Exhibit 10.8
QUEST DIAGNOSTICS INCORPORATED
EMPLOYEE EQUITY PARTICIPATION PROGRAM
1. Purpose
The Employee Equity Participation Program (the "Program") is intended to
encourage executive, managerial, technical and other employees of (i) Quest
Diagnostics Incorporated (the "Corporation"), (ii) any "subsidiary corporation"
of the Corporation within the meaning of Section 424 of the Internal Revenue
Code of 1986, as amended (the "Code") or of any successor section, or (iii) any
other entity in which the Corporation holds beneficially at least one-half of
the ownership interest (such entity or "subsidiary corporation" being referred
to herein as a "Subsidiary") to become owners of stock of the Corporation in
order to increase their proprietary interest in the Corporation's success; to
stimulate the efforts of certain key executive, managerial, technical and other
employees by giving suitable recognition to services which contribute materially
to the Corporation's success; and to provide such employees with additional
incentive and reward opportunity based, in part, upon the attainment of
predetermined goals over specified periods. The Program shall consist of two
plans: (a) the Stock Option Plan and (b) the Incentive Stock Plan.
2. Administration
The Program shall be administered by a committee appointed by the Board of
Directors of the Corporation, to be known as the "Compensation Committee" (the
"Committee"), consisting of not less than two members of the Corporation's Board
of Directors, each member of which shall be a "non-employee director" within the
meaning of Rule 16b-3(b)(3)(i) promulgated under the Securities Exchange Act of
1934 (the "1934 Act") or any successor thereto and an "outside director" within
the meaning set forth in regulations promulgated under Section 162(m) of the
Code. Without limiting the foregoing, unless and to the extent those definitions
are amended, no member of the Committee shall be an officer or employee of the
Corporation or a subsidiary thereof, a former officer of the Corporation, a
former employee of the Corporation who receives compensation for prior services
(other than benefits under a tax-qualified retirement plan) during the taxable
year, any other person who receives directly or indirectly in any capacity
(other than as a director) remuneration in excess of the lesser of $60,000 or 5
percent of the gross income realized by the entity employing such member during
such entity's taxable year ending with or within the Corporation's taxable year
or any person who is a member of a law firm retained by, or a partner or
executive officer of an investment banking firm that performs services for, the
Corporation. No member of the Committee shall have been eligible to participate
in the Program in the preceding year nor be eligible to participate in the
Program while serving on the Committee. The Committee shall select periodically
the executive, managerial, technical and other employees who shall participate
in the Program and the extent of their participation in any particular Plan
under the Program and shall report such selections and levels of participation
to the Board of Directors.
The Committee's interpretation and construction of any provisions of this
Program or any Plan or any right, option or award granted or contract executed
under it shall be final unless otherwise determined by the Board of Directors,
which determination shall be final. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith.
3. Eligibility
The Committee shall from time to time select the executive, managerial,
technical and other employees (including officers and employees who are
directors) of the Corporation and of any Subsidiary who shall be eligible to
participate in any Plan under the Program.
4. Stock
The shares subject to options, grants or incentive stock rights under the
Program shall be shares of the Corporation's Common Stock par value $.01 per
share, either authorized but unissued or issued and held in treasury or such
other securities as may be issued by the Corporation in substitution therefor.
The total amount of the Common Stock of the Corporation which may be (i) sold
pursuant to options granted under the Stock Option Plan and (ii) granted, or
issued pursuant to incentive stock rights awarded, under the Incentive Stock
Plan shall not exceed 3,000,000 shares. There may be awarded under the Incentive
Stock Plan in lieu of shares the cash equivalent thereof valued at the date that
the Committee determines whether, or to what extent, performance objectives have
been met. In each case, the number of shares shall be subject to adjustment in
accordance with the provisions of Section 5.
Shares from the unexercised portion of the options which expire or of the
options which are terminated during the period when options may be granted and
shares forfeited or not earned under the Incentive Stock Plan may again either
(i) be the subject of an option under the Stock Option Plan or (ii) be awarded
or be the subject of rights granted under the Incentive Stock Plan. Shares of
the Common Stock of the Corporation used by an optionee as full or partial
payment to the Corporation for the purchase price of shares subject to an option
agreement, the terms of which explicitly provide for the grant of an additional
option as contemplated by Section 6(a)(i) hereof, shall again be made available
for use under the Program. Shares otherwise surrendered upon the exercise of
stock options may not again be the subject of options or awards granted under
the Program. Shares surrendered under the Program in payment of taxes due upon
the exercise of stock options or upon the recognition of income for shares
issued under the Incentive Stock Plan may not be issued again under the Program.
No single eligible employee under the Stock Option Plan may receive grants of
stock options covering in excess of 600,000, or 20% of the total, shares
authorized under the Program.
5. Recapitalization
The number of shares of Common Stock which may be granted, awarded or earned
under the Incentive Stock Plan or made subject to options granted under the
Stock Option Plan in the
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aggregate and to any single eligible employee, the number of shares covered by
each outstanding option, and the price per share thereunder, and the number of
shares granted or subject to incentive stock rights under the Incentive Stock
Plan shall all be proportionally adjusted for any increase or decrease in the
number of issued shares of Common Stock of the Corporation resulting from a
subdivision or consolidation of shares or other capital adjustment, the
distribution of shares of capital stock to stockholders of the Corporation, the
payment of a stock dividend or other increase or decrease in such shares
effected without receipt of consideration by the Corporation, or any
distribution or spin-off of assets (other than a normal cash dividend) to the
stockholders of the Corporation.
Subject to any required action by the stockholders, if the Corporation shall be
the surviving corporation in any merger or consolidation, any option granted
under the Stock Option Plan and any incentive stock right granted under the
Incentive Stock Plan shall apply to the securities to which a holder of the
number of shares of Common Stock subject to the option or such right, as the
case may be, would have been entitled before the occurrence of such event. A
dissolution or liquidation of the Corporation, or a merger or consolidation in
which the Corporation is not the surviving corporation, shall cause every option
outstanding under the Stock Option Plan to terminate, except that the surviving
corporation may, in its absolute and uncontrolled discretion, tender an option
or options to purchase its shares on terms and conditions, both as to number of
shares and otherwise, which will substantially preserve the rights and benefits
of any option then outstanding under the Stock Option Plan. Upon the dissolution
or liquidation of the Corporation, or upon the effective date of any merger or
consolidation in which the Corporation is not the survivor and in which the
survivor has not tendered options as provided in the preceding sentence, the
Corporation shall deliver to each optionee whose incentive stock options are
being terminated an amount in cash equal to the difference between the option
price and the fair market value of a share of the Corporation's Common Stock
determined in good faith by the Committee. In the case of such a merger or
consolidation in which the Corporation is not the survivor, the Corporation
shall also deliver to each person whose incentive stock options are being
terminated and to each person who had exercised an incentive stock option and
who was holding the shares so purchased for long-term capital gains treatment an
amount equal to the difference between the federal income tax which the person
would be required to pay as a result of being unable to hold such shares for
long-term capital gains purposes (assuming a sale price equal to the fair market
value as provided above) and the tax such person is required to pay as a result
of having to dispose of shares on account of such merger or consolidation.
In the event of a change in the Corporation's presently authorized Common Stock
which is limited to a change of authorized shares with par value into the same
number of shares with a different par value or into the same number of shares
without par value, the shares resulting from any such change shall be deemed to
be Common Stock within the meaning of the Program.
6. Stock Option Plan
(a) The Committee may from time to time grant options, including but not limited
to performance-based stock options and to incentive stock options permitted
by Section 422 of the Code, to purchase shares of Common Stock, evidenced
by agreements in such form
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as the Committee may, from time to time, approve, containing in substance the
following terms and conditions:
(i) The option price shall be payable in full upon the exercise of the
option and may be paid either in United States dollars, or under
rules established and maintained from time to time by the Committee,
in shares of the Common Stock of the Corporation owned by the
optionee, or a combination of cash and shares. Under such rules, an
optionee paying the purchase price of an option in already-owned,
freely transferable, unencumbered shares of Common Stock of the
Corporation may receive new options to purchase shares of Common
Stock of the Corporation at the then current market price (being the
mean between the high and low selling prices of the Corporation's
Common Stock on the on the date of exercise as reported in the Wall
Street Journal on the next business day) for the same number of
shares surrendered upon exercise of the original option. In no
circumstance will the total number of shares subject to the new
option granted exceed the number of shares surrendered upon exercise
of the original option, will the new option be exercisable within
twelve months of the date of exercise or will the new option have a
life beyond that of the original option.
Shares of the Corporation's Common Stock shall be valued at the mean
between the high and low selling prices of the Corporation's Common
Stock on the date of exercise (as reported in the Wall Street Journal
on the next business day).
(ii) The option shall state the total number of shares to which it
pertains.
(iii) The option price shall be not less than 100% of the fair market value
of the shares on the date of the granting of the option, which
valuation shall be the mean between the high and low selling prices
on the date of grant as reported in the Wall Street Journal on the
next business day.
(iv) Each option granted under the Stock Option Plan shall expire on the
date designated by the Committee but in no event more than ten years
from the date the option is granted.
(v) The Committee may in its discretion provide that an option may
not be exercised in whole or in part for any period or periods of
time specified by the Committee. Except as may be so provided by the
Committee and except as otherwise provided herein, any option may be
exercised in whole at any time or in part from time to time after the
option has vested in accordance with the terms of the applicable
agreement and during its term; provided, however, that, except in the
event of a change of control (as determined by the Committee) in no
circumstance will an option under the Stock Option Plan become
exercisable in less than twelve months from the date of grant.
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(vi) The aggregate fair market value (determined as of the time the
option is granted) of the stock for which any employee may be granted
incentive stock options under this Plan or any other plans of the
Corporation or any subsidiary of the Corporation shall not exceed
$100,000 (or such other limit as may be in effect from time to time
under Section 422 of the Code or any statutory successor thereto) in
any calendar year in which such option or any portion thereof first
becomes exercisable pursuant to the terms of the agreement between
such employee and the Corporation.
(vii) If, in the opinion of counsel for the Corporation, the listing,
registration or qualification of the shares subject to option under
any securities exchange or under any state or Federal law, or the
consent or approval of any governmental regulatory body, or an
exemption from registration, is necessary or desirable, each option
shall be subject to the requirement that such option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent, approval or exemption shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
(viii) An optionee shall have no rights as a stockholder with respect
to shares covered by his option to purchase until the date of the
issuance or transfer of the shares to him and only after such shares
are fully paid. No adjustment will be made for dividends or other
rights for which the record date is prior to the date of such
issuance or transfer, except as provided in Section 5.
(ix) The option agreements authorized under the Stock Option Plan
shall contain such other provisions not inconsistent with this
Program as the Committee may deem advisable.
(b) Options may be granted under the Stock Option Plan from time to time in
substitution for (i) stock options held by consultants to or directors or
employees of other corporations who are about to become and who do
concurrently with the grant of such options become consultants to or
directors or employees of the Corporation or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Corporation
or a Subsidiary, or the acquisition by the Corporation or a Subsidiary of
the assets of the employing corporation, or the acquisition by the
Corporation or a Subsidiary of stock of the employing corporation as the
result of which it becomes a Subsidiary or (ii) stock options to acquire
common stock of Corning Incorporated ("Corning"), which options are held by
employees of the Corporation and are canceled as a result of the spinoff
distribution by Corning of all of the Corporation's outstanding common
stock to the stockholders of Corning. The terms and conditions of the
substitute options so granted may vary from the terms and conditions set
forth in Section 6 of this Program to such extent as the Committee at the
time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are granted.
Options granted under this paragraph (b) or pursuant to the terms of the
agreements contemplated by Section 6(a)(i) hereof shall not reduce the
shares available for options, grants or incentive stock rights under the
Program as set forth in Section 4 hereof.
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(c) If the optionee's employment by the Corporation or a Subsidiary shall
terminate, his option shall terminate unless otherwise determined by the
Committee, or specific provision has been otherwise made as evidenced by
the terms of the option agreement approved by the Committee. The Committee
shall have full power and authority to determine whether, to what extent
and under what circumstances any option shall be exercisable, suspended or
canceled in the event of an optionee's termination of employment.
If an optionee dies while in the employ of the Corporation or a Subsidiary,
or within three months after termination of employment with options
exercisable pursuant to action taken by the Committee or otherwise in
accordance with the preceding sentences, the optionee's estate, personal
representative or beneficiary shall have the right to exercise such option
in accordance with the terms of the option agreement with respect to all
shares subject to option on the date of death.
If an optionee shall be transferred from the Corporation to a Subsidiary or
from a Subsidiary to the Corporation or from a Subsidiary to another
Subsidiary, his employment shall not be deemed to have terminated. If an
optionee shall be employed by a corporation or an entity which ceases to be
a Subsidiary, the Committee may, subject to the provisions of clauses (iv)
and (v) of Paragraph (a) of this Section 6, permit the participant to
exercise options held for such period of time as it determines with respect
to all shares which were available for purchase by the optionee on the date
the corporation or entity ceased to be a Subsidiary.
7. Incentive Stock Plan
The Committee may from time to time award shares of Incentive Stock and grant
incentive stock rights, or either, to eligible employees on the terms set forth
herein.
(a) "Incentive Stock" shall be shares of the Corporation's Common Stock awarded
pursuant to the terms of the Incentive Stock Plan.
(b) An "incentive stock right" shall, subject to the terms, conditions and
limitations of this Section 7, give the holder thereof the right to receive
in consideration of services performed for, but without payment of cash to,
the Corporation such shares of Common Stock, cash or a combination of the
two as the Committee may determine.
(c) Subject to the limitations of Section 4, the Committee shall from time to
time select, and report to the Board of Directors, (i) the individual
employees who are to receive shares of Incentive Stock or incentive stock
rights, or a combination thereof, (ii) the number of shares of Incentive
Stock a designated employee is to receive, either directly or upon
maturation of an incentive stock right, (iii) whether ownership of, or any
portion of, such shares of Incentive Stock is to be vested in the
designated employee without the possibility of forfeiture or other
restrictions at the time of the Committee's action or at one or more
specified dates in the future, (iv) whether ownership of such, or any
portion of such, shares
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of Incentive Stock is to be vested in the designated employee at the time
of the Committee's action, but subject to the possibility of forfeiture or
other restrictions, and (v) the specific dates from the date of the
Committee's award over which the possibility of forfeiture or other
restrictions are to lapse.
Shares of Incentive Stock shall be issued in the name of, and distributed
to, those employees from time to time designated by the Board as recipients
of Incentive Stock as follows:
(1) Each employee designated as a recipient of shares of Incentive
Stock shall receive, promptly after the date or dates the
Committee determines the number of such shares which such employee
is to receive not subject to the possibility of forfeiture and
other restrictions, one or more stock certificates registered in
the name of the designated employee for such number of shares, the
ownership of which is vested non-forfeitably and without
restriction in such employee; and
(2) Certificates covering shares of Incentive Stock subject to the
possibility of forfeiture and other restrictions shall be issued
promptly after the date or dates the Committee determines the
number of such shares to be issued in the name of the designated
employee but held by the Corporation as provided in clause (e)
below.
(d) The shares which are granted subject to restrictions and the possibility of
forfeiture (and all shares issued or distributed by means of dividends,
splits, combinations, reclassifications, or other capital changes thereon)
(i) may not be sold, assigned, transferred, pledged or otherwise
encumbered, except (a) for gifts to a spouse, ancestors, or descendants, or
to trusts for their benefit and (b) pursuant to the qualified domestic
relations orders referred to in Section 9 hereof, subject, however, in each
such case to the restrictions and possibility of forfeiture applicable to
such shares and (ii) except as otherwise provided in an agreement approved
by the Committee are to be forfeitable to the Corporation upon termination
of employment for any reason other than death, disability approved by the
Corporation or retirement with the consent of the Corporation. The
restrictions and possibility of forfeiture imposed by this clause (d) shall
lapse at such time and in such proportions as the Committee shall, subject
to limitations of clause (c) above, determine.
(e) Each certificate issued in respect of shares granted under the Incentive
Stock Plan subject to restrictions on transfer and the possibility of
forfeiture shall be registered in the name of the employee but shall be
held by the Corporation in safekeeping for the employee and until such
restrictions and the possibility of forfeiture shall lapse. Such
certificates shall bear a legend substantially as follows:
"The transferability of this certificate and the shares of stock
represented hereby are restricted and the shares are subject to the further
terms and conditions (including forfeiture) contained in the Incentive
Stock Plan of Quest Diagnostics Incorporated and an agreement executed
pursuant thereto. A copy of such Plan and such agreement are on file in the
office of the Secretary of Quest Diagnostics Incorporated, Teterboro, New
Jersey."
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(f) An employee who is to receive shares of Incentive Stock only upon the
expiration of certain specified periods or who is the holder of an
incentive stock right shall have no rights as a stockholder with respect
to any shares which may become vested in, or be awarded to, him, as the
case may be, until such shares have been actually issued.
(g) The value of shares of the Incentive Stock or the value of the shares of
Common Stock granted by the Corporation to the holder of an incentive
stock right shall be the mean between the high and low selling prices of
the Corporation's Common Stock on the date the Committee determines that
the applicable performance objectives were met or the date the
possibility of forfeiture shall terminate, as the case may be, in each
case as reported in the Wall Street Journal on the next business day.
(h) At the time an incentive stock right is granted, the Committee shall
establish with respect to each holder one or more performance periods and
performance objectives. If the objectives have been met and are being
maintained at the end of the applicable performance period to the
satisfaction of the Committee, the holder of the incentive stock right
shall receive promptly the shares and/or cash which are subject to the
agreement referred to below.
(i) Any provisions hereof the contrary notwithstanding, the Committee shall
have the authority and the power to adjust performance periods,
performance objectives and the number of shares which may be awarded
pursuant to an incentive stock right if it determines that conditions so
warrant. Such conditions may include, but need not be limited to, changes
in functional responsibilities of a holder of an incentive stock right,
changes in laws or government regulations, changes in accounting
treatment or in generally accepted accounting principles, acquisitions,
dispositions or distributions deemed to be material, or extraordinary
events which significantly impact consolidated financial performance.
(j) Incentive stock rights shall be evidenced by agreements in such form and
not inconsistent with the Incentive Stock Plan as the Committee shall
approve from time to time, which agreements shall, among other things,
contain in substance the following terms, conditions and provisions:
(i) The number of shares to which the incentive stock right relates
and whether such rights are to be paid in shares, in cash or in
a combination or the two;
(ii) The length of the performance period or periods;
(iii) The performance objectives applicable to an individual granted
an incentive stock right, which objectives may relate, but shall
not be limited, to overall corporate performance measures, such
as earnings per share, return on stockholders' equity and return
on capital, or to divisional, subsidiary or other business unit
performance measures, or to a combination of each; and
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(iv) Such other rules, as determined by the Committee, governing the
continuation of an incentive stock right after the holder
terminates, either voluntarily or involuntarily, his employment
with the Corporation.
(k) Unless otherwise determined by the Committee or set forth in the
agreement contemplated by subsection (j) above, if the holder of an
incentive stock right shall cease to be employed by the Corporation or a
Subsidiary, his incentive stock right shall terminate immediately.
However, if employment is terminated on account of death, retirement or
termination of employment with the consent of the Corporation (including
termination by reason of retirement, disability or a Subsidiary ceasing
to be such), the Committee may award to such employee such shares or cash
at such time and under such conditions as it shall in its sole discretion
determine.
8. Amendment and Administration of the Program
The Board of Directors may, upon the recommendation of the Committee, from time
to time alter, amend, suspend, or discontinue the Program or either Plan
thereunder, except that no alteration or amendment shall, without the approval
of the holders of a majority of the outstanding shares entitled to vote thereon,
increase the total number of shares which may be sold or awarded under the
Program, decrease the price at which options may be granted, change the
standards of eligibility of employees eligible to participate, materially
increase the benefits of the Program or either Plan thereunder to participants,
or extend the term of the Program or of options granted thereunder. Adjustments
in the total number of shares purchasable or awardable under the Program or
optioned to any individual and adjustments of the option price may be made,
however, without stockholder approval pursuant to the adjustment provisions
described under the provisions of Section 5 hereof. No amendment or modification
shall apply to affect adversely any employee with respect to incentive stock or
incentive stock rights already awarded to him or an option already granted.
Anything to the contrary in this Section 8 notwithstanding, should the
provisions of Rule 16b-3, or any successor rule, under the 1934 Act be amended,
the Board may amend the Program in accordance with any modifications to such
Rule.
With respect to persons subject to Section 16 of the 1934 Act, transactions
under the Program are intended to comply with all applicable conditions of Rule
16b-3, or any successor rule, under the 1934 Act. To the extent any provision of
the Program or action by the Committee, the Board of Directors or any
administrator fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee or the Board of
Directors.
9. Assignability
No option or right granted under the Program shall be assignable or transferable
except by Will, by the laws of descent and distribution, or except for an
incentive stock option pursuant to domestic relations orders as defined in or
meeting the requirements of the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended. During the lifetime of an optionee, an
option shall be exercisable only by him and any shares purchased upon the
exercise of an option shall be issued in the name of the optionee alone.
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10. Effective Date and Term of Program.
The Program shall become effective when approved by a majority of the votes cast
at a meeting of the Corporation's stockholders by stockholders entitled to vote
thereon. No shares may be optioned or awarded (except upon the attainment of
performance goals contemplated by Section 7(h) hereof) and no incentive stock
rights may be granted under the Program after the fifth anniversary, plus 60
calendar days, of the Program's effective date.
11. Use of Proceeds
Proceeds from the sale of stock under the Program shall constitute general funds
of the Corporation.
12. Withholding
Whenever under the Program shares are to be issued in satisfaction of options,
awards or rights granted thereunder, the Corporation shall have the right to
require the employee to remit to it an amount in cash, in shares of the
Corporation's Common Stock, or though the reduction of options, awards or rights
to be issued thereof, necessary to satisfy federal, state and local withholding
tax requirements prior to the delivery of any certificate or certificates for
shares. Whenever under the Program payments are to be made in cash, such payment
shall be net of an amount necessary to satisfy federal, state and local
withholding tax requirements.
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