EXHIBIT 10.57

 

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (this “Agreement) is made and
entered into by and between Douglas S. Harrington, M.D. (“Executive”), and
Specialty Laboratories, Inc., a California corporation (the “Company”)
(hereinafter, Executive and the Company shall be referred to individually as a
“Party” and collectively as the “Parties”), with reference to the following
facts:

 

A.            Executive has been employed by the Company as its Chief Executive
Officer and Laboratory Director.  The terms of Executive’s employment were
governed by a written Employment Agreement dated May 15, 2002 (the “Employment
Agreement”).

 

B.            Executive has decided to end his employment relationship with the
Company, and has tendered his voluntary resignation effective March 29, 2005,
which was accepted by the Company’s board of directors (the “Board”).

 

C.            The Employment Agreement does not provide for severance payments
to Executive in the event of a voluntary resignation but does provide for the
continuation of Executive’s salary for two years in the event that the Company
terminates Executive’s employment other than for Cause (as defined in the
Employment Agreement) or should Executive resign for Good Reason (as defined in
the Employment Agreement).  The Company has agreed to pay Executive a severance
payment and other consideration in exchange for certain covenants and
obligations, as described in this Agreement, and in exchange for Executive’s
general release of any and all claims and disputes, whether known or unknown,
which exist or could exist on Executive’s behalf against the Company or its
affiliates arising out of Executive’s employment with the Company as its Chief
Executive Officer and Laboratory Director and the termination of that employment
relationship.

 

NOW, THEREFORE, in consideration of the covenants and promises contained herein,
the Parties hereto agree as follows:

 

1.             TRANSITION PERIOD.  EXECUTIVE AGREES TO CONTINUE IN HIS POSITION
AS THE COMPANY’S CHIEF EXECUTIVE OFFICER AND LABORATORY DIRECTOR THROUGH THE
CLOSE OF BUSINESS ON MARCH 29, 2005.  EXECUTIVE AGREES THAT, PRIOR TO MARCH 29,
2005, HE SHALL USE HIS BEST EFFORTS TO ENSURE A SMOOTH EXECUTIVE TRANSITION,
INCLUDING BUT NOT LIMITED TO: THE SIGNING AND FILING OF THE COMPANY’S ANNUAL
REPORT ON FORM 10-K, AND ANY NECESSARY DOCUMENTS OR FILINGS RELATING TO
SARBANES-OXLEY SECTION 404; PREPARING FOR AND COMPLETING THE NEW YORK STATE
LABORATORY INSPECTION SCHEDULED FOR MARCH 8-10, 2005; PROVIDING NECESSARY
BACKUP, CERTIFICATIONS AND QUALIFICATIONS AS LABORATORY DIRECTOR AS REQUIRED FOR
ALL REGULATORY AND ACCREDITING AUTHORITIES THROUGH MARCH 29, 2005 (AND A THIRTY
(30) DAY EXTENSION AS NEEDED AND AS REQUIRED BY THE COMPANY, AS MORE FULLY
DESCRIBED IN SECTION 3 BELOW); AND ASSISTING WITH TRANSITION PLANNING, EMPLOYEE
RETENTION PLANNING, AND OTHER TRANSITION ACTIVITIES.

 

2.             VOLUNTARY RESIGNATION OF CORPORATE POSITIONS.  EXECUTIVE HAS
VOLUNTARILY RESIGNED, WITH SUCH RESIGNATION EFFECTIVE AS OF MARCH 29, 2005, FROM
ANY AND ALL POSITIONS HELD AS AN OFFICER AND EMPLOYEE OF THE COMPANY.  EXECUTIVE
ACKNOWLEDGES AND UNDERSTANDS THAT FROM MARCH 29, 2005, HE WILL NOT BE AN
EMPLOYEE OF THE COMPANY.  EXECUTIVE WILL BE PAID FOR ALL ACCRUED VACATION AND
SALARY THROUGH MARCH 29, 2005.

 

3.             ADDITIONAL THIRTY (30) DAY TRANSITION PERIOD.  FROM MARCH 30,
2005, AND EXTENDING THROUGH THE CLOSE OF BUSINESS ON APRIL 28, 2005, EXECUTIVE
SHALL MAKE HIMSELF AVAILABLE, AS NEEDED AND AS REQUESTED BY THE COMPANY, TO
ENSURE A CONTINUED SMOOTH EXECUTIVE TRANSITION.  THE SERVICES TO BE PROVIDED BY
EXECUTIVE DURING THIS EXTENDED TRANSITION PERIOD SHALL INCLUDE, WITHOUT
LIMITATION, PREPARING

 

 

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FOR AND COMPLETING ANY STATE LABORATORY INSPECTION; PROVIDING NECESSARY BACKUP,
CERTIFICATIONS AND QUALIFICATIONS AS NECESSARY FOR ALL REGULATORY AND
ACCREDITING AUTHORITIES, INCLUDING ANY NECESSARY NEW YORK STATE CERTIFICATES OF
QUALIFICATION; AND ASSISTING WITH TRANSITION PLANNING, EMPLOYEE RETENTION
PLANNING, AND OTHER TRANSITION ACTIVITIES.  TO THE EXTENT FEASIBLE, THE COMPANY
SHALL PROVIDE EXECUTIVE WITH REASONABLE ADVANCE NOTICE OF ITS REQUIREMENTS FOR
SERVICES UNDER THIS SECTION 3.  IN THE EVENT THE COMPANY REQUESTS EXECUTIVE’S
SERVICES DURING THIS THIRTY (30) DAY TRANSITION PERIOD, THE COMPANY SHALL PAY
EXECUTIVE $5,000 FOR EACH DAY THAT EXECUTIVE PROVIDES SUCH SERVICES.  UNDER NO
CIRCUMSTANCES WILL EXECUTIVE SERVE AS A CLIA OR DHS DIRECTOR AFTER MARCH 29,
2005.

 

4.             ADDITIONAL SERVICES BEYOND APRIL 28, 2005.  BEYOND APRIL 28,
2005, EXECUTIVE SHALL ASSIST WITH, AND ACTIVELY PARTICIPATE IN, ANY INSPECTION
BY CALIFORNIA LABORATORY INSPECTORS AND/OR INSPECTORS FROM THE CENTERS FOR
MEDICARE AND MEDICAID SERVICES (“CMS”), AND TO EXTENT NECESSARY, EXECUTIVE WILL
SERVE AS A BACKUP MEDICAL DIRECTOR/LABORATORY DIRECTOR OR SUCH OTHER NECESSARY
CAPACITY AS REQUESTED BY THE COMPANY, BUT ONLY TO THE EXTENT NECESSARY TO
PROVIDE COVERAGE FOR CERTIFICATIONS AND QUALIFICATIONS (INCLUDING ANY NECESSARY
NEW YORK STATE CERTIFICATES OF QUALIFICATION) FOR WHICH ADEQUATE COVERAGE HAS
NOT YET BEEN OBTAINED BY THE COMPANY.  TO THE EXTENT FEASIBLE, THE COMPANY SHALL
PROVIDE EXECUTIVE WITH REASONABLE ADVANCE NOTICE OF ITS REQUIREMENTS FOR
SERVICES UNDER THIS SECTION 4.  IN THE EVENT THE COMPANY REQUESTS EXECUTIVE’S
SERVICES FOLLOWING APRIL 28, 2005, THE COMPANY SHALL PAY EXECUTIVE $5,000 FOR
EACH DAY THAT EXECUTIVE PROVIDES SUCH SERVICES.

 

5.                                       SEVERANCE PAYMENTS.

 

(A)           ON MARCH 29, 2005, COMPANY SHALL PROVIDE EXECUTIVE WITH HIS FINAL
PAYROLL CHECK, INCLUDING ALL ACCRUED VACATION AND SALARY THROUGH MARCH 29, 2005,
AND A ONE-TIME SEVERANCE PAYMENT OF $275,000 (LESS REQUIRED WITHHOLDINGS AND
DEDUCTIONS AUTHORIZED BY EXECUTIVE OR REQUIRED BY LAW).

 

(B)           THE COMPANY ALSO AGREES TO PAY EXECUTIVE $420,000 PER YEAR THROUGH
MARCH 29, 2007 (THE “SEVERANCE PERIOD”), TO BE PAID IN ACCORDANCE WITH THE
COMPANY’S NORMAL STANDARD BI-WEEKLY PAYROLL SCHEDULE.  THE COMPANY SHALL DEDUCT
AND WITHHOLD FROM THE COMPENSATION PAYABLE TO EXECUTIVE HEREUNDER ANY AND ALL
APPLICABLE FEDERAL, STATE AND LOCAL INCOME AND EMPLOYMENT WITHHOLDING TAXES AND
ANY OTHER AMOUNTS REQUIRED OR AUTHORIZED BY EXECUTIVE TO BE DEDUCTED OR WITHHELD
BY THE COMPANY UNDER APPLICABLE STATUTES, REGULATIONS, ORDINANCES OR ORDERS
GOVERNING OR REQUIRING THE WITHHOLDING OR DEDUCTION OF AMOUNTS OTHERWISE PAYABLE
AS COMPENSATION OR WAGES TO EMPLOYEES.  EVEN THOUGH EXECUTIVE IS NO LONGER A
COMPANY EMPLOYEE, THE PARTIES ACKNOWLEDGE AND AGREE THAT THE PAYMENTS REQUIRED
BY THIS SUBSECTION(A) ARE WAGES SUBJECT TO FEDERAL AND STATE INCOME TAX
WITHHOLDING AND FICA TAXATION.

 

(C)           THE COMPANY SHALL REIMBURSE EXECUTIVE FOR ACTUAL OUT-OF-POCKET
EXPENSES FOR COBRA PAYMENTS FOR HIM AND HIS DEPENDENTS FOR A PERIOD OF UP TO
EIGHTEEN (18) MONTHS FOLLOWING THE TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH
THE COMPANY.  THE COMPANY SHALL NOT PROVIDE NOR REIMBURSE EXECUTIVE FOR ANY
SUPPLEMENTAL INSURANCE PRODUCTS, INCLUDING LIFE INSURANCE, OR ANY OTHER
EMPLOYMENT BENEFIT.

 

(D)           EXECUTIVE AGREES THAT THESE PAYMENTS ARE FULLY SATISFACTORY TO HIM
AND CONSTITUTE VALID CONSIDERATION IN EXCHANGE FOR THE RELEASES AND COMMITMENTS
SET FORTH IN THIS AGREEMENT.

 

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6.               NO FILING OF CLAIMS.

 

6.1 Executive represents and warrants that he does not presently have on file,
and further represents that he will not hereafter file, any claims, charges,
grievances, actions, appeals or complaints against the Company and its
affiliates, and their respective parents, subsidiaries, and related entities or
corporations, and their past and present officers, directors, shareholders,
employees, agents, partners, attorneys, heirs, successors, and assigns, in or
with any administrative, state, federal or governmental entity, agency, board or
court, or before any other tribunal or panel of arbitrators, public or private,
based upon any actions by the Company or its affiliates occurring prior to the
date of this Agreement.

 

6.2 The Company represents and warrants that it does not presently have on file,
and further represents that it will not hereafter file, any claims, charges,
grievances, actions, appeals or complaints against Executive, in or with any
administrative, state, federal or governmental entity, agency, board or court,
or before any other tribunal or panel of arbitrators, public or private, based
upon any actions by Executive occurring prior to the date of this Agreement.

 

7.             RELEASE OF ALL CLAIMS BY EXECUTIVE.  IN CONSIDERATION FOR THE
PROMISES AND COMPENSATION PROVIDED ABOVE, EXECUTIVE HEREBY AGREES TO WAIVE,
RELEASE, ACQUIT AND FOREVER DISCHARGE THE COMPANY, AND ITS AFFILIATES, AND THEIR
RESPECTIVE PARENTS, SUBSIDIARIES, AND RELATED ENTITIES, AND THEIR PAST AND
PRESENT OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS, PARTNERS,
ATTORNEYS, HEIRS, SUCCESSORS, AND ASSIGNS, FROM ANY AND ALL CLAIMS, DEMANDS,
ACTIONS, CHARGES, COMPLAINTS AND CAUSES OF ACTION (HEREINAFTER COLLECTIVELY
REFERRED TO AS “CLAIMS”), OF WHATEVER NATURE, WHETHER KNOWN OR UNKNOWN, WHICH
EXIST OR MAY EXIST ON EXECUTIVE’S BEHALF AS OF THE DATE OF THIS AGREEMENT
ARISING OUT OF OR RELATING TO EXECUTIVE’S EMPLOYMENT BY THE COMPANY OR THE
TERMINATION OF SUCH EMPLOYMENT OR ARISING OUT OF OR RELATING TO EXECUTIVE’S
SERVICE ON THE BOARD OF DIRECTORS OF THE COMPANY OR THE TERMINATION OF SUCH
SERVICE, INCLUDING BUT NOT LIMITED TO ANY AND ALL TORT CLAIMS, CONTRACT CLAIMS
(EXPRESS OR IMPLIED), WAGE CLAIMS, BONUS CLAIMS, WRONGFUL TERMINATION CLAIMS,
PUBLIC POLICY CLAIMS, WHISTLEBLOWER CLAIMS, IMPLIED COVENANT OF GOOD FAITH AND
FAIR DEALING CLAIMS, RETALIATION CLAIMS, STATUTORY CLAIMS, PERSONAL INJURY
CLAIMS, EMOTIONAL DISTRESS CLAIMS, INVASION OF PRIVACY CLAIMS, DEFAMATION
CLAIMS, FRAUD CLAIMS, AND ANY AND ALL CLAIMS ARISING UNDER ANY FEDERAL, STATE OR
OTHER GOVERNMENTAL STATUTE, LAW, REGULATION OR ORDINANCE COVERING DISCRIMINATION
IN EMPLOYMENT, INCLUDING BUT NOT LIMITED TO TITLE VII OF THE CIVIL RIGHTS ACT OF
1964, AS AMENDED, THE AMERICANS WITH DISABILITIES ACT, THE FAMILY AND MEDICAL
LEAVE ACT, THE EQUAL PAY ACT AND THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT,
COVERING DISCRIMINATION IN EMPLOYMENT INCLUDING RACE, COLOR, RELIGIOUS CREED,
NATIONAL ORIGIN, ANCESTRY, PHYSICAL OR MENTAL DISABILITY, MEDICAL CONDITION,
MARITAL STATUS, FAMILY CARE LEAVE, PREGNANCY, SEX, SEXUAL ORIENTATION, AND
HARASSMENT OR RETALIATION.

 

8.             RELEASE OF ALL CLAIMS BY THE COMPANY.  IN CONSIDERATION FOR THE
PROMISES AND RELEASES PROVIDED HEREIN, THE COMPANY HEREBY AGREES TO WAIVE,
RELEASE, ACQUIT AND FOREVER DISCHARGE EXECUTIVE, AND HIS HEIRS, SUCCESSORS, AND
ASSIGNS, FROM ANY AND ALL CLAIMS, OF WHATEVER NATURE, WHETHER KNOWN OR UNKNOWN,
WHICH EXIST OR MAY EXIST ON THE COMPANY’S BEHALF AS OF THE DATE OF THIS
AGREEMENT ARISING OUT OF OR RELATING TO EXECUTIVE’S EMPLOYMENT BY THE COMPANY OR
THE TERMINATION OF SUCH EMPLOYMENT OR ARISING OUT OF OR RELATING TO EXECUTIVE’S
SERVICE ON THE BOARD OF DIRECTORS OF THE COMPANY OR THE TERMINATION OF SUCH
SERVICE, INCLUDING BUT NOT LIMITED TO ANY AND ALL TORT CLAIMS, CONTRACT CLAIMS
(EXPRESS OR IMPLIED), PUBLIC POLICY CLAIMS, IMPLIED COVENANT OF GOOD FAITH AND
FAIR DEALING CLAIMS, STATUTORY CLAIMS, INVASION OF PRIVACY CLAIMS, AND
DEFAMATION CLAIMS; PROVIDED, HOWEVER, THAT THIS SECTION IS NOT INTENDED TO, AND
SHALL NOT, WAIVE OR RELEASE ANY CLAIMS THE COMPANY HAS OR MAY HAVE AGAINST
EXECUTIVE FOR FRAUD, THEFT, EMBEZZLEMENT OR MATERIAL MISAPPROPRIATION OF FUNDS,
OR OTHER ILLEGAL CONDUCT BY EXECUTIVE WHILE EMPLOYED BY THE COMPANY, IT BEING
UNDERSTOOD THAT THE COMPANY IS NOT PRESENTLY AWARE OF ANY SUCH CLAIMS AGAINST
EXECUTIVE, BUT INTENDS ONLY TO EXPRESSLY RESERVE THE RIGHT TO BRING SUCH CLAIMS
(IF ANY), NOTWITHSTANDING THE RELEASE LANGUAGE CONTAINED IN THIS SECTION TO THE
CONTRARY.

 

9.             WAIVER OF UNKNOWN CLAIMS.  IT IS FURTHER UNDERSTOOD AND AGREED BY
EXECUTIVE AND THE COMPANY THAT, EXCEPT AS EXPRESSLY SET FORTH IN SECTION 8
ABOVE, EXECUTIVE AND THE COMPANY HEREBY

 

 

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EXPRESSLY WAIVE AND RELINQUISH ANY AND ALL CLAIMS, RIGHTS OR BENEFITS THAT THEY
MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

 

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

In connection with such waiver and relinquishment, and notwithstanding the
provisions of California Civil Code section 1542, each Party hereby expressly
acknowledges that this Agreement is intended to include, and does include in its
effect, without limitation, all such claims which each Party does not know or
suspect to exist at the time of the execution of this Agreement, and that this
Agreement contemplates the extinguishment of those claims.  Each Party further
acknowledges, understands and agrees that this representation and commitment is
essential to the other Party and that this Agreement would not have been entered
into were it not for this representation and commitment.

 

10.           EXERCISE OF STOCK OPTIONS.

 

Executive acknowledges that he has previously been granted certain options to
purchase shares of the Company’s common stock, and that this Agreement provides
no acceleration or extended exercise period of such options.  Executive
acknowledges that as of March 29, 2005 any unvested options granted to Executive
shall automatically expire, and that any vested and unexercised options granted
to Executive shall expire pursuant to the terms and conditions of the Company’s
2000 Stock Incentive Plan and the terms of the grant of such options at the time
the grants were made.

 

11.           COVENANT OF CONFIDENTIALITY.

 

11.1  Acknowledgment of Confidentiality of Proprietary Information.  Executive
acknowledges that he has an obligation not to disclose or use confidential,
proprietary, or trade secret information obtained during the course of his
employment with the Company.  Executive hereby acknowledges that he has during
the course of his employment with the Company acquired, created, developed, or
added to certain confidential and/or proprietary information regarding the
Company and its affiliates and/or their respective business (“Proprietary
Information”), which Proprietary Information shall include, without limitation,
all of the following materials and information (whether or not reduced to
writing and whether or not patentable or protected by copyright):  inventions,
processes, formulae, programs, technical data, “know-how,” procedures, manuals,
confidential reports and communications, marketing methods, product sales or
cost information, new product ideas or improvements, new packaging ideas or
improvements, research and development programs, identities or lists of
suppliers, vendors, customers, financial information of the Company or its
affiliates of any nature whatsoever, or any other confidential or proprietary
information relating to the Company or its affiliates.  The Parties hereto agree
that the failure of any Proprietary Information to be marked or otherwise
labeled as confidential or proprietary information shall not affect its status
as Proprietary Information.  Executive shall hold in the strictest confidence
(except as previously approved by the Company in writing), and shall not,
directly or indirectly, disclose, divulge, reveal, report, publish, transfer or
otherwise communicate, or use for his own benefit or the benefit of any other
person, partnership, firm, corporation or other entity, or use to the detriment
of the Company or its affiliates, or misuse in any way, any Proprietary
Information.  Executive and the Company each hereby stipulate that, as between
them, all Proprietary Information acquired or made, developed, or conceived of
in whole or in part by Executive constitutes important, material, and
confidential and/or proprietary information of the Company or its affiliates,
constitutes unique and valuable information, and affects the successful conduct
of the business of the Company or its affiliates and its goodwill, and that the
Company and/or its affiliates, as applicable, shall be entitled to recover its
damages in addition to any injunctive remedy for any breach of this Section. 
The foregoing notwithstanding, if, after consulting with legal counsel,
Executive determines that he is legally compelled to disclose Proprietary
Information to any tribunal or governmental agency or else stand liable for
contempt or suffer other similar censure or penalty, then the disclosure to such
tribunal or governmental agency of only that Proprietary Information which such
counsel advises in writing is legally required to be disclosed shall not

 

 

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constitute a breach of this Section, provided that Executive shall give the
Company as much advance notice of such disclosure as is reasonably practicable.

 

11.2 Restricted Activity. Executive further acknowledges that the Proprietary
Information has been and will be of central importance to the businesses of the
Company and its affiliates, and that disclosure of it to, or its use by, others
could cause substantial loss to the Company or its affiliates. Executive and the
Company also recognize that an important part of Executive’s duties has been to
develop goodwill for the Company and its affiliates through his personal contact
with Clients (as defined below), employees, and others having business
relationships with the Company and its affiliates, and that there is a danger
that this goodwill, a proprietary asset of the Company, may follow Executive
upon the termination of his employment relationship with the Company.
Accordingly, Executive agrees as follows:

 

(A)   PROHIBITED ACTIVITIES.  EXECUTIVE AGREES THAT HE WILL NOT AT ANY TIME
DURING WHICH HE IS ENTITLED TO RECEIVE PAYMENTS PURSUANT TO SECTION 5 ABOVE, (I)
WHETHER FOR HIS OWN ACCOUNT OR FOR THE ACCOUNT OF ANY OTHER PERSON, SOLICIT,
DIVERT, OR ENDEAVOR TO ENTICE ANY CLIENT OR SUPPLIER OF THE COMPANY AWAY FROM
THE COMPANY OR ITS AFFILIATES, OR OTHERWISE ENGAGE IN ANY ACTIVITY INTENDED TO
TERMINATE, DISRUPT, OR INTERFERE WITH THE COMPANY’S OR ITS AFFILIATES’
RELATIONSHIP WITH CLIENTS OR SUPPLIERS, OR OTHERWISE ADVERSELY AFFECT THE
COMPANY’S OR ITS AFFILIATES’ RELATIONSHIP WITH CLIENTS OR SUPPLIERS OR OTHER
BUSINESS RELATIONSHIPS OF THE COMPANY AND/OR ITS AFFILIATES; AND (II) DIRECTLY
OR THROUGH ONE OR MORE INTERMEDIARIES, SOLICIT FOR EMPLOYMENT OR RECOMMEND TO
ANY SUBSEQUENT EMPLOYER OF EXECUTIVE THE SOLICITATION FOR EMPLOYMENT OF, ANY
PERSON WHO, AT THE TIME OF SUCH SOLICITATION, IS EMPLOYED BY THE COMPANY OR ANY
AFFILIATE.  AS USED HEREIN, “CLIENTS” SHALL MEAN THOSE PERSONS OR ENTITIES THAT,
AT ANY TIME DURING EXECUTIVE’S COURSE OF EMPLOYMENT WITH THE COMPANY WERE
CLIENTS OR CUSTOMERS OF THE COMPANY OR ANY AFFILIATE, OR ANY PREDECESSOR OF ANY
OF THE FOREGOING.

 

(B)   LIMITATIONS ON CERTAIN ACTIVITIES DURING THE SEVERANCE PERIOD.  EXECUTIVE
ACKNOWLEDGES AND AGREES THAT HE HAS OBTAINED THE COMPANY’S PROPRIETARY
INFORMATION, INCLUDING BUT NOT LIMITED TO THE COMPANY’S TRADE SECRETS. 
CONSEQUENTLY, DURING ANY PERIOD FOR WHICH EXECUTIVE IS RECEIVING PAYMENTS FROM
THE COMPANY PURSUANT TO SECTION 5 ABOVE, EXECUTIVE SHALL NOT, WITHOUT PRIOR
WRITTEN CONSENT OF THE BOARD, OWN, MANAGE, OPERATE, CONTROL OR PARTICIPATE IN
THE OWNERSHIP, MANAGEMENT, OPERATION OR CONTROL OF, OR BE EMPLOYED BY, ANY OF
THE FOLLOWING ENTITIES OR THEIR SUBSIDIARIES OR AFFILIATES:  QUEST DIAGNOSTICS,
LABORATORY CORPORATION OF AMERICA HOLDINGS (“LABCORP”), ASSOCIATED REGIONAL
UNIVERSITY PATHOLOGISTS LABORATORIES (“ARUP”), MAYO MEDICAL LABORATORIES, BIO
REFERENCE LABORATORIES, ESTOTERIX, INC., OR GENZYME CORPORATION; PROVIDED,
HOWEVER, THAT SUCH RESTRICTION SHALL NOT APPLY TO ANY PASSIVE INVESTMENT
REPRESENTING AN INTEREST OF LESS THAN TWO PERCENT (2%) OF AN OUTSTANDING CLASS
OF PUBLICLY-TRADED SECURITIES OF ANY COMPANY.

 

(C)   OTHER RESTRICTIONS.  FOR A PERIOD OF TWELVE (12) MONTHS BEGINNING ON MARCH
29, 2005, EXECUTIVE SHALL NOT DIRECTLY PURSUE OR RESPOND TO DISCUSSIONS ABOUT
ACQUISITION, JOINT VENTURE OR SIMILAR RELATIONSHIPS OR TAKE ANY OTHER ACTIONS
THAT MIGHT ADVERSELY AFFECT THE COMPANY’S ABILITY TO COMPLETE A TRANSACTION WITH
THE ENTITIES IDENTIFIED BY THE COMPANY AS CANDIDATES FOR POTENTIAL BUSINESS
COMBINATIONS, STRATEGIC TRANSACTIONS, ACQUISITION OR JOINT VENTURES AND WHO HAD
SIGNED CONFIDENTIALITY AGREEMENTS WITH THE COMPANY SINCE SEPTEMBER 29, 2004. 
EXECUTIVE MAY, HOWEVER, PURSUE SUCH DISCUSSIONS WITH ANY SUCH ENTITIES AT ANY
TIME IF COMPANY FIRST CONFIRMS IN WRITING TO EXECUTIVE THAT IT HAS ENDED
DISCUSSIONS WITH SUCH ENTITY.

 

(D)   PERMITTED ACTIVITIES.  EXECUTIVE SHALL BE FREE TO ENGAGE IN ANY ACTIVITIES
RELATED TO HIS FIELDS OF EXPERTISE TO THE EXTENT NOT IN CONFLICT WITH THE TERMS
OF THIS AGREEMENT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
NOTWITHSTANDING THE RESTRICTIONS CONTAINED HEREIN, EXECUTIVE MAY BE EMPLOYED OR
OTHERWISE CONSULT WITH ANY ENTITY, INCLUDING ANY ENTITIES LISTED HEREINABOVE,
INCLUDING THOSE CONTAINED IN SECTION 11.2(B), PROVIDED THAT EXECUTIVE IS NOT
DIRECTLY INVOLVED IN THE SALES, MARKETING OR GENERAL MANAGEMENT OF SUCH
ENTITIES, AND EXECUTIVE IS NOT IN A POSITION TO SOLICIT BUSINESS OR CUSTOMERS
AWAY FROM COMPANY.  EXECUTIVE MAY ALSO BE EMPLOYED BY OR CONSULT WITH CUSTOMERS
OF THE COMPANY SO

 

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LONG AS IN SUCH CAPACITY EXECUTIVE DOES NOT, OR IS NOT IN A POSITION TO, SOLICIT
BUSINESS OR CUSTOMERS AWAY FROM COMPANY.  EXECUTIVE SHALL BE FREE TO PRACTICE
HIS EXPERTISE AS A PHYSICIAN IN AREAS THAT COMPANY DOES NOT HAVE MATERIAL
INVOLVEMENT AS OF THE DATE OF THIS AGREEMENT, SUCH AS ANATOMIC PATHOLOGY,
WHETHER IN A HOSPITAL, CLINIC, OR THE EXCLUDED ENTITIES LISTED ABOVE, AND AS AN
EMPLOYEE OR CONSULTANT TO THE BIOTECH AND DIAGNOSTICS INDUSTRIES.  EXECUTIVE
AGREES THAT THE COVENANTS CONTAINED HEREIN ARE A MATERIAL INDUCEMENT TO THE
COMPANY FOR THE AGREEMENT TO PAY THE SEVERANCE PAYMENTS SET FORTH IN SECTION 5
ABOVE.

 

(E)   REMEDIES.  EXECUTIVE UNDERSTANDS THAT THE COMPANY WOULD (I) HAVE NO
FURTHER OBLIGATION TO PAY THE SALARY PAYMENTS SET FORTH IN SECTION 5 ABOVE, AND
(II) SEEK AN IMMEDIATE INJUNCTION AND RESTRAINING ORDER TO PREVENT SUCH BREACH
AND/OR THREATENED BREACH AND/OR CONTINUED BREACH BY EXECUTIVE, IN ADDITION TO
ANY OTHER REMEDIES OR DAMAGES TO WHICH THE COMPANY MAY BE ENTITLED AT LAW OR IN
EQUITY, IN THE EVENT EXECUTIVE WERE TO BREACH ANY OF THE TERMS OF THIS SECTION
11.  EXECUTIVE ACKNOWLEDGES THAT MONETARY DAMAGES MAY NOT BE SUFFICIENT TO
COMPENSATE THE COMPANY FOR ANY ECONOMIC LOSS WHICH MAY BE INCURRED BY REASON OF
HIS BREACH OF THE FOREGOING RESTRICTIVE COVENANTS.  ACCORDINGLY, IN THE EVENT OF
ANY SUCH BREACH, THE COMPANY SHALL, IN ADDITION TO THE TERMINATION OF THIS
AGREEMENT AND ANY REMEDIES AVAILABLE TO THE COMPANY AT LAW, BE ENTITLED TO
OBTAIN EQUITABLE RELIEF IN THE FORM OF AN INJUNCTION PRECLUDING EXECUTIVE FROM
CONTINUING SUCH BREACH.

 

12.           NON-DISPARAGEMENT.  COMPANY AND EXECUTIVE EACH AGREE NOT TO
PUBLISH OR MAKE ANY STATEMENT DISPARAGING OR CRITICAL OF THE OTHER PARTY (AND IN
THE CASE OF COMPANY, ITS AFFILIATES AND/OR THEIR RESPECTIVE OFFICERS, DIRECTORS,
MANAGERS, SUPERVISORS, EMPLOYEES, INVESTORS, PRODUCTS, SERVICES, OR TECHNOLOGY),
OR OTHERWISE MALIGN THE BUSINESS OR REPUTATION OF ANY OF THE FOREGOING ENTITIES
OR PERSONS (“ADVERSE INFORMATION”); PROVIDED, HOWEVER, THAT IF, AFTER CONSULTING
WITH LEGAL COUNSEL, EITHER PARTY DETERMINES THAT IT IS LEGALLY COMPELLED TO
DISCLOSE ADVERSE INFORMATION TO ANY TRIBUNAL OR GOVERNMENTAL AGENCY OR ELSE
STAND LIABLE FOR CONTEMPT OR SUFFER OTHER SIMILAR CENSURE OR PENALTY, THEN THE
DISCLOSURE TO SUCH TRIBUNAL OR GOVERNMENTAL AGENCY OF ONLY THAT ADVERSE
INFORMATION WHICH SUCH COUNSEL ADVISES IS LEGALLY REQUIRED TO BE DISCLOSED SHALL
NOT CONSTITUTE A BREACH OF THIS SECTION, PROVIDED THAT EACH PARTY SHALL GIVE THE
OTHER AS MUCH ADVANCE NOTICE OF SUCH DISCLOSURE AS IS REASONABLY PRACTICABLE;
PROVIDED, FURTHER, THAT NOTHING CONTAINED IN THIS SECTION IS INTENDED TO PREVENT
EITHER PARTY FROM TESTIFYING TRUTHFULLY IN ANY LEGAL PROCEEDING.

 

13.           NON-ADMISSION OF LIABILITY.  EXECUTIVE ACKNOWLEDGES THAT THE
COMPANY DENIES ANY WRONGDOING WHATSOEVER IN CONNECTION WITH EXECUTIVE, HIS
EMPLOYMENT, AND THE CESSATION OF THAT EMPLOYMENT, AND THAT THE SEVERANCE PAYMENT
MADE PURSUANT TO THIS AGREEMENT IS MADE SOLELY FOR THE PURPOSE OF AMICABLY
RESOLVING ANY DISPUTES THE PARTIES MAY HAVE ARISING FROM THE EMPLOYMENT
RELATIONSHIP AND FOR EXECUTIVE’S AGREEMENTS SET FORTH HEREIN.  EXECUTIVE AND THE
COMPANY EXPRESSLY UNDERSTAND AND AGREE THAT NOTHING CONTAINED IN THIS AGREEMENT
SHALL CONSTITUTE OR BE TREATED AS AN ADMISSION OF ANY WRONGDOING OR LIABILITY ON
THE PART OF EXECUTIVE OR THE COMPANY.

 

14.           NO OTHER PAYMENTS DUE.  EXECUTIVE UNDERSTANDS AND AGREES THAT THIS
AGREEMENT IS INTENDED TO AND DOES BAR ALL CLAIMS EXECUTIVE HAS OR MAY HAVE FOR
INJURIES, LOSSES, DAMAGES, WAGES, SALARIES, BONUSES, COMMISSIONS, OVERTIME PAY,
VACATION PAY, SEVERANCE PAY, CAR ALLOWANCE, BENEFITS, COSTS, EXPENSES,
ATTORNEYS’ FEES, OR ANY SIMILAR CLAIMS THAT EXECUTIVE COULD POSSIBLY HAVE
AGAINST THE COMPANY OR ITS AFFILIATES, AND THAT EXECUTIVE IS NOT ENTITLED TO
RECEIVE AND WILL NOT CLAIM ANY RIGHT, BENEFIT, OR COMPENSATION OTHER THAN WHAT
IS SET FORTH ABOVE IN THIS AGREEMENT.

 

 

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15.           RETURN OF COMPANY PROPERTY.  EXCEPT FOR THE COMPANY LAPTOP
COMPUTER CURRENTLY USED BY EXECUTIVE, EXECUTIVE AGREES TO RETURN TO THE COMPANY
ALL OFFICE KEYS, BUILDING ACCESS CARDS, COMPANY CREDIT CARDS, EQUIPMENT,
DOCUMENTS, AND ANY OTHER MATERIALS OF THE COMPANY THAT EXECUTIVE HAS IN HIS
POSSESSION, CUSTODY, OR CONTROL ON OR BEFORE MARCH 29, 2005.  EXECUTIVE MAY
RETAIN THE COMPANY LAPTOP CURRENTLY USED BY HIM, AND SUCH COMPUTER SHALL BECOME
THE PROPERTY OF EXECUTIVE AFTER COMPANY’S REPRESENTATIVES FIRST REMOVE ANY OF
COMPANY’S CONFIDENTIAL INFORMATION.

 

16.           OWNERSHIP OF CLAIMS.  EXECUTIVE REPRESENTS AND WARRANTS THAT HE IS
THE SOLE AND LAWFUL OWNER OF ALL RIGHTS, TITLE, AND INTEREST IN AND TO ALL
RELEASED MATTERS, CLAIMS AND DEMANDS REFERRED TO HEREIN.  EXECUTIVE FURTHER
REPRESENTS AND WARRANTS THAT THERE HAS BEEN NO ASSIGNMENT OR OTHER TRANSFER OF
ANY INTEREST IN ANY SUCH MATTERS, CLAIMS OR DEMANDS WHICH EXECUTIVE MAY HAVE
AGAINST THE COMPANY OR ANY AFFILIATE.

 

17.           NON-CONFIDENTIALITY OF THIS AGREEMENT.  THE PARTIES UNDERSTAND AND
AGREE THAT THE PRINCIPAL TERMS OF THIS AGREEMENT HAVE BEEN PUBLICLY DISCLOSED
AND THAT A COPY OF THIS AGREEMENT MAY BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

18.           CALIFORNIA LAW APPLIES.  THIS AGREEMENT, IN ALL RESPECTS, SHALL BE
INTERPRETED, ENFORCED, AND GOVERNED BY AND UNDER THE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAWS.

 

19.           ARBITRATION.  ANY DISPUTE OR CONTROVERSY BETWEEN EXECUTIVE, ON THE
ONE HAND, AND COMPANY, ON THE OTHER HAND, IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT OR THE SUBJECT MATTER THEREOF, OR OTHERWISE IN
ANY WAY ARISING OUT OF RELATED TO, OR CONNECTED WITH EXECUTIVE’S EMPLOYMENT WITH
COMPANY OR THE TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH COMPANY, SHALL BE
RESOLVED THROUGH FINAL AND BINDING ARBITRATION IN LOS ANGELES COUNTY,
CALIFORNIA, PURSUANT TO CALIFORNIA CIVIL PROCEDURE CODE §§ 1282 — 1284.2.  IN
THE EVENT OF SUCH ARBITRATION, UNLESS OTHERWISE REQUIRED BY LAW, EACH PARTY
SHALL PAY ITS OWN ATTORNEYS’ FEES AND COSTS AND COMPANY SHALL PAY THE
ARBITRATOR’S FEES, AND ANY AND ALL OTHER ADMINISTRATIVE COSTS OF THE
ARBITRATION.  NOTWITHSTANDING ANY PROVISION IN THIS SECTION 19, NEITHER PARTY
SHALL BE PROHIBITED FROM SEEKING INJUNCTIVE RELIEF AS NECESSARY TO MAINTAIN THE
STATUS QUO PENDING AN ARBITRATION PROCEEDING REGARDING THE BREACH OR THREATENED
BREACH OF THIS AGREEMENT OR ANY OTHER CONFIDENTIALITY OBLIGATIONS OWED TO THE
OTHER PARTY.

 

20.           SUCCESSORS AND ASSIGNS.  IT IS EXPRESSLY UNDERSTOOD AND AGREED BY
EXECUTIVE THAT THIS AGREEMENT AND ALL OF ITS TERMS SHALL BE BINDING UPON
EXECUTIVE AND THE COMPANY’S RESPECTIVE REPRESENTATIVES, HEIRS, EXECUTORS,
ADMINISTRATORS, SUCCESSORS, AND ASSIGNS.

 

21.           ATTORNEYS’ FEES.  IN THE EVENT THAT EITHER PARTY ASSERTS A CLAIM
FOR BREACH OF THIS AGREEMENT OR SEEKS TO ENFORCE ITS TERMS, THE PREVAILING PARTY
IN ANY SUCH PROCEEDING SHALL BE ENTITLED TO RECOVER COSTS AND REASONABLE
ATTORNEYS’ FEES.

 

22.           HEADINGS.  THE HEADINGS IN EACH SECTION HEREIN ARE FOR CONVENIENCE
OF REFERENCE ONLY AND SHALL BE OF NO LEGAL EFFECT IN THE INTERPRETATION OF THE
TERMS HEREOF.

 

23.           INTEGRATION.  THIS AGREEMENT CONSTITUTES A SINGLE, INTEGRATED,
WRITTEN CONTRACT, EXPRESSING THE ENTIRE AGREEMENT BETWEEN THE PARTIES.  IN THIS
REGARD, EXECUTIVE REPRESENTS AND WARRANTS THAT HE IS NOT RELYING ON ANY PROMISES
OR REPRESENTATIONS THAT DO NOT APPEAR WRITTEN HEREIN.  EXECUTIVE FURTHER
UNDERSTANDS AND AGREES THAT THIS AGREEMENT CAN BE AMENDED OR MODIFIED ONLY BY A
WRITTEN AGREEMENT, SIGNED BY THE PARTIES HERETO.

 

 

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24.           VOLUNTARY AGREEMENT.  EXECUTIVE UNDERSTANDS AND AGREES THAT HE MAY
BE WAIVING SIGNIFICANT LEGAL RIGHTS BY SIGNING THIS AGREEMENT.  EXECUTIVE
REPRESENTS THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL OF HIS CHOICE REGARDING
THIS AGREEMENT, AND REPRESENTS THAT HE HAS ENTERED INTO THIS AGREEMENT
VOLUNTARILY, WITH A FULL UNDERSTANDING OF AND IN AGREEMENT WITH ALL OF ITS
TERMS.

 

25.           SEVERABILITY.  ANY TERM OR PROVISION OF THIS AGREEMENT THAT IS
HELD BY A COURT OF COMPETENT JURISDICTION OR OTHER AUTHORITY TO BE INVALID,
VOID, OR UNENFORCEABLE IN ANY SITUATION IN ANY JURISDICTION SHALL NOT AFFECT THE
VALIDITY OR ENFORCEABILITY OF THE REMAINING TERMS AND PROVISIONS HEREOF OR THE
VALIDITY OR ENFORCEABILITY OF THE INVALID, VOID, OR UNENFORCEABLE TERM OR
PROVISION IN ANY OTHER SITUATION OR IN ANY OTHER JURISDICTION.  IF THE FINAL
JUDGMENT OF A COURT OF COMPETENT JURISDICTION OR OTHER AUTHORITY DECLARES THAT
ANY TERM OR PROVISION HEREOF IS INVALID, VOID, OR UNENFORCEABLE, THE PARTIES
AGREE THAT THE COURT MAKING SUCH DETERMINATION SHALL HAVE THE POWER TO AND
SHALL, SUBJECT TO THE DISCRETION OF SUCH COURT, REDUCE THE SCOPE, DURATION,
AREA, OR APPLICABILITY OF THE TERM OR PROVISION, TO DELETE SPECIFIC WORDS OR
PHRASES, OR TO REPLACE ANY INVALID, VOID, OR UNENFORCEABLE TERM OR PROVISION
WITH A TERM OR PROVISION THAT IS VALID AND ENFORCEABLE AND THAT COMES CLOSEST TO
EXPRESSING THE INTENTION OF THE INVALID OR UNENFORCEABLE TERM OR PROVISION.

 

26.           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN MORE THAN ONE
COUNTERPART, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH
TOGETHER SHALL CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.

 

THE SIGNATORIES HAVE CAREFULLY READ THIS ENTIRE AGREEMENT.  THE SIGNATORIES HAVE
CONSULTED WITH LEGAL COUNSEL OF THEIR CHOICE REGARDING THIS AGREEMENT.  THE
SIGNATORIES FULLY UNDERSTAND THE FINAL AND BINDING EFFECT OF THIS AGREEMENT. 
THE SIGNATORIES ARE SIGNING THIS AGREEMENT VOLUNTARILY.

 

IN WITNESS WHEREOF, the Parties hereto have executed this Separation Agreement
and General Release on the dates indicated below.

 

DATED: April 22, 2005

By:

/s/ Douglas S. Harrington

 

 

Douglas S. Harrington, M.D.

 

 

 

DATED: April 19, 2005

SPECIALTY LABORATORIES, INC.

 

 

 

By:

/s/ Richard K. Whitney

 

Its:

Chairman of the Board of Directors

 

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