Exhibit 10.10
QUEST DIAGNOSTICS INCORPORATED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Section 1. Purpose. The purpose of the Quest Diagnostics Incorporated Stock
Option Plan for Non-Employee Directors is to secure for the Company and its
stockholders the benefits of the incentive inherent in increased common stock
ownership by the members of the Board of Directors who are not employees of the
Company or any of its subsidiaries.
Section 2. Definitions. When used herein, the following terms shall have the
following meanings:
"Administrator" means the Board, or a committee of the Board, duly
appointed to administer the Plan.
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means ($.01 par value) common stock of the Corporation.
"Corporation" means Quest Diagnostics Incorporated, a Delaware
corporation.
"Effective Date" shall mean January 13, 1998.
"Exercise Price" means the price per share specified in the Option
agreement at which the Participant may purchase Common Stock through the
exercise of his/her Option, as the same may be adjusted in accordance with
Section 7(h).
"Fair Market Value" means, as of any date, the mean of the high and low
sales price of a share of Common Stock on The New York Stock Exchange Composite
list on such date (or if no sale took place on such exchange on such date, the
mean between the high and the low on such exchange on the most recent preceding
date on which a sale took place).
"Option" means a right granted under the Plan to a Participant to purchase
shares of Common Stock as a Nonqualified Stock Option which is not intended to
qualify as an Incentive Stock Option under Section 422 of the Code.
"Option Period" means the period within which the Option may be exercised
pursuant to the Plan.
"Participant" means a member of the Board of Directors of Quest
Diagnostics Incorporated who is not an employee of Quest Diagnostics
Incorporated or any subsidiary thereof.
"Plan" means the Quest Diagnostics Incorporated Stock Option Plan for
Non-Employee Directors.
Section 3. Administration. The Plan shall be administered by the Administrator
who shall establish from time to time regulations for the administration of the
Plan, interpret the Plan, delegate in writing administrative matters to
committees of the Board or to other persons, and make such other determinations
and take such other action as it deems necessary or advisable for the
administration of the Plan.
All decisions, actions and interpretations of the Administrator shall be
final, conclusive and binding upon all parties.
Section 4. Participation. All Non-Employee Directors who become members of the
Board shall automatically be participants in the Plan.
Section 5. Shares Subject to the Plan. (a) Participants shall receive under the
Plan grants of Options to purchase not more than an aggregate of 500,000 shares
of Common Stock and 500,000 shares shall be reserved for Options granted under
the Plan (subject to adjustment as provided in Section 7(h)). The shares issued
upon the exercise of Options granted under the Plan may be authorized and
unissued shares or shares held in the treasury of the Corporation including
shares purchased on the open market by the Corporation (at such time or times
and in such manner as it may determine). The Corporation shall be under no
obligation to acquire Common Stock for distribution to Participants before
payment in shares of Common Stock is due. If any Option granted under the Plan
shall be canceled or expire, new options may thereafter be granted covering
such shares.
Section 6. Grants of Options.
(a) On the Effective Date and on the date of the Annual Meeting of
Shareholders of each year commencing on January 1, 1999, each Participant shall
be granted an Option to acquire 9,000 shares of Common Stock. In the event that
a Participant is elected as a director of the Company other than on the date of
the Annual Meeting of Shareholders, the Board may grant to such director, on
his/her election, an option to acquire a number of shares (not to exceed 9,000)
that is proportional to the fraction of a year remaining until the next Annual
Meeting of Shareholders.
(b) Each Participant may elect to receive an Option in lieu of the cash
compensation payable to such director in any year. The number of shares of
Common Stock underlying the Option available to such director shall be computed
using the same Black-Scholes methodology as is used for the Quest Diagnostics
Employees Equity Participation Program (or any successor plan) so as to achieve
a value equal to the cash compensation that would otherwise have been paid. Any
such election shall be irrevocable and shall be made by December 31, effective
for the fees payable during the following year and with an Option
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being granted on each day on which the fees would otherwise have been payable
(generally expected to be the first day of each calendar quarter). However, for
1998 such election may be made by March 31, 1998 for fees payable on or after
April 1, 1998.
Section 7. Terms and Conditions of Options. Each Option granted under the Plan
shall be evidenced by a written agreement, in form approved by the
Administrator and executed by the Chairman of the Board, President or Senior
Vice President of the Corporation, which shall be subject to the following
express terms and conditions and to such other terms and conditions as the
Administrator may deem appropriate.
(a) Option Period. Each Option agreement shall specify that the Option
granted thereunder is granted for a period of ten (10) years from the date of
grant and shall provide that the Option shall expire on such ten year
anniversary.
(b) Exercise Price. The Exercise Price per share shall be the Fair Market
Value at the time the Option is granted.
(c) Exercise of Option. Subject to Section 7(e), Options granted under
Section 6(a) hereof shall become exercisable in three equal annual installments
beginning on the first anniversary of the date of grant. Options granted under
Section 6(b) vest and become exercisable immediately on the date of grant.
(d) Payment of Exercise Price Upon Exercise. The Exercise Price of the
shares as to which an Option shall be exercised shall be paid to the Corporation
at the time of exercise in cash. The Administrator may authorize in its sole
discretion, the payment of the Option Price by (i) delivering Common Stock of
the Corporation already owned by the Participant and having a total Fair Market
Value on the date of such delivery equal to the Option Price, (ii) delivering a
combination of cash and Common Stock of the Corporation having a total Fair
Market Value on the date of such delivery equal to the Exercise Price, or (iii)
by delivery of a notice of cancellation of vested Options held by the
participant having a spread equal to the Exercise Price of the number of shares
being exercised, including any taxes required to be withheld by the corporation
in connection with such exercise. For purposes of the preceding sentence
"spread" shall mean the difference between the Fair Market Value of the Common
Stock on the date of exercise and the Exercise Price multiplied by the number of
shares covered by the vested Options being canceled.
(e) Termination of Service on the Board. In the event service on the Board
of a Participant terminates for any reason, all Options previously granted to
such Participant under the Plan may be exercised by the Participant (or, if the
Participant is deceased, by his/her representative) at any time, from time to
time, through the tenth anniversary of the date of grant on the terms set forth
herein. Notwithstanding the foregoing, any options granted on the Effective
Date shall be forfeited in the event that the Participant ceases to be a member
of the Board of Directors on the date of the 1998 Annual Meeting.
(f) Transferability of Options. No Option granted under the Plan and no
right arising under such Option shall be transferable other than by will or by
the laws of descent and distribution. During the lifetime of the optionee, an
Option shall be exercisable only by him/her.
(g) Investment Representation. Each Option agreement may contain an
undertaking that, upon demand by the administrator for such a representation,
the optionee (or any person acting under Section 7(e)) shall deliver to the
Administrator at the time of any exercise of an Option a written representation
that the shares to be acquired upon such exercise are to be acquired for
investment and not for resale or with a view to the distribution thereof. Upon
such demand, delivery of such representation prior to the delivery of any shares
issued upon exercise of an Option shall be a condition precedent to the right of
the optionee or such other person to purchase any shares.
(h) Adjustments in Event of Change in Common Stock. In the event of any
change in the Common Stock by reason of any stock dividend recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or of any similar change affecting the Common Stock, the number and kind
of shares which thereafter be optioned and sold under the Plan and the number
and kind of shares subject to Option in outstanding Option agreements and the
Exercise Price per share thereof shall be appropriately adjusted consistent with
such change in such manner as the administrator may deem equitable to prevent
substantial dilution or enlargement of the right granted to, or available for,
Participants in the Plan.
(i) Participants to Have No Rights as Stockholders. No Participant shall
have any rights as a stockholder with respect to any shares subject to his or
her Option prior to the date on which he or she is recorded as the holder of
such shares on the records of the Corporation.
(j) Other Option Provisions. The form of Option agreement authorized by the
Plan may contain such other provisions as the Board may, from time to time,
determine.
Section 8. Listing and Qualification of Shares. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Corporation to sell
and deliver shares under such Options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required. The Corporation, in its
discretion, may postpone the issuance or delivery of shares upon any exercise
of an Option until completion of any stock
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exchange listing, or other qualification of such shares under any state or
federal law, rule or regulation as the Corporation may consider appropriate,
and may require any Participant, beneficiary or legal representative to make
such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
Section 9. Taxes. The Corporation may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of all federal,
state, local and other taxes required by law to be withheld with respect to
Options under the Plan including, but not limited to (a) reducing the number of
shares of Common Stock otherwise deliverable, based upon their Fair Market
Value on the date of exercise, to permit deduction of the amount of any such
withholding taxes from the amount otherwise payable under the Plan, (b)
deducting the amount of any such withholding taxes from any other amount then
or thereafter payable to a Participant, or (c) requiring a participant,
beneficiary or legal representative to pay in cash to the Corporation the
amount required to be withheld or to execute such documents as the Corporation
deems necessary or desirable to enable it to satisfy its withholding
obligations as a condition of releasing the Common Stock.
Section 10. No Liability of Board Members. No member of the Board shall be
personally liable by reason of any contract or other instrument executed by
such member or on his behalf in his/her capacity as a member of the Board or
the Administrator nor for any mistake of judgment made in good faith, and the
Corporation shall indemnify and hold harmless to the fullest extent permitted
by the Corporation's Restated Certificate of Incorporation and By-Laws and
Delaware General Corporation Law, each employee, officer or director of the
Corporation to whom any duty or power relating to the administration or
interpretation of the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Board) arising out of any act or
omission to act in connection with the Plan.
Section 11. Amendment or Termination. The Board may, with prospective or
retroactive effect, amend, suspend or terminate the Plan or any portion thereof
at any time; provided, however, that no amendment, suspension or termination of
the Plan shall deprive any Participant of any right with respect to any Option
granted under the Plan without his written consent; and provided, further, that
unless duly approved by the holders of stock entitled to vote thereon at a
meeting (which may be the annual meeting) duly called and held for such
purpose, except as provided in paragraph 7(h), no amendment or change shall be
made in the Plan (i) increasing the total number of shares which may be issued
or transferred under the Plan; (ii) changing the exercise price specified for
the shares subject to Options; (iii) changing the maximum period during which
Options may be exercised; (iv) extending the period during which Options may be
granted under the Plan; or (v) expanding the class of individuals eligible to
receive Options under the Plan.
Section 12. Captions. The captions preceding the sections of the Plan have been
inserted solely as a matter of convenience and shall not in any manner define
or limit the scope or intent of any provisions of the Plan.
Section 13. Governing Law. The Plan and all rights thereunder shall be governed
by and construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State.
Section 14. Effective Date and Duration of Plan. The Plan shall, subject to
approval of the stockholders of the Company at the 1998 Annual Meeting, become
effective as of the Effective Date. This Plan shall terminate at the close of
business on the last day of January 2008, and no Option may be granted under
the Plan after such date, but such termination shall not affect any Option
previously granted.
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