8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 22, 2005

Merck & Co., Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

New Jersey	1-3305	22-1109110
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
One Merck Drive, P.O. Box 100, Whitehouse Station, New Jersey		08889
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 908-423-1000

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

(a) Grant of Annual Bonus.

On February 22, 2005, the Board of Directors (the "Board") of Merck & Co., Inc. (the "Company") granted bonuses in the following amounts to the executive officers named in the Company’s summary compensation table ("Named Executive Officers") under its shareholder approved Executive Incentive Plan in respect of Total Compensation Management planning for the 2004/2005 cycle. Bonus opportunity for each individual was determined at the beginning of 2004 based on Company, division and individual performance. Actual bonuses were determined in light of the Company performance measures relating to, among other things, earnings per share, sales growth, return on operating assets and results in research, manufacturing productivity and the management of human resources, as well as division and individual performance. The Board exercised its judgment and discretion in determining the amount of the bonuses.

Name -- Annual Bonus
Raymond V. Gilmartin -- $1,375,000
Judy C. Lewent -- $625,000
Peter S. Kim -- $625,000
Per Wold-Olsen -- $580,000
David W. Anstice -- $520,000

(b) Grant of Performance Share Units.

On February 22, 2005, the Board also granted performance share unit ("PSU") targets in the following amounts to the Named Executive Officers. Grants of PSUs provide for the payout of shares of Merck Common Stock, generally in three years, if the recipient has met certain continued service requirements. The PSU payout is also contingent on the Company’s performance against a pre-set objective or set of objectives described below.

Name -- Target PSU
Raymond V. Gilmartin -- 83,333
Judy C. Lewent -- 12,500
Peter S. Kim -- 16,667
Per Wold-Olsen -- 10,833
David W. Anstice -- 12,500

The maximum number of shares payable to any Named Executive Officer equals two times the number shown above as the target; the minimum number of shares payable to any Named Executive Officer is zero. The final amount of the award d epends on the Company’s earnings per share ("EPS") growth compared to 11 other leading healthcare peer companies over a three-year period. More specifically, the Company granted target awards to eligible executives at the beginning of the award period. For the first year of the performance period, EPS will be compared to a target amount for the Company and change in EPS will be calculated for each peer company. For the remainder of the performance period, change in EPSs will be calculated for the Company and each peer company. For each year within the performance period, the companies will then be ranked on those measures, from one (highest) to 12. After the end of the award period, the rank of each company will be averaged for the three years, and that result will again be ranked from one to 12 to determine the final ranking. A predetermined percentage, running from 0 to 200 percent, will be applied to the target award, based on the Company’s final ranking. If the Company’s final ranking is one, 200 percent of target is paid. If the Company’s final ranking is six, the target amount will be awarded. No amount will be awarded if the Company’s final ranking is lower than nine.

Other terms are as described in, and the foregoing summary is qualified by reference to the text of, the term sheet for PSU, a copy of which is filed as an exhibit to this report.

(c) Amendment of Outstanding Incentives.

As previously reported on a Form 8-K, on November 23, 2004 the Board adopted the Merck & Co., Inc. Change in Control Separation Benefits Plan and an amendment to the Company's 2004 Incentive Stock Plan. At that time, the Company announced its intention to request Board and Compensation and Benefits Committee action amending the Company's and its subsidiaries' stock incentive plans and the outstanding awards thereunder consistent with the amendment to the Company's 2004 Incentive Stock Plan approved by the Board on November 23, 2004, subject to a determina tion that these actions would not give rise to adverse tax consequences under the American Jobs Creation Act ("AJCA"). Under the amendment adopted November 23, 2004, with respect to incentives granted after November 23, 2004, (1) unvested stock options and restricted stock units would become vested in connection with the occurrence of a Change in Control (as defined in such amendment) to the extent provided in such amendment and (2) the post-termination exercise period of stock options held by individuals whose employment is terminated under certain circumstances following the Change in Control would be extended.

On February 22, 2005, after the Company determined that amending incentives that were outstanding prior to November 24, 2004, should not give rise to adverse tax consequences under the AJCA, the Board and the Compensation and Benefits Committee amended the Company's and its subsidiaries' stock incentive plans and the outstanding awards thereunder. Pursuant to the new amendments, (1) unves ted stock options (other than Key R&D grants) and restricted stock units will become vested in connection with the occurrence of a Change in Control to the extent provided in such amendment and (2) the post-termination exercise period of stock options held by individuals whose employment is terminated under certain circumstances following the Change in Control would be extended. However, no amendments were made with respect to any outstanding incentive stock options as defined by Section 422 of the Internal Revenue Code.

If stock options do not remain outstanding following a Change in Control and are not converted into successor stock, then option holders will be entitled to receive cash for their options in an amount at least equal to the difference between the exercise price and the price paid to shareholders in the Change in Control.

Upon a Change in Control of the Company, a portion of performance share units generally will become vested determined by reference to the holder's period of employment during the performance cycle and (1) based on actual performance as to fiscal years that have been completed for at least 90 days as of the date of a Change in Control and ( 2) otherwise, based on target performance.

In addition, for two years following a Change in Control, the material terms of equity incentive plans of the Company and its subsidiaries may not be modified in a manner that is materially adverse to individuals who participated in them immediately before any such Change in Control. In addition, the Company will pay the legal fees and expenses of any participant that prevails on his or her claim for relief in an action regarding an impermissible amendment to these equity incentive plans (other than ordinary claims for benefits) or, if applicable, in an action regarding restrictive covenants applicable to the participant.

The foregoing summary is qualified in its entirety by reference to the text of the amendment, a copy of which is filed as an exhibit to this report.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

As previously disclosed on Form 8-K filed on October 28, 2004, the Registrant's Board of Directors elected Rochelle B. Lazarus, Chairman and Chief Executive Officer of Ogilvy & Mather Worldwide, a director effective October 26, 2004. At the time of her election, Ms. Lazarus was not assigned to any committee of the Board. At a meeting of the Board of Directors on February 22, 2005, Ms. Lazarus was elected a member of the Audit Committee of the Board, effective April 1, 2005.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

Exhibit 10.1 - Performance Share Unit Terms Under the Merck & Co., Inc. 2004 Incentive Stock Plan
Exhibit 10.2 - Amendment of Merck & Co., Inc. Equity Stock Plans

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Merck & Co., Inc.
February 28, 2005	By:	Debra A. Bollwage
		Name: Debra A. Bollwage
		Title: Senior Assistant Secretary

Exhibit Index

Exhibit No.	Description
10.1	Performance Share Unit Terms Under the Merck & Co., Inc. 2004 Incentive Stock Plan
10.2	Amendment of Merck & Co., Inc. Equity Stock Plans

EX-10.1

Exhibit 10.1

PERFORMANCE SHARE UNIT TERMS UNDER THE
MERCK & CO., INC. 2004 INCENTIVE STOCK PLAN

Except as otherwise indicated in this schedule, the terms of Performance Shares 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.

I. Definitions For the purpose of this Schedule:

“Award Period” shall mean three years, with the first Award Period commencing on January 1, 2004 and ending December 31, 2006. The next Award Period also shall be three years, commencing January 1, 2005.

“Final Award Percentage” for each Award Period shall mean the percentage of Target described in Article IV.

“Grant Date” shall mean the date a Performance Share Award is granted, and shall not be later than 90 days after the beginning of an Award Period with respect to that Award Period.

“Leading Healthcare Peers” shall mean the group of healthcare companies used by the Board of Directors in evaluating the Company’s annual performance for that year.

“Leading Healthcare Peers Earnings Per Share” for a Year shall mean the change in Earnings Per Share for each Leading Healthcare Peer from the prior year using the same method applicable to the Board’s evaluation of the Company’s annual performance; provided, however, that the calculation shall be as of the most reasonably practicable date prior to the date on which the Earnings Per Share is calculated.

“Performance Award Grantee” shall mean an Eligible Employee who receives a Performance Share Award as described in Article II.

“Performance Share Award” shall mean an award of Performance Shares as described in this Schedule.

“Performance Measure” shall mean the change in the Company’s Earnings Per Share for a Year and each Leading Healthcare Peers Earnings Per Share for the same Year to the extent data for the same Year is available.

“Performance Share” shall mean a phantom share of Merck Common Stock. Until distributed pursuant to Article VII, Performance Shares shall not entitle the holder to any of the rights of a holder of Merck 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” shall mean the number of Performance Shares that will be distributable if the Performance Measures are achieved at the 6^th of 12 Final Ranks as described in Article IV.

“Year” means calendar year.

II. Eligibility

Each Eligible Employee who also is a Grade 1 or Grade 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 Award (“Performance Award Grantee”).

III. Establishment of Targets

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

IV. Determination of Performance Share Awards

The Committee expects that there will be 11 Leading Healthcare Peers for each Award Period.

For each Year, the Performance Measure shall be calculated for the Company and each Leading Healthcare Peer. Each Leading Healthcare Peer and the Company shall then be assigned a rank (“Rank”) from one to 12, highest to lowest Performance Measure, as appropriate.

After the end of the Award Period, the Ranks of each Leading Healthcare Peer and the Company for all Years within the Award Period shall be averaged, and the averages shall then be ranked (the “Final Rank”) from one (the highest rank) to 12 (the lowest rank), as appropriate.

The Final Award Percentage shall be the following percentage of Target Shares based on the Company’s Final Rank for an Award Period.

1	2		3		4		5		6		7		8		9		10		11		12
200%	180	%	160	%	140	%	120	%	100	%	80	%	60	%	40	%	0	%	0	%	0	%

If at any time the number of Leading Healthcare Peers is not 11, the Committee intends to adjust the above schedule appropriately to retain a similar range of Performance Share Award opportunities with a maximum Final Award Percentage of 200% and a minimum of 0%. The Committee also intends that, in case of multiple changes in the Leading Healthcare Peer group during an Award Period, replacement companies shall be substituted based on the substitutes’ market capitalization relative to the other Leading Healthcare Peer group.

Notwithstanding the above, for the Award Period commencing January 1, 2005 and ending December 31, 2007 (the “Special Award Period”), the Rank of the Company with respect to the first Year only shall not be based on a comparison to the Leading Healthcare Peers Earnings Per Share but instead be based on the Company’s earnings per share against business plan. [Pre-determined targets established by Company omitted.]

The Rank of each Leading Healthcare Peer for the first Year of the Special Award Period shall be determined using the Performance Measure except that each Leading Healthcare Peer with a Rank that is equal to or lower than the Company’s Rank for the first Year will instead assume a Rank that is one Rank lower than its Rank using the Performance Measure. [Reference to pre-determined targets established by Company omitted.] All Leading Healthcare Peers with Ranks from one to five for the first Year using the Performance Measure will retain their Ranks; the Leading Healthcare Peers with Ranks from six to 11 will instead assume Ranks from seven to 12, respectively. The Company intends that grants be deductible by the Company under Section 162(m) of the Internal Revenue Code and reserves the right to make such adjustments as may be required to comply with Section 162(m).

V. Dividends

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

VI. Termination of Employment

A. General Rule. Upon the termination of the employment of a Performance Award Grantee for any reason other than those specified in paragraphs B through F 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 Joint Venture), any Final Award shall be distributed to the Performance Award Grantee with respect to any Award Period that was completed prior to the employment termination. All other Performance Share Awards 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 B through F (in the Committee’s determination) shall render a Performance Share Award subject to this paragraph A upon termination of employment.

B. Separation. If a Performance Award Grantee’s employment is terminated at an employer’s initiative (as determined by the Company or Joint Venture in its sole discretion) due to lack of work because, for example, the Company eliminates the Performance Award Grantee’s job or divests itself of a business resulting in his/her loss of employment with the Company, then the Performance Award Grantee shall be considered “Separated.” In case of Separated Performance Award Grantees, with respect to any Award Period completed prior to the employment termination, the Final Award shall be distributed at the time active Performance Award Grantees receive such distributions. With respect to any other Performance Share Award, 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 Award Grantee was employed by the Company or Joint Venture, and the denominator of which is 36. Such pro rata amount shall be distributed at the time active Performance Award Grantees receive such distributions with respect to that Award Period.

C. Retirement. Upon a Performance Award Grantee’s retirement (including early and disability retirement):

Performance Share Awards granted in 2004 shall continue and be distributable in accordance with their terms as if employment had continued; such Performance Share Awards shall be distributed at the time active Performance Award Grantees receive such distributions with respect to that Award Period.

Performance Share Awards granted in 2005 and later: Performance Share Awards granted less than six 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 Awards granted at least six months prior to such retirement date shall be distributable on a pro rata basis at the time active Performance Award 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 Award Grantee was employed by the Company or Joint Venture, and the denominator of which is 36.

D. Death. Upon a Performance Award Grantee’s death, any Final Award shall be distributed to the Performance Award Grantee with respect to any Award Period that was completed prior to the Performance Award Grantee’s death. All other Performance Share Awards 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 Award 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.

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

F. Joint Venture Service. For the purposes of this Article, notwithstanding a Performance Award Grantee’s termination of employment with the Company, if he or she assumes and retains a position in a Joint Venture in accordance with this paragraph, employment with the Joint Venture will be treated as if it were employment with the Company. To qualify for this paragraph, (i) a Performance Award Grantee must transfer employment directly from the Company to the Joint Venture without an intervening break in employment, (ii) the Performance Award Grantee’s transfer to the Joint Venture 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 Joint Venture must agree that the transfer meets the business needs of the Company and the Joint Venture.

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

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

VII. Distribution of Performance Shares

A. General Rule. Following the end of an Award Period, each Performance Award Grantee shall be entitled to receive a number of shares of Merck Common stock equal to the Target Shares times the Final Award Percentage, rounded down to the nearest whole number (no fractional  shares shall be issued). Prior to distribution, the Performance Award Grantee shall deliver to the Company an amount the Company determines sufficient to satisfy any amount required to withheld, include applicable taxes. The Committee, in its discretion, may permit Performance Award Grantee to elect to direct the Company to withhold any applicable taxes directly from a Performance Share Award before it is denominated in actual shares of Merck Common Stock. Moreover, the Committee may permit the Performance Award Grantee to defer the value of a Performance Share Award 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 Merck Common Stock and ultimately distributed as such. An election to defer a Performance Share Award into the Deferral Program shall be made in accordance with rules applicable to the Deferral Program.

B. Death. In the case of distribution on account of a Performance Award Grantee’s death, the portion of the Performance Share Award distributable shall be distributed to the Performance Award Grantee’s estate. Prior to distribution, the Company shall receive from the Performance Award Grantee’s representative or estate an amount, if any, the Company determines sufficient to satisfy any amount required to be withheld, include applicable taxes. The Committee in its discretion may provide that the Company will withhold any applicable taxes directly from a Performance Award before it is denominated in actual shares of Merck Common Stock.

VIII. Transferability

Prior to distribution pursuant to Article VII, Performance Share Awards shall not be transferable, assignable or alienable except according to the laws of descent or distribution following a Performance Award Grantee’s death.

IX. Administrative Powers

In addition to the Committee’s powers set forth in the Incentive Stock Plan, anything in this Schedule to the contrary notwithstanding, with respect to any Performance Share Award not intended to constitute “performance-based compensation” under Section 162(m) of the Code, the Committee may revise the terms of any Performance Share Award not yet granted or 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 Award unfair and contrary to the intentions of this Schedule unless a revision is made.

Exhibit 10.2

AMENDMENT OF MERCK & CO., INC. EQUITY STOCK PLANS

WHEREAS, Merck & Co., Inc. (the “Company”) maintains the plans listed on Attachment A (collectively, the “Plans”);

WHEREAS, some or all of the Plans provide for the grant of Stock Options and other equity awards, including restricted stock unit awards and performance share unit awards;

WHEREAS, pursuant to resolutions of the Board of Directors of the Company (the “Board”) dated February 22, 2005, the Board has amended the Plans as set forth herein to provide for the treatment of these awards previously granted under the Plans in the event of a Change in Control of the Company; and

NOW, THEREFORE, pursuant to resolutions of the Board dated February 22, 2005, each of the Plans shall be, and hereby is, amended to add a new Schedule entitled “Merck Change in Control” at the end thereof, as follows:

Merck Change in Control

(a) Options.

1. Vesting of Options Other Than Key R&D Options. Upon the occurrence of a Change in Control, each Stock Option which is outstanding immediately prior to the Change in Control, other than the Key R&D Options, shall immediately become fully vested and exercisable.

2. Vesting of Key R&D Options.

(i) Subject to (a)(2)(ii) of this Schedule, upon the occurrence of a Change in Control, each Key R&D Option shall continue to be subject to the performance-based vesting schedule applicable thereto immediately prior to the Change in Control.

(ii) Notwithstanding (a)(2)(i) of this Schedule, if the Stock Options do not continue to be outstanding following the Change in Control or are not exchanged for or converted into options to purchase securities of a successor entity (“Successor Options”), then, upon the occurrence of a Change in Control, all or a portion of each Key R&D Option shall immediately vest and become exercisable in the following percentages: (A) if such Key R&D Option’s first milestone has not been reached before the date of the Change in Control, 14% of the then-unvested portion of the Key R&D Option shall vest and become exercisable and the remainder shall be forfeited; (B) if only such Key R&D Option’s first milestone has been reached before the date of the Change in Control, 42% of the then-unvested portion of the Key R&D Option shall vest and become exercisable and the remainder shall be forfeited; and (C) if such Key R&D Option’s first and second milestones have been reached before the date of the Change in Control, 100% of the then-unvested portion of the Key R&D Option shall vest and become exercisable.

3. Post-Termination Exercise Period. If Stock Options continue to be outstanding following the Change in Control or are exchanged for or converted into Successor Options, then the portion of such Stock Options or such Successor Options, as applicable, that is vested and exercisable immediately following the termination of employment of the holder thereof after the Change in Control shall remain exercisable following such termination for five years from the date of such termination (but not beyond the remainder of the term thereof) provided, however, that, if such termination is by reason of gross misconduct, death or retirement (as these terms are applied to awards granted under the Plans), then those provisions of the Plan that are applicable to a termination by reason of gross misconduct, death or retirement, if any, shall apply to such termination. If the effect of vesting pursuant to this Section (a) would cause a Stock Option or Successor Stock Option to terminate earlier than if such accelerated vesting had not occurred, then the term of such Stock Option shall not expire earlier than if such accelerated vesting had not occurred.

4. Cashout of Stock Options. If the Stock Options do not continue to be outstanding following the Change in Control and are not exchanged for or converted into Successor Options, each holder of a vested and exercisable option shall be entitled to receive, as soon as practicable following the Change in Control, for each share of Common Stock subject to a vested and exercisable option, an amount of cash determined by the Committee prior to the Change in Control but in no event less than the excess of the Change in Control Price over the exercise price thereof (subject to any existing deferral elections then in effect). If the consideration to be paid in a Change in Control is not entirely shares of common stock of an acquiring or resulting corporation, then the Committee may, prior to the Change in Control, provide for the cancellation of outstanding Stock Options at the time of the Change in Control, in whole or in part, for cash pursuant to this provision or may provide for the exchange or conversion of outstanding Stock Options at the time of the Change in Control, in whole or in part, and, in connection with any such provision, may (but shall not be obligated to) permit holders of Stock Options to make such elections related thereto as it determines are appropriate.

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

(b) Restricted Stock Units and Performance Share Units.

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

2. Vesting of Performance Share Units. Upon the occurrence of a Change in Control, each unvested performance share unit award which is outstanding immediately prior to the Change in Control under the Plan shall immediately become vested in an amount equal to the PSU Pro Rata Amount.

3. Settlement of Restricted Stock Units and Performance Share Units.

(i) If the Common Stock continues to be widely held and freely tradable following the Change in Control or is exchanged for or converted into securities of a successor entity that are widely held and freely tradable, then the restricted stock units and the vested performance share units shall be paid in shares of Common Stock or such other securities as soon as practicable after the date of the Change in Control (subject to any existing deferral elections then in effect).

(ii) If the Common Stock does not continue to be widely held and freely tradable following the Change in Control and is not exchanged for or converted into securities of a successor entity that are widely held and freely tradable, then the restricted stock units and the vested performance share units shall be paid in cash as soon as practicable after the date of the Change in Control (subject to any existing deferral elections then in effect).

(c) Other Provisions.

1. Except to the extent required by applicable law, for the entirety of the Protection Period, the material terms of the Plan shall not be modified in any manner that is materially adverse to the Qualifying Participants (it being understood that this Section (c) of this Schedule shall not require that any specific type or levels of equity awards be granted to Qualifying Participants following the Change in Control).

2. During the Protection Period, the Plan may not be amended or modified to reduce or eliminate the protections set forth in Section (c)(1) of this Schedule and may not be terminated.

3. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) reasonably and in good faith incurred by a Qualifying Participant if the Qualifying Participant prevails on his or her claim for relief in an action (x) by the Qualifying Participant claiming that the provisions of Section (c)(1) or (c)(2) of this Schedule have been violated (but, for avoidance of doubt, excluding claims for Plan benefits in the ordinary course) and (y) if applicable, by the Company or the Qualifying Participant’s employer to enforce post-termination covenants against the Qualifying Participant.

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

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

(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.

Attachment A

PLANS

• 2004 Merck & Co., Inc. Incentive Stock Plan

• 2001 Merck & Co., Inc. Incentive Stock Plan

• 1996 Merck & Co., Inc. Incentive Stock Plan

• Medco 1991 Class C NQ Plan

• Systemed 1993 Employee Stock Option Plan

• MMG 1991 Special NQ Plan

• SIBIA 1996 Equity and Incentive Plan

• Provantage 1999 Stock Incentive Plan

• Rosetta 1997 Employee Stock Plan