EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT ("Agreement") made and entered into as
of the 1st day of May, 1999, by and between DIANON Systems, Inc., a Delaware
corporation ("DIANON"), and Ralph M. Richart, M.D. ("Richart").
RECITALS:
WHEREAS, DIANON has acquired substantially all of the assets and business
of Kyto Meridien Diagnostics, L.L.C., a New York limited liability company
("Kyto Meridien"), pursuant to the terms of an Asset Purchase Agreement dated as
of April 7, 1999, by and among DIANON, Kyto Meridien, Kyto Diagnostics, L.P.,
Meridien Diagnostics Labs, Inc., Richart and A. Bruce Shapiro (the "Asset
Purchase Agreement"); and
WHEREAS, DIANON desires to employ Richart for a period commencing as of
the Closing Date ("Closing Date") of the Asset Purchase Agreement and ending
three years from that date and Richart desires to work for DIANON for such
period on the terms and conditions hereinafter provided; and
WHEREAS, Richart's position with Kyto Meridien has given him access to and
familiarity with the confidential information and business of Kyto Meridien
acquired by DIANON and his employment with DIANON will give him access to and
familiarity with the confidential information and business of DIANON; and
WHEREAS, DIANON would be irreparably harmed if Richart should disclose any
of the confidential information which Richart has acquired and will acquire or
by entering into any activity competing with DIANON or the business of Kyto
Meridien acquired by DIANON.
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions of this Agreement, Richart and DIANON agree as follows:
1. EMPLOYMENT. DIANON hereby employs Richart for the term of this
Agreement as specified in Section 3, below. Richart's duties shall include: (i)
service, for a period of one year from and after the Closing Date, as statutory
Laboratory Director at the laboratory facility acquired by DIANON from Kyto
Meridien located at 216 Congers Road in New City, New York, provided, however,
that Richart's responsibilities in that regard shall be no greater in terms of
quantity or substance than those held at Kyto Meridien during the one year
period immediately preceding the Closing Date and provided further that he shall
not, except to the extent required by law or regulation, have responsibility for
the day-to-day oversight or management of the laboratory; (ii) for a period of
at least six months from and after the Closing Date, performance of a volume of
surgical and anatomic pathology and cytology examinations and diagnoses
consistent with his workload while employed by Kyto Meridien and, thereafter, at
a reduced volume as mutually agreed; (iii) while serving as Laboratory Director,
performance of all requirements of a laboratory director specified under CLIA,
New York State law and other federal, state and local laws, rules and
regulations; (iv) occasional rendering of decisions on significant medical
matters and other matters materially impacting on medical decisions; (v)
rendering, as needed, professional advice to clients, as well as written and
telephonic responses to client inquiries regarding test results or other medical
inquiries; (vi) preparing client communications and newsletters on medical and
laboratory issues; (vii) upon mutual agreement, attendance and delivery of
presentations at professional meetings and conferences as DIANON's
representative; and (vii) such other tasks and assignments that are mutually
agreed to at the request of the senior management of DIANON.
It is expressly agreed and understood that the above duties shall be
performed by Richart on a good faith basis subject to an academic and travel
schedule commensurate with his schedule in the one year immediately preceding
the Closing Date. Under no circumstances shall the performance of any duties
herein exceed those performed by Richart during the one year immediately
preceding the Closing Date in quantity or substance and, further, except as
required by law or regulation, such performance does not require Richart's
on-site presence other than on an incidental basis. DIANON further agrees to
make reasonable efforts to ensure that, during the term of this Agreement, there
will be adequate personnel and consultants available to assist and support
Richart in the performance of his duties hereunder.
During his employment Richart shall at all times conduct himself and
perform his professional services in a proficient and professional manner, in
accordance with the applicable standards of care and the highest standards of
ethics of the medical profession.
2. COMPENSATION. As full consideration for the services rendered by
Richart pursuant to this Agreement, together with Richart's undertakings
pertaining to the preservation of confidential information and the restrictive
covenant set forth, respectively, in Sections 4 and 5 below, DIANON shall,
during the term of this Agreement, compensate Richart as follows:
(a) DIANON shall pay Richart an annualized salary of two hundred
thousand ($200,000) dollars, payable in twenty-six equal biweekly (one every two
weeks) increments, of seven thousand six hundred ninety-two dollars and
thirty-one cents ($7,692.31);
(b) DIANON shall reimburse the reasonable business expenses of
Richart in performing his duties hereunder in accordance with such policies
regarding employee expenses as DIANON may have in effect from time to time
during the term;
(c) DIANON shall provide Richart with an automobile allowance
of five hundred and sixty-nine ($569) dollars per month;
(d) Richart shall be eligible for such other employee benefits as
are generally provided by DIANON to its employees subject to the terms and
conditions, including eligibility conditions, of any applicable employee benefit
plan or program; provided that, during the period of employee conversion, as
determined by DIANON consistent with the requirements of the Asset Purchase
Agreement, Richart shall be entitled to such Kyto Meridien benefits that are
required by the Asset Purchase Agreement to be extended to all Kyto Meridien
employees hired by DIANON.
(e) Upon termination of employment, Richart may, at his own cost
and in accordance with the requirements of COBRA, extend his employee insurance
benefits.
2
3. TERM. Unless sooner terminated in accordance with Section 9 below,
the term of this Agreement and Richart's employment shall commence on the
Closing Date of the Asset Purchase Agreement and end on the third anniversary
thereof.
4. CONFIDENTIAL INFORMATION. From and after the date hereof, Richart
will not, directly or indirectly, use for his own benefit or purposes, or
disclose to, or use for the benefit or purpose of any person or entity other
than DIANON, any confidential information, knowledge or data relating to the
business or operations of DIANON or those acquired by DIANON from Kyto Meridien.
Such information, knowledge or data includes, but is not limited to, secret or
confidential matters not published or generally known in the industry, such as
information regarding pricing, costs, purchasing, profits, financing, markets,
sales or customer lists, future developments, audits, investigations,
enforcement actions, regulatory compliance, laboratory procedures and marketing
and expansion plans. Any and all materials which may be produced or created by
Richart or others, or which may come into his possession in the course of his
employment, or which relate in any manner to the business or prospective
business of DIANON are and shall be the exclusive property of DIANON and Richart
shall not have any right, title or interest in any such materials. Upon
termination of his employment, Richart shall not have the right to remove any
such materials from the offices of DIANON and shall promptly return to DIANON
all things of whatever nature that belong to DIANON, including all materials and
records in any form, format or medium containing or related to the confidential
information of DIANON, and he shall neither make nor retain any part or copy
thereof for his personal use or the use of third parties.
Notwithstanding the foregoing, confidential information shall not
include any information that is: (i) demonstrably developed independently by
Richart; (ii) publicly disclosed by DIANON or otherwise in the public domain
without violation of this Agreement by Richart; or (iii) rightfully received by
Richart from a third party, which, by disclosing to Richart, does not breach any
obligation or duty to DIANON. Notwithstanding this Section 4, Richart may make
such disclosures of confidential information as are duly compelled by court
order or as required by law.
5. RESTRICTIVE COVENANT. In consideration of this Agreement and the
purchase of the assets and business of Kyto Meridien by DIANON, for a period of
three years from and after the Closing Date and for any renewal period or
extension of the term hereof, and notwithstanding any earlier termination of
this Agreement, except upon the express written consent of DIANON (which consent
may be unreasonably withheld), Richart shall not, for his own account, on behalf
of, or jointly with, any other person, directly or indirectly, own, manage,
operate, join, control, finance, invest in, perform services for, advise (or
advise others with respect to), or otherwise participate in, or be connected
with, or become or act as a partner, manager, member, director, officer,
employee, consultant, representative or agent of any business (other than
DIANON), individual, partnership, firm, proprietorship, professional practice,
corporation, limited liability company or other entity that provides clinical
laboratory or anatomic or surgical pathology services within a one hundred and
fifty mile radius of New York City; provided however, that Richart may purchase
or own, solely as an inactive investor, the securities of any entity that are
publicly traded on a national securities exchange where Richart's aggregate
holdings of such securities do not exceed two percent of the voting power or of
any class of stock of such entity.
3
Notwithstanding anything to the contrary herein, Richart may continue: (i)
in his academic post at the Columbia College of Physicians and Surgeons; (ii) in
his position as the Associate Director of Obstetrical and Gynecological
Pathology and Cytology at Columbia Presbyterian Medical Center; and (iii) to
participate, from time to time, as a consultant in research studies (but not
clinical trials) relating to clinical and surgical pathology, provided that
Richart shall not act as a consultant in research studies for any medical
laboratory.
In addition to the foregoing, during the same three-year period and
for any renewal period or extension of the term hereof, Richart shall not, on
his own behalf, or on behalf of any other person or entity: (i) solicit the
customers, suppliers or employees of DIANON or any affiliated entity; (ii)
solicit or seek to hire any employee of DIANON or any affiliated entity; or
(iii) attempt in any manner, directly or indirectly, to influence, induce or
encourage any such employee to leave the employment of DIANON or any affiliated
entity. Richart shall not take any action intended, or which may reasonably be
expected, directly or indirectly, to impair the goodwill, reputation or good
name of DIANON or Kyto Meridien, or otherwise to be detrimental to the interests
of DIANON, including any action intended, or which may reasonably be expected,
directly or indirectly to benefit a competitor of DIANON.
6. SCOPE OF RESTRICTIONS. Richart agrees that the restrictions set
forth in Section 5 are reasonable. If, however, a court determines that any
provision of Section 5 is unreasonable, either in geographic scope, length of
time or otherwise, then Section 5 shall be interpreted and enforced to the
maximum extent permitted by law and Richart consents and agrees that such scope
may be judicially modified accordingly in any proceeding brought to enforce such
restriction.
7. INJUNCTIVE RELIEF. Richart acknowledges that irreparable harm would
be suffered by DIANON in the event that any of the provisions of Sections 4 or 5
were not performed fully in accordance with the terms specified therein and that
monetary damages are an inadequate remedy for breach thereof because of the
difficulty of ascertaining and quantifying the amount of damage that will be
suffered by DIANON in the event that such undertakings and provisions were
breached or violated. Accordingly, Richart agrees that DIANON shall be entitled
to an injunction or injunctions to restrain, enjoin and prevent breaches or
threatened breaches of the covenants, undertakings and provisions of those
sections and to enforce specifically the provisions therein in any court of the
United States or any state having jurisdiction over the matter, it being
understood that any such remedies shall be in addition to, and not in lieu of,
any other rights and remedies available at law or in equity and shall not be
deemed exclusive of any common law or other rights of DIANON in connection with
the matters covered hereby.
8. INTELLECTUAL PROPERTY RIGHTS. Richart agrees to assign, and hereby
does assign to DIANON all of his right, title and interest in and to all
inventions, improvements, discoveries and technical developments, whether or not
patentable, which he solely or jointly with others, may conceive or reduce to
practice during the term of his employment, which are related, in whole or in
part, directly or indirectly, to the business of, or services or products of the
type, provided by DIANON, or which may reasonably be provided or used by DIANON,
or which are otherwise developed, in whole or in part, at DIANON's expense.
Richart shall disclose promptly to DIANON's Chief Executive Officer, all
such ideas, discoveries and improvements conceived by him alone or in
collaboration with others, and shall
4
cooperate fully with DIANON both during and after employment, with respect to
the procurement of patents for the establishment and maintenance of DIANON's
rights and interests in said inventions, improvements, discoveries or
developments, and shall sign all papers which DIANON may reasonably deem
necessary or desirable for the purpose of vesting it with such rights.
9. TERMINATION. (a) Richart's employment under this Agreement
shall terminate on the occurrence of any of the following events:
(i) Upon the disqualification of Richart to practice medicine
in the State of New York;
(ii) Upon the disqualification of Richart, or his failure to
maintain all necessary licenses and certifications, to serve as a laboratory
director in the State of New York, while serving as a Laboratory Director for
DIANON;
(iii) Upon the death of Richart;
(iv) Upon the passage of thirty (30) days after written notice of
termination without cause from DIANON to Richart;
(v) Upon the sending of written notice from DIANON describing the
activities constituting an act of default falling within any one or more of the
following categories:
(A) Richart's breach of any material promise or agreement
set forth herein, including, without limitation, those
set forth in Sections 4, 5 and 8 above, or failure to
perform substantially all of the duties reasonably
required by Section 1; or
(B) Richart's commission of an act of gross negligence or
willful misconduct in the performance of his duties or
obligations hereunder or an act of negligence in the
performance of a medical function;
Provided that no such termination under this subsection 9(a)(v) shall be
effective unless Richart has first been afforded an opportunity to correct the
alleged default, but such default continues, recurs or can not otherwise be
corrected, in the good faith judgment of DIANON, within thirty days after
delivery of such written notice of default to Richart; and
(vi) Upon the occurrence of an event or the commission of an act
under which Richart is or may become subject to mandatory or permissive
exclusion from Medicare and State health care programs, including those set
forth in sections 1128, 1156 and 1892 of the Social security Act and any
regulations promulgated thereunder.
(b) In the event of a termination of this Agreement pursuant to
subsections 9(a)(iii) or 9(a)(iv) above, DIANON shall continue to pay the
compensation required by subsections 2(a) and 2(c) above until the third
anniversary of the Closing Date of the Asset Purchase Agreement.
5
(c) Sections 4, 5, 6, 7, 11, 13 and 14 of this Agreement shall, in
accordance with their terms, survive any termination or expiration of this
Agreement, whether any such termination be with or without cause or expiration
occurs with the passage of time. Without limitation, no termination or
expiration of this Agreement shall relieve Richart of his obligations to DIANON
with respect to the restrictive covenant in Section 5 and the preservation of
confidential information under Section 4. Should Richart violate any of the
requirements of Sections 4 or 5 of this Agreement, DIANON may, in addition to
any other remedies provided to DIANON under this Agreement, the Asset Purchase
Agreement, at law or in equity, immediately terminate any further
post-termination payments to Richart hereunder that otherwise may have been
required.
10. WAIVER. The failure of either party at any time to require
performance by the other party of any provision hereof shall not affect in any
way the full right to require such performance at any time thereafter, nor shall
a waiver by either party of a breach of any provision hereof be taken or held to
be a waiver of the provision itself.
11. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, by nationally recognized overnight delivery service, or
mailed by certified or registered mail, postage prepaid, and addressed as
follows:
If to Richart: Ralph M. Richart, M.D.
350 Shore Drive
Oakdale, New York 11769
with a copy to: Brown Raysman Millstein Felder & Steiner LLP
120 West 45th Street
New York, New York 10036
Attn: Sarah Hewitt, Esq.
If to DIANON: DIANON Systems, Inc.
200 Watson Boulevard
Stratford, Connecticut 06497
Attn: President
12. ENTIRE AGREEMENT. This Agreement and the Asset Purchase Agreement
set forth the entire agreement and understanding of the parties concerning the
subject matter hereof. This Agreement may be amended only by a written
instrument signed by both parties, which instrument must make specific reference
to this Agreement and the intention to modify it.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to the
conflicts of laws provisions of that state.
14. INDEMNIFICATION. DIANON shall protect, defend, hold harmless and
indemnify Richart from and against all losses, claims, actions, suits,
proceedings, investigations,
6
demands, liabilities, judgments, settlements, damages, costs and expenses
(including reasonable legal fees and costs) which are asserted against or
incurred by Richart as a result of, or which arise out of, Richart's performance
of his duties within the scope of his employment with DIANON, all in accordance
with the May 15, 1997 resolution of the DIANON Board of Directors pertaining to
indemnification of physicians employed by it, a copy of which is attached
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
first above written.
/s/ Ralph M. Richart
--------------------
Ralph M. Richart, M.D.
DIANON SYSTEMS, INC.
/s/ Kevin J. Johnson
--------------------
By: Kevin J. Johnson
Its: President & CEO
7