Document:

EX-10.3

 

Exhibit 10.3

RESTRICTED STOCK UNIT TERMS

FOR LEADER SHARES GRANT

UNDER THE MERCK & CO., INC. 2007 INCENTIVE STOCK PLAN

These Restricted Stock Unit Terms apply to the 2008 Leader

Shares Restricted Stock Unit Grant. They may be amended

by the Merck Compensation and Benefits Committee of the

Board of Directors as permitted by the ISP.

This is a summary of the terms applicable to the Restricted Stock Unit (RSU) Award specified on
this document. Different terms may apply to any prior or future RSU Awards.

I. GENERAL INFORMATION

A. Restricted Period. The Restricted Period is the period during which this RSU Award is
restricted and subject to forfeiture. The Restricted Period begins on the Grant Date and ends on
the earlier of (a) the third anniversary of the Grant Date and (b) a Change in Control, as such
term is defined Change in Control Separation Benefits Plan. If RSUs are considered “deferred
compensation” subject to the American Jobs Creation Act of 2004 (the “AJCA”), the definition of
Change in Control will be modified to the extent necessary to comply with the AJCA.

B. Dividend Equivalents. During the Restricted Period, dividend equivalents will be paid to the
holder (“you”) around the same time dividends, if any, are paid by the Company on Merck Common
Stock. Any payment of dividend equivalents will be reduced to the extent necessary for the Company
to satisfy any tax or other withholding obligations. No voting rights apply to this RSU Award.

C. Distribution. Upon the expiration of the Restricted Period if you are then employed, you will
be entitled to receive a number of shares of Merck common stock equal to the number of RSUs that
have become unrestricted. Prior to distribution, you must deliver to the Company an amount the
Company determines to be sufficient to satisfy any amount required to be withheld, including
applicable taxes. The Company may, in its sole discretion, withhold from the RSU Award
distribution a number of shares to pay applicable withholding (including taxes).

D. 409A Compliance. Anything to the contrary notwithstanding, no distribution of RSUs may be made
unless in compliance with Section 409A of the Internal Revenue Code or any successor thereto.
Specifically, distributions made due to a separation from service (as defined in Section 409A) to a
“Specified Employee” as defined in Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the
extent required by Section 409A of the Code will not be made until administratively feasible
following the first day of the sixth month following the separation from service, in the same form
as they would have been made had this restriction not applied; provided further, that dividend
equivalents that otherwise would have been paid will be paid during the period during which
distribution is suspended.

II. TERMINATION OF EMPLOYMENT

If your employment with the Company is terminated during the Restricted Period, your right to this
RSU Award will be determined according to the terms in this Section II.

A. General Rule. If your employment is terminated during the Restricted Period for any reason
other than those specified in the following paragraphs, this RSU Award will be forfeited on the
date your employment ends.

B. Separation. If your employment is terminated during the Restricted Period and the Company
determines that such termination resulted from the elimination of your job or the sale of your
subsidiary, division or joint venture, a pro rata portion (based on the number of completed months
held) will be distributed as soon as possible after such separation date. The remainder will be
forfeited on the date your employment ends.

C. Retirement. If you terminate employment during the Restricted Period by retirement (including
early and disability retirement) (“Retirement”) on or after the one-year anniversary of the Grant
Date, then a pro rata portion (based on the number of completed months held prior to the Retirement
date) of this Award shall be distributed as soon as possible after such Retirement. If your
Retirement occurs before the one-year anniversary of the Grant Date, then this RSU Award will be
forfeited on the date your employment ends.

D. Death. If you die during the Restricted Period, a pro rata portion of this RSU Award (based on
the number of completed months held) will be distributed to your estate as soon as possible after
your death.

E. Misconduct. If your employment is terminated as a result of your deliberate, willful or gross
misconduct, this RSU Award will be forfeited immediately upon your receipt of notice of such
termination.

F. Joint Venture. Employment with a joint venture or other entity in which the Company has a
significant business or ownership interest is not considered termination of employment for purposes
of this RSU Award. Such employment must be approved by, and contiguous with employment by, the
Company, as described more fully in the Rules and Regulations. The terms set out in paragraphs A-E
above apply to this RSU Award while you are employed by the joint venture or other entity.

III. TRANSFERABILITY

This RSU Award is not transferable and may not be assigned or otherwise transferred.

This RSU Award is subject to the provisions of the 2007 Incentive Stock Plan and the Rules and
Regulations thereunder.EX-10.4

 

Exhibit 10.4

PERFORMANCE SHARE UNIT TERMS

FOR ANNUAL GRANT

UNDER THE MERCK & CO., INC. 2007 INCENTIVE STOCK PLAN

These Terms apply to the 2008 Annual Performance Share Unit Grant. They may be amended by the

Merck Compensation and Benefits Committee of the Board of Directors as permitted by the ISP.

I. GENERAL. Except as otherwise indicated in this schedule, the terms of Performance Shares Units
(“PSUs”) granted under this Schedule are the same as those described in the Rules and Regulations.
Except as defined below, defined terms under this Schedule are the same as under the Rules and
Regulations.

II. ELIGIBILITY. Each Eligible Employee who also is a Grade 1 or 2 employee on the Grant Date is
eligible to receive Performance Shares if the Committee in its sole and non-reviewable discretion
designates him or her to receive a Performance Share Unit (“Performance Unit Grantee”).

III. PSUs

A. Definitions: For the purpose of this Schedule:

“2005—2010 EPS CAGR” means Earnings per Share for 2010 divided by $2.53 to the power of
0.2, reduced by One.

“Award Period” means three years, with the first Award Period commencing on January 1, 2008
and ending December 31, 2010. The next Award Period also shall be three years, commencing
January 1, 2009. “Award Year” means each of the years in the Award Period.

“Code” means the Internal Revenue Code of 1986 or any successor thereto.

“Final Award” for each Award Period means the percentage of Target described in paragraph C
of this Article III.

“Earnings Per Share” or “EPS” means the Company’s earnings per shares of common stock
adjusted to exclude charges or items from the measurement of performance relating to (1)
restructurings, discontinued operations, extraordinary items and other unusual or
non-recurring charges; (2) an event either not directly related to Company operations or not
reasonably within the control of Company management; and (3) the effects of tax or
accounting changes in accordance with U.S. generally accepted accounting principles.

“Grant Date” means the date a Performance Share Unit is granted, which for Performance Share
Units intended to constitute “performance-based compensation” under Section 162(m) of the
Code shall not be later than 90 days after the beginning of an Award Period.

“Performance Unit Grantee” means an Eligible Employee who receives a Performance Share Unit.

“Performance Share Unit” means an award of Performance Shares as described in this Schedule.

“Performance Share” means a phantom share of Common Stock. Until distributed pursuant to
paragraph F of this Article III, Performance Shares shall not entitle the holder to any of
the rights of a holder of Common Stock; provided, however, that the Committee retains the
right to make adjustments in the case of a corporate restructuring as described in Section 6
of the ISP.

 

 

“Target Shares” means the number of Performance Shares that will be distributable if the
Performance Measures are achieved at the level identified as “target” for the entire Award
Period without regard to the Payout Multiplier.

“Year” means calendar year.

B. Establishment of Targets

The Committee, in its sole and non-reviewable discretion, shall determine the Target Shares
for each Performance Share Unit for each Performance Unit Grantee.

C. Determination of Performance Share Units. The Final Award is derived as follows:

1. The Target Award is divided by 3 (the “First Annual Tranche,” “Second Annual Tranche” and
“Third Annual Tranche,” respectively, and each an “Annual Tranche”). Each Annual Tranche is
a separate award for purposes of Section 162(m).

2. By March 30 of an Award Year, the Committee shall associate an EPS for each Payout
Percentage in the following table with respect to that Year:

	 	 	 	 	 
	EPS	 	Payout Percentage
	Less than Threshhold
	 	 	-0-	 
	Threshhold
	 	 	50	 
	 
	 	 	55	 
	 
	 	 	60	 
	 
	 	 	65	 
	 
	 	 	70	 
	 
	 	 	75	 
	 
	 	 	80	 
	 
	 	 	87	 
	 
	 	 	93	 
	Target
	 	 	100	 
	 
	 	 	107	 
	 
	 	 	113	 
	 
	 	 	120	 
	 
	 	 	127	 
	 
	 	 	133	 
	 
	 	 	140	 
	 
	 	 	153	 
	 
	 	 	160	 
	 
	 	 	167	 
	 
	 	 	173	 
	 
	 	 	180	 
	 
	 	 	187	 
	 
	 	 	193	 
	Stretch
	 	 	200	 

3. After the Award Year ends, the Annual Tranche is multiplied by the Payout Percentage
according to the above table after the Committee determines actual EPS for that Award Year.

4. Steps 2 and 3 are completed for each of the First, Second and Third Year Annual Tranches,
(yielding the “First, Second and Third Year Results,” respectively).

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5. The Sum of the First, Second and Third Year Results is multiplied by the sum of One and
the Payout Modifier Percentage based on the 2005—2010 EPS CAGR according to the following
table. The result is the Final Award.

	 	 	 	 	 
	2005—2010 EPS	 	 
	CAGR	 	Payout Modifier
	0.0%
	 	 	-20.0	%
	0.5
	 	 	-18.8	 
	1.0
	 	 	-17.5	 
	1.5
	 	 	-16.3	 
	2.0
	 	 	-15.0	 
	2.5
	 	 	-13.8	 
	3.0
	 	 	-12.5	 
	3.5
	 	 	-11.3	 
	4.0
	 	 	-10.0	 
	4.5
	 	 	-8.8	 
	5.0
	 	 	-7.5	 
	5.5
	 	 	-6.3	 
	6.0
	 	 	-5.0	 
	6.5
	 	 	-3.8	 
	7.0
	 	 	-2.5	 
	7.5
	 	 	-1.3	 
	8.0
	 	 	0.0	 
	8.5
	 	 	2.5	 
	9.0
	 	 	5.0	 
	9.5
	 	 	7.5	 
	10.0
	 	 	10.0	 
	10.5
	 	 	12.5	 
	11.0
	 	 	15.0	 
	11.5
	 	 	17.5	 
	12.0
	 	 	20.0	 

D. Dividends

Dividends shall not be paid, accrued or accumulated on Performance Shares during the Award
Period.

E. Termination of Employment

1. General Rule — Upon the termination of the employment of a Performance Unit Grantee for
any reason other than those specified in paragraphs E.2. through E.6. of this Article
(including but not limited to voluntary or involuntary resignation, or failure or refusal to
accept relocation or reassignment within the Company or employment with a JV), any Final
Award shall be distributed to the Performance Unit Grantee with respect to any Award Period
that was completed prior to the employment termination. All other Performance Share Units
shall expire and be forfeited in their entirety at the end of the last day of employment.
Failure to satisfy each and every condition described in paragraphs E.2. through E.6. (in
the Committee’s determination) shall render a Performance Share Unit subject to this
paragraph E.1. upon termination of employment.

2. Separation — If a Performance Unit Grantee’s employment is terminated at an employer’s
initiative (as determined by the Company or JV in its sole discretion) due to lack of

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work because, for example, the Company eliminates the Performance Unit Grantee’s job or
divests itself of a business resulting in his/her loss of employment with the Company, then
the Performance Unit Grantee shall be considered “Separated.” In case of Separated
Performance Unit Grantees, with respect to any Award Period completed prior to the
employment termination, the Final Award shall be distributed at the time active Performance
Unit Grantees receive such distributions. With respect to any other Performance Share Unit,
the Final Award shall be multiplied by a fraction, the numerator of which is the number of
completed months in the Award Period during which the Performance Unit Grantee was employed
by the Company or JV, and the denominator of which is 36. Such pro rata amount shall be
distributed at the time active Performance Unit Grantees receive such distributions with
respect to that Award Period.

3. Retirement — Upon a Performance Unit Grantee’s retirement (including early and
disability retirement): PSUs granted less than 6 months prior to such retirement date shall
expire and be forfeited in their entirety at the end of the last day of employment.
Performance Share Units granted at least 6 months prior to such retirement date shall be
distributable on a pro rata basis at the time active Performance Unit Grantees receive such
distributions with respect to that Award Period. The pro rata portion shall be determined
by multiplying the Final Award by a fraction, the numerator of which is the number of
completed months in the Award Period during which the Performance Unit Grantee was employed
by the Company or JV, and the denominator of which is 36.

4. Death — Upon a Performance Unit Grantee’s death, any Final Award shall be distributed to
the Performance Unit Grantee with respect to any Award Period that was completed prior to
the Performance Unit Grantee’s death. All other Performance Share Units shall assume a
Target Shares payout and be multiplied by a fraction, the numerator of which is the number
of completed months in the Award Period during which the Performance Unit Grantee was alive,
and the denominator of which is 36. Such amount shall be distributed as soon as
administratively practicable following the date of death.

5. Gross Misconduct — If the employment of a Performance Unit Grantee is terminated for
deliberate, willful or gross misconduct, all Performance Share Units, including but not
limited to those for which the Award Period has ended, shall immediately be forfeited.

6. Joint Venture Service. For the purposes of this Article, notwithstanding a Performance
Unit Grantee’s termination of employment with the Company, if he or she assumes and retains
a position in a JV in accordance with this paragraph, employment with the JV will be treated
as if it were employment with the Company. To qualify for this paragraph, (i) a Performance
Unit Grantee must transfer employment directly from the Company to the JV without an
intervening break in employment, (ii) the Performance Unit Grantee’s transfer to the JV must
be made with the input and approval of his/her senior management and a representative of the
Company’s Corporate Human Resources department and (iii) the Company’s Corporate Human
Resources representative and a similar representative from the JV must agree that the
transfer meets the business needs of the Company and the JV.

Where a Performance Unit Grantee transfers employment from a JV to the Company, employment
will be treated as if it continued with the JV if (i) the Performance Unit Grantee transfers
employment directly from the JV to the Company without an intervening break in employment,
and (ii) the Company’s Corporate Human Resources representative and a similar representative
from the JV agree that the transfer meets the business needs of the Company and the JV.

This paragraph does not apply to a transfer of employment to the JV’s parent or other
affiliate unless that entity is within the Company’s controlled group of entities.

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F. Distribution of Performance Shares

1. General Rule. Following the end of an Award Period, each Performance Unit Grantee shall
be entitled to receive a number of shares of Common stock equal to the Final Award, rounded
down to the nearest whole number (no fractional shares shall be issued). Such distribution
shall be made as soon as administratively feasible, but in no event later than the end of
the calendar year in which the Final Award is determined. Unless otherwise determined by
the Committee, the Company shall withhold any applicable taxes directly from a Performance
Share Unit before it is denominated in actual shares of Common Stock. Moreover, the
Committee may permit the Performance Unit Grantee to defer the value of a Performance Share
Unit into the Merck & Co., Inc. Deferral Program (the “Deferral Program”) or such other
Company-sponsored deferral program; provided, however, the Committee intends that any such
deferral shall for so long as it remains within the Deferral Program be limited to
investment denominated as Common Stock and ultimately distributed as such. An election to
defer a Performance Share Unit into the Deferral Program shall be made in accordance with
rules applicable to the Deferral Program.

2. Death. In the case of distribution on account of a Performance Unit Grantee’s death, the
portion of the Performance Share Unit distributable shall be distributed to the Performance
Unit Grantee’s estate. Unless the Committee determines otherwise, the Company will withhold
any applicable taxes directly from a Performance Unit before it is denominated in actual
shares of Common Stock.

G. Transferability

Prior to distribution pursuant to paragraph F. of this Article III, Performance Share Units
shall not be transferable, assignable or alienable except by will or the laws of descent or
distribution following a Performance Unit Grantee’s death.

IV. Administrative Powers

In addition to the Committee’s powers set forth in the ISP and the Rules and Regulations,
anything in this Schedule to the contrary notwithstanding, the Committee may revise the
terms of any Performance Share Unit not yet granted or, with respect to any Performance
Share Unit not intended to constitute “performance-based compensation” under Section 162(m)
of the Code, granted but prior to the end of an Award Period if unforeseen events occur and
which, in the judgment of the Committee, make the application of original terms of this
Schedule or the Performance Share Unit unfair and contrary to the intentions of this
Schedule unless a revision is made.

V. Clawback Policy for PSUs Upon Significant Restatement of Financial Results

A. PSUs Subject to Clawback. PSUs, and any proceeds therefrom, are subject to the
Company’s right to reclaim their benefits in the event of a significant restatement of
financial results for any Award Period, pursuant to the process described below.

1. The Audit Committee of the Board will review the issues and circumstances that
resulted in a restatement of financial results to determine if the restatement was
significant and make an initial determination of the cause of the restatement—that
is whether the restatement was caused, in whole or in part, by Executive Fault (as
those terms are defined below); and

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2. The Compensation and Benefits Committee of the Board will (a) recalculate the
Company’s results for any Award Period with respect to PSUs that included an Award
Period which occurred during the restatement period; and (b) if it is determined
that such restatement was caused in whole or in part by the Executive’s Fault, the
Compensation and Benefits Committee will seek reimbursement from the Executive of
that portion of the payout of the PSU that the Executive received within 18 months
of the restatement based on the erroneous financial results.

B. “Executive” means executive officers for the purposes of the Securities Exchange Act of
1934, as amended.

C. “Fault” means fraud or willful misconduct. “Willful misconduct” is generally viewed as
dereliction of a duty or unlawful or improper behavior committed voluntarily and
intentionally; something more than negligence. If the Audit Committee determines that
Fault may have been a factor causing the restatement, the Audit Committee will appoint an
independent investigator whose determination shall be final and binding.

D. Exclusions from Clawback. This Article does not apply to restatements that the Audit
Committee determines (1) are required or permitted under generally accepted accounting
principles (“GAAP”) in connection with the adoption or implementation of a new accounting
standard or (2) are caused due to the Company’s decision to change its accounting practice
as permitted under GAAP.

VI. Change in Control

Upon the occurrence of a Change in Control (as such term is defined in the ISP), each
unvested Performance Share Unit which is outstanding immediately prior to the Change in
Control shall immediately become vested in an amount equal to the sum of (1) the Annual
Tranche times the Payout Percentage for each Year in the Award Cycle prior to the Change in
Control, if any, that has been completed for at least 90 days and (2) the sum of each Annual
Tranche for all other Years in the Award Cycle.

     VII. Section 409A Compliance.

Anything in the ISP or this Schedule to the contrary notwithstanding, no distribution of
Performance Share Units may be made unless in compliance with Section 409A of the Code or
any successor thereto. In addition, distributions to “Specified Employee” as defined in
Treas. Reg. Sec. 1.409A-1(i) or any successor thereto, to the extent required by Section
409A of the Code, distributions, if any, made due to a separation from service (as defined
in Section 409A) will be made as soon as administratively feasible after the first day of
the sixth month following the separation from service, in the same form as they would have
been made had this restriction not applied; provided further, that no dividend or dividend
equivalents will be paid, accrued or accumulated in respect of the period during which
distribution was suspended.

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