EXECUTIVE EMPLOYMENT AGREEMENT
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AGREEMENT, dated as of 9/1/96, by and between DIANON Systems,
Inc., a Delaware corporation having offices at 200 Watson Boulevard, Stratford,
Connecticut 06497 (the "Company"), and James B. Amberson, whose residence is 18
Tubbs Spring Court, Weston, Connecticut 06883 (the "Executive").
The Company's Board of Directors (the "Board") considers the
continued services of key executives of the Company to be in the best interest
of the Company and its stockholders.
The Board desires to assure, and has determined that it is
appropriate and in the best interests of the Company and its stockholders to
reinforce and encourage, the continued attention and dedication of key
executives of the Company to their duties without personal distraction or
conflict of interest in circumstances arising from the possibility or occurrence
of a change in control of the Company.
In consideration of the premises and the covenants and agreements
contained herein, and other good and valuable consideration, the Company and the
Executive agree as follows:
1. Services During Certain Events. In the event a proposal is made to
effect a Change in Control (as defined in Section 3 hereof), the Executive
agrees that he will not voluntarily leave the employ of the Company and will
render the services contemplated in the recitals of this Agreement until such
proposal for a Change in Control is terminated or abandoned or until a Change in
Control has occurred, except as otherwise provided in Section 2 hereof.
2. Termination. For purposes of this Agreement, a "Termination" shall
be deemed to have occurred in the event that the Executive's employment by the
Company is terminated at any time from 90 days prior to a Change in Control to
two years following a Change in Control:
(a) by the Company for reasons other than "cause" (as defined in
Section 6 hereof), "disability" (as defined in Section 6 hereof), death or
attainment of age 65;
(b) by the Executive following the occurrence of any of the
following events without the Executive's consent:
(i) the assignment of the Executive to any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities or status immediately preceding such Change in
Control, or a change in his reporting responsibilities or titles within
the Company in effect at such time resulting in a reduction of his
responsibilities or position at the Company;
(ii) a reduction of the Executive's annual salary;
(iii) a material reduction in any year of the ratio of
incentive compensation or fringe benefits received by the Executive
pursuant to any bonus, incentive or fringe benefit plan (the "Benefit
Plan") to his annual salary in such year, which reduction is greater
than the average reduction in the ratio of such incentive compensation
or fringe benefits to annual salary received by all participants under
the Benefits Plans;
(iv) a material increase in the amount of travel normally
required of the Executive in connection with his employment by the
Company, or the transfer of the Executive to a location requiring a
change in his residence; or
(v) any failure by the Company to comply with an d satisfy
Section 8 of this Agreement; or
(c) by the Executive, if he determines, in his sole discretion,
during the 60-day period commencing 180 days following a Change in Control, that
due to the Change in Control he can no longer effectively perform his duties.
For purposes of this Agreement, any determination by the Executive pursuant to
the preceding sentence shall be conclusive.
3. Change in Control. For purposes of this Agreement, a "Change in
Control" of the Company shall be deemed to have occurred if:
(a) individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board, provided, however, that
any individual becoming a director subsequent to the date of this Agreement
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the then In-cumbent Directors
(other than an election or nomination of an individual whose assumption of
office is the result of an actual or threatened election contest relating to the
election of directors of the Company, as such terms are used in Rule 14a-11
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
shall be, for purposes of this Agreement, considered as though such individual
were an Incumbent Director; or
(b) the shareholders of the Company shall approve (i) any
consolidation or recapitalization of the Company (or, if the capital stock of
the Company is affected, any subsidiary of the Company) or any sale, lease, or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an "Acquisition Transaction")
where (x) the shareholders of the Company immediately prior to such Acquisition
Transaction would not immediately after such Acquisition Transaction
beneficially own, directly or indirectly, shares representing in the aggregate
more than 65% of (A) the then outstanding common stock of the corporation
surviving or resulting from such merger, consolidation or recapitalization or
acquiring such assets of the Company, as the case may be (the "Surviving
Corporation") (or of its ultimate parent corporation, if any) and (B) the
Combined Voting Power (as defined below) of the then outstanding Voting
Securities (as defined below) of the Surviving Corporation (or of its ultimate
parent corporation, if any) or (y) the Incumbent Directors at the time of the
initial approval of such Acquisition Transaction would not immediately after
such Acquisition Transaction constitute a majority of the Board of Directors of
the Surviving Corporation (or of its ultimate parent corporation, if any) or
(ii) any plan or proposal for the liquidation or dissolution of the Company; or
(c) any Person (as defined below) shall become the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of securities of the Company representing in the aggregate 30% or
more of either (i) the then outstanding shares of the Company Common Stock
("Common Stock"), or (ii) the Combined Voting Power of all then outstanding
Voting Securities of the Company; provided, however, that notwithstanding the
foregoing, a Change in Control of the Company shall not be deemed to have
occurred for purposes of this subsection (c) solely as the result of:
(i) the acquisition of securities by the Company which, by
reducing the number of shares of Common Stock or other Voting
Securities outstanding, increases (i) the proportionate number of
shares of Common Stock beneficially owned by any Person to 30% or more
of the shares of Common Stock then outstanding or (ii) the
proportionate voting power represented by the Voting Securities
beneficially owned by any Person to 30% or more of the Combined Voting
Power of all then outstanding Voting Securities; or
(ii) an acquisition of securities if the Incumbent Directors
at the time of the initial approval of such acquisition would not
immediately after (or otherwise as a result of) such acquisition
constitute a majority of the Board;
(A) any conversion of a security that was not acquired
directly from the Company; or
(B) any acquisition of securities if the Incumbent
Directors at the time of the initial approval of such acquisition
would not immediately after (or otherwise as a result of) such
acquisition constitute a majority of the Board;
provided, however, that if any Person referred to in subsections (i) or (ii) of
this clause (c) shall thereafter become the beneficial owner of any additional
shares of the Company Common Stock or other Voting Securities of the Company
(other than pursuant to a stock split, stock dividend or similar transaction or
an acquisition exempt under such subsection (ii)), then a Change in Control
shall be deemed to have occurred for purposes of this clause(c).
(d) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive experiences a Termination prior to a Change in
Control and the Executive reasonably demonstrates that such Termination (A) was
at the request of a Third Party (as defined below) or (B) otherwise occurred in
connection with or in anticipation of a Change in Control, then for all purposes
of the Agreement, the date of such Change in Control shall mean the date
immediately prior to the date of such Termination.
For purposes of this Agreement:
"Person" shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body and any successor to any such entity) or group (as defined in
Sections 13(d)(3) or 14(d)(2) of the Exchange Act and the rules and regulations
thereunder); provided, however, that Person shall not include the Executive, the
Company, any of its majority-owned subsidiaries, any executive benefit plan of
the Company or any of its majority-owned subsidiaries or any entity organized,
appointed or established by the Executive, the Company or any of its
majority-owned subsidiaries for or pursuant to the terms of any such plan, or
any of their affiliates;
"Voting Securities" shall mean all securities of a corporation
having the right under ordinary circumstances to vote in an election of the
board of directors of such corporation;
"Combined Voting Power" shall mean the aggregate votes entitled to
be case generally in the election of directors of a corporation by holders of
then outstanding Voting Securities of such corporation; and
"Third Person" shall mean a third party who has indicated an
intention, or taken steps reasonably calculated, to effect a Change in Control.
4. Rights and Benefits upon Termination or Change in Control.
(a) Severance Payment. Subject to Section 6 and 11(a) hereof, in
the event of a Termination the Company shall pay the Executive, in twelve equal
monthly installments beginning no later than 30 days following the Executive's
Termination, (i) the greater of the Executive's annual salary as in effect
immediately prior to (x) the Termination or (y) a Change in Control plus (ii) if
a Change of Control could have been deemed to occur as a result of meeting the
conditions set forth in paragraph 3(a) hereof (whether or not such conditions
were the sole reason for a Change of Control), the most recent annual bonus paid
the Executive. In the event of the Executive's death, such payments shall be
made to Executive's estate or other legal representative.
(b) Stock Options. Immediately prior to a Change in Control, all
outstanding options to buy Company stock held by the Executive, other than
options granted pursuant to the Company's Employee Stock Purchase Plan, shall
become fully vested and immediately exercisable.
(c) Restricted Stock. Immediately prior to a Change in Control,
any (i) repurchase agreement or (ii) right of first refusal agreement between
the Executive and the Company with respect to the Company stock shall terminate
and the Executive's ownership of all shares of Company stock shall fully vest.
5. Certain Additional Payments by the Company. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment, distribution or other action by the Company to or for the
benefit of the Executive, whether pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the
Executive, if such Executive has been employed by the Company for five years or
more, shall be entitled to receive from the Company at the time such Excise Tax
is due an additional payment (a "Gross-Up Payment") in any amount reasonably
calculated by the Company's independent auditors such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
6. Conditions to the Obligations of the Company. The rights and
benefits provided in Section 4 hereof shall not accrue to the Executive if any
of the following events shall occur:
(a) The Company shall terminate the Executive's employment for
"cause." For purposes of this Agreement, termination of employment for "cause"
shall mean (i) the Executive's conviction for, or plea of nolo contendere to, a
felony, (ii) the Executive's engaging in fraud, misappropriation, embezzlement
or other act or acts of dishonesty resulting in, or intended to result in,
substantial personal enrichment of the Executive at the expense of the Company
or (iii) the Executive's intentional and continual failure substantially to
perform his duties with the Company (other than a failure resulting from the
Executive's incapacity due to physical or mental illness) which failure has
continued for a period of at least 30 days after a written notice of demand for
substantial performance has been delivered to the Executive specifying in
reasonable detail the manner in which the Executive has failed to substantially
perform. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for cause unless and until there shall have been delivered
to the Executive a copy of a resolution (x) duly adopted by three-quarters of
the entire membership of the Board, at a meeting called and held for such
purpose after reasonable notice to Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before the Board,
and (y) finding that in the good faith opinion of the Board, Executive was
guilty of conduct described in the preceding sentence and specifying the
particulars of such conduct in detail.
(b) Following a Termination, the Executive shall not, upon
receiving a written request to do so, resign as a director and/or officer of the
Company and of each subsidiary and affiliate of the Company of which he is then
serving as a director and/or officer.
(c) The Company shall terminate the Executive's employment for
"disability." For purposes of this Agreement, "disability" shall mean a physical
or psychological condition of the Executive which renders him unable to perform
his duties for the Company for a period for six months or longer, as confirmed
in writing by the Executive's independent physician.
7. Arbitration and Expenses.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration, conducted before a panel of
three arbitrators in Stamford, Connecticut, in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall be
approved by both the Company and the Executive and their decision shall be
binding on the parties and conclusive for all purposes. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. The expense of such
arbitration shall be borne by the Company.
(b) The Company shall pay or reimburse the Executive for all costs
and expenses (including, without limitation, reasonable attorneys' fees)
incurred by the Executive as a result of any claim, action or proceeding
(including, without limitation, a claim, action or proceeding by the Executive
against the Company) arising out of, or challenging the validity, advisability
or enforceability of, this Agreement or any provision hereof.
8. Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume 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 herein, "the Company" shall include any
successor to all or substantially all of the Company's business or assets which
executes and delivers an agreement provided for in this Section 8 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
9. Notice of Termination. Any termination of the Executive's employment
by the Company shall be communicated to the Executive at the address set forth
above (or such other address as the Executive shall have notified the Company in
writing for purposes of this Agreement) in a written notice and, except for
termination for "cause," shall specify a termination date no sooner than 15 days
after the giving of such notice.
10. Term of Agreement. This Agreement shall terminate on the fifth
anniversary of the date hereof; provided, however, that this Agreement shall
automatically renew for successive one-year terms unless the Company's Board of
Directors notifies the Executive in writing at least 30 days prior to an
expiration date that it does not wish to renew the Agreement for an additional
term; and provided further that if a Change in Control occurs during the term of
an additional term of this Agreement, the Agreement shall continue in effect for
two years following such Change in Control.
11. Miscellaneous.
(a) Duty to Mitigate: Other Severance Payments. If a Termination
is deemed to occur, the Executive shall during the one-year period subsequent to
his Termination notify the Company of any employment when obtained, and the
severance payment provided under Section 4(a) hereof shall be offset by any
compensation, which he receives from such employment during the one-year period
subsequent to this Termination. Furthermore, the severance payment provided
under Section 4(a) hereof shall also be offset by any other severance payment
which the Executive receives under any employment agreement with the Company,
including damages for breach of any such agreement.
(b) Assignment. No right, benefit or interest hereunder shall be
subject to assignment, anticipation, alienation, sale, encumbrance, charge,
pledge, hypothecation or set-off in respect of any claim, debt or obligation, or
to execution, attachment, levy or similar process; provided, however, that the
Executive may assign any right, benefit or interest hereunder if such assignment
is permitted under the terms of any plan or policy of insurance or annuity
contract governing such right, benefit or interest.
(c) Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of the Company. This
Agreement is not, and nothing herein shall be deemed to create, a commitment of
continued employment of the Executive by the Company.
(d) Amendment. This agreement may not be amended, modified or
canceled except by written agreement of the parties.
(e) Waiver. No provision of this Agreement may be waived except by
a writing signed by the party to be bound thereby.
(f) Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall remain in full force
and effect to the fullest extent permitted by law.
(g) Taxes. Any payment or delivery required under this Agreement
shall be subject to all requirements of the law with regard to withholding of
taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
(h) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York.
(i) Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby.
DIANON SYSTEMS, INC.
By: /s/ Richard A. Sandberg
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/s/ James B. Amberson
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James. B. Amberson, M.D.