Exhibit 10.42

 

SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS

 

This Separation Agreement and Release of All Claims (“Agreement”) is voluntarily
entered into by Frank J. Spina (“Employee”) and Specialty Laboratories, Inc.
(“Specialty” or “Company”) to settle fully and finally all obligations and/or
differences between them, disputed and/or undisputed, arising out of, relating
to or resulting from Employee’s employment with Specialty and separation from
employment.  Employee and Specialty agree:

 

1.     Employee acknowledges that he has resigned from employment and from all
of his positions with Specialty and any of its subsidiaries effective March 19,
2004 (the “Termination Date”).  On that date Employee’s service with Specialty
and any of its subsidiaries will automatically and immediately cease for all
purposes except as provided below.  Also on that date, the Company will provide
Employee with a final paycheck, which will include payment for hours worked up
through and including the Termination Date, plus all earned and untaken
vacation.

 

2.     As full and final settlement of all claims, demands, damages, liabilities
and/or causes of action of any kind whatsoever, known or unknown (“Claims”) that
employee has or may have against Specialty, its officers, directors,
shareholders, owners, parent companies, subsidiaries, affiliates, predecessors,
successors, assigns, agents, employees and representatives (“Specialty, et al”),
and in reliance upon Employee’s termination of employment, release, covenants
and promises contained herein, Specialty agrees to provide Employee with the
following upon cessation of Employee’s employment:

 

Specialty agrees that Employee will be entitled to the following:

 

A lump sum payment equal to fifty thousand dollars ($50,000), minus applicable
required deductions and tax withholding.  Such payment shall be made eight (8)
days after Employee’s delivery of the signed Agreement; provided, Employee has
not revoked the Agreement pursuant to Section 16(f) below.  No bonuses or other
payment shall be paid to Employee except as specifically provided herein.

 

Extension of the period of exercisability of any outstanding non-qualified stock
options granted to Employee to purchase shares of Specialty, to the extent such
options are vested, to a period of one (1) year from the Termination Date.

 

Employee’s participation in any medical, dental and/or vision plans will
terminate on March 31, 2004.  Following March 31, 2004, Employee may elect to
continue any medical, dental and/or vision plan coverage under COBRA.  Any
continuation of coverage under COBRA beyond March 31, 2004 will be at Employee’s
expense; provided, however, that Specialty agrees to reimburse Employee for his
COBRA expenses for up to three (3) months upon presentation of appropriate
evidence of expenses.  Employee must comply with the terms and conditions of
COBRA to maintain eligibility.

 

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Employee’s coverage in the Company’s Life Insurance and Long Term Disability
plans will end on the Termination Date.

 

Employee acknowledges that the amounts to be paid to him/her pursuant to this
Agreement are more than Specialty is required to pay under its normal policies
and procedures.

 

3.     In consideration of the above, Employee and Specialty waive, release and
forever discharge each other, et al, from all Claims that Employee or Specialty
has or may have against each other, et al, arising out of, relating to, or
resulting from any events occurring before the execution of this Agreement,
including but not limited to any Claims arising out of, relating to or resulting
from Employee’s employment with Specialty, the cessation of that employment, any
Claims for violation of Specialty’s policies or procedures, breach of fiduciary
duty, wrongful termination, breach of contract, breach of the covenant of good
faith and fair dealing, violation of public policy, negligent and/or intentional
infliction of emotional distress and/or stress, negligence, injury to the psyche
and/or internal organs, negligent and/or intentional misrepresentation, fraud
and/or deceit, defamation and/or invasion of privacy, any claims for physical,
mental and/or psychological injuries, attorneys’ fees, costs, any Claims under
the California Labor Code, the California Workers’ Compensation Act, the
California Fair Employment and Housing Act, Title VII of the Civil Rights Act of
1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Equal Pay
Act, the Age Discrimination in Employment Act, the Americans with Disabilities
Act, the Family and Medical Leave Act, the California Family Rights Act, the
Consolidated Omnibus Budget Reconciliation Act of 1985 and/or the Employee
Retirement Income Security Act of 1974 and/or any Claims under any other
federal, state of local law, constitution, regulation or ordinance.  Employee
and Specialty further agree not to bring, continue or maintain any legal
proceedings of any nature whatsoever against each other, et al, before any
court, administrative agency, arbitrator or any other tribunal or forum by
reason of any such Claims.

 

Specifically included in this release are all Claims of age discrimination,
whether under the Federal Age Discrimination in Employment Act of 1967, 29
U.S.C. Section 621 et seq., the California Fair Employment and Housing Act,
California Government Code Section 12941 et seq. or any other law.

 

Furthermore, in consideration of the services provided by Employee to Company
prior to the Termination Date, the Company covenants not to bring any claims,
demands, and/or causes of action of any kind whatsoever against Employee arising
out of or related to Employees services for the Company from the period
beginning with the execution of this Agreement up through and including the
Termination Date.

 

4.     This Agreement is intended to be effective as a bar to all Claims as
stated in paragraph 3.  Accordingly, Employee and Specialty hereby expressly
waive all rights and benefits conferred by Section 1542 of the California Civil
Code, which states:

 

“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.”

 

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Employee and Specialty acknowledge that they may hereafter discover Claims or
facts in addition to or different from those which they now know or believe to
exist with respect to the subject matter of this Agreement and which, if known
or suspected this Agreement, may have materially affected this settlement. 
Nevertheless, Employee and Specialty hereby waive any right, claim or cause of
action that might arise as a result of such different or additional claims or
facts.  Employee and Specialty acknowledge that they understand the significance
and consequence of such release and such specific waiver of Section 1542.

 

5.     Employee acknowledges and agrees he has signed the “Agreement with
Respect to Confidential Information, Inventions and Works of Authorship”
(“Confidentiality Agreement”), which is fully incorporated herein by this
reference.  Employee warrants and represents he has not breached any of his
obligations under the Confidentiality Agreement and agrees to abide by all
promises, terms, obligations and covenants agreed to, made and/or assumed by
employee under the Confidentiality Agreement.

 

6.     Employee acknowledges and agrees he will make only truthful remarks and
statements about and will not disparage Specialty and/or Specialty’s business
operations, products, services, practices, procedures, policies, officers,
directors, shareholders, agents, employees and representatives.  The Company
acknowledges and agrees that no member of Company’s Directors, Officers, and
senior management will make disparaging or untrue remarks about Employee.

 

7.     Employee agrees that upon completion of the consulting period outlined in
Section 22 with the Company, Employee will transfer to the Company within 30
days, all drawings, manuals, guides, records, notebooks, papers, writings,
computer software or programs in any form and other documents and materials,
including all copies thereof, which are in Employee’s possession or under
Employee’s control, whether or not such items were prepared by Employee, which
would not be in the possession of the Employee except for the employment of the
Employee by the Company.  Company agrees, for the period outlined in Section 22
hereof, that Employee may continue to use the Company’s laptop computer,
currently used by Employee for his daily work duties for the Company.  Company
shall fully image the hard drive of such computer for backup, archival, and
document retention purposes prior to Employee being permitted to use such
computer following the Termination Date.  Employee agrees that such computer
will remain the property of Company, and that it will only be used for the
services contemplated in Section 22 hereof, and not for any other purpose. 
Employee acknowledges and agrees that he may not delete, remove or alter any
files or information from such computer that may be relevant to any litigation
involving the Company, including without limitation, the shareholder class
action suit pending in the Central District of California.  Employee further
agrees that he will, within 30 days of the completion of the consulting period
described in Section 22 hereof, return such computer to Company without any
deletion, removal or alteration of such files and information.

 

8.     Employee agrees not to disclose this Agreement or any of its terms to
anyone except his attorney, or tax advisor, if any.  Employee agrees and
acknowledges that Specialty may issue a press release and file a Form 8-K
regarding Employee’s separation from Specialty and that Specialty may describe
and disclose the contents of this Agreement in any of its filings with the
Securities and Exchanges Commission and may provide this Agreement as an exhibit
to any filings made by Specialty with the Securities and Exchange

 

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Commission or any filings pursuant to the federal securities laws or other
applicable law, to the extent Specialty deems necessary or desirable.

 

9.     Specialty expressly denies any violation of any of its policies,
procedures, state or federal laws or regulations.  Accordingly, while this
Agreement resolves all issues between Employee and Specialty relating to any
alleged violation of Specialty’s policies or procedures or any state or federal
law or regulation, this Agreement does not constitute an adjudication or finding
on the merits and it is not, and shall not be construed as, an admission by
Specialty of any violation of its policies, procedures, state or federal laws or
regulations.

 

10.   The consideration described in paragraph 2 above constitutes the sole and
exclusive consideration provided Employee under this Agreement.  Employee
acknowledges and agrees he has received all wages, bonuses, commissions,
compensation remuneration, and all other moneys due him arising out of, relating
to or resulting from his employment with Specialty subject to the final paycheck
as noted in section 1 of this agreement, up through the Termination Date,
including but not limited to all moneys due him under any and all benefit plans
established and/or maintained by Specialty.  The Company acknowledges that
Employee has participated in the Company’s Deferred Compensation Plan, and may
continue to so participate up to and including the Termination Date.
Notwithstanding anything herein to the contrary, the Company hereby agrees that
Employee shall be paid out the amounts due to Employee as part of the Company’s
Deferred Compensation Plan, in accordance with the terms of such Deferred
Compensation Plan.

 

11.   Employee and Specialty each acknowledge and agree that any payments and
benefits provided hereunder are in full satisfaction of any obligations under
Employee’s employment agreement with Specialty dated as of September 11, 2003
(the “Employment Agreement”).

 

12.   Employee acknowledges and agrees that his termination of employment and
resignation from his positions with Specialty do not constitute either a
termination of employment by Specialty without Cause or a resignation by
Employee for Good Reason within the meaning of the Employment Agreement.

 

13.   Employee and Specialty each represent and warrant they have not
transferred or assigned to any person or entity any rights or Claims released
herein.

 

14.   This Agreement is binding upon and inures to the benefits of Employee’s
spouse, family, heirs, successors, assigns, executors, administrators and
personal representatives and is binding upon the inures to the benefit of the
successors and assigns of Specialty.

 

15.   Except as explicitly provided herein, neither party will be liable to the
other party for any costs or attorneys’ fees, including any provided by
statutes.

 

16.   Employee fully understands, acknowledges and agrees among the various
rights and Claims he is waiving, releasing and forever discharging by the
execution of this Agreement are all rights and Claims arising under the Federal
Age Discrimination in

 

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Employment Act of 1967, 29 U.S.C. Section 621, et. seq. (the “ADEA”).  Employee
further understands, acknowledges and agrees that:

 

a.             In return for this Agreement, Employee will receive compensation
beyond that which Employee was already entitled to receive before entering into
this Agreement.

 

b.             Employee has had at least twenty-one (21) days within which to
consider this waiver and release relating to the ADEA;

 

c.             Employee has carefully read and fully understands all of the
provisions of this Agreement;

 

d.             Employee is, by the execution of this Agreement, waiving,
releasing and forever discharging Specialty, et al, from all Claims that he has
or may have against Specialty, et al, individually and/or collectively,
including but not limited to all Claims of age discrimination;

 

e.             Employee was previously advised, and is hereby further advised,
in writing to consult with an attorney before executing this Agreement;

 

f.              Employee was informed that Employee has a period of seven (7)
days following the execution of this Agreement by both parties to revoke this
Agreement by providing written notice of such revocation to Specialty’s Human
Resources Department and was previously advised, and is hereby further advised,
in writing that this Agreement shall not become effective or enforceable until
this seven (7) day revocation period has expired without him having exercised
his right of revocation.

 

17.   This is the entire agreement between the parties and supersedes all
previous negotiations, agreements and understandings, with the exception of the
Confidentiality Agreement referenced in Section 5 hereof and the Indemnification
Agreement referenced in Section 23 hereof.  Any oral representations regarding
this Agreement shall have no force or effect.  No modifications of this
Agreement can be made except in writing signed by Employee and an authorized
representative of Specialty.  If any action or other legal proceeding is brought
by either party for damages, specific performance or other injunctive relief by
reason of any asserted violation of this Agreement, the prevailing party shall
be entitled to recover its reasonable costs and attorney fees.

 

18.   Employee acknowledges and agrees that he has been advised this Agreement
is a final and binding legal document, that he has had reasonable and sufficient
time and opportunity to consult with an attorney of his own choosing before
signing this Agreement and that in signing this Agreement, he has acted
voluntarily of his own free will and has not relied upon any representation made
by Specialty or any of its agents, employees or representatives regarding this
Agreement’s subject matter or its effect.

 

19.   Employee agrees to return all Company property, including but not limited
to all computer equipment, credit cards, telephone equipment, and dictation
equipment 30 days following the completion of the consulting services described
in Section 22 hereof.  Employee agrees to use this property solely of the
purpose of completing consulting

 

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services as noted in Section 22 hereof.  Employee agrees to return the leased
vehicle to the Company on the Termination Date.

 

20.   In addition to any obligations under the Confidentiality Agreement, for a
period of one (1) year after the execution of this Agreement by both parties,
Employee shall not:  (a) directly or indirectly, on his own behalf or on behalf
of any other person or business, solicit for employment any person employed by
Specialty or its affiliates; or (b) will not use any confidential information
obtained from or while at or Specialty to directly or indirectly, on his own
behalf or on behalf of any other person or business, induce, attempt to induce
or knowingly encourage any Customer (as defined below) not to do business with
Specialty or to divert any business or income from Specialty or any of its
affiliates or to stop or alter the manner in which the Customer is then doing
business with Specialty or any of its affiliates.  “Customer” shall mean any
individual or business that was or is a customer or client of Specialty or any
of its affiliates, regardless of whether such customer was generated, in whole
or in part, by Employee’s efforts.

 

21.   Any dispute or controversy between Employee, on the one hand, and
Specialty, 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 Employee’s employment with
Specialty or the termination of Employee’s employment with Specialty, shall be
resolved through final and binding arbitration in Los Angeles, 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 Specialty shall pay the arbitrator’s fees and any
and all other administrative costs of the arbitration.  Notwithstanding any
provision in this Section 21, 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 the Confidentiality
Agreement or any other confidentiality obligations owed to the other party.  The
provisions of this Section 21 supersede and replace in their entirety any prior
arbitration agreement(s) that may exist between Employee and Specialty.

 

22.   Employee agrees that he will provide assistance to Specialty on a
consulting basis for up to ten (10) hours per month for a transition period up
to the date of filing of Specialty’s periodic report on Form 10-Q for the first
quarter of 2004.  In addition, the Employee will make himself available at
mutually agreeable times as requested by Specialty to use his reasonable efforts
to cooperate with Specialty in any litigation or government investigations or
proceedings now pending or which may later arise in which Specialty requires or
desires his cooperation as a witness or otherwise.  Specialty will reimburse
Employee for reasonable travel and other out-of-pocket expenses incurred as a
result of providing such cooperation.  It is understood that Employee’s
availability will be for reasonable periods of time during normal business and
employment activities elsewhere and that his availability for assistance in such
litigation activities on behalf of Specialty will not unreasonably interfere
with his efforts to pursue such other business and employment activities.

 

a.             In order to allow Employee to perform the consulting services
under this Section 22, the Company may provide Employee with certain
confidential information of the Company subsequent to the Termination Date.  It
is understood by the parties that Employee’s future employer may be a direct

 

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competitor of the Company, and any such information provided to Employee after
the Termination Date is provided by the Company voluntarily to assist in the
transition of Employee’s duties to other Company employees, and to assist the
Company’s preparation of it first quarter 2004 financial earnings release and
Company’s Form 10-Q for the first quarter of 2004.

 

b.             The Company agrees that it will limit any such information shared
with Employee following the Termination Date to materials related to historical
information of the Company and information concerning the Company’s first
quarter 2004 operating results.  Under no circumstances will Company provide
employee with information related to the Company’s second quarter 2004 or later
operating results.  Employee agrees that he will not trade in the Company’s
securities at any time he is in possession of material non-public information.

 

c.             Employee agrees that he will keep any such confidential
information provided by the Company strictly confidential, and will not share or
make available such information with his new employer or any unauthorized third
party.  Employee further agrees to return any such information provided by the
Company upon request, or alternatively destroy any such information and certify
to the Company in writing that he has done so.

 

d.             Notwithstanding anything to the contrary herein, the Company
hereby agrees that Employee’s possession and use of any information provided to
it by the Company subsequent to the Termination Date will not be governed by or
under the Confidentiality Agreement, and Company may not bring any claims,
demands, and/or causes of action of any kind whatsoever against Employee or his
future employer for violation of the Confidentiality Agreement based upon or
related to the confidential information provided to Employee subsequent to the
Termination Date.

 

e.             In consideration of the services provided by Employee under this
Section 22, the Company agrees to indemnify and hold harmless Employee from and
against all Claims arising out of or related to the consulting services provided
by Employee under this Section 22.  Such indemnification of Employee by Company
shall be to the fullest extent allowed by law, and in any event to no lesser
degree that the terms provided by the Indemnification Agreement (as defined in
Section 23 hereof).  Furthermore, in consideration of the services provided by
Employee under this Section 22, the Company covenants not to bring any claims,
demands, and/or causes of action of any kind whatsoever against Employee arising
out of or related to the consulting services provided by Employee under this
Section 22.

 

f.              The parties agree that any consulting services under this
Section 22 are within the Company’s sole discretion, and that Company may decide
to forego any such consulting services, or cease the consulting services at any
time.  The parties acknowledge that the consideration provided to Employee under
Section 2 hereof will not be reduced in any way by any such decision by the
Company, and shall constitute full and adequate consideration for the

 

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consulting services under this Section 22, and no further consideration shall be
owed or paid to Employee for such services.

 

23.   Specialty acknowledges that, as provided in Section 5 of the
Indemnification Agreement dated December 6, 2000 by and between Employee and the
Company (the “Indemnification Agreement”), the Indemnification Agreement shall
continue after the Termination Date for so long as Employee shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Employee was an officer or director of the Company or serving in any other
capacity referred to in the Indemnification Agreement.  Company acknowledges
that the Company’s Directors and Officers Insurance Policy is in effect at the
time of the execution of this Agreement, that Employee is covered under such
policy as an officer of the Company, and that the policy is a “claims made”
policy that provides coverage for former officers of the Company following their
termination of employment.

 

24.   If any provision of this Agreement or the application thereof is held
invalid the invalidity shall not affect other provisions or applications of this
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.

 

I HAVE COMPLETELY AND CAREFULLY READ THE FOREGOING, INCLUDING THE WAIVER AND
RELEASE OF CLAIMS SET FORTH IN PARAGRAPHS 2, 3, 4, 10, 15 AND 16 ABOVE AND FULLY
UNDERSTAND AND VOLUNTARILY AGREE TO ITS TERMS.

 

THIS AGREEMENT CONTAINS A WAIVER OF CLAIMS UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT. YOU ARE ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING
THIS AGREEMENT.

 

 

Dated:   

March 14, 2004

 

/s/ Frank J. Spina

 

Frank J. Spina

 

 

 

 

 

SPECIALTY LABORATORIES, INC.

 

 

 

 

Dated:   

March 14, 2004

 

/s/ Douglas S. Harrington

 

Douglas S. Harrington, M.D.

 

Chief Executive Officer

 

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