QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(dollars in thousands unless otherwise indicated)

The following relates to options outstanding at December 31, 2003:

Options Outstanding					Options Exercisable
Range of Exercise Price	Shares (in thousands)	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Shares (in thousands)	Weighted Average Exercise Price
$5.26 - $11.28 ....	564	3.8	$      7.91		564	$      7.91
$12.92 - $19.16 ....	2,431	5.8	14.02		2,431	14.02
$28.53 - $35.64 ....	360	6.4	30.44		360	30.44
$44.00 - $60.00 ....	4,142	8.3	51.44		1,349	53.13
$60.06 - $75.94 ....	2,376	8.5	68.43		836	69.16
$80.95 - $94.99 ....	367	8.4	93.06		166	91.15

The following summarizes the activity relative to incentive stock awards granted in 2003, 2002 and 2001 (shares in thousands):

		2003		2002		2001
Incentive shares, beginning of year.................................................		735		1,320		1,788
Incentive shares granted....................................................................		102		-		-
Incentive shares vested......................................................................		(533)		(570)		(439)
Incentive shares forfeited and canceled...........................................		(16)		(15)		(29)
Incentive shares, end of year.............................................................		288		735		1,320
Weighted average fair value of incentive shares at grant date ....		$49.88		$        -		$        -

The balance of the incentive stock awards at December 31, 2003 are subject to forfeiture if employment terminates prior to the end of the prescribed vesting period.

Employee Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“ESPP”), substantially all employees can elect to have up to 10% of their annual wages withheld to purchase Quest Diagnostics common stock. The purchase price of the stock is 85% of the lower of its beginning-of-quarter or end-of-quarter market price. Under the ESPP, the maximum number of shares of Quest Diagnostics common stock which may be purchased by eligible employees is 4 million. Approximately 272, 236 and 203 thousand shares of common stock were purchased by eligible employees in 2003, 2002 and 2001, respectively.

Employee Stock Ownership Plan

Prior to 1999, the Company maintained its Employee Stock Ownership Plan (“ESOP”) to account for certain shares of Quest Diagnostics common stock which had been issued for the account of all active regular employees of the Company as of December 31, 1996. Effective with the closing of the SBCL acquisition, the Company modified certain provisions of the ESOP to provide an additional benefit to employees through ownership of the Company’s common stock. During the year ended December 31, 2002, the ESOP was merged into the Company’s defined contribution plan. Prior to the merger of the ESOP into the Company’s defined contribution plan, substantially all of the Company’s employees were eligible to participate in the ESOP. The Company’s contributions to the ESOP trust were based on 2% of eligible employee compensation for those employees who were actively employed or on a leave of absence on the last day of the Plan year. Company contributions to the trust were made in the form of shares of Quest Diagnostics common stock. The Company’s contributions to this plan aggregated $10.4 million and $19.7 million for 2002 and 2001, respectively.

Defined Contribution Plan

The Company maintains a qualified defined contribution plan covering substantially all of its employees. During the year ended December 31, 2002, the ESOP, to which the Company made annual contributions equal to 2% of eligible compensation, was merged into the Company’s defined contribution plan and the Company increased its maximum matching contribution for its defined contribution plan from 4% to 6% of an employee’s eligible wages. The Company’s expense for contributions to its defined contribution plan aggregated $54 million, $42 million and $30 million for 2003, 2002 and 2001, respectively.

Supplemental Deferred Compensation Plan

The Company’s supplemental deferred compensation plan is an unfunded, non-qualified plan that provides for certain management and highly compensated employees to defer up to 50% of their eligible compensation. The compensation deferred under this plan, together with Company matching amounts, are credited with earnings or losses measured by the mirrored rate of return on investments elected by plan participants. Each plan participant is fully vested in all deferred compensation, Company match and earnings credited to their account. Although the Company is currently contributing all participant deferrals and matching amounts to a trust, the funds in the trust, totaling $19.2 million and $14.8 million at December 31, 2003 and 2002, respectively, are general assets of the Company and are subject to any claims of the Company’s creditors. The Company’s expense for matching contributions to this plan were $0.4 million, $0.4 million and $0.6 million for 2003, 2002 and 2001, respectively.