Document:

Exhibit
10.26

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT
AGREEMENT (the “Agreement”) is entered into as of September 11, 2003
by and between Specialty Laboratories, Inc., a California corporation (the
“Company”), and Frank J. Spina (“Executive”), and is effective upon execution
by the Executive and approval by the Compensation Committee of the Company’s
Board of Directors (the “Compensation Committee”).

 

1.             Duties
and Responsibilities.

 

A.            Executive shall serve as the Company’s
Senior Vice-President and Chief Financial Officer or such other title or
position as may be designated from time to time by the Board of Directors.

 

B.            Executive agrees to devote his/her full
time and attention to the Company, to use his/her best efforts to advance the
business and welfare of the Company, to render his/her services under this
Agreement fully, faithfully, diligently, competently and to the best of his/her
ability, and not to engage in any other employment activities to the extent
such other employment interferes with the Company’s business or the performance
of the Executive’s duties hereunder.

 

C.            Executive shall be based at the Company’s
office located in Santa Monica, California (which the Company may move to
Valencia, California), but Executive may be required to travel to other
geographic locations in connection with the performance of his/her Executive
duties.

 

2.             Period
of Employment.

 

Executive’s employment with the
Company shall be governed by the provisions of this Agreement for the period
commencing September 11, 2003 and continuing until this Agreement terminates
pursuant to written notification by either the Company or Executive, which
notification may occur at any time for any reason or no reason.  The period during which the Executive
provides services to the Company pursuant to this Agreement shall be referenced
in this Agreement as the “Employment Period.”

 

3.             Cash
Compensation.

 

A.            Executive’s base salary shall be payable in
accordance with the Company’s standard payroll schedule (“Base Salary”).  Executive’s compensation shall be subject to
periodic review by the Company, and may be increased or decreased in the
Company’s discretion with approval of the Compensation Committee.

 

B.            For each fiscal year during the Employment
Period, Executive shall be eligible for an incentive bonus in the Company’s
sole discretion (“Incentive Bonus”). 
For each full fiscal year of employment during the Employment Period,
Executive shall be eligible for an Incentive Bonus, targeted at forty-five
percent (45%) of his/her annual base salary. 
The Incentive Bonus amount will be based on a number of factors,
including but not limited to:  (1)

 

 

the
financial performance of the Company as determined and measured by the
Company’s Board of Directors, and (2) Executive’s achievement of management
targets and goals as set by the Company. 
Executive shall also be eligible, in addition to the percentage
described above, for an additional bonus of up to one hundred fifty thousand
dollars ($150,000) upon the successful completion of certain written strategic
goals specified annually by the Company’s Board of Directors (“Additional
Bonus”).  The Additional Bonus shall be
paid upon successful completion of the goals, and subsequent approval by the
Company’s Compensation Committee. The Incentive Bonus amount is intended to
reward contribution to the Company’s performance over an entire fiscal year,
and to encourage continuing contribution, and consequently will be paid only if
Executive is employed and in good standing at the time of bonus payments, which
generally occurs within ninety (90) days after the close of the Company’s
fiscal year.  Determination of the
amount of Incentive Bonus and Additional Bonus, or whether any bonus shall be
paid, shall be within the sole discretion of the Compensation Committee of the
Company’s Board of Directors.

 

C.            The Company shall
deduct and withhold from the compensation payable to Executive hereunder,
including the Incentive Bonus (if any), 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.

4.             Equity Participation.  

 

Pursuant
to the Company’s 2000 Stock Incentive Plan, Executive may have previously been
granted a specific number of options to purchase shares of the Company’s common
stock (the “Options”), with certain vesting schedules and exercise prices, and
except as specifically detailed herein, such grants remain in effect and are
not affected by this Agreement.

 

5.             Expense Reimbursement.

 

In
addition to the compensation specified in Section 3, Executive shall be
entitled, in accordance with the Company’s reimbursement policies in effect
from time to time, to receive reimbursement from the Company for reasonable
business expenses incurred by Executive in the performance of his/her duties
hereunder, provided Executive furnishes the Company with vouchers, receipts and
other details of such expenses in the form required by the Company sufficient
to substantiate a deduction for such business expenses under all applicable
rules and regulations of Federal and state taxing authorities.

 

6.             Fringe
Benefits.

 

A.            Executive shall, throughout the Employment
Period (after any applicable waiting period for new employees as specified in
Company policies), be eligible to participate in all group term life insurance plans,
group health plans, accidental death and dismemberment plans and short-term
disability programs and other Executive perquisites which are made available to
the Company’s Executives and for which Executive qualifies.  The Company’s

 

2

 

Employee
Handbook, copies of which Executive acknowledges were provided to Executive by
Company, set forth further information concerning these benefits.

 

B.            Executive shall earn vacation time during
the Employment Period at the rate of three (3) weeks per year. Vacation shall
accrue and be taken pursuant to the Company’s vacation benefit policy set forth
in the Company’s Employee/Team Member Handbook, up to a maximum accrual of 160
hours, or four (4) weeks, of unused vacation time.  Once this maximum accrual is reached, the accrual will stop until
Executive reduces the vacation balance by taking vacation time.

 

7.             Severance Pay for Exercise of the
At-Will Clause.

 

A.            Notwithstanding any of
the provisions of this Agreement, Executive’s employment with the Company is
“at will”, which means that it is not for a specific term and may be terminated
by either the Company or Executive at any time, for any reason or no reason,
without advance notice.  Similarly the
Company may change the terms and conditions of Executive’s employment at any
time, for any reason, without advance notice.

 

B.            Should
the Company terminate Executive’s employment for Cause (as defined in Section 9
below), or should Executive voluntarily resign (other than a resignation for
Good Reason (as defined in Section 8 below)), the Company shall have no
obligation to Executive under this Agreement other than for accrued but unpaid
salary and vacation time as of the date of termination.

 

C.            If the Company
terminates Executive’s employment other than for Cause, or if Executive resigns
for Good Reason, the Company shall pay to Executive (in either a lump sum or on
a bi-weekly basis, at the sole discretion of the Company) severance pay in the
amount equivalent to twelve (12) months of Executive’s Base Salary immediately
preceding such termination of Executive’s employment, and Company shall
also make a lump sum payment to Executive of an amount equivalent to the
payments necessary for continuation of Executive’s
health benefits for twelve (12)
months under COBRA (such payments collectively “Severance Compensation”).  Any election of coverage under COBRA will be
at Executive’s sole discretion and expense. 
Executive must comply with the terms and conditions of COBRA to establish
and maintain eligibility.  In the event
the provisions of this Section 7(C) are implemented, upon the payment of the
Severance Compensation and any accrued but unpaid salary and vacation
time as of the date of termination have been paid to Executive, the Company
shall have no further obligation to Executive under this Agreement.  The
Company shall not provide nor reimburse Executive for any supplemental
insurance products, including life insurance.

 

D.            The Company shall deduct and withhold from the Severance
Compensation 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.

 

3

 

8.             Good Reason.

 

For
Purposes of this Agreement, “Good Reason” shall mean any of the following
events or occurrences, provided that Executive first provides prompt written
notice to Company of the event or occurrence, and Company has not cured such
event or occurrence within fourteen (14) days of receipt of such notice:

 

A.            A material reduction
or alteration in the duties, responsibilities, status, reporting
responsibilities, title, or offices that Executive had with the Company
immediately before the reduction;

 

B.            A reduction by more
than 10% of the annual Base Salary that Executive was eligible to receive from
the Company and its affiliates immediately before the reduction, or any
cumulative reductions totaling more than 10% of the annual Base Salary of
Executive as the effective date of this Agreement;

 

C.            A Change in Control
after which the Executive is not offered the same or equivalent position at no
less than ninety percent (90%) of Executive’s Base Salary immediately preceding
such Change of Control;

 

D.            The failure of any
successor to the Company by merger, consolidation or acquisition of all or
substantially all of the business or assets of the Company to assume the
Company’s obligations under this Agreement; or

 

E.             A material breach by
the Company of its obligations under this Agreement.

 

9.             Cause.  

 

For
purposes of this Agreement, “Cause” shall mean a reasonable belief by the Board
of Directors (or any of the Executive’s supervisors) that Executive has engaged
in any one or more of the following: 
(i) financial dishonesty, including, without limitation, misappropriation
of a material or substantial quantity of Company funds or property, or any
attempt by Executive to secure any personal profit related to the business or
business opportunities of the Company without the informed, written approval of
the Company’s Board of Directors; (ii) gross insubordination; (iii) gross
negligence or reckless or willful misconduct in the performance of Executive’s
duties; (iv) misconduct which has a materially adverse effect upon the
Company’s business or reputation; (v) the conviction of, or plea of nolo
contendre to, any felony involving moral turpitude or fraud; (vi) the material
breach of any provision of this Agreement; (vii) a material violation of
Company policies including, without limitation, the Company’s policies on equal
employment opportunity and prohibition of unlawful harassment; or (viii) the
death or Disability of the Executive (as defined below).

 

10.           Failure to Render Service.

 

In the
event Executive fails for a period of 365 calendar days during any twelve-month
period, as a result of illness, incapacity, Disability (as defined below),
injury, or by reason of any statute law, ordinance, regulation, order, judgment
or decree, to render the services

 

4

 

contemplated
by this Agreement, Company, by written notice to Executive, may, to the extent
consistent with applicable law, suspend payment of any salary or other benefits
and/or terminate Executive’s employment without those benefits provided herein.  For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from this duties with the Company on a
full-time basis for 365 consecutive days as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or his/her legal representative (such agreement as to acceptability
not to be unreasonably withheld).

 

11.           Special Change In Control Provisions.

 

A.            For purposes of this Agreement,
“Change In Control” shall mean any of the following transactions or events
effecting a change in ownership or control of the Company:

 

(i)            a merger, consolidation or reorganization
approved by the Company’s stockholders, unless securities representing
more than fifty percent (50%) of the total combined voting power of the voting
securities of the successor company are immediately thereafter beneficially
owned, directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Company’s outstanding voting securities
immediately prior to such transaction, or

 

(ii)           any
stockholder-approved transfer or any other disposition of all or substantially
all of the Company’s assets, or

 

(iii)          the acquisition, directly or indirectly, by
any person or related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities pursuant to
a tender or exchange offer made directly to the Company’s stockholders, or

 

(iv)          a
change in the composition of the Board such that: (a) five (5) or more Board
members resign or are otherwise removed as Board members within any period of
six (6) consecutive months or less; or (b) five (5) or more Board members opt
not to stand for re-election to the Board within any period of six (6)
consecutive months or less; or (c) the authorized number of Board members is
increased or decreased by five (5) or more members within any period of six (6)
consecutive months or less; or (d) any combination of the foregoing Sections
11(A)(iv)(a-c) occurs, such that five (5) or more Board member positions are
affected by a combination of resignations/removals, the option not to stand for
re-election, or the increase/decrease of the authorized number of Board members
within any period of six (6) consecutive months or less.  As an example of the foregoing, and for
illustrative purposes only, in the event that two (2) Board members resign, one
(1) Board member opts not to stand for re-election, and the authorized number
of Board members is increased by two (2) positions, all of which

 

5

 

occur within any period of six (6) consecutive months
or less, a Change of Control will be deemed to have occurred.

 

B.            Change in Control Acceleration.
In the event of a of a Change in Control as described in Section 11(A)(iv)
herein, the Options, to the extent outstanding at the time of such Change in
Control, but not otherwise vested and exercisable for all the shares of Common
Stock subject to those Options will, immediately and automatically as of the
effective date of such Change in Control, vest and become exercisable for all
of the shares of Common Stock at the time subject to the Options and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock.  In the event of a Change of
Control other than that described in Section 11(A)(iv) herein, the Options
shall be governed by the terms of the Company’s 2000 Stock Incentive Plan.

 

D.            Termination or Resignation Following Change
in Control.  Following a
Change in Control, should Executive’s employment with the Company or successor
company terminate by reason of (i) a resignation for Good Reason within twelve
(12) months after a Change in Control, or (ii) an involuntary termination of
Executive’s employment (other than a termination for Cause) within twelve (12)
months after a Change in Control (“Involuntary Termination”), Executive will
become entitled to receive the severance benefits set forth herein, provided and only if Executive
executes and delivers to the Company or successor company a general release (in
form and substance substantially similar to that in Exhibit A hereto or such
other form as mutually agreed to by Executive and Company or successor
company).

 

12. Additional Restrictive Covenants.

 

A.            Executive acknowledges
and agrees that given the extent and nature of the confidential and proprietary
information he/she will obtain during the course of his/her employment with the
Company, it would be inevitable that such confidential information would be
disclosed or utilized by the Executive should he/she obtain employment from, or
otherwise become associated with, an entity or person that is engaged in a
business or enterprise that directly competes with the Company.  Consequently, if in any period during which
the Executive is receiving payments from the Company as a severance benefit,  including
but not limited to severance pay pursuant to Section 7, Executive shall,
without prior written consent of the Company’s Board of Directors, directly or
indirectly own, manage, operate, join, control or participate in the ownership,
management, operation or control of, or be employed by, render service to or be
connected in any manner with, any enterprise which is engaged in any business
directly competitive with that of the Company, then Company may, in its sole
discretion, permanently and/or temporarily cancel and/or suspend any remaining
severance payments to Executive. 
Cancellation or suspension of payments to Executive under this Section
12(A) shall not be deemed a breach of this Agreement by Company.  The provisions of this Section 12(A) 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 or other enterprise.

 

B.            During the Employment
Period, and for any additional period thereafter during which the
Executive is receiving payments from the Company as a severance benefit, including
but not limited to severance pay pursuant to Section 7, Executive
shall not encourage or solicit any of the Company’s employees to leave
the Company’s employ for any reason or

 

6

 

interfere
in any other manner with employment relationships at the time existing between
the Company and its employees.  In
addition, Executive shall not solicit, directly or indirectly, business from
any client of the Company, induce any of the Company’s clients to terminate
their existing business relationship with the Company or interfere in any other
manner with any existing business relationship between the Company and any
client or other third party.

 

C.            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/her 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.

 

13.           Proprietary
Information.

 

As a
condition of Executive’s employment with the Company, Executive will execute
(or has already executed) the Company’s standard Confidential Information and
Assignment of Inventions Agreement. 
Executive’s obligations pursuant to the Confidential Information and
Assignment of Inventions Agreement will survive termination of Executive’s
employment with the Company.

 

14.           Successors
and Assigns.

 

This
Agreement is personal in its nature and the Executive shall not assign or
transfer his/her rights under this Agreement. 
The provisions of this Agreement shall inure to the benefit of, and be
binding on each successor of the Company whether by merger, consolidation,
transfer of all or substantially all assets (whether or not such transaction
qualifies as a Change in Control) or otherwise and the heirs and legal
representatives of Executive.

 

15.           Notices.

 

Any
notices, demands or other communications required or desired to be given by any
party shall be in writing and shall be validly given to another party if served
either personally or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested.  If such notice, demand or other
communication shall be served personally, service shall be conclusively deemed
made at the time of such personal service. 
If such notice, demand or other communication is given by mail, such
notice shall be conclusively deemed given forty-eight (48) hours after the
deposit thereof in the United States mail addressed to the party to whom such
notice, demand or other communication is to be given as hereinafter set forth:

 

	
   

  	
  To the Company:

  
	
   

  
	
   

  	
  Human Resources
  Department

  
	
   

  	
  Specialty Laboratories,
  Inc.

  
	
   

  	
  2211 Michigan Avenue

  
	
   

  	
  Santa Monica,
  California 90404

  
			

 

7

 

To Executive at the current address as noted in
personnel file at Company.

 

Any party may change its address for the purpose of
receiving notices, demands and other communications by providing written notice
to the other party in the manner described in this Section.

 

16.           Governing
Documents.

 

This
Agreement along with the documents expressly referenced in this Agreement
constitute the entire agreement and understanding of the Company and Executive
with respect to the terms and conditions of Executive’s employment with the
Company and the payment of severance benefits and supersedes all prior and
contemporaneous written or verbal agreements and understandings between
Executive and the Company relating to such subject matter.  This Agreement may only be amended by
written instrument signed by Executive and an authorized officer of the
Company.  Any and all prior agreements,
understandings or representations relating to the Executive’s employment with
the Company are terminated and cancelled in their entirety and are of no
further force or effect.

 

17.           Governing
Law.

 

The
provisions of this Agreement will be construed and interpreted under the laws
of the State of California. If any provision of this Agreement as applied to
any party or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision shall in no way affect (to the maximum extent permissible by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this Agreement,
or the enforceability or invalidity of this Agreement as a whole.  Should any provision of this Agreement
become or be deemed invalid, illegal or unenforceable in any jurisdiction by
reason of the scope, extent or duration of its coverage, then such provision
shall be deemed amended to the extent necessary to conform to applicable law so
as to be valid and enforceable or, if such provision cannot be so amended
without materially altering the intention of the parties, then such provision
will be stricken and the remainder of this Agreement shall continue in full
force and effect.

 

18.           Remedies.

 

All
rights and remedies provided pursuant to this Agreement or by law shall be
cumulative, and no such right or remedy shall be exclusive of any other.  A party may pursue any one or more rights or
remedies hereunder or may seek damages or specific performance in the event of
another party’s breach hereunder or may pursue any other remedy by law or
equity, whether or not stated in this Agreement.

 

19.           Arbitration.

 

A.            Except as provided for
in Section 12(C), and to the fullest extent allowed by law, any controversy or
claim arising out of or relating to Executive’s employment with the Company or
anything set forth herein, shall be settled by final and binding arbitration,
conducted in Los Angeles County, by an arbitrator selected in accordance with
the procedure set forth

 

8

 

below.  Possible disputes covered by the foregoing,
include (without limitation) claims pursuant to Title VII of the Civil Rights
Act, the California Fair Employment and Housing Act and comparable statutes in
other states if applicable, the Americans with Disabilities Act,  the Age Discrimination in Employment Act,
and any other statutes relating to an employee’s relationship with his/her
employer. The Executive and the Company shall initially confer and attempt to
reach agreement on the individual to be appointed as the arbitrator.  If no agreement is reached, the Executive
and the Company shall request from the Judicial Arbitration and Mediation
Services (“JAMS”) a list of five (5) retired judges affiliated with JAMS. The
Executive and the Company shall each alternately strike names from such list
until only one (1) name remains, and such person shall thereby be selected as
the arbitrator.  Except as otherwise
provided for herein, such arbitration shall be conducted in conformity with the
procedures specified in the California Arbitration Act (Cal. C.C.P. §§ 1280 et
seq.).  The arbitrator shall
allow the discovery authorized by California Code of Civil Procedure section
1283.05 or any other discovery required by law in arbitration proceedings.  To the extent that anything in this
Agreement conflicts with the arbitration procedures required by applicable law,
the arbitration procedures required by applicable law shall govern.  The arbitrator shall issue a written award
that sets forth the essential findings and conclusions on which the award is
based.  The arbitrator shall have the
authority to award any relief authorized by law in connection with the asserted
claims or disputes.  The arbitrator’s
award shall be subject to correction, confirmation or vacation, as provided by
any applicable law setting forth the standard of judicial review of arbitration
awards.

 

B.            The Company shall bear
the entire cost of (i) the arbitrator’s fee, (ii) any other type of expense or
cost that the Executive would not be required to bear if the Executive were
free to bring the dispute or claim in court and (iii) any other expense or cost
that is unique to arbitration.  The
parties intend that this section describing arbitration shall be valid,
binding, enforceable and irrevocable and shall survive the termination of this
Agreement.  Any final decision of the
arbitrator so chosen may be enforced by a court of competent jurisdiction.  The Executive acknowledges and agrees that
he/she is waiving his/her right to a jury trial and agrees that the decision of
the arbitrator shall be final and binding. 
Each party shall pay its own costs and attorneys’ fees, if any.  However, if any party prevails on a
statutory claim which affords the prevailing party attorneys’ fees and costs,
the Arbitrator may award reasonable fees and costs to the prevailing
party.  Any dispute as to the reasonableness
of any fee or cost shall be resolved by the Arbitrator.

 

 

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REMINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

9

 

20.           No Waiver.

 

The
waiver by either party of a breach of any provision of this Agreement shall not
operate as or be construed as a waiver of any later breach of that provision.

 

21.           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.

 

	
   

  	
  SPECIALTY LABORATORIES,
  INC.

  
	
   

  
	
   

  
	
   

  	
  /s/ Douglas S.
  Harrington

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Douglas S.
  Harrington, M.D.

  	
   

  
	
   

  
	
   

  	
  Title:

  	
  Chief Executive
  Officer

  	
   

  
	
   

  
	
   

  	
  Date:

  	
  September 12,
  2003

  	
   

  
	
   

  
	
   

  
	
   

  	
  /s/ Frank J. Spina

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  
	
   

  	
  Date:

  	
  September 15,
  2003

  	
   

  
								

 

10

 

Exhibit A

Form of General Release

 

GENERAL RELEASE OF ALL
CLAIMS

 

This General Release of All Claims (“Agreement”) is
voluntarily entered into by «NAME» (“Executive”) 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
Executive’s employment with Specialty
and separation from employment. 
Executive and Specialty
agree:

 

 

1.                                                 Executive’s employment with Specialty will terminate/terminated
effective «TERMDATE».  On that date
Executive’s employment with Specialty
will/did automatically and immediately cease for all purposes except as
provided below.  Also on that date, the
Company will/did provide the Executive with a final paycheck which will include
payment for hours worked up through and including «TERMDATE», 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 Executive 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
Executive’s termination of employment, release, covenants and promises
contained herein, Specialty
agrees to provide Executive with the severance benefits provided for and
described in the Employment Agreement between Specialty and Executive
dated September 11, 2003.

 

3.                                                 In consideration of the above, Executive and Specialty waive, release and forever discharge
each other, et al, from all Claims that Executive 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 Executive’s employment with Specialty, the cessation of that
employment, any Claims for violation of Specialty’s
policies or procedures, 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.  Executive and Specialty further agree

 

11

 

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.

 

4.                                                 This Agreement is intended to be effective as
a bar to all Claims as stated in paragraph 3. 
Accordingly, Executive 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.”

 

Executive
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, Executive 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.  Executive and Specialty acknowledge that they understand the significance
and consequence of such release and such specific waiver of Section 1542.

 

5.                                                 Executive acknowledges and agrees he/she has
signed, or concurrent with this Agreement is signing, the “Agreement with
Respect to Confidential Information, Inventions and Works of Authorship”
(“Confidentiality Agreement”), which is fully incorporated herein by this
reference.  Executive warrants and
represents he/she 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 Executive under the
Confidentiality Agreement.

 

6.                                                 Executive acknowledges and agrees he/she 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, employee and representatives. 
The Company acknowledges and agrees that no member of Company senior
management will make disparaging or untrue remarks about Executive.

 

7.                                                 Executive agrees that upon termination of
employment with the Company, Executive will promptly transfer to the Company,
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 Executive’s possession or under Executive’s
control, whether or not such items were prepared by

 

12

 

Executive, which would not
be in the possession of the Executive except for the employment of the
Executive by the Company.

 

8.                                                 Executive
agrees not to disclose this Agreement or any of its terms to anyone except his
attorney, or tax advisor, if any.

 

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 Executive 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 Executive under
this Agreement.  Executive acknowledges
and agrees he/she has received all wages, bonuses, commissions, compensation
remuneration, and all other moneys due him/her arising out of, relating to or
resulting from his employment with Specialty,
including but not limited to all moneys due him/her under any and all benefit
plans established and/or maintained by Specialty.

 

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

 

12.                                           This Agreement is binding upon and inures to
the benefits of Executive’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.

 

13.                                           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.

 

14.                                           Executive fully understands, acknowledges and
agrees among the various rights and Claims he/she is waiving, releasing and
forever discharging by the execution of this Agreement are all rights and
Claims arising under the Federal Age Discrimination in Employment Act of 1967,
29 U.S.C. Section 621, et. seq. 
Executive further understands, acknowledges and agrees that:

 

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

 

b.          Executive
was given a copy of this Agreement on                                 ,
and informed that Executive has been given forty-five (45) days within which to
consider this Agreement;

 

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

 

13

 

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

 

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

 

f.          Executive
was informed that Executive 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/her having exercised his right of revocation; and

 

15.                                            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 herein and the surviving provisions of the Employment
Agreement.  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 Executive 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.

 

16.                                            Executive acknowledges and agrees that he/she
has been advised this Agreement is a final and binding legal document, that
he/she 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/she 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.

 

17.                                            Executive agrees to return all Company
property, including but not limited to all computer equipment, credit cards,
telephone equipment, and dictation equipment. 
Executive also agrees to provide a final reconciliation of all cash
advances, travel advances, along with incurred authorized expenses as
substantiated by appropriate receipts. 
Executive agrees that failure to return all Company property and/or
provide proper documentation to account for any outstanding travel or cash
advances within seven (7) days of Executive’s execution of this Agreement shall
make this Agreement null and void.

 

18.                                            Executive agrees that he/she will make
himself available at mutually agreeable times as requested by Specialty to use his best efforts to
cooperate with Specialty in any
litigation or government investigations or proceedings now pending or which may
later

 

14

 

arise in which Specialty requires or desires his
cooperation as a witness or otherwise.  Specialty will reimburse Executive for
reasonable travel and other out-of-pocket expenses incurred as a result of
providing such cooperation.  It is
understood that Executive’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.

 

19.                                            Any dispute or controversy between Executive,
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, 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 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 the
Confidentiality Agreement or any other confidentiality obligations owed to the
other party.  The provisions of this
Section 19 supercede and replace in their entirety any prior arbitration
agreement(s) that may exist between Executive and Specialty.

 

20.                                            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, 13, AND 14 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:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  «NAME»

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SPECIALTY
  LABORATORIES, INC.

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
							

 

15Exhibit
10.27

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT
AGREEMENT (the “Agreement”) is entered into as of September 11, 2003
by and between Specialty Laboratories, Inc., a California corporation (the
“Company”), and Dan R. Angress (“Executive”), and is effective upon execution
by the Executive and approval by the Compensation Committee of the Company’s
Board of Directors (the “Compensation Committee”).

 

1.             Duties
and Responsibilities.

 

A.            Executive shall serve as the Company’s
Vice-President, Marketing & Client Support or such other title or position
as may be designated from time to time by the Board of Directors.

 

B.            Executive agrees to devote his/her full
time and attention to the Company, to use his/her best efforts to advance the
business and welfare of the Company, to render his/her services under this
Agreement fully, faithfully, diligently, competently and to the best of his/her
ability, and not to engage in any other employment activities to the extent
such other employment interferes with the Company’s business or the performance
of the Executive’s duties hereunder.

 

C.            Executive shall be based at the Company’s
office located in Santa Monica, California (which the Company may move to
Valencia, California), but Executive may be required to travel to other
geographic locations in connection with the performance of his/her Executive
duties.

 

2.             Period
of Employment.

 

Executive’s
employment with the Company shall be governed by the provisions of this
Agreement for the period commencing September 11, 2003 and continuing until
this Agreement terminates pursuant to written notification by either the
Company or Executive, which notification may occur at any time for any reason
or no reason.  The period during which
the Executive provides services to the Company pursuant to this Agreement shall
be referenced in this Agreement as the “Employment Period.”

 

3.             Cash
Compensation.

 

A.            Executive’s base salary shall be payable in
accordance with the Company’s standard payroll schedule (“Base Salary”).  Executive’s compensation shall be subject to
periodic review by the Company, and may be increased or decreased in the
Company’s discretion with approval of the Compensation Committee.

 

B.            For each fiscal year during the Employment
Period, Executive shall be eligible for an incentive bonus in the Company’s
sole discretion (“Incentive Bonus”). 
For each full fiscal year of employment during the Employment Period,
Executive shall be eligible for an Incentive Bonus, targeted at forty-five percent
(45%) of his/her annual base salary. 
The Incentive Bonus amount will be based on a number of factors,
including but not limited to:  (1)

 

 

the
financial performance of the Company as determined and measured by the
Company’s Board of Directors, and (2) Executive’s achievement of management
targets and goals as set by the Company. 
The Incentive Bonus amount is intended to reward contribution to the
Company’s performance over an entire fiscal year, and to encourage continuing
contribution, and consequently will be paid only if Executive is employed and
in good standing at the time of bonus payments, which generally occurs within
ninety (90) days after the close of the Company’s fiscal year.  Determination of the amount of Incentive
Bonus, or whether any Incentive Bonus shall be paid, will be made in the
Company’s sole discretion.

 

C.            The Company shall deduct and withhold from
the compensation payable to Executive hereunder, including the Incentive Bonus
(if any), 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.

 

4.             Equity
Participation. 

 

Pursuant
to the Company’s 2000 Stock Incentive Plan, Executive may have previously been
granted a specific number of options to purchase shares of the Company’s common
stock (the “Options”), with certain vesting schedules and exercise prices, and
except as specifically detailed herein, such grants remain in effect and are
not affected by this Agreement.

 

5.             Expense
Reimbursement.

 

In
addition to the compensation specified in Section 3, Executive shall be
entitled, in accordance with the Company’s reimbursement policies in effect
from time to time, to receive reimbursement from the Company for reasonable
business expenses incurred by Executive in the performance of his/her duties
hereunder, provided Executive furnishes the Company with vouchers, receipts and
other details of such expenses in the form required by the Company sufficient
to substantiate a deduction for such business expenses under all applicable
rules and regulations of Federal and state taxing authorities.

 

6.             Fringe
Benefits.

 

A.            Executive shall, throughout the Employment
Period (after any applicable waiting period for new employees as specified in
Company policies), be eligible to participate in all group term life insurance
plans, group health plans, accidental death and dismemberment plans and
short-term disability programs and other Executive perquisites which are made
available to the Company’s Executives and for which Executive qualifies.  The Company’s Employee Handbook, copies of
which Executive acknowledges were provided to Executive by Company, set forth
further information concerning these benefits.

 

B.            Executive shall earn vacation time during
the Employment Period at the rate of three (3) weeks per year. Vacation shall
accrue and be taken pursuant to the Company’s vacation benefit policy set forth
in the Company’s Employee/Team Member Handbook, up to a maximum accrual of 160
hours, or four (4) weeks, of unused vacation time.  Once this maximum

 

2

 

accrual
is reached, the accrual will stop until Executive reduces the vacation balance
by taking vacation time.

 

7.             Severance Pay for Exercise of the
At-Will Clause.

 

A.            Notwithstanding any of
the provisions of this Agreement, Executive’s employment with the Company is
“at will”, which means that it is not for a specific term and may be terminated
by either the Company or Executive at any time, for any reason or no reason,
without advance notice.  Similarly the
Company may change the terms and conditions of Executive’s employment at any
time, for any reason, without advance notice.

 

B.            Should the Company
terminate Executive’s employment for Cause (as defined in Section 9 below), or
should Executive voluntarily resign (other than a resignation for Good Reason
(as defined in Section 8 below)), the Company shall have no obligation to
Executive under this Agreement other than for accrued but unpaid salary and
vacation time as of the date of termination.

 

C.            If the Company
terminates Executive’s employment other than for Cause, or if Executive resigns
for Good Reason, the Company shall pay to Executive (in either a lump sum or on
a bi-weekly basis, at the sole discretion of the Company) severance pay in the
amount equivalent to twelve (12) months of Executive’s Base Salary immediately
preceding such termination of Executive’s employment, and Company shall
also make a lump sum payment to Executive of an amount equivalent to the
payments necessary for continuation of Executive’s
health benefits for twelve (12) months
under COBRA (such payments collectively “Severance Compensation”).  Any election of coverage under COBRA will be
at Executive’s sole discretion and expense. 
Executive must comply with the terms and conditions of COBRA to establish
and maintain eligibility.  In the event
the provisions of this Section 7(C) are implemented, upon the payment of the
Severance Compensation and any accrued but unpaid salary and vacation
time as of the date of termination have been paid to Executive, the Company
shall have no further obligation to Executive under this Agreement.  The
Company shall not provide nor reimburse Executive for any supplemental
insurance products, including life insurance.

 

D.            The Company shall
deduct and withhold from the Severance Compensation 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.

 

8.             Good Reason.

 

For Purposes of this
Agreement, “Good Reason” shall mean any of the following events or occurrences,
provided that Executive first provides prompt written notice to Company of the
event or occurrence, and Company has not cured such event or occurrence within
fourteen (14) days of receipt of such notice:

 

3

 

A.            A material reduction
or alteration in the duties, responsibilities, status, reporting
responsibilities, title, or offices that Executive had with the Company
immediately before the reduction;

 

B.            A reduction by more
than 10% of the annual Base Salary that Executive was eligible to receive from
the Company and its affiliates immediately before the reduction, or any
cumulative reductions totaling more than 10% of the annual Base Salary of
Executive as the effective date of this Agreement;

 

C.            A Change in Control
after which the Executive is not offered the same or equivalent position at no
less than ninety percent (90%) of Executive’s Base Salary immediately preceding
such Change of Control;

 

D.            The failure of any
successor to the Company by merger, consolidation or acquisition of all or
substantially all of the business or assets of the Company to assume the
Company’s obligations under this Agreement; or

 

E.             A material breach by
the Company of its obligations under this Agreement.

 

9.             Cause. 

 

For purposes of this
Agreement, “Cause” shall mean a reasonable belief by the Board of Directors (or
any of the Executive’s supervisors) that Executive has engaged in any one or
more of the following:  (i) financial
dishonesty, including, without limitation, misappropriation of a material or
substantial quantity of Company funds or property, or any attempt by Executive
to secure any personal profit related to the business or business opportunities
of the Company without the informed, written approval of the Company’s Board of
Directors; (ii) gross insubordination; (iii) gross negligence or reckless or
willful misconduct in the performance of Executive’s duties; (iv) misconduct
which has a materially adverse effect upon the Company’s business or
reputation; (v) the conviction of, or plea of nolo contendre to, any felony
involving moral turpitude or fraud; (vi) the material breach of any provision
of this Agreement; (vii) a material violation of Company policies including,
without limitation, the Company’s policies on equal employment opportunity and
prohibition of unlawful harassment; or (viii) the death or Disability of the
Executive (as defined below).

 

10.           Failure to Render Service.

 

In the event Executive
fails for a period of 365 calendar days during any twelve-month period, as a
result of illness, incapacity, Disability (as defined below), injury, or by
reason of any statute law, ordinance, regulation, order, judgment or decree, to
render the services contemplated by this Agreement, Company, by written notice
to Executive, may, to the extent consistent with applicable law, suspend
payment of any salary or other benefits and/or terminate Executive’s employment
without those benefits provided herein. 
For purposes of this Agreement, “Disability” shall mean the absence of
the Executive from this duties with the Company on a full-time basis for 365
consecutive days as a result of incapacity due to mental or physical illness
which is determined to be total and permanent by a physician selected by the

 

4

 

Company or its insurers and acceptable to the Executive or his/her
legal representative (such agreement as to acceptability not to be unreasonably
withheld).

 

11.           Special Change In Control Provisions.

 

A.            For purposes of this
Agreement, “Change In Control” shall mean any of the following transactions or
events effecting a change in ownership or control of the Company:

 

(i)            a merger,
consolidation or reorganization approved by the Company’s stockholders, unless
securities representing more than fifty percent (50%) of the total combined
voting power of the voting securities of the successor company are immediately
thereafter beneficially owned, directly or indirectly and in substantially the
same proportion, by the persons who beneficially owned the Company’s
outstanding voting securities immediately prior to such transaction, or

 

(ii)           any stockholder-approved
transfer or any other disposition of all or substantially all of the Company’s
assets, or

 

(iii)          the acquisition, directly or indirectly, by
any person or related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company), of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities pursuant to
a tender or exchange offer made directly to the Company’s stockholders, or

 

(iv)          a change in the
composition of the Board such that: (a) five (5) or more Board members resign
or are otherwise removed as Board members within any period of six (6)
consecutive months or less; or (b) five (5) or more Board members opt not to
stand for re-election to the Board within any period of six (6) consecutive
months or less; or (c) the authorized number of Board members is increased or
decreased by five (5) or more members within any period of six (6) consecutive
months or less; or (d) any combination of the foregoing Sections 11(A)(iv)(a-c)
occurs, such that five (5) or more Board member positions are affected by a
combination of resignations/removals, the option not to stand for re-election,
or the increase/decrease of the authorized number of Board members within any
period of six (6) consecutive months or less. 
As an example of the foregoing, and for illustrative purposes only, in
the event that two (2) Board members resign, one (1) Board member opts not to
stand for re-election, and the authorized number of Board members is increased
by two (2) positions, all of which occur within any period of six (6)
consecutive months or less, a Change of Control will be deemed to have
occurred.

 

B.            Change in Control Acceleration.
In the event of a of a Change in Control as described in Section 11(A)(iv)
herein, the Options, to the extent outstanding at the time of such Change in
Control, but not otherwise vested and exercisable for all the shares of Common
Stock subject to those Options will, immediately and automatically as of the effective
date of

 

5

 

such
Change in Control, vest and become exercisable for all of the shares of Common
Stock at the time subject to the Options and may be exercised for any or all of
those shares as fully-vested shares of Common Stock.  In the event of a Change of Control other than that described in
Section 11(A)(iv) herein, the Options shall be governed by the terms of the
Company’s 2000 Stock Incentive Plan.

 

D.            Termination or Resignation Following
Change in Control.  Following
a Change in Control, should Executive’s employment with the Company or
successor company terminate by reason of (i) a resignation for Good Reason
within twelve (12) months after a Change in Control, or (ii) an involuntary
termination of Executive’s employment (other than a termination for Cause)
within twelve (12) months after a Change in Control (“Involuntary
Termination”), Executive will become entitled to receive the severance benefits
set forth herein, provided and only if Executive
executes and delivers to the Company or successor company a general release (in
form and substance substantially similar to that in Exhibit A hereto or such
other form as mutually agreed to by Executive and Company or successor
company).

 

12.
Additional Restrictive Covenants.

 

A.            Executive acknowledges
and agrees that given the extent and nature of the confidential and proprietary
information he/she will obtain during the course of his/her employment with the
Company, it would be inevitable that such confidential information would be
disclosed or utilized by the Executive should he/she obtain employment from, or
otherwise become associated with, an entity or person that is engaged in a
business or enterprise that directly competes with the Company.  Consequently, if in any period during which
the Executive is receiving payments from the Company as a severance benefit,  including
but not limited to severance pay pursuant to Section 7, Executive shall,
without prior written consent of the Company’s Board of Directors, directly or
indirectly own, manage, operate, join, control or participate in the ownership,
management, operation or control of, or be employed by, render service to or be
connected in any manner with, any enterprise which is engaged in any business
directly competitive with that of the Company, then Company may, in its sole
discretion, permanently and/or temporarily cancel and/or suspend any remaining
severance payments to Executive. 
Cancellation or suspension of payments to Executive under this Section
12(A) shall not be deemed a breach of this Agreement by Company.  The provisions of this Section 12(A) 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 or other enterprise.

 

B.            During
the Employment Period, and for any additional period thereafter during
which the Executive is receiving payments from the Company as a severance
benefit, including
but not limited to severance pay pursuant to Section 7, Executive
shall not encourage or solicit any of the Company’s employees to leave
the Company’s employ for any reason or interfere in any other manner with
employment relationships at the time existing between the Company and its
employees.  In addition, Executive shall
not solicit, directly or indirectly, business from any client of the Company,
induce any of the Company’s clients to terminate their existing business
relationship with the Company or interfere in any other manner with any existing
business relationship between the Company and any client or other third party.

 

6

 

C.            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/her 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.

 

13.           Proprietary
Information.

 

As a condition of
Executive’s employment with the Company, Executive will execute (or has already
executed) the Company’s standard Confidential Information and Assignment of
Inventions Agreement.  Executive’s
obligations pursuant to the Confidential Information and Assignment of
Inventions Agreement will survive termination of Executive’s employment with
the Company.

 

14.           Successors
and Assigns.

 

This
Agreement is personal in its nature and the Executive shall not assign or
transfer his/her rights under this Agreement. 
The provisions of this Agreement shall inure to the benefit of, and be
binding on each successor of the Company whether by merger, consolidation,
transfer of all or substantially all assets (whether or not such transaction
qualifies as a Change in Control) or otherwise and the heirs and legal
representatives of Executive.

 

15.           Notices.

 

Any notices, demands or
other communications required or desired to be given by any party shall be in
writing and shall be validly given to another party if served either personally
or if deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested.  If
such notice, demand or other communication shall be served personally, service
shall be conclusively deemed made at the time of such personal service.  If such notice, demand or other
communication is given by mail, such notice shall be conclusively deemed given
forty-eight (48) hours after the deposit thereof in the United States mail
addressed to the party to whom such notice, demand or other communication is to
be given as hereinafter set forth:

 

	
   

  	
  To the Company:

  
	
   

  
	
   

  	
  Human Resources
  Department

  
	
   

  	
  Specialty Laboratories,
  Inc.

  
	
   

  	
  2211 Michigan Avenue

  
	
   

  	
  Santa Monica,
  California 90404

  
	
   

  	
   

  
	
   

  	
  To Executive at the
  current address as noted in personnel file at Company.

  
				

 

Any party may change its address for the purpose of
receiving notices, demands and other communications by providing written notice
to the other party in the manner described in this Section.

 

7

 

16.           Governing
Documents.

 

This
Agreement along with the documents expressly referenced in this Agreement
constitute the entire agreement and understanding of the Company and Executive
with respect to the terms and conditions of Executive’s employment with the
Company and the payment of severance benefits and supersedes all prior and
contemporaneous written or verbal agreements and understandings between
Executive and the Company relating to such subject matter.  This Agreement may only be amended by
written instrument signed by Executive and an authorized officer of the
Company.  Any and all prior agreements,
understandings or representations relating to the Executive’s employment with
the Company are terminated and cancelled in their entirety and are of no
further force or effect.

 

17.           Governing
Law.

 

The
provisions of this Agreement will be construed and interpreted under the laws
of the State of California. If any provision of this Agreement as applied to
any party or to any circumstance should be adjudged by a court of competent
jurisdiction to be void or unenforceable for any reason, the invalidity of that
provision shall in no way affect (to the maximum extent permissible by law) the
application of such provision under circumstances different from those
adjudicated by the court, the application of any other provision of this Agreement,
or the enforceability or invalidity of this Agreement as a whole.  Should any provision of this Agreement
become or be deemed invalid, illegal or unenforceable in any jurisdiction by
reason of the scope, extent or duration of its coverage, then such provision
shall be deemed amended to the extent necessary to conform to applicable law so
as to be valid and enforceable or, if such provision cannot be so amended
without materially altering the intention of the parties, then such provision
will be stricken and the remainder of this Agreement shall continue in full
force and effect.

 

18.           Remedies.

 

All
rights and remedies provided pursuant to this Agreement or by law shall be
cumulative, and no such right or remedy shall be exclusive of any other.  A party may pursue any one or more rights or
remedies hereunder or may seek damages or specific performance in the event of
another party’s breach hereunder or may pursue any other remedy by law or
equity, whether or not stated in this Agreement.

 

19.           Arbitration.

 

A.            Except as provided for
in Section 12(C), and to the fullest extent allowed by law, any controversy or
claim arising out of or relating to Executive’s employment with the Company or
anything set forth herein, shall be settled by final and binding arbitration,
conducted in Los Angeles County, by an arbitrator selected in accordance with
the procedure set forth below.  Possible
disputes covered by the foregoing, include (without limitation) claims pursuant
to Title VII of the Civil Rights Act, the California Fair Employment and
Housing Act and comparable statutes in other states if applicable, the
Americans with Disabilities Act,  the
Age Discrimination in Employment Act, and any other statutes relating to an employee’s
relationship with his/her employer. The Executive and the Company shall
initially confer and attempt to

 

8

 

reach
agreement on the individual to be appointed as the arbitrator.  If no agreement is reached, the Executive
and the Company shall request from the Judicial Arbitration and Mediation
Services (“JAMS”) a list of five (5) retired judges affiliated with JAMS. The
Executive and the Company shall each alternately strike names from such list
until only one (1) name remains, and such person shall thereby be selected as
the arbitrator.  Except as otherwise
provided for herein, such arbitration shall be conducted in conformity with the
procedures specified in the California Arbitration Act (Cal. C.C.P. §§ 1280 et
seq.).  The arbitrator shall allow
the discovery authorized by California Code of Civil Procedure section 1283.05
or any other discovery required by law in arbitration proceedings.  To the extent that anything in this
Agreement conflicts with the arbitration procedures required by applicable law,
the arbitration procedures required by applicable law shall govern.  The arbitrator shall issue a written award
that sets forth the essential findings and conclusions on which the award is
based.  The arbitrator shall have the
authority to award any relief authorized by law in connection with the asserted
claims or disputes.  The arbitrator’s
award shall be subject to correction, confirmation or vacation, as provided by
any applicable law setting forth the standard of judicial review of arbitration
awards.

 

B.            The Company shall bear
the entire cost of (i) the arbitrator’s fee, (ii) any other type of expense or
cost that the Executive would not be required to bear if the Executive were
free to bring the dispute or claim in court and (iii) any other expense or cost
that is unique to arbitration.  The
parties intend that this section describing arbitration shall be valid,
binding, enforceable and irrevocable and shall survive the termination of this
Agreement.  Any final decision of the
arbitrator so chosen may be enforced by a court of competent jurisdiction.  The Executive acknowledges and agrees that
he/she is waiving his/her right to a jury trial and agrees that the decision of
the arbitrator shall be final and binding. 
Each party shall pay its own costs and attorneys’ fees, if any.  However, if any party prevails on a
statutory claim which affords the prevailing party attorneys’ fees and costs,
the Arbitrator may award reasonable fees and costs to the prevailing
party.  Any dispute as to the reasonableness
of any fee or cost shall be resolved by the Arbitrator.

 

 

[THE
REMINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

9

 

20.           No Waiver.

 

The
waiver by either party of a breach of any provision of this Agreement shall not
operate as or be construed as a waiver of any later breach of that provision.

 

21.           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.

 

	
   

  	
  SPECIALTY LABORATORIES,
  INC.

  
	
   

  
	
   

  
	
   

  	
  /s/ Douglas S.
  Harrington

  	
   

  
	
   

  
	
   

  	
  By:

  	
  Douglas S.
  Harrington, M.D.

  	
   

  
	
   

  
	
   

  	
  Title:

  	
  Chief Executive
  Officer

  	
   

  
	
   

  
	
   

  	
  Date:

  	
  September 12,
  2003

  	
   

  
	
   

  
	
   

  
	
   

  	
  /s/ Dan R. Angress

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  
	
   

  	
  Date:

  	
  September 18,
  2003

  	
   

  
								

 

10

 

Exhibit A

Form of General Release

 

GENERAL RELEASE OF ALL
CLAIMS

 

This General Release of All
Claims (“Agreement”) is voluntarily entered into by «NAME» (“Executive”) 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 Executive’s employment with Specialty
and separation from employment. 
Executive and Specialty
agree:

 

1.                       Executive’s employment with Specialty will terminate/terminated
effective «TERMDATE».  On that date
Executive’s employment with Specialty
will/did automatically and immediately cease for all purposes except as
provided below.  Also on that date, the
Company will/did provide the Executive with a final paycheck which will include
payment for hours worked up through and including «TERMDATE», 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 Executive 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
Executive’s termination of employment, release, covenants and promises
contained herein, Specialty
agrees to provide Executive with the severance benefits provided for and
described in the Employment Agreement between Specialty and Executive
dated September 11, 2003.

 

3.                       In consideration of the above, Executive and Specialty waive, release and forever
discharge each other, et al, from all Claims that Executive 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 Executive’s employment
with Specialty, the cessation of
that employment, any Claims for violation of Specialty’s
policies or procedures, 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.  Executive and Specialty further agree

 

11

 

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.

 

4.                       This Agreement is intended to be effective as
a bar to all Claims as stated in paragraph 3. 
Accordingly, Executive 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.”

 

Executive
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, Executive 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.  Executive and Specialty acknowledge that they understand the significance
and consequence of such release and such specific waiver of Section 1542.

 

5.                         Executive acknowledges and agrees he/she has
signed, or concurrent with this Agreement is signing, the “Agreement with
Respect to Confidential Information, Inventions and Works of Authorship”
(“Confidentiality Agreement”), which is fully incorporated herein by this
reference.  Executive warrants and
represents he/she 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 Executive under the
Confidentiality Agreement.

 

6.                         Executive acknowledges and agrees he/she 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, employee and representatives. 
The Company acknowledges and agrees that no member of Company senior
management will make disparaging or untrue remarks about Executive.

 

7.                         Executive agrees that upon termination of
employment with the Company, Executive will promptly transfer to the Company,
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 Executive’s possession or under Executive’s
control, whether or not such items were prepared by

 

12

 

Executive,
which would not be in the possession of the Executive except for the employment
of the Executive by the Company.

 

8.                         Executive agrees not to disclose this
Agreement or any of its terms to anyone except his attorney, or tax advisor, if
any.

 

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 Executive 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 Executive under
this Agreement.  Executive acknowledges
and agrees he/she has received all wages, bonuses, commissions, compensation
remuneration, and all other moneys due him/her arising out of, relating to or
resulting from his employment with Specialty,
including but not limited to all moneys due him/her under any and all benefit
plans established and/or maintained by Specialty.

 

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

 

12.                       This Agreement is binding upon and inures to
the benefits of Executive’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.

 

13.                       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.

 

14.                       Executive fully understands, acknowledges and
agrees among the various rights and Claims he/she is waiving, releasing and
forever discharging by the execution of this Agreement are all rights and
Claims arising under the Federal Age Discrimination in Employment Act of 1967,
29 U.S.C. Section 621, et. seq. 
Executive further understands, acknowledges and agrees that:

 

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

 

b.                Executive was given a copy of this Agreement
on                               , and informed that Executive has been given
forty-five (45) days within which to consider this Agreement;

 

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

 

13

 

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

 

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

 

f.                 Executive was informed that Executive 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/her having
exercised his right of revocation; and

 

15.                        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 herein and the surviving provisions of the Employment
Agreement.  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 Executive 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.

 

16.                        Executive acknowledges and agrees that he/she
has been advised this Agreement is a final and binding legal document, that
he/she 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/she 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.

 

17.                        Executive agrees to return all Company
property, including but not limited to all computer equipment, credit cards,
telephone equipment, and dictation equipment. 
Executive also agrees to provide a final reconciliation of all cash
advances, travel advances, along with incurred authorized expenses as
substantiated by appropriate receipts. 
Executive agrees that failure to return all Company property and/or provide
proper documentation to account for any outstanding travel or cash advances
within seven (7) days of Executive’s execution of this Agreement shall make
this Agreement null and void.

 

18.                        Executive agrees that he/she will make
himself available at mutually agreeable times as requested by Specialty to use his best efforts to
cooperate with Specialty in any
litigation or government investigations or proceedings now pending or which may
later

 

14

 

arise
in which Specialty requires or
desires his cooperation as a witness or otherwise.  Specialty will
reimburse Executive for reasonable travel and other out-of-pocket expenses
incurred as a result of providing such cooperation.  It is understood that Executive’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.

 

19.                        Any dispute or controversy between Executive,
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, 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 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 the
Confidentiality Agreement or any other confidentiality obligations owed to the
other party.  The provisions of this
Section 19 supercede and replace in their entirety any prior arbitration
agreement(s) that may exist between Executive and Specialty.

 

20.                        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, 13, AND 14 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:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  «NAME»

  
	
   

  
	
   

  
	
   

  	
  SPECIALTY
  LABORATORIES, INC.

  
	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
						

 

15

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