Exhibit C
CHANGE-OF-CONTROL AGREEMENT
AGREEMENT by and between DIANON SYSTEMS, INC., a Delaware Corporation
(the "Company"), and XXXXXXXXXXX X. XXXXXX (the "Executive"), dated as of the
___ day of April 2000.
The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its stockholders to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below).
The Board believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the Executive's full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations. Therefore,
in order to accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Accrued Obligations" shall mean (i) the Executive's base salary
through the Date of Termination (as defined below) to the extent not
theretofore paid, (ii) the Executive's annual bonus for the most recently
completed fiscal year to the extent not theretofore paid and (iii) payment
of any compensation previously deferred by the Executive (together with
any accrued interest thereon) and not yet paid by the Company and any
accrued vacation pay not yet paid by the Company as of the Date of
Termination.
(b) "Annual Base Salary" shall mean the highest annualized (for any
fiscal year consisting of less than twelve full months or with respect to
which the Executive has been employed by the Company for less than twelve
full months) base salary paid or payable to the Executive by the Company
and its affiliated companies in respect of the three fiscal years
immediately preceding the fiscal year in which the Effective Date occurs.
(c) "Annual Bonus" shall mean the amount of any bonus awarded under
the Company's management incentive compensation program for the fiscal
year preceding the Effective Date.
(d) "Change of Control Period" shall mean the period commencing on
the Effective Date and ending on the second anniversary of such date.
(e) "Effective Date" shall mean the date on which a Change of
Control
occurs; provided that the Executive is employed on that date.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) any acquisition or series of acquisitions, other than from the
Company, by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of 50% or more of either the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities"),
provided, however, that (A) any acquisition by the Company or any of its
subsidiaries, or (B) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
subsidiaries, shall not constitute a Change of Control; or
(b) individuals who as of April __, 2000, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any individual becoming a director subsequent to April __,
2000, whose election, or nomination for election, by the Company's
stockholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual was a member of the Incumbent Board; or
(c) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company, or of the sale or other
disposition of all or substantially all of the assets of the Company, or
of a reorganization, merger or consolidation of the Company, in each case,
with respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation beneficially own, directly or
indirectly, more than 60% of the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such reorganization, merger or
consolidation.
3. TERMINATION OF EMPLOYMENT.
(a) CAUSE. The Company may terminate the Executive's employment
during the Change of Control Period for "Cause." For purposes of this
Agreement, "Cause" means Executive's (i) gross negligence, (ii)
insubordination, or (iii) willful misconduct.
(b) GOOD REASON. The Executive's employment may be terminated
during
the Change of Control Period by the Executive for "Good Reason." For
purposes of this Agreement, "Good Reason" means
(i) the assignment to the Executive of any responsibilities or
duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities at any time during the 90-day
period immediately preceding the Effective Date, or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of
written notice thereof given by the Executive;
(ii) any failure by the Company to continue paying any
compensation or providing any benefits which the Executive was
entitled to receive during the 90-day period immediately preceding
the Effective Date, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied
by the Company promptly after receipt of written notice thereof
given by the Executive;
(iii) the Company requiring the Executive to be based at any
office or location other than the location where the Executive was
employed immediately preceding the Effective Date or any office or
location more than 10 miles from such location or, requiring the
Executive to travel away from his or her office in the course of
discharging responsibilities or duties in a manner which is
inappropriate for the performance of the Executive's duties
hereunder and which is significantly more frequent (in terms of
either consecutive days or aggregate days in any calendar year) than
was required prior to the Change of Control;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(v) any failure by any successor to the Company to comply with
and satisfy Section 12(c) of this Agreement, provided that such
successor has received at least ten (10) days prior written notice
from the Company or the Executive of the requirements of Section
12(c) of this Agreement.
For the purposes of this Section 3(b), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
(c) NOTICE OF TERMINATION. Any termination by the Company for Cause
or by the Executive for Good Reason shall be communicated by "Notice of
Termination" to the other party hereto given in accordance with Section
13(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen days after the giving of such
notice). The failure by the Executive or the Company to set forth in
the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause, as the case may be, shall not
waive any right of the Executive or the Company hereunder or preclude
the Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(d) DATE OF TERMINATION. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that if the Executive's employment
is terminated by the Company other than for Cause, the Date of Termination
shall be the date on which the Company notifies the Executive of such
termination.
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) CAUSE. If the Executive's employment shall be terminated for
Cause during the Change of Control Period, this Agreement shall terminate
without further obligations to the Executive other than the obligation to
pay to the Executive the Accrued Obligations through the Date of
Termination. If the Executive terminates employment during the Change of
Control Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive, other than
for Accrued Obligations. In such case, all Accrued Obligations shall be
paid to the Executive at the option of the Company, either (x) in a lump
sum in cash within 30 days of the Date of Termination, or (y) in twelve
equal consecutive monthly installments, with the first installment to be
paid within 30 days of the Date of Termination.
(b) GOOD REASON. If, during the Change of Control Period, the
Company shall terminate the Executive's employment other than for Cause,
or the Executive shall terminate employment under this Agreement for Good
Reason:
(i) the Company shall pay to the Executive the sum of the
following amounts in a one lump sum in cash payment within 30 days
of the Date of Termination.
A. all Accrued Obligations; and
B. 75% of the Executive's Annual Base Salary; and
C. 75% of the Executive's Annual Bonus; and
(ii) on the Date of Termination, the Executive and the Company
will enter into a mutually acceptable consulting agreement pursuant
to which the Executive will act as a consultant to the Company, as
reasonably requested by the Company, for a period of one year from
the Date of Termination, but in no event
more than six days per month; and
(iii) the Company shall pay the Executive up to $10,000 for
executive outplacement services utilized by the Executive upon the
receipt by the Company of written receipts or other appropriate
documentation; and
(iv) for one year following the Date Of Termination, or such
longer period as any plan, program, practice or policy may provide,
the Company shall continue benefits to the Executive and, where
applicable, the Executive's family at least equal to those which
would have been provided to them in accordance with the plans,
programs, practices and policies provided by the Company and its
affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and
programs) during the 90-day period immediately preceding the
Effective Date; provided, however, that if the Executive becomes
employed elsewhere during the one year period following the Date of
Termination and is thereby afforded comparable insurance and welfare
benefits, the Company's obligation to continue providing the
Executive with such benefits shall cease or be correspondingly
reduced, as the case may be; and
(v) All outstanding stock options held by the Executive
pursuant to any Company stock option plan shall immediately become
vested and exercisable as to all or any part of the shares covered
thereby, with the Executive being able to exercise his or her stock
options within a period of three months following the Date of
Termination or such longer period as may be permitted under
Executive's stock option agreements.
The amounts required to be paid under this Section 4(b) shall be reduced by any
other amount of severance (i.e., relating solely to salary or bonus continuation
or actual or deemed pension or insurance continuation) received by the Executive
upon such termination of employment under any severance plan, policy or
arrangement of the Company applicable to the Executive or a group of employees
of the Company, including the Executive, and applicable without regard to the
occurrence of a Change of Control prior to such termination of employment. The
amounts payable to the Executive pursuant to this Agreement will not be subject
to any requirement of mitigation, nor, except as specifically set forth herein,
will they be offset or otherwise reduced by reason of the Executive's receipt of
compensation from any source other than the Company.
5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement.
6. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder, except as provided in the last sentence of Section 4(b), shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement. The Company agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the Executive may
reasonably incur, including the costs and expenses of any arbitration
proceeding, as a result of any contest (regardless of the outcome thereof) by
the Company or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any content by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2) of the
Internal Revenue Code of 1986, as amended (the "Code"); provided that the
Executive's claim is not determined by a court of competent jurisdiction or an
arbitrator to be frivolous or otherwise entirely without merit.
7. RELEASE. Upon fulfillment of the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder, the Executive fully and unconditionally releases and discharges all
claims and causes of action which the Executive or his or her heirs, personal
representatives, successors, or assigns ever had, now have, or hereafter may
have against the Company and any of its affiliated companies on account of any
claims and causes of action arising out of or relating to this Agreement, any
other document relating hereto or delivered in connection with the transactions
contemplated hereby.
8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) If the Executive is to receive any payment or benefit under this
Agreement, any other agreement between the Company and Executive or any
employee benefit plan maintained by the Company (the "Payments") which is
payment or benefit subject to the excise tax imposed by Section 4999 of
the Code, or any successor or similar provision of the Code (the "Excise
Tax"), the Company shall pay the Executive an additional cash amount (the
"Gross-Up") such that the net amount retained by the Executive after the
payment of any Excise Tax on the Payments and the federal income tax and
Excise Tax on any amounts paid under this section shall be equal to the
Payments. The Gross-Up shall not include the amount of state or federal
income tax owed by the Executive on the amount of the Payments, excluding
any state or federal income tax on the Gross-Up.
(b) For purposes of determining the Gross-Up, the Executive shall be
deemed to pay the federal income tax at the highest marginal rate of
taxation (currently 39.6%) in the calendar year in which the payment to
which the Gross-Up applies is to be made. The determination of whether
such Excise Tax is payable and the amount thereof shall be made upon the
opinion of tax counsel selected by the Company and reasonably acceptable
to the Executive. The Gross-Up, if any, that is due as a result of such
determination shall be paid to the Executive in cash in a lump sum payment
within [30 days] of such computation. If such opinion is not finally
accepted by the Internal
Revenue Service, upon audit or otherwise, then appropriate adjustments
shall be computed (without interest, but with Gross-Up, if applicable)
by such tax counsel based upon the final amount of the Excise Tax so
determined. Any additional amount due the Executive as a result of
such adjustment shall be paid to the Executive by the Company in cash
in a lump sum payment within [30 days] of such computation, or any
amount due the Company as a result of such adjustment shall be paid to
the Company by the Executive in cash in a lump sum payment within [30
days] of such computation.
9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies and
their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In addition, to the extent that the
Executive is a party to any other agreement relating to confidential
information, inventions or similar matters with the Company, the Executive shall
continue to comply with the provisions of such agreements. In no event shall an
asserted violation of the provisions of this Section constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
10. PUBLIC ANNOUNCEMENTS. The Executive shall consult with the Company
before issuing any press release or otherwise making any public statement with
respect to the Company or any of its affiliated companies, this Agreement or the
transactions contemplated hereby, and the Executive shall not issue any such
press release or make any such public statement without the prior written
approval of the Company, except as may be required by applicable law, rule or
regulation or any self regulatory agency requirements, in which event the
Company shall have the right to review and comment upon any such press release
or public statement prior to its issuance.
11. ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall be determined and
settled by arbitration to be held in New York City pursuant to the labor rules
of the American Arbitration Association or any successor organization. Any award
rendered thereunder shall be final, conclusive and binding on the parties.
Subject to the provisions of Section 8 hereof, each party shall pay one-half of
all costs and expenses of any arbitration proceeding brought pursuant to this
Section, and each party shall pay its own attorneys' fees and expenses.
12. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as herein defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
13. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Xxxxxxxxxxx X. Xxxxxx
00 Xxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
If to the Company:
Dianon Systems, Inc.
000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
(ATTN: General Counsel)
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof in any particular instance shall not
be deemed to be a waiver of such provision or any other provision thereof.
IN WITNESS WHEREOF, the Executive has hereunto set his or her hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first stated above.
DIANON Systems, Inc.
/s/ Xxxxxxxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
------------------------- -------------------------
Xxxxxxxxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxxx
President and CEO
-------------------------
Title:
