Quest Diagnostics 2013 Annual Report Download - page 109

F- 37
16. STOCK OWNERSHIP AND COMPENSATION PLANS
Employee and Non-employee Directors Stock Ownership Programs
In 2005, the Company established the ELTIP to replace the Company's prior Employee Equity Participation Programs
established in 1999 (the “1999 EEPP”). At the Company's annual shareholders' meeting in May 2012, the shareholders
approved certain amendments to the ELTIP including: (i) increasing the number of shares available for award under the ELTIP
by approximately 7 million shares; (ii) limiting the number of shares subject to stock options or SARs that may be awarded to
an individual during any fiscal year to 2,000,000; (iii) limiting the number of shares subject to stock awards that may be
awarded to an individual during any fiscal year to 1,000,000; (iv) prohibiting the exchange of stock options or SARs for cash;
and (v) extending the term of the ELTIP until the date of the 2022 annual shareholders' meeting.
The ELTIP provides for three types of awards: (a) stock options, (b) stock appreciation rights and (c) stock awards.
The ELTIP provides for the grant to eligible employees of either non-qualified or incentive stock options, or both, to purchase
shares of Company common stock at an exercise price no less than the fair market value of the Company's common stock on
the date of grant. The stock options are subject to forfeiture if employment terminates prior to the end of the vesting period
prescribed by the Board of Directors. Grants of stock appreciation rights allow eligible employees to receive a payment based
on the appreciation of Company common stock in cash, shares of Company common stock or a combination thereof. The stock
appreciation rights are granted at an exercise price no less than the fair market value of the Company's common stock on the
date of grant. Stock options and stock appreciation rights granted under the ELTIP expire on the date designated by the Board
of Directors but in no event more than ten years from date of grant. No stock appreciation rights have been granted under the
ELTIP or the 1999 EEPP. The ELTIP allows eligible employees to receive awards of shares, or the right to receive shares, of
Company common stock, the equivalent value in cash or a combination thereof. These shares are generally earned on
achievement of financial performance goals and are subject to forfeiture if employment terminates prior to the end of the
vesting period prescribed by the Board of Directors. For performance share unit awards, the actual amount of performance
share awards earned is based on the achievement of the performance goals specified in the awards. Key executive, managerial
and technical employees are eligible to participate in the ELTIP. The provisions of the 1999 EEPP were similar to those
outlined above for the ELTIP. Certain options granted under the 1999 EEPP remain outstanding.
The maximum number of shares of Company common stock that may be optioned or granted under the ELTIP is
approximately 60 million shares.
In 2005, the Company established the DLTIP, to replace the Company's prior plan established in 1998. At the
Company's annual shareholders' meeting in May 2009, the shareholders approved certain amendments to the DLTIP including:
(i) increasing the number of shares available for award under the DLTIP by 0.4 million shares; (ii) increasing the maximum
term that the Board of Directors may establish for awards of stock options from seven to ten years, beginning with awards in
2009; and (iii) extending the term of the DLTIP until the date of the 2019 annual shareholders' meeting.
The DLTIP provides for the grant to non-employee directors of non-qualified stock options to purchase shares of
Company common stock at an exercise price no less than the fair market value of the Company's common stock on the date of
grant. The DLTIP also permits awards of restricted stock and restricted stock units to non-employee directors. Stock options
granted under the DLTIP expire on the date designated by the Board of Directors but in no event more than ten years from date
of grant, and generally become exercisable in three equal annual installments beginning on the first anniversary date of the
grant of the option regardless of whether the optionee remains a director of the Company. The maximum number of shares that
may be issued under the DLTIP is 2.4 million shares. For the years ended December 31, 2013, 2012 and 2011, grants under the
DLTIP totaled 75 thousand shares, 72 thousand shares and 60 thousand shares, respectively.
In general, the Company's practice has been to issue shares related to its stock-based compensation program from
shares of its common stock held in treasury. See Note 15 for further information regarding the Company's share repurchase
program.
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(in millions unless otherwise indicated)