8-KMaterial AgreementsExhibits & Filings

QUEST DIAGNOSTICS INC 8-K Report, Material Agreement (Dec 20, 2004)

Filed December 20, 2004For Securities:DGX

Summary

Quest Diagnostics Incorporated (DGX) filed an 8-K on December 20, 2004, reporting the adoption of a Supplemental Executive Retirement Plan (SERP) for its President and CEO, Dr. Surya N. Mohapatra. This plan was mandated by his employment agreement and provides a retirement benefit based on years of service, final average pay, and a multiplier for credited service. The terms include provisions for early retirement and termination scenarios, with potential for actuarial reductions if payments begin before age 62. The SERP can be paid as a lump sum unless Dr. Mohapatra elects otherwise. This filing is significant for investors as it outlines a new material agreement concerning executive compensation. The structure of the SERP, particularly the multipliers for credited service (1.13x regular, 1.29x for involuntary termination) and the ability to forgo other benefits for a higher accrual rate (1.5% vs 1.2%), suggests a potentially generous retirement package for the CEO. Investors should note the specific conditions under which Dr. Mohapatra would receive these benefits, including requirements for years of service and the definition of 'cause,' 'good reason,' and 'disability' which could impact the final payout.

Key Highlights

  • 1Quest Diagnostics adopted a Supplemental Executive Retirement Plan (SERP) for its CEO, Dr. Surya N. Mohapatra.
  • 2The SERP is a material definitive agreement entered into on December 14, 2004.
  • 3The plan provides a retirement benefit contingent on years of service and average final pay.
  • 4Credited service is calculated with a multiplier (1.13x regular, 1.29x for certain terminations).
  • 5Dr. Mohapatra can increase his retirement benefit accrual rate by forgoing other benefits before January 1, 2005.
  • 6The retirement benefit may be subject to actuarial reduction if paid before age 62.
  • 7The benefit is generally payable as a lump sum unless otherwise elected.

Frequently Asked Questions

The primary purpose of this 8-K filing is to report the adoption of a new Supplemental Executive Retirement Plan (SERP) for Quest Diagnostics' President and CEO, Dr. Surya N. Mohapatra, which constitutes a material definitive agreement.

The SERP provides a retirement benefit calculated as 1.2% (or 1.5% if certain other benefits are forgone) times the average of the CEO's final three years' pay, multiplied by his credited service. Credited service is enhanced by multipliers (1.13x or 1.29x). The plan includes provisions for receiving the benefit after completing eight years of service or under specific termination conditions, and it may be actuarially reduced if paid before age 62.

The CEO is eligible for the retirement benefit if he leaves the company after completing eight full years of service. Importantly, if his employment is terminated by the company for reasons other than 'cause,' or by the CEO for 'good reason' or 'disability,' he will be deemed to have completed the eight years of service, even if he hasn't met the full tenure prior to such termination.

While the 8-K filing doesn't provide specific financial figures for the SERP's cost, it establishes a defined benefit obligation for the company. Investors should consider this as a component of executive compensation that will impact future liabilities and cash flows upon the CEO's retirement or qualifying termination. The terms suggest a potentially significant benefit package for the CEO.