EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of September 1, 2000 by
and between Specialty Laboratories, Inc., a California Company (the "Company"),
and Xxxxx X. Xxxxx M.D., Ph.D. ("Executive"), and is effective upon approval of
the Compensation Committee of The Board of Directors.
1. DUTIES AND RESPONSIBILITIES.
A. Executive shall serve as the Company's Chairman and Chief Executive
Officer or such other title or position as may be designated from time to time
by the Company's Board of Directors.
B. Executive agrees to devote his full time and attention to the
Company, to use his best efforts to advance the business and welfare of the
Company, to render his services under this Agreement fully, faithfully,
diligently, competently and to the best of his ability, and not to engage in any
other employment activities.
C. Executive shall be based at the Company's office located in Santa
Monica, California, but Executive shall be required to travel to other
geographic locations in connection with the performance of his Executive duties.
2. PERIOD OF EMPLOYMENT.
A. Executive's employment with the Company shall be governed by the
provisions of this Agreement for the period commencing September 1, 2000 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. 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."
B. During the first five (5) years of this Agreement, if Executive is
terminated other than for Cause or if he resigns for Good Reason, he shall be
entitled to the payments and other benefits, set forth in Paragraphs 3,5 and 6
of this Agreement.
3. CASH COMPENSATION.
A. Executive's initial Base Salary shall be Six Hundred Thousand
Dollars ($600,000) per year payable in accordance with the Company's standard
payroll schedule. Executive's compensation shall be subject to periodic review
by the Company, and may be increased or decreased in the Company's discretion.
B. For each fiscal year during the Employment Period, Executive shall
be eligible for an incentive bonus in the Company's sole discretion. For each
full fiscal year of employment, Executive shall be eligible for an incentive
bonus of up to eighty (80%) of his annual base salary. During the first year of
employment, Executive shall be eligible for a pro rata portion of the incentive
bonus. The bonus amount will be based on the following factors: (1) the
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financial performance of the Company as determined and measured by the Company's
Board of Directors. (2) Executive's achievement of management targets and goals
as set by the Company. The bonus amount is intended to reward contribution to
the Company's performance over an entire fiscal year, and on the basis of
continuing, cumulative 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 45 days after the close of the Company's fiscal year.
Bonus determinations will be made in the Company's sole discretion.
C. The Company shall deduct and withhold from the compensation payable
to Executive hereunder any and all applicable Federal, State and Local income
and employment withholding taxes and any other amounts required or authorized by
Executive to be deducted or withheld by the Company under applicable statutes,
regulations, ordinances or orders governing or requiring the withholding or
deduction of amounts otherwise payable as compensation or wages to employees.
4. EXPENSE REIMBURSEMENT.
In addition to the compensation specified in Paragraph 3, Executive
shall be entitled, in accordance with the 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 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.
5. FRINGE BENEFITS.
A. Executive shall, throughout the Employment Period, 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. Please refer to the Company's Employee
Handbook and Summary Plan Descriptions for further information concerning these
benefits. Additionally, upon submission of appropriate documentation, Executive
shall be entitled to be reimbursed for supplemental insurance products including
life insurance at a cost of up to an additional Fifty thousand Dollars ($50,000)
per year.
B. Executive shall earn vacation time during the Employment Period at
the rate of six weeks per year. Vacation shall accrue and be taken pursuant to
the Company's vacation benefit policy set forth in the Company's Employee
Handbook.
C. Company will provide a leased vehicle with operating expenses,
whose payments will not exceed $800 per month.
D. Company will pay for up to three memberships including annual dues
in clubs of Executives choice.
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E. Company will provide Executive with a cash bonus on the last
business day of each calendar year equal to (i) the Federal and State income and
employment tax liability incurred for that year as a result of the income
attributable to the club memberships, automobile expenses, and life insurance
coverage provided Executive pursuant to paragraphs 5A and 5D of this Agreement
(estimated to be at the rate of 39.5% Federal, 6% State and 1.45% Medicare) plus
(ii) an additional amount equal to (A) the clause (i) amount divided by 0.53,
where the combined Federal and State income and employment tax rate is 47% or
(B) the clause (i) amount divided by 1 minus Executive's actual combined Federal
and State income and employment tax rate for the year of the bonus payment. As a
result, the bonus payment will cover Executive's total tax liability so that
Executive will not incur any out-of-pocket tax cost with respect to the club
memberships, supplemental insurance, and fringe benefits.
6. SEVERANCE PAY FOR EXERCISE OF THE AT-WILL CLAUSE.
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 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.
Should the Company terminate Executive's employment for Cause, as
defined below, or should Executive voluntarily resign other than for Good
Reason, the Company shall have no obligation to Executive under this Agreement
other than for accrued but unpaid salary and vacation as of the date of
termination. Should the Company terminate Executive's employment other than for
Cause during the first five years of this Agreement, or should Executive resign
for Good Reason, the Company shall have no further obligation under this
Agreement, except that the Company will continue to pay Executive's base salary
for a two year period, (less, if applicable, any long-term disability payments)
and the Incentive Bonus for a one year period following termination of
Executive's employment on the normal payroll dates.
7. GOOD REASON.
For Purposes of this agreement, "Good Reason" shall mean:
A. A material reduction 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 total annual cash compensation
(defined as Base Salary and Incentive Bonus) that Executive was eligible to
receive from the Company and its affiliates immediately before the reduction,
except a reduction that is part of, and consistent with, an across-the-board
reduction in the salaries of senior officers of the Company.
C. A change in control in which the Executive is not offered a similar
portion at no less than ninety percent (90%) of Executive's last total
compensation (defined as Base Salary plus Incentive Bonus of eighty percent
(80%).
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D. The failure of any successor to the Company by merger,
consolidation or acquisition of all or substantially all of the business of the
Company to assume the Company's obligations under this Agreement.
F. A material breach by the Company of its obligations under this
Agreement.
8. CAUSE.
For purposes of this Agreement, "Cause" shall mean a reasonable belief
by the Board of Directors that Executive has engaged in any one of the
following: (i) financial dishonesty, including, without limitation,
misappropriation of 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)
refusal to comply with reasonable directives of The Board of Directors; (iii)
negligence or reckless or willful misconduct in the performance of Executive's
duties; (iv) failure to perform, or continuing neglect in the performance of,
duties assigned to Executive; (v) misconduct which has a materially adverse
effect upon the Company's business or reputation; (vi) the conviction of, or
plea of nolo contendre to, any felony or a misdemeanor involving moral turpitude
or fraud; (vii) the material breach of any provision of this Agreement; (viii)
violation of Company policies including, without limitation, the Company's
policies on equal employment opportunity and prohibition of unlawful harassment;
(ix) death of the Executive; or (x) a disability which continues for a period in
excess of 365 days. A termination as a result of a Change in Control shall not
constitute cause.
9. CHANGE IN CONTROL.
For purposes of this Agreement "Change In Control" shall mean any of
the following transactions 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 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 0000 Xxx) 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.
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In no event, however, shall a Change in Control be deemed to occur in
connection with any public offering of the Common Stock.
10. RESTRICTIVE COVENANTS.
During the Employment Period:
(i) Executive shall devote Executive's full time and energy
solely and exclusively to the performance of Executive's duties
described herein, except during periods of illness or vacation
periods.
(ii) Executive shall not directly or indirectly provide
services to or through any person, firm or other entity except the
Company, unless otherwise authorized by the Board in writing.
(iii) Executive shall not render any services of any kind or
character for Executive's own account or for any other person, firm or
entity without first obtaining the Company's written consent.
Executive, however, shall have the right to perform such incidental services as
are necessary in connection with (a) Executive's private passive investments,
but only if Executive is not obligated or required to (and shall not in fact)
devote any managerial efforts which interfere with the services required to be
performed by him, or (b) Executive's charitable or community activities, or
participation in trade or professional organizations, or Boards, but only if
such incidental services do not interfere with the performance of Executive's
services to the Company.
11. NON-COMPETITION DURING THE EMPLOYMENT PERIOD.
Executive acknowledges and agrees that given the extent and nature of
the confidential and proprietary information he will obtain during the course of
his employment with the Company, it would be inevitable that such confidential
information would be disclosed or utilized by the Executive should he 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, during any period for which Executive is receiving payments from
the Company, either as wages or as a severance benefit, including but not
limited to severance pay pursuant xxx paragraph 6, Executive shall not, 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 or connected in any
manner with, any enterprise which is engaged in any business competitive with or
similar to that of the Company; provided, however, that such restriction shall
not apply to any passive investment representing an interest of less than two
percent (2%) of an outstanding class of publicly-traded securities of any
Company or other enterprise which is not, at the time of such investment,
engaged in a business competitive with the Company's business.
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12. NON-SOLICITATION.
During the Employment Period and for one (1) year following
termination of Executive's employment, 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.
Executive acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
his breach of the foregoing restrictive covenants. Accordingly, in the event of
any such breach, the Company shall, in addition to the termination of this
Agreement and any remedies available to the Company at law, be entitled to
obtain equitable relief in the form of an injunction precluding Executive from
continuing such breach.
13. PROPRIETARY INFORMATION.
As a condition precedent to Executive's employment with the Company,
Executive will execute the Company's standard Confidential Information and
Assignment of Inventions Agreement attached hereto as Exhibit A. 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 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, 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.
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0000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000-0000
To Executive:
Xxxxx X. Xxxxx, M.D., Ph.D.
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 paragraph.
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
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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.
Executive and the Company shall separately execute an Arbitration
Agreement in the form attached hereto as Exhibit B which, among other things
shall provide for arbitration of all claims which arise out of Executive's
employment under the terms of this Agreement. This Arbitration Agreement will
survive the termination of Executive's employment with the company.
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.
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By: Xxxxxxx X. Xxxxxxxxxx, M.D.
Title: Chairman, Compensation Committee of
The Board of Directors
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Xxxxx X. Xxxxx, M.D., Ph.D.
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