Exhibit 99.2
[Letterhead of Quest Diagnostics Incorporated]
April 21, 2004
Mr. Kenneth W. Freeman
Chief Executive Officer
Quest Diagnostics Incorporated
1290 Wall Street West
Lyndhurst, New Jersey 07071
Dear Mr. Freeman:
Reference is made to the Amended and Restated Employment Agreement
between you and Quest Diagnostics Incorporated (the "Company") dated as of
January 1, 2003 (the "Agreement"). Unless otherwise defined, all capitalized
terms used herein shall have the meaning set forth in the Agreement.
You and the Board have determined that, given the current successful
transition of Chief Executive Officer leadership roles in the Company, it is
beneficial and in the best interests of the Company to (a) provide for the
succession of Surya N. Mohapatra (the "Successor CEO") to you as Chief Executive
Officer as of May 4, 2004 (such date the "CEO Relinquishment Date"), and (b)
implement certain amendments to the Agreement to effectuate this succession and
address your duties and our respective obligations under the Agreement following
the CEO Relinquishment Date. This letter serves to memorialize the agreement of
the parties respecting these succession matters, as follows:
1. Effective as of the CEO Relinquishment Date, you will cease to be
the Chief Executive Officer and will continue to serve as a Director and
Chairman of the Board of the Company. Pursuant to Section 11(e)(v)(B) of the
Agreement, your employment with the Company shall terminate on December 14, 2004
(the "Chairman Termination Date") at which time you shall also resign as a
Director. This letter shall constitute an irrevocable mutual Notice of
Termination pursuant to Section 10(f) of the Agreement effective as of the
Chairman Termination Date and the Employment Term shall end on such date.
2. Beginning on the CEO Relinquishment Date and ending on the Chairman
Termination Date, your duties and responsibilities as Chairman of the Board
shall be part-time in nature and limited to assisting the Successor CEO on
issues of Board effectiveness (including presiding at meetings of the Board of
Directors and preparing agendas for such meetings in consultation with the
Successor CEO and the Lead Independent Director) and such other matters as the
Successor CEO may reasonably
request from time to time; it being understood that the Successor CEO shall have
full power and responsibility for the general management and operations of the
Company to the extent provided for in the Successor CEO's employment agreement
and as otherwise directed by the Board. Effective as of the CEO Relinquishment
Date (but conditioned on your employment termination on the Chairman Termination
Date (or such earlier termination of employment due to your death or
disability)) and to be ratified and confirmed by the Board of Directors (or any
authorized committee thereof no later than April 21, 2004, (a) you shall no
longer be subject to the Company's existing restrictions on certain stock option
exercises set forth in the procedures adopted May 13, 2003 by the Company and
(b) you shall be permitted on and after April 23, 2004 to implement a Rule
10b5-1 sales plan without giving effect to any blackout periods, subject to
compliance with Rule 10b5-1 issued under the Securities Exchange Act of 1934, as
amended. Except as otherwise provided for herein, the terms and conditions of
the Agreement shall continue to govern our respective rights and obligations
(including the payment of your current Base Salary and Annual Bonus) for the
period of your employment through the Chairman Termination Date; provided that
your Annual Bonus for the period from January 1, 2004 through to the Chairman
Termination Date shall be calculated at target (140% of your current Base
Salary) and pro rated through the Chairman Termination Date ("2004 Annual
Bonus") and you shall receive an additional special lump sum cash bonus of
$500,000 to be paid to you on the Chairman Termination Date as part of your 2004
compensation ("Special Bonus"). For purposes of determining the Executive's
benefit eligible compensation in calculating the Company Non-Qualified benefit
pursuant to Section 7(b)(ii)(4) of the Agreement, the amounts earned for 2004
shall consist solely of the Base Salary paid through the Chairman Termination
Date, the 2004 Annual Bonus and the Special Bonus.
3. Effective as of the Chairman Termination Date you shall become
entitled to the benefits conferred on you pursuant to Section 11(e)(v)(B) of the
Agreement (including, without limitation, accelerated vesting of the 2001
Performance Accelerated Stock Option Grant and the 2002 Non-Qualified Stock
Option Grant); provided that: (a) the payment relating to Annual Bonus due to
you pursuant to Sections 11(e)(v)(B)(x) shall be modified so that you shall
receive payment under the Agreement of a pro rata portion of your Annual Bonus
(determined at target (140% of current Base Salary) and pro-rated from December
15, 2004 through May 3, 2005); (b) for purposes of determining the exercise term
of any option following the Chairman Termination Date, your termination shall be
considered to be an elimination of position for which you are eligible for the
severance payments and other benefits provided for hereunder and under the
Agreement (in lieu of severance payments under any other plan of the Company)
and the Company shall provide you with adequate assurances that such exercise
period following the Chairman Termination Date will be fifteen (15) months
(other than with respect to stock option grants made in 1995 or 2003); and (c)
in the event of your death or disability following the Chairman Relinquishment
Date, the obligations of the Company shall remain in full force and effect
hereunder and under the Agreement and your estate or legal representative shall
be entitled to receive any payments or other benefits provided for hereunder and
under the Agreement.
4. Effective as of the Chairman Termination Date, you agree to remain
available to provide consulting services to the Company on a part-time and as
needed basis through to and including May 3, 2005 (the "Consulting Termination
Date"). Your role as a consultant shall be limited to bringing business
development ideas to the Company's Board and senior management and assistance
from time to time on governmental affairs and related issues, and appropriate
measures will be taken by the Company so that you are not furnished material
inside information that would limit or otherwise impact your ability to enter
into transactions involving the Company's securities. You shall be permitted to
accept other full or part-time employment at any time on or after the Chairman
Termination Date, subject to the non-solicitation and non-competition provisions
of Section 12 of the Agreement, which provisions shall terminate and expire as
of December 14, 2005 (the first anniversary of the Chairman Termination Date).
Section 7(b)(ii)(5) of the Agreement is modified so that payment to you of the
Lump Sum Option shall be made upon your attainment of age 55, in the event you
elect the Lump Sum Option.
5. Unless otherwise expressly provided for herein, the terms and
conditions of the Agreement shall remain in full force and effect. The Company
shall reimburse you for your attorney's fees incurred in connection with the
negotiation and execution of this agreement and related matters involving
leadership succession. This agreement may not be modified or amended unless
evidenced by a writing signed by you and a duly authorized representative of the
Company.
6. This letter may be executed in counterparts, each of which shall be
deemed to constitute an original but all of which together shall constitute one
and the same instrument.
Please indicate your agreement to the foregoing by signing this letter
as indicated below.
QUEST DIAGNOSTICS
INCORPORATED
By: /s/ David W. Norgard
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Name: David W. Norgard
Title: Vice-President -- Human Resources
Accepted and agreed:
/s/ Kenneth W. Freeman
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Kenneth W. Freeman