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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