<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Merck & Co., Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Merck & Co., Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
(MERCK LOGO)
NOTICE OF ANNUAL MEETING
and
PROXY STATEMENT
Annual Meeting of Stockholders
Edward Nash Theatre at Raritan Valley Community College
Route 28 and Lamington Road
North Branch, New Jersey
April 25, 1995
<PAGE> 3
Merck & Co., Inc.
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
(908) 423-1000
Notice of Annual Meeting of Stockholders
April 25, 1995
------------------
To the Stockholders:
The Annual Meeting of Stockholders of Merck & Co., Inc. will be held on
Tuesday, April 25, 1995, at 2:00 p.m., at the Edward Nash Theatre at Raritan
Valley Community College, Route 28 and Lamington Road, North Branch, New Jersey,
for the following purposes:
- To elect two directors for terms ending in 1996, one director for a term
ending in 1997 and four directors for terms ending in 1998;
- To consider and act upon a proposal to ratify the appointment of
independent public accountants for 1995;
- To consider and act upon a proposal to adopt the 1996 Incentive Stock
Plan;
- To consider and act upon a proposal to amend the Employee Savings and
Security Plan;
- To consider and act upon a proposal to amend the Employee Stock Purchase
and Savings Plan;
- To consider and act upon a stockholder proposal concerning non-employee
director pension benefits;
- To consider and act upon a stockholder proposal concerning annual
election of directors;
- To consider and act upon a stockholder proposal concerning executive
compensation; and
- To transact such other business as may properly come before the meeting
and all adjournments thereof.
Only stockholders of record at the close of business on March 9, 1995, the
record date and time fixed by the Board of Directors, are entitled to notice of,
and to vote at, said meeting. It is always important for you, as a stockholder,
to exercise your right to vote.
Admission to the meeting will be by ticket only. If you are a stockholder
of record and plan to attend, please check the appropriate box on the proxy card
and an admission ticket will be mailed to you. If you are a stockholder whose
shares are held through an intermediary such as a bank or broker and you plan to
attend, you may request a ticket by writing to the Office of the Secretary, WS
3AB-05, Merck & Co., Inc., P.O. Box 100, Whitehouse Station, New Jersey
08889-0100. Evidence of your ownership, which you can obtain from your bank,
broker, etc., must accompany your letter.
IN ORDER THAT YOUR STOCK MAY BE REPRESENTED AT THE MEETING IN CASE YOU ARE
NOT PERSONALLY PRESENT, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY/VOTING
INSTRUCTION CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ADDRESSED ENVELOPE.
By order of the Board of Directors,
CELIA A. COLBERT
Secretary and Assistant General
Counsel
March 20, 1995
<PAGE> 4
Merck & Co., Inc.
P. O. Box 100
Whitehouse Station, New Jersey 08889-0100
(908) 423-1000
March 20, 1995
Proxy Statement
------------------
This proxy statement is furnished to stockholders of Merck & Co., Inc. in
connection with the solicitation by the Board of Directors of proxies to be used
at the Annual Meeting of Stockholders of the Company to be held at the Edward
Nash Theatre at Raritan Valley Community College, Route 28 and Lamington Road,
North Branch, New Jersey, on Tuesday, April 25, 1995, and all adjournments
thereof. The Company's Annual Report for 1994, including financial statements,
and proxy statement and form of proxy/voting instruction card ("proxy card" or
"proxy") are being mailed to the stockholders commencing March 20, 1995.
If a stockholder is a participant in the Automatic Dividend Reinvestment
and Cash Payment Plan, the proxy card covers the shares in the account for that
plan, as well as shares registered in the participant's name.
HOWEVER, THE PROXY CARD WILL NOT SERVE AS A VOTING INSTRUCTION CARD FOR THE
SHARES HELD FOR PARTICIPANTS IN THE EMPLOYEE SAVINGS AND SECURITY PLAN
("ES&SP"), EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN ("ESP&SP"), HUBBARD FARMS,
INC. EMPLOYEE SAVINGS PLAN ("HFESP") OR MEDCO 401(K) SAVINGS PLAN ("MSP").
INSTEAD, THESE PARTICIPANTS WILL RECEIVE FROM THE PLAN TRUSTEES SEPARATE VOTING
INSTRUCTION CARDS COVERING THESE SHARES. VOTING INSTRUCTION CARDS FOR THE ES&SP,
ESP&SP AND HFESP MUST BE SIGNED AND RETURNED OR THE SHARES WILL NOT BE VOTED. IF
VOTING INSTRUCTION CARDS FOR THE MSP ARE NOT RETURNED, THE PLAN TRUSTEE WILL
VOTE THOSE SHARES IN THE SAME MANNER AS IT VOTED THE MAJORITY OF THE SHARES FOR
WHICH VOTING INSTRUCTIONS WERE RECEIVED.
Any cards returned without specification will be voted as to each proposal
in accordance with the recommendations of the Board of Directors.
THE PROXY
Any person giving a proxy has the power to revoke it at any time before it
is voted, upon written notice to Celia A. Colbert, Secretary and Assistant
General Counsel of the Company.
The Company will bear the costs of solicitation of proxies. Following the
mailing of proxy soliciting material, proxies may also be solicited by
directors, officers and regular employees of the Company in person, by telephone
or by other electronic means. The Company will also reimburse persons holding
stock for others in their names or in those of their nominees for their
reasonable expenses in sending proxy material to their principals and obtaining
their proxies. The Company will use the services of Morrow & Co., 909 Third
Avenue, New York, N.Y. 10022-4799, to aid in the solicitation of proxies at an
anticipated fee of $18,000 plus reasonable expenses.
BENEFICIAL OWNERSHIP OF SECURITIES AND VOTING RIGHTS
On December 31, 1994, no individual, corporation or other entity was known
by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock.
There are outstanding and entitled to vote as of the record date, March 9,
1995, 1,269,688,902 shares of Common Stock of the Company. The holders of a
majority in interest of all the stock of the
<PAGE> 5
Company entitled to vote at the meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business.
The holders of Common Stock are entitled to one vote per share but, in
connection with the cumulative voting feature applicable to the election of
directors, each stockholder is entitled to as many votes as shall equal the
number of shares held by such person at the close of business on the record
date, multiplied by the number of directors to be elected. A stockholder may
cast all of such votes for a single nominee or may apportion such votes among
any two or more nominees. For example, a holder of 100 shares may cast 700 votes
for a single nominee, apportion 350 votes to each of two nominees, or apportion
700 votes in any other manner by so noting in the space provided on the
accompanying form of proxy. A stockholder may withhold votes from any or all
nominees by notation to that effect on the accompanying form of proxy. Except to
the extent that a stockholder withholds votes from any or all nominees, the
persons named in the accompanying form of proxy, in their sole discretion, will
vote such proxy for, and, if necessary, exercise cumulative voting rights to
secure, the election of the nominees listed below as directors of the Company.
In the event that any of the nominees becomes unavailable, which the
Company does not expect, it is intended that, pursuant to the accompanying
proxy, votes will be cast for such substitute nominee or nominees as may be
designated by the Board of Directors, unless the Board of Directors reduces the
number of directors.
The persons named in the accompanying form of proxy will vote such proxy in
accordance with the specification made thereon with respect to each of the other
proposals or, if no specification is made, FOR the proposals to ratify the
appointment of independent public accountants, to adopt the 1996 Incentive Stock
Plan, to amend the Employee Savings and Security Plan, to amend the Employee
Stock Purchase and Savings Plan and AGAINST the stockholder proposals. A
majority of the votes cast by holders of Common Stock is required for approval
of these proposals. Abstentions and broker non-votes are not counted as votes
cast on any matter to which they relate.
1. ELECTION OF DIRECTORS
Seven directors are to be elected at the meeting. Two directors are to be
elected for the remaining year of terms expiring in 1996, one director is to be
elected for the two remaining years of a term expiring in 1997 and four
directors are to be elected for full three-year terms expiring in 1998. The
Board's nominees are Mr. Raymond V. Gilmartin and Dr. Samuel O. Thier for terms
expiring in 1996, Dr. Johnnetta B. Cole for a term expiring in 1997 and Sir
Derek Birkin, Dr. William G. Bowen, Dr. Carolyne K. Davis and Dr. Lloyd C. Elam
for terms expiring in 1998. Mr. Gilmartin, Dr. Cole and Dr. Thier were elected
by the Board effective June 16, September 27 and October 25, 1994, respectively,
subject to election by the stockholders at this Annual Meeting. All other
candidates have previously been elected by the stockholders. After the election
of seven directors at the meeting, the Company will have twelve directors,
including five directors whose present terms extend beyond the meeting.
Information on the nominees and continuing directors follows.
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
ELECTED DIRECTOR OR SIGNIFICANT AFFILIATIONS
- ---------------- ------------------------------------------------------------------------
<C> <S>
NOMINEES
FOR TERMS EXPIRING IN 1996
[PHOTO] Chairman of the Board (since November 1994), President and Chief
RAYMOND V. Executive Officer (since June 1994) of the Company; Chairman, President
GILMARTIN and Chief Executive Officer (1992 to 1994), President and Chief
AGE - 54 Executive Officer (1989 to 1992), President (1987 to 1988) of Becton
Dickinson and Company (medical supplies and devices and diagnostic
1994 systems)
Director, Board of Associates of Harvard Business School, Pharmaceutical
Research and Manufacturers of America, Project Hope, Providian
Corporation, Public Service Enterprise Group, Union College and United
Negro College Fund; Chairman, Ethics Resource Center, Healthcare
Leadership Council and Valley Hospital; Trustee, Committee for Economic
Development, Conference Board and Healthcare Leadership Council; Member,
The Business Council and The Business Roundtable
[PHOTO] President, Massachusetts General Hospital since May 1994; President,
SAMUEL O. THIER, Brandeis University from October 1991 to May 1994; President, National
M.D. Academy of Sciences, Institute of Medicine from November 1985 to
AGE - 57 September 1991
1994 Director, National Health Laboratories, Shawmut National Corporation;
Member, Association of American Physicians, Institute of Medicine of the
National Academy of Sciences; Master, American College of Physicians;
Trustee, Boston Museum of Science, Johns Hopkins University; Fellow,
American Academy of Arts and Sciences
FOR A TERM EXPIRING IN 1997
[PHOTO] President, Spelman College for more than five years
JOHNNETTA B.
COLE, PH.D. Director, Coca-Cola Enterprises, Alonzo F. and Norris B. Herndon
AGE - 58 Foundation, Management and Training Corporation, NationsBank of Georgia
and Rockefeller Foundation; Member, Council on Foreign Relations,
1994 National Council of Negro Women and Wellesley College Board of Trustees;
Fellow, American Anthropological Association
FOR TERMS EXPIRING IN 1998
[PHOTO] Chairman of the Board, The RTZ Corporation PLC (international mining
SIR DEREK BIRKIN company) since June 1991; Chief Executive and Deputy Chairman from April
AGE - 65 1985 to May 1991
1992 Director, Unilever PLC, Barclays Bank PLC, Carlton Communications PLC,
The Merchants Trust PLC and The Royal Opera House; Member, Council of
The Industrial Society
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
ELECTED DIRECTOR OR SIGNIFICANT AFFILIATIONS
- ---------------- ------------------------------------------------------------------------
<C> <S>
[PHOTO] President, The Andrew W. Mellon Foundation (philanthropic foundation)
WILLIAM G. for more than five years
BOWEN, PH.D.
AGE - 61 Director, American Express Company, Reader's Digest, Inc., Rockefeller
Group and Denison University
1986
[PHOTO] International Health Care Consultant for more than five years
CAROLYNE K.
DAVIS, PH.D. Director, Beckman Instruments, National Museum of Medicine and Health,
AGE - 63 National Rehabilitation Hospital, Pharmaceutical Marketing Services,
Inc., The Prudential Insurance Company of America, Inc. and Science
1989 Applications International Corp.; Trustee, University of Pennsylvania
Medical Center
[PHOTO] Professor of Psychiatry, Meharry Medical College for more than five
LLOYD C. ELAM, years
M.D.
AGE - 66 Director, First Union Bank of Tennessee, Premark International Inc. and
BellSouth Telecommunications, Inc.; Trustee, Fisk University, Tennessee
1973 Department of Mental Health and the Alfred P. Sloan Foundation
DIRECTORS WHOSE TERMS EXPIRE IN 1996
[PHOTO] Chairman of the Board and Chief Executive Officer, General Mills, Inc.
H. BREWSTER (consumer foods and restaurants) for more than five years
ATWATER, JR.
AGE - 63 Director, Public Radio International, General Electric Company, Mayo
Foundation and Walker Art Center; Member, The Business Council, The
1988 Business Roundtable and International Council of J.P. Morgan & Co.
Incorporated
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
ELECTED DIRECTOR OR SIGNIFICANT AFFILIATIONS
- ---------------- ------------------------------------------------------------------------
<C> <S>
[PHOTO] Retired; Chairman of the Board, J.P. Morgan & Co. Incorporated and
DENNIS Morgan Guaranty Trust Company of New York (banking and other financial
WEATHERSTONE services) from January 1990 to January 1995; Chairman of the Executive
AGE - 64 Committee of J.P. Morgan from February 1991 to January 1995; Chairman of
the Executive Committee of Morgan Guaranty from January 1991 to January
1988 1995
Director, J.P. Morgan & Co. Incorporated, Morgan Guaranty Trust Company
of New York, General Motors Corporation, L'Air Liquide, Institute for
International Economics and the Alfred P. Sloan Foundation; President
and Trustee, Royal College of Surgeons Foundation Inc.; Independent
Member of the Board of Banking Supervision of the Bank of England
DIRECTORS WHOSE TERMS EXPIRE IN 1997
[PHOTO] Chairman of the Board (since January 1992) and Chief Executive Officer
LAWRENCE A. (since July 1991), AlliedSignal, Inc. (aerospace, automotive products
BOSSIDY and engineered materials technology); Vice Chairman, General Electric
AGE - 60 Company from January 1984 to July 1991
1992 Member, The Business Council, The Business Roundtable and International
Council of J.P. Morgan & Co. Incorporated
[PHOTO] Retired; Chairman of the Board and Chief Executive Officer, NCR
CHARLES E. Corporation (business information processing systems) from January 1988
EXLEY, JR. to September 1991
AGE - 65
Director, Banc One Corporation; Trustee, The Andrew W. Mellon
1988 Foundation; Member, The Business Council and Board of Overseers,
Columbia University Graduate School of Business
[PHOTO] Chief Executive Officer, University of Pennsylvania Medical Center and
WILLIAM N. Health System and Executive Vice President, Dean of the School of
KELLEY, M.D. Medicine and Robert G. Dunlop Professor of Medicine, Biochemistry and
AGE - 55 Biophysics, University of Pennsylvania, for more than five years
1992 Director, Beckman Instruments, Greater Philadelphia First and
Philadelphia Orchestra Association; Trustee, Emory University; Master,
American College of Physicians; Fellow, American Academy of Arts &
Sciences; Member, Institute of Medicine of the National Academy of
Sciences, Advisory Council to the Director of NIH, Board of Managers of
Wistar Institute and Board of Governors of Leonard Davis Institute of
Health Economics
</TABLE>
5
<PAGE> 9
BOARD COMMITTEES
There are three standing committees of the Board of Directors: the
Executive Committee, the Audit Committee and the Compensation and Benefits
Committee. In April 1994, the Committee on Treasury Stock was consolidated into
the Executive Committee. Members of the individual committees are named below:
<TABLE>
<CAPTION>
COMPENSATION
AND
EXECUTIVE AUDIT BENEFITS
- ------------------- -------------------- ----------------------
<S> <C> <C>
H. B. Atwater, Jr. D. Birkin H. B. Atwater, Jr.(a)
W. G. Bowen C. K. Davis(b) L. A. Bossidy(b)
L. C. Elam C. E. Exley, Jr.(a) W. G. Bowen
C. E. Exley, Jr. W. N. Kelley J. B. Cole
R. V. Gilmartin(a) S. O. Thier L. C. Elam
D. Weatherstone D. Weatherstone
</TABLE>
- ---------------
(a) Chairman (b) Vice Chairman
The Executive Committee is charged with making recommendations with respect
to Board composition and acting as a screening and nominating committee for
candidates considered for election to the Board. In this capacity it concerns
itself with the composition of the Board with respect to depth of experience,
balance of professional interests, required expertise and other factors and
evaluates prospective nominees identified by the Committee on its own initiative
or referred to it by the other Board members, management, stockholders or
external sources. Names of prospective candidates may be submitted to the
Secretary of the Company for referral to the Committee. Any stockholder who
wishes to make a nomination at an annual or special meeting for the election of
directors must do so in compliance with procedures set forth in the Company's
By-Laws.
Other important functions of the Executive Committee are acting for the
Board of Directors when action is required between Board meetings, consulting
with and advising management on certain important proposals and policy matters,
reviewing and making recommendations with respect to financial policy, and
monitoring management and Company performance with respect to matters of public
responsibility and interest concerning the Company and making recommendations
thereon.
In addition to the functions described above, the Executive Committee
authorizes the purchase by the Company of outstanding shares of Company Common
Stock in accordance with directions given by the Board of Directors. Such
purchases are made from time to time under regulations determined by the
Committee.
The Audit Committee, consisting entirely of independent directors, oversees
the Company's financial reporting process and internal controls. The Committee
consults with management, the internal auditors and the Company's independent
auditors during the year on matters related to the annual audit, internal
controls, the published financial statements, and the accounting principles and
auditing procedures being applied. It meets with the auditors after year-end to
discuss the results of their examination. The Committee reviews management's
evaluation of the auditors' independence, approves audit fees and non-audit
services to ensure no compromise of auditor independence and submits to the
Board of Directors its recommendations for the appointment of an audit firm for
the upcoming year. It reviews the insurance program of the Company periodically
and makes recommendations to the Board of Directors on insurance policy, and is
also charged with monitoring compliance with the Foreign Corrupt Practices Act
and the Company's policies on ethical business practices and reporting on the
same to the Board of Directors annually.
The Compensation and Benefits Committee, consisting entirely of independent
directors, administers the Company's Executive Incentive Plan and stock option
and incentive program and also appoints and monitors the Management Pension
Investment Committee. The Committee consults generally with management on
matters concerning executive compensation and on pension, savings and welfare
benefit plans where Board or stockholder action is contemplated with respect to
the adoption of or amendments
6
<PAGE> 10
to such plans. It makes recommendations to the Board of Directors on
organization, succession and compensation generally, individual salary rates,
supplemental compensation and special awards, the election of officers,
consultantships and similar matters where Board approval is required.
In April 1994, an ad hoc CEO Search Committee of the Board, comprised of
Mr. Atwater, Mr. Bossidy and Dr. Bowen, as well as Drs. Ruben F. Mettler and
Richard S. Ross who were retiring from the Board at the end of April 1994, was
established for the purpose of continuing the CEO succession search begun by
those directors. The purpose of the CEO Search Committee was to seek, evaluate
and recommend to the Board a qualified successor to the Chief Executive Officer.
The Committee was dissolved in June 1994, upon the successful completion of its
duties.
BOARD AND BOARD COMMITTEE MEETINGS
In 1994, there were ten meetings held by the Board of Directors. Board
committees met as follows during 1994: the Executive Committee, five times; the
Audit Committee, three times; the Compensation and Benefits Committee, nine
times; the CEO Search Committee, four times. The total combined attendance for
all Board and Committee meetings was 97%. All directors, except Dr. Thier,
attended at least 75% of the meetings of the Board and of the Committees on
which they served.
RELATIONSHIPS WITH OUTSIDE FIRMS
Dennis Weatherstone is a director, and in 1994 was Chairman of the Boards
and Executive Committees, of J. P. Morgan & Co. Incorporated and Morgan Guaranty
Trust Company which performed financial advisory, commercial and investment
banking services for the Company during 1994 and which are expected to perform
such services for the Company during 1995.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is compensated for
services as a director by an annual retainer of $38,000 and a meeting fee of
$1,200 for each Board and Committee meeting attended. In addition, Chairmen of
the Compensation and Benefits Committee and of the Audit Committee are
compensated for such service by an annual retainer of $3,000. Former directors
serving on the CEO Search Committee received $3,000 for each Committee meeting
and interview attended. Those directors who are employees of the Company do not
receive any compensation for their services as directors. The Company reimburses
all directors for travel and other necessary business expenses incurred in the
performance of their services for the Company.
Under the Plan for Deferred Payment of Directors Compensation, each
director may elect to defer all or a portion of such compensation. Any amount so
deferred is, at the director's election, valued as if invested in a money market
fund or the Company's Common Stock and is payable in cash in installments or as
a lump-sum upon termination of services as a director.
Under the Retirement Plan for the Directors of Merck & Co., Inc., directors
(excluding those who are current or former employees of the Company) who have
served on the Board for five years will receive, upon normal retirement
(generally age 70), an annual retirement benefit of 50% of their last annual
retainer. Each additional year of service up to ten years increases the benefit
by 10%, to a maximum of 100% of the retainer. Any such directors who have served
on the Board for ten years will receive, in the event of early retirement
(minimum age 65), an annual benefit of 100% of their last annual retainer. The
applicable benefit is payable for the lifetime of the retired director.
Under the Non-Employee Directors Stock Option Plan, directors (excluding
those who are current or former employees of the Company) each receive an option
to purchase 1,000 shares of Common Stock each year on the first Friday following
the Company's Annual Meeting of Stockholders. The options become exercisable
five years from date of grant and expire ten years from date of grant. The
exercise price is the higher of (i) the simple average of the high and low
prices at which the Common
7
<PAGE> 11
Stock is traded on the date of grant, or (ii) the price of the last sale of
Common Stock on that date. The exercise price is payable in cash at the time the
stock option is exercised.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Beneficial ownership of Common Stock of the Company as of December 31, 1994
by each director of the Company, each executive officer of the Company named in
the Summary Compensation Table herein and by all directors and executive
officers as a group is set forth below. Unless otherwise stated, the beneficial
owners exercise sole voting and/or investment power over their shares.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
---------------------------------------
RIGHT TO ACQUIRE
OWNERSHIP UNDER
NAME OF OPTIONS EXERCISABLE PERCENT
BENEFICIAL OWNER SHARES OWNED(a) WITHIN 60 DAYS OF CLASS
- -------------------------------------------------- --------------- ------------------- --------
<S> <C> <C> <C>
Raymond V. Gilmartin.............................. 58,482 - *
P. Roy Vagelos**.................................. 849,518(b) 1,731,678 *
H. Brewster Atwater, Jr. ......................... 1,500 - *
Derek Birkin...................................... 527 - *
Lawrence A. Bossidy............................... 10,000 - *
William G. Bowen.................................. 10,800 - *
Johnnetta B. Cole................................. 175 - *
Carolyne K. Davis................................. 670(c) - *
Lloyd C. Elam..................................... 6,750 - *
Charles E. Exley, Jr. ............................ 1,500 - *
William N. Kelley................................. 1,100 - *
Samuel O. Thier................................... 10(d) - *
Dennis Weatherstone............................... 4,124 - *
David W. Anstice.................................. 9,338(e) 154,587 *
Jerry T. Jackson***............................... 52,234 198,000 *
Judy C. Lewent.................................... 59,095 122,700 *
Edward M. Scolnick................................ 55,384(f) 246,000 *
Bennett M. Shapiro................................ 764 61,500 *
Francis H. Spiegel, Jr.***........................ 102,730(g) 279,000 *
All Directors and Executive Officers as a Group... 1,349,616(h) 3,536,447 *
</TABLE>
- ---------------
(a) Includes shares of Common Stock held by the Trustees of the Employee Savings
and Security Plan or the Medco 401(k) Savings Plan for the accounts of
individuals as follows: Dr. Vagelos -- 3,197 shares, Mr. Anstice -- 1,304
shares, Mr. Jackson -- 7,079 shares, Ms. Lewent -- 2,132 shares,
Dr. Scolnick -- 1,505 shares, Dr. Shapiro -- 764 shares, Mr. Spiegel --
31,805 shares and all directors and executive officers as a group --
69,879 shares.
(b) Includes 116,422 shares held by a charitable foundation of which Dr. Vagelos
is trustee and has voting and dispositive power and 1,100 shares in trusts
for family members of which Dr. Vagelos is trustee and has voting and
dispositive power. Does not include 42,230 shares of Common Stock held by
members of Dr. Vagelos' family and in which beneficial ownership is
disclaimed by him.
(c) Includes 40 shares of Common Stock held by Dr. Davis in custody for a family
member.
(d) Under the policy of Massachusetts General Hospital, the President of the
hospital may hold only a de minimis amount of stock in any vendor
corporation.
(e) Does not include 252 shares held by a family member and in which beneficial
ownership is disclaimed by Mr. Anstice.
(f) Does not include 14,000 shares held by a family member and in which
beneficial ownership is disclaimed by Dr. Scolnick.
8
<PAGE> 12
(g) Does not include 17,250 shares of Common Stock held by family members and in
which beneficial ownership is disclaimed by Mr. Spiegel.
(h) Does not include 79,290 shares of Common Stock held by family members and in
which beneficial ownership is disclaimed.
* Less than one percent of the Company's outstanding shares of Common Stock.
** Dr. Vagelos served as Chairman of the Board, President and Chief Executive
Officer of the Company until June 1994 and continued to serve as Chairman of
the Board through October 31, 1994.
*** Messrs. Jackson and Spiegel were not executive officers at the end of the
last complete fiscal year.
COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board approves compensation
objectives and policy for all employees and sets compensation for the Company's
executive officers, including the individuals named in the Summary Compensation
Table below.
The Compensation and Benefits Committee is comprised entirely of
independent outside directors.
OBJECTIVES AND POLICIES
The Compensation and Benefits Committee seeks to:
- provide rewards that are closely linked to Company-wide, divisional,
area, team and individual performance
- align the interests of the Company's employees with those of its
stockholders through potential stock ownership
- ensure that compensation and benefits are at levels that enable the
Company to attract and retain the high-quality employees it needs.
The Committee applies these objectives and policies to most employees
through the broad and deep availability of performance-based cash incentive
opportunities and stock option grants.
Consistent with these objectives and in keeping with the long-term focus
required for the Company's research-based pharmaceutical business, it is the
policy of the Compensation and Benefits Committee to make a high proportion of
executive officer compensation and awards under stock ownership programs
dependent on long-term performance and on enhancing stockholder value.
Executive officer compensation and stock ownership programs have both
short-term and longer-term components. Short-term components include base salary
and annual bonus under the stockholder-approved Executive Incentive Plan
("EIP"). Longer-term components include stock option awards under the
stockholder-approved Incentive Stock Plan ("ISP") and awards of Performance
Shares under the Strategic Performance Feature ("SPF") under the EIP.
Performance Share awards currently provide for a payment of stock or cash or a
combination thereof at the end of a five-year period, based on the Company's
achievement of specified performance targets.
The Company employs a formal system for developing measures of executive
officer performance and evaluating performance.
Provided that other compensation objectives are met, it is the Committee's
intention that executive compensation be deductible for federal income tax
purposes. For this reason, at the Company's 1994 meeting of Stockholders,
compensation plans that comply with legislation on tax deductibility effective
for the 1994 tax year were submitted to stockholders for approval and were
approved.
9
<PAGE> 13
BASE SALARY AND BONUS
Executive officer base salary and individual bonus awards are determined
with reference to Company-wide, divisional, area, team and individual
performance for the previous fiscal year, based on a wide range of quantitative
and qualitative measures which permit comparisons with competitors' performance
and internal targets set before the start of each fiscal year. Base salary and
bonus award comparisons are made within the pharmaceutical industry using those
United States-owned companies also used for SPF measures. (See discussion of SPF
below.) The base salary and bonus award practices of the non-United States-owned
companies cannot be meaningfully compared with those of the Company since their
senior executive officers are based outside the United States and compensation
practices differ. The Committee also considers broader industry information if
it judges this to be appropriate.
The quantitative measures for 1994 were income and sales growth and return
on assets. Qualitative measures were the quality and measured progress of
research, marketing, manufacturing and administrative operations and the success
of strategic actions such as the formation of marketing and research alliances.
For 1994, important strategic actions included the formation of Astra Merck
Inc., a joint venture with Astra AB (for consideration of $820 million from
Astra) and the decisions to divest the Company's Calgon Vestal Laboratories and
Kelco units. The Company exceeded its targets for both quantitative and
qualitative measures in 1994. In addition to Company-wide measures of
performance, the Compensation and Benefits Committee considers those performance
factors particular to each executive officer -- the performance of the division
or area for which such officer had management responsibility and individual
managerial accomplishments.
The Committee relies heavily, but not exclusively, on these quantitative
and qualitative measures. It exercises subjective judgment and discretion in
light of these measures and in view of the Company's compensation objectives and
policies described above to determine base salaries, overall bonus funds and
individual bonus awards.
In 1994, important changes were made to the structure and responsibilities
of the executive officer group. In June 1994, Mr. Raymond V. Gilmartin succeeded
Dr. P. Roy Vagelos as Chief Executive Officer and President of the Company. Mr.
Gilmartin became Chairman of the Board upon Dr. Vagelos' retirement in November
1994. In September 1994, a Management Committee reporting directly to the CEO
was formed, broadening the group of executives reporting directly to the CEO. At
the same time the number of intermediate reporting positions was reduced.
The base salary increases awarded to the Company's executive officers in
1994 followed the principles outlined in the preceding paragraphs, and reflected
changes in responsibility. Individual bonus awards reflected Company, division,
area, team and individual performance. The Committee judged that executive
officer salary and bonus compensation for 1994 appropriately reflected
individual performance as well as Company results on sales and income growth,
return on assets and the strategic actions taken in 1994.
STOCK OPTIONS
Within the total number of shares authorized by stockholders, the
Compensation and Benefits Committee aims to provide stock option awards broadly
and deeply throughout the organization.
Individual executive officer stock option awards are based on level of
position and individual contribution. The Committee expects the CEO to hold 70%
and the other executive officers named in the Summary Compensation Table to hold
60% of the shares which may be purchased from the gains of stock option exercise
after deducting option price, taxes and transaction costs. The Committee also
considers stock option grants previously made and the aggregate of such grants.
As with the determination of base salaries and bonus awards, the Committee
exercises subjective judgment and discretion in view of the above criteria and
its general policies. The Company's long-term performance ultimately determines
compensation from stock options, since gains from stock option exercise are
entirely dependent on the long-term growth of the Company's stock price.
10
<PAGE> 14
STRATEGIC PERFORMANCE FEATURE
AWARDS
A target number of Performance Shares under the SPF is awarded to executive
officers based on the level of position. As shown in the Long-Term Incentive
Plans -- Awards in Last Fiscal Year table below, payments may vary from zero to
175% of target, depending on Company performance. The Compensation and Benefits
Committee reserves the right to pay Performance Share Awards in cash, stock, or
a combination of cash and stock. Payments in cash are equal to the market value
on the date of the payout of the stock that the cash payment replaces. Just as
for stock options, the ultimate value of the Performance Shares is dependent on
the Company's long-term performance. Performance Share Awards were made in 1994
for the 1994-1998 award period. Any payouts thereunder will be made in 1999.
PAYOUTS
In 1994, payouts were made for the 1989-1993 award period of the SPF.
Payouts for that period were made in cash or stock.
The Committee considered three quantitative measures: earnings-per-share
growth, sales growth and return on assets in comparison with a group of
healthcare companies selected in 1989. This group includes the companies in the
Dow Jones Pharmaceutical Index ("DJPI") other than the Company and Syntex
Corporation, and also includes Abbott Laboratories and SmithKline Beecham PLC.
For each of the three quantitative measures, the Company placed highest in the
comparison group. The Committee also considered return-on-assets performance
against eleven other companies identified as growth companies at the beginning
of the period, and the Company placed highest in this group as well. The results
on both comparisons permitted the maximum payout. The Committee considered the
Company's performance under the quantitative measures described above, and made
individual payments using its subjective judgment and discretion.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICERS
Dr. Vagelos served as Chairman of the Board, Chief Executive Officer and
President until the appointment of Mr. Gilmartin on June 16, 1994, and as
Chairman of the Board until his retirement on November 1, 1994. Mr. Gilmartin
has served as Chief Executive Officer and President since June 16, 1994 and as
Chairman of the Board, Chief Executive Officer and President since November 1,
1994.
DR. VAGELOS
BASE SALARY AND BONUS
No change was made in Dr. Vagelos' base salary in 1994, consistent with the
terms of the Company's award of stock options to Dr. Vagelos on July 28, 1992.
Dr. Vagelos' bonus award for 1994 was determined with reference to the same
qualitative and quantitative Company-wide and individual performance measures
applied to all executive officers of the Company. The quantitative measures for
1994 were income and sales growth and return on assets. Qualitative assessments
were the quality and measured progress of research, marketing, manufacturing and
administrative operations and the success of strategic actions such as the
formation of marketing and research alliances. The Company exceeded its targets
for both quantitative and qualitative measures in 1994. In addition to
Company-wide measures of performance, the Compensation and Benefits Committee
considered Dr. Vagelos' leadership of the Company in a challenging environment
for the industry. Dr. Vagelos' bonus award for 1994, on a full-year basis, was
3% higher than for 1993; however, his bonus award for 1994 was prorated to
reflect his ten months of service in 1994.
11
<PAGE> 15
STOCK OPTIONS
Consistent with the terms of the Company's award of stock options to Dr.
Vagelos on July 28, 1992, no further stock options were granted to Dr. Vagelos
in 1994.
STRATEGIC PERFORMANCE FEATURE
The Performance Share Award and the SPF payout made to Dr. Vagelos in 1994
followed the same principles as those described above for all executive officers
of the Company. Dr. Vagelos' Performance Share Award for 1994 was based on his
position as CEO. For his SPF payout, the Company's performance under the
quantitative measures described above for the 1989-1993 award period permitted
the maximum payout. In view of Dr. Vagelos' outstanding individual performance
over the award period, the Committee determined to provide Dr. Vagelos the
maximum payout.
MR. GILMARTIN
Mr. Gilmartin's base pay, bonus and long-term incentive awards for 1994
were set by the Committee at a level necessary to attract him to the Company and
to recognize the arrangements he would forfeit on leaving his previous employer.
SUPPLEMENTAL RETIREMENT PLAN
The Committee accepted management's recommendation to discontinue the
provision of the Supplemental Retirement Plan which, under certain conditions,
provided individuals in positions designated as bona fide executive or high
policymaking with one additional month of credited service for each month of
credited service accrued. Accrued benefits were maintained. This change was
effective on January 1, 1995.
The Company periodically retains outside compensation and benefits
consultants to compare base salary and incentive compensation programs for the
Company's executive officers with those of other leading industrial and
healthcare firms (including those in the DJPI) and to ensure that they are
appropriate to the Company's objectives. The Committee exercises judgment and
discretion in the information it reviews and the analyses it considers.
<TABLE>
<S> <C>
H. Brewster Atwater, Jr. Lawrence A. Bossidy
Chairman Vice Chairman
William G. Bowen Johnnetta B. Cole
Lloyd C. Elam
</TABLE>
12
<PAGE> 16
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- ----------
OTHER RESTRICTED
ANNUAL STOCK
SALARY BONUS COMPENSATION(b) AWARD(S)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)
- ---------------------------------------------- ---- ---------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Raymond V. Gilmartin 1994 $ 541,671 $1,000,000 $ - $778,125(c)
Chairman of the Board, President 1993 - - - -
and Chief Executive Officer 1992 - - - -
P. Roy Vagelos* 1994 941,108(a) 1,000,000 - -
Chairman of the Board, President 1993 1,040,625 1,200,000 - -
and Chief Executive Officer 1992 1,125,000 1,400,000 - -
Edward M. Scolnick 1994 609,996 600,000 58,955 -
Executive Vice President, 1993 555,000 500,000 78,861 -
Science and Technology and President, 1992 540,000 650,000 102,983 -
Merck Research Laboratories
Judy C. Lewent 1994 354,996 330,000 55,855 -
Senior Vice President and 1993 305,250 280,000 77,718 -
Chief Financial Officer 1992 287,500 345,000 - -
David W. Anstice 1994 356,589 325,000 - -
President, 1993 336,872 230,000 - -
Human Health -- U.S./Canada 1992 337,500 320,000 - -
Bennett M. Shapiro 1994 344,546 289,400 - -
Executive Vice President, 1993 319,716 365,000 - -
Worldwide Basic Research, 1992 306,593 275,000 - -
Merck Research Laboratories
Jerry T. Jackson** 1994 590,004 545,000 - -
Executive Vice President 1993 531,876 480,000 - -
1992 471,250 565,000 124,629 -
Francis H. Spiegel, Jr.** 1994 559,749(a) 450,000 - -
Executive Vice President 1993 555,000 500,000 - -
1992 540,000 650,000 - -
<CAPTION>
PAYOUTS
SECURITIES ----------
UNDERLYING LTIP ALL OTHER
OPTIONS/SARS(d) PAYOUTS(f) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR (#) ($) ($)
- ---------------------------------------------- ---- --------------- ---------- ------------
<S> <C> <C> <C> <C>
Raymond V. Gilmartin 1994 500,000 $ - $ 1,368(g)
Chairman of the Board, President 1993 - - -
and Chief Executive Officer 1992 - - -
P. Roy Vagelos* 1994 - 1,190,400 62,165(h)
Chairman of the Board, President 1993 300 1,303,200 5,895(i)
and Chief Executive Officer 1992 680,000(e) - 5,721(i)
Edward M. Scolnick 1994 90,000 311,829 2,250(i)
Executive Vice President, 1993 110,300 401,700 3,433(i)
Science and Technology and President, 1992 54,000 - 3,433(i)
Merck Research Laboratories
Judy C. Lewent 1994 50,000 130,541 3,750(i)
Senior Vice President and 1993 60,300 - 5,876(i)
Chief Financial Officer 1992 31,500 - 5,721(i)
David W. Anstice 1994 40,500 95,542 6,182(j)
President, 1993 30,300 - 7,760(j)
Human Health -- U.S./Canada 1992 40,500 - 5,128(j)
Bennett M. Shapiro 1994 39,500 - 2,250(i)
Executive Vice President, 1993 45,300 - 3,938(i)
Worldwide Basic Research, 1992 20,250 - 403,433(k)
Merck Research Laboratories
Jerry T. Jackson** 1994 90,000 247,225 3,749(i)
Executive Vice President 1993 110,300 322,000 5,721(i)
1992 54,000 - 5,721(i)
Francis H. Spiegel, Jr.** 1994 90,000 322,586 234,836(l)
Executive Vice President 1993 110,300 400,000 5,616(i)
1992 54,000 - 5,616(i)
</TABLE>
- ---------------
(a) Includes cash in lieu of vacation accrued in 1994 as follows: $97,358 for
Dr. Vagelos; $68,079 for Mr. Spiegel.
(b) Includes air commuting services as follows: $34,873 for Dr. Scolnick and
$38,642 for Ms. Lewent in 1994; $55,825 for Dr. Scolnick and $77,718 for
Ms. Lewent in 1993; $81,717 for Dr. Scolnick and $118,130 for Mr. Jackson in
1992. Also includes limousine service as follows: $24,082 for Dr. Scolnick
and $17,213 for Ms. Lewent in 1994.
(c) Represents a Restricted Stock Award of 25,000 shares of stock vesting June
16, 1999, on which regular dividends are being paid. The dollar value of the
Restricted Stock Award as of December 31, 1994 was $953,125.
(d) No stock appreciation rights were granted. Options have been adjusted to
reflect the Company's 3-for-1 stock split on May 6, 1992.
(e) Includes a special, one-time grant of an option to purchase 500,000 shares
of Company Common Stock made to Dr. Vagelos on July 28, 1992 in lieu of
future annual option grants and in lieu of base salary increases after
August 1991. This special option will become exercisable on July 28, 1997.
(f) EIP Strategic Performance Feature payouts in 1994 were for services
performed during the five-year award cycle 1989-1993; EIP Strategic
Performance Feature payouts in 1993 were for services performed during the
five-year award cycle 1988-1992.
(g) Imputed income for group term life insurance.
(h) Includes $3,750 Company contribution to the Employee Savings and Security
Plan and $58,415 cash in lieu of unused vacation accrued prior to 1994.
(i) Company contribution to the Employee Savings and Security Plan.
(j) Includes Company contributions to the Employee Savings and Security Plan of
$3,750, $5,894 and $4,583 for 1994, 1993 and 1992, respectively, and imputed
income for survivor income insurance of $2,432, $1,866 and $545 for 1994,
1993 and 1992, respectively.
(k) Includes $400,000 payment to Dr. Shapiro in connection with his joining the
Company and $3,433 Company contribution to the Employee Savings and Security
Plan.
(l) Includes Company contribution to the Employee Savings and Security Plan of
$3,749; $59,002 cash in lieu of unused vacation accrued prior to 1994 and
$172,085 lump-sum payment at retirement.
* Dr. Vagelos served as Chairman of the Board, President and Chief Executive
Officer of the Company until June 1994 and continued to serve as Chairman of
the Board through October 31, 1994.
** Messrs. Jackson and Spiegel were not executive officers at the end of the
last complete fiscal year.
13
<PAGE> 17
The following table sets forth stock options granted in 1994 to each of the
Company's executive officers named in the Summary Compensation Table and to all
employees as a group. The Company did not issue any stock appreciation rights.
The table also sets forth the hypothetical gains that would exist for the
options at the end of their ten-year terms for the executive officers named in
the Summary Compensation Table and for all employees as a group (assuming their
options had ten-year terms), at assumed compound rates of stock appreciation of
0%, 5% and 10%. The actual future value of the options will depend on the market
value of the Company's Common Stock. All option exercise prices are based on
market price on the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------
NUMBER OF PERCENT
SECURITIES OF TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS/ AT ASSUMED ANNUAL RATES
OPTIONS/ SARS OF STOCK PRICE APPRECIATION
SARS GRANTED TO EXERCISE OR FOR OPTION TERM(b)
DATE OF GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -------------------------------------------
NAME GRANT (#) FISCAL YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
- ------------------ ------- ---------- ------------ ------------ ---------- ------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond V.
Gilmartin........ 6/16/94 500,000 2.67% $ 31.125 6/15/04 - $ 9,787,173 $ 24,802,617
P. Roy Vagelos.... - - - - - - - -
Edward M.
Scolnick........ 1/7/94 90,000 0.48% 37.125 1/6/04 - 2,101,294 5,325,092
Judy C. Lewent.... 1/7/94 50,000 0.27% 37.125 1/6/04 - 1,167,386 2,958,384
David W.
Anstice......... 1/7/94 40,500 0.22% 37.125 1/6/04 - 945,582 2,396,291
Bennett M.
Shapiro......... 1/7/94 39,500 0.21% 37.125 1/6/04 - 922,235 2,337,124
Jerry T.
Jackson......... 1/7/94 90,000 0.48% 37.125 1/6/04 - 2,101,294 5,325,092
Francis H.
Spiegel, Jr. ... 1/7/94 90,000 0.48% 37.125 1/6/04 - 2,101,294 5,325,092
All employees
as a group...... (a) 18,748,644 100% (a) (a) - 437,737,960(c) 1,109,313,934(c)
---------------
0% 5% 10%
------ --------------- ---------------
Total potential stock price appreciation from January 7, 1994 to January 6, 2004
for all stockholders at assumed rates of stock price appreciation(d)............... - $29,133,883,883 $73,830,981,844
Potential actual realizable value of options granted to all employees, assuming
ten-year option terms, as a percentage of total potential stock price appreciation
from January 7, 1994 to January 6, 2004 for all stockholders at assumed rates of
stock price appreciation........................................................... - 1.50% 1.50%
</TABLE>
- ---------------
(a) Options were granted under the ISP throughout 1994 at prices ranging from
$29.50 to $38.125 and expire ten years from the date of grant. In addition,
stock options were granted throughout 1994 with prices ranging from $28.375
to $37.50 under the Medco Containment Services ("MEDCO") 1990 Special
Nonqualified Employee Stock Option Plan and the Medco 1991 Class C
Nonqualified Stock Option Plan. Options granted under the Medco 1990
Special Nonqualified Employee Stock Option Plan are exercisable three years
from date of grant and expire five years from date of grant. Options
granted under the Medco 1991 Class C Nonqualified Stock Option Plan have a
five-year (20%/yr.) vesting schedule and expire fifteen years from date of
grant.
(b) These amounts, based on assumed appreciation rates of 0% and the 5% and 10%
rates prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the Company's
stock price. The Company did not use an alternative formula for a grant
date valuation as it is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors.
(c) No gain to the optionees is possible without an increase in stock price,
which will benefit all stockholders.
(d) Based on a price of $37.125 on January 7, 1994, and a total of
1,247,826,023 shares of Common Stock outstanding.
14
<PAGE> 18
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized on exercise in 1994 by the
Company's executive officers named in the Summary Compensation Table. The table
also sets forth the number of shares covered by exercisable and unexercisable
options held by such executives on December 31, 1994 and the aggregate gains
that would have been realized had these options been exercised on December 31,
1994, even though these options were not exercised, and the unexercisable
options could not have been exercised, on December 31, 1994. The Company did not
issue stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
SECURITIES UNDERLYING OPTIONS/SARS
UNEXERCISED OPTIONS/SARS AT AT FISCAL YEAR END(b)
SHARES ACQUIRED VALUE FY-END (#) ($)
ON EXERCISE REALIZED(a) --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin............. -- -- -- 500,000 $ -- $ 3,500,000
P. Roy Vagelos................... -- -- 1,731,678 500,600 21,601,730 1,688
Edward M. Scolnick............... -- -- 246,000 200,600 2,240,172 132,938
Judy C. Lewent................... -- -- 122,700 110,600 780,387 74,188
David W. Anstice................. -- -- 154,587 71,100 1,106,905 53,438
Bennett M. Shapiro............... -- -- 61,500 85,100 228,375 58,063
Jerry T. Jackson................. -- -- 198,000 200,600 1,027,764 132,938
Francis H. Spiegel, Jr. ......... -- -- 279,000 200,600 2,003,166 132,938
</TABLE>
- ---------------
(a) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(b) Market value of shares covered by in-the-money options on December 31,
1994, less option exercise price. Options are in-the-money if the market
value of the shares covered thereby is greater than the option exercise
price.
15
<PAGE> 19
The following table sets forth the SPF Performance Share Awards made in
1994 to each of the executive officers named in the Summary Compensation Table.
The Compensation and Benefits Committee reserves the right to pay out awards in
cash, stock or a combination of cash and stock at the end of a five-year period,
based on the Company's achievement of specified performance targets at the end
of the period as compared to a group of other leading healthcare companies
chosen by the Compensation and Benefits Committee at the start of the period.
Any payout of 1994 Performance Share Awards will be made in 1999.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES, OR OTHER PRICE-BASED PLANS
UNITS OR PERIOD -------------------------------------------------
OTHER UNTIL BELOW
RIGHTS(a) MATURATION THRESHOLD THRESHOLD(b) TARGET MAXIMUM(b)
NAME (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #) ($ OR #)
- ------------------------------------ --------- ----------- --------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin................ -- -- -- -- -- --
P. Roy Vagelos...................... 15,844 5 years -- #3,961 #15,844 #27,727
Edward M. Scolnick.................. 9,141 5 years -- 2,285 9,141 15,997
Judy C. Lewent...................... 4,875 5 years -- 1,219 4,875 8,531
David W. Anstice.................... 4,875 5 years -- 1,219 4,875 8,531
Bennett M. Shapiro.................. 4,875 5 years -- 1,219 4,875 8,531
Jerry T. Jackson.................... 9,141 5 years -- 2,285 9,141 15,997
Francis H. Spiegel, Jr. ............ 9,141 5 years -- 2,285 9,141 15,997
</TABLE>
- ---------------
(a) Represents target SPF Performance Share Awards for the 1994-1998 award
period. Actual payouts at the end of this five-year period will be based on
the Company's performance ranking under the following criteria, subject to
the exercise by the Compensation and Benefits Committee of its subjective
judgment and discretion. For the 1994 year of the award period, performance
will be measured by net income growth versus a group of leading healthcare
companies chosen at the beginning of the period, return on assets versus
profit plan and the Company's total stockholder return versus the S&P 500.
For the other years of the award period, performance will be measured by
earnings-per-share growth and return on assets versus the same group of
leading healthcare companies, and the Company's total stockholder return
versus the S&P 500. The group of leading healthcare companies includes the
companies in the DJPI other than the Company and Syntex Corporation, and
also includes Abbott Laboratories, SmithKline Beecham PLC and Glaxo plc.
For all years, each performance measure is weighted so that performance
exceeding target under one measure may compensate for performance below
target under another. The closing price of the Company's Common Stock on
the New York Stock Exchange at the start of the award period was $36.00.
(b) Threshold represents 25% of target. Maximum represents 175% of target.
16
<PAGE> 20
ANNUAL BENEFITS PAYABLE UNDER RETIREMENT PLANS
The following table sets forth the estimated annual benefits payable under
the Retirement Plan for Salaried Employees and the Supplemental Retirement Plan
at age 65 to persons in specified compensation and years-of-service
classifications, based on a straight-life annuity form of retirement income.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
REMUNERATION
(AVERAGE PENSION COMPENSATION
DURING HIGHEST FIVE YEARS OF SERVICE
CONSECUTIVE YEARS (ESTIMATED ANNUAL RETIREMENT BENEFITS FOR
IN THE LAST TEN YEARS OF CREDITED SERVICE SHOWN BELOW*)
YEARS BEFORE ----------------------------------------------------------------
RETIREMENT) 15 20 25 30 35
- ------------------------------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 800,000.......... $240,000 $ 320,000 $ 400,000 $ 480,000 $ 560,000
1,000,000......... 300,000 400,000 500,000 600,000 700,000
1,200,000......... 360,000 480,000 600,000 720,000 840,000
1,400,000......... 420,000 560,000 700,000 840,000 980,000
1,600,000......... 480,000 640,000 800,000 960,000 1,120,000
1,800,000......... 540,000 720,000 900,000 1,080,000 1,260,000
2,000,000......... 600,000 800,000 1,000,000 1,200,000 1,400,000
2,200,000......... 660,000 880,000 1,100,000 1,320,000 1,540,000
2,400,000......... 720,000 960,000 1,200,000 1,440,000 1,680,000
2,600,000......... 780,000 1,040,000 1,300,000 1,560,000 1,820,000
2,800,000......... 840,000 1,120,000 1,400,000 1,680,000 1,960,000
3,000,000......... 900,000 1,200,000 1,500,000 1,800,000 2,100,000
</TABLE>
- ---------------
* Benefits shown above are exclusive of the social security offset provided for
by the benefit formula.
As of December 31, 1994, full years of actual credited service in the
Retirement Plan for Salaried Employees and the Supplemental Retirement Plan are:
Dr. Scolnick -- 12 years; Ms. Lewent -- 14 years; Mr. Anstice -- 20 years; Dr.
Shapiro -- 4 years. In addition, if these individuals retire from service with
the Company at age 65, and with less than 35 years of actual credited service,
then, pursuant to the enhanced pension provision of the Supplemental Retirement
Plan applicable to bona fide executives described in greater detail below, they
will receive an additional month of credited service for each month of actual
credited service up to an aggregate total of 35 years of credited service. As of
December 31, 1994, Mr. Jackson had 29 years of actual credited service in the
Retirement Plan for Salaried Employees and the Supplemental Retirement Plan; he
will not be entitled to additional credited service under the enhanced pension
provision of the Supplemental Retirement Plan because, pursuant to an agreement
described below, he will retire before reaching age 65. As of December 31, 1994,
Mr. Gilmartin had no full years of actual credited service in the Retirement
Plan for Salaried Employees and the Supplemental Retirement Plan but was
credited with 28 years of credited service under the Supplemental Retirement
Plan as provided in and subject to the employment agreement described below.
Upon his retirement on November 1, 1994, Dr. Vagelos had 18 full years of
actual credited service in these Plans and 17 years of additional credited
service under the enhanced pension provision of the Supplemental Retirement
Plan. Dr. Vagelos elected to receive a lump sum payment from the Plans;
$1,007,082 was paid from the Retirement Plan for Salaried Employees and
$14,264,648 was paid from the Supplemental Retirement Plan. Upon his retirement
on November 1, 1994, Mr. Spiegel had 27 full years of actual credited service in
these Plans; he was not entitled to additional credited service under the
enhanced pension provision of the Supplemental Retirement Plan because he
retired prior to reaching age 65. Mr. Spiegel also elected to receive a lump sum
from the Plans; $905,408 was paid from the Retirement Plan for Salaried
Employees and $5,442,740 was paid from the Supplemental Retirement Plan. Actual
annual benefits payable at age 65 to the other executive officers named in the
Summary Compensation Table from the Supplemental Retirement Plan are subject to
a number of factors and are currently not determinable.
17
<PAGE> 21
Pension compensation for a particular year as used for the calculation of
retirement benefits includes salaries and annual EIP bonus awards received
during the year. Pension compensation for 1994 differs from compensation
reported in the Summary Compensation Table in that pension compensation includes
the annual EIP bonus awards received in 1994 for services in 1993 rather than
the EIP bonus awards paid in 1995 for services in 1994. Pension compensation for
1994 was $541,671 for Mr. Gilmartin; $1,109,996 for Dr. Scolnick; $634,996 for
Ms. Lewent; $586,589 for Mr. Anstice and $709,546 for Dr. Shapiro.
SUPPLEMENTAL RETIREMENT PLAN
The Supplemental Retirement Plan is an unfunded plan providing benefits to
participants in certain retirement plans (the "primary plans") maintained by the
Company and its subsidiaries as follows: (1) benefits not payable by the primary
plans because of the limitations on benefits stipulated by the Internal Revenue
Code, (2) benefits not payable by the primary plans because of the exclusion of
deferred compensation from the benefit formulas of those plans ("supplemental
benefit"), (3) a minimum annual aggregate benefit under this Plan and the
primary plans of $50,000 on a straight-life annuity basis for the incumbents at
time of actual retirement in positions designated as bona fide executive or high
policymaking under the Company's Corporate Policy on Executive Retirement (which
include all the named executive officers in the Summary Compensation Table),
reduced in the event of retirement or death prior to normal retirement date and
(4) for employees who have occupied such executive or high policymaking
positions and who do not have 35 years of credited service, an enhanced benefit
payable upon retirement at age 65 (unless consent of the Compensation and
Benefits Committee of the Board is obtained for payment upon early retirement,
death or disability prior to age 65). The enhanced benefit is an amount
calculated under the benefit formula in the primary plan using one additional
month of credited service for each month of credited service accrued during, or
prior to attainment of, the designated position (up to the 35-year total) less
(i) the minimum benefit, where applicable, or the supplemental benefit, (ii) the
primary plan benefit and (iii) any retirement benefit payable from a plan not
sponsored by the Company. The Supplemental Retirement Plan was amended as of
January 1, 1995 to eliminate prospectively the enhanced benefit except for
certain grandfathered participants. In general, other terms and conditions of
benefit payments are determined by reference to the provisions of the primary
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
H. Brewster Atwater, Jr., Lawrence A. Bossidy, William G. Bowen, Johnnetta
B. Cole, Lloyd C. Elam, Ruben F. Mettler and Richard S. Ross served on the
Compensation and Benefits Committee during 1994.
There were no Compensation and Benefits Committee interlocks or insider
(employee) participation during 1994.
EMPLOYMENT CONTRACTS AND ARRANGEMENTS
Mr. Gilmartin entered into an employment agreement (the "Agreement") with
the Company dated as of June 9, 1994, providing that he serve as President,
Chief Executive Officer, Director and Chairman of the Board of Directors of the
Company. The Agreement provides that Mr. Gilmartin will be paid a base salary of
$1.0 million per year and that he will be eligible for annual bonus awards under
the Company's Executive Incentive Plan or any successor plan. Pursuant to the
Agreement, Mr. Gilmartin's EIP bonus award for 1994 will be at least $1.0
million, less any annual bonus paid by his previous employer for 1994.
In recognition of the forfeiture by Mr. Gilmartin of common stock ownership
rights provided by his previous employer, Mr. Gilmartin was granted 25,000
shares of restricted Company Common Stock (which will remain restricted for five
years) on June 16, 1994. In addition, Mr. Gilmartin was granted options under
the Company's Incentive Stock Plan on 500,000 shares of the Company's Common
Stock on June 16, 1994 and on 180,000 shares of the Company's Common Stock on
February 28, 1995. Both grants are exercisable at the market price of the
Company's Common Stock on the date of grant as determined under the ISP, vest on
the fifth anniversary of the date of grant and expire on the tenth
18
<PAGE> 22
anniversary of the date of grant. After 1995, Mr. Gilmartin will be entitled to
annual stock option grants as determined by the Board of Directors.
Pursuant to the Agreement, Mr. Gilmartin may participate in the Retirement
Plan for Salaried Employees of Merck & Co., Inc. and the Supplemental Retirement
Plan. In determining benefits payable under such Plans, Mr. Gilmartin's credited
service will equal his credited service with the Company plus 28 years and the
percentage multiple used in the formula for benefit calculation will be 1.6%.
Benefits payable under the Company Plans will be net of retirement benefits
payable by Mr. Gilmartin's previous employer.
If Mr. Gilmartin's employment is terminated by the Company without "Gross
Cause" or by Mr. Gilmartin with "Good Cause," the restricted stock and stock
options issued on June 16, 1994 will vest immediately and, for a period of two
years from the date of termination, Mr. Gilmartin will be entitled to receive
his cash compensation under the Agreement, his retirement benefits will continue
to accrue and his other stock options will continue to vest by their terms. If
Mr. Gilmartin's employment is terminated by the Company for "Gross Cause" or by
Mr. Gilmartin without "Good Cause," he will forfeit any restricted stock and
unvested stock options and all cash compensation will cease.
"Gross Cause" is defined as (i) employee's conviction of a felony; or (ii)
employee's willful gross neglect or willful gross misconduct in carrying out
employee's duties resulting, in either case, in material economic harm to the
Company, unless employee believed in good faith that such act or non-act was in
the best interests of the Company. "Good Cause" is defined as termination of
employee's employment at the initiative of employee within six months following
(i) any act or failure to act by the Board of Directors which would cause
employee (A) to be removed from the office of President and Chief Executive
Officer or the office of Chairman of the Board of Directors on a date earlier
than October 31, 1999, or (B) to not be nominated for election as a director by
the stockholders of the Company at any meeting of stockholders of the Company
held for that purpose on a date earlier than October 31, 1999; (ii) any
significant diminution in the powers, responsibilities and authorities described
in the Agreement without the consent of employee; (iii) the failure of the
Company to obtain in writing the assumption of its obligation to perform the
Agreement by any successor, prior to or concurrent with a merger, consolidation,
sale or similar transaction; and (iv) any material breach of the Agreement by
the Company which is unremedied after notice by employee.
The Agreement terminates on October 31, 1999.
Jerry T. Jackson relinquished his duties as Executive Vice President of the
Company in 1994. In connection therewith, the Company paid Mr. Jackson a lump
sum equal to one-half his base pay then in effect. The Company also agreed that
Mr. Jackson would remain as an employee, with pay, until June 1, 1996. As a
result of this additional period of employment, Mr. Jackson's retirement income
after June 1, 1996 will be increased by an aggregate amount that is the
actuarial equivalent of .45 times his base pay in effect at the time he
relinquished his duties as Executive Vice President.
Francis H. Spiegel, Jr. retired as Executive Vice President of the Company
in 1994. In connection with Mr. Spiegel's retirement, the Company paid him a
lump sum which represented three and one-half months of base salary. In
addition, the Company credited Mr. Spiegel with one and one-half years'
additional service for purposes of his pension benefits.
19
<PAGE> 23
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation plus reinvested dividends) on the Company's Common Stock with
the cumulative total return (including reinvested dividends) of the S&P 500
Index and the Dow Jones Pharmaceutical Index ("DJPI") for the five years ending
December 31, 1994. Amounts below have been rounded to the nearest dollar or
percent.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
MERCK & CO., INC., DOW JONES PHARMACEUTICAL INDEX AND S&P 500 INDEX
<TABLE>
<CAPTION>
PERIOD 1994/1989
VALUE CAGR**
------------ ---------------
<S> <C> <C>
Merck.................................. $168 11%
DJPI................................... 159 10
S&P 500................................ 152 9
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MERCK DJPI S&P 500
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 118.92 116.75 96.89
1991 224.49 182.93 126.28
1992 179.06 149.75 135.88
1993 146.39 138.92 149.52
1994 168.13 159.23 151.57
</TABLE>
* ASSUMES THAT THE VALUE OF THE INVESTMENT IN COMPANY COMMON STOCK AND EACH
INDEX WAS $100 ON DECEMBER 31, 1989 AND THAT ALL DIVIDENDS WERE REINVESTED.
** COMPOUND ANNUAL GROWTH RATE.
20
<PAGE> 24
2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee,
composed of independent members of the Board, has appointed Arthur Andersen LLP
as independent public accountants of the Company with respect to its operations
for the year 1995, subject to ratification by the holders of Common Stock of the
Company. In taking this action, the members of the Board and the Audit Committee
considered carefully Arthur Andersen LLP's performance for the Company in that
capacity since its original retention in 1971, its independence with respect to
the services to be performed and its general reputation for adherence to
professional auditing standards. Representatives of the firm will be present at
the Annual Meeting to make a statement if they desire to do so and to answer
appropriate questions that may be asked by stockholders.
There will be presented at the Annual Meeting a proposal for the
ratification of this appointment, which the Board of Directors believes is
advisable and in the best interests of the stockholders. If the appointment of
Arthur Andersen LLP is not ratified, the matter of the appointment of
independent public accountants will be considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
3. ADOPTION OF THE 1996 INCENTIVE STOCK PLAN
There will be presented to the meeting a proposal to adopt the 1996
Incentive Stock Plan (the "Plan"). The Plan will replace the 1991 Incentive
Stock Plan which, by its terms, expires on December 31, 1995. The Company's
experience with stock options has convinced the Board of Directors of the
important role of stock options and other stock-based incentives in retaining
the services of outstanding personnel and in encouraging such employees to have
a greater financial investment in the Company (although the Plan does not
necessarily require them to hold for investment stock received under the Plan).
The proposed Plan is set forth in Exhibit A. Primary aspects of the
proposed Plan are as follows.
GENERAL INFORMATION
The Plan would authorize the Compensation and Benefits Committee of the
Board of Directors (the "Committee") to grant (i) incentive stock options under
the Internal Revenue Code of 1986, (ii) nonqualified stock options, (iii) stock
appreciation rights, (iv) performance share awards and (v) restricted stock
grants to regular employees of the Company, its subsidiaries, joint ventures or
affiliates who are designated by the Committee. There are approximately 45,000
employees eligible to participate in the Plan.
The aggregate number of shares of the Company's Common Stock that may be
issued or transferred to grantees under the Plan shall not exceed 65 million
shares plus shares authorized but unissued under the 1991 Incentive Stock Plan
and the 1987 Incentive Stock Plan. Options may be granted under the 1991
Incentive Stock Plan until it expires on December 31, 1995; any outstanding
options or other benefits under that plan may be exercised in accordance with
the terms thereof. No further options or other benefits are to be granted under
the 1987 Incentive Stock Plan; provided, however, that any outstanding options
or other benefits under such plan may be exercised in accordance with the terms
thereof. If there is a stock split, stock dividend or other relevant change
affecting the Company's shares, appropriate adjustments will be made in the
number of shares that may be issued or transferred in the future and in the
number of shares and price in all outstanding grants made before such event. If
shares under a grant are not issued or transferred, those shares would again be
available for inclusion in future grants. Payment of cash in lieu of shares
would be considered an issuance or transfer of the shares. On March 7, 1995, the
closing price of the Company's Common Stock on the New York Stock Exchange was
$42.25.
21
<PAGE> 25
GRANTS UNDER THE PLAN
Stock Options. The Committee may grant options qualifying as incentive
stock options under the Internal Revenue Code of 1986, other statutory stock
options and nonqualified stock options. The term of an option shall be fixed by
the Committee. The option price shall not be less than the fair market value of
the Company's Common Stock on the date of grant.
Stock Appreciation Rights. The Committee may grant stock appreciation
rights ("SARs") either singly or in combination with an underlying stock option
under the Plan, the 1991 Incentive Stock Plan or the 1987 Incentive Stock Plan.
The term of an SAR may be fixed by the Committee. SARs entitle the grantee to
receipt of the same economic value that would have been derived from exercise of
an option. Payment may be made in cash, in shares or a combination of both at
the discretion of the Committee. If an SAR granted in combination with an
underlying stock option is exercised, the right under the underlying option to
purchase shares would terminate.
Performance Share Awards. The Committee may grant Performance Share Awards
under which payment may be made in shares of the Company's Common Stock, a
combination of shares and cash or cash if the performance of the Company or any
subsidiary, division or affiliate of the Company selected by the Committee meets
certain goals established by the Committee during an award period. The Committee
would determine the goals, the length of an award period, the maximum payment
value of an award and the minimum performance required before a payment would be
made. The Committee may revise the goals and the computation of payment at any
time to account for unforeseen events which occur during an award period and
which have a substantial effect on the performance of the Company, subsidiary or
division.
In order to receive payment, a grantee must remain in the employ of the
Company until the completion of the award period, except that the Committee may
provide complete or partial exceptions to that requirement as it deems
equitable.
Restricted Stock Grants. The Committee may also award shares under a
Restricted Stock Grant. The grant would set forth a restriction period during
which the grantee must remain in the employ of the Company in order to retain
the shares under grant. If the grantee's employment terminates during the
period, the grant would terminate and the grantee would be required to return
the shares to the Company. However, the Committee may provide complete or
partial exceptions to this requirement as it deems equitable. The grantee could
not dispose of the shares prior to the expiration of the restriction period.
During this period, the grantee would be entitled to vote the shares and, at the
discretion of the Committee, receive dividends. Each certificate would bear a
legend giving notice of the restrictions in the grant.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options. The grant of an incentive stock option or a nonqualified
stock option would not result in income for the grantee or in a deduction for
the Company.
The exercise of a nonqualified stock option would result in ordinary income
for the grantee and a deduction for the Company measured by the difference
between the option price and the fair market value of the shares received at the
time of exercise. Income tax withholding would be required.
The exercise of an incentive stock option would not result in income for
the grantee if the grantee (i) does not dispose of the shares within two years
after the date of grant or one year after the transfer of shares upon exercise
and (ii) is an employee of the Company or a subsidiary of the Company from the
date of grant until three months before the exercise date. If these requirements
are met, the basis of the shares upon later disposition would be the option
price. Any gain will be taxed to the employee as long-term capital gain and the
Company would not be entitled to a deduction. The excess of the market value on
the exercise date over the option price is an item of tax preference,
potentially subject to the alternative minimum tax.
22
<PAGE> 26
If the grantee disposes of the shares prior to the expiration of either of
the holding periods, the grantee would recognize ordinary income and the Company
would be entitled to a deduction equal to the lesser of the fair market value of
the shares on the exercise date minus the option price or the amount realized on
disposition minus the option price. Any gain in excess of the ordinary income
portion would be taxable as long-term or short-term capital gain.
SARs and Performance Share Awards. The grant of an SAR or a Performance
Share Award would not result in income for the grantee or in a deduction for the
Company. Upon the exercise of an SAR or the receipt of shares or cash under a
Performance Share Award, the grantee would recognize ordinary income and the
Company would be entitled to a deduction measured by the fair market value of
the shares plus any cash received. Income tax withholding would be required.
Restricted Stock Grants. The grant of Restricted Stock should not result
in income for the grantee or in a deduction for the Company for federal income
tax purposes, assuming the shares transferred are subject to restrictions
resulting in a "substantial risk of forfeiture" as intended by the Company. If
there are no such restrictions, the grantee would recognize ordinary income upon
receipt of the shares. Dividends paid to the grantee while the stock remained
subject to restriction would be treated as compensation for federal income tax
purposes. At the time the restrictions lapse, the grantee would receive ordinary
income and the Company would be entitled to a deduction measured by the fair
market value of the shares at the time of lapse. Income tax withholding would be
required.
OTHER INFORMATION
Upon approval of the Company's stockholders, the Plan will be effective on
January 1, 1996 and will terminate on December 31, 2000, unless terminated
earlier by the Board of Directors or extended by the Board with the approval of
the stockholders. The Board may amend the Plan as it deems advisable but, if the
Securities Exchange Act of 1934 requires the Company to obtain stockholder
approval, then such approval will be sought. No employee may receive grants
under this Plan in any given year which, singly or in the aggregate, cover more
than three million shares of Company Common Stock. Grants of Performance Share
Awards and Restricted Stock are limited to six million shares in the aggregate
during the term of the Plan. Employees who will participate in the Plan in the
future and the amounts of their allotments are to be determined by the Committee
subject to any restrictions outlined above. Since no such determinations have
yet been made, it is not possible to state the terms of any individual options
which may be issued under the Plan or the names or positions of or respective
amounts of the allotment to any individuals who may participate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. AMENDMENT OF THE
EMPLOYEE SAVINGS AND SECURITY PLAN
There will be presented to the meeting a proposal to amend the Company's
Employee Savings and Security Plan (the "ES&SP") to increase the Company
matching contribution and to eliminate the need for stockholder approval to
further increase the Company contribution to the ES&SP.
The proposed amendment is set forth in its entirety in Exhibit B. Primary
aspects of the ES&SP are discussed below.
CURRENT PLAN PROVISIONS
The ES&SP is open to full-time, part-time and temporary U.S. employees of
the Company and certain subsidiaries, and all U.S. citizens and permanent
residents employed by foreign subsidiaries of the Company, with at least one
year of employment who are not covered by collective bargaining agreements.
There were approximately 12,000 employees eligible to participate as of February
14, 1995.
23
<PAGE> 27
Participants may choose to contribute from 2% to 15% of base compensation,
not to exceed $150,000 of compensation in 1995. On contributions of up to 5% of
base compensation per pay period, the Company adds $.50 for every $1 contributed
(for a maximum Company contribution of 2.5% of base compensation). Participants
direct an independent trustee to invest their contributions in a variety of
investment vehicles, including mutual funds, money market funds and Company
Common Stock. Currently, Company contributions are invested entirely in Company
Common Stock.
Participants may designate that all or part of their savings be deemed
contributions under section 401(k) of the Internal Revenue Code, subject to the
Code's limitations on such contributions. Such participant contributions may not
be withdrawn until the earliest of retirement, death, disability, termination of
employment, hardship or attainment of age 59 1/2. All employee and Company
contributions vest immediately. Subject to certain restrictions and penalties, a
portion or all of a participant's non-401(k) account and Company contributions
may be withdrawn by the participant prior to the events described above.
On termination of employment, the total value of all investments not
previously withdrawn is payable in a single payment or in ten or fewer yearly
installments. There are special provisions for death. The Company Common Stock
fund is generally payable in shares of stock unless the participant directs
otherwise; the value of other investments is payable in cash.
INTEGRATED RETIREMENT PROGRAM
In 1993, the Company undertook a review of the pension, savings and retiree
health benefit plans for its 14,000 domestic salaried employees with the goal of
adopting an integrated approach to retirement planning for these employees. Each
of these plans had developed separately in response to various legal,
competitive and Company initiatives. The Company also evaluated the benefits in
light of their effect on the employees' financial positions at retirement.
Management of the Company developed the Integrated Retirement Program to
provide a coordinated program of retirement benefits to support the Company's
need to attract, retain and motivate employees, improve the predictability of
retirement benefit costs and maintain the Company's competitive position. The
Integrated Retirement Program is designed to provide a full-career employee the
opportunity for a projected benefit during retirement which is based on the
employee's estimated standard of living at retirement based solely upon their
Merck compensation (excluding incentive plan payments). The design of the
program assumes that employees will be able to achieve an appropriate level of
savings and will bear a larger share of the investment risk in providing for
their own retirement. Thus, the program moves a higher proportion of expected
income to the ES&SP, which provides for increased employee control over the
investment choices.
In October 1994, the Board of Directors adopted the Integrated Retirement
Program. As part of the program, the Board adopted amendments to the ES&SP,
effective July 1, 1995 (subject, where required by the ES&SP, to stockholder
approval) which (i) provide for an increase in the amount of base compensation
that will be matched by Company contributions, (ii) allow employees younger than
50 years of age to direct the investment of up to one-half of the Company
contribution to investments other than Company Common Stock, (iii) allow
employees 50 years of age or older to direct the investment of all of the
Company contribution to other investments and (iv) permit employees to
participate in the ES&SP soon after they commence employment. The Board of
Directors also approved changes to the pension and retiree health plans for the
nonunion employees including, effective July 1, 1995, a decrease from 2.0 to 1.6
in the percentage of average pensionable pay by which future years of credited
service will be multiplied and the elimination of certain early retirement
subsidies, and, effective January 1, 1996, cost containment and cost sharing
measures applicable to retiree health benefits.
24
<PAGE> 28
PROPOSED AMENDMENTS TO THE ES&SP
Pursuant to the terms of the ES&SP, the stockholders must approve any
substantial increase in the cost of the ES&SP to the Company, including an
increase in the Company matching contribution exceeding 2.5% of base
compensation. Moreover, the ES&SP requires that stockholders be notified of any
significant amendment of the ES&SP, which may then be altered or repealed by the
stockholders. It is proposed that the stockholders approve an amendment to the
ES&SP, effective July 1, 1995, to increase the Company matching contribution
from $.50 for every $1 of employee savings of up to 5% of base compensation (for
a maximum contribution of 2.5% of base compensation) to $.75 for every $1 of
employee savings of up to 6% of base compensation (for a maximum contribution of
4.5% of base compensation). In addition, it is proposed that the Board of
Directors be given the discretion to increase the Company matching contribution,
if a change in economic and competitive practices would warrant such action, and
to make other significant changes to the ES&SP as it deems necessary or
appropriate, without having to seek stockholder approval. Therefore, the
Company's U.S. Compensation and Benefits Committee, which has the authority to
amend the ES&SP with the concurrence of the Chief Executive Officer, has, with
the approval of the Board of Directors, adopted (subject to stockholder
approval) the amendment set forth in Exhibit B to eliminate the requirements of
stockholder approval of amendments to the ES&SP and reporting such changes to
stockholders. Such amendment would be effective upon stockholder approval. The
amendment does not affect the requirement that only the Board of Directors may
adopt an amendment which would (i) result in a cost increase to the Company in
excess of 5%, (ii) have a significant adverse impact on participants' rights or
(iii) have a significant effect on the long-term rights and liabilities of the
Company.
NEW PLAN BENEFITS
The following table sets forth for the executive officers named in the
Summary Compensation Table and the other participants in the ES&SP estimated
Company contributions based on the proposed increased Company contribution and
the assumptions indicated in the footnotes to the table.
25
<PAGE> 29
NEW PLAN BENEFITS
MERCK & CO., INC. EMPLOYEE SAVINGS AND SECURITY PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE($) OF UNITS
- --------------------------------------------------------------- ----------- --------
<S> <C> <C>
Raymond V. Gilmartin
Chairman of the Board,
President and Chief Executive Officer........................ $ 6,750(a) (c)
P. Roy Vagelos*
Chairman of the Board,
President and Chief Executive Officer........................ -- --
Edward M. Scolnick
Executive Vice President,
Science and Technology and
President, Merck Research Laboratories....................... 6,750(a) (c)
Judy C. Lewent
Senior Vice President and
Chief Financial Officer...................................... 6,750(a) (c)
David W. Anstice
President, Human Health-U.S./Canada.......................... 6,750(a) (c)
Bennett M. Shapiro
Executive Vice President,
Worldwide Basic Research,
Merck Research Laboratories.................................. 6,750(a) (c)
Jerry T. Jackson
Executive Vice President..................................... 6,750(a) (c)
Francis H. Spiegel, Jr.*
Executive Vice President..................................... -- --
Executive Group................................................ 121,500(a) (c)
Non-Executive Director Group**................................. -- --
Non-Executive Officer Employee Group........................... 33,050,758(b) (c)
</TABLE>
- ---------------
(a) The maximum annual Company contribution assuming participation for a full
year at the proposed increased Company contribution level, subject to
applicable Internal Revenue Service limits.
(b) Based upon 1994 total Company contributions adjusted for inflation and the
full-year effect of the proposed increased Company contribution.
(c) The number of units is dependent upon the future share price of Company
Common Stock, the future net asset values of the mutual funds offered in the
ES&SP and the participants' individual investment elections.
* Dr. Vagelos and Mr. Spiegel retired November 1, 1994.
** Non-employee directors do not participate in the ES&SP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
26
<PAGE> 30
5. AMENDMENT OF THE
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
There will be presented to the meeting a proposal to amend the Company's
Employee Stock Purchase and Savings Plan (the "ESP&SP") to eliminate the need
for stockholder approval to increase the Company contribution to the ESP&SP.
The proposed amendment is set forth in its entirety in Exhibit C. Primary
aspects of the ESP&SP are discussed below.
CURRENT PLAN PROVISIONS
The ESP&SP is open to U.S. employees of the Company with at least one year
of employment who are covered by collective bargaining agreements which provide
for participation in the ESP&SP. There were approximately 3,400 employees
eligible to participate as of February 14, 1995.
Subject to the provisions of the applicable collective bargaining
agreement, participants may choose to contribute from 2% to 15% of base
compensation not to exceed $150,000 of compensation in 1995. The Company adds
$.50 for every $1 contributed by the participant, up to a maximum amount of base
compensation as specified in the applicable collective bargaining agreement,
subject to a maximum Company contribution of 2.5% of base compensation.
Participants direct an independent trustee to invest their contributions in a
variety of investment vehicles, including mutual funds, money market funds and
Company Common Stock. Company contributions are invested entirely in Company
Common Stock.
Some of the participants may designate that all or part of their savings be
deemed contributions under section 401(k) of the Internal Revenue Code, subject
to the Code's limitations on such contributions. Such participant contributions
may not be withdrawn until the earliest of retirement, death, disability,
termination of employment, hardship or attainment of age 59 1/2. All employee
and Company contributions vest immediately. Subject to certain restrictions and
penalties, a portion or all of a participant's non-401(k) account and Company
contributions may be withdrawn by the participant prior to the events described
above.
On termination of employment, the total value of all investments not
previously withdrawn is payable in a single payment or in ten or fewer yearly
installments. There are special provisions for death. The Company Common Stock
fund is generally payable in shares of stock unless the participant directs
otherwise; the value of other investments is payable in cash.
PROPOSED AMENDMENT TO THE ESP&SP
Pursuant to the terms of the ESP&SP, the stockholders must approve any
substantial increase in the cost of the ESP&SP to the Company, including an
increase in the Company matching contribution exceeding 2.5% of base
compensation. Moreover, the ESP&SP requires that the stockholders be notified of
any significant amendment of the ESP&SP, which may then be altered or repealed
by stockholders. It is proposed that the Board of Directors be given the
discretion to increase the Company matching contribution and make other
significant changes to the ESP&SP, if such a change were negotiated with the
applicable collective bargaining unit, without having to seek stockholder
approval or report such change to stockholders. This would allow the Company
flexibility in its negotiations with the collective bargaining units. Therefore,
the Company's U. S. Compensation and Benefits Committee, which has the authority
to amend the ESP&SP with the concurrence of the Chief Executive Officer, has,
with the approval of the Board of Directors, adopted (subject to stockholder
approval) the amendment set forth in Exhibit C to eliminate the requirements of
stockholder approval of amendments to the ESP&SP and reporting such changes to
stockholders. Such amendment would be effective upon stockholder approval. The
amendment does not affect the requirement that only the Board of Directors may
adopt an amendment which would (i) result in a cost increase to the Company in
excess of 5%, (ii) have a significant adverse impact on participants' rights or
(iii) have a significant effect on the long-term rights and liabilities of the
Company.
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<PAGE> 31
NEW PLAN BENEFITS
The following table sets forth for the participants in the ESP&SP the
aggregate estimated Company contribution based upon the 1994 total Company
contribution adjusted for inflation. No contribution is made under the ESP&SP
for any executive officer or director of the Company.
NEW PLAN BENEFITS
MERCK & CO., INC. EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE($) OF UNITS
- ---------------------------------------------------------------- ---------- --------
<S> <C> <C>
Raymond V. Gilmartin
Chairman of the Board,
President and Chief Executive Officer......................... -- --
P. Roy Vagelos
Chairman of the Board,
President and Chief Executive Officer......................... -- --
Edward M. Scolnick
Executive Vice President,
Science and Technology and President,
Merck Research Laboratories................................... -- --
Judy C. Lewent
Senior Vice President and
Chief Financial Officer....................................... -- --
David W. Anstice
President, Human Health-U.S./Canada........................... -- --
Bennett M. Shapiro
Executive Vice President,
Worldwide Basic Research,
Merck Research Laboratories................................... -- --
Jerry T. Jackson
Executive Vice President...................................... -- --
Francis H. Spiegel, Jr.
Executive Vice President...................................... -- --
Executive Group................................................. -- --
Non-Executive Director Group.................................... -- --
Non-Executive Officer Employee Group............................ $2,269,405 (a)
</TABLE>
- ---------------
(a) Company contributions are invested in Company Common Stock; therefore, the
number of units is dependent upon the future share price of Company Common
Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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<PAGE> 32
6. STOCKHOLDER PROPOSAL CONCERNING
NON-EMPLOYEE DIRECTOR PENSION BENEFITS
Mr. William Steiner, 4 Radcliffe Drive, Great Neck, N.Y. 11024, owner of
100 shares of Common Stock of the Company, has given notice that he intends to
present for action at the Annual Meeting the following resolution:
"RESOLVED, that the shareholders assembled in person and by proxy,
recommend (i) that all future non-employee directors not be granted pension
benefits and (ii) current non-employee directors voluntarily relinquish
their pension benefits.
"SUPPORTING STATEMENT: Aside from the usual reasons, presented in the
past, regarding 'double dipping', that is outside (non-employee) directors
who are in almost all cases amply rewarded with their pension at their
primary place of employment, and in many instances serving as outside
pensioned directors with other companies, there are other more cogent
reasons that render this policy as unacceptable.
"Traditionally, pensions have been granted in both the private and
public sectors for long term service. The service component usually
represents a significant number of hours per week. The practice of offering
pensions for consultants is a rarity. Outside directors' service could
logically fit the definition of consultants and pensions for this type of
service is an abuse of the term.
"But more importantly, outside directors, although retained by
corporate management, namely the C.E.O., are in reality representatives of
shareholders. Their purpose is to serve as an impartial group to which
management is accountable. Although outside directors are certainly
entitled to compensation for their time and expertise, pensions have the
pernicious effect of compromising their impartiality. In essence, pensions
are management's grants to outside directors to insure their unquestioning
loyalty and acquiescence to whatever policy management initiates, and at
times, serving their own self interests. Thus, pensions become another
device to enhance and entrench management's controls over corporate
policies while being accountable only to themselves. As a founding member
of the Investors Rights Association of America I feel this practice
perpetuates a culture of corporate management 'cronyism' that can easily be
at odds with shareholder and company interest.
"A final note in rebuttal to management's contention that many
companies offer their outside directors pensions, so they can attract and
retain persons of the highest quality. Since there are also companies that
do not offer their outside directors pensions, can management demonstrate
that those companies that offer pensions have a better performance record
then their non-pensioned peers? In addition, do we have any evidence of a
significant improvement in corporate profitability with the advent of
pensions for outside directors?
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
The Company seeks to attract the most highly qualified individuals to serve
as members of the Board of Directors. With its practice of having a majority of
outside independent directors, management believes that the Company would be at
a disadvantage in attracting and retaining the most qualified and experienced
persons to serve as members of the Board of Directors were it limited in its
ability to provide benefits and compensation comparable to other major
companies. A leading independent benefits consulting firm reported that in 1994,
70 percent of companies surveyed provided pension benefits to outside directors,
reflecting an increase from 59 percent in 1989. Accordingly, the Company
believes that the pension benefits paid to the Company's outside directors are
consistent with those paid to directors of other companies of the Company's size
and standing. The Company must retain the ability to offer reasonable benefit
programs to outside directors to continue to attract individuals of the highest
caliber. Therefore, the Board believes that this proposal is not in the best
interests of the Company or its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
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<PAGE> 33
7. STOCKHOLDER PROPOSAL CONCERNING
ANNUAL ELECTION OF DIRECTORS
Mr. Kenneth Steiner, 14 Stoner Avenue, Great Neck, N.Y. 11024, owner of 100
shares of Common Stock of the Company, has given notice that he intends to
present for action at the Annual Meeting the following resolution:
"RESOLVED: That the stockholders of the Company request that the Board
of Directors take the necessary steps, in accordance with state law, to
declassify the Board of Directors so that all directors are elected
annually, such declassification to be effected in a manner that does not
affect the unexpired terms of directors previously elected.
"SUPPORTING STATEMENT: The election of directors is the primary avenue
for stockholders to influence corporate governance policies and to hold
management accountable for it's implementation of those policies. I believe
that the classification of the Board of Directors, which results in only a
portion of the Board being elected annually, is not in the best interests
of the Company and it's stockholders.
"The Board of Directors of the Company is divided into three classes
serving staggered three-year terms. I believe that the Company's classified
Board of Directors maintains the incumbency of the current Board and
therefore of current management, which in turn limits management's
accountability to stockholders.
"The elimination of the Company's classified Board would require each
new director to stand for election annually and allow stockholders an
opportunity to register their views on the performance of the Board
collectively and each director individually. I believe this is the one of
the best methods available to stockholders to insure that the Company will
be managed in a manner that is in the best interests of the stockholders.
"As a founding member of the Investors Rights Association of America I
believe that concerns expressed by companies with classified boards that
the annual election of all directors could leave companies without
experienced directors in the event that all incumbents are voted out by
stockholders, are unfounded. In my view, in the unlikely event that
stockholders vote to replace all directors, this decision would express
stockholder dissatisfaction with the incumbent directors and reflect the
need for change.
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
A similar proposal has been submitted by another stockholder at the last
nine Annual Meetings of Stockholders and has been overwhelmingly defeated on
each occasion. The Board of Directors continues to believe that this proposal is
not in the best interest of the Company or its stockholders.
The Company's current system for electing directors, with the Board divided
into three classes of directors serving staggered three-year terms, was adopted
by the Company's stockholders in 1985 by an affirmative vote of 79%.
The Board believes that the staggered system of electing directors provides
important benefits to the Company:
- The staggered system helps assure continuity and stability of the
Company's business strategies and policies. Since at least two
stockholders' meetings will generally be required to effect a change in
control of the Board, a majority of directors at any given time will have
prior experience as directors of the Company. This is particularly
important to a research-based organization such as the Company, where
product development often requires many years.
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<PAGE> 34
- In the event of any unfriendly or unsolicited proposal to take over
or restructure the Company, the staggered system would permit the Company
time to negotiate with the sponsor, to consider alternative proposals and
to assure that stockholder value is maximized.
As part of the 1985 amendment to the Company's Restated Certificate of
Incorporation (the "Charter") to provide for the current staggered system of
electing directors, the stockholders also approved a requirement that any change
in the provisions of the amendment be approved by the holders of shares of stock
of the Company representing at least 80% of the votes entitled to be cast
generally for the election of directors. This stockholder resolution does not
propose an amendment to the Charter but, instead, seeks to have the Board take
any necessary steps to return to annual election of directors. Thus, the
proposal's approval by stockholders would not itself re-establish annual
election of directors but would require the Board to submit a Charter amendment
for action by stockholders at the 1996 Annual Meeting and an 80% stockholder
vote would be necessary for approval.
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W.,
Suite 215, Washington, D.C. 20037, owner of 225 shares of Common Stock of the
Company, has submitted independently a substantially similar resolution with
respect to annual election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
8. STOCKHOLDER PROPOSAL CONCERNING
EXECUTIVE COMPENSATION
Ms. Virginia F. Gruber, 131 Northfield Road, Millington, NJ 07946, owner of
1576 shares of Common Stock of the Company, has given notice that she intends to
present for action at the Annual Meeting the following resolution:
"RESOLVED: That the shareholders of Merck recommend that the Board of
Directors take the necessary steps to see that not any Merck executive (or
other employee) receive compensation (summation of salary, bonuses,
receipts from stock options, etc.) amounting to more than 25 times that of
the average Merck employee.
"REASONS: While it has been argued that high-paying incentive plans
are needed to retain 'key' employees, modern psychology suggest that the
best executives are goal-orientated individuals who are motivated by the
responsibilities and challenges of their positions rather than the monetary
gains available to them. Besides lowering operating costs, keeping
differences of compensation and levels between executives and other
employees comparatively small (< 25 times) provides increased self-esteem
and thus increased productivity for the average employee.
"Is 25 times (or less) the average employee's compensation fair
compensation for an executive -- even for the CEO? Although the executive's job
of managing Merck's business affairs is certainly important to Merck's success,
it is Merck's many scientists, their support staffs, and the many other
employees who are instrumental in the manufacturing and marketing of Merck's
products -- these average employees -- who are the true backbone of Merck's
business. To compensate any executive (even the CEO) 25 times that of the
average employee is more than fair -- it is generous.
"If health care reform brings what is promised -- health care to every
American, the volume of pharmaceutical sales will increase dramatically. This
will provide a golden opportunity for the pharmaceutical industry. However, with
this opportunity, comes responsibility. Taxes fed into the system will help pay
for prescription drugs as well as for other medical costs of those who cannot
afford to pay their share. To use public monies to provide excessive
compensation to pharmaceutical executives would be unconscionable.
"Help Merck, in these times of fierce competition (and opportunities), to
meet their public responsibilities, and to become more equitable and efficient.
Vote FOR this resolution."
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<PAGE> 35
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
This identical proposal was submitted by the same stockholder at the 1994
Annual Meeting of Stockholders and was soundly defeated. The Board of Directors
reaffirms its belief that a cap on executive compensation could prevent the
Company from attracting, retaining and motivating the extraordinarily talented
people essential to manage the Company for maximum stockholder value. The
companies with which the Company competes are not subject to a pay cap on
executive compensation. A pay cap would eliminate a crucial element of
flexibility in setting executive compensation and would place the Company at a
severe competitive disadvantage. Accordingly, the Board believes that this
proposal is not in the best interest of the Company or its stockholders.
The Company's compensation policies are approved by the Compensation and
Benefits Committee of the Board, which is comprised entirely of independent
outside directors. Company executive compensation is highly dependent on the
Company's performance and the performance of its stock.
The compensation of the Company's executives is within a range of
compensation offered by comparable companies. The Company periodically retains
outside compensation and benefits consultants to assure that its compensation
and benefits programs are not inconsistent with those of other leading
industrial and healthcare companies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
FILINGS UNDER SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the New York Stock Exchange. Officers, directors and
greater than ten-percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file. The Company is not aware of any beneficial owner of more than ten percent
of its Common Stock.
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Forms
5 were required, the Company believes that all filing requirements applicable to
its officers and directors were complied with during the 1994 fiscal year.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1996
Stockholder proposals to be presented at the 1996 Annual Meeting must be
received by the Company on or before November 21, 1995 for inclusion in the
proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before the
meeting. However, if any other matters properly come before the meeting, it is
the intention of the persons named in the enclosed form of proxy to vote said
proxy in accordance with their judgment in such matters.
MERCK & CO., INC.
March 20, 1995
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<PAGE> 36
EXHIBIT A
MERCK & CO., INC.
1996 INCENTIVE STOCK PLAN
(EFFECTIVE JANUARY 1, 1996)
The 1996 Incentive Stock Plan ("ISP"), effective January 1, 1996, is
established to encourage employees of Merck & Co., Inc. (the "Company"), its
subsidiaries, its affiliates, its joint ventures and the Merck Institute for
Therapeutic Research to acquire Common Stock in the Company. It is believed that
the ISP will stimulate employees' efforts on the Company's behalf, will tend to
maintain and strengthen their desire to remain with the Company, will be in the
interest of the Company and its Stockholders, and will encourage such employees
to have a greater personal financial investment in the Company through ownership
of its Common Stock.
1. ADMINISTRATION
The ISP shall be administered by the Compensation and Benefits Committee of
the Board of Directors of the Company (the "Committee"). The Committee is
authorized, subject to the provisions of the ISP, to establish such rules and
regulations as it deems necessary for the proper administration of the ISP, and
to make such determinations and to take such action in connection therewith or
in relation to the ISP as it deems necessary or advisable, consistent with the
ISP. The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other senior member of management as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its authority with regard to any matter or action affecting an officer
subject to Section 16 of the Securities Exchange Act of 1934.
For the purpose of this section and all subsequent sections, the ISP shall
be deemed to include this plan and any comparable sub-plans established by
subsidiaries which, in the aggregate, shall constitute one plan governed by the
terms set forth herein.
2. ELIGIBILITY
Regular full-time and part-time employees of the Company, its subsidiaries,
its affiliates, its joint ventures and the Merck Institute for Therapeutic
Research, including officers, whether or not directors of the Company, shall be
eligible to participate in the ISP ("Eligible Employees") if designated by the
Committee or its delegate. Those directors who are not regular employees are not
eligible.
3. INCENTIVES
Incentives under the ISP may be granted in any one or a combination of (a)
Incentive Stock Options (or other statutory stock option); (b) Nonqualified
Stock Options; (c) Stock Appreciation Rights; (d) Restricted Stock Grants and
(e) Performance Shares (together "Incentives"). All Incentives shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions as may be established by the Committee. Determinations by the
Committee under the ISP including without limitation, determinations of the
Eligible Employees, the form, amount and timing of Incentives, the terms and
provisions of Incentives, and the agreements evidencing Incentives, need not be
uniform and may be made selectively among Eligible Employees who receive, or are
eligible to receive, Incentives hereunder, whether or not such Eligible
Employees are similarly situated.
4. SHARES AVAILABLE FOR INCENTIVES
(a) SHARES SUBJECT TO ISSUANCE OR TRANSFER. Subject to adjustment as
provided in Section 4(c) hereof, there is hereby reserved for issuance under the
ISP 65 million shares of the Company's Common Stock ("Common Stock"). The shares
available for granting awards shall be increased by the number of shares as to
which options or other benefits granted under the Plan have lapsed, expired,
terminated or been canceled. In addition, any shares reserved for issuance under
the Company's 1991 Incentive Stock Plan and 1987 Incentive Stock Plan ("Prior
Plans") in excess of the number of shares as to which options or other benefits
have been awarded thereunder, plus any such shares as to which options or other
benefits granted under the Prior Plans may lapse, expire, terminate or be
canceled, shall also be
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reserved and available for issuance or reissuance under the ISP. Shares under
this Plan may be delivered by the Company from its authorized but unissued
shares of Common Stock or from Common Stock held in the Treasury.
(b) LIMIT ON AN INDIVIDUAL'S INCENTIVES. In any given year, no Eligible
Employee may receive Incentives covering more than three million shares of the
Company's Common Stock (such number of shares may be adjusted in accordance with
Section 4(c)).
(c) RECAPITALIZATION ADJUSTMENT. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering, or any other change in the corporate structure
or shares of the Company, the Committee shall make such adjustment, if any, as
it may deem appropriate in the number and kind of shares authorized by the ISP,
in the number and kind of shares covered by Incentives granted, in the case of
Stock Options, in the option price, and in the case of stock appreciation
rights, in the fair market value.
5. STOCK OPTIONS
The Committee may grant options qualifying as Incentive Stock Options under
the Internal Revenue Code of 1986, as amended, or any successor code thereto
(the "Code"), other statutory options under the Code, and Nonqualified Options
(collectively "Stock Options"). Such Stock Options shall be subject to the
following terms and conditions and such other terms and conditions as the
Committee may prescribe:
(a) OPTION PRICE. The option price per share with respect to each Stock
Option shall be determined by the Committee, but shall not be less than 100% of
the fair market value of the Common Stock on the date the Stock Option is
granted, as determined by the Committee.
(b) PERIOD OF OPTION. The period of each Stock Option shall be fixed by
the Committee but shall not exceed ten (10) years.
(c) PAYMENT. The option price shall be payable in cash at the time the
Stock Option is exercised. No shares shall be issued until full payment therefor
has been made. A grantee of a Stock Option shall have none of the rights of a
stockholder until the shares are issued.
(d) EXERCISE OF OPTION. The shares covered by a Stock Option may be
purchased in such installments and on such exercise dates as the Committee or
its delegate may determine. Any shares not purchased on the applicable exercise
date may be purchased thereafter at any time prior to the final expiration of
the Stock Option. In no event (including those specified in paragraphs (e), (f)
and (g) of this section) shall any Stock Option be exercisable after its
specified expiration period.
(e) TERMINATION OF EMPLOYMENT. Upon the termination of a Stock Option
grantee's employment (for any reason other than retirement, death or termination
for deliberate, willful or gross misconduct), Stock Option privileges shall be
limited to the shares which were immediately exercisable at the date of such
termination. The Committee, however, in its discretion, may provide that any
Stock Options outstanding but not yet exercisable upon the termination of a
Stock Option grantee's employment may become exercisable in accordance with a
schedule to be determined by the Committee. Such Stock Option privileges shall
expire unless exercised or surrendered under a Stock Appreciation Right within
such period of time after the date of termination of employment as may be
established by the Committee, but in no event later than the expiration date of
the Stock Option. If a Stock Option grantee's employment is terminated for
deliberate, willful or gross misconduct, as determined by the Company, all
rights under the Stock Option shall expire upon receipt of the notice of such
termination.
(f) RETIREMENT. Upon retirement of a Stock Option grantee, Stock Option
privileges shall apply to those shares immediately exercisable at the date of
retirement. The Committee, however, in its discretion, may provide that any
Stock Options outstanding but not yet exercisable upon the retirement of a Stock
Option grantee may become exercisable in accordance with a schedule to be
determined by
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the Committee. Stock Option privileges shall expire unless exercised within such
period of time as may be established by the Committee, but in no event later
than the expiration date of the Stock Option.
(g) DEATH. Upon the death of a Stock Option grantee, Stock Option
privileges shall apply to those shares which were immediately exercisable at the
time of death. The Committee, however, in its discretion, may provide that any
Stock Options outstanding but not yet exercisable upon the death of a Stock
Option grantee may become exercisable in accordance with a schedule to be
determined by the Committee. Such privileges shall expire unless exercised by
legal representatives within a period of time as determined by the Committee but
in no event later than the expiration date of the Stock Option.
(h) LIMITS ON INCENTIVE STOCK OPTIONS. Except as may otherwise be
permitted by the Code, the Committee shall not grant to an Eligible Employee
Incentive Stock Options, that, in the aggregate, are first exercisable during
any one calendar year to the extent that the aggregate fair market value of the
Common Stock, at the time the Incentive Stock Options are granted, exceeds
$100,000.
6. STOCK APPRECIATION RIGHTS
The Committee may, in its discretion, grant a right to receive the
appreciation in the fair market value of shares of Common Stock ("Stock
Appreciation Right") either singly or in combination with an underlying Stock
Option granted hereunder or under the Prior Plans. Such Stock Appreciation
Rights shall be subject to the following terms and conditions and such other
terms and conditions as the Committee may prescribe:
(a) TIME AND PERIOD OF GRANT. If a Stock Appreciation Right is granted
with respect to an underlying Stock Option, it may be granted at the time of the
Stock Option Grant or at any time thereafter but prior to the expiration of the
Stock Option Grant. If a Stock Appreciation Right is granted with respect to an
underlying Stock Option, at the time the Stock Appreciation Right is granted the
Committee may limit the exercise period for such Stock Appreciation Right,
before and after which period no Stock Appreciation Right shall attach to the
underlying Stock Option. In no event shall the exercise period for a Stock
Appreciation Right granted with respect to an underlying Stock Option exceed the
exercise period for such Stock Option. If a Stock Appreciation Right is granted
without an underlying Stock Option, the period for exercise of the Stock
Appreciation Right shall be set by the Committee.
(b) VALUE OF STOCK APPRECIATION RIGHT. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, the grantee will be entitled
to surrender the Stock Option which is then exercisable and receive in exchange
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 are surrendered. If a Stock Appreciation Right is granted without
an underlying Stock Option, the grantee will receive upon exercise of the Stock
Appreciation Right an amount equal to the excess of the fair market value of the
Common Stock on the date the election to surrender such Stock Appreciation Right
is received by the Company over the fair market value of the Common Stock on the
date of grant multiplied by the number of shares covered by the grant of the
Stock Appreciation Right.
(c) PAYMENT OF STOCK APPRECIATION RIGHT. Payment of a Stock Appreciation
Right shall be in the form of shares of Common Stock, cash, or any combination
of shares and cash. The form of payment upon exercise of such a right shall be
determined by the Committee either at the time of grant of the Stock
Appreciation Right or at the time of exercise of the Stock Appreciation Right.
7. PERFORMANCE SHARE AWARDS
The Committee may grant awards under which payment may be made in shares of
Common Stock, cash or any combination of shares and cash if the performance of
the Company or any subsidiary, division or affiliate of the Company selected by
the Committee during the Award Period meets certain goals established by the
Committee ("Performance Share Awards"). Such Performance Share Awards
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shall be subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe:
(a) AWARD PERIOD AND PERFORMANCE GOALS. The Committee shall determine and
include in a Performance Share Award grant the period of time for which a
Performance Share Award is made ("Award Period"). The Committee shall also
establish performance objectives ("Performance Goals") to be met by the Company,
subsidiary or division during the Award Period as a condition to payment of the
Performance Share Award. The Performance Goals may include earnings per share,
return on stockholders' equity, return on assets, net income, or any other
financial or other measurement established by the Committee. The Performance
Goals may include minimum and optimum objectives or a single set of objectives.
(b) PAYMENT OF PERFORMANCE SHARE AWARDS. The Committee shall establish the
method of calculating the amount of payment to be made under a Performance Share
Award if the Performance Goals are met, including the fixing of a maximum
payment. The Performance Share Award shall be expressed in terms of shares of
Common Stock and referred to as "Performance Shares." After the completion of an
Award Period, the performance of the Company, subsidiary or division shall be
measured against the Performance Goals, and the Committee shall determine
whether all, none or any portion of a Performance Share Award shall be paid. The
Committee, in its discretion, may elect to make payment in shares of Common
Stock, cash or a combination of shares and cash. Any cash payment shall be based
on the fair market value of Performance Shares on, or as soon as practicable
prior to, the date of payment.
(c) REVISION OF PERFORMANCE GOALS. At any time prior to the end of an
Award Period, the Committee may revise the Performance Goals and the computation
of payment if unforeseen events occur which have a substantial effect on the
performance of the Company, subsidiary or division and which in the judgment of
the Committee make the application of the Performance Goals unfair unless a
revision is made.
(d) REQUIREMENT OF EMPLOYMENT. A grantee of a Performance Share Award must
remain in the employ of the Company until the completion of the Award Period in
order to be entitled to payment under the Performance Share Award; provided that
the Committee may, in its sole discretion, provide for a partial payment where
such an exception is deemed equitable.
(e) DIVIDENDS. The Committee may, in its discretion, at the time of the
granting of a Performance Share Award, provide that any dividends declared on
the Common Stock during the Award Period, and which would have been paid with
respect to Performance Shares had they 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 million shares of Common Stock (such
number of shares may be adjusted in accordance with Section 4(c)).
8. RESTRICTED STOCK GRANTS
The Committee may award shares of Common Stock to a grantee, which shares
shall be subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe ("Restricted Stock Grant"):
(a) REQUIREMENT OF EMPLOYMENT. A grantee of a Restricted Stock Grant must
remain in the employment of the Company during a period designated by the
Committee ("Restriction Period") in order to retain the shares under the
Restricted Stock Grant. If the grantee leaves the employment of the Company
prior to the end of the Restriction Period, the Restricted Stock Grant shall
terminate and the shares of Common Stock shall be returned immediately to the
Company; provided that the Committee may, at the time of the grant, provide for
the employment restriction to lapse with respect to a portion or
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portions of the Restricted Stock Grant at different times during the Restriction
Period. The Committee may, in its discretion, also provide for such complete or
partial exceptions to the employment restriction as it deems equitable.
(b) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATES. During the
Restriction Period, the grantee may not sell, assign, transfer, pledge, or
otherwise dispose of the shares of Common Stock except to a successor under
Section 10 hereof. Each certificate for shares of Common Stock issued hereunder
shall contain a legend giving appropriate notice of the restrictions in the
grant.
(c) ESCROW AGREEMENT. The Committee may require the grantee to enter into
an escrow agreement providing that the certificates representing the Restricted
Stock Grant will remain in the physical custody of an escrow holder until all
restrictions are removed or expire.
(d) LAPSE OF RESTRICTIONS. All restrictions imposed under the Restricted
Stock Grant shall lapse upon the expiration of the Restriction Period if the
conditions as to employment set forth above have been met. The grantee shall
then be entitled to have the legend removed from the certificates.
(e) DIVIDENDS. The Committee shall, in its discretion, at the time of the
Restricted Stock Grant, provide that any dividends declared on the Common Stock
during the Restriction Period shall either be (i) paid to the grantee, or (ii)
accumulated for the benefit of the grantee and paid to the grantee only after
the expiration of the Restriction Period.
(f) LIMIT ON RESTRICTED STOCK GRANT. Incentives granted as Restricted
Stock Grants under this section and Performance Share Awards under Section 7
shall not exceed, in the aggregate, six million shares of Common Stock (such
number of shares may be adjusted in accordance with Section 4(c)).
9. DISCONTINUANCE OR AMENDMENT OF THE PLAN
The Board of Directors may discontinue the ISP at any time and may from
time to time amend or revise the terms of the ISP as permitted by applicable
statutes, except that it may not revoke or alter, in a manner unfavorable to the
grantees of any Incentives hereunder, any Incentives then outstanding, nor may
the Board amend the ISP without stockholder approval where the absence of such
approval would cause the Plan to fail to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, or any other requirement of applicable law or
regulation. No Incentive shall be granted under the ISP after December 31, 2000,
but Incentives granted theretofore may extend beyond that date.
10. NONTRANSFERABILITY
Each Incentive Stock Option granted under the ISP shall not be transferable
other than by will or the laws of descent and distribution; each other Incentive
granted under the ISP may be transferable subject to the terms and conditions as
may be established by the Committee in accordance with regulations promulgated
under the Securities Exchange Act of 1934, or any other applicable law or
regulation.
11. NO RIGHT OF EMPLOYMENT
The ISP and the Incentives granted hereunder shall not confer upon any
Eligible Employee the right to continued employment with the Company, its
subsidiaries, its affiliates, its joint ventures or the Merck Institute for
Therapeutic Research or affect in any way the right of such entities to
terminate the employment of an Eligible Employee at any time and for any reason.
12. TAXES
The Company shall be entitled to withhold the amount of any tax
attributable to any option granted, any amount payable or shares deliverable
under the ISP after giving the person entitled to receive such amount or shares
notice as far in advance as practicable.
A-5
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EXHIBIT B
AMENDMENT 1995-2
TO THE
MERCK & CO., INC.
EMPLOYEE SAVINGS AND SECURITY PLAN
1. Effective July 1, 1995, Section 6.1 of the Merck & Co., Inc. Employee
Savings and Security Plan (the "Plan") is amended to read in its entirety as
follows:
6.1 At the time a Participant makes a Pre-Tax Contribution and/or After-Tax
Contribution to the Plan via payroll deduction, the Company shall
contribute to the Plan out of current earnings and earned surplus only, an
amount equal to 75% of each such After-Tax Contribution and/or Pre-Tax
Contribution, but in no event shall the Company Matching Contribution
exceed 4.5% of each Participant's Base Compensation applicable to the pay
period in which the Participant is making the Pre-Tax Contribution and/or
After-Tax Contribution.
For salaried Participants, Base Compensation applicable to any pay period
in which the Participant makes a contribution shall be determined by
dividing the Participant's Base Compensation by the number of times the
Participant is paid in a month. For hourly Participants who are paid
weekly, Base Compensation applicable to any pay period in which the
Participant makes a contribution shall be determined by converting the
Participant's hourly wage to a monthly rate and dividing by four with the
resulting amount being applied to each of the first four pay periods in the
month. For hourly Participants who are paid bi-weekly, Base Compensation
applicable to any pay period in which the Participant makes a contribution
shall be determined by converting the Participant's hourly wage to a
monthly rate and dividing by two with the resulting amount being applied to
each of the first two pay periods in the month.
2. Effective as of April 25, 1995, Section 17.1 of the Plan is amended to
read in its entirety as follows:
17.1 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; provided, however, that the U.S. Compensation and
Benefits Committee (as appointed by the Chief Executive Officer of the
Company), with the concurrence of the Chief Executive Officer of the
Company, shall have the right to amend or revise the terms of the Plan to
the extent that such amendment or revision does not (i) result in a cost
increase to the Company in excess of 5%, (ii) have a significant adverse
impact on the prospective rights of Participants, or (iii) have a
significant effect on the long-term rights or liabilities of the Company.
Notwithstanding the foregoing sentence, no such discontinuance, amendment
or revision shall affect adversely any right or obligation of any
Participant with respect to contributions theretofore made. No amendment
may be made which would permit any funds paid to the Trustee to revert to
the Company.
B-1
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EXHIBIT C
AMENDMENT 1995-1
TO THE
MERCK & CO., INC.
EMPLOYEE STOCK PURCHASE AND SAVINGS PLAN
Effective as of April 25, 1995, Section 17.1 of the Merck & Co., Inc.
Employee Stock Purchase and Savings Plan ("the Plan") is amended to read in its
entirety as follows:
17.1 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; provided, however, that the U.S. Compensation and
Benefits Committee (as appointed by the Chief Executive Officer of the
Company), with the concurrence of the Chief Executive Officer of the
Company, shall have the right to amend or revise the terms of the Plan to
the extent that such amendment or revision does not (i) result in a cost
increase to the Company in excess of 5%, (ii) have a significant adverse
impact on the prospective rights of Participants, or (iii) have a
significant effect on the long-term rights or liabilities of the Company.
Notwithstanding the foregoing sentence, no such discontinuance, amendment
or revision shall affect adversely any right or obligation of any
Participant with respect to contributions theretofore made. No amendment
may be made which would permit any funds paid to the Trustee to revert to
the Company.
C-1
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(MERCK LOGO)
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MERCK & CO., INC. PROXY/VOTING INSTRUCTION CARD
P.O. BOX 100, WHITEHOUSE STATION, NJ 08889-0100 ANNUAL MEETING OF STOCKHOLDERS -- APRIL 25, 1995
THIS PROXY IS SOLICITED ON BEHALF The shares represented by this proxy will be voted as
OF THE BOARD OF DIRECTORS directed by the stockholder. If no specification is made, the
shares will be voted FOR proposals 1, 2, 3, 4 and 5 and
AGAINST proposals 6, 7 and 8.
When signing as attorney, executor, administrator, trustee or
guardian, give full title as such, and when stock has been
issued in the names of two or more persons, all should sign
unless evidence of authority to sign on behalf of others is
attached.
Signature(s) ...............................................
...............................................
Dated.................................................., 1995
Please complete, sign, date and return
promptly using the enclosed envelope.
/ / Please check ONLY if you plan to attend the Annual
Meeting. (Over)
An admission ticket will be mailed to you.
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The undersigned hereby appoints RAYMOND V. GILMARTIN, MARY M. McDONALD and
CELIA A. COLBERT, as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them to represent and to vote ALL of the
stock of MERCK & CO., Inc. standing in the name of the undersigned at the
ANNUAL MEETING OF STOCKHOLDERS to be held on April 25, 1995, and at all
adjournments thereof, upon the matters below, as designated (including the
power to vote cumulatively in the election of directors), and upon such other
matters as may properly come before the meeting. This card also provides voting
instructions for shares held for the account of the undersigned in the dividend
reinvestment plan, as described in the proxy statement. Any prior proxy or
voting instructions are hereby revoked.
THE DIRECTORS RECOMMEND A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors: Nominees are Raymond V. Gilmartin and Samuel O.
Thier for terms expiring in 1996; Johnnetta B. Cole for a term expiring in
1997; William G. Bowen, Carolyne K. Davis, Lloyd C. Elam and Derek Birkin for
terms expiring in 1998.
AUTHORITY TO VOTE FOR ANY NOMINEE MAY BE WITHHELD BY LINING THROUGH THE
NOMINEE'S NAME ABOVE. To cumulate votes as to a particular nominee(s) as
explained in the proxy statement, indicate the name(s) and the number of votes
to be given to such nominee(s):
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FOR all nominees (except as WITHHOLD AUTHORITY
marked to the contrary above) / / to vote for all nominees / /
2. Ratification of Appointment of Independent Public Accountants................ FOR / / AGAINST / / ABSTAIN / /
3. Proposal to adopt the 1996 Incentive Stock Plan.............................. FOR / / AGAINST / / ABSTAIN / /
4. Proposal to amend the Employee Savings and Security Plan..................... FOR / / AGAINST / / ABSTAIN / /
5. Proposal to amend the Employee Stock Purchase and Savings Plan............... FOR / / AGAINST / / ABSTAIN / /
THE DIRECTORS RECOMMEND A VOTE AGAINST PROPOSALS 6, 7 AND 8.
6. Stockholder proposal re Non-employee Director Pension Benefits............... FOR / / AGAINST / / ABSTAIN / /
7. Stockholder proposal re Annual Election of Directors......................... FOR / / AGAINST / / ABSTAIN / /
8. Stockholder proposal re Executive Compensation............................... FOR / / AGAINST / / ABSTAIN / /
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