Exhibit 10.11

 

GRAPHIC [g13662kei001.jpg]

 

December 15, 2008

 

Mr. Ronald Andrews

Clarient, Inc.

31 Columbia

Aliso Viejo, CA  92656

 

Dear Ron:

 

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 Chief Executive Officer of the Company and will report directly to the
Board of Directors of the Company (the “Board”).  This Letter Agreement amends,
restates and supersedes in its entirety the employment letter agreement, dated
as of June 18, 2004, 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 $400,000 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 75% of base
salary, pro-rated for the number of months of services in any given year.   
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

 

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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 thereunder.  Notwithstanding anything herein to the
contrary, for purposes of calculating any bonus that may become payable to
Executive under the MIP in respect of calendar year 2008 (if any), Executive’s
base salary shall be deemed to be $363,000.

 

4.                                       Change of Control/Equity Grants.  If
Executive remains employed by the Company through the occurrence of a Change of
Control (as defined below), then, notwithstanding anything to the contrary
contained in the stock option agreements by and between the Company and
Executive identified on Schedule 1 hereto (the “Option Agreements”), all shares
subject to the stock options granted under the Option Agreements shall vest and
become exercisable immediately prior to the consummation of such Change of
Control.  In addition, with respect to the stock option granted to Executive by
the Company on April 3, 2006, the parties agree that 120,000 shares which were
covered by such stock option and which were subject to performance vesting
conditions, which conditions were not attained, did not vest, and for the
avoidance of doubt, such stock option shall not be exercisable with respect to
such 120,000 shares and is hereby cancelled with respect thereto; however, this
provision shall have no effect on the 80,000 shares which were covered by such
stock option, but which were not subject to performance vesting conditions. To
the extent inconsistent with the Option Agreements, this Section 4 shall
constitute an amendment to the Option Agreements and, except as expressly
provided herein, all terms and conditions of the Option Agreements shall remain
in full force and effect. 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 2007
Incentive Awards Plan and by the Company’s Board of Directors or Compensation
Committee thereof.

 

5.                                       Fringe Benefits.

 

(a)   Executive will be paid a car allowance at the rate of $600 per month, paid
on a monthly basis.  Without limiting the Company’s obligation pursuant to the
preceding sentence, in no event shall the monthly allowance 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.

 

(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.

 

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(c)   Executive will also be entitled twenty-five (25) days of vacation per
annum which will accrue at the rate of 7.7 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.

 

(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).

 

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, bonuses and vacation
accruals (except for salary, bonuses and vacation accruals for periods ending on
the date of termination as provided in Section 8 below) and other rights
Executive may have against the Company or its affiliates.

 

(a)           If a Severance Termination occurs, Executive will receive payment
of an amount equal to twenty four (24) 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.  To the extent
inconsistent with any Option Agreement, this Section 6(b) shall constitute an
amendment to such Option Agreement and, except as expressly provided herein, all
terms and conditions of such Option Agreement shall remain in full force and
effect.

 

(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 twelve 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,

 

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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.

 

(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.

 

(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
twenty four (24) 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 Chief
Executive Officer of a comparable publicly-held Company or removal from his
position as Chief 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 other than directly to the Board; 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.

 

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(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, 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

 

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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 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)
payable no later than March 15th of the year following that in which such
termination occurs.  “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) 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 become subject to taxes, interest or penalties imposed
under 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.

 

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;

 

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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.

 

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.

 

 

 

Sincerely,

 

 

 

Clarient, Inc.

 

 

 

/s/ Jon R. Wampler

 

By: Jon R. Wampler

 

Title: Chairman, Compensation Committee of the Clarient, Inc. Board of Directors

 

I agree to the terms and conditions of this Letter Agreement

 

 

/s/ Ronald Andrews

 

Ronald Andrews

 

 

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