Document:

EXHIBIT 10.3

 

Exhibit 10.3

MERCK & CO., INC.

DEFERRAL PROGRAM

(Amended and Restated as of January 1, 2005)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	Article I 
	Administration
	 	1	 
	Article II
	Eligibility
	 	1	 
	Article III
	Deferral Into a Deferred Compensation Account
	 	1	 
	Article IV 
	Valuation of Deferred Compensation Accounts
	 	2	 
	Article V
	Redesignation Within a Deferred Compensation Account
	 	4	 
	Article VI
	Distribution of Deferred Compensation Accounts
	 	6	 
	Article VII
	Deductions from Distributions
	 	8	 
	Article VIII
	Beneficiary Designations
	 	8	 
	Article IX
	Amendments
	 	8	 
	Schedule I 
	Deferral Program Investment Alternatives
	 	9	 
	Schedule II
	Special Provisions Applicable to Medco Health Employees
	 	15	 

(i)

 

 

MERCK & CO., INC. DEFERRAL PROGRAM

     The Deferral Program (“the Program”) is intended to permit a select group of management to
defer income which would otherwise be immediately payable to them as annual base salary or under
various incentive plans of Merck & Co., Inc. (“the Company”).

I. ADMINISTRATION

     This Program is administered by the Compensation and Benefits Committee of the Company’s Board
of Directors. This Committee is composed of non-employee directors only. The Committee shall have
responsibility for determining which investments will be available under the Program, and those
investments shall be listed on Schedule I hereto. The Committee shall review the investment
selections at least once every five years. The Committee shall make all decisions affecting the
timing, price or amount of any and all of the Deferred Compensation of participants subject to
Section 16 of the Securities Exchange Act of 1934, as amended (“Section 16 Officers”), but may
otherwise delegate any of its authority under this Program.

II. ELIGIBILITY

     Eligibility to defer under this Program will be determined in accordance with the terms of the
Company’s Base Salary Deferral Plan and various incentive plans. However, the Committee has the
authority to refuse to permit an employee to participate in this Program, if the Committee
determines that such participation would jeopardize the Program’s compliance with applicable law or
the Program’s status as a top hat plan under the Employee Retirement Income Security Act.

III. DEFERRAL INTO A DEFERRED COMPENSATION ACCOUNT

A. Election to Defer

     A participant’s decision to defer under the Program must be made, (i) for the Base Salary
Deferral Plan, prior to the commencement of the pay period during which the base salary to be
deferred will be earned, (ii) for annual incentive plans, prior to the commencement of the
performance year during which the bonus monies to be deferred will be earned, and (iii) for
long-term incentive plans, prior to the commencement of the last year of the award period during
which the bonus monies to be deferred will be earned. For purposes of annual incentive plans only,
a participant who is hired by the Company during a performance year may make an election, no later
than the thirtieth (30th) day from the participant’s date of hire, to defer bonus monies
to be earned during such performance year. For the Base Salary Deferral Plan, only amounts equal
to or in excess of five percent (5%) of Annual Base Salary (as defined in the Base Salary Deferral
Plan) and less than or equal to the lesser of (1) fifty percent (50%) of Annual Base Salary or (2)
the Participant’s Annual Base Salary in excess of the amount determined under Section 401(a)(17) of
the Internal Revenue Code may be deferred. For the annual and long-term incentive plans, only
amounts in excess of $3,000 may be deferred. Amounts so deferred are known as “Deferred
Compensation” and will be credited to the participant’s “Deferred Compensation Account.” Deferred
Compensation shall be held in one account regardless of the plan (Base Salary Deferral or incentive
plan) under which it was deferred.

 

 

B. Election of Distribution Schedule

1. Timing of Election

     The participant shall also elect a distribution schedule for his/her Deferred Compensation. A
participant’s election of a distribution schedule in connection with a deferral election under
annual and/or long-term incentive plans shall be made at the same time that the participant makes
the election to defer. A participant’s initial election of a distribution schedule in connection
with deferrals under the Base Salary Deferral Plan shall be made at the same time as the initial
deferral election, shall be irrevocable during the calendar year for which it was made and shall
apply to all deferrals of Annual Base Salary until a new distribution election becomes effective.
Thereafter, an election of a different distribution schedule in connection with deferrals under the
Base Salary Deferral Plan may be made at any time, provided, however, that such new distribution
schedule shall only apply prospectively to deferrals of Annual Base Salary in the following
calendar year.

2. Distribution Schedule

     A participant may elect to have payments begin at the participant’s actual retirement date,
subsequent to that date or prior thereto. A participant may elect a lump sum or a schedule of
annual installments, up to a maximum of 15 annual installments. No installment, however, may be
payable more than fifteen years after the participant’s termination of employment.

C. Election of Investment Alternatives

     The participant shall designate, in accordance with procedures established by the Company for
such designation, the portion (in multiples of 1%) of the Deferred Compensation to be allocated to
any investment alternative available under this Program.

IV. VALUATION OF DEFERRED COMPENSATION ACCOUNTS

A. Common Stock 

1. Initial Crediting

     The amount allocated to Merck Common Stock shall be used to determine the number of full and
partial shares of Merck Common Stock which such amount would purchase at the closing price of Merck
Common Stock on the New York Stock Exchange on the date cash payments of base salary, for amounts
deferred under the Base Salary Deferral Plan, or incentive awards, for amounts deferred under the
various incentive plans, would otherwise be paid to the participant (“the Deferral Date”). Should
the Committee determine that valuation on any Deferral Date would not constitute fair market value,
then the Committee shall decide on which date fair market value shall be determined using the
valuation method set forth in this paragraph. The Company shall credit the participant’s Deferred
Compensation Account with the number of full and partial shares of Merck Common Stock so
determined. However, at no time prior to the delivery of such shares shall any shares be purchased
or earmarked for such Account and the participant shall not have any of the rights of a shareholder
with respect to shares credited to his/her Deferred Compensation Account.

2

 

2. Dividends

     The Company shall credit the Participant’s Deferred Compensation Account with the number of
full and partial shares of Merck Common Stock purchasable at the closing price of Merck Common
Stock on the New York Stock Exchange as of the date each dividend is paid on the Common Stock, with
the dividends which would have been paid on the number of shares credited to such Account
(including pro rata dividends on any partial share) had the shares so credited then been issued and
outstanding.

3. Redesignations

     The value of Merck Common Stock for purposes of redesignation shall be the closing price of
Merck Common Stock on the New York Stock Exchange on (i) the day when the redesignation request is
received pursuant to administrative guidelines established by the Human Resources Financial
Services area of the Treasury department, provided the request is received prior to the close of
the New York Stock Exchange on such day or (ii) the next following business day if the request is
received when the New York Stock Exchange is closed.

4. Distributions

     Distributions of Merck Common Stock will be valued at the closing price of Merck Common Stock
on the New York Stock Exchange on the distribution date.

5. Limitations

     Shares of Merck Common Stock to be delivered under the provisions of this Program may be
delivered by the Company from its authorized but unissued shares of Common Stock or from Common
Stock held in the treasury. The amount of shares available each year under this Program shall be
one-tenth of one-percent of outstanding shares of Merck Common Stock on the last business day of
the preceding calendar year plus any shares authorized under this Program in previous years but not
used, minus any shares distributed under the Executive Incentive Plan after April 26, 1994.

6. Adjustments

     In the event of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, rights offering or any other change in the corporate structure or
shares of the Company, the number and kind of shares of Merck Common Stock available under this
Program or credited to participants’ Deferred Compensation Accounts shall be adjusted accordingly.

B. Mutual Funds

1. Initial Crediting

     The amount allocated to each Mutual Fund shall be used to determine the number of full and
partial Mutual Fund shares that such amount would purchase at the closing net asset value of the
Mutual Fund shares on the Deferral Date. The Company shall credit the participant’s Deferred
Compensation Account with the number of full and partial Mutual Fund shares so

3

 

determined.
However, no Mutual Fund shares shall be purchased or earmarked for such Account, nor shall the
participant have the rights of a shareholder with respect to such Mutual Fund shares.

2. Dividends

     The Company shall credit the participant’s Deferred Compensation Account with the number of
full and partial Mutual Fund shares purchasable, at the closing net asset value of the Mutual Fund
shares as of the date each dividend is paid on the Mutual Fund shares, with the dividends which
would have been paid on the number of shares credited to such Account (including pro rata dividends
on any partial share) had the shares then been owned by the participant for purposes of the above
computation.

3. Redesignations

     The value of Mutual Fund shares for purposes of redesignation shall be the net asset value of
such Mutual Fund at the close of business on (i) the day when the redesignation request is received
pursuant to administrative guidelines established by the Human Resources Financial Services area of
the Treasury department, provided the request is received prior to the close of the New York Stock
Exchange on such day or (ii) the next following business day if the request is received when the
New York Stock Exchange is closed.

4. Distributions

     Mutual Fund distributions will be valued based on the closing net asset value of the Mutual
Fund shares on the distribution date.

5. Adjustments

     In the event of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, rights offering or any other change in the corporate structure or
shares of a Mutual Fund, the number and kind of shares of that Mutual Fund credited to
participants’ Deferred Compensation Accounts shall be adjusted accordingly.

V. REDESIGNATION WITHIN A DEFERRED COMPENSATION ACCOUNT

A. Basic Redesignation Rules

     A participant, or the beneficiary or legal representative of a deceased participant, may
redesignate amounts credited to a Deferred Compensation Account among the investments available
under this Program in accordance with the following rules:

	 	(1)  	Eligible Participants - Active employees, separated employees and retired
participants are eligible to redesignate; provided, however, that no such redesignation
shall be made into Merck Common Stock.

4

 

	 	(2)  	Frequency and Timing - Effective June 1, 1999, there is no limit on the number of times a
participant may redesignate amounts measured by Mutual Funds, or, subject to Section B,
below, Merck Common Stock. Redesignation shall take place on (i) the day when the
redesignation request is received pursuant to administrative guidelines established by
the Human Resources Financial Services area of the Treasury department, provided the
request is received prior to the close of the New York Stock Exchange on such day or (ii)
the next following business day if the request is received when the New York Stock
Exchange is closed.
	 
	 	(3)  	Amount and Extent of Redesignation - Redesignation must be in 1% multiples of the
investment from which redesignation is being made.
	 
	 	(4)  	Beneficiaries or Legal Representatives - The beneficiary or legal representative of a
deceased participant may redesignate subject to the same rules as participants. However,
the beneficiary or legal representative shall have one opportunity to redesignate any
amount out of Merck Common Stock without regard to the rule set forth in Section B, below;
thereafter, the beneficiary or legal representative shall be subject to the same
redesignation rules as participants (including the limitation on redesignation out of
Merck Common Stock).

B. Special Rules for Redesignation Out of Common Stock 

1. Frequency and Timing

     For Section 16 Officers, redesignations may only be made out of Merck Common Stock during any
window period established by the Company from time-to-time and is restricted to amounts held in
Merck Common Stock for longer than six (6) months.

2. Material, Nonpublic Information

     The Committee, in its sole discretion and with advice of counsel, at any time may rescind a
redesignation out of Merck Common Stock if such redesignation was made by a participant who, a) at
the time of the redesignation was in the possession of material, nonpublic information with respect
to the Company; and b) in the Committee’s estimation benefited from such information in the timing
of his/her redesignation. The Committee’s determination shall be final and binding. In the event
of such rescission, the participant’s Deferred Compensation Account shall be returned to a status
as though such redesignation had not occurred. Notwithstanding the above, the Committee shall not
rescind a redesignation if the facts were reviewed by the participant with the General Counsel of
the Company or a designee prior to the redesignation and if the General Counsel or designee had
concluded that such participant was not in possession of adverse material, nonpublic information.

C. Conversion of Common Stock Accounts

     The Committee may, in its sole discretion, convert all of the shares of Merck Common Stock
allocated to a participant’s Deferred Compensation Account in the manner provided below where a
position which a terminated or retired participant has taken or wishes to take is, in the opinion
of the Committee, such as would make uncertain the propriety of the participant’s having a
continued interest in Merck Common Stock. The date of conversion shall be the date of commencement
of such other employment or the date of the Committee’s action, whichever is later.

5

 

     Conversion shall be from an expression of value in shares of Merck Common Stock in the
participant’s Deferred Compensation Account to an expression of value in United States dollars in
another
available investment. The value of the Merck Common Stock shall be based upon its closing price on
the New York Stock Exchange on the date of conversion or if no trading took place on such day, the
next business day on which trading took place. Any conversion under this paragraph shall be
irrevocable and absolute.

VI. DISTRIBUTION OF DEFERRED COMPENSATION ACCOUNTS

     Distribution of Deferred Compensation Accounts shall be made in accordance with the
participant’s distribution schedule pro rata by investment. Distributions from Merck Common Stock
will be made in shares, with cash payable for any partial share, subject to the limitations set
forth in Article IV, Section A.5. For Section 16 Officers, distribution of amounts in Merck Common
Stock is also restricted to amounts held in Merck Common Stock for longer than six months.
Distributions from Mutual Funds will be in cash. Distributions will be valued on the fifteenth day
of the distribution month (or, if such day is not a business day, the next business day) and paid
as soon thereafter as practicable.

A. Retirement

     A participant’s retirement from active service will cause distributions of his/her Deferred
Compensation Account to commence as soon as administratively feasible in accordance with the
participant’s previously elected schedule.

     If a participant retires from active service prior to age 65, the Committee may establish a
different distribution schedule. The schedule chosen by the Committee, however, shall not be
shorter than the participant’s previously elected schedule unless there has been or would be a
significant change in the participant’s economic circumstances attributable to the participant’s
early retirement. If the Committee decides to change the participant’s distribution schedule, the
participant’s Deferred Compensation Account must be distributed ratably over no less than five
years. However, if a participant has retired at the Company’s request, the limitation in the
preceding sentence does not apply.

B. Death

     In the event of a participant’s death, distributions under this Program will commence as soon
as administratively feasible in accordance with his/her previously elected schedule. The
participant’s beneficiary or legal representative, however, may request that the Committee change
such distribution schedule.

C. Automatic Distribution

     If a participant terminates employment for reasons other than death, divestiture or a
separation due to reorganization, reduction in force, elimination of the participant’s job, or to
take a position with a joint venture or other business entity defined in Section E, below, and is
not eligible to retire from active service under one of the Company’s pension plans, then his/her
Deferred Compensation Account will be automatically paid in a lump sum as soon as administratively
feasible following his/her termination of employment. Furthermore, except as provided in Schedule
II, any participant who dies, retires from active service, or whose

6

 

employment terminates as a
result of a divestiture, or a separation due to reorganization, reduction in force, or elimination
of the participant’s job, but whose Deferred Compensation Account is valued at less than $125,000
on the date of his/her death, retirement, termination due to divestiture or separation will have
his/her Deferred Compensation Account distributed in a lump sum as soon as administratively
feasible following his/her death, retirement, or termination due to divestiture or separation.

D. Termination Due to Divestiture or Separation

     If a participant is employed by a subsidiary of the Company that is sold, so that the
subsidiary is no longer considered within the controlled group of the Company, that participant
shall be considered to have terminated employment with the Company for purposes of this Program.
If a participant’s employment terminates as a result of a divestiture of a division or subsidiary
of the Company, or as a result of a separation due to a reorganization, reduction in force, or
elimination of the participant’s job, distributions under this Program will commence as soon as
administratively feasible after such termination of employment in accordance with his/her
previously elected schedule or such schedule as the Committee, in its discretion, may approve in
accordance with Section G, below.

E. Joint Venture Service

     A participant’s termination of employment in order to take a position with a joint venture or
other business entity in which the Company shall directly or indirectly own fifty percent or more
of the outstanding voting or other ownership interest shall not be considered a termination of
employment with the Company for purposes of distribution under this Program.

F. Hardship Distributions

     The Committee, in its sole discretion, may accelerate the time of distribution of a
participant’s Deferred Compensation Account, if the participant experiences severe financial
hardship due to illness, accident or death in the immediate family, loss of or damage to property
due to casualty, or other extraordinary and unforeseeable circumstances. Such participant should
provide the Committee with a statement in reasonable detail as to the nature of such financial
hardship together with a statement that such acceleration is necessary to alleviate such hardship.

G. Post-Retirement, Post-Divestiture and Post-Separation Modifications

     A participant who has retired from active service or whose employment has terminated as a
result of a divestiture or separation as described in Section D, above, may submit one petition to
the Committee requesting an extension of the period of distribution of his/her Deferred
Compensation Account. Such petition must be received by the Committee prior to the first
distribution to the participant of his/her previously elected distribution schedule. Any revised
distribution schedule may not exceed fifteen years from the date of actual retirement, or the
divestiture or separation date and will be effective the beginning of the next calendar year. The
Committee shall in no event grant a new schedule under which the participant would cumulatively
receive a greater portion of his/her Deferred Compensation Account as measured at the end of each
calendar year. Except as provided in Schedule II, a participant who is an active employee may not
make a request under this paragraph.

7

 

VII. DEDUCTIONS FROM DISTRIBUTIONS

     The Company will deduct from each distribution amounts required to be withheld for income,
Social Security and other tax purposes. Such withholding will be done on a pro rata basis per
investment. The Company may also deduct any amounts the participant owes the Company for any
reason.

VIII. BENEFICIARY DESIGNATIONS

     A participant under this program may designate a beneficiary to receive his/her Deferred
Compensation Account upon the participant’s death. Should the beneficiary predecease the
participant or should the participant not name a beneficiary, the participant’s Deferred
Compensation Account will be distributed to the participant’s estate.

IX. AMENDMENTS

     The Committee may amend this Program at any time. However, such amendment shall not
materially adversely affect any right or obligation with respect to any Deferred Compensation made
theretofore.

8

 

SCHEDULE I

DEFERRAL PROGRAM INVESTMENT ALTERNATIVES

(January 1, 2002 – January 10, 2003)

Merck Common Stock

Mutual Funds

	 	 	 
	

	 	American Century Emerging Markets Fund
	

	 	American Funds EuroPacific Growth Fund
	

	 	Fidelity Destiny I
	

	 	Fidelity Dividend Growth
	

	 	Fidelity Equity-Income Fund
	

	 	Fidelity Low-Priced Stock Fund
	

	 	Fidelity Retirement Money Market
	

	 	Fidelity Spartan ® Government Income
	

	 	Fidelity Spartan ® U.S. Equity Index
	

	 	Franklin Small-Mid Cap Growth A
	

	 	Janus Enterprise
	

	 	Janus Growth & Income
	

	 	Liberty Acorn Fund-Class Z
	

	 	PIMCO Foreign Bond Institutional
	

	 	PIMCO Long Term US Government Institutional
	

	 	PIMCO Total Return Institutional
	

	 	Putnam Global Equity Fund A*
	

	 	Putnam International Voyager A
	

	 	Putnam Vista A
	

	 	T. Rowe Price Blue Chip Growth Fund
	

	 	Vanguard Asset Allocation

	*	 	From September 20, 2002 – September 30, 2002, this investment was briefly named the Putnam
Global Growth Fund A as a result of the merger, in September 2002, of Putnam Global Equity Fund A
with Putnam Global Growth Fund A. The merged fund briefly retained the name “Putnam Global Growth
Fund A.” Effective October 1, 2002, the merged fund changed its name to “Putnam Global Equity Fund
A.”

9

 

SCHEDULE I

DEFERRAL PROGRAM INVESTMENT ALTERNATIVES

(Effective January 11, 2003 to July 31, 2003)

Merck Common Stock

Mutual Funds

	 	 	 
	

	 	American Century Emerging Markets Institutional
	

	 	American Funds EuroPacific Growth Fund
	

	 	Fidelity Destiny I
	

	 	Fidelity Dividend Growth
	

	 	Fidelity Equity-Income
	

	 	Fidelity Low-Priced Stock
	

	 	Fidelity Retirement Money Market
	

	 	Fidelity Spartan Government Income
	

	 	Fidelity Spartan U.S. Equity Index
	

	 	Franklin Small-Mid Cap Growth A
	

	 	Janus Enterprise
	

	 	Janus Growth & Income
	

	 	Liberty Acorn Class Z
	

	 	PIMCO Foreign Bond Institutional
	

	 	PIMCO Long Term US Government Institutional
	

	 	PIMCO Total Return Institutional
	

	 	Putnam Global Equity A
	

	 	Putnam International Capital Opportunities Fund A*
	

	 	Putnam Vista A
	

	 	T. Rowe Price Blue Chip Growth
	

	 	Vanguard Asset Allocation

	*	 	Prior to April 30, 2003, known as Putnam International Voyager Fund A

Redesignation of Deferred Amounts measured by Putnam Vista A on July 31, 2003

Prior to 4 p.m. ET on July 31, 2003, each participant who has any part of his/her Deferred
Compensation Account measured by the Putnam Vista A investment alternative may redesignate the
amount in such investment alternative in accordance with Article V, Section A. If a participant
does not redesignate the amount measured by the Putnam Vista A investment alternative to any other
remaining investment alternatives before 4 p.m. ET on July 31, 2003, then the amount in the Putnam
Vista A account shall be redesignated as of 4 p.m. ET on July 31, 2003, to the Fidelity Mid-Cap
Stock Fund.

10

 

SCHEDULE I

DEFERRAL PROGRAM INVESTMENT ALTERNATIVES

(Effective July 31, 2003-November 19, 2003)

Merck Common Stock

Mutual Funds

	 	 	 
	

	 	American Century Emerging Markets Institutional
	

	 	American Funds EuroPacific Growth Fund
	

	 	Columbia Acorn Fund Z*
	

	 	Fidelity Destiny I
	

	 	Fidelity Dividend Growth
	

	 	Fidelity Equity-Income
	

	 	Fidelity Low-Priced Stock
	

	 	Fidelity Mid-Cap Stock Fund
	

	 	Fidelity Retirement Money Market
	

	 	Fidelity Spartan Government Income
	

	 	Fidelity Spartan U.S. Equity Index
	

	 	Franklin Small-Mid Cap Growth A
	

	 	Janus Enterprise
	

	 	Janus Growth & Income
	

	 	PIMCO Foreign Bond Institutional
	

	 	PIMCO Long Term US Government Institutional
	

	 	PIMCO Total Return Institutional
	

	 	Putnam Global Equity A
	

	 	Putnam International Capital Opportunities Fund A**
	

	 	T. Rowe Price Blue Chip Growth
	

	 	Vanguard Asset Allocation

	*	 	Prior to October 2003, known as Liberty Acorn Class Z
	 
	**	 	Prior to April 30, 2003, known as Putnam International Voyager Fund A

Redesignation of Deferred Amounts measured by Putnam Global Equity A and Putnam International
Capital Opportunities Fund A (collectively, the “Putnam Funds”) on November 19, 2003

Prior to 4 p.m. ET on November 19, 2003, each participant who has any part of his/her Deferred
Compensation Account measured by a Putnam Funds investment alternative may redesignate the amount
in such investment alternative in accordance with Article V, Section A. If a participant does not
redesignate the  amount measured  by a Putnam Funds investment
alternative  to  any other remaining
investment alternative(s) before 4 p.m. ET on November 19, 2003, then the amount in the Putnam
Funds investment alternative shall be redesignated as of 4 p.m. ET on November 19, 2003, to the
Fidelity Retirement Money Market portfolio.

11

 

SCHEDULE I

DEFERRAL PROGRAM INVESTMENT ALTERNATIVES

(November 19, 2003 to April 2, 2004)

Merck Common Stock

Mutual Funds

	 	 	 
	

	 	American Century Emerging Markets Institutional
	

	 	American Funds EuroPacific Growth Fund
	

	 	Columbia Acorn Class Z*
	

	 	Fidelity Destiny I
	

	 	Fidelity Dividend Growth
	

	 	Fidelity Equity-Income
	

	 	Fidelity Low-Priced Stock
	

	 	Fidelity Mid-Cap Stock Fund
	

	 	Fidelity Retirement Money Market
	

	 	Fidelity Spartan Government Income
	

	 	Fidelity Spartan U.S. Equity Index
	

	 	Franklin Small-Mid Cap Growth A
	

	 	Janus Enterprise
	

	 	Janus Growth & Income
	

	 	PIMCO Foreign Bond Institutional
	

	 	PIMCO Long Term US Government Institutional
	

	 	PIMCO Total Return Institutional
	

	 	T. Rowe Price Blue Chip Growth
	

	 	Vanguard Asset Allocation

	*	 	Prior to October 2003, known as Liberty Acorn Class Z

12

 

SCHEDULE I

DEFERRAL PROGRAM INVESTMENT ALTERNATIVES

(April 2, 2004 to January 31, 2005)

Merck Common Stock

Mutual Funds

	 	 	 
	

	 	American Century Emerging Markets Institutional
	

	 	American Funds EuroPacific Growth Fund
	

	 	Columbia Acorn Class Z*
	

	 	Fidelity Destiny I
	

	 	Fidelity Dividend Growth
	

	 	Fidelity Equity-Income
	

	 	Fidelity Low-Priced Stock
	

	 	Fidelity Mid-Cap Stock Fund
	

	 	Fidelity Retirement Money Market
	

	 	Fidelity Spartan Government Income
	

	 	Fidelity Spartan U.S. Equity Index
	

	 	Janus Enterprise
	

	 	Janus Growth & Income
	

	 	PIMCO Foreign Bond Institutional
	

	 	PIMCO Long Term US Government Institutional
	

	 	PIMCO Total Return Institutional
	

	 	T. Rowe Price Blue Chip Growth
	

	 	Vanguard Asset Allocation

	*	 	Prior to October 2003, known as Liberty Acorn Class Z

13

 

SCHEDULE I

(February 1, 2005)*

Merck Common Stock Fund

Mutual Funds

	 	 	 
	

	 	AXA Rosenberg U.S. Small Capitalization Account
	

	 	American Funds EuroPacific Growth Fund — Class A
	

	 	Columbia Acorn Fund — Class Z
	

	 	Fidelity Diversified International Fund
	

	 	Fidelity Freedom 2005 Fund
	

	 	Fidelity Freedom 2010 Fund
	

	 	Fidelity Freedom 2015 Fund
	

	 	Fidelity Freedom 2020 Fund
	

	 	Fidelity Freedom 2025 Fund
	

	 	Fidelity Freedom 2030 Fund
	

	 	Fidelity Freedom 2035 Fund
	

	 	Fidelity Freedom 2040 Fund
	

	 	Fidelity Low-Priced Stock Fund
	

	 	Fidelity Retirement Money Market Portfolio
	

	 	GMO U.S. Core Fund — M
	

	 	PIMCO Total Return Fund — Institutional Class
	

	 	SSgA S&P 500 Index Fund
	

	 	T. Rowe Price Blue Chip Growth Fund

	*	 	Or as near thereto as is administratively feasible

14

 

SCHEDULE II

SPECIAL PROVISIONS APPLICABLE TO

MEDCO HEALTH EMPLOYEES

(Approved July 23, 2002)

DEFINITIONS

Medco Health — Medco Health Solutions, Inc.

Medco Health Employee — A participant who is (i) employed by Medco Health prior to the
Spin-Off or (ii) employed by Merck prior to the Spin-Off and expected to be employed by Medco
Health prior to or as of the Spin-Off.

Separated Medco Health Employee — A participant in the Deferral Program who is employed by
Medco Health as of the date of the Spin-Off and is considered to have terminated employment with
the Company as a result of the Spin-Off.

Spin-Off — The distribution by Merck to its shareholders of the equity securities of Medco
Health. The Spin-Off will be a divestiture for purposes of the Deferral Program.

SPECIAL PROVISIONS

Notwithstanding anything to the contrary in Article VI, Section C of the Deferral Program, the
Deferred Compensation Account of each Separated Medco Health Employee shall be paid out in
accordance with Article VI, Section D, without regard to the $125,000 threshold set forth in
Section C.

Notwithstanding anything to the contrary in Article VI, Section G of the Deferral Program, each
Medco Health Employee may submit the petition for an extension of the distribution schedule
permitted under Section G either prior to the Spin-Off or once the Medco Health Employee has become
a Separated Medco Health Employee; provided, however, that if a Medco Health Employee makes a
request for a new distribution schedule prior to the Spin-Off and thereafter does not become a
Separated Medco Health Employee, then such request shall not be effective.

15EXHIBIT 10.5

 

Exhibit 10.5                    

 

 

MERCK & CO., INC.

1996 INCENTIVE STOCK PLAN

(Amended and Restated as of February 22, 2005)

 

 

 

 

1996 INCENTIVE STOCK PLAN

     The 1996 Incentive Stock Plan (“ISP”), effective January 1, 1996, is established to encourage
employees of Merck & Co., Inc. (the “Company”), its subsidiaries, its affiliates, its joint
ventures and the Merck Institute for Therapeutic Research to acquire Common Stock in the Company.
It is believed that the ISP will stimulate employees’ efforts on the Company’s behalf, will tend to
maintain and strengthen their desire to remain with the Company, will be in the interest of the
Company and its Stockholders, and will encourage such employees to have a greater personal
financial investment in the Company through ownership of its Common Stock.

	1.  	Administration

     The ISP shall be administered by the Compensation and Benefits Committee of the Board of
Directors of the Company (the “Committee”). The Committee is authorized, subject to the provisions
of the ISP, to establish such rules and regulations as it deems necessary for the proper
administration of the ISP, and to make such determinations and to take such action in connection
therewith or in relation to the ISP as it deems necessary or advisable, consistent with the ISP.
The Committee may delegate some or all of its power and authority hereunder to the Chief Executive
Officer or 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 subject to Section 16 of the Securities Exchange Act of 1934.

     For the purpose of this section and all subsequent sections, the ISP 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.

	2.  	Eligibility

     Regular full-time and part-time employees of the Company, its subsidiaries, its affiliates,
its joint ventures and the Merck Institute for Therapeutic Research, 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 and who are not directors
or officers of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, shall
be eligible to participate in the ISP (“Eligible Employees”) if designated by the Committee or its
delegate. Those directors who are not regular employees are not eligible.

	3.  	Incentives

     Incentives under the ISP may be granted in any one or a combination of (a) Incentive Stock
Options (or other statutory stock option); (b) Nonqualified Stock Options; (c) Stock Appreciation
Rights; (d) Restricted Stock Grants, and (e) Performance Shares (together “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. Determinations by the Committee under the
ISP including without limitation, determinations of the Eligible Employees, the form, amount and
timing of Incentives, the terms and provisions of Incentives, and the agreements 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.

	4.  	Shares Available for Incentives

     (a) Shares Subject to Issuance or Transfer. Subject to adjustment as provided in Section
4(c) hereof, there is hereby reserved for issuance under the ISP 130 million shares of the

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Company’s Common Stock (“Common Stock”). The shares available for granting awards shall be
increased by the number of shares as to which options or other benefits granted under the Plan have
lapsed, expired, terminated or been cancelled. In addition, any shares reserved for issuance under
the Company’s 1991 Incentive Stock Plan and 1987 Incentive Stock Plan (“Prior Plans”) in excess of
the number of shares as to which options or other benefits have been awarded thereunder, plus any
such shares as to which options or other benefits granted under the Prior Plans may lapse, expire,
terminate or be cancelled, shall also be reserved and available for issuance or reissuance under
the ISP. Shares under this Plan may be delivered by the Company from its authorized but unissued
shares of Common Stock or from Common Stock held in the Treasury.

     (b) Limit on an Individual’s Incentives. In any given year, no Eligible Employee may receive
Incentives covering more than three million shares of the Company’s Common Stock (such number of
shares may be adjusted in accordance with Section 4(c)).

     (c) Recapitalization Adjustment. In the event of a reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Company, the Committee shall make such
adjustment, if any, as it may deem appropriate in the number and kind of shares authorized by the
ISP, in the number and kind of shares covered by Incentives granted, in the case of Stock Options,
in the option price, and in the case of stock appreciation rights, in the fair market value.

	5.  	Stock Options

     The Committee may grant options qualifying as Incentive Stock Options under the Internal
Revenue Code of 1986, as amended, or any successor code thereto (the “Code”), other statutory
options under the Code, and Nonqualified Options (collectively “Stock 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) 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% 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 Option. The period of each Stock Option shall be fixed by the Committee but
shall not exceed ten (10) years.

     (c) Payment. The option price shall be payable in cash at the time the Stock Option is
exercised. No shares shall be issued until full payment therefore has been made. A grantee of a
Stock Option shall have none of the rights of a stockholder until the shares are issued.

     (d) Exercise of Option. The shares covered by a Stock Option may be purchased in such
installments and on such exercise dates as the Committee or its delegate may determine. Any shares
not purchased on the applicable exercise date may be purchased thereafter at any time prior to the
final expiration of the Stock Option. In no event (including those specified in paragraphs (e),
(f) and (g) of this section) shall any Stock Option be exercisable after its specified expiration
period.

     (e) Termination of Employment. Upon the termination of a Stock Option grantee’s employment
(for any reason other than retirement, death or termination for deliberate, willful or gross
misconduct), Stock Option privileges shall be limited to the shares which 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 to be determined
by the Committee. Such Stock Option privileges shall expire unless exercised or

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surrendered under
a Stock Appreciation Right 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. If a Stock Option grantee’s employment is terminated for deliberate, willful or gross
misconduct, as determined by the Company, all rights under the Stock Option shall expire upon
receipt of the notice of such termination.

     (f) Retirement. Upon retirement of a Stock Option grantee, Stock Option privileges shall
apply to those shares immediately exercisable at the date of retirement. The Committee, however,
in its discretion, may provide that any Stock Options outstanding but not yet exercisable upon the
retirement of a Stock Option grantee may become exercisable in accordance with a schedule to be
determined by the Committee. Stock Option privileges shall expire unless exercised within such
period of time as may be established by the Committee, but in no event later than the expiration
date of the Stock Option.

     (g) Death. Upon the death of a Stock Option grantee, Stock Option privileges shall apply to
those shares which were immediately exercisable at the time of death. The Committee, however, in
its discretion, may provide that any Stock Options outstanding but not yet exercisable upon the
death of a Stock Option grantee may become exercisable in accordance with a schedule to be
determined by the Committee. Such privileges shall expire unless exercised by legal
representatives within a period of time as determined by the Committee but in no event later than
the expiration date of the Stock Option.

     (h) Limits on Incentive Stock Options. Except as may otherwise be permitted by the Code, the
Committee shall not grant to an Eligible Employee Incentive Stock Options, that, in the aggregate,
are first exercisable during any one calendar year to the extent that the aggregate fair market
value of the Common Stock, at the time the Incentive Stock Options are granted, exceeds $100,000.

	6.  	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 or under the Prior Plans. Such Stock
Appreciation Rights 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, 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. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, at the time the Stock Appreciation Right 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 Stock Appreciation Right granted with respect to an
underlying Stock Option exceed the exercise period for such Stock Option. If a Stock Appreciation
Right is granted without an underlying Stock Option, the period for exercise of the Stock
Appreciation Right shall be set by the Committee.

     (b) Value of Stock Appreciation Right. If a Stock Appreciation Right is granted with respect
to an underlying Stock Option, the grantee 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 over the Stock Option price multiplied by the number of shares covered by the Stock Option
which are surrendered. If a Stock Appreciation Right is granted without an underlying Stock
Option, the grantee will receive upon exercise of the Stock Appreciation Right an amount

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equal to
the excess of the fair market value of the Common Stock on the date the election to surrender such
Stock Appreciation Right is received 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 Stock
Appreciation Right.

     (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.

	7.  	Performance Share Awards

     The Committee may grant awards under which payment may be made in shares of Common Stock, cash
or any combination of shares and cash if the performance of the Company or any subsidiary, division
or affiliate of the Company selected by the Committee during the Award Period meets certain goals
established by the Committee (“Performance Share Awards”). Such Performance Share 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 shall also establish performance objectives (“Performance Goals”)
to be met by the Company, subsidiary or division during the Award Period as a condition to payment
of the Performance Share Award. The Performance Goals may include earnings per share, return on
stockholders’ equity, return on assets, net income, or 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 Share Awards. The Committee shall establish the method of
calculating the amount of payment to be made under a Performance Share Award if the Performance
Goals are met, including the fixing of a maximum payment. The Performance Share Award shall be
expressed in terms of shares of Common Stock and referred to as “Performance Shares.” After the
completion of an Award Period, the performance of the Company, subsidiary or division shall be
measured against the Performance Goals, and the Committee shall determine whether all, none or any
portion of a Performance Share 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 Performance Shares on, or as soon as practicable prior
to, the date of payment.

     (c) Revision of Performance Goals. 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, subsidiary or division 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 Share Award must remain in the
employ of the Company until the completion of the Award Period in order to be
entitled to payment under the Performance Share Award; provided that the Committee may, in its sole
discretion, provide for a 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 Share 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

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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.

     (f) Limit on Performance Share Awards. Incentives granted as Performance Share Awards under
this section and Restricted Stock Grants under Section 8 shall not exceed, in the aggregate, 12
million shares of Common Stock (such number of shares may be adjusted in accordance with Section
4(c)).

	8.  	Restricted Stock Grants

     The Committee may award shares of Common Stock to a grantee, which shares shall be subject to
the following terms and conditions and such other terms and conditions as the Committee may
prescribe (“Restricted Stock Grant”):

     (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 (“Restriction Period”) in
order to retain the shares under the Restricted Stock Grant. If the grantee leaves the employment
of the Company prior to the end of the Restriction Period, the Restricted Stock Grant shall
terminate and the 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
Restriction 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 Restriction
Period, the grantee may not sell, assign, transfer, pledge, or otherwise dispose of the shares of
Common Stock except to a successor under Section 10 hereof. Each 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 the 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 Restriction 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 the
certificates.

     (e) Dividends. The Committee shall, in its discretion, at the time of the Restricted Stock
Grant, provide that any dividends declared on the Common Stock during the Restriction Period shall
either 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 Restriction Period.

     (f) Limit on Restricted Stock Grant. Incentives granted as Restricted Stock Grants under
this section and Performance Share Awards under Section 7 shall not exceed, in the aggregate, 12
million shares of Common Stock (such number of shares may be adjusted in accordance with Section
4(c)).

	9.  	Discontinuance or Amendment of the Plan

     The Board of Directors may discontinue the ISP at any time and may from time to time amend or
revise the terms of the ISP as permitted by applicable statutes, except that it may not revoke or
alter, in a manner unfavorable to the grantees of any Incentives hereunder, any Incentives then
outstanding, nor may the Board amend the ISP without stockholder approval

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where the absence of such
approval would cause the Plan to fail to comply with Rule 16b-3 under the Securities Exchange Act
of 1934, or any other requirement of applicable law or regulation. No Incentive shall be granted
under the ISP after December 31, 2000, but Incentives granted theretofore may extend beyond that
date.

	10.  	Nontransferability

     Each Incentive Stock Option granted under the ISP shall not be transferable other than by will
or the laws of descent and distribution; each other Incentive granted under the ISP may be
transferable subject to the terms and conditions as may be established by the Committee in
accordance with regulations promulgated under the Securities Exchange Act of 1934, or any other
applicable law or regulation.

	11.  	No Right of Employment

     The ISP and the Incentives granted hereunder shall not confer upon any Eligible Employee the
right to continued employment with the Company, its subsidiaries, its affiliates, its joint
ventures or the Merck Institute for Therapeutic Research or affect in any way the right of such
entities to terminate the employment of an Eligible Employee at any time and for any reason.

	12.  	Taxes

     The Company shall be entitled to withhold the amount of any tax attributable to any option
granted, any amount payable or shares deliverable under the ISP after giving the person entitled to
receive such amount or shares notice as far in advance as practicable.

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Merck 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 (a)(2)(ii) of this Schedule, 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 (a)(2)(i) of this Schedule, 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 Plans), then those provisions of the Plan that are applicable to a
termination by reason of gross misconduct, death or retirement, if any, shall apply to such
termination. If the effect of vesting pursuant to this Section (a) would cause a Stock Option or
Successor Stock Option to terminate earlier than if such accelerated vesting had not occurred, then
the term of such Stock Option shall not expire earlier than if such accelerated vesting had not
occurred.

     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 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
provision 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

7

 

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.

     5. Incentive Stock Options Not Amended. This Section does not apply to any incentive stock
option within the meaning of Section 422 of the Internal Revenue Code.

(b) Restricted Stock Units and Performance Share Units.

     1. Vesting of Restricted Stock Units. Upon the occurrence of a Change in Control, each
unvested restricted stock unit award which is outstanding immediately prior to the Change in
Control under the Plan shall immediately become fully vested.

     2. Vesting of Performance Share Units. Upon the occurrence of a Change in Control, each
unvested performance share unit 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 Units and Performance Share Units.

     (i) If the 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, then the restricted stock units and the vested performance share units
shall be paid in shares of Common Stock or such other securities as soon as practicable after the
date of the Change in Control (subject to any existing deferral elections then in effect).

     (ii) If the 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, then the restricted stock units and the vested performance
share units 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 (c) of this Schedule
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 (c)(1) of this Schedule 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 (c)(1) or (c)(2) of this Schedule 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.

     4. This section does not apply to any incentive stock option within the meaning of Section
422 of the Internal Revenue Code.

     5. Anything in the Plan as amended by this Schedule notwithstanding, the Company reserves the
right to make such further changes as may be required if and to the extent required to avoid
adverse consequences under the American Jobs Creation Act of 2004, as amended.

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(d) Definitions.

     For purposes of this Schedule, 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.

     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 10-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 non-cash consideration, the value of such securities or other non-cash 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, if any.

     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 Share Unit award, the amount
determined by multiplying (x) and (y), where (x) is the number of Target Shares subject to the
Performance Share Unit award times the Assumed Performance Percentage and (y) is a fraction, the
numerator of which is the number of whole and partial calendar months elapsed during the applicable
performance period (counting any partial month as a whole month for this purpose) and the
denominator of which is the total number of months in the applicable performance period. The
Assumed Performance Percentage shall be determined by (1) averaging the ranks during the Award
Period as follows: (A) as to any completed performance year as of the Change in Control, the actual
rank (except that, if fewer than 90 days have elapsed since the completion of such performance
year, the Target Rank shall be used), and (B) as to any performance year that is incomplete or has
not yet begun as of the Change in Control, the Target Rank, (2) rounding the average rank
calculated pursuant to the foregoing clause (1) to the nearest whole number using ordinary
numerical rounding, and (3) using the Final Award Percentage associated with the number determined
in the foregoing clause (2). The Target Rank is the rank associated with 100% on the chart of Final
Award Percentages.

     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.

(e) Application.

     This Schedule shall apply to Stock Options, restricted stock unit awards and performance share
unit awards under the Plans granted prior to November 24, 2004.

9

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