8-KMaterial AgreementsExhibits & Filings

QUEST DIAGNOSTICS INC 8-K Report, Material Agreement (Mar 20, 2006)

Filed March 20, 2006For Securities:DGX

Summary

This Form 8-K filing from Quest Diagnostics Incorporated (DGX) details the compensation adjustments and incentive plan targets for its executive officers for fiscal year 2006, approved on February 15, 2006. The report outlines updated base salaries, the criteria for annual cash bonuses under the Senior Management Incentive Plan (SMIP), and grants of long-term incentives, including stock options and performance shares under the Amended and Restated Employee Long-Term Incentive Plan (ELTIP). Investors should note the specific base salaries set for key executives, including the CEO Surya N. Mohapatra at $1,023,000. The compensation structure emphasizes both financial performance (earnings per share and revenue growth) and non-financial metrics (patient satisfaction, quality, customer and employee satisfaction) for cash bonuses. Long-term incentives are tied to multi-year earnings per share growth relative to a peer group, with performance shares potentially vesting at 0% to 200% of target based on competitive EPS ranking.

Key Highlights

  • 1Quest Diagnostics' Compensation Committee approved 2006 annual base salaries for its executive officers on February 15, 2006.
  • 2CEO Surya N. Mohapatra's base salary for 2006 was set at $1,023,000.
  • 3Annual cash bonuses under the SMIP are contingent on financial performance (EPS, revenue growth) and other strategic targets (patient satisfaction, quality, retention, employee satisfaction).
  • 4The CEO is eligible for a target bonus of up to 130% of his base salary, with other executives having varying target percentages.
  • 5The company granted stock options and target performance shares under the ELTIP for the 2006 fiscal year.
  • 6Stock options vest over three years, have a seven-year term, and cannot be re-priced below fair market value, with limited exceptions for corporate transactions.
  • 7Performance shares are earned based on multi-year EPS growth relative to a peer group, with payouts ranging from 0% to 200% of target based on percentile ranking.

Frequently Asked Questions

The executive compensation package for 2006 includes base salary, annual cash bonuses tied to financial and strategic performance, and long-term incentives in the form of stock options and performance shares. The specific details of these components, including base salaries, bonus targets, and grant sizes, were approved by the Compensation Committee.

Annual cash bonuses are determined based on a combination of factors: the company's financial performance (measured against earnings per share and revenue growth targets), performance against other specific company objectives (like patient satisfaction and quality), and individual executive performance. A target percentage of base salary is established for each executive, which can be earned based on the achievement of these metrics.

The stock options granted as part of the long-term incentive plan will vest over a three-year period and have a seven-year term from the date of grant. The exercise price is set at no less than the fair market value of the company's common stock on the grant date, and the plan prohibits option repricing except under specific circumstances related to corporate transactions.

The payout for performance shares is based on the company's earnings per share (EPS) growth over a multi-year period, compared to a peer group. Depending on Quest Diagnostics' relative EPS ranking within the peer group (from the 25th percentile to the 85th percentile and above), executives can earn between 0% and 200% of their target performance share award.