Quest Diagnostics 2004 Annual Report Download - page 18

Board of Directors as a result of a contested election such that a majority of the Board
members at any particular time were initially placed on the Board as a result of such
contested election.
Employment Agreement of Dr. Mohapatra
In November 2003, Dr. Mohapatra entered into a three-year employment agreement with
Quest Diagnostics, which provides for:
•an annual base salary of no less than $875,000, with any increases subject to the discretion
of the Board of Directors or the Compensation Committee;
•an annual target cash bonus not less than 120% of annual base salary in effect at the time
performance goals are established;
•a grant of 170,000 stock options for 2004 subject to the same terms and conditions as
options granted to other executive officers;
•upon a “change of control’’, a termination by death or disability, outstanding equity awards
shall vest; upon a termination without cause by the Company or by Dr. Mohapatra for
“good reason,’’ outstanding equity awards shall continue to vest until the second anniversary
of such termination (the third anniversary if such termination is within 90 days prior to or
two years following a “change of control’’); in all cases, all vested stock options shall remain
exercisable for their original term;
•establishment of a New SERP as described above under “Pension Plans’’;
•continued payment of base salary and target bonus in equal monthly installments and
continued coverage under Company benefit plans for three years upon termination for
death or disability or the longer of (x) two years and (y) the balance of the contract term
if termination is without cause by the Company or by Dr. Mohapatra for “good reason’’
(but if such termination is within 90 days prior to or two years following a “change of
control,’’ the benefit coverage period shall be three years and Dr. Mohapatra shall receive a
lump sum payment of three times base salary and target bonus in lieu of monthly
payments);
•a one-year non-compete and a one-year nonsolicit of customers and employees following
termination for any reason; and
•“good reason’’ would include (1) a material change in Dr. Mohapatra’s duties or
responsibilities, (2) removal or a failure to re-elect Dr. Mohapatra to the position of
President and Chief Executive Officer, (3) any change of Dr. Mohapatra’s title of President
and Chief Executive Officer, (4) a greater than 75-mile relocation without his consent, (5) a
reduction in compensation or benefits, (6) a “change in control’’, (7) material breach by
the Company of the agreement, (8) a failure to appoint Dr. Mohapatra as Chief Executive
Officer no later than the 2004 annual meeting or May 31, 2004, whichever is earlier,
(9) the occurrence of an irreconcilable difference with the non-executive Chairman of the
Board of Directors (should such position be established) such that Dr. Mohapatra is unable
to effectively carry out his duties and responsibilities under the employment agreement or
(10) a failure by the Company to secure written assumption of the agreement by a successor
of the Company after a merger or consolidation. “Change of control’’ would include (1) a
sale or disposition of all or substantially all of Quest Diagnostics’ assets or a partial or
complete liquidation of Quest Diagnostics or similar transactions, (2) (i) a merger or
consolidation in which the surviving entity ceases to be a publicly traded company and Dr.
Mohapatra is not the Chief Executive Officer of the publicly traded parent (if any) of the
surviving entity or (ii) a merger or consolidation in which the surviving entity is publicly
traded and Dr. Mohapatra is not the Chief Executive Officer of such surviving entity or
(iii) a merger or consolidation in which the stockholders of the Company immediately prior
to such transaction hold less than 50% of the voting power of the Company, (3) the
acquisition by any third party of at least 40% of the voting power of the outstanding shares
16 ?Quest Diagnostics Incorporated ?2004 Proxy Statement