Quest Diagnostics 2004 Annual Report Download - page 15

Option Grants. The following table sets forth certain information regarding options granted in
2003 to the named executive officers pursuant to stock option plans. No stock appreciation rights
(SARs) were granted in 2003.
Option/SAR Grants in 2003
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
% of
Total
Number of Options
Securities Granted to
Underlying All Employees Gain Gain Gain
Options in Fiscal Exercise Expiration at at at
Executive Granted Year Price Date 0% 5% 10%
Kenneth W. Freeman 700,000(1) 22.8% $49.52 12/31/12 $0 $21,800,003 $55,245,489
Surya N. Mohapatra 100,000(2) 3.3% $49.52 2/13/13 0 3,114,286 7,892,213
Surya N. Mohapatra 76,000(3) 2.5% $71.07 2/27/12 0 1,413,355 4,956,673
Surya N. Mohapatra 5,618(3) 0.2% $93.79 1/13/08 0 0 0
Surya N. Mohapatra 2,975(3) 0.1% $64.07 2/3/09 0 39,828 114,201
Robert A. Hagemann 50,000(2) 1.6% $49.52 2/13/13 0 1,557,143 3,946,106
Robert A. Hagemann 34,000(3) 1.1% $71.07 2/27/12 0 632,290 2,217,459
Robert A. Hagemann 2,516(3) 0.1% $89.24 7/30/08 0 0 9,680
Robert A. Hagemann 2,078(3) 0.1% $69.58 1/13/08 0 8,715 48,859
Robert A. Hagemann 1,797(3) 0.1% $69.58 1/20/07 0 1,224 27,045
David M. Zewe 40,000(2) 1.3% $49.52 2/13/13 0 1,245,714 3,156,885
David M. Zewe 38,000(3) 1.2% $71.07 2/27/12 0 706,677 2,478,336
Gerald C. Marrone 32,000(2) 1.0% $49.52 2/13/13 0 996,572 2,525,508
Gerald C. Marrone 28,000(3) 0.9% $71.07 2/27/12 0 520,710 1,826,143
Gerald C. Marrone 1,713(3) 0.1% $93.79 1/13/08 0 0 0
Gerald C. Marrone 1,783(3) 0.1% $93.79 11/10/07 0 0 0
Gerald C. Marrone 2,507(3) 0.1% $64.07 1/13/08 0 24,316 72,747
Gerald C. Marrone 5,614(3) 0.2% $58.65 8/16/09 0 111,980 254,045
All Employees 3,068,720(4) 100%
(1) The option provides for monthly vesting over a three-year period beginning January 1, 2003 and vests immediately in
full if Mr. Freeman’s employment is terminated by reason of death. Upon Mr. Freeman relinquishing his position as
Chief Executive Officer, there will be no further monthly vesting from the relinquishment date except that Mr.
Freeman will vest in an additional 12/36 of the option if he remains as Chairman of the Board until the first
anniversary of the relinquishment date or if prior to such date his employment is terminated by the Company without
“cause’’ or by Mr. Freeman for “good reason’’ (provided that the option will vest in full if such termination by the
Company without “cause’’ or by Mr. Freeman for “good reason’’ occurs within six months of the date he ceases to be
Chief Executive Officer). The term “good reason’’ is defined below under “Employment Agreement of Mr. Freeman’’.
However, the option is not exercisable prior to December 31, 2006, unless Mr. Freeman’s employment is terminated by
the Company without “cause’’ or by Mr. Freeman for “good reason’’, in which case the option is not exercisable until
the first anniversary of such termination.
(2) The option vests in three equal annual installments beginning February 13, 2004 and vests immediately upon a change
of control (as defined below under “Severance Arrangements’’) or termination of employment by reason of death or
disability. In addition, on a termination of employment prior to February 13, 2007 (other than for cause), the
executive will vest in an additional percentage of the option as if the option had vested on a monthly basis. The shares
acquired upon exercise of the option may not be sold prior to February 13, 2007.
(3) The grant involved the replacement of an existing option. The replacement option was issued in order to fully ensure
that the Company would be entitled to available tax deductions upon the exercise of the option. The executive officer
realized no benefits, financial or otherwise, as a result of the replacement of the option. Each replacement option has
the same exercise price (which was above the market price at the time of issuance), the same vesting terms and the
same expiration date as the option that it replaces.
(4) Excludes 292,255 shares of the Company’s common stock reserved for outstanding stock options of Unilab Corporation
which were converted upon the completion of the Unilab acquisition into options to acquire shares of the Company’s
common stock.
Quest Diagnostics Incorporated ?2004 Proxy Statement ?13