<PAGE>

                                                                    Exhibit 10.7

[CHROMA VISION LOGO]

June 9, 2004

Richard J. Cote, M.D.
911 Hilts Avenue
Los Angeles, CA 90024

Dear Richard:

      ChromaVision Medical Systems, 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 and in the best interests of its stockholders to
attract and foster the continuous employment of key management of the Company,
and the arrangements described in this Letter Agreement are intended to address
that goal.

1. Duties. During the period (the "Term") commencing on the date hereof (the
"Commencement Date") until March 31, 2005, Executive will serve as Vice
President - Chief Medical Officer and will report directly to the President and
Chief Executive Officer of the Company. Executive will make a full time
commitment to the development of the Company's business of providing integrated
oncology services and information resources for application in the oncology drug
discovery and development process and of providing patient-specific cancer
diagnostic and prognostic information (the "Target Business"). It shall not be a
violation of this Letter Agreement for Executive to fulfill limited medical
research commitments so long as such obligations do not interfere with the
performance of Executive's full-time responsibilities as an employee of the
Company in accordance with this Letter Agreement.

2. Term. Notwithstanding anything to the contrary herein, Executive's employment
relationship with the Company is employment "at will". As a result, Executive's
employment may be terminated by the President, Chief Executive Officer, or the
Board of Directors of 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. Executive may terminate employment
at any time for convenience. If Executive terminates his employment, he shall
give the Company written notice of such termination not less than sixty (60)
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). At the end of the Term, Executive and
Company will discuss in good faith the terms of a new consulting agreement to
cover periods following the expiration of the Term.

3. Compensation.

<PAGE>

      (a) Base Salary. During the Term, Executive will receive a base salary
equal to $240,000 per annum less the amount of UPA Payments (as defined below),
payable in biweekly increments, subject to annual salary and performance review
and potential salary increase at the sole discretion of the Company. Under no
circumstances will Executive's annual salary be reduced as a result of such
performance review. Upon written request from Executive (which request will be
irrevocable), the Company will make a monthly payment to the University
Pathology Associates, Inc. ("UPA") in an amount equal to (i) $5,476.41 for the
period from the Commencement Date through and including June 30, 2004, and (ii)
$5,486.64 for the period from July 1, 2004 through and including March 31, 2005
(collectively, the "UPA Payments"); provided, however, that in the event a
Severance Termination occurs during the Term, the UPA Payments shall cease
immediately on the date of such termination. In the event Executive requests
that such payments be made to UPA, the Company will coordinate directly with UPA
regarding the appropriate mechanics for making the UPA Payments and Executive
acknowledges that he will have no further rights or claims of any sort
whatsoever to the UPA Payments and that the Company will have the right to
withhold applicable taxes (if required) and other legally required deductions
from the UPA Payments.

      (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 Board of
Directors) with an annual target payment of 50% of base salary. Any earned MIP
payment will be pro-rated based on the number of days of service in the
applicable year.

      (c) Expenses. The Company will reimburse Executive all reasonable costs of
travel, entertainment, meals lodging and related expenses incurred in connection
with providing services under this Letter Agreement in a manner consistent with
the Company's travel and entertainment policy. In addition, the Company will
reimburse Executive for attorneys' fees which Executive may reasonably incur in
connection with the defense of the action captioned Impath Inc., et al. v.
Safeguard Scientifics, Inc., ChromaVision Medical Systems Inc., Richard J. Cote,
Heather Creran and Horacio Vall denominated Case No. 04-02782 (PCB), currently
pending in the United States Bankruptcy Court, Southern District of New York
(the "Impath Litigation"), provided that the Company will control all
proceedings and activities related to such defense with counsel designated by it
to jointly defend the Company, Executive and the other defendants in such matter
("Joint Counsel"); further provided, that the Company's obligation to reimburse
Executive will be conditioned on Executive's agreement to the terms of the joint
representation letter in the form of Exhibit __ hereto; and, further provided,
that during the period when Executive is represented by Joint Counsel, the
Company will be obligated to reimburse Executive for separate legal counsel
selected by Executive in connection with the Impath Litigation only to the
extent that (a) the scope of the legal services and amount of legal fees
incurred are of a limited nature consistent with the scope of the legal services
and the amount of legal fees incurred by Executive's "shadow" counsel in
connection with the Impath Litigation for periods prior to the date hereof, or
(b) the parties otherwise agree given the duration of the Impath Litigation and
the tasks required to be undertaken by Executive's "shadow" counsel (it being
understood that if the Company notifies Executive in writing that Joint Counsel
is unable to continue its representation of the Company and Executive, then the
Company shall reimburse Executive for attorney's fees reasonably incurred by
Executive in connection with the Impath Litigation for any single firm of
separate counsel selected by Executive).

      (d) Housing. The Company will reimburse Executive the reasonable cost
associated with hotel accommodations near the Company's headquarters during the
work week.

                                       2
<PAGE>

4. Restricted Stock Grants. Assuming Executive remains in Continued Service (as
defined on Schedule A) with the Company, Executive shall be granted equity
incentives as described on and subject to the terms of Schedule A hereto. This
incentive program shall be in lieu of participation in the equity incentive
program provided to other senior executives.

5. Fringe Benefits.

      (a) Insurance. 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, 401k Plan, flexible spending account (Section 125) plan
and employee assistance program.

      (b) Vacation. Executive will also be entitled to seventeen (17) days of
vacation which will accrue from Commencement Date at the rate of 5.23 hours for
each biweekly 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.

      (c) D&O Insurance. Executive will be covered under the Company's
Director's and Officer's insurance policies in a manner and with coverage that
is consistent with other officers of the Company, and in his capacity as an
officer of the Company, Executive will be entitled to indemnification under the
terms set forth in the Company's certificate of incorporation and bylaws to the
same extent as other officers of the Company (it being understood that the
Company shall not be obligated to indemnify Executive for breaches of the
representations, warranties and covenants set forth in Section 10 below).

      6. Severance Payments. Subject to the provisions of (d) below and the
other terms and conditions of this Letter Agreement, in the event during the
Term (i) the Company terminates Executive's employment without cause, (ii)
Executive terminates his employment with good reason within twelve months
following a Change of Control, (iii) Executive's employment terminates as a
result of Executive's death or disability, or (iv) Executive terminates his
employment due to the Company's failure to diligently pursue the Target Business
(any of the foregoing being a "Severance Termination"), the Company will provide
Executive the following benefits, 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 (except for salary for periods ending
on the date of termination), accrued vacation and other rights Executive may
have against the Company or its affiliates.

      (a) After a Severance Termination, any UPA Payments shall cease
immediately upon such termination and Executive will receive (i) his base salary
for the remainder of the Term and (ii) at the discretion of the Board of
Directors of the Company, any projected "bonus" (determined in accordance with
Section 8 hereof) for the remainder of the Term.

                                       3
<PAGE>

      (b) Upon a Severance Termination, (i) Executive will be able to exercise
any options previously issued to him which have become exercisable on or before
the termination date until the earlier of (A) the first anniversary of the date
of termination or (B) the expiration date of the option; (ii) Executive will
receive a pro rata portion of the Business Establishment Grant (rounded down to
the nearest whole number) determined by multiplying the Business Establishment
Grant by a fraction (rounded to two decimal places), the numerator of which is
the number of complete months of Continued Service during the Term, and the
denominator of which is 12, but in no event shall such pro rata portion be fewer
than 75,000 shares, and such shares shall be fully vested on the date of
termination; and (iii) on the first anniversary of the date of such termination,
Executive will receive (A) the Business Participant Grant, if any, to which
Executive would otherwise have been entitled had his Continued Service not so
terminated, for the calendar year in which such termination occurs and (B) a pro
rata portion of the Business Participant Grant for the following calendar year
commencing on January 1 of such calendar year and ending on the first
anniversary of the date of such termination; provided, however, that if the
Severance Termination occurs by reason of Executive's termination of his
employment for good reason within twelve months following a Change of Control,
then clause (iii) above will not apply and the provisions under the caption
"Change of Control" under Schedule A will apply. Such pro rata portion of the
Business Establishment Grant and such Business Participant Grants (or portion
thereof) specified in clauses (ii) and (iii) above shall be fully vested on the
date of grant. For purposes of this paragraph, (i) "Business Participant Grant
for the following year commencing on January 1 of such calendar year and ending
on the first anniversary of the date of such termination" means the Business
Participant Grant Executive would have received if the Incremental Growth in
Clinical Services Revenue for the period from January 1 of the calendar year
following the year in which the Severance Termination occurs through the first
anniversary of the date of such termination was annualized for the entire year,
and (ii) the "pro rata portion" means the number of days in such year up to and
including the date of the first anniversary of such termination divided by the
total number of days in that full calendar year.

      (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 for the remainder of the
Term (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 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.

      (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, (ii)
Executive's not engaging in any Competition (as defined in Section 7 of this
Letter

                                       4
<PAGE>

Agreement) with the Company during the period of his employment by the Company
or the Term, and (iii) 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 Term.

      (e) The Company will pay Executive the amount described in (a) above in
equal monthly installments 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 written policy of the Company 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 ten days); (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); (d) Executive's
actual (as opposed to merely asserted) breach or default under any other
agreements or obligations provided for in previous employment agreements
including provisions related to obligations of confidentiality, noncompetition,
nonsolicitation or use of information, (e) actual (as opposed to merely
asserted) legal prohibitions on Executive's ability to provide services to the
Company contemplated by this Letter Agreement arising from Executive's fiduciary
or other duties or obligations to Executive's most recent employer (prior to
Executive's becoming a consultant to the Company), or (f) 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 Vice
President - Chief Medical Officer, or (ii) the relocation of the Company's
offices at which Executive is based to a location which is more thirty miles
from the location of the Company's principal offices on the date of this Letter
Agreement; 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, specifying in reasonable detail the events comprising the good
reason, and the Company fails to eliminate the good reason within fifteen (15)
days after receipt of the notice.

      (g) In this Letter Agreement, the term "Change of Control" means (a) the
issuance, sale, transfer or acquisition by the Company 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

                                       5
<PAGE>

(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.

      (i) Executive will not be required to mitigate the amount of any payment
provided for in this Letter Agreement by seeking other employment or otherwise.

      (j) 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 (including the incentive program described in Schedule
A hereto), 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) For purposes of Section 6(d) of this Letter Agreement, Executive shall
be deemed to have engaged in "Competition" with the Company if, without prior
written approval of the Board of Directors of the Company, Executive directly or
indirectly through any other person, firm or corporation, whether individually
or in conjunction with any other person, or as an employee, agent, consultant,
representative, partner or holder of any interest in any other person, firm,
corporation or other association during any portion of the term of this Letter
Agreement or any renewals or extensions hereof or the period of salary
continuation referred to in Section 6(a), competes with, or encourages or
assists others to compete with, or solicit orders or otherwise participates in
business transactions or provides services in competition with, the business
engaged in by the Company at any time during the term of Executive's employment
(unless such business shall have been abandoned by the Company.) Executive
acknowledges that the Company's products are marketed throughout the United
States, that therefore the Company is engaged in business in every county and
state of the United States and that the foregoing definition of "competition"
includes competition in every county and state of the United States as well as
in foreign countries.

      (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 any other person,
firm or corporation with respect to, or provide, products or services which are
competitive with products or services then sold or under development by the
Company 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.

                                       6
<PAGE>

      (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 two years prior to such time, a client, customer, OEM,
distributor, or reseller of the Company or a bona fide prospect to become any of
the foregoing.

      (d) Competition shall not include investing in the securities of any
corporation having securities listed on a national securities exchange, the
Nasdaq National Market, or the Nasdaq SmallCap Market, provided that such
investment does not exceed 5% of any class of securities of any corporation
engaged in business in competition with the Company, and provided that such
ownership represents a passive investment and that neither Executive nor any
group of persons including him, in any way, either directly or indirectly,
manages or exercises control of any such corporation, guarantees any of its
financial obligations, otherwise takes any part in its business, other than
exercising his rights as a shareholder, or seeks to do any of the foregoing.

      (e) 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 and 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 year of termination up to and including the date of
termination divided by the total number of days in that full year. The "bonus
for the year of termination" means the amount the 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

                                       7
<PAGE>

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 Impath. Executive
covenants to the Company that during the term of this Letter Agreement (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.

11. Miscellaneous. The 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.

                                       8
<PAGE>

      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 Agreement
which will then constitute our legally binding agreement on this subject.

                                   Sincerely,

                                   CHROMAVISION MEDICAL SYSTEMS, INC.

                                   --------------------------------------
                                   By:
                                   Title:

I agree to the terms and conditions of this Letter Agreement

-----------------------------------------
Richard J. Cote, M.D.

                                       9
<PAGE>

                                   SCHEDULE A

                            EQUITY INCENTIVE PROGRAM
                              RICHARD J. COTE, M.D.

BUSINESS ESTABLISHMENT GRANT: Assuming Executive remains in Continued Service
through March 31, 2005, on March 31, 2005, Executive shall be granted up to
150,000 shares of restricted stock, in the event that he has achieved the
business establishment objectives set forth below (the "Business Establishment
Grant"). As used herein, "Continued Service" means Executive serving as a full
time employee of the Company or, following March 31, 2005, Executive devoting,
if requested by the Company, at least 20% of his business time and attention to
the Company as a consultant or employee under terms that are mutually agreed by
the Company and Executive. The Business Establishment Grant shall vest over
three-years of Continued Service from the date of grant in equal 1/6 increments
on each 6-month anniversary of the date of grant. The Compensation Committee of
the Board of Directors of the Company shall, in its sole but reasonable
discretion, determine the number of shares to be granted, consistent with its
determination as to the degree to which such objectives have been achieved.

      -     Raise $15-20mm; cultivate analyst support

      -     Support recruitment and integration of a new CEO

      -     Identify and recruit medical leadership and other key hires

      -     Lead brand definition and market education

      -     Clinical labs licensed and in service:

      -     IHC services - April 15

      -     Full range of oncology diagnostics - September 30

      -     Retention of current team


BUSINESS PARTICIPATION GRANTS: Subject to remaining in Continued Service until
March 31 of the applicable year, on March 31 of each calendar year from
2005-2009, Executive shall be granted a number of shares of restricted stock
equal to the product of (a) the increase (if any) in Clinical Services Revenue
over the prior year's Clinical Service Revenue (the "Incremental Growth"),
multiplied by (b) the percentage indicated below subject to proportionate
adjustment for any stock split, reverse stock split, stock dividend or similar
event occurring after the date hereof (collectively, the "Business Participation
Grants"). Each separate Business Participation Grant shall vest over three-years
of Continued Service from the date of grant in equal 1/6 increments on each 6
month anniversary of the date of grant. Except as otherwise expressly provided
herein or in the Letter Agreement, in the event Executive's employment or
consulting relationship with the Company is terminated such that following such
termination Executive is no longer in engaged in Continued Service, Executive
shall forfeit any shares of restricted stock covered by Business Participation
Grants that have not vested as of the termination date to the Company. "Clinical
Service Revenue" means revenues of the Company from all clinical laboratory
services including all Access services; provided, however, that with respect to
revenues arising from any business acquired by the Company after the date hereof
(whether as a result of an asset acquisition, merger or otherwise), "Clinical
Service Revenue" shall only include incremental growth revenue (to the extent
such growth revenue constitutes Clinical Services Revenue) arising from the
acquired business following the date of

                                       10
<PAGE>

acquisition and shall not include any base revenues generated from such acquired
business following the date of acquisition. Without limiting the generality of
the foregoing, the parties agree that Clinical Services Revenue for 2003 was
equal to $2.6 million.

<TABLE>
<CAPTION>
 Date of Grant                          Percentage factor
 -------------                          -----------------
<S>                               <C>
March 31, 2005                    2004 Incremental Growth - 1%
March 31, 2006                    2005 Incremental Growth - 1%
March 31, 2007                    2006 Incremental Growth - 0.5%
March 31, 2008                    2007 Incremental Growth - 0.33%
March 31, 2009                    2008 Incremental Growth - 0.25%
</TABLE>

An example of potential outcomes under this equation assuming Continued Service
through March 31, 2009 is set forth on the following page.

                                       11
<PAGE>

         EXAMPLE OF POTENTIAL OUTCOMES FOR BUSINESS PARTICIPATION GRANTS
                           (ALL NUMBERS IN THOUSANDS)

<TABLE>
<CAPTION>
         $000                            START-UP                              EXPANSION
                           -----------------------------------     --------------------------------
COTE PARTICIPATION         UP FRONT      YEAR 1         YEAR 2     YEAR 3        YEAR 4      YEAR 5
------------------         --------      ------         ------     ------        ------      ------
<S>                        <C>           <C>           <C>         <C>        <C>          <C>
Clinical Service Revenue      0          $4,000        $20,000     $45,000    $100,000     $165,000
Y-o-Y Increase                           $4,000        $16,000     $25,000     $55,000      $65,000

Revenue Grants

            Factor                         1.00%          1.00%       0.50%       0.33%        0.25%

            # of Shs                         40            160         125         182          163
                                         ======        =======     =======     =======      =======

                                         ======        =======     =======     =======      =======
</TABLE>

CHANGE OF CONTROL: In the event of a Change of Control, all shares of restricted
stock covered by any outstanding Business Establishment Grant or Business
Participation Grants will become immediately vested in full. In addition, in the
event the Change of Control occurs after January 1 of any calendar year from
2005-2009, upon the closing of the Change in Control, Executive will receive a
pro rata portion of the Business Participation Grant for the year of the Change
of Control. For purposes of this paragraph, (i) the "Business Participant Grant
for year of the Change of Control" means the Business Participation Grant the
Executive would have received if the Incremental Growth in Clinical Services
Revenue for the period from January of the year in which the Change of Control
occurs through the date of the Change of Control was annualized for the entire
year, and (ii) the "pro rata portion" means the number of days in the calendar
year of the Change of Control up to and including the date of the Change of
Control divided by the total number of days in that full calendar year.

TERMINATION OF CONTINUED SERVICE AFTER EXPIRATION OF TERM: If Executive remains
in Continued Service after the expiration of the Term and Executive's service is
thereafter terminated, Executive shall receive the following benefits:

      (a) In the event Executive's Continued Service is terminated by reason of
Executive's death or disability, then Executive shall receive the benefits under
Section 6(b)(i) and (iii) of the Letter Agreement.

      (b) Subject to clause (a) above, in the event Executive's Continued
Service is terminated by the Company with cause, or Executive notifies the
Company that he does not intend to devote at least 20% of his business time and
attention to the Company, or Executive fails to devote such time and attention
to the Company upon request by the Company, vesting of any outstanding awards
granted to Executive by the Company shall immediately cease and the Company
shall have no further obligations to Executive under the Letter Agreement
(including this Schedule A).

      (c) Subject to clauses (a) and (b) above, in the event Executive's
Continued Service is terminated by the Company without cause or the Company
notifies Executive that it does not intend

                                       12
<PAGE>

to request Executive to devote at least 20% of his business time and attention
to the Company, Executive shall nonetheless be deemed to be in Continued Service
for purposes of this Schedule A.

      (d) For purposes of this Schedule A, "cause" means (a) Executive's failure
to adhere to any written policy of the Company 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
ten days); (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); (d) Executive's actual (as opposed to
merely asserted) breach or default under any other agreements or obligations
provided for in previous employment agreements including provisions related to
obligations of confidentiality, non-competition, non-solicitation or use of
information; (e) actual (as opposed to merely asserted) legal prohibitions on
Executive's ability to provide services to the Company contemplated by this
Letter Agreement arising from Executive's fiduciary or other duties or
obligations to Executive's most recent employer (prior to Executive's becoming a
consultant to the Company); (f) 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; (g) Executive's breach or default of any confidentiality,
non-competition, non-solicitation, or use of information obligation or agreement
between the Company and Executive or Executive's engaging in any act of
Competition or Solicitation; or (h) Executive's failure to provide at least 20%
of his business time and attention to the Company as a consultant or employee if
requested by the Company.

      (e) For purposes of this Schedule A, Executive shall be deemed to have
engaged in "Competition" with the Company if, without prior written approval of
the Board of Directors of the Company, Executive directly or indirectly through
any other person, firm or corporation, whether individually or in conjunction
with any other person, or as an employee, agent, consultant, representative,
partner or holder of any interest in any other person, firm, corporation or
other association during his Continued Service following the expiration of the
Term, competes with, or encourages or assists others to compete with, or solicit
orders or otherwise participates in business transactions or provides services
in competition with, the business engaged in by the Company at any time during
the term of such Continued Service (unless such business shall have been
abandoned by the Company.) Executive acknowledges that the Company's products
are marketed throughout the United States, that therefore the Company is engaged
in business in every county and state of the United States and that the
foregoing definition of "competition" includes competition in every county and
state of the United States as well as in foreign countries.

      (f) For purposes of this Schedule A, "Solicitation" shall mean (a)
soliciting, enticing, or inducing any Customer (as defined below) to become a
client, customer, OEM, distributor, or reseller of any other person, firm or
corporation with respect to, or provide, products or services which are
competitive with products or services then sold or under development by the
Company 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

                                       13
<PAGE>

has decided to leave the employ of the Company, is seeking other employment, and
requests the reference.

      (g) For purposes of this Schedule A, "Customer" means any person or entity
which at the time of determination, if made prior to termination of Continued
Service, or, after termination of Continued Service, at the time of such
termination, shall be, or shall have been within two years prior to such time, a
client, customer, OEM, distributor, or reseller of the Company or a bona fide
prospect to become any of the foregoing.

      (h) Competition shall not include investing in the securities of any
corporation having securities listed on a national securities exchange, the
Nasdaq National Market, or the Nasdaq SmallCap Market, provided that such
investment does not exceed 5% of any class of securities of any corporation
engaged in business in competition with the Company, and provided that such
ownership represents a passive investment and that neither Executive nor any
group of persons including him, in any way, either directly or indirectly,
manages or exercises control of any such corporation, guarantees any of its
financial obligations, otherwise takes any part in its business, other than
exercising his rights as a shareholder, or seeks to do any of the foregoing.

WITHHOLDING: Notwithstanding anything to the contrary, no shares of Common Stock
(including shares of restricted stock that have vested) shall be delivered to
the Executive until the Executive has remitted to the Company (by cash or check)
an amount sufficient to satisfy federal, state, local and foreign taxes
(including the Executive's FICA obligation) required by law to be withheld with
respect to the issuance, vesting, or exercise of the Options, Business
Establishment Grants or Business Participant Grants.

                                       14
<PAGE>

                                    EXHIBIT A

                          GENERAL RELEASE AND AGREEMENT

      This GENERAL RELEASE AND AGREEMENT (hereinafter the "Release") is made and
entered into as of this day of __, _______, 2004, by and between CHROMAVISION
MEDICAL SYSTEMS, INC. (the "Company") and Richard J. Cote, M.D. ("Employee").

      1. Background. The parties hereto acknowledge that this Release is being
entered into pursuant to the terms of the Letter Agreement, dated _________,
2004 (the "Letter Agreement"), between the Company and Employee. As used in this
Release, any reference to the Company shall include its predecessors and
successors and, in their capacities as such, all of its present, past, and
future directors, officers, employees, attorneys, insurers, agents and assigns,
as well as all Company affiliates, subdivisions, subsidiaries and parents,
including without limitation Safeguard Scientifics, Inc. and its subsidiaries
(collectively, the "Company Affiliates") and their respective past, present and
future directors, officers, employees, consultants, attorneys, insurers, agents
and assigns; and any reference to Employee shall include, in their capacities as
such, his attorneys, heirs, administrators, representatives, agents, and
assigns.

      2. Resignation from Boards. Employee shall, and hereby does resign from
such Boards and officer positions with the Company and all affiliates and
partner companies of the Company as such employee holds on the date hereof. In
this regard, if requested, Employee agrees to pre-sign and deliver to the
Company resignation letters acceptable to the Company in order to effect
Employee's resignation from certain companies and entities, and we may submit
other such letters from time to time, although nothing contained herein shall
prohibit Employee from resigning from such boards and officer positions at an
earlier time.

      3. General Release.

            (a) Employee, for and in consideration of the special transition
services and corresponding separation payments and other benefits offered to him
by the Company specified in the Letter Agreement that accompanies this Release
and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER
DISCHARGE the Company and the Company Affiliates, of and from any and all causes
of actions, suits, debts, claims, and demands whatsoever in law or in equity,
which he/she ever had, now has, or hereafter may have or which his or her heirs,
executors or administrators may have, by reason of any matter, cause, or thing
whatsoever, from the beginning of his or her employment with the Company and/or
the Company Affiliates to the date of this Release, and particularly, but
without limitation, any claims arising from or relating in any way to his or her
employment or the separation of his or her employment relationship with the
Company, including, but not limited to, any claims arising under any federal,
state, or local laws, including Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. Section 2000e et seq., ("Title VII"), the Age Discrimination
in Employment Act, 29 U.S.C. Section 621 et seq. ("the ADEA"), the Americans
with Disabilities Act, 42 U.S.C. Section 12101 et seq. ("ADA"), the Employee
Retirement Income Security Act of 1974, 29 U.S.C. Section 301, et seq., as
amended ("ERISA"), and any and all other federal, state or

<PAGE>

local laws, and any common law claims now or hereafter recognized, including
claims for wrongful discharge, slander and defamation, as well as all claims for
counsel fees and costs.

            (b) By signing this Release, Employee represents that Employee has
not commenced any proceeding against the Company or any Company Affiliate in any
forum (administrative or judicial) concerning Employee's employment.

            (c) Employee agrees and covenants not to sue or to bring, or assign
to any third person, any claims or charges against the Company or any Company
Affiliate with respect to any known matter arising before the date of this
Release or covered by the release and not to assert against the Company or any
Company Affiliate in any action, grievance, suit, litigation or proceeding any
known matter before the date of this Release or covered by the release. Employee
agrees that in the event of a breach of any covenant of this Release by
Employee, the Company or any Company Affiliate damaged as a result of such
breach shall be entitled to recover attorneys' fees and costs in an action
relating to such breach, in addition to compensatory damages.

            (d) Anything herein to the contrary notwithstanding, neither party
is released from any of his, her or its obligations under this Release or the
Letter Agreement, and each party confirms that such obligations are the only
obligations of the Company or its affiliates in connection with the cessation of
Employee's service with the Company.

            (e) Employee acknowledges that this Release extends to all causes of
action, suits, debts, claims and demands referred to in (a) above, known or
unknown, suspected or unsuspected. By signing this Release, Employee expressly
waives all rights under Section 1542 of the California Civil Code, which reads
in full as follows:

            "A General Release does not extend to claims which the creditor does
            not know or suspect to exist in his favor at the time of executing
            the release, which if known by him must have materially affected his
            settlement with the debtor."

            (f) By signing this Release and the Letter Agreement and by making
the payments and providing the benefits contemplated by the Letter, the Company
does not admit any liability, wrongdoing or fault and expressly denies any such
liability, wrongdoing or fault.

      4. Confidentiality; Non-Disparagement.

            (a) Except to the extent required by law, including SEC disclosure
requirements, the Employee agrees that the terms of this Release will be kept
confidential by Employee, except that Employee may advise his or her family and
confidential advisors.

            (b) Employee will not at any time knowingly reveal to any person or
entity any of the trade secrets or confidential information of the Company or
the Company Affiliates or of any third party which the Company is under an
obligation to keep confidential (including, but not limited to, trade secrets or
confidential information respecting inventions, products, designs, methods,
know-how, techniques, systems, processes, software programs, works of
authorship, customer lists, projects, plans, and proposals), and Employee shall
keep secret all confidential matters relating to

                                       2
<PAGE>

the Company or the Company Affiliates and shall not use or attempt to use any
such confidential information in any manner which injures or causes loss or may
reasonably be calculated to injure or cause loss whether directly or indirectly
to the Company or the Company Affiliates. These restrictions contained in this
sub-paragraph (b) shall not apply to: (i) information that at the time of
disclosure is in the public domain through no fault of Employee; (ii)
information received from a third party outside of the Company that was
disclosed without a breach of any confidentiality obligation; (iii) information
approved for release by written authorization of the Company or the Company
Affiliate; or, (iv) information that may be required by law or an order of the
court, agency or proceeding to be disclosed; provided, Employee shall provide
the Company notice of any such required disclosure once Employee has knowledge
of it and will help the Company at the Company's expense to the extent
reasonable to obtain an appropriate protective order.

            (c) Employee represents that Employee has not taken, used or
knowingly permitted to be used any notes, memorandum, reports, lists, records,
drawings, sketches, specifications, software programs, data, documentation, or
other materials of any nature relating to any matter within the scope of the
business of the Company, the Company Affiliates, or their partner companies or
concerning any of its dealings or affairs otherwise than for the benefit of the
Company or the Company Affiliates. Employee shall not, after his or her
termination of employment, use or knowingly permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation, or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the
Company, the Company Affiliate or client of the same, as the case may be, and
that immediately upon the effectiveness of Employee's resignation from
employment, Employee shall deliver all of the foregoing, and all copies thereof,
to the Company at its main office.

            (d) In accordance with normal ethical and professional standards,
the Company and Employee agree that they shall not in any way engage in any
conduct or make any statement that would defame or disparage the other, or make
to, or solicit for, the media or others, any comments, statements (whether
written or oral), and the like that may be considered to be derogatory or
detrimental to the good name or business reputation of either party. It is
understood and agreed that the Company's obligation under this paragraph extends
only to the conduct of the Company's senior officers. The only exception to the
foregoing shall be in those circumstances in which Employee or the Company is
obligated to provide information in response to an investigation by a duly
authorized governmental entity or in connection with legal proceedings.

      5. Indemnity.

            (a) This Release shall not release the Company or any of its
insurance carriers from any obligation it or they might otherwise have to defend
and/or indemnify Employee and hold him/her harmless from any claims made against
him/her arising out of his/her activities as director or officer of the Company,
to the same extent as the Company or its insurance carriers are or may be
obligated to defend and/or indemnify and hold harmless any other director or
officer and the Company affirms its obligation to provide indemnification to
Employee as a director, officer, former director, or former officer of the
Company, as set forth in the Company's bylaws and charter documents in effect on
the date of the Letter Agreement.

                                       3
<PAGE>

            (b) Employee agrees that Employee will personally provide reasonable
assistance and cooperation to the Company, at the Company's expense, in
activities related to the prosecution or defense of any pending or future
lawsuits or claims involving the Company.

      6. General.

            (a) Employee understands that this Release is revocable by Employee
for a period of seven (7) days following execution of the Release. This Release
shall not become effective or enforceable until this seven (7) day revocation
period has ended.

            (b) Employee has carefully read and fully understands all the
provisions of the Notice and the Release which sets forth the entire agreement
between Employee and the Company, and Employee acknowledges that Employee has
not relied upon any representation or statement, written or oral, not set forth
in this document.

            (c) Employee agrees that any breach of this Release or corresponding
Letter Agreement by Employee will cause irreparable damage to the Company and
that in the event of such breach the Company shall have, in addition to any and
all remedies of law, the right to an injunction, specific performance or other
equitable relief to prevent the violation of the obligations hereunder.

            (d) No term or condition set forth in this Release may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Employee and a duly authorized officer of the Company.

                                       4
<PAGE>

            (e) Any waiver by the Company of a breach of any provision of this
Release shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.

      IN WITNESS WHEREOF, the parties have executed this Release as of the date
written above.

Dated:_______________                       ________________________________
                                                     NAME

                                            CHROMAVISION MEDICAL SYSTEMS, INC.

Dated: _______________                      By: _____________________________
                                                Stephen T. D. Dixon
                                                Executive Vice President and
                                                Chief Financial Officer

                                       5