EXHIBIT 10.1
QUEST DIAGNOSTICS INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective December 14, 2004
QUEST DIAGNOSTICS INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
1.1 Definitions..............................................................1
1.2 Rules of Construction....................................................3
ARTICLE II ELIGIBILITY AND PARTICIPATION
2.1 Eligibility..............................................................4
2.2 Participation............................................................4
ARTICLE III RETIREMENT BENEFIT AND DEATH BENEFIT
3.1 Retirement Benefit.......................................................5
3.2 Death Benefit............................................................6
ARTICLE IV FORM AND TIMING OF RETIREMENT BENEFIT
4.1 Form.....................................................................8
4.2 Timing...................................................................8
ARTICLE V VESTING
5.1 Vesting..................................................................9
ARTICLE VI ADMINISTRATION
6.1 Committee...............................................................10
6.2 Claims Procedures.......................................................10
ARTICLE VII FUNDING
7.1 General Rule............................................................11
ARTICLE VIII AMENDMENT AND TERMINATION
8.1 General Rule............................................................12
ARTICLE IX GENERAL PROVISIONS
9.1 Payments to Minors and Incompetents.....................................13
9.2 No Contract.............................................................13
9.3 Non-Alienation of Benefits..............................................13
9.4 Income Tax Withholding..................................................13
9.5 Governing Law...........................................................13
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9.6 Captions................................................................13
9.7 Severability............................................................13
9.8 Notices.................................................................13
Appendix A - Actuarial Assumptions
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PREAMBLE
Effective December 14, 2004, Quest Diagnostics Incorporated (the
"Company") established this nonqualified defined benefit pension plan referred
to as the Supplemental Executive Retirement Plan (the "Plan") for the benefit of
the Chief Executive Officer of the Company.
The Plan is an unfunded nonqualified pension plan that is intended to
qualify as a "top hat plan" for purposes of the Employee Retirement Income
Security Act of 1974, as amended. Furthermore, the Plan is intended to satisfy
and comply with all requirements of section 409A of the Internal Revenue Code of
1986, as amended, and shall be interpreted accordingly.
ARTICLE I
DEFINITIONS
1.1 Definitions. The following words and phrases when used in the Plan
shall have the meanings indicated in this Article I.
"Actuarial Equivalence" or "Actuarially Equivalent" means a benefit of
equal value, determined using the actuarial assumptions set forth in Appendix A.
"Annual Bonus" means the regular annual bonus paid (or which would
have been paid but for a deferral election by the Participant) under the
Company's Management Incentive Plan (as amended from time to time and any
successor thereto).
"Annuity Forms of Benefit" means the 50% Joint and Survivor Annuity,
the Five-Year Certain Annuity, and the Single Life Annuity. All Annuity Forms of
Benefit shall be of Actuarially Equivalent value.
"Base Pay" means the monthly salary paid to the Participant by the
Company (or which would have been paid but for a deferral election by the
Participant).
"Beneficiary" means (a) the Participant's Spouse if the 50% Joint and
Survivor Annuity is elected, or (b) any individual designated in accordance with
procedures established by the Committee as the beneficiary, where the
Participant has elected the Five-Year Certain Annuity.
"Benefit Starting Date" means the first day of the calendar month
following a Termination from Service Date.
"Board" means the Board of Directors of the Company.
"Cause" means "Cause" as defined in Section 10(a) of the Employment
Agreement.
"Chief Executive Officer" or "Participant" means Dr. Surya N.
Mohapatra.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee of the Board designated by the Board
to administer the Plan. Unless the Board shall determine otherwise, the
Committee shall be the Compensation Committee of the Board.
"Company" means Quest Diagnostics Incorporated, a Delaware
corporation, and any entity that acquires or succeeds to all or substantially
all of the Company's business or assets and any successor to any such entity.
"Credited Service" means all calendar months of employment with the
Company, whether or not consecutive. Calendar months in which a Participant was
employed during the month shall be treated as a period of Credited Service.
"Disability" means "disability" as defined in Section 10(b) of the
Employment Agreement.
"Earliest Retirement Date" means the first day of the calendar month
following the completion of 96 months of Credited Service.
"Employment Agreement" is the Employment Agreement Between Surya N.
Mohapatra and Quest Diagnostics Incorporated dated as of November 9, 2003, as
amended from time to time.
"Employment Term" means "Employment Term" as defined in the Employment
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"50% Joint and Survivor Annuity" means a form of payment whereby the
benefit is paid in monthly installments commencing on the Benefit Starting Date
and continuing for the lifetime of the Participant, with 50% of such amount
being paid to the Spouse of such Participant for as long as the Spouse survives
after the Participant's death.
"Final Average Pay" means an annual amount, determined in accordance
with the formula P/Y, where "P" is the sum of (a) the Participant's Base Pay for
the 36 full consecutive calendar months immediately preceding the month in which
the Participant's Termination from Service Date occurs plus (b) the three most
recent Annual Bonuses prior to his Termination from Service Date and "Y" is
three.
For purposes of determining Final Average Pay, Base Pay and Annual Bonuses shall
be determined including amounts that may have been deferred pursuant to any
qualified or nonqualified plan of the Company.
"Five-Year Certain Annuity" means a form of payment whereby the
benefit is paid in monthly installments commencing on the Benefit Starting Date
and continuing for the longer of (a) the lifetime of the Participant or (b) 60
months.
"Good Reason" means "Good Reason" as defined in Section 10(d) of the
Employment Agreement.
"Lump Sum" means the single sum benefit that is the Actuarial
Equivalent of an immediately commencing Retirement Benefit.
"Normal Retirement Date" means the first of the month coincident with
or next following the Participant's 62nd anniversary of birth.
"Plan" means this Quest Diagnostics Supplemental Executive Retirement
Plan, as set forth herein and as amended from time to time in accordance
herewith.
"Retirement Benefit" has the meaning set forth in Section 3.1.
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"Single Life Annuity" means a form of payment whereby the benefit is
paid in monthly installments commencing on the Benefit Starting Date and
continuing for the lifetime of the Participant.
"Spouse" means the person to whom the Participant is legally married
on the Benefit Starting Date.
"Termination from Service Date" means the date on which the
Participant's employment with the Company terminates.
"Years of Credited Service" means (a) the number of completed calendar
months of Credited Service from the Participant's original date of hire (taking
into account all consecutive and nonconsecutive periods of employment) times
1.13, divided by (b) 12. However, if (a) the Company provides to the Participant
a notice of non-renewal of the Employment Agreement (pursuant to Section 2(a)
thereof) which causes the Employment Term to end before he has attained age 60,
or (b) the Participant's employment is otherwise terminated by the Company other
than for Cause or is terminated by the Participant for Good Reason before he has
attained age 60, then the multiplier shall be 1.29 rather than 1.13.
1.2 Rules of Construction. The singular form of a word shall be deemed
to include the plural form, unless the context requires otherwise. Unless
indicated otherwise, references herein to articles and sections are to articles
and sections of the Plan.
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ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1 Eligibility. The Chief Executive Officer is the sole Participant
in this Plan.
2.2 Participation.
(a) Commencement. The Chief Executive Officer shall commence
participation on December 14, 2004.
(b) Duration. The Participant shall continue to be a Participant
as long as he is entitled to a Retirement Benefit under the Plan.
(c) Effect of Reemployment.
(i) If the Participant incurs a Termination from Service
Date for any reason he shall cease to accrue any benefits under
this Plan and if he is subsequently reemployed, no Base Salary or
Annual Bonus paid after such reemployment nor any Credited
Service shall be taken into account in determining any benefit
under this Plan.
(ii) Notwithstanding anything in the Plan to the contrary,
Annuity Forms of Benefit shall not be suspended if the
Participant is subsequently reemployed by the Company.
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ARTICLE III
RETIREMENT BENEFIT AND DEATH BENEFIT
3.1 Retirement Benefit.
(a) Benefit Starting Date on or After Normal Retirement Date. The
annual Retirement Benefit payable to the Participant if his Benefit Starting
Date occurs on or after his Normal Retirement Date is a life annuity equal to
1.2% times his Final Average Pay times his Years of Credited Service.
(b) Benefit Starting Date on or After Earliest Retirement Date. The
annual Retirement Benefit payable where the Participant's Benefit Starting Date
occurs on or after his Earliest Retirement Date but before his Normal Retirement
Date shall be an immediately commencing life annuity equal to 1.2% times the
Participant's Final Average Pay times his Years of Credited Service, reduced by
0.5% for each month that the Benefit Starting Date precedes the Normal
Retirement Date.
(c) Benefit Starting Date Before Earliest Retirement Date. If the
Participant's employment with the Company is terminated before the Earliest
Retirement Date (i) by the Company for Cause, or (ii) by the Participant other
than for (x) Good Reason, (y) Disability or (z) death, then no benefit shall be
payable from this Plan. If the Participant's employment with the Company is
terminated before the Earliest Retirement Date for any other reason (including
if the Company provides to the Participant a notice of non-renewal of the
Employment Agreement (pursuant to Section 2(a) thereof) which causes the
Employment Term to end), then the Participant's Retirement Benefit shall be a
life annuity payable at the Earliest Retirement Date equal to 1.2% times the
Participant's Final Average Pay (taking into account compensation paid under the
remaining term of the Employment Agreement) times the Participant's Years of
Credited Service. For purposes of the preceding sentence, Credited Service shall
be deemed to be 96 months.
(d) One-Time Benefit Election. Before January 1, 2005, the Participant
may make an irrevocable written election in accordance with procedures set forth
by the Committee to forego the employer matching credit under the Company's
Supplemental Deferred Compensation Plan for 2005 and all later years (matching
credits for years prior to 2005 are not impacted), and if such election is made,
then the benefit multiplier set forth in this Section 3.1 shall be 1.5% instead
of 1.2%, in all instances.
(e) Disability. In the event of a Disability, the Participant's
Credited Service, Base Pay and Annual Bonus during the disability period will be
determined consistent with the first sentence of Section 11(a) of the Employment
Agreement and the 0.5% per month reduction for early commencement shall not
apply.
(f) No Reduction for Early Commencement. Notwithstanding the preceding
paragraphs, if (a) the Company provides to the Participant a notice of
non-renewal of the Employment Agreement (pursuant to Section 2(a) thereof) which
causes the Employment Term to end before he has attained his Normal Retirement
Date, or (b) the Participant's employment is otherwise terminated by the Company
other than for Cause, or is terminated by the Participant for Good Reason,
before the Normal
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Retirement Date, then the 0.5% per month reduction for early commencement shall
not apply.
3.2 Death Benefit.
(a) Before Benefit Starting Date.
(i) If the Participant dies and has not incurred a Benefit Starting
Date and, as of the date of death, (x) is married, (y) has attained his
Earliest Retirement Date, and (z) is employed by the Company, a Retirement
Benefit shall be payable to the Participant's Spouse commencing on the
first day of the month following the Participant's death, calculated as if
the Participant had retired on the date of death, selected the 50% Joint
and Survivor Annuity option, and then died. If the Participant dies and has
not incurred a Benefit Starting Date and, as of the date of death, (x) is
married, (y) has not attained his Earliest Retirement Date, and (z) is
employed by the Company, a Retirement Benefit shall be payable to the
Participant's Spouse commencing on the Earliest Retirement Date, calculated
as if the Participant had terminated with a benefit described in the second
sentence of Section 3.1(c) on the date of death, selected the 50% Joint and
Survivor Annuity option, and then died. However, in all cases, the 0.5% per
month reduction for early commencement shall not apply to benefits payable
under this Section 3.2(a)(i).
(ii) Except as otherwise provided in clause (iii) below, if the
Participant dies before incurring a Benefit Starting Date and is unmarried,
then no death benefit shall be payable from the Plan.
(iii) If the Participant incurs a Termination from Service Date, and
is eligible for a Retirement Benefit under the Plan upon his Termination
from Service Date, but dies after the Termination from Service date and
before the the Retirement Benefit begins to be distributed, benefits are
payable as if the Participant died immediately after his Retirement Benefit
had begun to be distributed. If the Retirement Benefit was to have been
paid in a Lump Sum, such Lump Sum will be paid to the Participant's estate.
(b) Following Benefit Starting Date.
(i) If the Participant dies after (x) incurring a Benefit Starting
Date, (y) electing a Retirement Benefit in the form of a Five-Year Certain
Annuity, and (z) has not received 60 monthly installment payments of the
Retirement Benefit as of the date of death, the remaining installment
payments that would have been payable to the Participant had the
Participant survived to the end of the 60-month period shall be payable to
such Participant's Beneficiary. If a Beneficiary who is receiving
installment payments from a Five-Year Certain Annuity dies before all
remaining installments are paid, the remaining Retirement Benefit shall be
paid to the Beneficiary's estate in the form of an Actuarial Equivalent
lump sum. In the event the Participant's Beneficiary predeceases the
Participant or the Participant did not designate a Beneficiary, upon the
Participant's death any remaining Retirement Benefit under this form shall
be paid to the Participant's estate in the form of an Actuarial Equivalent
lump sum.
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(ii) If the Participant dies after (y) incurring a Benefit Starting
Date and (z) electing a Retirement Benefit in the form of a 50% Joint and
Survivor Annuity, payments shall be made to the surviving Spouse in
accordance with the elected form of benefit.
(iii) If the Participant dies after incurring a Benefit Starting Date
and (w) has received payment of his entire Retirement Benefit, (x) has
elected the Single Life Annuity, (y) has elected the Five-Year Certain
Annuity and has received 60 or more monthly payments by the date of death,
or (z) has elected the 50% Joint and Survivor Annuity where the Spousal
Beneficiary predeceased the Participant, no death benefit shall be payable
from the Plan.
(iv) If the Participant dies after incurring a Benefit Starting Date
and has not elected an Annuity Form, the Retirement Benefit will be payable
to the Participant's estate, to the extent not previously been paid.
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ARTICLE IV
FORM AND TIMING OF RETIREMENT BENEFIT
4.1 Form.
(a) General Rule. The Retirement Benefit shall be paid as an
Actuarially Equivalent Lump Sum payment unless the Participant makes an election
to receive the Retirement Benefit in another form pursuant to Section 4.1(b) or
(c).
(b) Changes from Lump Sum to Annuity. The Participant may make a
written irrevocable election to the extent permitted by the Committee to receive
the Retirement Benefit that otherwise would have been payable in a Lump Sum form
in an Annuity Form of Benefit, provided that to the extent required under
section 409A of the Code (i) payment of the Retirement Benefit shall not begin
until five years after the date the payments under the Plan otherwise would have
begun, (ii) the election is made at least 12 months before the original Benefit
Starting Date otherwise would have occurred, and (iii) the election is in effect
for at least 12 months prior to the new Benefit Starting Date. Such delayed
benefit shall be the Actuarial Equivalent of the Retirement Benefit.
(c) Annuity Forms of Benefit. A Participant may change any election to
receive one Annuity Form of Benefit to another Annuity Form of Benefit before a
Benefit Starting Date, only to the extent permitted by section 409A of the Code
and procedures established by the Committee. No election to receive an Annuity
Form of Benefit may be changed to an election to receive a Lump Sum benefit.
4.2 Timing.
(a) General Rule. The Participant's Retirement Benefit shall not begin
to be distributed before the first day of the seventh calendar month following
the month that includes his Termination from Service Date, unless a later date
is elected pursuant to Section 4.1(b). If the Retirement Benefit is paid in an
Actuarially Equivalent Lump Sum, then the payment shall include interest for the
period from the Benefit Starting Date to the payment date at the rate used to
determine Actuarial Equivalence.
(b) Death Benefit. A benefit paid under the Plan on account of the
death of a Participant shall commence as soon as practicable following the
Participant's date of death, except as otherwise may be provided in Section
3.2(a)(i) and Section 3.2(b).
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ARTICLE V
VESTING
5.1 Vesting. The Participant shall be vested in a Retirement Benefit on the
attainment of his Earliest Retirement Date and as otherwise provided in the
second sentence of Section 3.1(c).
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ARTICLE VI
ADMINISTRATION
6.1 Committee.
(a) Responsibilities. The Plan shall be administered by the Committee,
which shall be responsible for the interpretation of the Plan and
establishment of the rules and regulations governing the administration
thereof. The Committee shall have full discretion to interpret and
administer the Plan. The Committee's decision in any matter involving the
interpretation and application of this Plan shall be final and binding on
all parties. Neither the Committee nor any member thereof nor the Company
shall be liable for any action or determination made in good faith with
respect to the Plan or the rights of any person under the Plan.
(b) Authority of Members. The members of the Committee may authorize
one or more of their number to execute or deliver any instrument, make any
payment or perform any other act that the Plan authorizes or requires the
Committee to do, including, without limitation, the retention of counsel
and other agents as it may require in carrying out the provisions of
the Plan.
(c) Authority to Delegate. Any responsibility or authority assigned to
the Committee under the Plan may be delegated to any other person or
persons, by name or in the case of a delegation to an employee of the
Company by title or position with the Company, consistent with the by-laws
or other procedures of the Committee; provided that such delegation is
revocable by the Committee at any time, in its discretion.
(d) Records and Expenses. The Committee or its designees shall keep
such records as may be necessary for the administration of the Plan and
shall furnish such periodic information to Participants as may be necessary
or desirable, in the sole discretion of the Committee. All expenses of
administering the Plan shall be paid by the Company and shall not affect a
Participant's right to, or the amount of, benefits.
6.2 Claims Procedures. All claims for benefits under the Plan shall be made
in writing to the Committee or its designee. The claims procedures hereunder
shall be consistent with those established under the Quest Diagnostics
Supplemental Deferred Compensation Plan; however, the Committee shall provide
adequate written notice to any individual whose claim for benefits under the
Plan has been denied, setting forth specific reasons for such denial, written in
a manner calculated to be understood by such individual.
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ARTICLE VII
FUNDING
7.1 General Rule. The Plan is an unfunded arrangement. No portion of any
funds of the Company or any of its subsidiaries shall be required to be set
apart for a Participant or Beneficiary. The rights of a Participant or
Beneficiary to the payment of the Retirement Benefit shall be limited to those
of a general, unsecured creditor of the Company who has a claim equal to the
value of the Participant's Retirement Benefit. Retirement Benefits shall be
payable from the general assets of the Company, or from a permissible funding
vehicle consistent with the tax deferral objective of this Plan, or both.
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ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 General Rule. The Committee shall have the right to amend or terminate
the Plan for any reason, at any time and from time to time. However, no
amendment or termination of the Plan shall cause,without the Participant's
written consent, a reduction in the Retirement Benefit or other benefits to
which the Participant or his beneficiary would have been entitled to under the
terms of this Plan absent such amendment or termination, whether such benefits
are attributable to periods of employment prior to, on or after the effective
date of the Plan amendment or termination; provided, however, that the Company
shall not be required to increase or otherwise adjust benefits payable to the
Participant or his beneficiary on account of future changes in law. Furthermore,
no amendment may result in an acceleration of benefit payment (except as may be
permitted by section 409A of the Code) or an adverse Federal income tax
consequence to the Participant. Any action by the Committee to amend or
terminate the Plan shall be undertaken by a resolution duly adopted at a meeting
of the Committee, or by written consent of the Committee, in lieu of a meeting,
as the case may be.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Payments to Minors and Incompetents. If the Participant or any
Beneficiary entitled to receive any benefits hereunder is a minor or is deemed
by the Committee or is adjudged to be legally incapable of giving valid receipt
and discharge for such benefits, they will be paid to such person or institution
as the Committee may designate or to a duly appointed guardian. Such payment
shall, to the extent made, be deemed a complete discharge of any such payment
under the Plan.
9.2 No Contract. This Plan shall not be deemed a contract of employment
with the Participant, and no provision hereof shall affect the right of the
Company to terminate the Participant's employment.
9.3 Non-Alienation of Benefits. No amount payable to, or held under the
Plan for the account of, the Participant or any Beneficiary shall be subject, in
any manner, to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void. No amount
payable to, or held under the Plan for the account of, the Participant shall be
subject to any legal process of levy or attachment.
9.4 Income Tax Withholding. The Company may withhold from any payments
hereunder such amount as it may be required to withhold under applicable
federal, state or other income tax law, and transmit such withheld amounts to
the appropriate taxing authority. In lieu thereof, the Company shall have the
right, to the extent permitted by law, to withhold the amount of such taxes from
any other sums due from the Company to the Participant upon such terms and
conditions as the Committee may prescribe.
9.5 Governing Law. The provisions of the Plan shall be interpreted,
construed and administered under the laws of the State of New Jersey applicable
to contracts entered into and performed in such state, without regard to the
choice of law provisions thereof and to the extent that ERISA and other federal
laws do not apply.
9.6 Captions. The captions contained in the Plan are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of the Plan or in any way affect the construction
of any provision of the Plan.
9.7 Severability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability will not affect any other
provision of the Plan, and the Plan will be construed and enforced as if such
provision had not been included.
9.8 Notices. The Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing of notices and
delivery of agreements and payments. Any notice required or permitted to be
given shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States first class mail, postage prepaid.
If any item mailed to such address is returned as undeliverable to the
addressee, mailing shall be suspended until the Participant furnishes the proper
address.
9.9 Binding Nature; Assignability. This Plan shall be binding upon the
successors and assigns of the Company. No rights or obligations of the Company
under this
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Plan may be assigned or transferred by the Company without the Participant's
prior written consent, except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which the Company is not
the continuing entity, or a sale, liquidation or other disposition of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and assumes the liabilities, obligations and duties of the Company under
this Plan, either contractually or as a matter of law.
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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer as of the 14th day of December, 2004.
Quest Diagnostics Incorporated
By: /s/ David W. Norgard
--------------------
David W. Norgard
Vice President, Human Resources
APPENDIX A
ACTUARIAL ASSUMPTIONS
Actuarial Equivalence shall be determined by the following
assumptions:
(a) Mortality: the GAR 1994 Table.
(b) Interest: For determinations made during the period January 1
through June 30 of a given year, the average of the Moody's Aa High Quality
Corporate Bond Yield Average as of each day of the months of September, October
and November of the previous year. For determinations made during the period
July 1 through December 31 of a given year, the average of the Moody's Aa High
Quality Corporate Bond Yield Average as of each day of the months of March,
April and May of the current year.