Document:

EX-10.5

 

Exhibit 10.5

 

 

MERCK & CO., INC.

2001 INCENTIVE STOCK PLAN

(Amended and Restated as of December 19, 2006)

 

 

 

 

2001 INCENTIVE STOCK PLAN

     The 2001 Incentive Stock Plan (“ISP”), effective January 1, 2001, 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 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. Incentives

     Incentives under the ISP may be granted in any one or a combination of (a) Incentive Stock
Options (or other statutory stock options); (b) Nonqualified Stock Options; (c) Stock
Appreciation Rights; (d) Restricted Stock Grants and (e) Performance Shares (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 Compensation and Benefits
Committee of the Board of Directors (the “Committee”).

2. Eligibility

     Regular full-time and part-time employees of the Company, 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, shall be eligible to participate in the ISP
(“Eligible Employees”) if designated by the Committee. Directors of the Company who are not
regular employees are not eligible to participate in the ISP.

3. Administration

     The ISP shall be administered by the Committee. The Committee shall be responsible for the
administration of the ISP including, without limitation, determining which Eligible Employees
receive Incentives, what kind of Incentives are made under the ISP and for what number of
shares, and the other terms and conditions of such Incentives. 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.

     The Committee shall have the responsibility of construing and interpreting the ISP and of
establishing and amending such rules and regulations as it may deem necessary or desirable for
the proper administration of the ISP. 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 ISP 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 conclusive and binding upon the Company, all Eligible Employees and any
person claiming under or through any Eligible Employee.

     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.

 

 

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 95 million shares of 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 ISP have lapsed, expired, terminated or been
canceled. In addition, any shares reserved for issuance under the Company’s 1996 Incentive Stock
Plan and 1991 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
canceled, shall also be reserved and available for issuance or reissuance under the ISP. Shares
under this ISP 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 (3) million shares of the Company’s Common Stock
(such number of shares shall be adjusted in accordance with Section 4(c)).

     (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 ISP, (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.

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. No shares shall be issued until full payment of the option price has
been made. The option prices may be paid in cash or, if the Committee determines, in shares
of Common Stock or a combination of cash and shares. 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 ISP 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 the Committee may determine from time to time. The Committee may
establish rules and procedures to permit an optionholder to defer recognition of gain upon
the exercise of a stock option.

     (d) Exercise of Option. 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 options become exercisable or “vested” and exercise periods, provided that in no
event (including those specified

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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 as may be determined by the Committee. Such Stock Option privileges shall expire
unless exercised or 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.

     (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 as may 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 as may be determined by the Committee. Such privileges shall
expire unless exercised by legal representative(s) within a period of time as determined by
the Committee, but in no event later than the expiration date of the Stock Option.

     (h) Termination Due to Misconduct. 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.

     (i) 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, or such other amount as the Internal Revenue Service may decide
from time to time.

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

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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 therefor 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 is 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 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, affiliate or joint venture 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, division or joint venture
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, division or joint venture 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,
division or joint

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venture 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
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 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
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, six (6) million shares of Common Stock (such number of shares shall 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. 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.

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     (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, six (6) million shares of Common Stock (such number of shares shall be adjusted
in accordance with Section 4(c)).

9. Transferability

     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 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 regulations promulgated under the Securities
Exchange Act of 1934, or any other applicable law or regulation.

10. 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 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.
Unless approved by the Company’s stockholders, no adjustments or reduction of the exercise price
of any outstanding Incentives shall be made by cancellation of outstanding Incentives and the
subsequent regranting of Incentives at a lower price to the same individual. No Incentive shall
be granted under the ISP after December 31, 2003, but Incentives granted theretofore may extend
beyond that date.

11. No Right of Employment or Participation

     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 or its
joint ventures 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. No individual shall have a right to be granted
an Incentive, or having been granted an Incentive, to receive any future Incentives.

12. No Limitation on Compensation

     Nothing in the ISP 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 ISP.

13. No Impact on Benefits

     Except as may otherwise be specifically stated under any employee benefit plan, policy or
program, no amount payable in respect of any Incentive shall be treated as compensation for
purposes of calculating an employee’s right under any such plan, policy or program.

14. No Constraint on Corporate Action

     Nothing in the ISP 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 10, 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.

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15. Withholding Taxes

     The Company shall be entitled to deduct from any payment under the ISP, 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.

16. Governing Law

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

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

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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 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.

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     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.

     (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

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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.

10EX-10.6

 

Exhibit 10.6

 

 

MERCK & CO., INC.

2004 INCENTIVE STOCK PLAN

(Amended and Restated as of December 19, 2006)

 

 

 

 

MERCK & CO., INC.

2004 INCENTIVE STOCK PLAN

(Amended December 19, 2006)

1. Purpose

     The 2004 Incentive Stock Plan (the “Plan”), effective May 1, 2003, 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 subject to Section 16 of the
Exchange Act 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”).

     (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

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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, 2003, subject to the approval of the Plan by
the affirmative vote of the stockholders of the Company entitled to vote thereon at the time of
such approval. No Incentive shall be granted under the Plan after April 30, 2013, 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, (b) Nonqualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Stock
Grants, (e) Performance Shares, (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.

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 115
million. Any shares under this Plan or under the predecessor Incentive Stock Plans that are
not purchased or awarded under an Incentive that has lapsed, expired, terminated or been
cancelled, may be used for the further grant of Incentives under the Plan. 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) Incentives covering more than 3 million shares of the Company’s
Common Stock (such number of shares shall be adjusted in accordance with Section 6(c)), or (ii) any Incentive if such person owns
more than 10 percent of the stock of the Company within the meaning of Section 422 of the
Code, or (iii) any Incentive Stock Option, as defined in Section 422 of the Code, that would
result in such person receiving a grant of Incentive Stock Options for stock that would have
an aggregate fair market value in excess of $100,000, determined as of the time that the
Incentive Stock Option is granted, that would be exercisable for the first time by such person
during any calendar year.

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     (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 Incentive Stock Options as defined in
Section 422 of the Code, and options other than Incentive Stock Options (“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) 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 or a combination of cash and shares
of Common Stock. 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 Committee may establish rules and procedures to permit an optionholder 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 Incentive Stock Options. Except as may otherwise be permitted by the
Code, an Eligible Employee may not receive a grant of Incentive Stock Options 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
Incentive Stock Option is granted, that would be exercisable for the first time by such person
during any calendar year.

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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, 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 therefor 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. 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
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 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 Stock
Appreciation Right. Notwithstanding the foregoing, in its sole discretion the Committee at
the 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.

9. 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 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 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 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 Share Award. The Performance Goals may include share price, pre-tax profits,
earnings per share, return on stockholders’ equity, return on assets, sales, net income 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 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

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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 Share Award, 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.
The Committee may establish rules and procedures to permit a grantee to defer recognition of
income upon the attainment of a Performance Share 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 Share 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 Share
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 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
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, Restricted Stock Grants under Section 10 and Other Share Based
Awards under Section 11 shall not exceed, in the aggregate, 12 million shares of Common Stock
(such number of shares shall be adjusted in accordance with Section 6(c)).

10. Restricted Stock Grants

     The Committee may award shares of Common Stock 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 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. 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. The Committee may establish

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rules and procedures to
permit a grantee to defer recognition of income upon the expiration of the Restriction Period.

     (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) 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).

     (g) Limit on Restricted Stock Grant. Incentives granted as Restricted Stock Grants
under this section, Performance Share Awards under Section 9 and Other Share Based Awards
under Section 11 shall not exceed, in the aggregate, 12 million shares of Common Stock (such
number of shares shall be adjusted in accordance with Section 6(c)).

11. Other Share-Based Awards

     The Committee may grant an award of shares of common stock (a “Share 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. Incentives granted as Share Based Awards under this section,
Performance Share Awards under Section 9 and Restricted Stock Grants under Section 10 shall not
exceed, in the aggregate, 12 million shares of Common Stock (such number of shares shall be
adjusted in accordance with Section 6(c)).

12. Transferability

     Each Incentive Stock Option 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 regulations promulgated under the Securities
Exchange Act of 1934, or any other applicable 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 Incentive Stock Options) 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. 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.

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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 subject to Section 16 of the Exchange Act (“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.

18. Use of Proceeds

     The proceeds received by the Company from the sale of stock 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.

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(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 KeyR&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 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 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

8

 

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 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.

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 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

9

 

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 Section 21 shall apply to Stock Options, restricted stock unit awards
and performance share unit awards granted after November 23, 2004. (NOTE: For incentives granted
before November 23, 2004, see Merck Change in Control schedule.)

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

10

 

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 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.

11

 

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.

     (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.

12

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