Document:

EX-10.7

 

Exhibit 10.7

 

 

MERCK & CO., INC.

2007 INCENTIVE STOCK PLAN

(as amended effective December 19, 2006)

 

 

 

 

MERCK & CO., INC.

2007 INCENTIVE STOCK PLAN

(Effective December 19, 2006)

1. Purpose

     The 2007 Incentive Stock Plan (the “Plan”), effective May 1, 2006, is established to
encourage employees of Merck & Co., Inc. (the “Company”), its subsidiaries, its affiliates and its
joint ventures to acquire Common Stock in the Company (“Common Stock”). It is believed that the
Plan will serve the interests of the Company and its stockholders because it allows employees to
have a greater personal financial interest in the Company through ownership of, or the right to
acquire its Common Stock, which in turn will stimulate employees’ efforts on the Company’s behalf,
and maintain and strengthen their desire to remain with the Company. It is believed that the Plan
also will assist in the recruitment of employees.

2. Administration

     The Plan shall be administered by the Compensation and Benefits Committee of the Board of
Directors of the Company (the “Committee”). A Director of the Company may serve on the Committee
only if he or she (i) is a “Non-Employee Director” for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) satisfies the requirements of an
“outside director” for purposes of Section 162(m) of the Internal Revenue Code (the “Code”). The
Committee shall be responsible for the administration of the Plan including, without limitation,
determining which Eligible Employees receive Incentives, the types of Incentives they receive under
the Plan, the number of shares covered by Incentives granted under the Plan, and the other terms
and conditions of such Incentives. Determinations by the Committee under the Plan including,
without limitation, determinations of the Eligible Employees, the form, amount and timing of
Incentives, the terms and provisions of Incentives and the writings evidencing Incentives, need not
be uniform and may be made selectively among Eligible Employees who receive, or are eligible to
receive, Incentives hereunder, whether or not such Eligible Employees are similarly situated.

     The Committee shall have the responsibility of construing and interpreting the Plan,
including the right to construe disputed or doubtful Plan provisions, and of establishing, amending
and construing such rules and regulations as it may deem necessary or desirable for the proper
administration of the Plan. Any decision or action taken or to be taken by the Committee, arising
out of or in connection with the construction, administration, interpretation and effect of the
Plan and of its rules and regulations, shall, to the maximum extent permitted by applicable law, be
within its absolute discretion (except as otherwise specifically provided herein) and shall be
final, binding and conclusive upon the Company, all Eligible Employees and any person claiming
under or through any Eligible Employee.

     The Committee, as permitted by applicable state law, may delegate any or all of its power
and authority hereunder to the Chief Executive Officer or such other senior member of management as
the Committee deems appropriate; provided, however, that the Committee may not delegate its
authority with regard to any matter or action affecting an “officer” as such term is defined in
Rule 16(a)-1(f) of the Exchange Act (a “Section 16 Officer”) and that no such delegation shall be
made in the case of Incentives intended to be qualified under Section 162(m) of the Code.

     For the purpose of this section and all subsequent sections, the Plan shall be deemed to
include this Plan and any comparable sub-plans established by subsidiaries which, in the aggregate,
shall constitute one Plan governed by the terms set forth herein.

3. Eligibility

     (a) Employees. Regular full-time and part-time employees employed by the Company,
its parent, if any, or its subsidiaries, its affiliates and its joint ventures, including
officers, whether or not directors of the
Company, and employees of a joint venture partner or affiliate of the Company who provide
services to the joint venture with such partner or affiliate (each such person, an
“Employee”), shall be eligible to participate in the Plan if designated by the Committee
(“Eligible Employees”).

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     (b) Non-employees. The term “Employee” shall not include any of the following
(collectively, “Excluded Persons”): a director who is not an employee or an officer; a person
who is an independent contractor, or agrees or has agreed that he/she is an independent
contractor; a person who has any agreement or understanding with the Company, or any of its
affiliates or joint venture partners that he/she is not an employee or an Eligible Employee,
even if he/she previously had been an employee or Eligible Employee; a person who is employed
by a temporary or other employment agency, regardless of the amount of control, supervision or
training provided by the Company or its affiliates; or a “leased employee” as defined under
Section 414 (n) of the Code. An Excluded Person is not an Eligible Employee and cannot receive
Incentives even if a court, agency or other authority rules that he/she is a common-law
employee of the Company or its affiliates.

     (c) No Right To Continued Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company, its parent, its subsidiaries, its affiliates or its
joint ventures to terminate the employment of any participant at any time, nor confer upon any
participant the right to continue in the employ of the Company, its parent, its subsidiaries,
its affiliates or its joint ventures. No Eligible Employee shall have a right to receive an
Incentive or any other benefit under this Plan or having been granted an Incentive or other
benefit, to receive any additional Incentive or other benefit. Neither the award of an
Incentive nor any benefits arising under such Incentives shall constitute an employment
contract with the Company, its parent, its subsidiaries, its affiliates or its joint ventures,
and accordingly, this Plan and the benefits hereunder may be terminated at any time in the
sole and exclusive discretion of the Company without giving rise to liability on the part of
the Company, its parent, its subsidiaries, its affiliates or its joint ventures for severance.
Except as may be otherwise specifically stated in any other employee benefit plan, policy or
program, neither any Incentive under this Plan nor any amount realized from any such Incentive
shall be treated as compensation for any purposes of calculating an employee’s benefit under
any such plan, policy or program.

4. Term of the Plan

     This Plan shall be effective as of May 1, 2006, subject to the approval of the Plan by a
majority of the votes cast at the Annual Meeting of stockholders of the Company on or about April
25, 2006. No Incentive shall be granted under the Plan after April 30, 2011 (or such earlier date
that the Plan may be terminated by the Board), but the term and exercise of Incentives granted
theretofore may extend beyond that date.

5. Incentives

     Incentives under the Plan may be granted in any one or a combination of (a) Incentive
Stock Options (“ISOs”), (b) Nonqualified Options (together with ISOs, “Stock Options”), (c) Stock
Appreciation Rights, (d) Restricted Stock Grants, (e) Performance Awards, (f) Share Awards and (g)
Phantom Stock Awards (collectively, “Incentives”). All Incentives shall be subject to the terms and
conditions set forth herein and to such other terms and conditions as may be established by the
Committee. In general, Incentives may not vest, and Stock Options and Stock Appreciation Rights
may not be exercisable, earlier than one year from their grant date except in case of an
intervening event, such as for example, a change in control of the Company, or the grantee’s death,
retirement, termination of the employment caused by the Company, or other event as established by
the Committee, or as required by applicable law.

6. Shares Available for Incentives

     (a) Shares Available. Subject to the provisions of Section 6(c), the maximum number
of shares of Common Stock of the Company that may be issued under the Plan is 155 million.

          (i) A Stock Option or Stock Appreciation Right shall be counted as one share for purposes
of the limit set forth in Section 6(a) at the time of grant. A combination of Tandem SAR and
Stock Option, where the exercise of the Tandem SAR or Stock Option results in the
cancellation of the other, shall be counted as one share for purposes of the limit set forth
in Section 6(a) at the time of grant.

          (ii) A Restricted Stock Grant, Performance Share, Share Award or Phantom Stock Award
shall be counted as four shares for purposes of the limit set forth in Section 6(a) at the
time of grant.

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          (iii) Any shares under this Plan or under the 1991, 1996, 2001 or 2004 Incentive Stock
Plans that are not purchased or awarded under an Incentive because such Incentive has lapsed,
expired, terminated or been canceled may be used for the further grant of Incentives under the
Plan.

          (iv) Notwithstanding anything to the contrary: (a) shares tendered in payment of the
exercise price of a Stock Option shall not be added to the maximum share limitations described
above; (b) shares withheld by the Company to satisfy the tax withholding obligation shall not
be added to the maximum share limitations described above; and (c) all shares covered by a
Stock Appreciation Right, to the extent that it is exercised and whether or not shares of
Common Stock are actually upon exercise of the right, shall be considered issued or
transferred pursuant to the Plan.

          (v) Incentives and similar awards issued by an entity that is merged into or with the
Company, acquired by the Company or otherwise involved in a similar corporate transaction with
the Company are not considered issued under this Plan. Shares under this Plan may be delivered
by the Company from its authorized but unissued shares of Common Stock or from issued and
reacquired Common Stock held as treasury stock, or both. In no event shall fractional shares
of Common Stock be issued under the Plan.

     (b) Limit on an Individual’s Incentives. In any calendar year, no Eligible Employee
may receive (i) with respect to Incentives denominated with respect to shares of Common Stock,
Incentives covering more than 3 million shares of the Company’s Common Stock (such number of shares shall be counted as provided in Section 6(a) and shall be adjusted in accordance with
Section 6(c)), or (ii) with respect to Incentives denominated in cash, Incentives with a fair
market value exceeding that of 3 million shares of Common Stock determined as of the date such
Incentive is granted.

     (c) Adjustment of Shares. In the event of a reorganization, recapitalization, stock
split, stock dividend, extraordinary cash dividend, combination of shares, merger,
consolidation, rights offering, spin off, split off, split up or other similar change in the
capital structure of the Company, the Committee shall make equitable adjustments to (i) the
number and kind of shares authorized for issuance under the Plan, (ii) the number and kind of shares
subject to outstanding Incentives, (iii) the option price of Stock Options and (iv) the
grant value of Stock Appreciation Rights. Any such determination shall be final, binding and
conclusive on all parties.

7. Stock Options

     The Committee may grant options qualifying as ISOs as defined in Section 422 of the Code,
and options other than ISOs (“Nonqualified Options”). Such Stock Options shall be subject to the
following terms and conditions and such other terms and conditions as the Committee may prescribe:

     (a) Stock Option Price. The option price per share with respect to each Stock
Option shall be determined by the Committee, but shall not be less than 100 percent of the
fair market value of the Common Stock on the date the Stock Option is granted, as determined
by the Committee.

     (b) Period of Stock Option. The period of each Stock Option shall be fixed by the
Committee, provided that the period for all Stock Options shall not exceed ten years from the
grant, provided further, however, that, in the event of the death of an Optionee prior to the
expiration of a Nonqualified Option, such Nonqualified Option may, if the Committee so
determines, be exercisable for up to eleven years from the date of the grant. The Committee
may, subsequent to the granting of any Stock Option, extend the term thereof, but in no event
shall the extended term exceed ten years from the original grant date.

     (c) Exercise of Stock Option and Payment Therefore. No shares shall be issued until
full payment of the option price has been made. The option price may be paid in cash or, if
the Committee determines, in shares of Common Stock, a combination of cash and shares of
Common Stock, or through a cashless exercise procedure that allows grantees to sell
immediately some or all of the shares underlying the exercised portion of the Option in order
to generate sufficient cash to pay the option price. If the Committee approves the use of
shares of Common Stock as a payment method, the Committee shall establish such conditions as
it deems appropriate for the use of Common Stock to exercise a Stock Option. Stock Options
awarded under the Plan shall be exercised through such procedure or program as the Committee
may establish or define from time to time, which may include a designated broker that must be
used in exercising such Stock Options. The

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Committee may establish rules and procedures to permit an option holder to defer recognition of gain upon the exercise of a Stock Option.

     (d) First Exercisable Date. The Committee shall determine how and when shares
covered by a Stock Option may be purchased. The Committee may establish waiting periods, the
dates on which Stock Options become exercisable or “vested” and, subject to paragraph (b) of
this section, exercise periods. The Committee may accelerate the exercisability of any Stock
Option or portion thereof.

     (e) Termination of Employment. Unless determined otherwise by the Committee, upon
the termination of a Stock Option grantee’s employment (for any reason other than gross
misconduct), Stock Option privileges shall be limited to the shares that were immediately
exercisable at the date of such termination. The Committee, however, in its discretion, may
provide that any Stock Options outstanding but not yet exercisable upon the termination of a
Stock Option grantee’s employment may become exercisable in accordance with a schedule
determined by the Committee. Such Stock Option privileges shall expire unless exercised within
such period of time after the date of termination of employment as may be established by the
Committee, but in no event later than the expiration date of the Stock Option.

     (f) Termination Due to Misconduct. If a Stock Option grantee’s employment is
terminated for gross misconduct, as determined by the Company, all rights under the Stock
Option shall expire upon the date of such termination.

     (g) Limits on ISOs. Except as may otherwise be permitted by the Code, an Eligible
Employee may not receive a grant of ISOs for stock that would have an aggregate fair market
value in excess of $100,000 (or such other amount as the Internal Revenue Service may decide
from time to time), determined as of the time that the ISO is granted, that would be
exercisable for the first time by such person during any calendar year. If any grant is made
in excess of the limits provided in the Code, such grant shall automatically become a
Nonqualified Option.

     (h) No dividend equivalents. Anything in the Plan to the contrary notwithstanding, no
dividends or dividend equivalents may be paid on Stock Options.

8. Stock Appreciation Rights

     The Committee may, in its discretion, grant a right to receive the appreciation in the
fair market value of shares of Common Stock (“Stock Appreciation Right”) either singly or in
combination with an underlying Stock Option granted hereunder. Such Stock Appreciation Right shall
be subject to the following terms and conditions and such other terms and conditions as the
Committee may prescribe:

     (a) Time and Period of Grant. If a Stock Appreciation Right is granted with respect
to an underlying Stock Option (a “Tandem SAR”), it may be granted at the time of the Stock
Option grant or at any time thereafter but prior to the expiration of the Stock Option grant.
At the time the Tandem SAR is granted the Committee may limit the exercise period for such
Stock Appreciation Right, before and after which period no Stock Appreciation Right shall
attach to the underlying Stock Option. In no event shall the exercise period for a Tandem SAR
exceed the exercise period for such Stock Option. If a Stock Appreciation Right is granted
without an underlying Stock Option (a “Stand Alone SAR”), the period for exercise of the
Stock Appreciation Right shall be set by the Committee.

     (b) Value of Stock Appreciation Right. The grantee of a Tandem SAR will be entitled
to surrender the Stock Option which is then exercisable and receive in exchange therefore an
amount equal to the excess of the fair market value of the Common Stock on the date the
election to surrender is received by the Company in accordance with exercise procedures
established by the Company over the Stock Option price (the “Spread”) multiplied by the number
of shares covered by the Stock Option which is surrendered. The grantee of a Stand Alone SAR
will receive upon exercise of the Stock Appreciation Right an amount equal to the excess of
the fair market value of the Common Stock on the date the election to surrender such Stand
Alone SAR is received by the Company in accordance with exercise procedures established by the
Company over the fair market value of the Common Stock on the date of grant multiplied by the
number of shares covered by the grant of the Stand Alone SAR. Notwithstanding the foregoing,
in its sole discretion the Committee at the

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time it grants a Stock Appreciation Right may
provide that the Spread covered by such Stock Appreciation Right may not exceed a specified
amount.

     (c) Payment of Stock Appreciation Right. Payment of a Stock Appreciation Right
shall be in the form of shares of Common Stock, cash or any combination of shares and cash.
The form of payment upon exercise of such a right shall be determined by the Committee either
at the time of grant of the Stock Appreciation Right or at the time of exercise of the Stock
Appreciation Right.

     (d) No dividend equivalents. Anything in the Plan to the contrary notwithstanding, no
dividends or dividend equivalents may be paid on Stock Appreciation Rights.

9. Performance Awards

     The Committee may grant awards denominated in shares of Common Stock (“Performance
Shares”), or denominated in dollars(“Performance Units”) if the performance of the Company or its
parent or any subsidiary, division, affiliate or joint venture of the Company selected by the
Committee during the Award Period meets certain goals established by the Committee (“Performance
Awards”). Performance Awards shall be subject to the following terms and conditions and such other
terms and conditions as the Committee may prescribe:

     (a) Award Period and Performance Goals. The Committee shall determine and include
in a Performance Share Award grant the period of time for which a Performance Share Award is
made (“Award Period”). The Committee also shall establish performance objectives (“Performance
Goals”) to be met by the Company, its parent, subsidiary, division, affiliate or joint venture
of the Company during the Award Period as a condition to payment of the Performance Award. The
Performance Goals may include share price, pre-tax profits, earnings per share, return on
stockholders’ equity, return on assets, sales, net income, total shareholder return or any
combination of the foregoing or, solely for an Award not intended to constitute
“performance-based compensation” under Section 162(m) of the Code, any other financial or
other measurement established by the Committee. The Performance Goals may include minimum and
optimum objectives or a single set of objectives.

     (b) Payment of Performance Awards. The Committee shall establish the method of
calculating the amount of payment to be made under a Performance Award if the Performance
Goals are met, including the fixing of a maximum payment. After the completion of an Award
Period, the performance of the Company, its parent, subsidiary, division, affiliate or joint
venture of the Company shall be measured against the Performance Goals, and the Committee
shall determine, in accordance with the terms of such Performance Award, whether all, none or
any portion of a Performance Award shall be paid. The Committee, in its discretion, may elect
to make payment in shares of Common Stock, cash or a combination of shares and cash. Any cash
payment shall be based on the fair market value of shares of Common Stock on, or as soon as
practicable prior to, the date of payment. The Committee may establish rules and procedures to
permit a grantee to defer recognition of income upon the attainment of a Performance Award.

     (c) Revision of Performance Goals. As to any Award not intended to constitute
“performance-based compensation” under Section 162(m) of the Code, at any time prior to the
end of an Award Period, the Committee may revise the Performance Goals and the computation of
payment if unforeseen events occur which have a substantial effect on the performance of the
Company, its parent, subsidiary, division, affiliate or joint venture of the Company and
which, in the judgment of the Committee, make the application of the Performance Goals unfair
unless a revision is made.

     (d) Requirement of Employment. A grantee of a Performance Award must remain in the
employ of the Company, its parent, subsidiary, affiliate or joint venture until the completion
of the Award Period in order to be entitled to payment under the Performance Award; provided
that the Committee may, in its discretion, provide for a full or partial payment where such an
exception is deemed equitable.

     (e) Dividends. The Committee may, in its discretion, at the time of the granting of
a Performance Award, provide that any dividends declared on the Common Stock during the Award
Period, and which would have been paid with respect to Performance Shares had they been owned
by a grantee, be (i) paid to the grantee, or (ii) accumulated for the benefit of the grantee
and used to increase the number of Performance Shares of the grantee or (iii) not paid or
accumulated.

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10. Restricted Stock Grants

     The Committee may award actual shares of Common Stock (“Restricted Stock”) or phantom
shares of Common Stock (“Restricted Stock Units”) to an Eligible Employee, which shares shall be
subject to the following terms and conditions and such other terms and conditions as the Committee
may prescribe (“Restricted Stock Grants”).

     (a) Requirement of Employment. A grantee of a Restricted Stock Grant must remain in
the employment of the Company during a period designated by the Committee (“Restricted
Period”) in order to receive the shares, cash or combination thereof under the Restricted
Stock Grant. If the grantee leaves the employment of the Company prior to the end of the
Restricted Period, the Restricted Stock Grant shall terminate and any shares of Common Stock
shall be returned immediately to the Company, provided that the Committee may, at the time of
the grant, provide for the employment restriction to lapse with respect to a portion or
portions of the Restricted Stock Grant at different times during the Restricted Period. The
Committee may, in its discretion, also provide for such complete or partial exceptions to the
employment restriction as it deems equitable.

     (b) Restrictions on Transfer and Legend on Stock Certificates. During the
Restricted Period, the grantee may not sell, assign, transfer, pledge or otherwise dispose of
the Restricted Stock Grant, including but not limited to any shares of Common Stock. Any
certificate for shares of Common Stock issued hereunder shall contain a legend giving
appropriate notice of the restrictions in the grant.

     (c) Escrow Agreement. The Committee may require the grantee to enter into an escrow
agreement providing that any certificates representing the Restricted Stock Grant will remain
in the physical custody of an escrow holder until all restrictions are removed or expire.

     (d) Lapse of Restrictions. All restrictions imposed under the Restricted Stock
Grant shall lapse upon the expiration of the Restricted Period if the conditions as to
employment set forth above have been met. The grantee shall then be entitled to have the
legend removed from any certificates for Restricted Stock. Restricted Stock Units may be paid
in the form of shares of Common Stock, cash or any combination of shares and cash as
determined by the Committee. The Committee may establish rules and procedures to permit a
grantee to defer recognition of income upon the expiration of the Restricted Period.

     (e) Dividends. The Committee may, in its discretion, at the time of the Restricted
Stock Grant, provide that any dividends declared on Common Stock during the Restricted Period
or dividend equivalents be (i) paid to the grantee, or (ii) accumulated for the benefit of the grantee and paid to the
grantee only after the expiration of the Restricted Period or (iii) not paid or accumulated.

     (f) Performance Goals. The Committee may designate whether any Restricted Stock
Grant is intended to be “performance-based compensation” as that term is used in Section
162(m) of the Code. Any such Restricted Stock Grant designated to be “performance-based
compensation” shall be conditioned on the achievement of one or more Performance Goals (as
defined in Section 9(a)), to the extent required by Section 162(m).

11. Other Share-Based Awards

     The Committee may grant an award of actual shares of common stock (a “Share Award”) or
phantom shares of common stock (a “Phantom Stock Award”) to any Eligible Employee on such terms and
conditions as the Committee may determine in its sole discretion. Share Awards may be made as
additional compensation for services rendered by the Eligible Employee or may be in lieu of cash or
other compensation to which the Eligible Employee is entitled from the Company.

12. Transferability

     Each ISO granted under the Plan shall not be transferable other than by will or the laws
of descent and distribution; each other Incentive granted under the Plan will not be transferable
or assignable by the recipient, and may not be made subject to execution, attachment or similar
procedures, other than by will or the laws of descent and distribution or as determined by the
Committee in accordance with the Exchange Act or any other applicable

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law or regulation. Notwithstanding the foregoing, the Committee, in its discretion, may adopt rules permitting the
transfer, solely as gifts during the grantee’s lifetime, of Stock Options (other than ISOs) to
members of a grantee’s immediate family or to trusts, family partnerships or similar entities for
the benefit of such immediate family members. For this purpose, immediate family member means the
grantee’s spouse, parent, child, stepchild, grandchild and the spouses of such family members. The
terms of a Stock Option shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the grantee.

13. Discontinuance or Amendment of the Plan

     The Board of Directors may discontinue the Plan at any time and may from time to time
amend or revise the terms of the Plan as permitted by applicable statutes, except that it may not,
without the consent of the grantees affected, revoke or alter, in a manner unfavorable to the
grantees of any Incentives hereunder, any Incentives then outstanding, nor may the Board amend the
Plan without stockholder approval where the absence of such approval would cause the Plan to fail
to comply with Rule 16b-3 under the Exchange Act, or any other requirement of applicable law or
regulation. Notwithstanding the foregoing, without consent of affected grantees, Incentives may be
amended, revised or revoked when necessary to avoid penalties under Section 409A of the Internal
Revenue Code of 1986, as amended. Unless approved by the Company’s stockholders or as otherwise
specifically provided under this Plan, no adjustments or reduction of the exercise price of any
outstanding Incentives shall be made in the event of a decline in stock price, either by reducing
the exercise price of outstanding Incentives or through cancellation of outstanding Incentives in
connection with regranting of Incentives at a lower price to the same individual.

14. No Limitation on Compensation

     Nothing in the Plan shall be construed to limit the right of the Company to establish
other plans or to pay compensation to its employees, in cash or property, in a manner which is not
expressly authorized under the Plan.

15. No Constraint on Corporate Action

     Nothing in the Plan shall be construed (i) to limit, impair or otherwise affect the
Company’s right or power to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or
assets, or (ii) except as provided in Section 13, to limit the right or power of the Company, its
parent, or any subsidiary, affiliate or joint venture to take any action which such entity deems to
be necessary or appropriate.

16. Withholding Taxes

     The Company shall be entitled to deduct from any payment under the Plan, regardless of
the form of such payment, the amount of all applicable income and employment taxes required by law
to be withheld with respect to such payment or may require the Eligible Employee to pay to it such
tax prior to and as a condition of the making of such payment. In accordance with any applicable
administrative guidelines it establishes, the Committee may allow an Eligible Employee to pay the
amount of taxes required by law to be withheld from an Incentive by withholding from any payment of
Common Stock due as a result of such Incentive, or by permitting the Eligible Employee to deliver
to the Company, shares of Common Stock having a fair market value, as determined by the Committee,
equal to the amount of such required withholding taxes.

17. Compliance with Section 16

     With respect to Eligible Employees who are Section 16 Officers, transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successor under the
Exchange Act. To the extent that compliance with any Plan provision applicable solely to the
Section 16 Officers is not required in order to bring a transaction by such Section 16 Officer into
compliance with Rule 16b-3, it shall be deemed null and void as to such transaction, to the extent
permitted by law and deemed advisable by the Committee and its delegees. To the extent any
provision of the Plan or action by the Plan administrators involving such Section 16 Officers is
deemed not to comply with an applicable condition of Rule 16b-3, it shall be deemed null and void
as to such Section 16 Officers, to the extent permitted by law and deemed advisable by the Plan
administrators.

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18. Use of Proceeds

     Any proceeds received by the Company under the Plan shall be added to the general funds
of the Company and shall be used for such corporate purposes as the Board of Directors shall
direct.

19. Governing Law

     The Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of New Jersey without giving effect to the principles of
conflicts of laws.

20. Offset and Suspension of Exercise

     Anything to the contrary in the Plan notwithstanding, the Plan administrators may (i)
offset any Incentive by amounts reasonably believed to be owed to the Company by the grantee and
(ii) disallow an Incentive to be exercised or otherwise payable during a time when the Company is
investigating reasonably reliable allegations of gross misconduct by the grantee.

21. Effect of a Change in Control.

     (a) Options.

1. Vesting of Options Other Than Key R&D Options. Upon the occurrence of a Change in
Control, each 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 21(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 21(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 options to purchase securities of a successor entity (“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).

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, each holder of a vested and exercisable option shall be entitled to receive, as
soon as practicable following the Change in Control, for each share of Common Stock subject
to a vested and exercisable 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

8

 

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 21(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. Upon the occurrence of a Change in Control, each
unvested Restricted Stock Grant which is outstanding immediately prior to the Change in
Control under the Plan shall immediately become fully vested.

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 Common Stock continues to be widely held and freely tradeable
following the Change in Control or is exchanged for or converted into securities of
a successor entity that are widely held and freely tradeable, then the vested
Incentives shall be paid in shares of 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).

(ii) If the Common Stock does not continue to be widely held and freely
tradeable following the Change in Control and is not exchanged for or converted into
securities of a successor entity that are widely held and freely tradeable, then the
vested Incentives 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
21(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 21(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 21(c)(1) or
21(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) Definitions. For purposes of this Section 21, the following terms shall have the
following meanings:

1. “Change in Control” shall have the meaning set forth in the Company’s Change in Control
Separation Benefits Plan; provided, however, that, 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.

9

 

2. “Change in Control Price” shall mean, with respect to a share of 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 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.

3. “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.

4. “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.

5. “PSU Pro Rata Amount” shall mean for each Performance Award, the amount determined by the
Committee when it grants Performance Awards.

6. “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.

10EX-10.13

 

Exhibit 10.13

 

 

MERCK & CO., Inc.

2006 NON-EMPLOYEE DIRECTORS

STOCK OPTION PLAN

(Effective April 25, 2006; as amended and restated February 27, 2007)

 

 

 

 

2006 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

     The 2006 Non-Employee Directors Stock Option Plan (the “Plan”) is established to attract,
retain and compensate for service as members of the Board of Directors of Merck & Co., Inc. (the
“Company” or “Merck”) highly qualified individuals who are not current or former employees of the
Company and to enable them to increase their ownership in the Company’s Common Stock. The Plan will
be beneficial to the Company and its stockholders since it will allow these Directors to have a
greater personal financial stake in the Company through the ownership of Company stock, in addition
to underscoring their common interest with stockholders in increasing the value of the Company
stock longer term.

	1.	 	Eligibility

All members of the Company’s Board of Directors who are not current or former employees of the
Company or any of its subsidiaries (“Non-Employee Directors”) shall participate in this Plan.

	2.	 	Awards

Only nonqualified stock options to purchase shares of Merck Common Stock (“NQSOs”) and
Restricted Stock Grants (collectively, “Incentives”) may be granted under this Plan.

	3.	 	Shares Available

	 	a)	 	Number of Shares Available: There is hereby reserved for issuance under this Plan 1
million shares of Merck Common Stock, par value $0.01 per share, which may be authorized
but unissued shares, treasury shares, or shares purchased on the open market.
	 
	 	b)	 	Recapitalization Adjustment: In the event of a reorganization, recapitalization,
stock split, stock dividend, extraordinary cash dividend, combination of shares, merger,
consolidation, rights offering or other similar change in the capital structure or shares
of the Company, adjustments in the number and kind of shares authorized by this Plan, in
the number and kind of shares covered by Incentives, and in the option price of
outstanding NQSOs under, this Plan shall be made if, and in the same manner as, such
adjustments are made to incentives issued under the Company’s then current Incentive Stock
Plan subject to any required action by the Board of Directors or the stockholders of the
Company and compliance with applicable securities laws.

	4.	 	Annual Grant of Nonqualified Stock Options

Each year on the first Friday following the Company’s Annual Meeting of Stockholders, each
individual elected, reelected or continuing as a Non-Employee Director shall automatically
receive an NQSO to purchase 5,000 shares of Merck Common Stock or such other amount as may be
determined by the Board from time to time. Notwithstanding the foregoing, if, on that first
Friday, the General Counsel of the Company determines, in her/his sole discretion, that the
Company is in possession of material, undisclosed information about the Company, then the
annual grant of NQSOs to Non-Employee Directors shall be suspended until the second business
day after public dissemination of such information and the price, exercisability date and
option period shall then be
determined by reference to such later date. If Merck Common Stock is not

1

 

traded on the New York
Stock Exchange on any date a grant would otherwise be awarded, then the grant shall be made the
next day thereafter that Merck Common Stock is so traded.

	5.	 	Option Price

The price of the NQSO shall be the closing price of Merck Common Stock on the date of the grant
as quoted on the New York Stock Exchange.

	6.	 	Option Period

An NQSO granted under this Plan shall become exercisable at 12:01 a.m. in three equal
installments (subject to rounding) on each of the first, second and third anniversaries of the
date of grant and shall expire at 11:59 p.m. on the day before the tenth anniversary thereof
(“Option Period”). As used in this Plan, all times shall mean the time for New York, NY.

	7.	 	Payment

The NQSO price and any required tax withholding, if any, shall be paid in cash in U.S. dollars
at the time the NQSO is exercised or in such other manner as permitted for option exercises
under the Company’s Incentive Stock Plan (the “ISP”) applicable to “officers” (as defined in
Rule 16a-1 of the Securities Exchange Act of 1934 (the “Exchange Act”)) of Merck and its
affiliates. If the Compensation and Benefits Committee of the Board of Directors of the
Company approves the use of previously owned shares of Common Stock for any portion of the
exercise price for NQSOs granted under the ISP, then that same provision also shall apply to
this Plan. The NQSOs shall be exercised through the Company’s broker-assisted stock option
exercise program, provided such program is available at the time of the option exercise, or by
such other means as in effect from time to time for the ISP.

	8.	 	Cessation of Service

Upon cessation of service as a Non-Employee Director (for reasons other than Retirement or
death), only those NQSOs immediately exercisable at the date of cessation of service shall be
exercisable by the grantee. Such NQSOs must be exercised by 11:59 p.m. on the day before the
same day of the third month after such cessation of service (but in no event after the
expiration of the Option Period) or they shall be forfeited. For example, if service ends on
January 12 and this section applies, the NQSOs would expire no later than 11:59 p.m. on April
11. All other NQSOs shall expire at 11:59 p.m. on the day of such cessation of service.

	9.	 	Retirement

If a grantee ceases service as a Non-Employee Director and is then at least age 65 with ten or
more years of service or age 70 with five or more years of service (such cessation of service
is a “Retirement” and begins on the first day after service ends), then any of his/her
outstanding NQSOs shall continue to become exercisable as if service had continued. All
outstanding NQSOs must be exercised by the expiration of the Option Period, or such NQSOs shall
be forfeited.
Notwithstanding the foregoing, if a grantee dies before the NQSOs are forfeited, Section 10
shall control.

2

 

	10.	 	Death

Upon the death of a grantee, all unvested NQSOs shall become immediately exercisable. The NQSOs
which become exercisable upon the date of death and those NQSOs which were exercisable on the
date of death may be exercised by the grantee’s legal representatives or heirs by the earlier
of (i) 11:59 p.m. on the day before the third anniversary of the date of death (ii) the
expiration of the Option Period; if not exercised by the earlier of (i) or (ii), such NQSOs
shall be forfeited. Notwithstanding the foregoing, if local law applicable to a deceased
grantee requires a longer or shorter exercise period, these provisions shall comply with that
law.

	11.	 	Restricted Stock Grant

The Board may award actual shares of Common Stock (“Restricted Stock”) or phantom shares
of Common Stock (“Restricted Stock Units”) to a Non-Employee Director, which shares shall be
subject to the terms and conditions and as the Board may prescribe from time to time.

	12.	 	Administration and Amendment of the Plan

This Plan shall be administered by the Board of Directors of Merck. The Board may delegate to
any person or group, who may further so delegate, the Board’s powers and obligations hereunder
as they relate to day to day administration of the exercise process. This Plan may be
terminated or amended by the Board of Directors as it deems advisable. However, an amendment
revising the price, date of exercisability, option period of, or amount of shares under an NQSO
shall not be made more frequently than every six months unless necessary to comply with
applicable laws or regulations. Unless approved by the Company’s stockholders, no adjustments
or reduction of the exercise price of any outstanding NQSO shall be made directly or by
cancellation of outstanding NQSOs and the subsequent regranting of NQSOs at a lower price to
the same individual. No amendment may revoke or alter in a manner unfavorable to the grantees
any Incentives then outstanding, nor may the Board amend this Plan without stockholder approval
where the absence of such approval would cause the Plan to fail to comply with Rule 16b-3 under
the Exchange Act or any other requirement of applicable law or regulation. An Incentive may not
be granted under this Plan after December 31, 2015 but NQSOs granted prior to that date shall
continue to become exercisable and may be exercised, and Restricted Stock Grants shall continue
to vest, according to their terms.

	13.	 	Transferability

Except as set forth in this section, the NQSOs granted under this Plan shall not be exercisable
during the grantee’s lifetime by anyone other than the grantee, the grantee’s legal guardian or
the grantee’s legal representative, and shall not be transferable other than by will or by the
laws of descent and distribution. Incentives granted under this Plan shall be transferable
during a grantee’s lifetime only in accordance with the following provisions.

The grantee may only transfer an NQSO while serving as a Non-Employee Director of the Company
or within one year of ceasing service as a Non-Employee Director due to Retirement as defined
in Section 9.

3

 

The NQSO may be transferred only to the grantee’s spouse, children (including adopted children
and stepchildren) and grandchildren (collectively, “Family Members”), to one or more trusts for
the benefit of Family Members or, at the discretion of the Board of Directors, to one or more
partnerships where the grantee and his Family Members are the only partners, in accordance with
the rules set forth in this section. The grantee shall not receive any payment or other
consideration for such transfer (except that if the transfer is to a partnership, the grantee
shall be permitted to receive an interest in the partnership in consideration for the
transfer).

Any NQSO transferred in accordance with this section shall continue to be subject to the same
terms and conditions in the hands of the transferee as were applicable to such NQSO prior to
the transfer, except that the grantee’s right to transfer such NQSO in accordance with this
section shall not apply to the transferee. However, if the transferee is a natural person,
upon the transferee’s death, the NQSO privileges may be exercised by the legal representatives
or beneficiaries of the transferee within the exercise periods otherwise applicable to the
NQSO.

Any purported transfer of an NQSO under this section shall not be effective unless, prior to
such transfer, the grantee has (1) met the minimum stock ownership target then in place for
Directors of the Company, (2) notified the Company of the transferee’s name and address, the
number of shares under the Option to be transferred, and the grant date and exercise price of
such shares, and (3) demonstrated, if requested by the Board of Directors, that the proposed
transferee qualifies as a permitted transferee under the rules set forth in this section. In
addition, the transferee must sign an agreement that he or she is bound by the rules and
regulations of the Plan and by the same insider trading restrictions that apply to the grantee
and provide any additional documents requested by the Company in order to effect the transfer.
No transfer shall be effective unless the Company has in effect a registration statement filed
under the Securities Act of 1933 covering the securities to be acquired by the transferee upon
exercise of the NQSO, or the General Counsel of Merck has determined that registration of such shares is not necessary.

	14.	 	Compliance with SEC Regulations

It is the Company’s intent that the Plan comply in all respects with Rule 16b-3 of the Exchange
Act, and any regulations promulgated thereunder. If any provision of this Plan is later found
not to be in compliance with the Rule, the provision shall be deemed null and void. All grants
and exercises of NQSOs under this Plan shall be executed in accordance with the requirements of
Section 16 of the Exchange Act, as amended, and any regulations promulgated thereunder.

	15.	 	Miscellaneous

Except as provided in this Plan, no Non-Employee Director shall have any claim or right to be
granted an NQSO under this Plan. Neither the Plan nor any action thereunder shall be construed
as giving any director any right to be retained in the service of the Company.

	16.	 	Effective Date

This Plan shall be effective April 25, 2006 or such later date as stockholder approval is
obtained.

	17.	 	No Constraint on Corporate Action

Nothing in this Plan shall be construed (i) to limit or impair or otherwise affect the
Company’s right or power to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, or to merge or consolidate, liquidate, sell or transfer all
or any part of its

4

 

business or assets, or (ii) except as provided in Section 12, to limit the
right or power of the Company or any subsidiary to take any action which such entity deems to
be necessary or appropriate.

	18.	 	Governing Law

This Plan, and all agreements hereunder, shall be construed in accordance with and governed by
the laws of the State of New Jersey.

5

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