Exhibit 10.4
Quest Diagnostics Incorporated
1999 Employee Equity Participation Program
As amended as of May 7, 2002
1. THE PROGRAM
a) Purpose. This Quest Diagnostics Incorporated 1999 Employee Equity
Participation Program (the "Program") is intended to benefit the stockholders of
Quest Diagnostics Incorporated (the "Company") by providing a means to attract,
retain and reward individuals who can and do contribute to the longer term
financial success of the Company. Further, the recipients of stock-based awards
under the Program should identify their success with that of the Company's
stockholders and therefore will be encouraged to increase their proprietary
interest in the Company.
b) Effective Date. To serve this purpose, the Program will become effective upon
its approval by the holders of stock entitled to vote at the Company's 1999
Annual Meeting of Stockholders.
2. ADMINISTRATION
a) Committee. The Program shall be administered by a Committee, appointed by the
Board of Directors of the Company (the "Board"), which shall consist of no less
than two of its members, all of whom shall not be (or formerly have been)
employees of the Company (the "Committee"); provided, however, that from time to
time the Board may assume, at its sole discretion, administration of the
Program. Except with regard to awards to employees subject to Section 16 of the
Securities Exchange Act of 1934, the Committee may delegate certain
responsibilities and powers to any executive officer or officers selected by it.
Any such delegation may be revoked by the Committee at any time.
b) Powers and authority. The Committee's powers and authority include, but are
not limited to: selecting individuals, who are employees of the Company and any
subsidiary of the Company or other entity in which the Company has a significant
equity or other interest as determined by the Committee, to receive awards;
determining the types and terms and conditions of all awards granted, including
performance and other earnout and/or vesting contingencies; permitting
transferability of awards to eligible third parties; interpreting the Program's
provisions; and administering the Program in a manner that is consistent with
its purpose. The Committee's decision in carrying out the Program and its
interpretation and construction of any provisions of the Program or any award
granted or agreement or other instrument executed under it shall be final and
binding upon all persons. No members of the Board shall be liable for any action
or determination made in good faith in administering the Program.
c) Award Prices. All awards denominated or made in Shares shall use as the per
Share price the mean between the high and low selling prices of a share of the
Common Stock of the Company ("Share") on the applicable date as reported in The
New York Times l, or if Shares are not traded on such date, the mean between the
high and low selling prices on the next preceding day on which such Shares are
traded provided, however, that where a "reload" option is issued to an optionee
who exercises an option by tendering (either actually or by attestation) Shares
previously owned by the optionee, then the per Share exercise price of the
reload option (which shall be for the same number of shares tendered for
payment) shall be the market price at which the Shares tendered are valued in
accordance with Section 4(b). The applicable date shall be the day on which the
award is granted or, another Program transaction occurs, except that in the case
of a stock option or stock appreciation right granted retroactively in tandem
with or as a substitution for another previously granted stock option or stock
appreciation right, the applicable date shall be grant date for such prior
award. Except as provided for in Section 3(d), the per Share exercise price of
any stock option or stock appreciation right may not be decreased after the
grant of the award, and a stock option or stock appreciation right may not be
surrendered as consideration in exchange for the grant of a new award with a
lower per Share exercise price.
3. SHARES SUBJECT TO THE PROGRAM AND ADJUSTMENTS
a) Maximum Shares Available for Delivery. Subject to adjustments under Section
3(d), the maximum number of Shares that may be delivered to participants and
their beneficiaries under the Program shall be equal to (i) 9,000,000 Shares;
(ii) any Shares available for future awards under the Company's 1996 Employee
Equity Participation Program (the "Prior Program") as of the effective date of
this Program; and (iii) any Shares that are represented by awards granted under
the Prior Program of the Company, which are forfeited, expire or are canceled
without the delivery of Shares or which result in the forfeiture of Shares back
to the Company. In addition, any Shares delivered under the Program or the Prior
Program of the Company which are forfeited back to the Company because of the
failure to meet an award
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contingency or condition shall again be available for delivery pursuant to new
awards granted under the Program. Any Shares covered by an award (or portion of
an award) granted under the Program or the Prior Program of the Company, which
is forfeited or canceled, expires or is settled in cash, including the
settlement of tax withholding obligations using Shares, shall be deemed not to
have been delivered for purposes of determining the maximum number of Shares
available for delivery under the Program. Likewise, if any stock option is
exercised by tendering Shares, either actually or by attestation, to the Company
as full or partial payment for such exercise under this Program or the Prior
Program of the Company, only the number of Shares issued net of the Shares
tendered shall be deemed delivered for purposes of determining the maximum
number of Shares available for delivery under the Program. Further, Shares
issued under the Program through the settlement, assumption or substitution of
outstanding awards or obligations to grant future awards as a condition of the
Company acquiring another entity shall not reduce the maximum number of Shares
available for delivery under the Program.
b) Other Program Limits. Subject to adjustment under Section 3(d), the following
additional maximums are imposed under the Program. The maximum number of Shares
that may be issued in conjunction with awards granted pursuant to Section 4(d)
shall be 1,800,000. The maximum aggregate number of Shares that may be covered
by awards granted to any one individual pursuant to Sections 4(b) and 4(c) shall
not exceed 1,000,000 Shares. The aggregate maximum payments that can be made for
awards granted to any one individual pursuant to Section 4(d) shall not exceed
300,000 Shares.
c) Payment Shares. Subject to the overall limitation on the number of Shares
that may be delivered under the Program, the Committee may, in addition to
granting awards under Section 4, use available Shares as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company, including those of any entity acquired by the
Company.
d) Adjustments for Corporate Transactions.
(i) The Committee may determine that a corporate transaction has affected the
price per Share such that an adjustment or adjustments to outstanding awards are
required to preserve (or prevent enlargement of) the benefits or potential
benefits intended at time of grant. For this purpose a corporate transaction
will include, but is not limited to, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares, or other
similar occurrence. In the event of such a corporate transaction, the Committee
may, in such manner as the Committee deems equitable, adjust (i) the number and
kind of shares which may be delivered under the Program pursuant to Sections
3(a) and 3(b); (ii) the number and kind of shares subject to outstanding awards;
and (iii) the exercise price of outstanding stock options and stock appreciation
rights. Similar adjustments may be made in situations where the Company assumes
or substitutes for outstanding awards held by employees and other persons of an
entity acquired by the Company.
(ii) In the event that the Company is not the surviving company of a merger,
consolidation or amalgamation with another company, or in the event of a
liquidation or reorganization of the Company, and in the absence of the
surviving corporation's assumption of outstanding awards made under the Program,
the Committee may provide for appropriate adjustments and/or settlements of such
grants either at the time of grant or at a subsequent date. The Committee may
also provide for adjustments and/or settlements of outstanding awards as it
deems appropriate and consistent with the Program's purpose in the event of any
other change-in-control of the Company.
4. TYPES OF AWARDS
a) General. An award may be granted singularly, in combination with another
award(s) or in tandem whereby exercise or vesting of one award held by a
participant cancels another award held by the participant. Subject to the
limitations of Section 2(c), an award may be granted as an alternative or
successor to or replacement of an existing award under the Program or under any
other compensation plan or arrangement of the Company, including the plan of any
entity acquired by the Company. The types of awards that may be granted under
the Program include:
b) Stock Option. A stock option represents a right to purchase a specified
number of Shares during a specified period at a price per Share which is no less
than one hundred percent (100%) of the per Share amount stipulated by Section
2(c). A stock option may be in a form intended to comply with Section 422 or any
other similar provision of the Internal
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Revenue Code (the "Code") or in another form which may or may not qualify for
favorable federal income tax treatment. Each stock option shall expire on the
applicable date designated by the Committee but in no event may such date be
more than eleven years from the date the stock option is granted. The Shares
covered by a stock option may be purchased by means of a cash payment or such
other means as the Committee may from time-to-time permit, including (i)
tendering (either actually or by attestation) Shares valued using the market
price at the time of exercise (which, where on the date of exercise, the
optionee sells through a broker designated by the Corporation any of the shares
purchased as a result of the exercise of the stock option, shall be the average
sales price of the price of such shares sold on such date as reported to the
Corporation by the broker), (ii) authorizing a third party to sell Shares (or a
sufficient portion thereof) acquired upon exercise of a stock option and to
remit to the Company a sufficient portion of the sale proceeds to pay for all
the Shares acquired through such exercise and any tax withholding obligations
resulting from such exercise; or (iii) any combination of the above.
c) Stock Appreciation Right. A stock appreciation right is a right to receive a
payment in cash, Shares or a combination, equal to the excess of the aggregate
market price at time of exercise of a specified number of Shares over the
aggregate exercise price of the stock appreciation right being exercised. The
longest term a stock appreciation right may be outstanding shall be eleven
years. Such exercise price shall be no less than one hundred percent (100%) of
the per Share amount stipulated by Section 2(c).
d) Stock Award. A stock award is a grant of Shares or of a right to receive
Shares (or their cash equivalent or a combination of both) in the future. Except
in cases of certain terminations of employment or an extraordinary event, each
stock award shall be earned and vest over at least three years and shall be
governed by such conditions, restrictions and contingencies as the Committee
shall determine. These may include continuous service and/or the achievement of
performance goals. The performance goals that may be used by the Committee for
such awards granted to persons who may become subject to Code Section 162(m)
shall consist of operating profits (including EBITDA), net profits, earnings per
share, profit returns and margins, revenues, shareholder return and/or value,
stock price and working capital. Performance goals may be measured solely on a
corporate, subsidiary or business unit basis, or a combination thereof. Further,
performance criteria may reflect absolute entity performance or a relative
comparison of entity performance to the performance of a peer group of entities
or other external measure of the selected performance criteria. Profit, earnings
and revenues used for any performance goal measurement shall exclude: gains or
looses on operating asset sales or dispositions; asset write-downs; litigation
or claim judgments or settlements; accruals for historic environmental
obligations; effect of changes in tax law or rate on deferred tax liabilities;
accruals for reorganization and restructuring programs; uninsured catastrophic
property losses; the cumulative effect of changes in accounting principles; and
any extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management's discussion and analysis of financial
performance appearing in the Company's annual report to stockholders for the
applicable year.
5. AWARD SETTLEMENTS AND PAYMENTS
a) Dividends and Dividend Equivalents. An award may contain the right to receive
dividends or dividend equivalent payments which may be paid either currently or
credited to a participant's account. Any such crediting of dividends or dividend
equivalents may be subject to such conditions, restrictions and contingencies as
the Committee shall establish, including the reinvestment of such credited
amounts in Share equivalents.
b) Payments. Awards may be settled through cash payments, the delivery of
Shares, the granting of awards or combination thereof as the Committee shall
determine. Any award settlement, including payment deferrals, may be subject to
such conditions, restrictions and contingencies as the Committee shall
determine. The Committee may permit or require the deferral of any award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest, or dividend
equivalents, including converting such credits into deferred Share equivalents.
6. PROGRAM AMENDMENT AND TERMINATION
a) Amendments. The Board may amend this Program as it deems necessary and
appropriate to better achieve the Program's purpose provided, however, that: (i)
the Share and other award limitations set forth in Sections 3(a) and 3(b) cannot
be increased and (ii) the minimum stock option and stock appreciation right
exercise prices set forth in Sections 2(c) and 4(b) and (c) cannot be changed
unless such a plan amendment is properly approved by the Company's stockholders.
b) Program Suspension and Termination. The Board may suspend or terminate this
Program at any time. However, in no event may any awards be granted under the
Program after the tenth anniversary of its approval by stockholders of the
Company. Any such suspension or termination shall not of itself impair any
outstanding award granted under the Program or the applicable participant's
rights regarding such award.
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7. MISCELLANEOUS
a) Assignability. Except by will or by the laws of descent and distribution and,
if permitted by the Committee, as a gift to a family member or a trust or
similar entity for the benefit of one or more family members, no award granted
under the Program shall be assignable or transferable.
b) No Individual Rights. No person shall have any claim or right to be granted
an award under the Program. Neither the Program nor any action taken hereunder
shall be construed as giving any employee or other person any right to continue
to be employed by or to perform services for the Company, any subsidiary or
related entity. The right to terminate the employment of or performance of
services by any Program participant at any time and for any reason is
specifically reserved to the employing entity.
c) Unfunded Program. The Program shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Program shall not
establish any fiduciary relationship between the Company and any participant or
beneficiary of a participant. To the extent any person holds any obligation of
the Company by virtue of an award granted under the Program, such obligation
shall merely constitute a general unsecured liability of the Company and
accordingly shall not confer upon such person any right, title or interest in
any assets of the Company.
d) Use of Proceeds. Any proceeds from the sale of shares under the Program shall
constitute general funds of the Company.
e) Other Benefit and Compensation Programs. Unless otherwise specifically
determined by the Committee, settlements of awards received by participants
under the Program shall not be deemed a part of a participant's regular,
recurring compensation for purposes of calculating payments or benefits from any
Company benefit plan or severance program. Further, the Company may adopt any
other compensation programs, plans or arrangements as it deems appropriate.
f) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Program or any award, and the Committee shall determine whether
cash shall be paid or transferred in lieu of any fractional Shares, or whether
such fractional Shares or any rights thereto shall be canceled.
g) Governing Law. The validity, construction and effect of the Program and any
award, agreement or other instrument issued under it shall be determined in
accordance with the laws of the state of New Jersey without reference to
principles of conflict of law.
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