Exhibit 10.38


QUEST DIAGNOSTICS INCORPORATED 

PERFORMANCE SHARE AWARD AGREEMENT

(2007 – 2009 Performance Period) 


This Performance Share Award Agreement (the “Share Agreement”) dated as of Grant Date (the “Grant Date”) is by and between Quest Diagnostics Incorporated, 1290 Wall Street West, Lyndhurst, NJ 07071 (the
“Company”) and ________________________ (the “Employee”). 

	
1.          	
Conditions.
    This Share Agreement is subject in all respects to the Company’s Amended
    and Restated Employee Long-Term Incentive Plan (the “Plan”),
the applicable terms of which are incorporated herein by reference. Terms not
    defined in this Share Agreement shall have the meaning ascribed in the Plan.
    The Employee acknowledges that he/she has read the terms of the Plan. This
    Share Agreement shall become void and the underlying grant will be revoked
    unless this document is executed by the Employee and returned by mail to
    the Executive Compensation Department to the attention of Lisa Zajac (1290
    Wall Street West – 5th Floor,
    Lyndhurst, NJ 07071) within thirty
    (30) days from the date of transmittal to the Employee.
  
	 
	
2.	
Calculation of Potential Award. The Employee shall be eligible to vest in shares of the Company’s stock as provided in this section (shares that have so
vested, “Vested Shares”).

  
	 
	 	
Employee’s Target Performance Shares: ____________________

  
	 
	 	
Performance will be measured over the Performance Period using the Baseline results and Final Year results for the Company as well as for the companies in the Comparator Peer Group (see Appendix A for these
defined terms). After the Final Year of the Performance Period, the results of each company in the Comparator Peer Group will be arrayed from highest to lowest. The Company’s results will then be compared to that of the Comparator Peer Group
and, based on the Company’s relative position in this array; Vested Shares will be awarded based upon the following formula:

  
	 


	          	 Performance
    Relative to Peers * 
	 “Earnings
    Multiple”* multiplied by Target 

	 	 

  	
Performance Shares = Vested Shares
  
	 	
Greater Than or Equal to 80th%ile
  	
2 x Target Performance Shares = Vested Shares
  
	 	
Equal to 50th %ile
  	
1 x Target Performance Shares = Vested Shares
  
	 	
Less Than or Equal to 20th %ile
  	
0 x Target Performance Shares = 0 Shares
  
	 	        *Intermediate
    Performance and resulting Earnings Multiple will be interpolated. 




	 	
For example, if the Company’s EPS Compound Annual Growth Rate (CAGR) from the Baseline to the end of the Performance Period (the end of fiscal year 2009) is at the 65th %ile relative to the companies in the S&P500 Healthcare Index, an Earnings Multiple of 1.5 will be applied to the Target Performance Shares to calculate the Vested Shares.

  
	 
	
3.          	
Adjustments to Target Performance
        Shares: The
        Target Performance Shares will only be adjusted on a pro rata basis in
    the event either of the following occur:
  
	 
	 	
(a)          	
the Employee’s employment with the Company ends prior to the end of the Performance Period, except if for death, disability (as defined in Section 22(e)(3) of the Internal Revenue Code), or retirement
(defined as termination after the Employee attains age sixty and with the consent of the Company). In that event, the Target Performance Shares will be pro-rated by dividing the number of full months served by the Employee during the Performance
Period by the number of months in the Performance Period (“Pro Ration Factor”); provided, however, that no Target Performance Shares shall vest under this sentence if the Employee’s
termination of employment occurs less than three months after the Grant Date.
At the end of the Performance Period, the Vested Shares will be calculated based
on the product of the Target Performance Shares, the Pro 

  
	 



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	         	 	 Ration Factor and the Earnings Multiple; provided,
      however, that an Employee shall be deemed to be disabled only if on or
      before the first anniversary of the Employee’s termination of employment,
      the Employee delivers to the Company evidence satisfactory to the Company
      that the Social Security Administration has determined that the Employee
      is disabled (as defined in Section 22(e)(3) of the Internal Revenue Code);
    or 
	 	 	 
	 	
(b)          	
the Employee’s employment with the Company ends prior to the end of the Performance Period as a result of (1) a separation which would entitle the Employee to severance benefits under the Company’s
Severance Policy or an employment agreement between such Employee and the Company or (2) a divestiture and the Employee is employed by the purchasing entity. In that event, the Target Performance Shares will be pro-rated by adding the number of full
months served by the Employee during the Performance Period plus twelve (but not to exceed the number of months remaining in the Performance Period) and then dividing that total by the number of months in the Performance Period (“Severance Pro
Ration Factor”). At the end of the Performance Period, the Vested Shares will be calculated based on the product of the Target Performance Shares, the Severance Pro Ration Factor and the Earnings Multiple; or

  
	 
	 	
(c)	
if prior to the end of the Performance Period, the Employee’s employment status in the Company is changed such that the Employee will no longer be eligible to receive performance shares pursuant to the
Equity Award Eligibility Policy of the Company as in effect on the date hereof and attached as Appendix B to this Agreement and such changed status continues for a consecutive 90-day period, then, notwithstanding any other provision in this
Agreement to the contrary, the Target Performance Shares will be pro-rated by dividing (x) the number of full months served by the Employee during the Performance Period through such 90th day (not to exceed 36) by (y) the number of months in the Performance Period (“Pro Ration Factor”). At the end of the Performance Period, the Vested Shares will be calculated based on the product of the Target
Performance Shares, the Pro Ration Factor and the Earnings Multiple. The balance of the Target Performance Shares will be forfeited. Notwithstanding the foregoing, there will be no pro- ration under the first sentence of this Section 3(c) (and no
Target Performance Shares will be forfeited as a result of the Employee being no longer eligible to receive performance shares pursuant to the Equity Award Eligibility Policy of the Company) if, (i) before the end of such 90- day period, the
Employee has attained age 60 or (ii) the Compensation Committee in its absolute discretion determines to waive the application of this Section 3(c).

  
	 
	 	
(d)	
Notwithstanding anything to the contrary contained herein, if the Employee is on a leave of absence approved by the Corporation for medical, personal, educational and/or other permissible purposes pursuant
to policies of the Corporation as in effect on the date hereof, for a consecutive twelve-month period, the Employee will be deemed terminated for purposes of this Agreement on the first anniversary of the commencement of such leave of absence (with
the result that the Target Performance Shares will be pro-rated in accordance with Section 3(a)); provided, however, that on or before the first anniversary of the commencement of the leave of absence, the Compensation Committee may, in its absolute
discretion, determine to waive the application of this Section 3(d), in which case the Employee will not be deemed terminated for purposes of this Agreement and the Target Performance Shares will continue to vest in accordance with this Agreement.
Notwithstanding the foregoing, if the Employee’s employment is terminated pursuant to this Section 3(d) at the end of a medical or disability leave, then the Target Performance Shares shall cease to vest as of the end of the twelve-month leave
but shall not be forfeited until the first anniversary of the Employee’s termination of employment unless, prior to such first anniversary, the Employee delivers to the Company evidence satisfactory to the Company that the Social Security
Administration has determined that the Employee is disabled as provided in Section 3(a).

  
	 



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(e)          	
If the Employee shall be transferred from the Corporation to a subsidiary company (being a 50% owned entity within the meaning of Section 424(f) of the Code), or joint venture or similar entity existing as
of the date of this Agreement in which the Corporation has at least a 33.33% interest (“joint venture”) or vice versa or from one subsidiary company (or joint venture) to another, the Employee’s employment shall not be deemed to have
terminated. If, while the Employee is employed by such a subsidiary company or joint venture, such subsidiary company or joint venture shall cease to be a subsidiary company or joint venture as described above and the Employee is not thereupon
transferred to and employed by the Corporation or another subsidiary company or joint venture as described above, then the Employee’s employment will be treated as a termination due to a divestiture under Section 3(b)(2) above as of the date
that the Employee’s employer ceases to be such a subsidiary company or joint venture of the Corporation.

  
	 
	
4.          	
Vesting and Exceptions to Vesting:

  
	 
	 	
Subject to the exception enumerated at the end of this Section 4, the Employee will vest at the end of the Performance Period. Vested Shares, net of required tax withholding as described in Section 8 below,
will be transferred into the Employee’s account at the Company’s dedicated broker as soon as practicable after the final calculation of the number of Vested Shares.

  
	 
	 	
In the event a Change in Control of the Company occurs prior to the end of the Performance Period (or prior to the determination of the final approved Earnings Multiple), then, upon the consummation of such
transaction, a number of Vested Shares will be delivered to the Employee equal to the greater of: (1) the Target Performance Shares (as pro rated, if applicable, pursuant to section 3 above) or (2) the number of Performance Shares that would be
Vested Shares had the calculation been based on the Performance Period including the most recent fiscal year end results of the Company and the companies in the Comparator Peer Group. For purposes of this Share Agreement, Change of Control shall
mean and shall be deemed to occur if and when:

  
	 
	 	
(a)	
Any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing
40% of more of the combined voting power of the Company’s then outstanding securities; or

  
	 
	 	
(b)	
The individuals who, as of the grant date, constituted the Company’s Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual (other than any individual whose initial assumption of office is in connection with an actual or threatened election contest (as such
term is used in Rule 14a-11 of Regulation A promulgated under the Securities Exchange Act of 1934)), becoming a director subsequent to the Grant Date, whose election, or nomination for election by the stockholders of the Company, was approved by a
vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual was a member of the Incumbent Board; or

  
	 
	 	
(c)	
Shareholders of the Company approve an agreement, providing for (a) a transaction in which the Company will cease to be an independent publicly owned corporation, or (b) the sale or other disposition of all
or substantially all of the Company’s assets, or (c) a plan of partial or complete liquidation of the Company.

  
	 
	 	
The Employee will not vest and will forfeit all Performance Shares if, either:

  
	 



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(x)          	
The Employee was terminated for Cause where “Cause” shall be defined as the Employee committing any act that shall or could cause the Company to suffer financial harm or damage to its reputation
(either before or after termination of employment) through (i) dishonesty, (ii) violation of law in the course of the Employee’s employment or violation of the Company’s Corporate Compliance Manual and compliance bulletins or other written
policies, or (iii) material deviation from the duties owed the Company by the Employee; or

  
	 
	 	
(y)	
The Employee breaches any non solicit, non compete or confidentiality covenant or any other restrictive covenants of his or hers that may be in place. The Employee understands and acknowledges that he or she
is a key employee of the Company which was a reason, in part, for being provided with this Grant, and, as such, may have restrictive covenants in place. Forfeiture under this subsection (y) shall not constitute a release of any claim that the
Company may have for damages, past, present, or future in respect of any such breach. In addition, a breach by the Employee of any non solicit, non compete or confidentiality covenant or any other restrictive covenants of his or hers that may be in
place that occurs after any shares have been delivered pursuant to this Agreement (including any breach occurring after termination of employment) shall cause such delivery to be rescinded (and if the Employee has previously sold the shares issued
pursuant to this Agreement, the Employee would be required to pay back to the Company the pre-tax proceeds received from the sale of such shares).

  
	 
	
5.          	
Executive Share Ownership Guidelines: If the Employee has been designated as a participant in the Company’s Executive Share Ownership Guidelines, which
have been established by the Compensation Committee of the Board of Directors, Vested Shares earned by the Employee (net of tax withholdings) pursuant to this Share Agreement would qualify under and are subject to such guidelines.

  
	 
	
6.	
Non-Transferability. Except pursuant to the laws of descent and distribution, the Performance Shares described in this Share Agreement may not be sold,
assigned, transferred, pledged or otherwise encumbered by or on behalf of or for the benefit of the Employee. Unless otherwise provided at the time of delivery of the Vested Shares to the Employee, the Vested Shares may be so sold, assigned,
transferred, pledged or encumbered.

  
	 
	
7.	
Interpretation. Any dispute, disagreement or matter of interpretation which shall arise under this Share Agreement shall be finally determined by the
Company’s Compensation Committee in its absolute discretion.

  
	 
	
8.	
Taxes: Any Vested Shares under this program will be considered taxable income and subject to tax and tax withholdings as appropriate. The Company will reduce
the number of Vested Shares to be delivered to the Employee by the amount of the taxes due (with the shares valued at the average of the high and low selling prices on the date that the Vested Shares are valued for purposes of reporting compensation
for Federal income tax purposes).

  
	 
	
9.	
Governing Law. This Share Agreement and all rights hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the state of
New York applicable to contracts made and to be performed entirely within such state. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York state court
or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York state court or, to the extent permitted by law, in such federal
court.

  
	 



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	 	 Each of the parties hereto agrees
      that a final judgment in any such action or proceeding shall be conclusive
      and may be enforced in other jurisdictions by suit on the judgment or in
      any other manner provided by law. Each of the parties hereto irrevocably
      and unconditionally waives, to the fullest extent it may legally and effectively
      do so, any objection that it may now or hereafter have to the laying of
      venue of any suit, action or proceeding arising out of or relating to this
      Agreement in any state or federal court sitting in New York City. Each
      of the parties hereto hereby irrevocably waives, to the fullest extent
      permitted by Law, the defense of an inconvenient forum to the maintenance
    of such action or proceeding in any such court. 
	 	 
	
10.          	
Acknowledgements. By execution of this Share Agreement, the Employee agrees that he/she has received and reviewed a copy of:

  
	 
	 	
(a)          	
the Prospectus (link to Prospectus: http://questnet1.qdx.com/Business_Groups/Legal/policies/stock_Grant/stock_Grant.htm) relating to
the Company’s Amended and Restated Employee Long-Term Incentive Plan;

  
	 
	 	
(b)	
the Quest Diagnostics Incorporated 2006 Annual Report (link to 2006 Annual Report:
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=DGX&script=700 to Shareholders and Form 10-K);

  
	 
	 	
(c)	
the Company’s Policy for Purchasing and Selling Securities (“the Policy”) (link to
Trading Policy: http://questnet1.qdx.com/Business_Groups/Legal/policies/policies.htm.) The Employee further agrees to fully comply with the terms of the Policy;

  
	 
	 	
(d)	
the Company’s Executive Share Ownership Guidelines (link to guidelines: http://questnet1.qdx.com/Business_Groups/Legal/policies/policies.htm); and

  
	 
	 	
(e)	
the Company’s Equity Award Eligibility Policy attached hereto as Appendix B.

  
	 



EMPLOYEE: 



  

  By:           ________________________________

                     (NAME) 


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Appendix A 

QUEST DIAGNOSTICS INCORPORATED 

PERFORMANCE SHARE AWARD AGREEMENT

 2007 – 2009 Performance Period 


Baseline  –$2.50 per share for the Company and fully-diluted earnings per share for Fiscal Year 2006 for each company in the Comparator Peer Group.

	
Fiscal Year refers to the year during which the last full month occurs in each company’s annual reporting period. For most companies in the Comparator Peer Group, the
Fiscal Year ended on December 31. For certain other companies, the Fiscal Year ended during other months in 2006.




Final Year – Fiscal Year 2009 for the Company and each company in the Comparator Peer Group. 


Performance Period – The Performance Period will run from January 1, 2007 through December 31, 2009, the Final Year for the Company (and corresponding Peer Group fiscal
years). 


Performance Goal(s) - Compound Annual Growth Rate (CAGR) in Fully-Diluted Earnings Per Share for the Company and each company in the
Comparator Peer Group from the Baseline to the Final Year (i.e., for Fiscal Years 2007, 2008 and 2009). . 

	
The reported Fully-Diluted Earnings Per Share results will include the annual compensation cost of each company’s equity awards.

	
Final awards will be determined by the end of the first quarter following the end of the measurement period based upon publicly filed information. If any company in the Peer
Group has not publicly reported its Fully Diluted Earnings Per Share by February 28, 2010, its CAGR will be computed as of its most recent quarterly report.




Comparator Peer Group – The Comparator Peer Group is comprised of the companies in the Standard & Poors 500 Healthcare Index as of December 31, 2009.

	
Excluded from the list of companies in the Comparator Peer Group will be those companies reporting a negative EPS in fiscal Year 2006 since calculating CAGR will not be
possible for these companies.














2007 Incentive Stock Agreement

 


Appendix B 

Quest Diagnostics Incorporated 

"Equity Award Eligibility Policy"


Option Eligibility

	
	

	
Unreduced Work Schedule

  
	 
	
	

	
One of the following salary grades:

  
	 
	 	     	
	

	
Corporate VP or Higher

  
	 
	 	 	
	

	
Salary Grade 53 or Higher

  
	 
	 	 	
	

	
Research & Development - Grade RD6 or Higher

  
	 
	 	 	
	

	
Medical Director - Grade MD2

  



For employees whose salary is administered outside the standard Quest structure (i.e., MedPlus, International, Clinical Trials Europe), a Quest Diagnostics salary grade has been assigned consistent with the above
requirements. This grade is stored within the Company's Stock Administration System.


IMPORTANT: Meeting the criteria for “Option Eligibility” does not guarantee an award. All grants are subject to a separate
approval process.