SENIOR EXECUTIVE AGREEMENT

 

Executive to re-locate his place of employment to the Company’s headquarters, Executive shall be entitled to reimbursement and/or compensation for certain costs and expenses incurred in connection with such relocation, as negotiated by Executive and the Company.

 

(b)           Salary, Bonus and Benefits.

 

(i)            Salary and Bonus.  During the Service Term, the Company will pay Executive a base salary (the “Annual Base Salary”) as the Board (or Compensation Committee thereof) may designate from time to time, at the rate of not less than $200,000 per annum; provided, however, that the Annual Base Salary shall be subject to review annually (at the end of each fiscal year of the Company) by the Board (or Compensation Committee thereof) for upward increases thereto.  Executive will be eligible to receive an annual bonus in an amount of up to 100% of Executive’s Annual Base Salary for such fiscal year, as determined by the Compensation Committee of the Board based upon the following:  Promptly following the Start Date and at the beginning of each fiscal year of the Company that commences during the Service Term, the COO and Executive shall cooperate with each other in good faith to determine plan targets (the “Financial Targets”), which shall be a combination of targets for revenue, gross profit and operating margin of the Company’s U.S. Lab Support operations.  The Financial Targets shall be subject to approval by the Compensation Committee of the Board.  Executive shall be entitled to a bonus of up to 50% of the Annual Base Salary if the Financial Targets, as approved by the Compensation Committee, are met.  Executive shall be eligible for an additional bonus of up to 50% of the Annual Base Salary (thereby making the total bonus opportunity 100% of the Annual Base Salary), which may be awarded in the discretion of the COO in consultation with the Compensation Committee, and shall be based upon over-achievement of the Financial Targets and/or accomplishment of key operating objectives determined by the COO.   With respect to fiscal year 2004, Executive shall be entitled to the foregoing bonus pro rated based upon the number of days remaining in the fiscal year from and after the Start Date; provided, that Executive shall be entitled to a minimum bonus of $50,000 for fiscal year 2004, which shall be due and payable to Executive on or prior to March 30, 2005.  Executive’s bonus hereunder, if any, in any subsequent year shall be due and payable to Executive prior to March 30 of the following fiscal year.

 

(ii)           Benefits.  Executive shall be entitled to the benefits set forth in this Section 1(b)(ii) during the Service Term, but only during the Service Term unless explicitly provided to the contrary.  Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company.  In addition, the Executive and/or the Executive’s family shall be entitled to participate and shall

 

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receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans) to the extent and on the same basis applicable generally to other peer executives of the Company.  In the event that Executive is not eligible to participate in any of the Company’s welfare benefit plans as of the Start Date, the Company shall reimburse Executive for any payments Executive is required to make to his former employer to continue his participation in each of such employer’s welfare benefit plans, until such time as Executive is eligible to participate in the analogous welfare benefit plan of the Company; provided, however, that Executive shall be entitled to such reimbursement only (a) so long as his eligibility for the Company’s welfare benefit plans relates to his time of service with the Company, and (b) upon presentation of reasonably acceptable documentation and evidence of payment; and provided further that “analogous” shall relate to the subject matter covered by such plan (e.g., medical or dental) and shall not be construed to require the provision to Executive of identical or substantially equivalent benefits to those provided by the former employer’s plans.  Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements.  Such travel reimbursement shall apply to Executive’s travel to and from the Company’s headquarters in Calabasas, California, for so long as Executive’s primary place of business is outside of Calabasas, California.  In addition, Executive will receive a car allowance of $450 per month, which allowance may be used in Executive’s discretion toward lease or financing payments, maintenance and/or other car-related expenses.  Executive shall also be eligible to receive four weeks paid vacation per annum.

 

(iii)         Stock Options.

 

(A)          On the Start Date, Executive shall receive a non-qualified stock option grant for the purchase of 75,000 shares of the common stock of the Company (the “Common Stock”).  Such option shall (i) have an exercise price of the fair market value of the Common Stock on the date of grant, as determined in accordance with the Company’s Restated 1987 Stock Option Plan (the “Stock Plan”); (ii) vest over a four-year period with 25% vesting on the first anniversary of the date of grant and monthly thereafter at the rate of 1/36^th of the remainder of the grant (subject to accelerated vesting upon a change of control or permanent disability to the extent permitted by the Stock Plan); and (iii) expire not later than the tenth anniversary of the date of grant.

 

(B)           The other terms and conditions of the foregoing option shall be set in accordance with the Stock Plan and shall be consistent with the terms contained in stock option agreements provided to other peer executives of the Company.

 

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(iv)          Change of Control; Sale of Division.  Executive shall be entitled to participate in the Company’s existing Change of Control Severance Plan as well as any successor plan thereto. In the event the Company sells the Division to a third party, Executive shall be entitled to a lump-sum payment equal to the then applicable Annual Base Salary ($200,000 as of the Start Date), which payment shall (A) be made within 30 days following the closing of the sale of the Division, and (B) be in lieu of any other severance or similar payment to which Executive may be entitled as a result of such sale or Executive’s termination of employment with the Company in connection therewith, unless such other payment is (or payments in the aggregate are) greater than the then applicable Annual Base Salary, or unless Executive otherwise elects in his sole discretion to receive such other payment(s), in either of which cases Executive shall be entitled to such other payment(s) but not the lump-sum payment provided by this Section 1(b)(iv).

 

(c)           Termination.

 

(i)            Events of Termination.  Executive’s employment with the Company shall cease upon:

 

(A)          Executive’s death.

 

(B)           Executive’s voluntary retirement.

 

(C)           Executive’s permanent disability, which means his incapacity due to physical or mental illness such that he is unable to perform the essential functions of his previously assigned duties for a period of six months in any twelve month period and such permanent incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the Board in good faith based on competent medical advice in the event that the Company does not maintain disability insurance on Executive.

 

(D)          Termination by the Company by the delivery to Executive of a written notice from the Board, the CEO or the COO that Executive has been terminated (“Notice of Termination”) with or without Cause.  “Cause” shall mean:

 

(1)           Executive’s (aa) conviction of a felony; (bb) Executive’s commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executive’s misappropriation of material funds or assets of the Company for personal use; or (dd) Executive’s engagement in unlawful harassment or other

 

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discrimination with respect to the employees of the Company or its Subsidiaries;

 

(2)           Executive’s continued substantial and repeated neglect of his duties, after written notice thereof from the Board, the CEO or the COO, and such neglect has not been cured within 30 days after Executive receives notice thereof;

 

(3)           Executive’s gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company; or

 

(4)           Executive’s engaging in conduct constituting a breach of Sections 2 or 3 hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after notice of default thereof, from the Company, as determined by a court of law.

 

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in Section 1(f) shall constitute a termination by the Company without Cause unless such notice fulfills the requirements of Section 1(c)(i)(D)(1), (2), (3) or (4) above.

 

(E)           Executive’s voluntary resignation for whatever reason by the delivery to the Company and the Board of at least 14 days’ prior written notice from Executive (or 90 days in the case of notice to the Company that Executive does not intend to renew this Agreement as provided in Section 1(f)).

 

(ii)           Date of Termination.  “Date of Termination” means (A) if the employment is terminated for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be; (B) if the employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination; (C) if the employment is terminated by the Executive’s resignation, the Date of Termination shall be the date which is fourteen days following the date on which the Company receives notice of such resignation; (D) if the Executive’s employment is terminated by reason of death or disability, the Date of Termination shall be the date of death or the disability effective date, as the case may be; or (E) if either the Company or the Executive delivers a notice under Section 1(f) indicating that it or he is not renewing the Service Term, the Date of Termination shall be the last day of the then-current Service Term.

 

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(iii)         Rights on Termination.

 

(A)          In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(c)(i)(D) above), the Company will continue, for a period of six (6) months commencing on the Date of Termination (the “Severance Period”), to pay Executive a monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.  During the Severance Period, the Company will also pay for Executive’s existing Company insurance coverage.  The payments of Annual Base Salary and insurance premiums in accordance with this Section 1(c)(iii)(A) are collectively referred to as “Severance Payments”. This Section 1(c)(iii)(A) shall not apply unless the Company and Executive have executed a general release in a form acceptable to the Company.  In addition, the Company will pay to Executive in a lump sum any accrued but unused vacation time.

 

(B)           If the Company terminates Executive’s employment for Cause, or if Executive resigns for whatever reason (including by the Executive’s non-renewal of the Service Term under Section 1(f) below), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all stock options held by Executive will cease effective as of the Date of Termination.  In such event, Executive’s rights under stock options vested prior to the Date of Termination shall not be affected, except to the extent that Executive’s termination of employment accelerates the termination of such stock options.  Executive’s right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

 

(C)           If Executive’s employment terminates because of Executive’s death or permanent disability, then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any  “key man” life insurance policy) paid for by the Company.  In addition, if such death or disability occurs while Executive is employed hereunder, for a period of six (6) months commencing on the date of such death or such disability is established, Executive or his estate shall be entitled to payment of his monthly or bi-weekly portion of the Annual Base Salary on regular salary payment dates.

 

Notwithstanding the foregoing, the Company’s obligation to Executive for severance pay or other rights under subparagraphs (A) or (B) above (the “Severance Pay”) shall cease if Executive is found by a court of law to be in material violation of the provisions of Sections 2 or 3 hereof.  Until

 

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such time as Executive has received all of his Severance Payments, he will be entitled to continue to receive any health, life, accident and disability insurance benefits provided by the Company to Executive under this Agreement.

 

(d)           Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to Section 1(c)(iii)(A) above and the benefits pursuant to the second sentence of Section 1(c)(iii)(C) above shall cease if Executive becomes employed as a senior executive by a third party.  Executive shall be under no obligation to seek or accept any employment during the Severance Period.

 

(e)           Liquidated Damages. The parties acknowledge and agree that damages which may result to Executive for termination by the Company without Cause would be extremely difficult or impossible to establish or prove, and agree that the Severance Pay shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination.  Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

 

(f)            Term of Employment.  Unless Executive’s employment under this Agreement is sooner terminated as a result of Executive’s termination in accordance with the provisions of Section 1(c) above, Executive’s employment under this Agreement shall commence on the Start Date and shall terminate on the second anniversary thereof (the “Service Term”); provided, however, that Executive’s employment under this Agreement, and the Service Term, shall be automatically renewed for additional one-year periods commencing on such second anniversary and, thereafter, on each successive anniversary of such date unless either the Company or Executive notifies the other party in writing at least ninety (90) days prior to any such anniversary that it or he desires not to renew Executive’s employment under this Agreement.  All references herein to “Service Term” shall include any renewals thereof after the second anniversary of the Start Date.

 

2.             Confidential Information; Proprietary Information, etc.

 

(a)           Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed