL TIMES UNTIL FULL PAYMENT OF
ALL AMOUNTS DUE HEREUNDER, AND/OR UNDER THE OTHER LOAN DOCUMENTS.  THE LENDER MAY CONFESS ONE OR MORE
JUDGMENTS IN THE SAME OR DIFFERENT JURISDICTIONS FOR ALL OR ANY PART OF
THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER, AND/OR UNDER THE OTHER LOAN
DOCUMENTS, WITHOUT REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN CONFESSED ON
MORE THAN ONE OCCASION FOR THE SAME INDEBTEDNESS OR OBLIGATIONS.  IN THE EVENT THAT ANY JUDGMENT CONFESSED
AGAINST THE BORROWERS IS STRICKEN OR OPENED UPON APPLICATION BY OR ON BEHALF OF
ANY OF THE BORROWERS FOR ANY REASON, THE LENDER IS HEREBY AUTHORIZED AND
EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST THE OBLIGORS FOR ANY
PART OR ALL OF THE INDEBTEDNESS DUE AND OWING TO THE LENDER HEREUNDER,
AND/OR UNDER THE OTHER LOAN DOCUMENTS.


 


(c)                                 WARRANT OF
ATTORNEY TO CONFESS JUDGMENT – General Provisions.  IN ANY ACTION OR PROCEEDING DESCRIBED IN SECTION 8.04
HEREIN OR IN CONNECTION THEREWITH, IF COPIES OF THIS AGREEMENT AND/OR THE OTHER
LOAN DOCUMENTS ARE THEREIN VERIFIED BY THE LENDER OR SOMEONE ACTING FOR THE
LENDER TO BE TRUE AND CORRECT COPIES OF THIS AGREEMENT AND/OR THE OTHER LOAN
DOCUMENTS (AND SUCH COPIES SHALL BE CONCLUSIVELY PRESUMED TO BE TRUE AND
CORRECT BY VIRTUE OF SUCH VERIFICATION), THEN IT SHALL NOT BE NECESSARY TO FILE
THE ORIGINAL OF THIS AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS, ANY STATUTE,
RULE OF COURT OF LAW, CUSTOM OR PRACTICE TO THE CONTRARY NOTWITHSTANDING.  THE BORROWERS HEREBY RELEASE TO THE LENDER,
ANYONE ACTING FOR THE LENDER AND ALL ATTORNEYS WHO MAY APPEAR FOR THE
BORROWERS, ALL ERRORS IN PROCEDURE REGARDING THE ENTRY OF JUDGMENT OR JUDGMENTS
BY CONFESSION OR OTHERWISE BY VIRTUE OF THE WARRANTS OF ATTORNEY CONTAINED IN
THIS AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS, AND ALL LIABILITY THEREFOR.  THE RIGHT TO ENTER JUDGMENT OR JUDGMENTS BY
CONFESSION OR OTHERWISE BY VIRTUE OF THE WARRANTS OF ATTORNEY CONTAINED IN THIS
AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS, AND TO ENFORCE ALL OF THE OTHER
PROVISIONS OF THE AFORESAID DOCUMENTS MAY BE EXERCISED BY ANY ASSIGNEE OF
THE LENDER’S RIGHT, TITLE AND INTEREST IN THIS AGREEMENT AND/OR THE OTHER LOAN
DOCUMENTS IN SUCH ASSIGNEE’S OWN NAME, ANY STATUTE, RULE OF COURT OR LAW,
CUSTOM OR PRACTICE TO THE CONTRARY NOTWITHSTANDING.


 


8.05                          Nature of
Remedies.  All rights and remedies granted Lender
hereunder and under the Loan Documents, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time until
all Obligations are satisfied in full. 
The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and Lender, upon or at any time after the
occurrence of an Event of Default, may proceed against Borrowers, or any of
them, at any time, under any agreement, with any available remedy and in any
order.


 


8.06                          Set-Off.  Upon the occurrence of an
Event of Default, Lender and/or any Affiliate of Lender and/or participant with
Lender shall have and be deemed to have, without notice to Borrowers, the
immediate right 


 


35





















 


of set-off and may apply the
funds or other amounts or Property thus set off against any of Borrowers’
Obligations hereunder.


 


8.07                          Application of
Proceeds.  The net cash proceeds resulting from Lender’s
exercise of any of Lenders rights pursuant to this Article 8 (after
deducting all Expenses relating thereto) shall be applied by Lender to the
payment of the Obligations as set forth in Section 2.08(b) hereof,
and the Borrowers shall remain liable to Lender for any deficiencies, and
Lender in turn agrees to remit to the Borrowers or their successors or assigns,
any surplus resulting therefrom.


 


ARTICLE
9


 


MISCELLANEOUS


 


9.01                          GOVERNING LAW.  THIS AGREEMENT, AND ALL
MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, 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.


 


9.02                          Integrated
Agreement.  The Revolving Note, the other Loan Documents,
all related agreements, and this Agreement shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender’s
rights and remedies.  If, after applying
the foregoing, an inconsistency still exists, the provisions of this Agreement
shall constitute an amendment thereto and shall control.


 


9.03                          Waiver and
Indemnity.


 


(a)                                 No omission or
delay by Lender in exercising any right or power under this Agreement or any
related agreements and documents will impair such right or power or be
construed to be a waiver of any default, or Event of Default or an acquiescence
therein, and any single or partial exercise of any such right or power will not
preclude other or further exercise thereof or the exercise of any other right,
and as to any Borrower no waiver will be valid unless in writing and signed by
Lender and then only to the extent specified.


 


(b)                                Each Borrower
releases and shall indemnify, defend and hold harmless Lender, and its
respective officers, directors, employees, attorneys and agents (each, an “Indemnified
Party”), of and from any claims, demands, liabilities, obligations,
judgments, injuries, losses, damages and costs and expenses (including, without
limitation, Expenses and reasonable legal fees) of any kind or nature, which at
any time may be imposed on, incurred by, or asserted against any Indemnified
Party, resulting from (i) acts or conduct of a Borrower under, pursuant or
related to this Agreement and the other Loan Documents, (ii) as a result
of Lender’s exercise of (or failure to exercise) any of Lender’s rights and
remedies hereunder or under the other Loan Documents, including (A) any
sale or transfer of the Collateral, (B) the preservation, repair,
maintenance, preparation for sale or securing of any Collateral, (C) the
defense of Lender’s interests in the Collateral (including the defense of
claims brought by the Borrowers (or any of them) as a debtor-in-possession or
otherwise, any secured or unsecured creditors of the Borrowers (or any of
them), or any trustee or receiver in bankruptcy), and (D) rights, remedies
or obligations under the Business Associate Agreement; (iii) as a result
of any environmental pollution, hazardous material or environmental clean-up
and the Borrowers’ off-site disposal practices; (iv) in connection with
any regulatory investigation or proceeding by any regulatory authority or
agency having jurisdiction over the Borrowers (or any of them); (v) otherwise
relating to or arising out of the transactions contemplated by this Agreement
and the other Loan Documents, or any action taken (or failure to act) by any
Indemnified Party with respect thereto; (vi) any Borrower’s breach, or
alleged breach, or violation of any representation, warranty, covenant or
undertaking contained in this Agreement or the other Loan Documents, and (vii) any
Borrower’s failure, or alleged failure, to comply with any or all laws,
statutes, ordinances, governmental rules, regulations or standards, whether
federal, state or local, or court or administrative orders or decrees
(including, without limitation, environmental laws, etc.), and all costs, expenses,
fines, penalties or other damages resulting therefrom, unless in each case
resulting from acts or conduct of Lender constituting willful misconduct or
gross negligence, as finally determined by a court of competent
jurisdiction.  This indemnification shall
survive the termination of this Agreement and the payment in full and
satisfaction of the Obligations.


 


36





















 


(c)                                 Lender shall
not be liable for, and Borrowers hereby agree that Lender’s liability in the
event of a breach by Lender of this Agreement or any other Loan Document shall
be limited to Borrowers’ direct damages suffered and shall not extend to, any
consequential or incidental damages.  In
the event Borrowers bring suit against Lender in connection with the
transactions contemplated hereunder, and Lender is found not to be liable,
Borrowers shall indemnify and hold Lender harmless from all costs and expenses,
including attorneys’ fees, incurred by Lender in connection with such suit.


 


9.04                          Time.  Whenever Borrowers, or any of
them, shall be required to make any payment, or perform any act, on a day which
is not a Business Day, such payment may be made, or such act may be performed,
on the next succeeding Business Day. 
Time is of the essence in Borrowers’ 
performance under all provisions of this Agreement and all related
agreements and documents.


 


9.05                          Expenses of
Lender.


 


(a)                                 At Closing and
from time to time thereafter, Borrowers will pay all reasonable expenses of
Lender on demand (including, without limitation, search costs, audit fees,
appraisal fees, and the fees and expenses of legal counsel for Lender) relating
to this Agreement, and all related agreements and documents, including, without
limitation, expenses incurred in the analysis, negotiation, preparation,
closing, administration and enforcement of this Agreement and the other Loan
Documents, the enforcement, protection and defense of the rights of Lender in
and to the Revolving Loans and Collateral or otherwise hereunder, and any reasonable
expenses relating to extensions, amendments, waivers or consents pursuant to
the provisions hereof, or any related agreements and documents or relating to
agreements with other creditors, or termination of this Agreement
(collectively, the “Expenses”). 
Any Expenses not paid upon demand by Lender shall bear interest at the
highest per annum rate of interest applicable to the Revolving Loans.


 


(b)                                In addition, at
any time following the date of this Agreement, Borrowers effect any changes
which results in a change in the format or sequence of Borrowers’ data,
Borrowers shall pay to Lender its reasonable charge for implementing such
changes as are necessary to accommodate the changes in the format or sequence
of the data such that Lender’s accounts receivable monitoring system is capable
of importing such data, including an hourly fee of $125.00.


 


9.06                          Confidentiality.  Except as provided in Section 9.19
hereof or to the extent required by law or applicable regulations, Borrowers
and Lender (and Lender’s assignees and participants) agree to maintain the
confidentiality of this Agreement and not to disclose the contents hereof or
provide a copy hereof to any third party, except (i) accountants, lawyers
and financial advisers of the parties who are informed of and agree to be bound
by this Section 9.06, and (ii) that copies hereof may be provided to
any assignee or participant (or potential assignee or participant) of Lender’s
interests herein, any investors or prospective investors who acquire or may
acquire Securities backed by Accounts and any parties which facilitate the
issuance of such Securities, including rating agencies, guarantors and
insurers.  Lender agrees to maintain the
confidentiality of patient information obtained as a result of its interests
in, or duties with respect to, the Accounts and as otherwise may be required
pursuant to the Business Associate Agreement.


 


9.07                          Notices.


 


(a)                                 Any notices or
consents required or permitted by this Agreement shall be in writing and shall
be deemed given if delivered in person or if sent by telecopy or by nationally
recognized overnight courier, or via first class, certified or registered mail,
postage prepaid, to the address of such party set forth on the signature pages hereof,
unless such address is changed by written notice hereunder;


 


(b)                                Any notice sent
by Lender or Borrowers, or any of them, by any of the above methods shall be
deemed to be given when so received; and


 


(c)                                 Lender shall be
fully entitled to rely upon any facsimile transmission or other writing
purported to be sent by any Authorized Officer (whether requesting an Advance
or otherwise) as being genuine and authorized.


 


37





















 


9.08                          Brokerage.  Borrowers represent that
Borrowers have not committed Lender to the payment of any brokerage fee,
commission or charge in connection with this transaction.  If any such claim is made on Lender by any
broker, finder or agent or other Person, each Borrower hereby indemnifies,
defends and saves Lender harmless against such claim and further will defend,
with counsel satisfactory to Lender, any action or actions to recover on such
claim, at Borrowers’ own cost and expense, including Lender’s reasonable
counsel fees.  Each Borrower further
agrees that until any such claim or demand is adjudicated in Lender’s favor,
the amount demanded shall be deemed an Obligation of Borrowers under this
Agreement.


 


9.09                          Headings.  The headings of any paragraph
or section of this Agreement are for convenience only and shall not be used to
interpret any provision of this Agreement.


 


9.10                          Survival.  All warranties,
representations, and covenants made by any or all Borrowers and/herein, or in
any agreement referred to herein or on any certificate, document or other
instrument delivered by it or on its behalf under this Agreement, shall be
considered to have been relied upon by Lender, and shall survive the delivery
to Lender of the Revolving Note, regardless of any investigation made by Lender
or on its behalf.  All statements in any
such certificate or other instrument prepared and/or delivered for the benefit
of Lender shall constitute warranties and representations by Borrowers
hereunder.  Except as otherwise expressly
provided herein, all covenants made by any or all Borrowers hereunder or under
any other agreement or instrument shall be deemed continuing until all
Obligations are satisfied in full.


 


9.11                          Successors and
Assigns.  This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties.  No Borrower may transfer, assign or delegate
any of its duties or obligations hereunder.


 


9.12                          Duplicate
Originals.  Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.  This Agreement may be executed in
counterparts and by PDF or facsimile signature, all of which counterparts taken
together shall constitute one completed fully executed document.


 


9.13                          Modification.  No modification hereof or any
agreement referred to herein shall be binding or enforceable unless in writing
and signed by Borrowers and Lender.


 


9.14                          Signatories.  Each individual signatory
hereto represents and warrants that he is duly authorized to execute this
Agreement on behalf of his principal and that he executes the Agreement in such
capacity and not as a party.


 


9.15                          Third Parties.  No rights are intended to be
created hereunder, or under any related agreements or documents for the benefit
of any third party donee, creditor or incidental beneficiary of any
Borrower.  Nothing contained in this
Agreement shall be construed as a delegation to Lender of any Borrower’s duty
of performance, including, without limitation, such Borrower’s duties under any
account or contract with any other Person.


 


9.16                          Waivers.


 


(a)                                 Borrowers
hereby waive diligence, demand, presentment, protest and any notices thereof as
well as notices of nonpayment, intent to accelerate and acceleration. Borrowers
each hereby irrevocably, unconditionally and fully subordinate in favor of
Lender, any and all rights they or any of them, may have at any time (whether
arising directly or indirectly, by operation of law or contract) to assert or
receive payment on any claim against each other or any of them, on account of
payments made under this Agreement, including, without limitation, any and all
rights of subrogation, reimbursement, exoneration, contribution or
indemnity.  Each Borrower waives any
event or circumstances which might constitute a legal or equitable defense of,
or discharge of, such Borrower. 
Furthermore, each Borrower agrees that if any payment on the Obligations
is recovered from or repaid by Lender in whole or in part in any bankruptcy,
insolvency or similar proceeding instituted by or against any Borrower, the
remaining Borrowers and/shall be obligated to the same extent as if the
recovered or repaid payment had never been originally made on such
Obligation.  Each Borrower consents and
agrees that Lender shall be under 


 


38





















 


no
obligation to marshal any assets or Collateral in favor of such Borrower or
against or in payment of any or all of the Obligations.


 


(b)                                Each Borrower
hereby consents and agrees that Lender, at any time or from time to time in its
discretion may:  (i) settle,
compromise or grant releases for liabilities of other Borrowers, and/or any
other Person or Persons liable for any Obligations, (ii) exchange,
release, surrender, sell, subordinate or compromise any Collateral of any party
now or hereafter securing any of the Obligations, and (iii) following an
Event of Default, apply any and all payments received at any time against the
Obligations in any order as Lender may determine; all of the foregoing in such
manner and upon such terms as Lender may see fit, without notice to or further
consent from such Borrower who hereby agrees and shall remain bound upon this
Agreement notwithstanding any such action on Lender’s part.


 


(c)                                 The liability
of each Borrower hereunder is absolute and unconditional and shall not be
reduced, impaired or affected in any way by reason of (i) any failure to
obtain, retain or preserve, or the lack of prior enforcement of, any rights
against any Person or Persons (including other Borrowers), or in any Property, (ii) the
invalidity or unenforceability of any Obligations or rights in any Collateral, (iii) any
delay in making demand upon other Borrowers or any delay in enforcing, or any
failure to enforce, any rights against other Borrowers or in any Collateral
even if such rights are thereby lost, (iv) any failure, neglect or
omission to obtain, perfect or retain any lien upon, protect, exercise rights
against, or realize on, any Property of any Borrower, or any other party
securing the Obligations, (v) the existence or nonexistence of any
defenses which may be available to the other Borrowers with respect to the
Obligations, or (vi) the commencement of any bankruptcy, reorganization,
liquidation, dissolution or receivership proceeding or case filed by or against
any Borrower.


 


9.17                          CONSENT TO
JURISDICTION.  EACH BORROWER AND LENDER HEREBY IRREVOCABLY
CONSENT TO THE NONEXCLUSIVE JURISDICTION OF, AND VENUE IN, ANY STATE OR FEDERAL
COURT LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA IN ANY AND ALL ACTIONS AND
PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR
UNDERTAKING.  BORROWERS WAIVE ANY
OBJECTION TO IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH
COURT OR COURTS AND ALL RIGHTS TO TRANSFER FOR ANY REASON.  EACH BORROWER IRREVOCABLY AGREES TO SERVICE
OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE
APPROPRIATE PARTY SET FORTH HEREIN.


 


9.18                          WAIVER OF JURY
TRIAL.  EACH BORROWER AND LENDER HEREBY WAIVE ANY AND
ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION
COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO OR UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT
OR OTHERWISE.


 


9.19                          Publication.  Borrowers grant Lender the
right to publish and/or advertise information to the effect that this
transaction has closed, which information may include, without limit, (a) the
names of Borrowers and Lender, (b) the size of the transaction and (c) those
items of information commonly included within a “tombstone advertisement” of
the type customarily published in financial or business periodicals.


 


9.20                          Discharge of
Taxes, Borrowers’ Obligations, Etc.  Lender, in its sole
discretion, shall have the right at any time, and from time to time, with prior
notice to Borrowers, if Borrowers fail to do so five (5) Business Days
after requested in writing to do so by Lender, to: (a) pay for the
performance of any of Borrowers’ Obligations hereunder, and (b) discharge
taxes or liens, at any time levied or placed on any of Borrowers’ Property in
violation of this Agreement unless Borrowers are in good faith with due
diligence by appropriate proceedings contesting such taxes or liens and have
established appropriate reserves therefor under GAAP.  Payment of such Expenses and advances shall
be deemed Advances hereunder and shall bear interest at the highest rate
applied to the Revolving Loans until reimbursed to Lender.  Such payments and advances made by Lender
shall not be construed as a waiver by Lender of any Event of Default under this
Agreement.


 


9.21                          Injunctive
Relief.  The parties acknowledge and agree that, in
the event of a breach or threatened breach of any party’s obligations
hereunder, the other party may have no adequate remedy in money damages and, 


 


39





















 


accordingly, shall be
entitled to an injunction (including, without limitation, a temporary
restraining order, preliminary injunction, writ of attachment, or order
compelling an audit) against such breach or threatened breach, including,
without limitation, maintaining the cash management and collection procedure
described herein.  However, no
specification in this Agreement of a specific legal or equitable remedy shall
be construed as a waiver or prohibition against any other legal or equitable
remedies in the event of a breach or threatened breach of any provision of this
Agreement.


 


9.22                          Assignment or
Syndication by Lender.  Lender
may, at its sole discretion, assign in whole or in part any and all of its
rights and/or obligations herein to any other person, including but not limited
to any assignment by Lender to an Affiliate of Lender or any assignment in part
or in whole of its rights herein to another party as collateral security for
Lender’s obligation(s) to such other party (a “Collateral Assignment”).


 


9.23                          Severability.  If any provision hereof or of
any other Loan Document is held to be illegal or unenforceable, such provision
shall be fully severable, and the remaining provisions of the applicable
agreement shall remain in full force and effect and shall not be affected by
such provision’s severance.  Furthermore,
in lieu of any such provision, there shall be added automatically as a part of
the applicable agreement a legal and enforceable provision as similar in terms
to the severed provision as may be possible.


 


9.24                          Authority.   Without limiting
the powers granted to Lender in Section 8.03 hereof, if an Event of
Default shall have occurred and be continuing, the Borrowers hereby authorize
Lender, or any person or agent which Lender may designate, at the Borrowers’
cost and expense, to exercise all of the following powers, which authority
shall be irrevocable until the termination of this Agreement and the full and
final payment and satisfaction of the Obligations to: (a) receive, take,
endorse, sign, assign and deliver, all in the name of Lender or the Borrowers
(or any of them), any and all checks, notes, drafts, and other documents or
instruments relating to the Collateral; (b) receive, open and dispose of
all mail addressed to the Borrowers (or any of them), and to notify postal
authorities to change the address for delivery thereof to such address as
Lender may designate; (c) request from customers indebted on Accounts at
any time, in the name of Lender, information concerning the amounts owing on
the Accounts; (d) request from customers indebted on Accounts at any time,
in the name of the Borrowers (or any of them), any certified public accountant
designated by Lender or any other designee of Lender, information concerning
the amounts owing on the Accounts; (e) transmit to customers indebted on
Accounts notice of Lender’s interest therein and to notify customers indebted
on Accounts to make payment directly to Lender for the Borrowers’ account
(subject to all applicable laws and regulations governing payment of Medicare
and Medicaid receivables); and/or (f) take or bring, in the name of Lender
or the Borrowers (or any of them), all steps, actions, suits or proceedings deemed
by Lender necessary or desirable to enforce or effect collection of the
Accounts.


 


9.25                          Usury Limit.    In no event
shall the Borrowers, upon demand by Lender for payment of any indebtedness
relating hereto, by acceleration of the maturity thereof, or otherwise, be
obligated to pay interest and fees in excess of the amount permitted by
law.  Regardless of any provision herein
or in any agreement made in connection herewith, Lender shall never be entitled
to receive, charge or apply, as interest on any indebtedness relating hereto,
any amount in excess of the maximum amount of interest permissible under
Applicable Law.  If Lender ever receives,
collects or applies any such excess, it shall be deemed a partial repayment of
principal and treated as such.  If as a
result, the entire principal amount of the Obligations is paid in full, any
remaining excess shall be refunded to Borrowers.  This Section 9.25 shall control every
other provision of this Agreement, the other Loan Documents and any other
agreement made in connection herewith.


 


9.26                          Termination.   Except as
otherwise provided in Article 8 hereof, Lender may terminate this
Agreement only as of the Maturity Date. 
Borrowers, or any one of them, may terminate this Agreement at any time
prior to the Maturity Date only in accordance with the terms of Section 2.03(d).  A termination by one Borrower shall be deemed
to be a termination by all Borrowers.


 


40
















 


ARTICLE 10



SPECIAL INTER-BORROWER PROVISIONS


 


10.01                    Certain
Borrower Acknowledgments and Agreements.


 


(a)                                 Each Borrower
acknowledges that it will enjoy significant benefits from the business
conducted by the other Borrowers because of, inter alia, their combined ability
to bargain with other Persons including, without limitation, their ability to
receive the Credit Facility on favorable terms granted by this Agreement and
other Loan Documents which would not have been available to an individual
Borrower acting alone.  Each Borrower has
determined that it is in its best interest to procure the Credit Facility which
each Borrower may utilize directly and which receive the credit support of the
other Borrowers as contemplated by this Agreement and the other Loan Documents.


 


(b)                                Lender has
advised Borrowers that it is unwilling to enter into this Agreement and the
other Loan Documents and make available the Credit Facility extended hereby to
any Borrower unless each Borrower agrees, among other things, to be jointly and
severally liable for the due and proper payment of the Obligations of each
Borrower under this Agreement and other Loan Documents.  Each Borrower has determined that it is in
its best interest and in pursuit of its purposes that it so induce Lender to
extend credit pursuant to this Agreement and the other documents executed in
connection herewith (i) because of the desirability to each Borrower of
the Credit Facility, the interest rates and the modes of borrowing available
hereunder, (ii) because each Borrower may engage in transactions jointly
with other Borrowers and (iii) because each Borrower may require, from
time to time, access to funds under this Agreement for the purposes herein set
forth.


 


(c)                                 Each Borrower
has determined that it has and, after giving effect to the transactions
contemplated by this Agreement and the other Loan Documents (including, without
limitation, the inter-Borrower arrangement set forth in this Section 10.01)
will have, assets having a fair saleable value in excess of the amount required
to pay its probable liability on its existing debts as they fall due for
payment and that the sum of its debts is not and will not then be greater than
all of its Property at a fair valuation, that such Borrower has, and will have,
access to adequate capital for the conduct of its business and the ability to
pay its debts from time to time incurred in connection therewith as such debts
mature and that the value of the benefits to be derived by such Borrower from
the access to funds under this Agreement (including, without limitation, the
inter-Borrower arrangement set forth in this Section 10.1) is reasonably
equivalent to the obligations undertaken pursuant hereto.


 


(d)                                Borrower
Representative (on behalf of each Borrower) shall maintain records specifying (i) all
Obligations incurred by each Borrower, (ii) the date of such incurrence, (iii) the
date and amount of any payments made in respect of such Obligations and (iv) all
inter-Borrower obligations pursuant to this Section 10. Borrower
Representative shall make copies of such records available to Lender, upon
request.


 


10.02                    Maximum Amount
of Joint and Several Liability.   Notwithstanding
any provisions of this Agreement to the contrary, it is the intent of the
parties hereto that the primary and secondary nature of the liabilities of the
Borrowers, and the security interests granted by the Borrowers to secure the
Obligations directly incurred by any Borrower not constitute a fraudulent
conveyance under Section 548 of Chapter 11 of Title 11 of the
United States Code (11 U.S.C. § 101, et seq.), as amended, or a fraudulent
conveyance or fraudulent transfer under the applicable provisions of any
fraudulent conveyance, fraudulent transfer or similar law of any state, nation
or other governmental unit, as in effect from time to time or otherwise be
rendered invalid or unenforceable due to the nature of the joint and several
liability.  Accordingly,  Lender and Borrowers agree that if the
Obligations of any Borrower, or any security interests granted by such Borrower
securing the Obligations would, but for the application of this sentence,
constitute a fraudulent conveyance or fraudulent transfer under Applicable Law,
or would otherwise render such Borrower’s Obligations or the security interests
granted herein invalid or unenforceable, the Obligations of such Borrower
hereunder, as well as the security interests securing such Obligations, shall
be valid and enforceable only to the maximum extent that would not cause such
Obligations or security interests to constitute a fraudulent conveyance or
fraudulent transfer under Applicable Law or otherwise result in such invalidity
or unenforceability; provided however that each Borrower’s Obligations shall be
presumptively valid and enforceable to their fullest extent in accordance with
the terms hereof or thereof, as if this Section 10.02 were not a part of
this Agreement.


 


41





















 


10.03                    Authorization
of Borrower Representative by Borrowers.


 


(a)                                 Each of Borrowers
hereby irrevocably authorizes Borrower Representative to give notices, make
requests, make payments, receive payments and notices, give receipts and
execute agreements, make agreements or take any other action whatever on behalf
of such Borrower under and with respect to any Loan Document and each Borrower
shall be bound thereby.  This
authorization is coupled with an interest and shall be irrevocable, and Lender
may rely on any notice, request, information supplied by Borrower
Representative, every document executed by Borrower Representative, every
agreement made by Borrower Representative or other action taken by Borrower
Representative in respect of Borrowers or any thereof as if the same were
supplied, made or taken by any or all Borrowers.  Without limiting the generality of the
foregoing, the failure of one or more Borrowers to join in the execution of any
writing in connection herewith shall not, unless the context clearly requires,
relieve any such Borrower from obligations in respect of such writing.


 


(b)                                Borrowers
acknowledge that the credit provided hereunder is on terms more favorable than
any Borrower acting alone would receive and that each Borrower benefits
directly and indirectly from all Advances hereunder.  Each of Borrowers, shall be jointly and
severally liable for all Obligations, regardless of, inter alia, which Borrower
requested (or received the proceeds of) a particular Advance.


 


10.04                    Joint and
Several Liability.  The Revolving Loans made to the Borrowers
shall be deemed jointly funded to, and received by, all of the Borrowers.  Each Borrower jointly and severally agrees to
pay, and shall be joint and severally liable for the payment and performance
of, all Obligations directly incurred by any other Borrower, regardless of
whether such Borrower actually receives the proceeds of the indebtedness
governed hereby or the benefit of any other extensions of credit
hereunder.  Each Borrower acknowledges
and agrees that the joint and several liability of the Borrowers is provided as
an inducement to Lender to provide loans and other financial accommodations to
the Borrowers, and that each such Revolving Loan or other financial
accommodation shall be deemed to have been done or extended by Lender in
consideration of, and in reliance upon, the joint and several liability of the
Borrowers. The joint and several liability of each Borrower hereunder is
absolute, unconditional and continuing, regardless of the validity or
enforceability of any of the Obligations, or the fact that a security interest
or lien in any Collateral may not be enforceable or subject to equities or
defenses or prior claims in favor of others, or may be invalid or defective in
any way and for any reason.  Each
Borrower hereby waives:  (a) all
notices to which such Borrower may be entitled as a co-obligor with respect to
the Obligations, including notice of (i) acceptance of this Agreement, (ii) the
making of Revolving Loans or other financial accommodations under this
Agreement, or the creation or existence of the Obligations, and (iii) presentment,
demand, protest, notice of protest and notice of non-payment; and (b) all
defenses based on (i) any modification (or series of modifications) of
this Agreement, the other Loan Documents, that may create a substituted
contract, or that may fundamentally alter the risks imposed on such Borrower
hereunder, (ii) the release of any other Borrower from its duties this
Agreement, the other Loan Documents, or the extension of the time of
performance of any other Borrower’s duties hereunder or thereunder, (iii) the
taking, releasing, impairment or abandonment of any Collateral, or the
settlement, release or compromise of the Obligations or any other Borrower’s
liabilities with respect to all or any portion of the Obligations, or (iv) any
other act (or any failure to act) that fundamentally alters the risks imposed
on such Borrower by virtue of its joint and several liability hereunder.  It is the intent of each Borrower by this
paragraph to waive any and all suretyship defenses available to such Borrower
with respect to the Obligations, whether or not specifically enumerated
above.  Borrowers acknowledge that the
credit provided hereunder is on terms more favorable than any Borrower acting
alone would receive and that each Borrower benefits directly and indirectly
from the Revolving Loans made hereunder. 
Each Borrower shall be jointly and severally liable for all Obligations
regardless of, inter alia, which Borrower received proceeds of the Revolving Loans.


 


[Remainder of Page Intentionally Left Blank]


 


42

















 


IN WITNESS WHEREOF,
this Agreement has been duly executed as of the day and year first above
written.


 


 


	
  BORROWERS:

  	
  CLARIENT, INC.

  
	
  Address for notices to Borrowers:

  	
   

  	
   

  
	
  c/o Clarient, Inc.

  	
  By:

  	
  /s/ Raymond Land

  
	
  31 Columbia

  	
  Name: Raymond Land

  
	
  Aliso Viejo, CA 92656

  	
  Title: Chief Financial Officer and
  Secretary

  
	
  Attn: Chief Financial Officer

  	
   

  	
   

  
	
  Fax: 949-425-5863

  	
   

  	
   

  
	
   

  	
  CLARIENT DIAGNOSTIC SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Raymond Land

  
	
   

  	
  Name: Raymond Land

  
	
   

  	
  Title: Chief Financial Officer and
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CHROMAVISION INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Raymond Land

  
	
   

  	
  Name: Raymond Land

  
	
   

  	
  Title: Chief Financial Officer and
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDER:

  	
  GEMINO HEALTHCARE FINANCE, LLC

  
	
  Address for notices to Lender:

  	
   

  	
   

  
	
  One International Plaza,
  Suite 220

  	
  By: 

  	
  /s/ Jennifer W. Leibowitz

  
	
  Philadelphia, PA 19113

  	
  Name: Jennifer W. Leibowitz

  
	
  Attention: Thomas Schneider

  	
  Title: Senior Underwriter

  
	
  Fax: 610-870-5401

  	
   

  	
   

  



 


 


[Signature Page To
Credit Agreement]


 


S-1

















 


ANNEX I


 


DEFINITIONS


 


“Account(s)” means (a) all of
Borrowers’ present and future accounts, payment intangibles, instruments,
chattel paper (including electronic chattel paper) (all as defined in the UCC)
and all other rights of each Borrower to receive payments including, without
limitation, the third party reimbursable portion of accounts receivable owing
to a Borrower arising out of the delivery by such Borrower of medical,
surgical, diagnostic, treatment or other professional or medical or healthcare
related services and/or the supply of goods related to any of such services
(whether such services are supplied by a Borrower or a third party), including,
without limitation all health-care-insurance-receivables (as defined in the
UCC) and all other rights to reimbursement under any agreements with an
Obligor, (b) all accounts, general intangibles, rights, remedies,
guarantees, supporting obligations, letter-of-credit rights, and security
interests in respect of the foregoing and, all rights of enforcement and
collection, all books and records evidencing or related to the foregoing, and
all rights under this Agreement in respect of the foregoing, (c) all
information and data compiled or derived by such Borrower in respect of such
accounts receivable (other than any such information and data subject to legal
restrictions of patient confidentiality), and (d) all proceeds of any of
the foregoing.


 


“Accounts Detail File” has the meaning
set forth in Section 2.02(b) hereof.


 


“Advance(s)” means any monies advanced
or credit extended, including, without limitation, the Revolving Loans to or
for the benefit of Borrowers, or any of them, by Lender under the Credit
Facility.


 


“Advance Rate” means seventy-five percent (75%) or such
other percentage(s) resulting from an adjustment pursuant to Section 2.01(e) hereof.


 


“Affiliate” means with respect to any
Person (the “Specified Person”), (a) any Person which directly or
indirectly controls, or is controlled by, or is under common control with, the
Specified Person, and (b) any partner, director or officer (or, in the
case of a Person which is not a corporation, any individual having analogous
powers) of the Specified Person or of a Person who is an Affiliate of the
Specified Person within the meaning of the preceding clause (a).  For purposes of the preceding sentence, “control”
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person, or
direct or indirect ownership (beneficially or of record) of, or direct or
indirect power to vote, five percent (5%) or more of the Capital Stock of such
Person. Notwithstanding the foregoing, Lender shall not be deemed to be an
Affiliate of any Borrower or any Affiliate thereof.


 


“Applicable Law” shall mean, as to any
Borrower or its assets, any law, ordinance, policy, manual provision,
administrative guidance, statute, rule or regulation, or any determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Borrower or any of its assets, or to which
such Borrower or any of its assets is subject.


 


“Applicable Margin” shall mean, as
applicable, the spread over the LIBOR Rate equal to 5.25%; provided  that
commencing on the day which is five (5) Business Days after the Lender’s
receipt of the financial statements delivered pursuant to Section 6.07(a)(i) hereof
and the corresponding covenant compliance certificate delivered pursuant to Section 6.08
hereof for the fiscal year ending December 31, 2008, on and thereafter
such spread shall be (i) subject to subclause (ii) below, in the
event Borrowers have achieved a Fixed Charge Coverage Ratio of at least 1.20 to
1.0, measured as of December 31, 2008 and calculated on a rolling four
quarter basis, 4.75%, (ii) upon the occurrence and during the continuance
an Unmatured Event of Default or Event of Default, 5.25% and (iii) at all
other times, 5.00%.


 


“Authorized Officer” means any
officer, member or partner of a Borrower authorized by specific resolution of
Borrower to request Revolving Loans as set forth in the incumbency certificate
referred to in Section 4.01(d) of this Agreement.


 

















 


“Average Cash Collections” means, for
the three (3) month period ending on the date of the determination, the
average monthly Collections forwarded to the Commercial Lockbox and
Governmental Lockbox during such period; provided, however,
that such calculation as of the calendar month ending May 31, 2008 shall
be based on such average monthly Collections for the most recent calendar month
ending on such date and such calculation for the calendar month ending June 30,
2008 shall be based on such average month Collections for the two (2) most
recent calendar months ending on such date.


 


“Billing Date” means the Business Day
on which the first invoice is released for goods or services giving rise to the
corresponding Account which date shall be no longer than ten (10) days
following the date on which such goods or services were provided or rendered
and the corresponding lab report issued.


 


“Borrower Representative” shall mean
Clarient.


 


“Borrowing Base” means, at any date,
an amount equal to the lesser of (a) the Revolving Loan Commitment, or (b) the
product of (i) the applicable Advance Rate then in effect, times (ii) the
Estimated Net Value of all Eligible Accounts as of such date, minus (iii) an
amount equal to any reserves, minus (iv) unposted cash.


 


“Borrowing Base Deficiency” means, as
of any date, the amount, if any, by which (a) the aggregate amount of all
Advances outstanding as of such date exceeds (b) the Borrowing Base as of
such date.


 


“Borrowing Base Excess” means, as of
any date, the amount, if any, by which (a) the Borrowing Base as of such
date exceeds (b) the aggregate amount of all Advances outstanding as of
such date.


 


“Borrowing Base Report” has the
meaning set forth in Section 2.02(b) hereof.


 


“Business Associate Agreement” means
that certain Business Associate Agreement among Borrowers and Lender, as the
same may be modified, amended, restated or replaced from time to time.


 


“Business Day” means any day other
than a Saturday, Sunday or any day on which banking institutions in
Philadelphia, Pennsylvania or New York City, New York are permitted or required
by law, executive order or governmental decree to remain closed or a day on
which Lender is closed for business.


 


“Capital Lease” means, with respect to
any Person, any lease of any property (whether real, personal or mixed) by such
Person as lessee which would, in accordance with GAAP, be required to be
accounted for as a capital lease on the balance sheet of such person.


 


“Capital Stock” means (a) in the
case of a corporation, capital stock, (b) in the case of an association or
business entity, any and all shares, units, interests, participations, rights
or other equivalents (however designated) of capital stock, (c) in the
case of a partnership, partnership interests (whether general or limited), (d) in
the case of a limited liability company, membership interests and (e) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.


 


“Cash Equivalents” means, as at any
date:


 


(a)                                 securities
issued or directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than twelve (12) months from the date of acquisition;


 


(b)                                dollar
denominated time deposits and certificates of deposit of (i) Lender, (ii) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $500,000,000.00 or (iii) any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from Moody’s
is at least P-1 or the equivalent thereof (any such bank being an “Approved
Institution”), in each case with maturities of not more than two hundred
seventy (270) days from the date of acquisition;


 





















 


(c)                                 commercial
paper and variable or fixed rate notes issued by any Approved Institution (or
by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof)
or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s
and maturing within six (6) months of the date of acquisition;


 


(d)                                repurchase
agreements entered into by any Person with a bank or trust company (including
any of the Lenders) or recognized securities dealer having capital and surplus
in excess of $500,000,000.00 for direct obligations issued by or fully
guaranteed by the United States in which such Person shall have a perfected
first priority security interest (subject to no other Liens) and having, on the
date of purchase thereof, a fair market value of at least one hundred percent
(100%) of the amount of the repurchase obligations;


 


(e)                                 debt
obligations issued by any domestic corporation or any domestic government instrumentality,
in each case rated A-1 (or the equivalent thereof) or better by S&P or P-1
(or the equivalent thereof) or better by Moody’s and maturing within six (6) months
of the date of acquisition; and


 


(f)                                   Investments,
classified in accordance with GAAP as current assets, in money market
investment programs registered under the Investment Company Act of 1940 which
are administered by reputable financial institutions having capital of at least
$500,000,000.00 and the portfolios of which are limited to Investments of the
character described in the foregoing clauses (a) through (e).


 


“Clarient Pathology” means Clarient
Pathology Services, Inc., a California professional corporation.


 


“Closing” has the meaning set forth in
Section 4.06 hereof.


 


“Closing Date” has the meaning set
forth in Section 4.06 hereof.


 


“CMS” means the Centers for Medicare
and Medicaid Services of the United States Department of Health and Human
Services and any successor thereof and any predecessor thereof, including the
United States Health Care Financing Administration.


 


“Code” means the Internal Revenue Code
of 1986, as amended from time to time.


 


“Collateral” has the meaning set forth
in Section 3.01 hereof.


 


“Collateral Assignment of Services
Agreement” means that certain Collateral Assignment of Services Agreements
dated of even date herewith executed by Clarient and Clarient Diagnostics in
favor of Lender.


 


“Collateral Monitoring Fee” has the
meaning set forth in Section 2.03(e) hereof.


 


“Collections” means with respect to
any Account, all cash collections on such Account.


 


“Collection Account” has the meaning
set forth in Section 2.07(a) hereof.


 


“Comerica” means Comerica Bank.


 


“Comerica Loan Documents” means,
collectively and individually as context requires, that certain Amended and
Restated Loan Agreement dated February 28, 2008 between Comerica and
Clarient, that certain First Amendment and Waiver to Amended and Restated Loan
Agreement dated March 14, 2008 between Comerica and Clarient, that certain
Second Amendment to Amended and Restated Loan Agreement dated March 21,
2008 between Comerica and Clarient, that certain Third Amendment and Consent to
Amended and Restated Loan Agreement dated of even date herewith between
Clarient and Comerica, that certain Subordination Agreement dated March 7,
2007 among Comerica, Safeguard Delaware, Inc. and Clarient, that certain
Affirmation and Amendment of Subordination Agreement dated March 14, 2008
among Comerica, Safeguard Delaware, Inc. and Clarient, and that certain
Affirmation and Amendment of Subordination Agreement dated of even date
herewith among Comerica, 


 

















 


Safeguard Delaware, Inc. and Clarient,
each as amended, restated, supplemented or otherwise modified from time to time
to the extent that such amendments, restatements, supplements or modifications
are permitted pursuant to the Comerica Subordination Agreement.


 


“Comerica Subordinated Debt” means
certain obligations of Borrowers to Comerica subject to the Comerica
Subordination Agreement.


 


“Comerica Subordination Agreement”
means that certain Subordination Agreement dated of even date herewith executed
by Comerica in favor of Lender, as amended, restated, supplemented or modified
from time to time.


 


“Commercial Lockbox” means a lockbox
in the name of Lender (or a nominee of Lender) and maintained at the Lockbox
Bank, or such other bank as is acceptable to Lender, to which Collections on
all Accounts, other than Government Accounts, are sent.


 


“Commitment Fee” has the meaning set
forth in Section 2.09 hereof.


 


“Concentration Limits” means the
various financial tests, expressed as percentages of the then current ENV of
all Eligible Accounts, described on Schedule 1.01 hereto as in effect
from time to time.


 


“Contract” means an agreement by which
an Obligor is obligated to pay for services rendered to patients of Borrower.


 


“Controlled Group” means all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with Borrowers, are
treated as a single employer under Section 414 of the Code.


 


“Credit Facility” has the meaning set
forth in Section 2.01(a) hereof.


 


“Debtor Relief Laws” means the
Bankruptcy Code of the United States, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief Laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.


 


“Default Rate” means three percent (3%) above the Interest
Rate otherwise applicable on the Revolving Loans.


 


“Defaulted Account” means an Account
as to which (a) the initial ENV has not been received in full as
Collections within one hundred twenty (120) days of the Billing Date, or (b) Lender
reasonably deems uncollectible because of the bankruptcy or insolvency of the
Obligor or any other reason.


 


“Depository Agreement(s)” means those
certain Depository Agreements entered into in connection with this Agreement
among Borrowers, Lender and the Lockbox Bank, relating to the Commercial
Lockbox and the Government Lockbox, as applicable.


 


“Distribution” means (a) dividends
or other distributions on Capital Stock of a Borrower; (b) the redemption,
repurchase or acquisition of such Capital Stock or of warrants, rights or other
options to purchase such Capital Stock; and (c) loans made to any
Shareholders, officers, directors and/or Affiliates of such Borrower.


 


“Download Date” has the meaning set
forth in Section 2.02(b) hereof.


 


“EBITDA” means, for any period, the
sum of (i) net income of Borrowers for such period plus (ii) amounts
deducted in the calculation of such net income for (A) interest expense, (B) charges
against income for foreign, federal, state and local taxes, (C) depreciation
and amortization, and (D) stock based compensation, all determined on a
consolidated basis for Borrowers and their subsidiaries in accordance with
GAAP.


 

















 


“Eligible Account” means an Account of
a Borrower:


 


(a)                                 which is a
liability of an Obligor which is (i) a commercial insurance company
acceptable to Lender, organized under the laws of any jurisdiction in the
United States, having its principal office in the United States, other than
those listed on Schedule 1.01 hereto as ineligible, (ii) a Blue
Cross/Blue Shield Plan other than those listed on Schedule 1.01 hereto
as ineligible, (iii) Medicare, Medicaid or CHAMPUS, (iv) a HMO, PPO,
or an institutional Obligor acceptable to Lender, (v) a pathologist,
oncologist or other medical or healthcare service provider that is an Obligor
that Borrowers bill for technical services pursuant to an agreed upon fee
schedule (each a “Provider Obligor” and collectively, “Provider Obligors”), or (vi) any
other type of obligor, not included in the categories of obligors listed in the
foregoing clauses (i) - (v), organized under the laws of any jurisdiction
in the United States, having its principal office in the United States, and
listed on Schedule 1.01 hereto as an eligible Obligor,


 


(b)                                the Obligor of
which is not an Affiliate of Borrower;


 


(c)                                 the Obligor of
which has received a letter substantially in the form of Exhibit 4.02(c),
(in the case of all Accounts other than Government Accounts), or a letter
substantially in the form of Exhibit 4.02(d) (in the case of
all Government Accounts), except with respect to Obligors existing on the
Closing Date for which such letter was received within 60 days of the Closing
Date ;


 


(d)                                in an amount,
as relating to an individual patient, not less than $5.00 nor more than
$50,000.00, denominated and payable in dollars in the United States;


 


(e)                                 as to which the
representations and warranties of Section 5.21 hereof are true;


 


(f)                                   [Reserved].


 


(g)                                which (i) does
not arise from the delivery of cosmetic surgery services, (ii) is not a
workers’ compensation claim (unless approved in writing by Lender), (iii) does
not arise from any services delivered for injury sustained in a motor vehicle
accident (unless the Obligor on such Account is a type of Obligor permitted
pursuant to clause (a) of this definition) and (iv) is not an
Individual Payor Account;


 


(h)                                which is not
outstanding more than  one hundred twenty
(120) days past the Billing Date; provided  however  that in
no event may the Account be outstanding more than one hundred fifty (150) days
past the date the corresponding services and/or goods were provided;


 


(i)                                    the Obligor on
which does not have fifty percent (50%) or more of its Accounts owing to
Borrowers constituting Defaulted Accounts;


 


(j)                                    to the extent
such Account does not include late charges or finance charges;


 


(k)                                 which is not
subject to a dispute between the Obligor and applicable Borrower; and


 


(l)                                    which complies
with such other criteria and requirements as may be specified from time to time
by Lender in its reasonable discretion.


 


“Environmental Laws” means,
collectively, any local, state or federal law, rule or regulation or
common law duty pertaining to the environment, natural resources, pollution,
health (including any environmental clean up statutes and all regulations
adopted by any local, state, federal or other governmental authority, and any
statute, ordinance, code, order, decree, law rule or regulation all of
which pertain to or impose liability or standards of conduct concerning medical
waste or medical products, equipment or supplies), safety or clean-up,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. §  1251 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. § 5101 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Federal Insecticide, Fungicide and Rodenticide
Act 


 

















 


(7 U.S.C. § 136 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.),
the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. § 4851 et
seq.), any analogous state or local laws, any amendments thereto, and the
regulations promulgated pursuant to said laws, together with all amendments
from time to time to any of the foregoing.


 


“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.


 


“ERISA Affiliate” means any trade or
business (whether or not incorporated) that, together with any Borrower, is
treated as a single employer under Sections 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of
the Code, is treated as a single employer under Section 414 of the Code.


 


“Estimated Net Value” or “ENV”
means on any date of calculation with respect to any Account an amount equal to
the anticipated cash collections as calculated by Lender, except that if Lender
determines that all Obligor payments with respect to an Account have been made
or if an Account has become a Defaulted Account, the ENV of such Account shall
be zero.


 


“Event of Default” has the meaning set
forth in Section 8.01 hereof.


 


“Excess Liquidity” means an amount
equal to the sum of, without duplication, (i) Borrowing Base Excess, plus
(ii) the aggregate amount actually available to be borrowed by Clarient
under the Safeguard Loan Documents, plus (iii) unrestricted and
unencumbered (other than in favor of Lender) cash on hand and Cash Equivalents,
minus (iv) all accounts payable and other current obligations that
are past their respective due dates.


 


“Expenses” has the meaning set forth
in Section 9.05(a) hereof.


 


“First SubDebt Extension” means the
occurrence prior to December 31, 2008 of both (i) either (A) the
extension of the maturity date of the Comerica Subordinated Debt to a date no
earlier than February 26, 2010 pursuant to terms, conditions and
documentation, in form and substance satisfactory to the Lender in its sole
discretion, or (B) the replacement or refinancing of the Comerica
Subordinated Debt with Replacement Subordinated Debt in an amount not less than
the outstanding balance of the Comerica Subordinated Debt (including, without
limitation, principal, accrued interest, fees, costs and expenses)   and with a maturity date no earlier than February 26,
2010 (“Comerica Replacement Subordinated Debt”) AND (ii) either (A) the
extension of the maturity date of the Safeguard Subordinated Debt to a date no
earlier than April 1, 2010 pursuant to terms, conditions and
documentation, in form and substance satisfactory to the Lender in its sole
discretion, or (B) the replacement or refinancing of the Safeguard
Subordinated Debt with Replacement Subordinated Debt in an amount not less than
the outstanding balance of the Safeguard Subordinated Debt (including, without
limitation, principal, accrued interest, fees, costs and expenses) and with a maturity
date no earlier than April 1, 2010 (“Safeguard Replacement Subordinated
Debt”).


 


“Fixed Assets” means, as of any date
of determination, plant, property and equipment of the Borrowers on a
consolidated basis on such day as determined in accordance with GAAP.


 


“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 quarter basis; provided, however, that such calculation as of the fiscal quarter ending March 31,
2009 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, 2009 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, 2009 shall be
for the three (3) most recent fiscal quarterly periods ending on such date
on a cumulative, annualized basis.


 

















 


“Funded Indebtedness” means, as to any
Person at a particular time, without duplication, all of the following, whether
or not included as indebtedness or liabilities in accordance with GAAP:


 


(a)                                 all obligations
for borrowed money, whether current or long-term (including the Obligations and
the Subordinated Debt) and all obligations of such Person evidenced by bonds,
debentures, notes, loan agreements or other similar instruments;


 


(b)                                all purchase
money indebtedness;


 


(c)                                 the principal
portion of all obligations under conditional sale or other title retention
agreements relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered
into in the ordinary course of business);


 


(d)                                the maximum
amount available to be drawn under letters of credit (including standby and
commercial), bankers’ acceptances, bank guaranties, surety bonds and similar
instruments;


 


(e)                                 all obligations
in respect of the deferred purchase price of Property or services (other than
trade accounts payable in the ordinary course of business);


 


(f)                                   all
indebtedness in respect of Capital Leases;


 


(g)                                all preferred
stock or other equity interests providing for mandatory redemptions, sinking
fund or like payments prior to the Maturity Date;


 


(h)                                all Funded
Indebtedness of others secured by (or for which the holder of such Funded
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on, or payable out of the proceeds of production from, Property owned
or acquired by such Person, whether or not the obligations secured thereby have
been assumed; and


 


(i)                                    all guarantees
with respect to Funded Indebtedness of the types specified in clauses (a) through
(h) above of another Person.


 


“Funding Date” has the meaning set
forth in Section 2.02(a) hereof.


 


“GAAP” means generally accepted
accounting principles, consistently applied.


 


“Government Accounts” means Accounts
on which any federal or state governmental unit or any intermediary for federal
or state governmental unit is the Obligor.


 


“Government Lockbox” means a lockbox
and/or deposit account in the name of Borrower(s) maintained at the
Lockbox Bank, or such other bank as is acceptable to Lender, to which
Collections on all Government Accounts are sent.


 


“Governmental Authority” means any
nation or government, any state or other political subdivision thereof, and any
agency, department or person exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
corporation or other person owned or controlled (through Capital Stock or
capital ownership or otherwise) by any of the foregoing, whether domestic or
foreign.


 


“Hazardous Substances” means any
substances defined or designated as hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance or similar term, by any
environmental statute, rule or regulation of any governmental entity
presently in effect and applicable to such real property.


 


“Healthcare Facility” or “Healthcare
Facilities”, as applicable, shall mean any one or more of the diagnostic
testing laboratories or facilities and other healthcare facilities operated by
a Borrower, including the healthcare facilities described on Schedule 2.02
hereto.


 
















 


“Healthcare Laws” shall mean:  (a) any and all federal, state and local
fraud and abuse laws, including (i) the federal Anti-Kickback Statute (42
U.S.C. § 1320a-7(b)), (ii) the Stark Law (42 U.S.C. § 1395nn and
§1395(q)), (iii) the civil False Claims Act (31 U.S.C. § 3729 et
seq.), (iv) Sections 1320a-7 and 1320a-7a of Title 42 of the
United States Code, and (v) the regulations promulgated pursuant to such
statutes; (b) the federal Food, Drug & Cosmetic Act (21 U.S.C.
§§ 301 et seq.) and the regulations promulgated pursuant thereto; (c) the
Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191)
and the regulations promulgated pursuant thereto; (d) laws, rules and
regulations governing Medicare and Medicaid; (e) the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173) and
the regulations promulgated pursuant thereto; (f) quality, safety, life
safety, and accreditation standards and requirements of all applicable state
laws or regulatory bodies; (g) any Applicable Law relating to the
Borrowers’ ownership, management, or operation of a healthcare facility or
their business, or assets used in connection therewith; (h) any Applicable
Law relating to the billing or submission of claims, collection of accounts
receivable, underwriting the cost of, or provision of management or
administrative services in connection with, any and all of the foregoing, by
any Borrower; and (i) any and all other applicable healthcare laws,
regulations, manual provisions, policies and administrative guidance, each of (a) through
(h) as may be amended from time to time.


 


“HIPAA” means the Health Insurance
Portability and Accountability Act of 1996 (Pub.L.No. 104-101) and the
regulations promulgated pursuant thereto, each as amended from time to time.


 


“Indebtedness” means, as to any Person
at a particular time, without duplication, all of the following, whether or not
included as indebtedness or liabilities in accordance with GAAP:


 


(a)                                 all
Funded Indebtedness; and


 


(b)                                all
guarantees with respect to outstanding Indebtedness of the types specified in
clause (a) above of any other Person.


 


“Indemnified Party” has the meaning
set forth in Section 9.03(b) hereof.


 


“Individual Payor Account” means an
Account owing by an Obligor who is the individual patient or Person who
received the goods or services rendered.


 


“Initial Term” has the meaning set
forth in Section 2.01(d) hereof.


 


“Interest Rate” has the meaning set
forth in Section 2.03(a) hereof.


 


“Investment” means, as to any Person,
any direct or indirect acquisition or investment by such Person, whether by
means of (a) the purchase or other acquisition of Capital Stock of another
Person, or (b) a loan, advance or capital contribution to, guarantee or
assumption of debt of, or purchase or other acquisition of any other debt or
equity participation or interest in, another Person, including any partnership
or joint venture interest in such other Person. 
For purposes of determining covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.


 


“JCAHO” means the Joint Commission for
Accreditation of Healthcare Organizations, a nationally recognized organization
providing accreditations to hospitals and other healthcare facilities, or any
successor entity charged with performing its functions.


 


“LIBOR Rate”
means an annual rate equal to, as a reference rate, the annual rate reported as
the London Interbank Offer Rate applicable to thirty (30) day deposits of
United States dollars as reported in the Money Rates Section of The Wall
Street Journal on the date of determination. 
If The Wall Street Journal is not published on such Business Day or does
not report such rate, such rate shall be as reported by such other publication
or source as Lender may select.


 


“Loan(s)” means collectively the
Revolving Loans and each may also be referred to as a “Loan”.


 

















 


“Loan Documents” means this Agreement,
the Revolving Note, the Business Associate Agreement, Depository
Agreements,  and all agreements relating
to the Government Lockbox and the Commercial Lockbox, all financing statements,
the Subordination Agreement(s), the
Perfection Certificate, Collateral Assignment of Services Agreement, and
any other agreements, instruments, documents and certificates delivered in
connection with this Agreement.


 


“Loan Request” has the meaning set
forth in Section 2.02(c) hereof.


 


“Loan Turn Days” means, as of each
date of determination, a number of days determined by the product of (i) the
result of (A) the average outstanding balance of Revolving Loans for the
three (3) month period ending on the date of determination, divided by
(B) the Average Cash Collections, multiplied by (ii) thirty
(30);  provided,
however, that such calculation as of the calendar month ending May 31,
2008 shall be based on the average outstanding balance of Revolving Loans for
the most recent calendar month ending on such date and such calculation for the
calendar month ending June 30, 2008 shall be based on the average
outstanding balance of Revolving Loans for the two (2) most recent
calendar months ending on such date.


 


“Lockbox Bank” means Citizens Bank of
Pennsylvania or such other bank that is acceptable to Lender.


 


“Material Adverse Effect” shall mean a
material adverse affect upon, or a material adverse change in, any of (a) the
financial condition, operations, business, Property or prospects of Borrowers,
or any of them; (b) the ability of Borrowers, or any of them, to perform
their Obligations; (c) the legality, validity or enforceability of any
Loan Document; (d) the perfection or priority of the liens of Lender
granted under the Loan Documents or the rights and remedies of Lender under the
Loan Documents; (e) the condition or value of any material portion of the
Collateral (other than market fluctuations in the values of such Collateral); (f) the
use or scope of any Permit; or (g) the continued participation or the
ability to accept or bill for goods or services in the Medicaid, Medicare or
other government reimbursement programs by any Borrower.


 


“Maturity Date” has the meaning set
forth in Section 2.01(d) hereof.


 


“Medicaid” means, collectively, the
healthcare assistance program established by Title XIX of the Social Security
Act (42 U.S.C. §§ 1396 et. seq.) and any statutes succeeding thereto, and all
laws, rules, regulations, manuals, orders, guidelines or requirements (whether
or not having the force of law) pertaining to such program, in each case as the
same may be amended, supplemented or otherwise modified from time to time.


 


“Medicare” means, collectively, the
health insurance program for the aged and disabled established by Title XVIII
of the Social Security Act (42 U.S.C. §§ 1395 et. seq.) and any statutes succeeding
thereto, and all laws, rules, regulations, manuals, orders or guidelines
(whether or not having the force of law) pertaining to such program, in each
case as the same may be amended, supplemented or otherwise modified from time
to time.


 


“Multiemployer Plan” means a
multiemployer plan as defined in Section 4001(a)(3) of
ERISA.


 


“Obligations” means all now existing
or hereafter arising debts, obligations, covenants, and duties of payment or
performance of every kind, matured or unmatured, direct or contingent, owing,
arising, due, or payable to Lender, by or from Borrowers, or any of them,
whether arising out of this Agreement or any other Loan Document or otherwise,
including, without limitation, all obligations to repay principal of and
interest on all the Revolving Loans, and to pay interest, fees, costs, charges,
Expenses, professional fees, and all sums chargeable to Borrowers, or any of
them, under the Loan Documents, whether or not evidenced by any note or other
instrument.


 


“Obligor” means the party primarily
obligated to pay an Account.


 


“Organizational Documents” means, (a) with
respect to any corporation, the, charter, certificate or articles of
incorporation and the bylaws (or equivalent or comparable constituent documents
with respect to any non-U.S. jurisdiction); (b) with respect to any
limited liability company, the certificate or articles of formation or
organization and operating agreement; and (c) with respect to any
partnership, joint venture, trust or other form of 


 

















 


business entity, the partnership, joint
venture or other applicable agreement of formation or organization and any
agreement, instrument, filing or notice with respect thereto filed in
connection with its formation or organization with the applicable Governmental
Authority in the jurisdiction of its formation or organization and, if
applicable, any certificate or articles of formation or organization of such
entity.


 


“Participation Agreements” has the
meaning set forth in Section 5.03(d)(ii) hereof.


 


“PBGC” means the Pension Benefit
Guaranty Corporation or any Person succeeding to any or all of its functions
under ERISA.


 


“Perfection Certificate”
means that certain Perfection Certificate, in form and substance satisfactory
to Lender, entered into by Borrowers as of the date hereof.


 


“Permit” shall mean any permit,
approval, authorization, license, accreditation, certification, provider or
supplier number, registration, certificate of authority, certificate of need,
certificate of reimbursement, variance, qualification, filing or consent
required under any Applicable Law.


 


“Permitted Liens” means (a) liens
in existence on the date hereof listed on Schedule 2.06 hereto; (b) pledges
or deposits made in the ordinary course of business in connection with
governmental requirements respecting workmen’s compensation, unemployment
insurance, or social security and other similar laws; (c) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of Borrowers’
business and for which deposits are customary, in an aggregate amount not to
exceed $25,000 at any time; (d) mechanics’, workers’, materialmen’s or
other like liens arising by operation of law (i) that do not secure
Indebtedness for borrowed money and (ii) (Y) for which the
obligations secured are not delinquent or (Z) for which the obligations
are being contested in good faith by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of
such liens, are promptly instituted and diligently conducted and with respect
to which adequate reserves or other appropriate provisions are being maintained
in accordance with GAAP (provided that such proceedings do not, in Lender’s
sole discretion, involve any substantial risk of the sale, loss or forfeiture
of such property or assets or any interest therein); (e) liens for taxes,
assessments or other governmental charges not yet due or delinquent, or being
contested in good faith and by appropriate proceedings and with respect to
which proper reserves have been taken by Borrowers; provided, that no
enforcement of such lien shall be occurring or a stay of enforcement of any
such lien shall be in effect; (f) liens securing purchase money
indebtedness permitted by Section 7.12(c) hereof; (g) judgment
liens that do not constitute an Event of Default hereunder; (h) easements,
rights of way, covenants, consents, reservations, encroachments, minor defects
or irregularities in title, variations and other restrictions, charges or
encumbrances (whether or not recorded) affecting the use of real property,
which individually or in the aggregate do not or are not reasonably likely to
have a Material Adverse Effect; (i) liens in favor of landlords solely to
the extent such landlord has executed a landlord waiver in favor of Lender, in
form and substance satisfactory to Lender; and (j) lien in favor of
Safeguard solely to the extent permitted under the Safeguard Subordination
Agreement.


 


provided, however,
that Lender shall always have a first priority lien on all Borrowers’
Collateral and that no such lien shall be a Permitted Lien if it attaches to
any Borrower’s Collateral.


 


“Person” means any individual, corporation,
partnership, limited liability partnership, limited liability company,
association, trust, unincorporated organization, joint venture, court or
government or political subdivision or agency thereof, or other entity.


 


“Plan” means any employee pension
benefit plan (other than a Multiemployer Plan) subject to the provisions of
Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which Borrowers or any ERISA Affiliate is (or, if such plan
were terminated, would under Section 4069 of ERISA be deemed to be) an “employer”
as defined in Section 3(5) of ERISA.


 


“Property” means an interest of
Borrowers, or any of them, in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.


 

















 


“Replacement Subordinated Debt” means
replacement Subordinated Debt subject to a Subordination Agreement and from a
lender, and pursuant to terms, conditions and documentation, in form and
substance satisfactory to the Lender in its sole discretion.


 


“Required Insurance” has the meaning
set forth in Section 6.02(a) hereof.


 


“Revolving Interest Rate” has the
meaning set forth in Section 2.03(a) hereof.


 


“Revolving Loan(s)” has the meaning
set forth in Section 2.01(a) hereof.


 


“Revolving Note” has the meaning set
forth in Section 2.01(b) hereof.


 


“Revolving Loan Commitment” means an
amount equal to Eight Million Dollars ($8,000,000).


 


“Safeguard” means Safeguard Delaware, Inc.


 


“Safeguard Delaware” means Safeguard
Scientifics (Delaware), Inc.


 


“Safeguard Indemnity” means that
certain Amended and Restated Reimbursement and Indemnity Agreement dated January 17,
2007 executed by Clarient in favor of Safeguard and Safeguard Delaware, as
amended by that certain First Amendment to Amended and Restated Reimbursement
and Indemnity Agreement dated March 6, 2007 among Clarient, Safeguard and
Safeguard Delaware and that certain Second Amendment to Amended and Restated
Reimbursement and Indemnity Agreement dated March 14, 2008 among Clarient,
Safeguard and Safeguard Delaware.


 


“Safeguard Loan Documents” mean,
collectively and individually as context requires, that certain Amended and
Restated Senior Subordinated Revolving Credit Agreement dated March 14,
2008 between Clarient and Safeguard, that certain First Amendment and Consent
of Amended and Restated Senior Subordinated Revolving Credit Agreement dated of
even date herewith between Clarient and Safeguard, that certain Amended and
Restated Revolving Credit Note executed by Clarient in favor of Safeguard dated
March 14, 2008, those certain Warrants (as defined in the Safeguard
Subordination Agreement) and common stock warrants issued from time to time in
accordance with the terms of the Safeguard Loan Documents as in effect on the
date hereof, that certain Registration Rights Agreement dated March 14,
2008 among Clarient, Safeguard, Safeguard Scientifics, Inc. and Safeguard
Delaware and the Safeguard Indemnity, each as amended, restated, supplemented
or otherwise modified from time to time to the extent that such amendments,
restatements, supplements or modification are permitted pursuant to the
Safeguard Subordination Agreement.


 


“Safeguard Subordinated Debt” means
certain obligations of Borrowers to Safeguard and Safeguard Delaware subject to
the Safeguard Subordination Agreement.


 


“Safeguard Subordination Agreement”
means that certain Subordination Agreement dated as of even date herewith
executed by Safeguard and Safeguard Delaware in favor of Lender, as amended,
restated, supplemented or otherwise modified from time to time.


 


“Second SubDebt Extension” means the
occurrence prior to December 31, 2009 of both (i) either (A) the
extension of the maturity date of the Comerica Subordinated Debt or the
Comerica Replacement Subordinated Debt, as applicable, to a date no earlier
than February 26, 2011 pursuant to terms, conditions and documentation, in
form and substance satisfactory to the Lender in its sole discretion, or (B) the
replacement or refinancing of the Comerica Subordinated Debt or the Comerica
Replacement Subordinated Debt, as applicable, with Replacement Subordinated
Debt in an amount not less than the outstanding principal balance of the
Comerica Subordinated Debt (including, without limitation, principal, accrued
interest, fees, costs and expenses) and with a maturity date no earlier than February 26,
2011 AND (ii) either (A) the extension of the maturity date of the
Safeguard Subordinated Debt or the Safeguard Replacement Subordinated Debt, as
applicable, to a date no earlier than April 1, 2011 pursuant to terms,
conditions and documentation, in form and substance satisfactory to the Lender
in its sole discretion, or (B) the replacement or refinancing of the
Safeguard Subordinated Debt or the


 

















 


Safeguard Replacement Subordinated Debt, as
applicable, with Replacement Subordinated Debt in an amount not less than the
outstanding principal balance of the Safeguard Subordinated Debt (including,
without limitation, principal, accrued interest, fees, costs and expenses) and
with a maturity date no earlier than April 1, 2011.


 


“Securities” has the meaning set forth
in Section 6.14 hereof.


 


“Senior Debt” shall mean all
Indebtedness of the Company including without limitation the Obligations
hereunder, but not including the Subordinated Debt.


 


“Services Agreement” means, collectively
and individually as context requires, that certain Professional Services
Agreement between Clarient Diagnostic Services, Inc. and Clarient
Pathology and that certain Management Services Agreement between Clarient and
Clarient Pathology.


 


“Settlement Date” has the meaning set
forth in Section 2.02(a) hereof.


 


“Shareholder” means, as applicable, a
shareholder, member or partner of a Borrower.


 


 “Subordinated
Debt” means debt or other obligations of a Borrower that is subordinated to
the Obligations of Borrowers to Lender on terms and conditions that are
satisfactory to the Lender in its sole discretion, including, without
limitation, the Comerica Subordinated Debt and the Safeguard Subordinate Debt.


 


“Subordination Agreement” means
collectively and individually those certain Subordination Agreements, in form
and substance satisfactory to Lender, from the holders of the Subordinated Debt
in favor of Lender, including, without limitation, the Comerica Subordination
Agreement and the Safeguard Subordination Agreement.


 


“Subsidiary” of a Person means a
corporation, partnership, limited liability company or other business entity of
which more than fifty percent (50%) of the Capital Stock having ordinary voting
power for the election of directors or other governing body (other than Capital
Stock having such power only by reason of the happening of a contingency) are
at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person.  Unless otherwise
specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall
refer to a Subsidiary or Subsidiaries of the Borrowers.


 


“Taxes” shall mean all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax, or additional amounts with respect thereto,
and including liabilities under escheat, unclaimed property laws or similar
laws, and the term “Tax” means any of the foregoing taxes.


 


“Termination Fee” has the meaning set
forth in Section 2.03(c) hereof.


 


“Third Party Payor” means Medicare,
Medicaid, TRICARE, and other state or federal health care program, Blue Cross
and/or Blue Shield, private insurers, managed care plans and any other person
or entity which presently or in the future maintains Third Party Payor
Programs.


 


“Third Party Payor Programs” means all
payment and reimbursement programs sponsored by a Third Party Payor, in which a
Borrower participates.


 


“TRICARE” means the health care plan
for the uniformed services, retirees and their families.


 


“Uniform Commercial Code” or “UCC”
means the Uniform Commercial Code as in effect from time to time in the
Commonwealth of Pennsylvania or any other state, as applicable.


 

















 


“Unmatured Event of Default” means an
event which with the passage of time, giving of notice or both, would become an
Event of Default.


 


“Unused Line Fee” has the meaning set
forth in Section 2.03(e).