Document:

DGX 01.01.2013 8-K EX 10.1

Exhibit 10.1

AMENDED AND RESTATED QUEST DIAGNOSTICS INCORPORATED 
EXECUTIVE OFFICER SEVERANCE PLAN
1.Purpose.  The purpose of the Quest Diagnostics Incorporated Executive Officer Severance Plan (together with the attached schedules, appendices and exhibits, the “Plan”) is to secure the continued services of the executive officers of the Company and provide these executives with certain termination benefits in the event of a Qualifying Termination (as defined in Section 2) and to ensure their continued dedication to their duties in the event of any threat or occurrence of a Change in Control of the Company (as defined in Section 2).

2.Definitions.  As used in this Plan, the following terms shall have the respective meanings set forth below:

(a)“Annual Performance Bonus” means the annual cash bonus awarded under the Company's applicable incentive plans, as in effect from time to time (as of the date of adoption of this Plan the “Bonus” within the meaning of Section 5(a) of the Company's Senior Management Incentive Plan, effective as of May 13, 2003 and under the Company's Management Incentive Plan such plans referred to herein as the “Company Incentive Plan”).

(b)“Base Salary” means the Participant's annual rate of base salary as in effect on the Date of Termination, provided, however, that Base Salary for the Termination Period shall mean the Participant's highest annual rate of base salary during the twelve-month period immediately prior to the Participant's Date of Termination.

(c)“Board” means the Board of Directors of the Company and, after a Change in Control, the “board of directors” of the surviving corporation.  References herein to the Board include any committee or person to whom the Board has designated its authority.

(d)“Bonus Amount” means the Participant's target Annual Performance Bonus for the fiscal year in which the Participant's Date of Termination occurs, provided, however, that if the Participant's Qualifying Termination is on account of Good Reason pursuant to a reduction in a Participant's compensation or compensation opportunity under Section 2(k)(ii), “Bonus Amount” shall be the Participant's target Annual Performance Bonus for the prior fiscal year if higher.

(e)“Cause” means (i) the willful and continued failure of the Participant to perform substantially his duties with the Company (other than any such failure resulting from the Participant's incapacity due to physical or mental illness or any such failure subsequent to the Participant being delivered a notice of termination without Cause by the Company or delivering a notice of termination for Good Reason to the Company) after a written demand for substantial performance is delivered to the 

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Participant by or on behalf of the Board which specifically identifies the manner in which the Board believes that the Participant has not substantially performed his duties, (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its affiliates, (iii) the engaging by the Participant in conduct or misconduct that materially harms the reputation or financial position of the Company, (iv) the Participant (x) obstructs or impedes, (y) endeavors to influence, obstruct or impede or (z) fails to materially cooperate with, an Investigation, (v) the commission of a felony by the Participant or (vi) the Participant is found liable in any Securities and Exchange Commission or other civil or criminal securities law action.

For purposes of this paragraph (e), no act or failure to act by the Participant shall be considered “willful” unless done or omitted to be done by the Participant in bad faith and without reasonable belief that the Participant's action or omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, in accordance with authority duly given by the Board, based upon the advice of counsel for the Company (including counsel employed by the Company) shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company.
A Participant who is designated on Schedule A (and, after a Change in Control, a Participant who is designated on Schedule B) shall not be considered to have been terminated for Cause unless and until the Company has delivered to the Participant a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding the Participant from both the numerator and denominator if the Participant is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i), (ii), (iii), (iv), (v), or (vi) has occurred and specifying the particulars thereof in detail.
Anything herein to the contrary notwithstanding, if, following a termination of the Participant's employment by the Company for Cause based upon the conviction of the Participant for a felony, such conviction is overturned in a final determination on appeal, the Participant shall be entitled to the payments and the economic equivalent of the benefits the Participant would have received if his employment had been terminated by the Company without Cause.
(f)“Change in Control” means the occurrence of any one of the following events:

(i)any person is or becomes a “beneficial owner” (as defined in Rule 13d 3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 40% of the total voting power of the Company's then outstanding securities generally eligible to vote for the election of directors (the “Company Voting Securities”), provided, however, that any of the following acquisitions shall not be deemed to be a Change in Control:  (1) by the Company or any subsidiary or affiliate, (2) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any 

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subsidiary or affiliate, (3) by any underwriter temporarily holding securities pursuant to an offering of such securities, or (4) pursuant to a Non-Qualifying Transaction (as defined in paragraph (ii));

(ii)the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries or affiliates that requires the approval of the Company's stockholders whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination:

(A)more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination,

(B)no person (other than any employee benefit plan (or any related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of securities of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) representing 40% of the total voting power of the securities then outstanding generally eligible to vote for the election of directors of the Parent Corporation (or the Surviving Corporation), and

(C)at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination;

(Any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);
(iii)individuals who, on the effective date of this Plan, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the effective date of this Plan, whose election or nomination for election was 

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approved by a vote of at least a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director; or

(iv)the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of a sale of all or substantially all of the Company's assets to an entity that is not an affiliate of the Company (other than pursuant to a Non-Qualifying Transaction).

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 40% of Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
(g)“Company” means Quest Diagnostics Incorporated, a Delaware corporation.

(h)“Date of Termination” means (i) the effective date on which the Participant's employment by the Company terminates as specified in a prior written notice by the Company or the Participant, as the case may be, to the other, delivered pursuant to Section 12 or (ii) if the Participant's employment by the Company terminates by reason of death, the date of death of the Participant.

(i)“Disability” shall have the same meaning ascribed to that term in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.

(j)“Equity Incentive Compensation” means all equity-based compensation (including stock options, stock appreciation rights, restricted stock and performance shares) awarded under the Company's incentive plan(s), as in effect from time to time (as of the date of adoption of this Plan the Amended and Restated Employee Long-Term Incentive Plan).

(k)“Good Reason” means the occurrence of one or more of the following circumstances, without the Participant's express written consent, and which circumstance(s) are not remedied by the Company within thirty (30) days of receipt of a written notice from the Participant describing in reasonable detail the Good Reason event that has occurred (which notice must be provided within ninety (90) days of the Participant's obtaining knowledge of the event):

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(i)(A) any material change in the duties, responsibilities or status (including reporting responsibilities) of the Participant that is inconsistent in any material and adverse respect with the Participant's position(s), duties, responsibilities or authority with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties, responsibilities (other than reporting responsibilities) or status that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this Section 2(k) or (B) a material and adverse change in the Participant's titles or offices (including, if applicable, membership on the Board) with the Company as in effect immediately prior to such Change in Control;

(ii)a material reduction by the Company in the Participant's aggregate rate of annual base salary, Annual Performance Bonus opportunity and Equity Incentive Compensation target opportunity (including any material and adverse change in the formula for such targets) as in effect immediately prior to such Change in Control;

(iii)the Company's requiring the Participant to be based at any office or location more than fifty (50) miles from the office where the Participant is located at the time of the Change in Control and as a result causing the Participant's commute from his residence at the time of the Change in Control to the new location to increase by more than fifty (50) miles;

(iv)the failure of the Company to continue in effect any employee benefit plan, compensation plan, welfare benefit plan or fringe benefit plan in which the Participant is participating immediately prior to such Change in Control or the taking of any action by the Company, in each case which would materially adversely affect the Participant, unless the Participant is permitted to participate in other plans providing the Participant with materially equivalent benefits in the aggregate (at materially equivalent or lower cost with respect to welfare benefit plans); or

(v)the failure of the Company to obtain the assumption of the Company's obligations hereunder from any successor as contemplated in Section 11(b).

Notwithstanding the foregoing, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within thirty (30) days after receipt of notice thereof given by the Participant shall not constitute Good Reason.  The Participant's right to terminate employment for Good Reason shall not be affected by the Participant's incapacities due to mental or physical illness and the Participant's continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason.  The Participant may terminate his employment for a “Good Reason” event that is not reasonably remedied by the Company provided that the Participant shall have delivered a notice of termination within ninety (90) days after delivery of the notice describing the Good Reason event giving rise to such termination.

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(l)“Investigation” means an investigation authorized by the Board, a self-regulatory organization empowered with self-regulatory responsibilities under federal or state laws or a governmental department or agency.

(m)“Participant” means an executive officer of the Company selected, from time to time, by the Board for participation in this Plan and who is designated on Schedule A or B at the applicable time but only if such executive has completed at least one year of continuous employment with the Company and its Subsidiaries at the applicable time (unless such one year employment requirement has been waived in writing by the Board).

(n)“Potential Change in Control” means the execution or entering into of any agreement by the Company the consummation of which can be expected to be a Change in Control.

(o)“Qualifying Termination” means a termination of the Participant's employment with the Company that occurs on or after January 1, 2008 (i) prior to a Change in Control, by the Company other than for Cause and (ii) after a Change in Control, by the Company other than for Cause or by the Participant for Good Reason.  Termination of the Participant's employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.  Notwithstanding the preceding sentence, the death of the Participant after notice of termination for Good Reason or without Cause has been validly provided shall be deemed to be a Qualifying Termination.

(p)“Retirement” means the Participant's voluntary termination of employment on or after he or she attains age 60 with five (5) years of service.

(q)“Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors (or members of any similar governing body) or in which the Company has the right to receive 50% or more of the distribution of profits or 50% of the assets or liquidation or dissolution.

(r)“Termination Period” means the period of time beginning with a Change in Control and ending two (2) years following such Change in Control.  Notwithstanding anything in this Plan to the contrary, if (i) the Participant's employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) the Participant reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur within six (6) months from the date of such termination, then for purposes of this Plan, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to the Participant under Section 5, the date of the actual Change in Control shall be treated as the Participant's Date of Termination under Section 2(h), and for purposes of determining the amount of payments and benefits owed to the Participant under Section 5, the date the 

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Participant's employment is actually terminated shall be treated as the Participant's Date of Termination under Section 2(h).

3.Eligibility.  (a)  The Board shall determine in its sole discretion which executives of the Company shall be Participants in this Plan and whether a Participant shall be designated on Schedule A or B.

(a)The Board may, in its sole discretion, remove any executive from Schedule A and add such executive to Schedule B but may not remove any executive from participation in this Plan entirely; provided, that a Participant who is designated on Schedule A as of immediately prior to a Change in Control may not be removed from such Schedule without his or her prior written consent within the two year period following a Change in Control.

(b)The Board may delegate its authority to determine which senior executives of the Company shall be Participants in this Plan, to designate the Participants on Schedule A or B and to remove a Participant from Schedule A to the Compensation Committee (or any successor committee) of the Board.

4.Payments Upon Termination of Employment Prior to a Change in Control.  If the employment of the Participant is terminated pursuant to a Qualifying Termination, then, subject to the Participant's execution of a Separation Agreement and Release in the form attached to this Plan as Exhibit A (the “Separation Agreement and Release”) which shall be provided to the Participant no later than two (2) days after the Date of Termination and must be executed by the Participant, become effective and not be revoked by the Participant by the fifty-fifth (55th) day following the Date of Termination, the Company shall provide to the Participant:

(a)A cash payment equal to the Participant's Base Salary multiplied by either (i) 2.00 for a Participant designated on Schedule A or (ii) 1.00 for a Participant designated on Schedule B;

(b)A cash payment equal to the Bonus Amount times (i) 2.00 for a Participant designated on Schedule A or (ii) 1.00 for a Participant designated on Schedule B;

(c)For eighteen (18) months for a Participant designated on Schedule A or (ii) twelve (12) months for a Participant designated on Schedule B, following the Date of Termination, group medical and life insurance coverage to the Participant (and his eligible dependents), under the terms prevailing at the time immediately preceding the Date of Termination; the Company shall continue to provide such coverage on the same terms as provided by the Company to similarly situated executives; provided, that the Company shall cease to provide such coverage if the Participant obtains alternate employment and is eligible for substantially comparable group medical or life insurance coverage with such employer; provided further, that the Participant shall notify the Company within 10 days of securing such alternate employment; provided further, that in the event of the disability of the Participant, group medical coverage shall continue for a longer period consistent with the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”) and, provided, further, to the extent that any 

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plan does not permit continuation of the Participant's or his eligible dependents' participation throughout such period, the Company shall pay the Participant an amount, on an after-tax basis, equal to the Company's cost of providing such benefits;

(d)For one (1) year following the Date of Termination, the Participant will be entitled to receive executive outplacement assistance from Lee Hecht Harrison or an equivalent career placement firm at the Company's expense and in accordance with the Company's policies for similarly situated executives; and

(e)A cash payment equal to any matching contributions made by the Company on behalf of the Participant to the Company's 401(k) plan and the Company's Supplemental Deferred Compensation Plan during the year preceding the Date of Termination.

The cash payments specified in paragraphs (a), (b), (c) and (e) of this Section 4 shall be paid no later than the sixtieth (60th) day (or the next following business day if the sixtieth day is not a business day) following the Date of Termination, but may be made earlier provided that the Separation Agreement has been executed by the Participant and the revocation period thereunder has lapsed.  Each such cash payment shall be deemed to be a separate payment for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
5.Payments Upon Termination of Employment After a Change in Control.  If during the Termination Period the employment of the Participant is terminated pursuant to a Qualifying Termination, then, subject to the Participant's execution of a Separation Agreement and Release which shall be provided to the Participant no later than two (2) days after the Date of Termination and must be executed by the Participant, become effective and not be revoked by the Participant by the fifty-fifth (55th) day following the Date of Termination, the Company shall provide to the Participant:

(a)A cash payment equal to the result of multiplying the sum of the Participant's Base Salary plus the Participant's Bonus Amount by (i) either 3.00 for a Participant designated on Schedule A or (ii) 2.00 for a Participant designated on Schedule B; and

(b)A cash payment equal to the Participant's target Annual Performance Bonus for the fiscal year in which the Participant's Date of Termination occurs, multiplied by a fraction the numerator of which shall be the number of days the Participant was employed by the Company during the fiscal year in which the Date of Termination occurred and the denominator of which is 365;

(c)The benefits and payments specified in paragraphs (c), (d) and (e) of Section 4.

(d)The provisions of Appendix A shall apply if a Participant listed on Schedule A or Schedule B is subject to the Excise Tax, as defined in Appendix A.

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The cash payments specified in paragraphs (a), (b) and (c) of this Section 5 shall be paid no later than the sixtieth (60th) day (or the next following business day if the sixtieth day is not a business day) following the Date of Termination, but may be made earlier provided that the Separation Agreement has been executed by the Participant and the revocation period thereunder has lapsed.  Each such cash payment shall be deemed to be a separate payment for purposes of Section 409A of the Code.
6.Key Employees.  It is the intent of the Company that no payments or benefits provided under this Plan shall be considered “non-qualified deferred compensation” within the meaning of Section 409A of the Code and the Plan shall be interpreted accordingly.  If and to the extent that any payment or benefit is determined by the Company (a) to constitute “non-qualified deferred compensation” subject to Section 409A of the Code, (b) such payment or benefit is provided to a Participant who is a “specified employee” (within the meaning of Section 409A of the Code and as determined pursuant to procedures established by the Company) and (c) such payment or benefit must be delayed for six months from the Participant's Date of Termination (or an earlier date) in order to comply with Section 409A(a)(2)(B)(i) of the Code and not cause the Participant to incur any additional tax under Section 409A of the Code, then the Company will delay making any such payment or providing such benefit until the expiration of such six month period.  The Company shall set aside those payments that would have been made but for payment delay required by the preceding sentence in a trust that is in compliance with Rev. Proc. 92‐64 which may, but need not be, the trust established under the Company's Supplemental Deferred Compensation Plan; provided, however, that no payment will be made to the Rabbi Trust if it would be contrary to law or cause the Participant to incur additional tax under Section 409A.

7.Participant's Obligations.  The Participant agrees that:

(a)Without the consent of the Company, the Participant will not terminate employment with the Company without giving 30 days prior notice to the Company, and during such 30 day period the Participant will assist the Company, as and to the extent reasonably requested by the Company, to effect an orderly transition of the Participant's duties and responsibilities with the Company.

(b)In the event that the Participant has received any benefits from the Company under Section 4 of this Agreement, then, during the period of 36 months following the Date of Termination, the Participant, upon request by the Company:

(i)Will consult with one or more of the executive officers concerning the business and affairs of the Company for not to exceed four hours in any month at times and places selected by the Participant as being convenient to him or her, all without compensation other than what is provided for in Section 4 of this Agreement; and

(ii)Will testify as a witness on behalf of the Company in any legal proceedings involving the Company which arise out of events or circumstances that occurred or existed prior to the Date of Termination (except for any such proceedings relating to this Plan), without compensation other than what is provided for in Section 4 of this Agreement; provided, that all out-of-pocket 

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expenses incurred by the Participant in connection with serving as a witness shall be paid by the Company.

The Participant shall not be required to perform the Participant's obligations under this Section 7 if and so long as the Company is in default with respect to performance of any of its obligations under this Agreement.
8.Withholding Taxes.  The Company may withhold from all payments due to the Participant (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.

9.Reimbursement of Expenses.  Following a Change in Control, if any contest or dispute shall arise under this Plan involving termination of a Participant's employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse the Participant on a current basis for all reasonable legal fees and related expenses, if any, incurred by the Participant in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate as reported in The Wall Street Journal, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue thirty (30) days from the date the Company receives the Participant's statement for such fees and expenses through the date of payment thereof, regardless of whether or not the Participant's claim is upheld by a court of competent jurisdiction or an arbitration panel; provided, however, that the Participant shall be required to repay immediately any such amounts to the Company to the extent that a court or an arbitration panel issues a final and non-appealable order setting forth the determination that the position taken by the Participant was frivolous or advanced by the Participant in bad faith.

10.No Guarantee of Employment.  Nothing in this Plan shall be deemed to entitle the Participant to continued employment with the Company or its Subsidiaries.

11.Successors; Binding Agreement.  (a)  This Plan shall not be terminated by any Business Combination.  In the event of any Business Combination, the provisions of this Plan shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.

(b)    The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Plan and shall constitute Good Reason hereunder and shall entitle the Participant to compensation and other benefits from the Company in the same amount and on the same terms as the Participant would be entitled hereunder if the Participant's employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by a Participant.

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(c)    The benefits provided under this Plan shall inure to the benefit of and be enforceable by the Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Participant shall die while any amounts would be payable to the Participant hereunder had the Participant continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to such person or persons appointed in writing by the Participant to receive such amounts or, if no person is so appointed, to the Participant's estate.

12.Notice.  (a)  For purposes of this Plan, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:

If to the Participant:  the address listed as the Participant's address in the Company's personnel files.
If to the Company:  
Quest Diagnostics Incorporated 
1290 Wall Street West 
Lyndhurst, NJ 07071 
Attention:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(b)    A written notice of the Participant's Date of Termination by the Company or the Participant, as the case may be, to the other, shall (i) indicate the specific termination provision in this Plan relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant's employment under the provision so indicated and (iii) specify the date of termination, which date shall be not less than fifteen (15) nor more than sixty (60) days after the giving of such notice; provided, however, that the Company may in its sole discretion accelerate such date to an earlier date or, alternatively, place the Participant on paid leave during such period.  The failure by the Participant or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Participant or the Company hereunder or preclude the Participant or the Company from asserting such fact or circumstance in enforcing the Participant's or the Company's rights hereunder.

13.Full Settlement; Resolution of Disputes and Costs.  (a)  The Company's obligation to make any payments provided for in this Plan and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to the Participant under any other severance or employment agreement between the Participant and the Company, and any severance plan of the Company.  In no event shall the Participant be obligated to seek other employment or take other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and, except as provided in the Separation Agreement and Release, such amounts shall not be reduced whether or not the Participant obtains other employment.

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(b)    Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in New Jersey by three arbitrators in accordance with the commercial arbitration rules of the American Arbitration Association (“AAA”) then in effect.  One arbitrator shall be selected by the Company, the other by the Participant and the third jointly by these arbitrators (or if they are unable to agree within thirty (30) days of the commencement of arbitration the third arbitrator will be appointed by the AAA).  Judgment may be entered on the arbitrators' award in any court having jurisdiction.  In the event of any such dispute or controversy arising during a Termination Period, the Company shall bear all costs and expenses arising in connection with any arbitration proceeding on the same terms as set forth in Section 9 of this Plan.

14.Employment with Subsidiaries.  Employment with the Company for purposes of this Plan shall include employment with any Subsidiary.

15.Survival.  The respective obligations and benefits afforded to the Company and the Participant as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Plan) 5, 6, 8(c) and 10 shall survive the termination of this Plan.

16.GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS, AND APPLICABLE FEDERAL LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS PLAN SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS PLAN, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

17.Amendment and Termination.  The Board may amend or terminate the Plan at any time; provided, however, that (i) Sections 3(b), 4(a) and 4(b) may not be amended in a manner which is materially adverse to any Participant then listed on Schedule A or B without such Participant's written consent, (ii) during the period commencing on a Change in Control and ending on the second anniversary of the Change in Control, the Plan (including, for the avoidance of doubt, any Schedules, Appendices and Exhibits) may not be amended or terminated by the Board in any manner which is materially adverse to any Participant then listed on Schedule A or B without such Participant's written consent and (iii) any termination or amendments to the Plan (including, for the avoidance of doubt, any Schedules, Appendices and Exhibits) that are materially adverse to the interests of any Participant then listed on Schedule A or B, and that occur during the period of time beginning on a date three (3) months prior to a Potential Change in Control and ending on the termination of the agreement that constituted the Potential Change in Control, shall be void unless consented to in writing by the affected Participant.

18.Interpretation and Administration.  The Plan shall be administered by the Board.  The Board may delegate any of its powers under the Plan to the Compensation Committee of the Board (or any successor committee).  With respect to those Participants who are not subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Committee may delegate any of its powers under the Plan to the Chief Executive Officer of the Company.  The Board, the Compensation Committee (or any 

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successor committee) and the Chief Executive Officer (to the extent of the powers delegated to him) shall have the authority in its sole and absolute discretion to:  (i) exercise all of the powers granted to it under this Plan; (ii) construe, interpret and implement this Plan; (iii) prescribe, amend and rescind rules and regulations relating to this Plan, including rules and regulations governing its own operations; (iv) make all determinations necessary or advisable in administering this Plan; (v) correct any defect, supply any omission and reconcile any inconsistency in this Plan; and (vi) amend this Plan to reflect changes in or interpretations of applicable law, rules or regulations.  The determination of the Board on all matters relating to the Plan and any amounts payable thereunder shall be final, binding and conclusive on all parties; provided, however, that following a Change in Control, notwithstanding anything in this Plan to the contrary, any court, tribunal or arbitration panel that adjudicates any dispute, controversy or claim arising between a Participant and the Company, or any of their delegates or successors, in respect of a Participant's Qualifying Termination, will apply a de novo standard of review to any determinations made by such person and such de novo standard shall apply notwithstanding the grant of full discretion hereunder to any such person or characterization of any such decision by such person as final, binding or conclusive on any party.

19.Claims and Appeals.  Participants may submit claims for benefits by giving notice to the Company pursuant to Section 12 of this Plan.  If a Participant believes that he or she has not received coverage or benefits to which he or she is entitled under the Plan, the Participant may notify the Board in writing of a claim for coverage or benefits.  If the claim for coverage or benefits is denied in whole or in part, the Board shall notify the applicant in writing of such denial within thirty (30) days (which may be extended to sixty (60) days under special circumstances), with such notice setting forth:  (i) the specific reasons for the denial; (ii) the Plan provisions upon which the denial is based; (iii) any additional material or information necessary for the applicant to perfect his or her claim; and (iv) the procedures for requesting a review of the denial.  Upon a denial of a claim by the Board, the Participant may:  (i) request a review of the denial by the Board or, where review authority has been so delegated, by such other person or entity as may be designated by the Board for this purpose; (ii) review any Policy documents relevant to his or her claim; and (iii) submit issues and comments to the Board or its delegate that are relevant to the review.  Any request for review must be made in writing and received by the Board or its delegate within sixty (60) days of the date the applicant received notice of the initial denial, unless special circumstances require an extension of time for processing.  The Board or its delegate will make a written ruling on the applicant's request for review setting forth the reasons for the decision and the Plan provisions upon which the denial, if appropriate, is based.  This written ruling shall be made within thirty (30) days of the date the Board or its delegate receives the applicant's request for review unless special circumstances require an extension of time for processing, in which case a decision will be rendered as soon as possible, but not later than sixty (60) days after receipt of the request for review.  All extensions of time permitted by this Section 16 will be permitted at the sole discretion of the Board or its delegate.  If the Board does not provide the Participant with written notice of the denial of his or her appeal, the Participant's claim shall be deemed denied.

20.Type of Policy.  This Plan is intended to be, and shall be interpreted as an unfunded employee welfare plan under Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and Section 2520.104‐24 of the Department of Labor Regulations, maintained primarily for the purpose of providing employee welfare benefits, to the extent that it provides welfare benefits, and under Sections 201, 301 and 401 of 

13

ERISA, as a plan that is unfunded and maintained primarily for the purpose of providing deferred compensation, to the extent that it provides such compensation, in each case for a select group of management or highly compensated employees.

21.No Duplication of Benefits.  Except as otherwise expressly provided pursuant to this Plan, this Plan shall be construed and administered in a manner which avoids duplication of compensation and benefits which may be provided under any other plan, program, policy, or other arrangement.  In the event a Participant is covered by any other plan, program, policy, individually negotiated agreement or other arrangement, in effect as of his or her Date of Termination, that may duplicate the payments provided in Sections 4 or 5, as applicable, the Company is specifically empowered to reduce or eliminate the duplicative benefits provided for under the Plan.  In taking such action, the Company will be guided by the principles that (1) such a Participant will otherwise be treated, for the purpose of the Sections specified above, no more or no less favorably than are other Participants who are not covered by such other plan, program, policy, individually negotiated agreement or other arrangement and (2) the provisions of such other plan, program, policy, individually negotiated agreement or other arrangement (including, but not limited to, a special individual pension, a special deferral account and/or a special equity based grant) which are not duplicative of the payments provided in Sections 4 or 5, as applicable, will not be considered in determining elimination and/or reductions in Plan benefits.

22.Nonassignability.  Benefits under the Plan may not be assigned by the Participant.  The terms and conditions of the Plan shall be binding on the successors and assigns of the Company.

23.Effective Date.  The Plan, as amended and restated, shall be effective as of May 10, 2012.

14

Schedule A
		
	Robert A. Hagemann
	Senior Vice President and Chief Financial Officer

		
	Michael E. Prevoznik
	Senior Vice President and General Counsel

		
	Stephen H. Rusckowski
	President and Chief Executive Officer

15

Schedule B
Jon R. Cohen, M.D.        Senior Vice President, Chief Medical Officer
Everett Cunningham        Senior Vice President, Commercial
Catherine T. Doherty         Senior Vice President, Clinical Franchises
John B. Haydon        Senior Vice President, Operations 
Kathy P. Ordoñez        Senior Vice President, Diagnostic Solutions

16

Appendix A 
Cutback to 280G Safe Harbor Cap in Certain Circumstances -
Schedule A and Schedule B Participants
(a)  Anything in this Plan to the contrary notwithstanding, in the event it shall be determined that (i) any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of the Participant (whether pursuant to the terms of this Plan or otherwise) (the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (such excise tax,  the “Excise Tax”), and (ii) the reduction of the amounts payable to the Participant under this Plan to the maximum amount that could be paid to the Participant without giving rise to the Excise Tax (the “Safe Harbor Cap”) would provide the Participant with a greater after-tax amount than if such amounts were not reduced, then the amounts payable to the Participant under this Plan shall be reduced (but not below zero) to the Safe Harbor Cap.  The reduction of the Payments, if applicable, shall be made by reducing the payments and benefits under the following sections of this Plan in the following order: (i) Section 5(a), (ii) Section 5(b) and (iii) Section 5(c) (in the order set forth in such Section 5(c)).  For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Plan (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a greater after tax result to the Participant, no amounts payable under this Plan shall be reduced pursuant to this provision.
(b)  All determinations required to be made under this Appendix A shall be made by a public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Participant within fifteen (15) business days of the receipt of notice from the Company or the Participant that there has been a Payment, or such earlier time as is requested by the Company (collectively, the “Determination”).  For the avoidance of doubt, the Accounting Firm may use the Option Redetermination Amount (as defined in paragraph (c), below) in determining the reduction of the Payments to the Safe Harbor Cap.  Notwithstanding the foregoing, in the event (i) the Board shall determine prior to the Change in Control that the Accounting Firm is precluded from performing such services under applicable auditor independence rules or (ii) the Audit Committee of the Board determines that it does not want the Accounting Firm to perform such services because of auditor independence concerns or (iii) the Accounting Firm is serving as accountant or auditor for the person(s) effecting the Change in Control, the Board shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company, and the Company shall enter into any agreement reasonably requested by the Accounting Firm in connection with the performance of the services hereunder.  If the Accounting Firm determines that no Excise Tax is payable by a Participant, it shall furnish the Participant with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on the Participant's applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish the Participant with a written opinion to such effect.  The Determination by the Accounting Firm shall be binding upon the Company and the Participant.

App. A-1

(c)  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Payments will have been made to, or provided for the benefit of, a Participant by the Company, which are in excess of the limitations provided in Paragraph (a) (hereinafter referred to as an “Overpayment”), such Overpayment shall be deemed for all purposes to be a loan to the Participant made on the date the Participant received the Overpayment and the Participant shall repay the Overpayment to the Company on demand, together with interest on the Overpayment at the applicable federal rate (as defined in Section 1274(d) of the Code) from the date of the Participant's receipt of such Overpayment until the date of such repayment.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Payments which will not have been made by the Company should have been made to a Participant (an “Underpayment”), consistent with the calculations required to be made under this Appendix A.  In the event that it is determined (i) by the Accounting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on its federal income tax return) or the IRS or (ii) pursuant to a determination by a court, that an Underpayment has occurred, the Company shall pay an amount equal to such Underpayment to the Participant within ten (10) days of such determination together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Participant until the date of payment.  The Participant shall cooperate, to the extent his or her expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the IRS in connection with the Excise Tax.  Notwithstanding the foregoing, in the event that amounts payable under this Plan were reduced pursuant to Paragraph (a) and the value of stock options is subsequently redetermined  by the Accounting Firm within the context of Treasury Regulation §1.280G-1 Q/A 33 that reduces the value of the Payments attributable to such options (the “Option Redetermination Amount”), the Company shall pay to the Participant (on the first business day of the calendar year following the year the Option Redetermination is made) any cash payments payable under this Plan that were not previously paid solely as a result of Paragraph (a) up to the Safe Harbor Cap, plus interest from the date such amount would have been paid to the participant until the date of payment at the 3 month Treasury Bill rate.

App. A-2

Exhibit A
FORM OF SEPARATION AGREEMENT AND RELEASE
(HEREIN “AGREEMENT”)
Quest Diagnostics Incorporated (the “Company”) and _______________ (“Executive”) agree as follows:
1.Executive's employment with the Company will terminate effective [Date].

2.Executive agrees to make himself reasonably available to the Company to respond to requests by the Company for information concerning litigation, regulatory inquiry or investigation, involving facts or events relating to the Company that may be within his knowledge.  Executive will cooperate fully with the Company in connection with any and all future litigation or regulatory proceedings brought by or against the Company to the extent the Company reasonably deems Executive's cooperation necessary.  Executive will be entitled to reimbursement of reasonable out-of-pocket expenses (not including counsel fees) incurred in connection with fulfilling his obligations under this Section 2.

3.In consideration of Executive's undertakings herein, the Company will pay an amount equal to $____________ in accordance with Section 4 of the Company's Executive Severance Plan (the “Severance Plan”), less required deductions (including, but not limited to, federal, state and local tax withholdings) as separation/severance pay (the “Severance Payment”).  The Severance Payment will be paid in accordance with the Severance Plan.  Payment of the Severance Payment is contingent upon the execution of this Agreement by Executive and Executive's compliance with all terms and conditions of this Agreement and the Severance Plan.  Executive agrees that if this Agreement does not become effective, the Company shall not be required to make any further payments to Executive pursuant to this Agreement or the Severance Plan and shall be entitled to recover all payments already made by it (including interest thereon).

4.Executive understands and agrees that any amounts that Executive owes the Company, including any salary or other overpayments related to Executive's employment with the Company, will be offset and deducted from Executive's final paycheck from the Company.  Executive specifically authorizes the Company to offset and deduct any such amounts from his final paycheck.  Executive agrees and acknowledges that, to the extent the amount of Executive's final paycheck is not sufficient to repay the full amount that Executive owes to the Company, if any, the full remaining amount owed to the Company, if any, will be offset and deducted from the amount of the Severance Payment.  Executive specifically authorizes the Company to offset and deduct any such amounts from his Severance Payment.

5.Executive agrees that, after payment of Executive's final paycheck on [Date] and the Severance Payment, Executive will have received all compensation and benefits that are due and owing to Executive by the Company, including but not limited to salary, vacation pay, bonus, commissions and incentive/override compensation but excluding any benefits or services provided pursuant to Sections 4(e) and 4(f) of the Severance Plan.

Exh. A-1

6.Executive represents that he has returned to the Company all property or information, including, without limitation, all reports, files, memos, plans, lists, or other records (whether electronically stored or not) belonging to the Company or its affiliates, including copies, extracts or other documents derived from such property or information.  Executive will immediately forfeit all rights and benefits under this Agreement and the Severance Plan, including, without limitation, the right to receive any Severance Payment if Executive, directly or indirectly, at any time (i) discloses to any third party or entity any trade secrets or other proprietary or confidential information pertaining to the Company or any of its affiliates or uses such secrets or information without the prior written consent of the General Counsel of the Company or (ii) takes any actions or makes or publishes any statements, written or oral, or instigates, assists or participates in the making or publication of any such statements which libel, slander or disparage the Company or any of its past or present directors, officers or employees.  Nothing in this Agreement shall prevent or prohibit Executive or the Company from responding to an order, subpoena, other legal process or regulatory inquiry directed to them or from providing information to or making a filing with a governmental or regulatory body.  Executive agrees that upon learning of any order, subpoena or other legal process seeking information that would otherwise be prohibited from disclosure under this Agreement, he will promptly notify the Company, in writing, directed to the Company's General Counsel.  In the event disclosure is so required, Executive agrees not to oppose any action by the Company to seek or obtain a protective order or other appropriate remedy.

7.Executive agrees that Executive's Employment and Confidentiality Agreement (the “Employment and Confidentiality Agreement”) shall continue to be in full force and effect, including but not limited to all non-competition and non-solicitation provisions contained therein.

8.Executive hereby represents that he has not filed any action, complaint, charge, grievance or arbitration against the Company or any of its affiliates in connection with any matters relating, directly or indirectly, to his employment, and covenants and agrees not to file any such action, complaint or arbitration or commence any other judicial or arbitral proceedings against the Company or any of its affiliates with respect to events occurring prior to the termination of his employment with the Company or any affiliates thereof.

9.Effective on [Date], the Company will cease all health benefit coverage and other benefit coverage for Executive.

10.GENERAL RELEASE - Effective as of the Effective Date, and in return for the consideration set forth above, Executive agrees not to sue or file any action, claim, or lawsuit against the Company, agrees not to pursue, seek to recover or recover any alleged damages, seek to obtain or obtain any other form of relief or remedy with respect to, and cause the dismissal or withdrawal of, any lawsuit, action, claim, or charge against the Company, and Executive agrees to waive all claims and release and forever discharge the Company, its officers, directors, subsidiaries, affiliates, parents, attorneys, shareholders and employees from any claims, demands, actions, causes of action or liabilities for compensatory damages or any other relief or remedy, and obligations of any kind or nature whatsoever, based on any matter, cause or thing, relating in any way, directly or indirectly, to his employment, from the beginning of time through the Effective Date of this Agreement, whether known or unknown, fixed or contingent, liquidated or unliquidated, and whether arising from tort, statute, or contract, including, but not limited to, any claims arising under or pursuant to the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1871, the Civil Rights Act 

Exh. A-2

of 1991, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act of 1993, the Occupational Safety & Health Act, the Employee Retirement Income Security Act of 1974, the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Notification Act, the Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967 (“ADEA”), New York State Labor Law, New York State Human Rights Law, New York Human Rights Law, and any other state, federal, city, county or local statute, rule, regulation, ordinance or order, or the national or local law of any foreign country, any claim for future consideration for employment with the Company, any claims for attorneys' fees and costs and any employment rights or entitlement law, and any claims for wrongful discharge, intentional infliction of emotional distress, defamation, libel or slander, payment of wages, outrageous behavior, breach of contract or any duty allegedly owed to Executive, discrimination based upon race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or another unlawful criterion or circumstance, and any other theory of recovery.  It is the intention of the parties to make this release as broad and as general as the law permits.

[Executive acknowledges that he is aware of, has read, has had explained to him by his attorneys, understands and expressly waives any and all rights he has or may have under Section 1542 of the California Civil Code, which provides as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him must have materially affected his or her settlement with the debtor.”]1 
11.Executive acknowledges that he may later discover facts different from or in addition to those which he knows or believes to be true now, and he agrees that, in such event, this Agreement shall nevertheless remain effective in all respects, notwithstanding such different or additional facts or the discovery of those facts.

12.This Agreement may not be introduced in any legal or administrative proceeding, or other similar forum, except one concerning a breach of this Agreement or the Severance Plan.

13.Executive acknowledges that Executive has made an independent investigation of the facts, and does not rely on any statement or representation of the Company in entering into this Agreement, other than those set forth herein.

14.Executive agrees that, without limiting the Company's remedies, should he commence, continue, join in, or in any other manner attempt to assert any claim released in connection herewith, or otherwise violate in a material fashion any of the terms of this Agreement, the Company shall not be required to make any further payments to the Executive pursuant to this Agreement or the Severance Plan and shall be entitled to recover all payments already made by it (including interest thereon), in addition to all damages, attorneys' fees and 

1 Include bracketed language for California employees.

Exh. A-3

costs the Company incurs in connection with Executive's breach of this Agreement.  Executive further agrees that the Company shall be entitled to the repayments and recovery of damages described above without waiver of or prejudice to the release granted by him in connection with this Agreement, and that his violation or breach of any provision of this Agreement shall forever release and discharge the Company from the performance of its obligations arising from the Agreement.

15.Executive has been advised and acknowledges that he has been given forty-five (45) days to sign this Agreement, he has seven (7) days following his signing of this Agreement to revoke and cancel the terms and conditions contained herein, and the terms and conditions of this Agreement shall not become effective or enforceable until the revocation period has expired (the “Effective Date”).

16.Executive acknowledges that Executive has been advised hereby to consult with, and has consulted with, an attorney of his choice prior to signing this Agreement.

17.Executive acknowledges that Executive has fully read this Agreement. understands the contents of this Agreement, and agrees to its terms and conditions of his own free will, knowingly and voluntarily, and without any duress or coercion.

18.Executive understands that this Agreement includes a final general release, and that Executive can make no further claims against the Company or the persons listed in Section 10 of this Agreement relating in any way, directly or indirectly, to his employment.  Executive also understands that this Agreement precludes Executive from recovering any damages or other relief as a result of any lawsuit, grievance, charge or claim brought on Executive's behalf against the Company or the persons listed in Section 10 of this Agreement.

19.Executive acknowledges that Executive is receiving adequate consideration (that is in addition to what Executive is otherwise entitled to) for signing this Agreement.

20.This Agreement and the Severance Plan constitute the complete understanding between Executive and the Company regarding the subject matter hereof and thereof.  No other promises or agreements regarding the subject matter hereof and thereof will be binding unless signed by Executive and the Company.

21.Executive and the Company agree that all notices or other communications required or permitted to be given under the terms of this Agreement shall be given in accordance with Section 9 of the Severance Plan.

22.Executive and the Company agree that any disputes relating to any matters covered under the terms of this Agreement shall be resolved in accordance with Section 10 of the Severance Plan.

23.By entering into this Agreement, the Company does not admit and specifically denies any liability, wrongdoing or violation of any law, statute, regulation or policy, and it is expressly understood and agreed that this Agreement is being entered into solely for the purpose of amicably resolving all matters of any kind whatsoever between Executive and the Company.

Exh. A-4

24.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 or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

25.The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations.

26.Unless expressly specified elsewhere in this Agreement, this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York without reference to the principles of conflict of law.

Exh. A-5

27.This Agreement may be executed in one or more counterparts.
	
							
	Company
	 
	Executive

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	By:
	 
	 
	By:
	 

	 
	 
	 
	 
	 

	Date:
	 
	 
	Date:
	 

Exh. A-6ShawnPallagiEmploymentAgreement

Exhibit 10.1
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of January 1, 2013 (the “Effective Date”), by and between Remy International, Inc., a Delaware corporation (the “Company”), and Shawn Pallagi (the “Employee”).  In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:
1.Purpose.  The purpose of this Agreement is to recognize the Employee’s significant contributions to the overall financial performance and success of the Company and to provide a single, integrated document which shall provide the basis for the Employee’s continued employment by the Company.
2.Employment and Duties. Subject to the terms and conditions of this Agreement, the Company agrees to continue to employ the Employee to serve in an executive capacity as Senior Vice-President and Chief Human Resources Officer.  The Employee accepts such continued employment and agrees to undertake and discharge the duties, functions and responsibilities commensurate with the aforesaid position and such other duties, functions and responsibilities as may be prescribed from time to time by the Company’s Chief Executive Officer (“CEO”).  The Employee shall devote his full business time, attention and effort to the performance of his duties hereunder and, except as described below, shall not engage in any business, profession or occupation, other than personal, personal investment, charitable, or civic activities or other matters that do not conflict with the Employee’s duties.  The Employee shall report to the President and CEO of the Company.
3.Term. The term of this Agreement shall commence on the Effective Date and shall continue until December 31, 2013 or if earlier pursuant to Section 8 (including any extensions as provided in this Section 3, the “Employment Term”).  Notwithstanding any termination of the Employment Term or the Employee’s employment, the Employee and the Company agree that Sections 8 through 28 hereof shall remain in effect until all parties’ obligations and benefits are satisfied thereunder.  This Agreement shall continue to renew for successive one-year terms upon expiration of the original Employment Term, and each extension thereof, unless either party gives prior written notice of its intent not to renew at least ninety (90) days before the end of the applicable Employment Term.   
4.Salary. During the Employment Term, the Company shall pay the Employee a base salary at an annual rate, before deducting all applicable withholdings, of no less than three hundred thousand ($300,000) per year, payable at the time and in the manner dictated by the Company’s standard payroll policies.  Such minimum annual base salary may be periodically reviewed and increased (but not decreased without the Employee’s express written consent and except in connection with a broad based corporate officer salary decrease) at the discretion of the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board’) to reflect, among other matters, cost of living increases and performance results (such annual base salary, including any increases pursuant to this Section 4, the “Annual Base Salary”).
5.Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and long-term incentive plans which the Company or an affiliate 

SGR\8735164.1

of the Company may from time to time make available to the Employee, the Employee shall be entitled to the following during the Employment Term:
		
	(a)
	the standard Company benefits enjoyed by and provided by Company to senior executives, including an annual executive physical;

		
	(b)
	an annual incentive bonus opportunity under the Company’s Amended and Restated Annual Bonus Plan (“Annual Bonus Plan”) for each calendar year included in the Employment Term, with such opportunity to be earned based upon attainment of performance objectives established by the Committee (“Annual Bonus”).  The Employee shall be eligible for an annual target incentive bonus of not less than 55% of his base salary under the Annual Bonus Plan, subject to the terms and conditions thereunder, including the attainment of objectives already established the Board.  The Annual Bonus shall be paid no later than the March 15 first following the calendar year to which the Annual Bonus relates. 

		
	(c)
	An Equity Grant valued at $400,000 for 2013.

6.Vacation. For and during each calendar year within the Employment Term, the Employee shall be entitled to 3 weeks paid vacation periods consistent with the Employee’s position and in accordance with the Company’s standard policies.  In addition, the Employee shall be entitled to such holidays consistent with the Company’s standard.
7.Expense Reimbursement.  In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses to the extent such reimbursement is permitted under the Company’s expense reimbursement policy.  
8.Termination of Employment. The Company or the Employee may terminate the Employee’s employment at any time and for any reason in accordance with Subsection 8(a) below.  The Employment Term shall be deemed to have ended on the last day of the Employee’s employment.  The Employment Term shall terminate automatically upon the Employee’s death.
		
	(a)
	Notice of Termination. Any purported termination of the Employee’s employment (other than by reason of death) shall be communicated by written Notice of Termination (as defined herein) from one party to the other in accordance with the notice provisions contained in Section 25.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice that indicates the Date of Termination (as that term is defined in Subsection 8(b)) and, with respect to a termination due to Disability (as that term is defined in Subsection 8(e)), Cause (as that term is defined in Subsection 8(d)), or Good Reason (as that term is defined in Subsection 8(f)), sets forth in reasonable detail the facts and circumstances that are alleged to provide a basis for such termination.  A Notice of Termination from the Company shall specify whether the termination is with or without Cause or due to the Employee’s Disability.  A Notice of Termination from the Employee shall specify whether the termination is with or without Good Reason.

		
	(b)
	Date of Termination. For purposes of this Agreement, “Date of Termination” shall mean the date specified in the Notice of Termination (but in no event shall such date 

2
SGR\8735164.1

be earlier than the thirtieth (30th) day following the date the Notice of Termination is given) or the date of the Employee’s death.  Notwithstanding the foregoing, in no event shall the Date of Termination occur until the Employee experiences a “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the “Date of Termination,” and all references herein to a “termination of employment” (or words of similar meaning) shall mean a “separation of service” within the meaning of Code Section 409A.
		
	(c)
	No Waiver. The failure to set forth any fact or circumstance in a Notice of Termination, which fact or circumstance was not known to the party giving the Notice of Termination when the notice was given, shall not constitute a waiver of the right to assert such fact or circumstance in an attempt to enforce any right under or provision of this Agreement.

		
	(d)
	Cause. For purposes of this Agreement, a termination for “Cause” means (i) the Employee engages in gross misconduct or gross negligence in the performance of the Employee’s material duties for the Company or any of its subsidiaries, (ii) the Employee embezzles assets of the Company or any of its subsidiaries, (iii) the Employee is convicted of or enters a plea of guilty or nolo contendere to a felony or misdemeanor involving moral turpitude, (iv) the Employee’s breach of any restrictive covenant set forth in Section 8 of this Agreement, (v) the Employee’s willful and material failure to follow the lawful and reasonable instructions of the CEO or the Board, or (vi) the Employee’s becoming barred or prohibited by the United States Securities and Exchange Commission or other regulatory body from holding his position with the Company or any of its subsidiaries; provided, however, that in each such case (except with regard to subsection (iii) or (vi), is not cured within 30 days after receipt of notice.

		
	(e)
	Disability. For purposes of this Agreement, a termination based upon “Disability” means a termination by the Company based upon the Employee’s entitlement to long-term disability benefits under the Company’s long-term disability plan or policy, as the case may be, as in effect on the Date of Termination; provided, however, that if the Employee is not a participant in the Company’s long-term disability plan or policy on the Date of Termination, he shall still be considered terminated based upon Disability if he would have been entitled to benefits under the Company’s long-term disability plan or policy had he been a participant on his Date of Termination.

		
	(f)
	Good Reason. For purposes of this Agreement, a termination for “Good Reason” means a termination by the Employee based upon the occurrence (without The Employee’s express written consent) of any of the following:

		
	(i)
	a material adverse change in the Employee’s position or title, or a material diminution in the Employee’s managerial authority, duties or responsibilities or the conditions under which such duties or responsibilities are performed (e.g., a material reduction in the number or scope of department(s), functional group(s) or personnel over which the Employee has managerial authority);

3
SGR\8735164.1

		
	(ii)
	a material adverse change in the position to which the Employee reports (i.e., the CEO), or a material diminution in the managerial authority, duties or responsibilities of the person in that position;

		
	(iii)
	a material diminution in the Employee’s Annual Base Salary or Annual Bonus opportunity except in connection with a broad based corporate officer salary decrease; or

		
	(iv)
	notice of non-renewal of this Agreement by the Company pursuant to Section 3 hereof or a material breach by Company of any of its obligations under this Agreement.

		
	(g)
	Notwithstanding the foregoing, the Employee being placed on a paid leave for up to sixty (60) days pending a determination of whether there is a basis to terminate the Employee for Cause shall not constitute Good Reason.  The Employee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder; provided, however, that no such event described above shall constitute Good Reason unless: (i) the Employee gives Notice of Termination to Company specifying the condition or event relied upon for such termination within ninety (90) days of the initial existence of such event; and (ii) Company fails to cure the condition or event constituting Good Reason within thirty (30) days following receipt of the Employee’s Notice of Termination.  

9.Obligations of the Company Upon Termination. 
		
	(a)
	Termination by the Company for a Reason Other than Cause, Death or Disability and Termination by the Employee for Good Reason.  If the Employee’s employment is terminated by the Company for any reason other than Cause, Death or Disability; or by the Employee for Good Reason:

		
	(i)
	the Company shall pay the Employee the following (collectively, the “Accrued Obligations”): (A) within five (5) business days after the Date of Termination, any earned but unpaid Annual Base Salary; (B) within a reasonable time following submission of all applicable documentation, any expense reimbursement payments owed to the Employee for expenses incurred prior to the Date of Termination; and (C) any other accrued and vested payments under any employee benefit plan, to be paid in accordance with the terms of such employee benefit plan, including the Omnibus Plan.

		
	(ii)
	the Company shall pay the Employee no later than March 15th of the calendar year following the year in which the Date of Termination occurs, a prorated Annual Bonus based upon the actual Annual Bonus that would have been earned by the Employee for the year in which the Date of Termination occurs (based upon the target Annual Bonus opportunity in the year in which the Date of Termination occurred, or the prior year if no target Annual Bonus opportunity has yet been determined, and the actual satisfaction of the applicable performance measures, but ignoring any requirement under the Annual Bonus Plan that the Employee must be employed on the payment 

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date) multiplied by the percentage of the calendar year completed before the Date of Termination; 
		
	(iii)
	the Company shall pay the Employee, no later than the sixtieth (60th) calendar day after the Date of Termination, a lump-sum payment equal to 100% of the sum of: (A) the Employee’s Annual Base Salary in effect immediately prior to the Date of Termination (disregarding any reduction in Annual Base Salary to which the Employee did not expressly consent in writing); and (B) the higher of (i) the highest of the Annual Bonus paid in the three calendar years prior to the Date of Termination, or (ii) the target Annual Bonus for the year of termination; and

		
	(iv)
	as long as the Employee pays the full monthly premiums for COBRA coverage, the Company shall provide the Employee and, as applicable, the Employee’s eligible dependents with continued medical and dental coverage, on the same basis as provided to the Company’s active executives and their dependents until the earlier of: (i) two (2) years after the Date of Termination; or (ii) the date the Employee is first eligible for medical and dental coverage (without pre-existing condition limitations) with a subsequent employer.  In addition, within sixty-five (65) days after the Date of Termination, the Company shall pay the Employee a lump sum cash payment equal to twenty-four (24) months of medical and dental COBRA premiums based on the level of coverage in effect for the Employee (e.g., employee only or family coverage) on the Date of Termination.  

		
	(b)
	Termination by the Company for Cause and by the Employee without Good Reason. If the Employee’s employment is terminated (i) by the Company for Cause or (ii) by the Employee without Good Reason, the Company’s only obligation under this Agreement shall be payment of any Accrued Obligations.

		
	(c)
	Termination due to Death. If the Employee’s employment is terminated due to death, the Company shall pay to the Employee’s estate or personal representative, within sixty-five (65) days after the Date of Termination any Accrued Obligations.  In addition, the Company shall pay to the Employee’s estate or personal representative: (i) a prorated Annual Bonus, for the year of termination, determined in accordance with the terms of the Annual Bonus Plan, but not less than the amount equal to the target Annual Bonus for the year of termination, multiplied by the percentage of the calendar year completed before the Date of Termination such payment to be made no later than 21⁄2 months after the end of the year in which the death occurs and at the time when bonus payments are paid to other senior executives in accordance with the Company’s normal payroll practices, and (ii) the Long Term Bonus and Restricted Stock Awards or other vested payments under any employee benefit plan which are payable in accordance with such plans.

		
	(d)
	Termination Due to the Employee’s Disability.  The Company may terminate the Employee’s employment hereunder due to Disability in accordance with this Section.  Notwithstanding the foregoing, if, in the good faith determination of the Board, the Employee is suffering from a mental or physical disease or disability that impacts 

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the performance of his duties in any material respect, the Company may suspend the Employee for a period of up to one hundred eighty (180) days during the Employment Term (provided that such suspension shall not constitute Good Reason under Section 8(f) and provided further that during such suspension, the Employee shall (i) continue to receive his Annual Base Salary in accordance with Section 4 and (ii) be eligible to receive benefits he may be entitled to under the Company’s short-term disability plan, if any).  If the Board does not re-instate the Employee to employment (under the terms and conditions of this Agreement) by the end of such one hundred eighty (180) day period or at any time prior to the end of such period, in the Board’s sole discretion, the Company may (i) terminate the Employee’s employment without Cause (as provided under Section 8(d)) if the Employee’s condition does not meet the definition of Disability (as provided under this Section), or (ii) for Disability if the Employee’s condition does meet the definition of Disability at the time of termination.  In such latter event, the Employee or his legal representative, as the case may be, shall be entitled to: (i) any Annual Base Salary earned but not paid as of the date of the Employee’s termination due to Disability, (ii) a pro-rata payment, for the year of termination determined according to the terms of the Annual Bonus Plan, but not less than the amount equal to the target Annual Bonus multiplied by a fraction, the numerator of which is the number of days transpired in the calendar year up to and including the date on which the Employee is terminated by the Company due to Disability, and the denominator of which is 365, such payment shall be made no later than 21⁄2 months after the end of the year in which the termination due to disability occurs and at the time when bonus payments are paid to other senior executives in accordance with the Company’s normal payroll procedures, and (iii) the Long Term Bonus and Restricted Stock Awards or other vested payments under any employee benefit plan which are payable in accordance with such plans.
		
	(e)
	Six-Month Delay. To the extent the Employee is a “specified employee,” as defined in Code Section 409A(a)(2)(B)(i) and the regulations and other guidance promulgated thereunder and any elections made by the Company in accordance therewith, notwithstanding the timing of payment provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b)) upon separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), after taking into account all available exemptions, that would otherwise be payable, distributable or settled during the six (6) month period after separation from service, will be made during such six (6) month period, and any such payment, distribution or benefit will instead be paid on the first business day after such six (6) month period, provided, however, that if the Employee dies following the Date of Termination and prior to the payment, distribution, settlement or provision of any payments, distributions or benefits delayed on account of Code Section 409A, such payments, distributions or benefits shall be paid or provided to the personal representative of the Employee’s estate within thirty (30) days after the date of the Employee’s death.

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10.Excise Taxes. If any payments or benefits paid or provided or to be paid or provided to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, his employment with the Company or its subsidiaries or the termination thereof (a “Payment” and, collectively, the “Payments”) would be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”), then, the Employee may elect for such Payments to be reduced to one dollar less than the amount that would constitute a “parachute payment” under Code Section 280G (the “Scaled Back Amount”).  Any such election must be in writing and delivered to the Company within thirty (30) days after the Date of Termination.  If the Employee does not elect to have Payments reduced to the Scaled Back Amount, the Employee shall be responsible for payment of any Excise Tax resulting from the Payments and the Employee shall not be entitled to a gross-up payment under this Agreement or any other agreement for such Excise Tax.  If the Payments are to be reduced, they shall be reduced in the following order of priority: (i) first from cash compensation, (ii) next from equity compensation, then (iii) pro-rata among all remaining Payments and benefits.  To the extent there is a question as to which Payments within any of the foregoing categories are to be reduced first, the Payments that will produce the greatest present value reduction in the Payments with the least reduction in economic value provided to the Employee shall be reduced first.  Notwithstanding the order of priority of reduction set forth above, the Employee may include in the Employee’s election for a Scaled Back Amount a change to the order of such Payment reduction.  The Company shall follow such revised reduction order, if and only if, the Company, in its sole discretion, determines such change does not violate the provisions of Code Section 409A.  
11.Non-Delegation of the Employee’s Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer.
12.Confidential Information. The Employee acknowledges that he will occupy a position of trust and confidence and will have access to and learn substantial information about the Company and its affiliates and their operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the financial positions and financing arrangements of the Company and its affiliates.  The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company and/or its affiliates, as the case may be.  The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company’s or its affiliates’ methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company or any of its affiliates, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 12.  Accordingly, the Employee agrees that during the Employment Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company and its affiliates.
13.Non-Competition.

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	(a)
	During Employment Term. The Employee agrees that, during the Employment Term, he will devote such business time, attention and energies reasonably necessary to the diligent and faithful performance of the services to the Company and its affiliates, and he will not engage in any way whatsoever, directly or indirectly, in any business that is a direct competitor with the Company’s or its affiliates’ principal business, nor solicit customers, suppliers or employees of the Company or affiliates on behalf of, or in any other manner work for or assist any business which is a direct competitor with the Company’s or its affiliates’ principal business.  In addition, during the Employment Term, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity.  

		
	(b)
	After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment.  The parties further acknowledge that the scope of business in which the Company and its affiliates are engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete.  Competition by the Employee in that business after the Employment Term would severely injure the Company and its affiliates.  Accordingly, for a period of one (1) year after the Employee’s employment terminates for any reason whatsoever, except as otherwise stated herein below, the Employee agrees: (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that directly competes with the Company or its affiliates in their principal products and markets; and (ii) on behalf of any such competitive firm or business, not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, a supplier or prospective supplier, or an employee of the Company or an affiliate.  Notwithstanding any of the foregoing provisions to the contrary, the Employee shall not be subject to the restrictions set forth in this Subsection 13(b) if the Employee’s employment is terminated by the Company without Cause.  

14.Return of Company Documents. Upon termination of the Employment Term, the Employee shall return immediately to the Company all records and documents of or pertaining to the Company or its affiliates and shall not make or retain any copy or extract of any such record or document, or any other property of the Company or its affiliates.
15.Improvements and Inventions. Any and all improvements or inventions that the Employee may make or participate in during the Employment Term, unless wholly unrelated to the business of the Company and its affiliates and not produced within the scope of the Employee’s employment hereunder, shall be the sole and exclusive property of the Company.  The Employee shall, whenever requested by the Company, execute and deliver any and all documents that the Company deems appropriate in order to apply for and obtain patents or copyrights in improvements or inventions or in order to assign and/or convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents, copyrights or applications.  

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16.Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions, nor will money damages adequately compensate for such injury.  Therefore, it is agreed between and hereby acknowledged by the parties that, in the event of a breach by the Employee of any of the obligations of this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein.  Nothing herein shall in any way limit or exclude any other right granted by law or equity to the Company.  
17.Release. Notwithstanding any provision herein to the contrary, the Company may require that, prior to payment of any amount or provision of any benefit under Section 9 (other than due to the Employee’s death), the Employee shall have executed a complete release of the Company and its affiliates and related parties in such form as is reasonably required by the Company, and any waiting periods contained in such release shall have expired; provided, however, that such release shall not apply to the Employee’s rights under the benefit plans and programs of the Company and its affiliates, which rights shall be determined in accordance with the terms of such plans and programs.  With respect to any release required to receive payments owed pursuant to Section 9, the Company must provide the Employee with the form of release no later than seven (7) days after the Date of Termination and the release must be signed by the Employee and returned to the Company, unchanged, effective and irrevocable, no later than sixty (60) days after the Date of Termination.
18.No Mitigation. The Company agrees that, if the Employee’s employment hereunder is terminated during the Employment Term, the Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Employee by the Company hereunder.  Further, the amount of any payment or benefit provided for hereunder (other than pursuant to Subsection 9(a)(v) hereof) shall not be reduced by any compensation earned by the Employee as the result of employment by another employer, by retirement benefits or otherwise.
19.Entire Agreement and Amendment. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement supersedes and replaces all prior agreements, understandings and commitments with respect to such subject matter.  This Agreement may be amended only by a written document signed by both parties to this Agreement.
20.Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Indiana, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.  Any litigation pertaining to this Agreement shall be adjudicated in courts located in Indiana.
21.Successors. This Agreement may not be assigned by the Employee.  In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the stock, business and/or assets of the Company, to expressly 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.  Failure of the Company to obtain such assumption by a successor shall be a material breach of this Agreement.  The Employee agrees and 

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consents to any such assumption by a successor of the Company, as well as any assignment of this Agreement by the Company for that purpose.  As used in this Agreement, “Company” shall mean the Company as herein before defined as well as any such successor that expressly assumes this Agreement or otherwise becomes bound by all of its terms and provisions by operation of law.  This Agreement shall be binding upon and inure to the benefit of the parties and their permitted successors or assigns.
22.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
23.Attorneys’ Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to interpret or enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be promptly paid by the other party its reasonable legal fees, court costs, litigation expenses, all as determined by the court and not a jury, and such payment shall be made by the non-prevailing party no later than the end of the Employee’s tax year following the Employee’s tax year in which the payment amount becomes known and payable; provided, however, that following the Employee’s termination of employment with the Company, if any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to interpret or enforce any of the terms hereof, the Company shall pay (on an ongoing basis) to the Employee to the fullest extent permitted by law, all legal fees, court costs and litigation expenses reasonably incurred by the Employee or others on his behalf (such amounts collectively referred to as the “Reimbursed Amounts”); provided, further, that the Employee shall reimburse the Company for the Reimbursed Amounts if it is determined that a majority of the Employee’s claims or defenses were frivolous or without merit.  Requests for payment of Reimbursed Amounts, together with all documents required by the Company to substantiate them, must be submitted to the Company no later than ninety (90) days after the expense was incurred.  The Reimbursed Amounts shall be paid by the Company within ninety (90) days after receiving the request and all substantiating documents requested from the Employee.  The payment of Reimbursed Amounts during the Employee’s tax year will not impact the Reimbursed Amounts for any other taxable year.  The rights under this Section 23 shall survive the termination of employment and this Agreement until the expiration of the applicable statute of limitations.
24.Severability. If any Section, subsection or provision hereof is found for any reason whatsoever to be invalid or inoperative, that section, subsection or provision shall be deemed severable and shall not affect the force and validity of any other provision of this Agreement.  If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form.  The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement.
25.Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United 

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States Certified Mail, postage prepaid, with Return Receipt Requested, to the parties at their respective addresses set forth below:
To the Company:
Chief Executive Officer
Remy International, Inc.
600 Corporation Drive
Pendleton, Indiana 46064
To the Employee:
Shawn Pallagi
3731 Pete Dye Blvd
Carmel, IN 46033

26.Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party. 
27.Tax Withholding. The Company or an affiliate may deduct from all compensation and benefits payable under this Agreement any taxes or withholdings the Company is required to deduct pursuant to state, federal or local laws. 
28.Code Section 409A. To the extent applicable, it is intended that this Agreement and any payment made hereunder shall comply with the requirements of Section 409A of the Code, or an exemption or exclusion therefrom and any related regulations or other guidance promulgated with respect to such Section by the U.S.  Department of the Treasury or the Internal Revenue Service (“Code Section 409A”), provided that for the avoidance of doubt, this provision shall not be construed to require a gross-up payment in respect of any taxes, interest or penalties imposed on the Employee as a result of Code Section 409A.  Any provision that would cause the Agreement or any payment hereof to fail to satisfy Code Section 409A shall have no force or effect until amended in the least restrictive manner necessary to comply with Code Section 409A, which amendment may be retroactive to the extent permitted by Code Section 409A.  Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A.  In no event may the Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.  All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Code Section 409A, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated to pay or provide in any given calendar year shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) the Employee’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the Employee’s remaining lifetime.  The Employee acknowledges that he has been advised to consult with an attorney and any other advisors of the Employee’s choice prior to executing this Agreement, and the Employee further acknowledges that, in entering into this Agreement, he has not relied upon any representation or statement made by any agent or representative of Company or its affiliates that is not expressly 

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set forth in this Agreement, including, without limitation, any representation with respect to the consequences or characterization (including for purpose of tax withholding and reporting) of the payment of any compensation or benefits hereunder under Code Section 409A and any similar sections of state tax law.

IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above.

REMY INTERNATIONAL, INC.

By:  ____/s/ John Weber_______________
Its:  President and Chief Executive Officer

EMPLOYEE NAME

By:  ____/s/ Shawn Pallagi______________
                                                                                    Shawn Pallagi

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