Document:

Exhibit 10.1

 

April 24, 2008

 

Dr. Michael
Pellini

32371
Caribbean Drive

Dana
Point, CA 92629

 

Dear
Mike:

 

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

 

1.                                       Duties.  Commencing on April 24, 2008 or a date
mutually agreed upon by the Company and Executive (the “Commencement Date”).
Executive will serve as President and Chief Operating Officer of the Company
and will report directly to the Chief Executive Officer of the Company. In
addition, a recommendation will be made to the Corporate Governance Committee
of the Company’s Board of Directors for Executive to be nominated at the
Company’s 2008 annual meeting to continue to serve on the Board of Directors of
the Company (albeit not as a designee of Safeguard Scientifics).

 

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). 
If Executive’s employment relationship with the Company is terminated
for any reason, Executive agrees to resign from the Board of Directors at the
Company’s request.

 

3.                                       Compensation.

 

(a)                                  Base Salary.  During the term of Executive’s employment,
Executive will receive a base salary of $283,250 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 60% of base
salary, pro-rated for the number of months of services in any given year, provided, however, that
to the extent that a bonus becomes payable under the MIP with respect to
calendar year 2008, such bonus shall be payable as if Executive commenced
employment under this Agreement on January 1, 2008.  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.

 

4.                                       Option Grant.  The Compensation Committee of the Company’s
Board of Directors has approved a recommendation, to be presented to and
formally approved by the Company’s Board of Directors or Compensation Committee
following the date of this Agreement, that on or as soon as practicable after
the Commencement Date, Executive should be granted a stock option for 400,000
shares of Common Stock of the Company. 
Subject to Executive’s continued employment with the Company through
each such date, the option shall vest as to 25% of the shares on the first
anniversary of the date of grant and the remaining 75% of the shares in equal
monthly installments on each monthly anniversary of the date of grant
thereafter, such that all shares subject to the option shall be vested (subject
to continued employment) as of the fourth anniversary of the date of grant,
except as otherwise provided in Section 6(b) below; provided that if
a Change of Control occurs during the term of employment, then the option shall
vest as to all shares that remain unvested immediately prior to the
consummation of such Change of Control. The option will be granted under the
Company’s 2007 Incentive Award Plan (the “Option Plan”) and be subject to the
same terms and conditions as are set forth in the standard form stock option
agreement currently in use under the Option Plan (including such terms and
conditions as are incorporated therein from the Option Plan itself), except to
the extent provided otherwise in this Agreement.  The option will be subject to the approval of
the Board of Directors or Compensation Committee, will have an exercise price
per share equal to the last sale price of the Company’s Common Stock on the
date the option is approved by the Board of Directors or Compensation Committee
and will expire on the tenth anniversary of the date of grant (subject to earlier
termination in accordance with the terms of the Option Plan and standard form
of stock option agreement thereunder). 
Additional equity grants may be awarded by action of the Company’s Board
of Directors or a duly authorized committee of the Board and, if made, will be
made in a manner commensurate with senior executives, the terms and conditions
of which shall be as determined under the Company’s Option Plan and by the
Company’s Board of Directors.

 

5.                                       Fringe Benefits.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

provided
in Section 8 below), accrued vacation 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.  In
addition, in the event that Executive remains employed by the Company through April 24,
2009 or experiences a Severance Termination prior to such date and, in either
case, within one year following the date of termination of Executive’s
employment, either (A) a Change of Control occurs, or (B) (1) the
Company enters into a definitive agreement pursuant to which, if consummated, a
Change of Control would occur, and (2) no later than eighteen months
following the date of termination a Change of Control occurs, then, in any such
case, any options, to the extent not vested as of the date of such termination,
shall become fully vested and exercisable immediately prior to the occurrence
of any such Change of Control (unless any such termination of employment was a
termination for “cause”, in which case the acceleration of vesting contemplated
by this sentence shall not apply).

 

(c)                                  Upon a
Severance Termination, Executive will receive continued coverage under the
Company’s medical and health plans in accordance with COBRA rules and
regulations following the termination date (including any period as may be required
by law), provided that coverage will end if Executive obtains comparable
coverage from a subsequent employer or otherwise ceases to be eligible for
COBRA benefits.  If Executive chooses
such continuation health insurance coverage, Executive will only pay the amount
paid by Executive during his employment and the Company will subsidize the
remaining costs which are normally the responsibility of the former employee
for 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.  The amount of expenses reimbursed in one year
shall not affect the amount eligible for reimbursement in any subsequent year.

 

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

 

4

 

(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  Chief Operating Officer of the Company or removal from his
position as an executive officer of the Company, (ii) the relocation of
the Company’s offices at which Executive is principally employed to a location
which is more than thirty miles from the location of the Company’s principal
offices on the date of this Letter Agreement, (iii) the reduction of
Executive’s base salary or bonus opportunity, except pursuant to a reduction
which also applies to the Company’s other senior executives or (iv) the
requirement that Executive report to any officer of the Company other than its
Chief Executive Officer; provided, however, that Executive must have given the
written notice to the Company that Executive believes he has the right to
terminate employment for good reason, within ninety (90) days of the initial
occurrence of such event, and the Company fails to eliminate the good reason
within fifteen (15) days after receipt of the notice.  Further, Executive’s termination of
employment must occur within 2 years from the initial occurrence of an event
that constitutes good reason.

 

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

 

5

 

(g)                                 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.

 

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

 

7.                                       Definitions of
Competition and Solicitation.

 

(a) [Intentionally
Deleted].

 

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

 

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

 

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

 

6

 

Executive
will be entitled to receive upon such termination a “pro rata portion” of his
“bonus for the year of termination” (as those terms are defined below).  “Pro rata portion” means the number of days
in the calendar year of termination up to and including the date of termination
divided by the total number of days in that full calendar year.  The “bonus for the year of termination” means
the amount Executive would have been likely to earn if he had been employed for
the full year, as determined in good faith by the Board of Directors of the
Company or a committee thereof.

 

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

 

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

 

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.

 

7

 

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

 

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

 

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

 

13.                                 Limit on
Payments by the Company. 
Executive shall bear all expense of, and be solely responsible for, all
federal, state, local or foreign taxes due with respect to any payment received
hereunder, including, without limitation, any excise tax imposed by Section 4999
of the Code; provided, however, that any payment or benefit received or to be received
by Executive in connection with a Change of Control or the termination of
Executive’s employment (whether payable pursuant to the terms of this Letter
Agreement (“Contract Payments”) or any other plan, arrangements or agreement
with the Company or any affiliate (collectively with the Contract Payments, the
“Total Payments”) shall be reduced to the extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the
Code but only if, by reason of such reduction, the net after-tax benefit
received by Executive shall exceed the net after-tax benefit received by
Executive if no such reduction was made. 
For purposes of this Section 13, “net after-tax benefit” shall mean
(i) the total of all payments and the value of all benefits which
Executive receives or is then entitled to receive from the Company that would
constitute “parachute payments” within the meaning of Section 280G of the
Code, less (ii) the amount of all federal, state and local income taxes
payable with respect to the foregoing calculated at the maximum marginal income
tax rate for each year in which the foregoing shall be paid to Executive (based
on the rate in effect for such year as set forth in the Code as in effect at
the time of the first payment of the foregoing), less (iii) the amount of
excise taxes imposed with respect to the payments and benefits described in (i) above
by Section 4999 of the Code.  The
foregoing determination shall be made by a nationally recognized accounting
firm (the “Accounting Firm”) selected by the Company and 

 

8

 

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, including without limitation,
that certain Services Agreement, dated October 1, 2007 between Executive,
the Company and Safeguard Scientifics, Inc. (the “Prior Agreement”), and
the parties hereto expressly acknowledge and agree that nothing herein shall
violate or be construed as a violation of any provision of the Prior Agreement,
including without limitation, Section 7(b) thereof.

 

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  Clarient, Inc.

  
	
   

  	
   

  
	
   

  	
  /s/
  Ronald A. Andrews

  
	
   

  	
  By:
  Ronald A. Andrews

  
	
   

  	
  Title:
  Chief Executive Officer

  

 

I
agree to the terms and conditions of this Letter Agreement

 

	
  /s/
  Michael J. Pellini

  	
   

  

 

9

 

GENERAL RELEASE AND AGREEMENT

 

                                                This GENERAL
RELEASE AND AGREEMENT (hereinafter the “Release”) is made and entered into as
of this April 24, 2008, by and between CLARIENT, INC. (the “Company”) and
Mike Pellini (“Employee”).

 

1.                                       Background.  The parties hereto acknowledge that this
Release is being entered into pursuant to the terms of the Letter Agreement,
dated April 24, 2008 (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 separation payments
and other benefits offered to him or her 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 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 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 costs and reasonable attorneys’ fees 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 her 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 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.

 

2

 

(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 harmless from any claims made against
him arising out of his 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.

 

(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.

 

3

 

(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.

 

(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:
  April 24, 2008

  	
  /s/
  Michael J. Pellini

  
	
   

  	
  NAME

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CLARIENT
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:
  April 24, 2008

  	
  By:

  	
  /s/
  Ronald A. Andrews

  
	
   

  	
  Ronald
  A. Andrews, CEO

  
				

 

4Exhibit 10.1

 

QUICKLOGIC
CORPORATION

 

2005
EXECUTIVE BONUS PLAN

(Amended
April 22, 2008)

 

 

TABLE OF CONTENTS

 

	
  SECTION 1

  	
  BACKGROUND,
  PURPOSE AND DURATION

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Effective
  Date

  	
   

  
	
  1.2

  	
  Purpose
  of the Plan

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  “Actual
  Award”

  	
   

  
	
  2.2

  	
  “Affiliate”

  	
   

  
	
  2.3

  	
  “Board”

  	
   

  
	
  2.4

  	
  “Code”

  	
   

  
	
  2.5

  	
  “Committee”

  	
   

  
	
  2.6

  	
  “Company”

  	
   

  
	
  2.7

  	
  “Disability”

  	
   

  
	
  2.8

  	
  “Employee”

  	
   

  
	
  2.9

  	
  “Participant”

  	
   

  
	
  2.10

  	
  “Performance
  Period”

  	
   

  
	
  2.11

  	
  “Plan”

  	
   

  
	
  2.12

  	
  “Target
  Award”

  	
   

  
	
  2.13

  	
  “Termination
  of Service”

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  SELECTION
  OF PARTICIPANTS AND DETERMINATION OF AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Selection
  of Participants

  	
   

  
	
  3.2

  	
  Determination
  of Target Awards

  	
   

  
	
  3.3

  	
  Discretion
  to Modify Awards

  	
   

  
	
  3.4

  	
  Discretion
  to Determine Criteria

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  PAYMENT
  OF AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Right
  to Receive Payment

  	
   

  
	
  4.2

  	
  Timing
  of Payment

  	
   

  
	
  4.3

  	
  Form of
  Payment

  	
   

  
	
  4.4

  	
  Payment
  in the Event of Death or Disability

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  VARIABLE
  INCENTIVE COMPENSATION PROGRAM

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6

  	
  ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Committee
  is the Administrator

  	
   

  
	
  6.2

  	
  Committee
  Authority

  	
   

  
	
  6.3

  	
  Decisions
  Binding

  	
   

  
	
  6.4

  	
  Delegation
  by the Committee

  	
   

  

 

i

 

	
  SECTION 7

  	
  GENERAL
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Tax
  Withholding

  	
   

  
	
  7.2

  	
  No
  Effect on Employment or Service

  	
   

  
	
  7.3

  	
  Participation

  	
   

  
	
  7.4

  	
  Successors

  	
   

  
	
  7.5

  	
  Beneficiary
  Designations

  	
   

  
	
  7.6

  	
  Nontransferability
  of Awards

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8

  	
  AMENDMENT,
  TERMINATION AND DURATION

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Amendment,
  Suspension or Termination

  	
   

  
	
  8.2

  	
  Duration
  of the Plan

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9

  	
  LEGAL
  CONSTRUCTION

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Gender
  and Number

  	
   

  
	
  9.2

  	
  Severability

  	
   

  
	
  9.3

  	
  Requirements
  of Law

  	
   

  
	
  9.4

  	
  Governing
  Law

  	
   

  
	
  9.5

  	
  Captions

  	
   

  

 

ii

 

QUICKLOGIC CORPORATION

 

2005 EXECUTIVE BONUS PLAN

(Amended April 22, 2008)

 

SECTION 1

BACKGROUND, PURPOSE AND DURATION

 

1.1          
Effective Date.  The Compensation Committee of the Board adopted
the Plan effective as of January 1, 2005.

 

1.2          
Purpose of the Plan.  The Plan is intended to increase shareholder
value and the success of the Company by motivating key employees (a) to
perform to the best of their abilities, and (b) to achieve the Company’s
objectives.

 

SECTION 2

DEFINITIONS

 

The
following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:

 

2.1          
“ Actual Award “ means as to any Performance Period, the actual award
(if any) payable to a Participant for the Performance Period, subject to the
Committee’s authority under Section 3.3 to modify the award.

 

2.2          
“ Affiliate “ means any corporation or other entity (including, but not
limited to, partnerships and joint ventures) controlled by the Company.

 

2.3          
“ Board “ means the Board of Directors of the Company.

 

2.4          
“ Code “ means the Internal Revenue Code of 1986, as amended. 
Reference to a specific section of the Code or regulation thereunder shall
include such section or regulation, any valid regulation promulgated
thereunder, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or
regulation.

 

2.5          
“ Committee “ means the committee appointed by the Board (pursuant to Section 6.1)
to administer the Plan.  Until otherwise determined by the Board, (a) the
Company’s Compensation Committee shall constitute the Committee, and (b) for
administrative convenience, the independent, non-employee members of the Board
also may act as the Committee from time to time.

 

2.6          
“ Company “ means QuickLogic Corporation, a Delaware corporation, or any
successor thereto.

 

2.7          
“ Disability “ means a permanent and total disability determined in
accordance with uniform and nondiscriminatory standards adopted by the
Committee from time to time.

 

2.8          
“ Employee “ means any employee of the Company or of an Affiliate at the
level of Vice President or above, whether such individual is so employed at the
time the Plan is adopted or becomes so employed subsequent to the adoption of
the Plan.

 

2.9          
“ Participant “ means as to any Performance Period, an Employee who has
been selected by the Committee for participation in the Plan for that
Performance Period.

 

2.10        
“ Performance Period “ means any fiscal year of the Company or such
other shorter period of time as determined by the Committee.

 

2.11        
“ Plan “ means the QuickLogic Corporation 2005 Executive Bonus Plan, as
set forth in this instrument and as hereafter amended from time to time.

 

2.12        
“ Target Award “ means the target award payable under the Plan to a
Participant for the Performance Period, as determined by the Committee in
accordance with Section 3.2.

 

2.13        
“ Termination of Service “ means a cessation of the employee-employer
relationship between an Employee and the Company or an Affiliate for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, retirement, or the disaffiliation of an
Affiliate, but excluding any such termination where there is a simultaneous
reemployment by the Company or an Affiliate.

 

 

SECTION 3

SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS

 

3.1          
Selection of Participants.  The Committee, in its sole discretion,
shall select the Employees who shall be Participants for any Performance
Period.  Participation in the Plan is in the sole discretion of the
Committee, on a Performance Period by Performance Period basis. 
Accordingly, an Employee who is a Participant for a given Performance Period in
no way is guaranteed or assured of being selected for participation in any
subsequent Performance Period or Periods.

 

3.2          
Determination of  Target Awards.  The Committee, in its sole
discretion, shall establish a Target Award for each Participant.

 

3.3          
Discretion to Modify Awards.  Notwithstanding any contrary
provision of the Plan, the Committee may, in its sole discretion and at any
time increase, reduce or eliminate a Participant’s Actual Award.  The
Committee may determine the amount of any reduction on the basis of such
factors as it deems relevant, and shall not be required to establish any
allocation or weighting with respect to the factors it considers.

 

3.4          
Discretion to Determine Criteria.  Notwithstanding any contrary
provision of the Plan, the Committee shall, in its sole discretion, determine
the performance requirements applicable to any Target Award.  The
requirements may be on the basis of any factors the Committee determines
relevant, and may be on an individual, divisional, business unit or
Company-wide basis.  Failure to meet the requirements will result in a
failure to earn the Target Award, except as provided in Section 3.3.

 

SECTION 4

PAYMENT OF AWARDS

 

4.1          
Right to Receive Payment.  Each Actual Award shall be paid in full
or in part from the general assets of the Company and/or with equity awards, as
determined by the Committee.  Nothing in this Plan shall be construed to
create a trust or to establish or evidence any Participant’s claim of any right
other than as an unsecured general creditor with respect to any payment to
which he or she may be entitled.

 

4.2          
Timing of Payment.  Payment of each Actual Award shall be made as
soon as practicable as determined by the Committee after the end of the
Performance Period during which the Actual Award was earned, but in no event
later than two and a half months after the end of the Performance Period. 
Unless otherwise determined by the Committee, a Participant must be employed by
the Company or any Affiliate on the last day of the Performance Period to receive
a payment under the Plan.

 

4.3          
Form of Payment.   Each Actual Award shall be paid in full or
in part with cash (or its equivalent) and/or with equity awards in lieu of
cash.

 

4.4          
Payment in the Event of Death  or Disability.  If a
Participant dies or becomes Disabled prior to the payment of an Actual Award
earned by him or her prior to death or Disability for a prior Performance
Period, the Actual Award shall be paid to his or her estate or to the
Participant, as the case may be, subject to the Committee’s discretion to
reduce or eliminate any Actual Award otherwise payable.

 

SECTION 5

VARIABLE INCENTIVE COMPENSATION PROGRAM

 

At
its discretion, the Committee may also establish a variable incentive
compensation component of the Target Award under the Plan.  The variable
incentive compensation component may result in an Actual Award which is higher
or lower than the Target Award based on the Company’s achievement of
performance objectives established by the Committee.

 

SECTION 6

ADMINISTRATION

 

6.1          
Committee is the Administrator.  The Plan shall be administered by
the Committee.  The Committee shall consist of not less than two (2) independent
members of the Board.  The members of the Committee shall be appointed
from time to time by, and serve at the pleasure of, the Board.

 

6.2          
Committee Authority.   It shall be the duty of the Committee to
administer the Plan in accordance with the Plan’s provisions.  The
Committee shall have all powers and discretion necessary or appropriate to
administer the Plan and to control its operation, including, but not limited
to, the power to (a) determine which Employees shall be granted awards, (b) prescribe
the terms and conditions of awards (including the provisions of the variable
incentive compensation program), (c) interpret the Plan and the awards, (d) adopt
such procedures and subplans as are necessary or appropriate to permit
participation in the Plan by Employees who are foreign nationals or employed
outside of the United States, (e) adopt rules for the administration,
interpretation and application of the Plan as are consistent therewith, and (f) interpret,
amend or revoke any such rules.

 

6.3          
Decisions Binding.  All determinations and decisions made by the
Committee, the Board, and any delegate of the Committee pursuant to the
provisions of the Plan shall be final, conclusive, and binding on all persons,
and shall be given the maximum deference permitted by law.

 

 

6.4          
Delegation by the Committee.  The Committee, in its sole discretion
and on such terms and conditions as it may provide, may delegate all or part of
its authority and powers under the Plan to one or more independent directors
and/or one or more officers of the Company.

 

SECTION 7

GENERAL PROVISIONS

 

7.1          
Tax Withholding.  The Company shall withhold all applicable taxes
from any Actual Award, including any federal, state and local taxes (including,
but not limited to, the Participant’s FICA and SDI obligations).

 

7.2          
No Effect on Employment or Service.  Nothing in the Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant’s employment or service at any time, with or without cause. 
For purposes of the Plan, transfer of employment of a Participant between the
Company and any one of its Affiliates (or between Affiliates) shall not be
deemed a Termination of Service.  Employment with the Company and its
Affiliates is on an at-will basis only.  The Company expressly reserves
the right, which may be exercised at any time and without regard to when during
a Performance Period such exercise occurs, to terminate any individual’s
employment with or without cause, and to treat him or her without regard to the
effect that such treatment might have upon him or her as a Participant.

 

7.3          
Participation.  No Employee shall have the right to be selected to
receive an award under this Plan, or, having been so selected, to be selected
to receive a future award.

 

7.4          
Successors.  All obligations of the Company under the Plan, with
respect to awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business or assets of the Company.

 

7.5          
Beneficiary Designations.  If permitted by the Committee, a
Participant under the Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid award shall be paid in the event of the Participant’s
death.  Each such designation shall revoke all prior designations by the
Participant and shall be effective only if given in a form and manner
acceptable to the Committee.  In the absence of any such designation, any
vested benefits remaining unpaid at the Participant’s death shall be paid to
the Participant’s estate.

 

7.6          
Nontransferability of Awards.  No award granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will, by the laws of descent and distribution, or
to the limited extent provided in Section 7.5.  All rights with
respect to an award granted to a Participant shall be available during his or
her lifetime only to the Participant.

 

SECTION 8

AMENDMENT, TERMINATION AND DURATION

 

8.1          
Amendment  , Suspension or Termination.  The Board, in its
sole discretion, may amend or terminate the Plan, or any part thereof, at any
time and for any reason. The amendment, suspension or termination of the Plan
shall not, without the consent of the Participant, alter or impair any rights
or obligations under any Actual Award theretofore earned by such
Participant.  No award may be granted during any period of suspension or
after termination of the Plan.

 

8.2          
Duration of the Plan.  The Plan shall commence on the date
specified herein, and subject to Section 8.1 (regarding the Board’s right
to amend or terminate the Plan), shall remain in effect thereafter.

 

SECTION 9

LEGAL CONSTRUCTION

 

9.1          
Gender and Number.  Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.

 

9.2          
Severability.  In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

 

9.3          
Requirements of Law.  The granting of awards under the Plan shall
be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.

 

9.4          
Governing Law.  The Plan and all awards shall be construed in
accordance with and governed by the laws of the State of California, but
without regard to its conflict of law provisions.

 

9.5          
Captions.  Captions are provided herein for convenience only, and
shall not serve as a basis for interpretation or construction of the Plan.

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