Exhibit 10.19

 

February 26, 2009

 

Dr. Michael Pellini
[address redacted]

 

Dear Mike:

 

Clarient Inc. (the “Company”) is pleased to enter into this letter agreement
(the “Letter Agreement”) with you (the “Executive”) which will address the terms
of Executive’s employment with the Company.  The Company considers it essential
to the best interests of its stockholders to attract and foster the continuous
employment of key management personnel of the Company and the arrangements
described in this Letter Agreement are intended to address that goal.

 

1.               Duties.  Executive will continue to serve as President and
Chief Operating Officer of the Company and will report directly to the Chief
Executive Officer of the Company. This Letter Agreement amends restates and
supersedes in its entirety the employment letter agreement dated, April 24, 2008
between Executive and the Company.

 

2.               Term.   Notwithstanding anything to the contrary, Executive’s
employment relationship with the Company is employment “at will”.  As a result,
Executive’s employment may be terminated by the Company or by Executive at any
time (subject to the notice provision below), in each case without any liability
or obligation, except as set forth in this Letter Agreement.  If Executive
terminates his employment, he shall give the Company written notice of such
termination not less than thirty (30) days prior to the effective date of such
termination.  In light of the severance benefits provided for in Section 6, the
Company will have no obligation to give Executive prior notice of any such
termination by the Company (whether or not such termination is without cause).

 

3.               Compensation.

 

a.               Base Salary.  During the term of Executive’s employment,
Executive will receive a base salary of $325,000 per annum, payable in biweekly
increments, subject to annual salary and performance review and potential salary
increase (but not reductions) at the sole discretion of the Company.

 

b.              Bonus.  Executive will be eligible for a performance-based bonus
as a participant in the Company’s Management Incentive Plan (“MIP”) (target
incentives as determined by the Compensation Committee of the Company’s Board of
Directors) with an annual target payment of 65% of base salary, pro-rated for
the number of months of services in any given year.  The potential exists to
receive as much as twice this figure based on achievement of Company and
personal objectives.  Any bonus that becomes payable under this subsection
(b) shall be paid in accordance with the Company’s past practices under the MIP,
but in no event after the later of (i) the 15th day of the third month following
Executive’s first taxable year in which such bonus is no longer subject to a
substantial risk of forfeiture, and (ii) the 15th day of the third month
following the first taxable year of the Company in which such bonus is no longer
subject to a substantial risk of forfeiture, as determined in accordance with
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and
any Treasury Regulations and other guidance issued there under.  For the
avoidance of doubt, for purposes of calculating any bonus that may become
payable to Executive under the MIP in respect of calendar year 2008 (if any),
Executives salary shall be deemed as $283,250.00.

 

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4.               Option Grant.  As part of this Letter Agreement, the Company’s
Board of Directors has approved a recommendation which was presented by the
Company’s Compensation Committee on February 24, 2009, that Executive will be
granted a stock option for 350,000 shares of Common Stock of the Company. 
Subject to Executive’s continued employment with the Company through each such
date, the option shall vest as to 25% of the shares on the first anniversary of
the date of grant and the remaining 75% of the shares in equal monthly
installments on each monthly anniversary of the date of grant thereafter, such
that all shares subject to the option shall be vested (subject to continued
employment) as of the fourth anniversary of the date of grant, except as
otherwise provided in Section 6(b) below; provided that if a Change of Control
occurs during the term of employment, then the option shall vest as to all
shares that remain unvested immediately prior to the consummation of such Change
of Control. The option will be granted under the Company’s 2007 Incentive Award
Plan (the “Option Plan”) and be subject to the same terms and conditions as are
set forth in the standard form stock option agreement currently in use under the
Option Plan (including such terms and conditions as are incorporated therein
from the Option Plan itself), except to the extent provided otherwise in this
Agreement.  The option will have an exercise price per share of $1.70, equal to
the last sale price of the Company’s Common Stock on February 24, 2009, the date
the option was approved by the Board of Directors, and will expire on the tenth
anniversary of the date of grant (subject to earlier termination in accordance
with the terms of the Option Plan and standard form of stock option agreement
thereunder).  Additional equity grants may be awarded by action of the Company’s
Board of Directors or a duly authorized committee of the Board, and if made,
will be made in a manner commensurate with senior executives, the terms and
conditions of which shall be as determined under the Company’s Option Plan and
by the Company’s Board of Directors.

 

5.               Fringe Benefits.

 

a.               Executive will be paid a car allowance at the rate of $600 per
month.

 

b.              Executive is eligible for group life and accidental death and
dismemberment insurance in an amount equal to one times the Executive’s annual
base salary not to exceed $600,000 (assuming that Executive meets normal
insurability requirements).  If insurability requirements cannot be met, the
maximum amount of group life insurance benefit is $225,000.  Executive will be
offered the opportunity to purchase voluntary life insurance for himself and his
spouse and children, if applicable; and otherwise be eligible to participate in
all other benefits programs offered generally by the Company to its other
executives, including medical, dental, and vision insurance, short and long term
disability insurance, 401(k) Plan, flexible spending account (Section 125) plan
and employee assistance program.

 

c.               Executive will also be entitled twenty-five (25) days of
vacation per annum which will accrue at the rate of 7.70 hours per pay period.
Executive may not accrue more than forty (40) hours above his eligible vacation
allowance per year.  All vacation accrued will carry over year to year; however,
the point at which the total number of vacation hours accrued exceeds the
maximum allowable, no additional accruals will be earned until the amount is
reduced below the maximum.

 

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d.              Executive shall be covered by the Company’s directors and
officers liability insurance policies and indemnification policies on the same
terms and conditions as apply to the Company’s other senior executives.  This
provision shall survive termination of this Agreement and shall not be covered
by the release contemplated by Section 6(d).

 

e.               Executive shall receive a monthly housing allowance of $8,000
plus other duplicate expenses (not to exceed a total annual expense, pro rated
for partial years, of $100,000) through August 31, 2009; provided that such
allowance shall be “grossed up” as necessary such that, after payment of all
taxes on such allowance (and any taxes payable on any such gross-up payments),
Executive still receives a total allowance of $8,000 per month (plus the full
value of other duplicate expenses within the limits of this Section 5(e));
further provided that (i) if Executive’s employment is terminated by the Company
without cause (as defined below) prior to April 1, 2009, then the Company shall
continue to pay the allowance contemplated by this Section 5(e) until July 1,
2009 or (ii) if Executive’s employment is terminated by the Company without
cause after April 1, 2009 but before August 31, 2009, then the Company shall
continue to pay the allowance contemplated by this Section 5(e) until the
earlier of (A) three (3) months from the date of termination and (B) August 31,
2009, in each case to the extent of Executive’s actual housing expenses in
California that Executive is not able to mitigate (e.g. if Executive is unable
to terminate Executive’s home lease and continues to owe lease payments to the
landlord there under.

 

f.                 Relocation Expenses.  The Company will reimburse Executive
for the following expenses, fully grossed-up for federal and state income
taxes:  (1) the usual and customary real estate fees incurred by Executive on
the sale of Executive’s home in Pennsylvania (ii) expenses incurred by Executive
in moving his household goods from Pennsylvania to Southern California. If the
Executive voluntarily terminate his employment within the first twelve months
after the relocation expense is paid, Executive shall be required to repay the
amount on a prorated basis, less 1/12th of such expenses for each month of his
employment until the first anniversary date.  Loss on Sale Provision: up to
$150,000 ($100,000 for actual loss on sale and $50,000 for gross up of expenses)
with the following stipulation: if Executive voluntarily leaves the Company
within the first year, Executive is required to pay back 100% of the loss on
sale payout.  If the Executive voluntarily leaves the Company after the first
anniversary of this Agreement, the payback amount will be prorated monthly down
to zero at the end of year three.

 

g.              Payment of the monthly allowances described above in (a) and
(e) of this Section 5 shall be paid on a monthly basis.  Without limiting the
Company’s obligation pursuant to the preceding sentence, in no event shall the
monthly allowances described above in (a) and (e) be made later than December 31
of the year following the year in which the expense was incurred.  The allowance
paid to Executive in one year shall not affect the allowance paid to Executive
in any subsequent year and shall not be subject to liquidation in favor of any
other benefit.

 

6.               Severance Payments.   Subject to the provisions of subsection
(d) and Section 11 below and the other terms and conditions of this Letter
Agreement, in the event Executive has incurred a Separation from Service (within
the meaning of Section 409A(a)(2)(A)(i) of the Code, and Treasury Regulation
Section 1.409A-1(h)) (“Separation from Service”) by reason of a termination of
Executive’s employment: (i) by the Company without “cause”, (ii) by Executive
for “good reason” within twelve months after a Change of Control, or (iii) by
Executive as a result of Executive’s death or disability (any of the foregoing
being a “Severance Termination”), the Company will provide Executive the
benefits described in this Section 6, which shall be the only severance benefits
or other payments with respect to Executive’s employment with the Company to
which Executive shall be entitled.  Without limiting the generality of the
foregoing, these benefits are in lieu of all salary and bonuses (except for
salary and bonuses for periods ending on the date of termination as provided in
Section 8 below), accrued vacation and other rights Executive may have against
the Company or its affiliates.

 

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a.               If a Severance Termination occurs, Executive will receive
payment of an amount equal to eighteen (18) months of his base salary in effect
at the time of the Severance Termination.

 

b.              Upon a Severance Termination, Executive will be able to exercise
any options which have become vested and exercisable on or before the
termination date and until the earlier of (i) the first anniversary of the date
of termination or (ii) the expiration date of the option.  In addition, in the
event that Executive remains employed by the Company through April 24, 2009 or
experiences a Severance Termination prior to such date and, in either case,
within one year following the date of termination of Executive’s employment,
either (A) a Change of Control occurs, or (B) (1) the Company enters into a
definitive agreement pursuant to which, if consummated, a Change of Control
would occur, and (2) no later than eighteen months following the date of
termination or a Change of Control occurs, then, in any such case, any options,
to the extent not vested as of the date of such termination, shall become fully
vested and exercisable immediately prior to the occurrence of any such Change of
Control (unless any such termination of employment was a termination for
“cause”, in which case the acceleration of vesting contemplated by this sentence
shall not apply).

 

c.               Upon a Severance Termination, Executive will receive continued
coverage under the Company’s medical and health plans in accordance with COBRA
rules and regulations following the termination date (including any period as
may be required by law), provided that coverage will end if Executive obtains
comparable coverage from a subsequent employer or otherwise ceases to be
eligible for COBRA benefits.  If Executive chooses such continuation health
insurance coverage, Executive will only pay the amount paid by Executive during
his employment and the Company will subsidize the remaining costs which are
normally the responsibility of the former employee for eighteen months or until
Executive obtains insurance through another employer, whichever occurs sooner.
Thereafter, Executive shall be solely responsible for paying the premiums for
COBRA continuation coverage. If Executive ceases to be eligible for COBRA
because the Company does not pay the premiums for its existing or group
insurance policy or the Company ceases to have a group healthcare plan, the
Company will pay Executive, for any portion of the period referred to above
during which Executive’s COBRA eligibility ceases for such reasons, the amount
of the premium it would have had to pay for Executive’s coverage under the then
existing, or if none, the most recently existing, healthcare insurance policy. 
Executive should consult with the Company’s Manager of Human Resources
concerning the process for assuming ownership of and continued premium payments
for any life insurance policy.  Executive will be reimbursed in accordance with
Company policies promptly for all of Executive’s reasonable and necessary
business expenses incurred on behalf of the Company prior to Executive’s
termination date.  Without limiting the Company’s obligation under the preceding
sentence, the reimbursement of any expense under this subsection (c) shall be
made no later than December 31 of the year following the year in which the
expense was incurred.  The amount of expenses reimbursed in one year shall not
affect the amount eligible for reimbursement in any subsequent year.

 

d.              All compensation and benefits described above in (a) through
(c) of this Section 6 will be contingent upon (i) Executive’s execution of a
release of all claims against the Company substantially in the form of Exhibit A
and expiration of the seven-day revocation period referred to in the release,
and  (ii) Executive’s not engaging in any Solicitation (as defined in Section 7
of this Letter Agreement) during the period of his employment by the Company or
the one-year period following Executive’s termination date.

 

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e.               Subject to Section 11 below, the Company will pay Executive the
amount described in (a) above in equal bi-weekly installments for a period of
eighteen months (18) months with the first payment being payable on the date
when the seven-day revocation period referred to below with respect to the
release expires.  The Company will prepare the final release (which will be
substantially in the form attached as Exhibit A to this Letter Agreement) and
deliver it to Executive within five business days of Executive’s termination of
employment.  Executive will have twenty-one (21) days in which to consider the
release although Executive may execute it sooner.  Please note that the release
has a revocation period of seven days.

 

f.                 In this Letter Agreement, the term “cause” means
(a) Executive’s failure to adhere to any lawful written policy of the Company
(unless Executive’s failure to adhere is at the request of the Board) if
Executive has been given a reasonable opportunity to comply with such policy and
cure Executive’s failure to comply (which reasonable opportunity to cure must be
granted for a period of at least ten days and up to thirty days, if reasonable);
(b) Executive’s appropriation (or attempted appropriation) of a business
opportunity of the Company, including attempting to secure or securing any
personal profit in connection with any transaction entered into on behalf of the
Company; (c) Executive’s misappropriation (or attempted misappropriation) of any
of the Company’s funds or property (including without limitation trade secrets
and other intellectual property); or (d) Executive’s conviction of, or
Executive’s entering of a guilty plea or plea of no contest with respect to, a
felony or the equivalent thereof.  In this Letter Agreement, the term “good
reason” means (i) Executive’s assignment (without Executive’s consent) to a
position, title, responsibilities, or duties of a materially lesser status or
degree of responsibility than the position, responsibilities, or duties of
President and Chief Operating Officer of the Company or removal from his
position as an executive officer of the Company, (ii) the relocation of the
Company’s offices at which Executive is principally employed to a location which
is more than thirty miles from the location of the Company’s principal offices
on the date of this Letter Agreement, (iii) the reduction of Executive’s base
salary or bonus opportunity, except pursuant to a reduction which also applies
to the Company’s other senior executives or (iv) the requirement that Executive
report to any officer of the Company other than its Chief Executive Officer;
provided, however, that Executive must have given the written notice to the
Company that Executive believes he has the right to terminate employment for
good reason, within ninety (90) days of the initial occurrence of such event,
and the Company fails to eliminate the good reason within fifteen (15) days
after receipt of the notice.  Further, Executive’s termination of employment
must occur within 2 years from the initial occurrence of an event that
constitutes good reason.

 

g.              In this Letter Agreement, the term “Change of Control” means
(a) the issuance, sale, transfer or acquisition of shares of capital stock of
the Company (including a transfer as a result of death, disability, operation of
law, or otherwise) in a single transaction or a group of related transactions,
as a result of which any entity, person, or group (other than Safeguard
Scientifics, Inc. and/or its affiliates) acquires the beneficial ownership of
newly issued, outstanding or treasury shares of the capital stock of the Company
having 50% or more of the combined voting power of the Company’s then
outstanding securities entitled to vote for at least a majority of the
authorized number of directors of the Company or (b) any merger,

 

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consolidation, sale of all or substantially all the assets or other comparable
transaction as a result of which all or substantially all of the assets and
business of the Company are acquired directly or indirectly by another entity
(except Safeguard Scientifics, Inc. and/or any of its affiliates).  An
“affiliate” of an entity is an entity controlling, controlled by, or under
common control with the entity specified, directly or indirectly through one or
more intermediaries.  “Group” shall have the same meaning as in section 13(d) of
the Securities Exchange Act of 1934, and “beneficial ownership” shall have the
meaning set forth in Rule 13d-3 of the Securities and Exchange Commission
adopted under the Securities Exchange Act of 1934.

 

h.              Executive will not be required to mitigate the amount of any
payment provided for in this Letter Agreement by seeking other employment or
otherwise and Executive shall be entitled to receive the severance payments
provided in this Section 6 without regard to whether Executive obtains other
employment or enters into other service relationships, provided Executive does
not violate any of his obligations under this Section 6.

 

i.                  Executive acknowledges that the arrangements described in
this Letter Agreement will be the only obligations of the Company or its
affiliates in connection with any determination by the Company to terminate
Executive’s employment with the Company.  This Letter Agreement does not
terminate, alter, or affect Executive’s rights under any plan or program of the
Company in which Executive may participate, except as explicitly set forth
herein.  Executive’s participation in such plans or programs will be governed by
the terms of such plans and programs.

 

7.               Definitions of Competition and Solicitation.

 

a.               [Intentionally Deleted].

 

b.              For purposes of Section 6(d) of this Letter Agreement
“Solicitation” shall mean (A) soliciting, enticing, or inducing any Customer (as
defined below) to become a client, customer, OEM, distributor, or reseller of
the laboratory services business of any other person, firm or corporation with
respect to products or services which are competitive with products or services
then sold or under development by the Company’s reference laboratory services
business or to cease doing business with the Company or authorizing or knowingly
approving the taking of such actions by any other person or (B) soliciting,
enticing, or inducing directly or indirectly, or hiring any person who presently
is or at any time during the term hereof shall be an employee of the Company to
become employed by any other person, firm or corporation or to leave his or her
employment with the Company or authorizing or approving any such action by any
other person or entity.  Providing a reference for an employee of the Company
will not, however, constitute Solicitation if the employee has decided to leave
the employ of the Company, is seeking other employment, and requests the
reference.

 

c.               For purposes of this Section 7, “Customer” means any person or
entity which at the time of determination, if made prior to termination of
employment, or, after termination of employment, at the time of such
termination, shall be, or shall have been within one year prior to such time, a
client, customer, OEM, distributor, or reseller of the Company.

 

d.              Executive acknowledges (i) that his experience and capabilities
are such that the conditions in Section 6(d) to his receiving the severance
benefits referred to in Section 6 will not prevent him from obtaining employment
or otherwise earning a living at the same general

 

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economic benefit as reasonably required by him without losing the severance
benefits and (ii) that he has, prior to the execution of this Letter Agreement,
reviewed this Letter Agreement with his legal counsel.  Executive acknowledges
that the provisions contained in this Section 7 and in Section 6(d) are
reasonable and necessary to protect the legitimate business interests of the
Company and that the Company would not have entered into this Letter Agreement
in the absence of such provisions.

 

8.               Other Payments in the Event of Termination of Employment.  In
the event of termination of Executive’s employment for any reason, Executive
will be entitled to receive upon such termination payment of all accrued, unpaid
salary to the date of termination.  In addition, in the event of termination of
Executive’s employment for any reason other than by the Company for “cause”,
Executive will be entitled to receive upon such termination a “pro rata portion”
of his “bonus for the year of termination” (as those terms are defined below). 
“Pro rata portion” means the number of days in the calendar year of termination
up to and including the date of termination divided by the total number of days
in that full calendar year.  The “bonus for the year of termination” means the
amount Executive would have been likely to earn if he had been employed for the
full year, as determined in good faith by the Board of Directors of the Company
or a committee thereof.

 

9.               Withholding; Nature of Obligations.  The Company will withhold
applicable taxes and other legally required deductions from all payments to be
made hereunder.  The Company’s obligations to make payments under this Letter
Agreement are unfunded and unsecured and will be paid out of the general assets
of the Company.

 

10.         Representations and Covenants of Executive.  Executive represents
and warrants to the Company that:  (a) he has full power and authority to enter
into this Letter Agreement and to perform his duties hereunder, (b) the
execution and delivery of this Letter Agreement and the performance of his
duties hereunder shall not result in an actual (as opposed to merely asserted)
breach of, or constitute an actual (as opposed to merely asserted) default
under, any agreement or obligation to which he may be bound or subject,
including without limitation any obligations of confidentiality, noncompetition,
nonsolicitation or use of information, (c) this Letter Agreement represents a
valid, legally binding obligation on him and is enforceable against him in
accordance with its terms except as the enforceability of this Letter Agreement
may be subject to or limited by general principles of equity and by bankruptcy
or other similar laws relating to or affecting the rights of creditors, (d) to
Executive’s knowledge, the services contemplated by this Letter Agreement do not
(i) infringe any third party’s copyright, patent, trademark, trade secret or
other proprietary right, or (ii) violate any law, statute, ordinance or
regulation, and (e) the Executive has resigned from all positions as an
employee, officer, director or executive of prior employers. Executive covenants
to the Company that during his employment with the Company (a) he shall not
(i) intentionally use, in connection with his employment with the Company, any
confidential or proprietary information or materials belonging to any third
person or entity, or (ii) knowingly violate any law, statute, ordinance or
regulation and (b) he shall not breach (i) any agreement with any third party to
keep in confidence any confidential or proprietary information, knowledge or
data acquired prior to his execution of this Letter Agreement or (ii) any
obligations of confidentiality, noncompetition, nonsolicitation or use of
information.

 

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11.         Section 409A.

 

a.               Notwithstanding anything to the contrary in this Letter
Agreement, if at the time of Executive’s Separation from Service with the
Company, Executive is a “specified employee” as defined in Section 409A of the
Code, as determined by the Company in accordance with Section 409A of the Code,
and the deferral of the commencement of any payments or benefits otherwise
payable hereunder as a result of such Separation from Service is necessary in
order to prevent any accelerated or additional tax under Section 409A of the
Code, then the Company will defer the commencement of the payment of any such
payments or benefits hereunder (without any reduction in the payments or
benefits ultimately paid or provided to Executive) until the date that is at
least six (6) months following Executive’s Separation from Service with the
Company (or the earliest date permitted under Section 409A of the Code),
whereupon the Company will pay Executive a lump-sum amount equal to the
cumulative amounts that would have otherwise been previously paid to Executive
under this Letter Agreement during the period in which such payments or benefits
were deferred.  Thereafter, payments will resume in accordance with this Letter
Agreement.

 

b.              With respect to the provisions of this Letter Agreement which
provide for “nonqualified deferred compensation” within the meaning of
Section 409A of the Code, this Letter Agreement shall comply with the provisions
of Section 409A of the Code and the Regulations thereunder and shall be so
interpreted, construed and administered.

 

c.               In the event that following the date hereof the Company or
Executive reasonably determines that any compensation or benefits payable under
this Letter Agreement may be subject to Section 409A of the Code, the Company
and Executive shall work together to adopt such amendments to this Letter
Agreement or adopt other policies or procedures (including amendments, policies
and procedures with retroactive effect), or take any other commercially
reasonable actions necessary or appropriate, to (i) exempt the compensation and
benefits payable under this Letter Agreement from Section 409A of the Code
and/or preserve the intended tax treatment of the compensation and benefits
provided with respect to this Letter Agreement or (ii) comply with the
requirements of Section 409A of the Code and related Department of Treasury
guidance.

 

12.         Miscellaneous.  This Letter Agreement will inure to the benefit of
Executive’s personal representatives, executors, and heirs.  In the event
Executive dies while any amount payable under this Letter Agreement remains
unpaid, all such amounts will be paid to the parties legally entitled thereto in
accordance with the terms and conditions of this Letter Agreement.  No term or
condition set forth in this Letter Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and an officer of the Company authorized to sign
such writing by the Board of Directors of the Company or an authorized committee
thereof.  This Letter Agreement will be construed and enforced in accordance
with the laws of the State of California without regard to the conflicts of laws
of any state.  Any controversy or claim arising out of or relating to this
Letter Agreement, or the breach thereof, will be settled by arbitration in Los
Angeles or Orange County, California in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association,
using one arbitrator, and judgment upon the award rendered by the arbitrator may
be entered in any court of competent jurisdiction.

 

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13.         Limit on Payments by the Company.  Executive shall bear all expense
of, and be solely responsible for, all federal, state, local or foreign taxes
due with respect to any payment received hereunder, including, without
limitation, any excise tax imposed by Section 4999 of the Code; provided,
however, that any payment or benefit received or to be received by Executive in
connection with a Change of Control or the termination of Executive’s employment
(whether payable pursuant to the terms of this Letter Agreement (“Contract
Payments”) or any other plan, arrangements or agreement with the Company or any
affiliate (collectively with the Contract Payments, the “Total Payments”) shall
be reduced to the extent necessary so that no portion thereof shall be subject
to the excise tax imposed by Section 4999 of the Code but only if, by reason of
such reduction, the net after-tax benefit received by Executive shall exceed the
net after-tax benefit received by Executive if no such reduction was made.  For
purposes of this Section 13, “net after-tax benefit” shall mean (i) the total of
all payments and the value of all benefits which Executive receives or is then
entitled to receive from the Company that would constitute “parachute payments”
within the meaning of Section 280G of the Code, less (ii) the amount of all
federal, state and local income taxes payable with respect to the foregoing
calculated at the maximum marginal income tax rate for each year in which the
foregoing shall be paid to Executive (based on the rate in effect for such year
as set forth in the Code as in effect at the time of the first payment of the
foregoing), less (iii) the amount of excise taxes imposed with respect to the
payments and benefits described in (i) above by Section 4999 of the Code.  The
foregoing determination shall be made by a nationally recognized accounting firm
(the “Accounting Firm”) selected by the Company and reasonably acceptable to
Executive (which may be, but will not be required to be, the Company’s
independent auditors).  The Accounting Firm shall submit its determination and
detailed supporting calculations to both Executive and the Company within
fifteen (15) days after receipt of a notice from either the Company or Executive
that Executive may receive payments which may be “parachute payments.”  If the
Accounting Firm determines that such reduction is required by this Section 13,
Executive, in Executive’s sole and absolute discretion, may determine which
Total Payments shall be reduced to the extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the Code,
and the Company shall pay such reduced amount to Executive.  If the Accounting
Firm determines that no reduction is necessary under this Section 13, it will,
at the same time as it makes such determination, furnish Executive and the
Company an opinion that Executive shall not be liable for any excise tax under
Section 4999 of the Code.  Executive and the Company shall each provide the
Accounting Firm access to and copies of any books, records, and documents in the
possession of Executive or the Company, as the case may be, reasonably requested
by the Accounting Firm, and otherwise cooperate with the Accounting Firm in
connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 13.  The fees and expenses of the
Accounting Firm for its services in connection with the determinations and
calculations contemplated by this Section 13 shall be borne by the Company.

 

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If this Letter Agreement sets forth our agreement on the subject matter hereof,
kindly sign and return to us the enclosed copy of this letter which will then
constitute our legally binding agreement on this subject and supersedes any
prior discussions or agreements on this subject, including without limitation,
that certain Services Agreement, dated October 1, 2007 between Executive, the
Company and Safeguard Scientifics, Inc. (the “Prior Agreement”), and the parties
hereto expressly acknowledge and agree that nothing herein shall violate or be
construed as a violation of any provision of the Prior Agreement, including
without limitation, Section 7(b) thereof.

 

 

 

Sincerely,

 

 

 

Clarient, Inc.

 

 

 

/s/ Ronald Andrews

 

By: Ronald Andrews

 

Title: CEO

 

I agree to the terms and conditions of this Letter Agreement

 

/s/ Michael Pellini

 

Michael Pellini

 

 

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