Document:

Exhibit 10.11

 

 

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

 

1

 

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,

 

3

 

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

 

5

 

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.

 

6

 

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;

 

7

 

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

  	
   

  

 

8Exhibit 10.12

 

 

December 15, 2008

 

Mr. David
Daly

Clarient, Inc.

31
Columbia

Aliso
Viejo, CA  92656

 

Dear
Dave:

 

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 SVP,
Commercial Operations and will report directly to the Chief Executive Officer
of the Company (the “CEO”).  This Letter
Agreement amends, restates and supersedes in its entirety the employment letter
agreement, dated as of February 28, 2005, between Executive and the
Company.  The obligations of Executive
under that certain Agreement to Protect 
Business Interests dated January 30, 2008 between Executive and the
Company (the “January 2008 Agreement”) shall remain in full force and
effect.

 

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 $190,000 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
(which base salary shall be increased to $220,000 per annum effective January 1,
2009).

 

(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 

 

1

 

by the Compensation Committee of the Company’s
Board of Directors) with an annual target payment of 40% 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 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.  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), Executive’s base
salary shall be deemed to be $190,000.

 

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 and restricted stock agreement by and between the Company and
Executive identified on Schedule 1 hereto (the “Equity Agreements”), all shares
subject to the stock options and all shares of restricted stock granted under
the Equity 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 30,000 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 30,000 shares and is hereby cancelled with respect thereto; however, this
provision shall have no effect on the 20,000 shares which were covered by such
stock option, but which were not subject to performance vesting
conditions.  To the extent inconsistent
with the Equity Agreements, this Section 4 shall constitute an amendment
to the Equity Agreements and, except as expressly provided herein, all terms
and conditions of the Equity 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

 

2

 

$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-three (23) days of vacation per annum which will
accrue at the rate of 6.77 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 twelve (12) 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 Equity Agreement, this Section 6(b) shall
constitute an amendment to such Equity Agreement and, except as expressly
provided herein, all terms and conditions of such Equity 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

 

3

 

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, 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
compliance with the terms of the January 2008 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 twelve (12)
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 Vice President, Sales of the Company, or (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; provided, however, that Executive
must have given the written notice to the Company that

 

4

 

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, 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) [Intentionally
Deleted]

 

(c) [Intentionally
Deleted]

 

(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

 

5

 

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.

 

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

 

6

 

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; 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

 

7

 

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.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ronald Andrews

  
	
   

  	
  Title:

  	
  CEO

  
				

 

I
agree to the terms and conditions of this Letter Agreement

 

 

	
  /s/
  David Daly

  	
   

  
	
  David
  Daly

  	
   

  

 

8

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