UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (date of earliest event reported): February 15, 2010
 
MERCK & CO., INC.
(Exact name of registrant as specified in its charter)
         
New Jersey
(State or other jurisdiction
of incorporation or
organization)
  1-6571
(Commission file number)
  22-1918501
(I.R.S. Employer
Identification No.)
         
     
One Merck Drive, P.O. Box 100,
Whitehouse Station, NJ

(Address of principal executive offices)
 
08889
(Zip code)
     
Registrant’s telephone number, including area code: (908) 423-1000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers .
(e) Compensatory Agreements and Arrangements
      Tax Gross Ups Eliminated : On February 15, 2010, Merck & Co., Inc. (the “Company” or “Merck”) amended its change in control plan to eliminate gross-up payment in the event that excise taxes are imposed under Sections 280G and 4999 (“280G Excise Tax”) of the Internal Revenue Code of 1986, as amended.
     Previously, Executive Committee members employed by Merck Sharp & Dohme Corp. (“MSD”), a wholly-owned subsidiary of the Company, were provided with gross ups for 280G Excise Taxes imposed in the event of or threat of a change in control of the Company (or, until November 3, 2010, of MSD). The Compensation and Benefits Committee (the “Committee”) of the Company’s Board of Directors (the “Board”) amended the Merck & Co., Inc. Change in Control Separation Benefits Plan (the “CIC Plan”) to provide that Executive Committee members will be treated in the same manner as other participating executives. That is, payments that become due under the terms of the CIC Plan will be reduced if doing so would result in the participant retaining a larger amount of his or her benefits as compared to receiving his or her full benefits and paying the 280G Excise Tax. Under the amendment procedures of the CIC Plan, this amendment will not apply if, generally, a change in control occurs before February 14, 2011.
      Double Trigger Vesting of Options, RSUs Adopted : Also on February 15, 2010, the Board amended the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan (“MSD 2007 ISP”) to provide that options (other than certain performance options) and Restricted Stock Units (“RSUs”) granted thereafter generally will vest upon a change in control only if the grantee’s employment is involuntarily terminated without cause within 24 months following a change in control. Previously granted options and RSUs generally vest immediately on a change in control. If options and RSUs are not continued after the change in control, the prior treatment is unchanged.
     The forgoing is qualified by reference to the full texts of the amendments, copies of which are attached to this report as exhibits and are incorporated by reference in this Item 5.02. Copies of the full CIC Plan and MSD 2007 ISP can be found as Exhibits 10.14 and 10.7, respectively, to the Company’s current report on Form 8-K filed on November 4, 2009.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits .
     
Number   Description
 
   
10.1
  Amendment 1 to Merck & Co., Inc. Change in Control Separation Benefits Plan
 
   
10.2
  Amendment 1 to Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan
 
   
10.3
  Terms for 2010 Stock Option Quarterly, Annual Grants under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan or Schering-Plough 2006 Stock Incentive Plan
 
   
10.4
  Terms for 2010 Restricted Stock Unit Quarterly, Annual Grants Under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan or Schering-Plough 2006 Stock Incentive Plan

-2-


 

SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 18, 2010
         
  Merck & Co., Inc.
 
 
  By:   /s/ Debra A. Bollwage    
    Name:   Debra A. Bollwage   
    Title:   Senior Assistant Secretary   

-3-


 

INDEX TO EXHIBITS
     
Number   Description
 
   
10.1
  Amendment 1 to Merck & Co., Inc. Change in Control Separation Benefits Plan
 
   
10.2
  Amendment 1 to Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan
 
   
10.3
  Terms for 2010 Stock Option Quarterly, Annual Grants under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan or Schering-Plough 2006 Stock Incentive Plan
 
   
10.4
  Terms for 2010 Restricted Stock Unit Quarterly, Annual Grants Under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan or Schering-Plough 2006 Stock Incentive Plan

-4-

Exhibit 10.1
AMENDMENT ONE
to the
MERCK & CO., INC.
CHANGE IN CONTROL SEPARATION BENEFITS PLAN
(Effective as Amended and Restated as of November 3, 2009)
     WHEREAS, under Section 8.2 of the Merck & Co., Inc. Change in Control Separation Benefits Plan (the “ CIC Plan ”), the CIC Plan may be amended or modified in any respect by resolution adopted by two-thirds of the Compensation and Benefits Committee of the Board; provided that in the event of a Change in Control within one year of the amendment, or an MSD Change in Control within one year of the Merck CIC Plan’s Restatement Date (as such terms are defined in the CIC Plan), the provisions that were in effect prior to such amendment will apply with respect to those impacted participants who were participants as of the date of the amendment;
     WHEREAS, the Committee desires to and hereby amends the CIC Plan to provide that Executive Committee Members who participate in the plan will be treated in the same manner as certain other executives who participate in the plan with respect to certain tax gross-up benefits that may otherwise be imposed under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “ Code ”);
     NOW, THEREFORE, BE IT
RESOLVED, that in consideration of the premises, the CIC Plan is hereby amended, as follows:
1. Section 6.1 of the CIC Plan shall be renamed as “Gross-up Payments” and the preamble for such section (prior to subsection (a)) is replaced with the following paragraph:
Gross-up Payments . This Section 6.1 is effective from the Effective Date until February 15, 2010 and shall be applicable solely to Participants who are Executive Committee Members. Effective on or after February 15, 2010, this Section 6.1 shall no longer be applicable and any Participants who are Executive Committee Members shall be eligible for the benefits described in Section 6.2; provided however that if a Change in Control occurs prior to February 15, 2011, or if an MSD Change in Control occurs prior to the first anniversary of the Restatement Date (in accordance with Section 7.2(b)), a Participant who is an Executive Committee Member shall be entitled to the benefits provided in this 6.1 in lieu of the benefits in 6.2.
2. Section 6.2 of the CIC Plan shall be renamed as “Modified Cap Benefit” and the preamble for such section (prior to subsection (a)) is replaced with the following paragraph:
Modified Cap Benefit . Effective until February 15, 2010, this Section 6.2 shall be applicable solely to Participants who are Other Executives. Effective on or after February 15, 2010, subject to Section 6.1, this Section 6.2 shall be applicable to Participants who are Executive Committee Members or Other Executives.
3. This amendment is effective as of February 15, 2010.

Exhibit 10.2
AMENDMENT ONE
to the
MERCK SHARP & DOHME CORP.
2007 INCENTIVE STOCK PLAN
(As Amended and Restated as of November 3, 2009)
     WHEREAS, under Section 13 of the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan (the “ MSD 2007 ISP ”), the Board of Directors of Merck (the “ Board” ) may from time to time amend the terms of the MSD 2007 ISP;
     WHEREAS, the Board desires to and hereby amends the MSD 2007 ISP to change the acceleration provisions of stock option and restricted stock unit awards granted on or after February 15, 2010 from providing for accelerated vesting of such awards automatically upon a change in control (as such term is defined in the MSD 2007 ISP) in all circumstances to (a) providing for accelerated vesting, if such awards are continued following the change in control, only upon an involuntary termination without cause that occurs within 24 months of a change in control; and (b) maintaining the ability to cash participants out of the vested and unvested awards if such awards are cashed out and cancelled in the change in control.
     NOW, THEREFORE, BE IT
     RESOLVED, that in consideration of the premises, the MSD 2007 ISP is hereby amended, as follows:
          1. Section 21 is amended by (i) changing the title of Section 21 to “Effect of a Change in Control for Incentives Awarded Prior to February 15, 2010”; and (ii) adding the following as a preamble applicable to such Section:
With respect to Incentives issued to Eligible Employees prior to February 15, 2010, the provisions of this Section 21 shall apply. With respect to Incentives issued to Eligible Employees on or after February 15, 2010, the provisions of Section 22 shall apply in lieu of the provisions of this Section 21.
          2. A new Section 22, in the form attached as Exhibit A, is added and shall apply to all Incentives awarded on or after February 15, 2010.
          3. This amendment is effective as of February 15, 2010.

 


 

EXHIBIT A
22. Effect of a Change in Control — Incentives Awarded On or After February 15, 2010
With respect to Incentives issued to Eligible Employees on or after February 15, 2010, notwithstanding any other provision of the Plan, the provisions of this Section 22 shall apply.
(a) Options.
1. Vesting of Options Other Than Key R&D Options . Except as otherwise determined by the Committee at the time of grant with respect to a particular Stock Option, and notwithstanding any other provision of the Plan to the contrary, in the event a Participant’s employment or service is involuntarily terminated without Cause during the 24 month period following a Change in Control, each unvested Stock Option which is outstanding immediately prior to the Change in Control, other than the Key R&D Options, shall immediately become fully vested and exercisable.
2. Vesting of Key R&D Options .
(i) Subject to Section 22(a)(2)(ii), upon the occurrence of a Change in Control, each Key R&D Option shall continue to be subject to the performance-based vesting schedule applicable thereto immediately prior to the Change in Control.
(ii) Notwithstanding Section 22(a)(2)(i), if the Stock Options do not continue to be outstanding following the Change in Control or are not exchanged for or converted into Successor Options, then, upon the occurrence of a Change in Control, all or a portion of each Key R&D Option shall immediately vest and become exercisable in the following percentages: (A) if such Key R&D Option’s first milestone has not been reached before the date of the Change in Control, 14% of the then-unvested portion of the Key R&D Option shall vest and become exercisable and the remainder shall be forfeited; (B) if only such Key R&D Option’s first milestone has been reached before the date of the Change in Control, 42% of the then-unvested portion of the Key R&D Option shall vest and become exercisable and the remainder shall be forfeited; and (C) if such Key R&D Option’s first and second milestones have been reached before the date of the Change in Control, 100% of the then-unvested portion of the Key R&D Option shall vest and become exercisable.
3. Post-Termination Exercise Period . If Stock Options continue to be outstanding following the Change in Control or are exchanged for or converted into Successor Options, then the portion of such Stock Options or such Successor Options, as applicable, that is vested and exercisable immediately following the termination of employment of the holder thereof after the Change in Control shall remain exercisable following such termination for five years from the date of such termination (but not beyond the remainder of the term thereof) ( provided, however , that, if such termination is by reason of gross misconduct, death or retirement (as these terms are applied to awards granted under the Plan), then those provisions of the Plan that are applicable to a termination by reason of gross misconduct, death or retirement shall apply to such termination).

2


 

4. Cashout of Stock Options . If the Stock Options do not continue to be outstanding following the Change in Control and are not exchanged for or converted into Successor Options, (i) any unvested Stock Options shall, immediately prior to the Change in Control, fully vest; and (ii) each holder of a vested Stock Option at the time of the Change in Control, shall be entitled to receive, as soon as practicable following the Change in Control, for each share of Parent Common Stock subject to an outstanding Stock Option, an amount of cash determined by the Committee prior to the Change in Control but in no event less than the excess of the Change in Control Price over the exercise price thereof (subject to any existing deferral elections then in effect). If the consideration to be paid in a Change in Control is not entirely shares of common stock of an acquiring or resulting corporation, then the Committee may, prior to the Change in Control, provide for the cancellation of outstanding Stock Options at the time of the Change in Control in whole or in part for cash pursuant to this Section 22(a)(4) or may provide for the exchange or conversion of outstanding Stock Options at the time of the Change in Control in whole or in part, and, in connection with any such provision, may (but shall not be obligated to) permit holders of Stock Options to make such elections related thereto as it determines are appropriate.
(b) Restricted Stock Grants and Performance Share Awards.
1. Vesting of Restricted Stock Grants. Except as otherwise determined by the Committee at the time of grant with respect to a particular Restricted Stock Grant, and notwithstanding any other provision of the Plan to the contrary, in the event a Participant’s employment or service is involuntarily terminated without Cause during the 24 month period following a Change in Control, each Restricted Stock Grant which is outstanding immediately prior to the date of such termination will continue in accordance with its terms as if employment had continued through the vesting date of such Restricted Stock Grant.
2. Vesting of Performance Award. Upon the occurrence of a Change in Control, each unvested Performance Award which is outstanding immediately prior to the Change in Control under the Plan shall immediately become vested in an amount equal to the PSU Pro Rata Amount.
3. Settlement of Restricted Stock Grants and Performance Awards.
(i) If the Parent Common Stock continues to be widely held and freely tradable following the Change in Control or is exchanged for or converted into securities of a successor entity that are widely held and freely tradable, and Restricted Stock Units and Performance Awards continue to be outstanding following the Change in Control or are converted into substantially similar Restricted Stock Units or Performance Awards with respect to securities of a successor entity, then (A) if the Participant’s employment is involuntarily terminated without Cause during the 24 month period following a Change in Control, the Restricted Stock Grants shall be paid in shares of Parent Common Stock or such other securities at the same time as such Restricted Stock Grant would have been payable if the Participant had continued employment through the vesting date of such Restricted Stock Grant; and (B) the Performance Awards shall be paid in shares of Parent Common Stock or such other securities as soon as practicable after the date of the Change in Control, or in the form of cash with respect to Performance Units (subject to any existing deferral elections then in effect).

3


 

(ii) If the Parent Common Stock does not continue to be widely held and freely tradable following the Change in Control and is not exchanged for or converted into securities of a successor entity that are widely held and freely tradable or if Restricted Stock Grants and Performance Awards do not continue to be outstanding following the Change in Control (nor are converted into Restricted Stock Units or Performance Awards with respect to securities of a successor entity), then (A) each unvested Restricted Stock Grant which is outstanding immediately prior to the Change in Control under the Plan shall immediately become fully vested and all outstanding Restricted Stock Grants shall be paid in cash as soon as practicable after the date of the Change in Control; and (B) the Performance Awards shall be paid in cash as soon as practicable after the date of the Change in Control (subject to any existing deferral elections then in effect).
(c) Other Provisions.
1. Except to the extent required by applicable law, for the entirety of the Protection Period, the material terms of the Plan shall not be modified in any manner that is materially adverse to the Qualifying Participants (it being understood that this Section 22(c) shall not require that any specific type or levels of equity awards be granted to Qualifying Participants following the Change in Control).
2. During the Protection Period, the Plan may not be amended or modified to reduce or eliminate the protections set forth in Section 22(c)(1) and may not be terminated.
3. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) reasonably and in good faith incurred by a Qualifying Participant if the Qualifying Participant prevails on his or her claim for relief in an action (x) by the Qualifying Participant claiming that the provisions of Section 22(c)(1) or 22(c)(2) of the Plan have been violated (but, for avoidance of doubt, excluding claims for plan benefits in the ordinary course) and (y) if applicable, by the Company or the Qualifying Participant’s employer to enforce post-termination covenants against the Qualifying Participant.
(d) Section 22 Definitions . For purposes of this Section 22, the following terms shall have the following meanings:
1. “ Cause ” shall have the meaning as set forth for such term in the Parent’s Change in Control Separation Benefits Plan.
2. “ Change in Control ” shall have the meaning as set forth for such term in the Company’s Change in Control Separation Benefits Plan; provided, however , that in any event, as to any award under the Plan that consists of deferred compensation subject to Section 409A of the Code, the definition of “Change in Control” shall be deemed modified to the extent necessary to comply with Section 409A of the Code.
3. “ Change in Control Price ” shall mean, with respect to a share of Parent Common Stock, the higher of (A) the highest reported sales price, regular way, of such share in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on

4


 

the NASDAQ National Market during the ten-day period prior to and including the date of a Change in Control and (B) if the Change in Control is the result of a tender or exchange offer, merger, or other, similar corporate transaction, the highest price per such share paid in such tender or exchange offer, merger or other, similar corporate transaction; provided that, to the extent all or part of the consideration paid in any such transaction consists of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined by the Committee.
4. “ Key R&D Options ” shall mean those performance-based options granted to employees under the Key Research and Development Program described in the applicable Schedule to the Rules and Regulations for the Plan.
5. “ Protection Period ” shall mean the period beginning on the date of the Change in Control and ending on the second anniversary of the date of the Change in Control.
6. “ PSU Pro Rata Amount ” shall mean for each Performance Award, the amount determined by the Committee when it grants Performance Awards.
7. “ Qualifying Participants ” shall mean those individuals who participate in the Plan (whether as current or former employees) as of immediately prior to the Change in Control.

5

Exhibit 10.3
TERMS FOR 2010 OPTION QUARTERLY, ANNUAL GRANTS
STOCK OPTION TERMS
FOR A NON-QUALIFIED STOCK OPTION (NQSO)
UNDER THE MERCK SHARP & DOHME CORP. 2007 INCENTIVE STOCK PLAN
SCHERING-PLOUGH 2006 STOCK INCENTIVE PLAN
This is a summary of the terms applicable to the stock option specified on this document. Different terms may apply to any prior or future stock option.
     
Grant Type:
  NQSO-
Option Price:
   
Grant Date:
   
Expiration Date:
   
 
   
Vesting Date
  Portion that Vests
.....
  First 33.333%
.....
  Second 33.333%
.....
  Balance
I. GENERAL INFORMATION
This stock option becomes exercisable in equal installments (subject to rounding process) on the Vesting Dates indicated in the accompanying box. This stock option expires on its Expiration Date, which is the day before the tenth anniversary of the Grant Date. If your employment with the Company is terminated, your right to exercise this stock option will be determined according to the terms in Section II.
Eligibility : Eligibility for grants is determined under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan for employees of Merck Sharp & Dohme Corp. and its subsidiaries (“Legacy Merck Employees”) if designated by the Committee. Eligibility for grants is determined under the Schering-Plough 2006 Stock Incentive Plan for employees of Schering Corporation and its subsidiaries (“Legacy Schering Employees”) if designated by the Committee.
II. TERMINATION OF EMPLOYMENT
A. General Rule. If your employment is terminated for any reason other than those specified in the following paragraphs, the portion of this stock option that is unvested will expire on the date your employment ends; the portion of this stock option that is vested will expire on the day before the same date of the third month after your employment ends, but in no event later than the original Expiration Date.
B. Retirement. If you retire from service with the Company on a date that is at least six months later than the Grant Date, this stock option will continue to become exercisable on applicable Vesting Dates and will expire on the earlier of (a) the day before the fifth anniversary of the Grant Date or (b) its original Expiration Date. For participants in a U.S.-based tax-qualified defined benefit retirement plan, “retire” means to terminate employment at a time that qualifies as a disability, early, normal or late retirement according to the terms of that plan as in effect from time to time. For other grantees, “retire” is determined by the Company.
C. Involuntary Termination . If your employment is terminated by the Company and the Company determines that such termination was involuntary, including the result of a restructuring or job elimination, but excluding non-performance of your duties and the reasons listed under paragraphs B or D through G, the portion of this stock option that is unvested will expire on the date your employment ends; the portion of this stock option that is vested will expire on the day before the one year anniversary of the date your employment ends, but in no event later than the original Expiration Date.
D. Sale. If your employment is terminated and the Company determines that such termination resulted from the sale of your subsidiary, division or joint venture, the portion of this stock option that would have become exercisable within one year of the date your employment terminated according to the original schedule will vest immediately upon such termination. Whether already vested on the date your employment terminates or vested as a result of such sale, this stock option will expire the day before the first anniversary of the date your employment with the Company ends, but in no event later than the original Expiration Date. Notwithstanding the foregoing, the Compensation and Benefits Committee of the Board of Directors of Merck & Co., Inc., may determine, for purposes of this stock option grant, whether employment with an entity that is established from the Company’s spin off, split off, split up or distribution of equity securities in connection with that entity constitutes a termination of employment, and may make adjustments, if any, as it deems appropriate, at the time of the distribution of such equity securities, in the kind and/or number of shares subject to this option, and/or in the option price of such option.
E. Misconduct. If your employment is terminated as a result of your deliberate, willful or gross misconduct, this stock option (whether vested or unvested) will expire immediately upon your receipt of notice of such termination.
F. Death. If your employment terminates as a result of your death, the portion of this stock option that is unvested will vest immediately upon your death. Whether already vested on the date of your death or vested as a result of your death, this stock option will expire on the day before the first anniversary of your death, even if such date is later than the Original Expiration date. This stock option will expire on such earlier date than otherwise specified in this paragraph as may be required under applicable non-U.S. law (e.g., in France, six months from the date of death).
G. Disability. If your employment is terminated and the Company determines that such termination resulted from inability to perform the material duties of your role by reason of a physical or mental infirmity that is expected to last for at least six months or to result in your death, whether or not you are eligible for disability benefits from any applicable disability program, then this stock option will continue to become exercisable on applicable Vesting Dates and will expire on the earlier of (a) the day before the fifth anniversary of the day your employment terminates and (b) its original Expiration Date
H. Change in Control. If the Company involuntarily terminates your employment without Cause before the second anniversary of the closing of a change in control, each unvested Stock Option that is outstanding immediately prior to the change in control will immediately become fully vested and exercisable. All options, including options vested prior to such time, will expire on the day before the fifth anniversary of the termination of your employment following a change in control (but not beyond the Expiration Date). This extended exercise period does not apply in the case of termination by reasons of retirement, involuntary termination, sale, misconduct, death or disability, as described in paragraphs B, D, E, F & G above or termination prior to a change in control. If this stock option does not remain outstanding following the change in control and is not converted into a successor stock option, then you will be entitled to receive cash for this option in an amount at least equal to the difference between the price paid to stockholders in the change in control and the Option Price of this stock option. A “change in control” has the same meaning that it has under the Merck & Co., Inc. Change in Control Separation Benefits Plan (excluding an MSD Change in Control).

 


 

I. Joint Venture. Employment with a joint venture or other entity in which the Company has determined that it has a significant business or ownership interest (a “JV”) is not considered termination of employment for purposes of this stock option. If you transfer employment from the Company to a JV or from a JV to the Company, such employment must be approved by, and contiguous with employment by, the Company or the JV. The terms set out in paragraphs A through H above apply to this stock option while the option holder is employed by the JV.
III. TRANSFERABILITY
This stock option is not transferable and may not be assigned or otherwise transferred except, under specific terms, by executives who hold or who retired within the prior 12 months from a Grade 1 or Section 16 position.
For Legacy Merck Employees this stock option is subject to the provisions of the 2007 Incentive Stock Plan and the Rules and Regulations thereunder. For further information regarding your stock options, you may access the Merck Stock Option homepage at http://humres.merck.com/stockoptions, which includes links to the Prospectus for the 2007 Incentive Stock Plan and the Company’s Annual Report and Proxy Statement.
For Legacy Schering employees, this option is subject to the provisions of the 2006 Stock Incentive Plan . For further information, https://e-hr.schp.com/S-PeWorld/s-pehr/comp/stockGrant.asp

Exhibit 10.4
TERMS FOR 2010 RSU QUARTERLY, ANNUAL GRANTS
RESTRICTED STOCK UNIT TERMS
FOR 2010 GRANT
UNDER THE MERCK SHARP & DOHME CORP. 2007 INCENTIVE STOCK PLAN
SCHERING-PLOUGH 2006 STOCK INCENTIVE PLAN
This is a summary of the terms applicable to the Restricted Stock Unit (RSU) Award specified on this document. Different terms may apply to any prior or future RSU Awards.
     
Grant Type:
  RSU —
Grant Date:
   
Vesting Date:
   
Eligibility : Eligibility for grants is determined under the Merck Sharp & Dohme Corp. 2007 Incentive Stock Plan for employees of Merck Sharp & Dohme Corp. and its subsidiaries (“Legacy Merck Employees”) if designated by the Committee. Eligibility for grants is determined under the Schering-Plough 2006 Stock Incentive Plan for employees of Schering Corporation and its subsidiaries (“Legacy Schering Employees”) if designated by the Committee.
I. GENERAL INFORMATION
A. Restricted Period . The Restricted Period is the period during which this RSU Award is restricted and subject to forfeiture. The Restricted Period begins on the Grant Date and ends on the third anniversary of the Grant Date unless ended earlier under Article II below.
B. Dividend Equivalents . During the Restricted Period, dividend equivalents will be accrued for the holder (“you”) if and to the extent dividends are paid by the Company on Merck Common Stock. Payment of such dividends will be made, without interest or earnings, at the end of the Restricted Period. If any portion of this RSU Award lapses, is forfeited or expires, no dividend equivalents will be credited or paid on such portion. Any payment of dividend equivalents will be reduced to the extent necessary for the Company to satisfy any tax or other withholding obligations. No voting rights apply to this RSU Award.
C. Distribution . Upon the expiration of the Restricted Period if you are then employed, you will be entitled to receive a number of shares of Merck common stock equal to the number of RSUs that have become unrestricted and the dividend equivalents that accrued on that portion. Prior to distribution, you must deliver to the Company an amount the Company determines to be sufficient to satisfy any amount required to be withheld, including applicable taxes. The Company may, in its sole discretion, withhold from the RSU Award distribution a number of shares to pay applicable withholding (including taxes).
D. 409A Compliance . Anything to the contrary notwithstanding, no distribution of RSUs may be made unless in compliance with Section 409A of the Internal Revenue Code or any successor thereto. Specifically, distributions made due to a separation from service (as defined in Section 409A) to a “Specified Employee” as defined in Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the extent required by Section 409A of the Code will not be made until administratively feasible following the first day of the sixth month following the separation from service, in the same form as they would have been made had this restriction not applied; provided further, that dividend equivalents that otherwise would have accrued will accrue during the period during which distribution is suspended.
II. TERMINATION OF EMPLOYMENT
If your employment with the Company is terminated during the Restricted Period, your right to this RSU Award will be determined according to the terms in this Section II.
A. General Rule. If your employment is terminated during the Restricted Period for any reason other than those specified in the following paragraphs, this RSU Award (and any accrued dividend equivalents) will be forfeited on the date your employment ends.
B. Sale. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted from the sale of your subsidiary, division or joint venture, the following portion of your RSU Award and accrued dividend equivalents will be distributed to you at such time as it would have been paid if your employment had continued: one-third if employment terminates on or after the Grant Date but before the first anniversary thereof; two-thirds if employment terminates on or after the first anniversary of the Grant Date but before the second anniversary thereof; and all if employment terminates on or after the second anniversary of the Grant Date. The remainder will be forfeited on the date your employment ends.
C. Involuntary Termination. If your employment terminates during the Restricted Period and the Company determines that your employment was involuntarily terminated on or after the first anniversary of the Grant Date and during the Restricted Period, a pro rata portion (based on the number of completed months held prior to the date your employment terminated) of your RSU Award and accrued dividend equivalents will be distributed to you at such time as they would have been paid if your employment had continued. The remainder will be forfeited on the date your employment ends. An “involuntary termination” includes termination of your employment by the Company as the result of a restructuring or job elimination, but excludes non-performance of your duties and the reasons listed under paragraphs B, or D through G of this section.
D. Retirement. If you terminate employment during the Restricted Period by retirement on or after the same day of the sixth month after the Grant Date, then this RSU Award will continue and be distributable in accordance with its terms as if employment had continued and will be distributed at the time active RSU Grantees receive distributions with respect to this Restricted Period. If your Retirement occurs before the same day of the sixth month after the Grant Date, then this RSU Award and any accrued dividend equivalents will be forfeited on the date your employment ends. For participants in a U.S.-based tax-qualified defined benefit retirement plan, “retirement” means a termination of employment at a time that qualifies as a disability, early, normal or late

 


 

retirement according to the terms of that plan as in effect from time to time. For other grantees, “retirement” is determined by the Company.
E. Death. If your employment terminates due to your death during the Restricted Period, all of this RSU Award and accrued dividend equivalents will be distributed to your estate as soon as possible after your death.
F. Misconduct. If your employment is terminated as a result of your deliberate, willful or gross misconduct, this RSU Award and accrued dividend equivalents will be forfeited immediately upon your receipt of notice of such termination.
G. Disability. If your employment is terminated during the Restricted Period and the Company determines that such termination resulted from inability to perform the material duties of your role by reason of a physical or mental infirmity that is expected to last for at least six months or to result in your death, whether or not you are eligible for disability benefits from any applicable disability program, then this RSU Award will continue and be distributable in accordance with its terms as if employment had continued and will be distributed at the time active RSU Grantees receive distributions with respect to this RSU Award.
H. Change in Control. If the Company involuntarily terminates your employment during the Restricted Period without Cause before the second anniversary of the closing of any change in control, then this RSU Award will continue in accordance with its terms as if employment had continued and will be distributed at the time active RSU Grantees receive distributions with respect to this RSU Award. If this RSU does not remain outstanding following the change in control and is not converted into a successor RSU, then you will be entitled to receive cash for this RSU in an amount equal to the fair market value of the consideration paid to Merck stockholders for a share of Merck common stock in the change in control payable within 30 days of the closing of the change in control. On the second anniversary of the closing of the change in control, this paragraph shall expire. Change in control is defined in the Merck & Co., Inc. Change in Control Separation Benefits Plan (excluding an MSD Change in Control), but if RSUs are considered “deferred compensation” under Section 409A of the Internal Revenue Code, the definition of change in control will be modified to the extent necessary to comply with Section 409A.
I. Joint Venture. Employment with a joint venture or other entity in which the Company has a significant business or ownership interest is not considered termination of employment for purposes of this RSU Award. Such employment must be approved by, and contiguous with employment by, the Company, as described more fully in the Rules and Regulations. The terms set out in paragraphs A-H above apply to this RSU Award while you are employed by the joint venture or other entity.
III. TRANSFERABILITY
This RSU Award is not transferable and may not be assigned or otherwise transferred.
For Legacy Merck Employees this RSU Award is subject to the provisions of the 2007 Incentive Stock Plan and the Rules and Regulations thereunder. For further information regarding your RSU Award, you may access the Merck Stock Option homepage at http://humres.merck.com/stockoptions, which includes links to the Prospectus for the 2007 Incentive Stock Plan and the Company’s Annual Report and Proxy Statement.
For Legacy Schering Employees, this RSU is subject to the provisions of the 2006 Stock Incentive Plan. For further information, https://e-hr.schp.com/S-PeWorld/s-pehr/comp/stockGrant.asp