<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 1-3305
MERCK & CO., INC.
P. O. Box 100
One Merck Drive
Whitehouse Station, N.J. 08889-0100
(908) 423-1000
Incorporated in New Jersey I.R.S. Employer Identification
No. 22-1109110
The number of shares of common stock outstanding as of the close of business on
July 31, 1996.
Class Number of Shares Outstanding
- ----- ----------------------------
Common Stock 1,205,396,246
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
Part I - Financial Information
MERCK & CO., INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
($ in millions except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------------ ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $4,908.8 $4,135.7 $9,439.2 $7,953.0
-------- -------- -------- --------
Costs, Expenses and Other
Materials and production 2,283.8 1,746.0 4,516.9 3,472.2
Marketing and administrative 946.2 849.6 1,760.6 1,619.6
Research and development 347.7 329.7 697.2 617.8
Gains on sales of specialty chemical businesses - - - (682.9)
Restructuring charge - - - 175.0
Other (income) expense, net (63.3) (31.1) (168.9) 414.0
------- -------- -------- --------
3,514.4 2,894.2 6,805.8 5,615.7
-------- -------- -------- --------
Income Before Taxes 1,394.4 1,241.5 2,633.4 2,337.3
Taxes on Income 422.3 383.4 797.5 721.8
-------- -------- -------- --------
Net Income $ 972.1 $ 858.1 $1,835.9 $1,615.5
======== ======== ======== ========
Per Share of Common Stock:
Net Income $.80 $.69 $1.50 $1.30
Dividends Declared $.34 $.30 $.68 $.60
Average Number of Common
Shares Outstanding (millions) 1,214.9 1,236.8 1,220.7 1,239.9
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 1 -
<PAGE> 3
MERCK & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996 AND DECEMBER 31, 1995
($ in millions)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
--------- ---------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 1,686.8 $ 1,847.4
Short-term investments 828.6 1,502.4
Accounts receivable 2,499.3 2,495.7
Inventories 1,811.0 1,872.5
Prepaid expenses and taxes 796.9 899.5
--------- ---------
Total current assets 7,622.6 8,617.5
--------- ---------
Investments 2,124.3 1,969.6
Property, Plant and Equipment, at cost,
net of allowance for depreciation of
$2,679.3 in 1996 and $2,439.9 in 1995 5,569.2 5,269.1
Goodwill and Other Intangibles,
net of accumulated amortization of
$505.6 in 1996 and $411.5 in 1995 6,740.1 6,826.3
Other Assets 1,190.0 1,149.3
--------- ---------
$23,246.2 $23,831.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 2,809.6 $ 3,105.2
Loans payable and current portion of long-term debt 333.4 423.1
Income taxes payable 1,719.5 1,743.0
Dividends payable 411.9 418.2
--------- ---------
Total current liabilities 5,274.4 5,689.5
--------- ---------
Long-Term Debt 1,505.9 1,372.8
--------- ---------
Deferred Income Taxes and Noncurrent Liabilities 2,824.4 2,747.5
--------- ---------
Minority Interests 2,308.2 2,286.3
--------- ---------
Stockholders' Equity
Common stock
Authorized - 2,700,000,000 shares
Issued - 1,483,606,873 shares - 1996
- 1,483,463,327 shares - 1995 4,795.8 4,742.5
Retained earnings 13,746.6 12,740.6
--------- ---------
18,542.4 17,483.1
Less treasury stock, at cost
274,755,265 shares - 1996
254,614,794 shares - 1995 7,209.1 5,747.4
--------- ---------
Total stockholders' equity 11,333.3 11,735.7
--------- ---------
$23,246.2 $23,831.8
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 2 -
<PAGE> 4
MERCK & CO., INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
($ in millions)
<TABLE>
<CAPTION>
Six Months
Ended June 30
--------------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Income before taxes $ 2,633.4 $ 2,337.3
Adjustments to reconcile income before taxes to cash provided from
operations before taxes:
Gains on sales of Specialty Chemical businesses - (682.9)
Restructuring charge - 175.0
Other 216.7 609.9
Net changes in assets and liabilities 33.7 (185.6)
--------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES BEFORE TAXES 2,883.8 2,253.7
INCOME TAXES PAID (598.5) (1,439.2)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,285.3 814.5
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (576.9) (379.6)
Purchase of securities, subsidiaries and other investments (5,714.5) (5,092.6)
Proceeds from sale of securities, subsidiaries and other investments 6,192.8 4,846.1
Proceeds from sales of Specialty Chemical businesses, net of cash transferred - 1,321.1
Other (31.3) (141.5)
--------- ---------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (129.9) 553.5
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in short-term borrowings 11.6 (45.0)
Proceeds from issuance of debt 315.0 13.6
Payments on debt (267.5) (14.2)
Purchase of treasury stock (1,583.8) (804.1)
Dividends paid to stockholders (835.5) (749.5)
Other 97.5 135.7
--------- ----------
NET CASH USED BY FINANCING ACTIVITIES (2,262.7) (1,463.5)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (53.3) 155.6
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (160.6) 60.1
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,847.4 1,604.0
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,686.8 $ 1,664.1
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
Notes to Financial Statements
1. The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations for reporting on Form
10-Q. Accordingly, certain information and notes required by generally
accepted accounting principles for complete financial statements are not
included herein. The interim statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K.
Interim statements are subject to possible adjustments in connection
with the annual audit of the Company's accounts for the full year 1996;
in the Company's opinion, all adjustments necessary for a fair
presentation of these interim statements have been included and are of a
normal and recurring nature.
Certain reclassifications have been made to prior year amounts to
conform with current year presentation.
- 3 -
<PAGE> 5
Notes to Financial Statements (continued)
2. Inventories consisted of:
<TABLE>
<CAPTION>
($ in millions)
---------------------------------------
June 30 December 31
1996 1995
-------- ------------
<S> <C> <C>
Finished goods $1,002.5 $1,078.3
Raw materials and work in process 740.6 716.2
Supplies 68.1 78.0
-------- --------
Total (approximates current cost) 1,811.2 1,872.5
Reduction to LIFO cost .2 -
-------- --------
$1,811.0 $1,872.5
======== ========
</TABLE>
3. In January 1996, the Company issued $250.0 million of 30-year
debentures, under its existing $1.0 billion shelf registration, bearing
a coupon of 6.3% payable semi-annually.
4. The Company, including Merck-Medco Managed Care (Medco), is party to a
number of antitrust suits, four of which have been certified as class
actions (one at the Federal level and three at the state level),
instituted by most of the nation's retail pharmacies and consumers in
several states, alleging conspiracies in restraint of trade and
challenging the pricing and/or purchasing practices of the Company and
Medco, respectively. Effective January 31, 1996, the Company and
several other defendants entered into an agreement, subject to Court
approval, to settle the Federal class action alleging conspiracy, which
represents the single largest group of retail pharmacy claims, pursuant
to which the Company would pay $51.8 million, payable in four equal
annual installments. On April 4, 1996, the Court declined to approve
the settlement. Subsequently, the Company and several other defendants
entered into an amended settlement agreement, which provides for the
same monetary payment and addresses the Court's concerns as expressed
in its April 4, 1996 opinion. On June 21, 1996, the Court granted
approval of the amended settlement agreement, which will become
effective at the completion of appeals, if any. The Company has not
engaged in any conspiracy and no admission of wrongdoing has been made
or is included in the amended agreement, which was entered into in
order to avoid the cost of litigation and the risk of an inaccurate
adverse verdict by a jury presented by a case of this size and
complexity. While it is not feasible to predict the final outcome of
these proceedings, in the opinion of management, such proceedings
should not ultimately result in any liability which would have a
material adverse effect on the financial position, results of
operations or liquidity of the Company.
5. Sales consisted of:
<TABLE>
<CAPTION>
($ in millions)
-------------------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cardiovasculars $1,944.8 $1,644.2 $3,576.1 $2,952.6
Anti-ulcerants 254.9 202.1 535.8 475.2
Antibiotics 197.9 203.3 413.3 432.8
Ophthalmologicals 171.7 140.2 321.5 251.0
Vaccines/biologicals 137.6 146.7 249.7 243.4
Benign prostate hypertrophy 110.0 89.0 230.2 197.7
Other Merck human health 90.1 55.3 138.8 149.0
Other human health 1,749.6 1,394.2 3,501.2 2,726.8
Animal health/crop protection 252.2 260.7 472.6 485.3
Specialty chemical - - - 39.2
-------- -------- -------- --------
$4,908.8 $4,135.7 $9,439.2 $7,953.0
======== ======== ======== ========
</TABLE>
Sales by therapeutic class include Medco sales of Merck products. Other
human health primarily includes Medco sales of non-Merck products and
Medco human health services, principally managed prescription drug
programs.
- 4 -
<PAGE> 6
Notes to Financial Statements (continued)
6. Other (income) expense, net, consisted of:
<TABLE>
<CAPTION>
($ in millions)
-----------------------------------------------------
Three Months Six Months
Ended June 30 Ended June 30
------------------------ -----------------------
1996 1995 1996 1995
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Interest income $ (49.2) $ (46.4) $ (109.4) $ (96.6)
Interest expense 32.8 23.0 67.3 45.1
Exchange gains (5.6) (8.2) (13.1) (2.1)
Minority interests 42.5 34.1 71.9 52.9
Equity income from affiliates (128.4) (71.5) (293.8) (163.5)
Amortization of goodwill and other intangibles 47.2 47.4 94.2 95.2
Other, net (2.6) (9.5) 14.0 483.0
------- ------- -------- -------
$ (63.3) $ (31.1) $ (168.9) $ 414.0
======= ======= ======== =======
</TABLE>
Minority interests include third parties' share of exchange gains and
losses arising from translation of the financial statements into U.S.
dollars.
Interest paid for the six-month periods ended June 30, 1996 and 1995
was $35.5 million and $39.1 million, respectively.
7. Income taxes paid for the six-month periods ended June 30, 1996 and
1995 were $598.5 million and $1,439.2 million, respectively. The
decrease in 1996 primarily reflects increased taxes paid in 1995 on the
1994 gain resulting from the sale to Astra AB (Astra) of an interest in
a joint venture, the 1995 gains on sales of subsidiaries and a change
in law affecting the calculation of Federal estimated payments.
8. Legal proceedings to which the Company is a party are discussed in Part
I Item 3, Legal Proceedings, in the Annual Report on Form 10-K. Current
developments are discussed in Part II of this filing.
- 5 -
<PAGE> 7
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION
Earnings per share for the second quarter of 1996 were $0.80, an increase of 16%
over the second quarter of 1995. Second quarter net income increased 13% to
$972.1 million. Sales for the quarter were $4.9 billion, up 19% from the same
period last year.
For the first six months, earnings per share were $1.50, an increase of 15% from
the first six months of 1995. Net income was $1,835.9 million for the first six
months of 1996, an increase of 14% from the first six months of 1995.
Sales rose 19% to $9.4 billion.
Sales growth for the quarter and first six months was affected by the
divestiture of Medco Behavioral Care Corp. in the fourth quarter of 1995. Sales
growth for the first six months was also affected by the divestiture of Kelco in
the first quarter of 1995. Adjusting for these effects, sales for the second
quarter and first six months increased 21% and 22%, respectively.
Sales growth for the quarter and the first half of 1996 continued to be led by
established major products, recent product introductions and growth from the
Merck-Medco Managed Care business. Both domestic and international operations
reported strong unit volume gains.
Foreign exchange reduced the second quarter sales growth by two percentage
points as compared to essentially no effect on the first quarter sales growth.
Excluding exchange, sales of Merck human and animal health products increased
19% and 16% for the second quarter and six months, respectively. Sales outside
the United States accounted for 30% of the first half of 1996 sales, compared
with 33% for the same period last year.
Income growth for the first six months was driven by strong unit volume gains.
The unfavorable effect of inflation, net of price and exchange, was partially
offset by cost controls and productivity improvements in manufacturing and
selling, general and administrative expenses.
The growth in pretax income for the second quarter and first six months was
reduced by the Company's share of the increase in taxes related to the Astra
Merck joint venture and the European vaccine joint venture with Pasteur Merieux
Serums et Vaccins. The reduction in pretax growth, however, was offset by a
corresponding reduction in the Company's tax rate in 1996, resulting in no
effect on net income growth.
Results for the first six months were paced by sales gains for 'Zocor',
'Mevacor', 'Vasotec', 'Vaseretic', 'Prinivil', 'Proscar' and 'Pepcid'. The 1995
introductions of 'Cozaar'*, 'Hyzaar'*, 'Fosamax' and 'Trusopt' in the U.S. and
many major European markets, the 1995 launch of 'Varivax' in the U.S. and the
1996 introduction of 'Crixivan' also contributed to the first half sales gain.
Significant prescription volume growth in the Merck-Medco Managed Care business
also contributed to the sales increase for the first six months.
Together, Merck's cholesterol-lowering agents, 'Zocor' and 'Mevacor', hold about
40% of the worldwide cholesterol-lowering market, and combined sales continued
to show significant growth in 1996. The cholesterol-lowering market continues to
expand, fueled by results of the landmark Scandinavian Simvastatin Survival
Study (4S) and additional key studies on the benefits of using this class of
products to lower cholesterol in high-risk patients.
Twenty countries have approved a new indication for 'Zocor', based on 4S, as a
cholesterol-lowering medicine proven to save lives and prevent heart attacks in
people with heart disease and high cholesterol. 'Zocor', unsurpassed in its
cholesterol-lowering ability, remains the only medication with a FDA-approved
indication to reduce all-cause mortality in patients with coronary heart
disease. With fewer than one-third of patients who have coronary disease
currently receiving cholesterol-lowering therapy, there is strong potential for
the continued growth of 'Zocor'.
'Mevacor' is the first cholesterol-lowering drug demonstrated in a study to
regress atherosclerotic plaques in the carotid arteries of patients without
coronary artery disease. The Asymptomatic Carotid Artery Progression Study
(ACAPS) found that patients taking 'Mevacor' experienced significantly fewer
major cardiac events than patients treated with a placebo. In February, the FDA
cleared addition of the study results to the clinical pharmacology section of
the labeling for 'Mevacor'.
*'Cozaar' and 'Hyzaar' are registered trademarks of E.I. du Pont de
Nemours and Company, Wilmington, DE, USA.
- 6 -
<PAGE> 8
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued)
'Vasotec', Merck's angiotensin converting enzyme (ACE) inhibitor for reducing
high blood pressure and treating heart failure, continued its growth. It remains
the leading branded product in the worldwide cardiovascular market.
The strong volume growth of 'Proscar' is attributable to increasing acceptance
by urologists and the results from the Scandinavian Reduction of the Prostate
Study (SCARP) and the 'Proscar' Safety Plus Efficacy Canadian Two-Year
(PROSPECT) study. Another new study pooled the results of five trials comparing
'Proscar' and a placebo. The study found that 'Proscar' appeared to reduce
symptoms in patients with severely enlarged prostates. About 50 percent of
patients suffer from this condition. All these results continue to support the
long-term safety and effectiveness of the medicine in improving urinary
symptoms, urinary flow and quality of life in patients taking 'Proscar'.
'Fosamax', Merck's breakthrough product for the treatment of osteoporosis in
postmenopausal women, has been introduced in 29 countries, including the United
States where it became available last October. Prescription trends are strong.
In May, researchers at the University of California at San Francisco announced
that 'Fosamax' reduced by about half the risk of hip and vertebral fractures in
postmenopausal women with osteoporosis who have had a previous spinal fracture.
This is the first study to show a reduction in hip fractures in this population.
In the United States, the annual cost of hip fractures is estimated at $10
billion.
Merck continues to educate women about the consequences of osteoporosis and the
benefits of treatment with 'Fosamax' through major consumer campaigns --
including full-page advertisements in major newspapers and magazines. 'Fosamax'
is the first nonhormonal medicine for treating osteoporosis, a disease that
affects about one-in-three women over the age of 50.
On April 29, Merck filed a supplement with the U.S. FDA for a new indication for
'Fosamax' - the prevention of osteoporosis in postmenopausal women.
Prescription activity remains strong for 'Pepcid', an H2-receptor antagonist for
the treatment of duodenal ulcers and the short-term treatment of gastric ulcers
and gastroesophageal reflux disease (GERD). It continues its solid performance
despite competition from generic cimetidine, newer antisecretory agents and the
introduction of over-the-counter (OTC) H2 antagonists.
Pepcid AC Acid Controller(TM), sold by Johnson & Johnson o Merck Consumer
Pharmaceuticals Co., continues to lead the high-growth acid indigestion remedy
market, even in the face of expanded competition. The product, which recently
celebrated its one-year anniversary in the OTC market, has registered retail
sales of more than $250 million since launch. In addition to its presence in the
United States, 'Pepcid AC' was just launched in Canada, making it the first OTC
acid controller to be marketed there.
As the first and only chickenpox vaccine in the United States, 'Varivax' also
contributed to the strong volume growth in the first six months of 1996. In May,
Merck reached an agreement with the U.S. Centers for Disease Control and
Prevention (CDC) to supply 'Varivax' for use in children served by the federally
funded Vaccines for Children program. About 60 percent of children in the United
States are vaccinated through federal and state-funded programs.
In May, Merck began shipping in the United States its newest vaccine, 'Vaqta',
which is for the prevention of hepatitis A in people two years of age and older.
Because there is no treatment for hepatitis A, a highly infectious viral disease
that attacks the liver, and because the medical and economic consequences of the
disease are substantial, immunization of high-risk individuals is recommended by
the CDC.
'Cozaar' and 'Hyzaar' (a combination of 'Cozaar' and the diuretic
hydrochlorothiazide) were introduced in the U.S. in May 1995. 'Cozaar' has also
been registered in 50 other countries, including Canada and 19 western European
countries. Both products have been exceptionally well accepted. 'Cozaar' is the
first in a new class of anti-hypertensive drugs called Angiotensin-II (A-II)
receptor antagonists. In clinical studies, 'Cozaar' and 'Hyzaar' had excellent
tolerability profiles and were highly effective. Both products were developed in
collaboration with the DuPont Merck Pharmaceutical Company.
- 7 -
<PAGE> 9
MANAGEMENT'S ANALYSIS OF INTERIM FINANCIAL INFORMATION (continued)
Sales of 'Trusopt', the first carbonic anhydrase inhibitor made in a topical
(eyedrop) formulation, have proceeded at a strong pace since it was first
introduced in the United States in May 1995. It also has been introduced in
several other countries, mainly in Europe. In only a year, 'Trusopt' has become
the most widely prescribed anti-glaucoma medicine in the United States. The
product is indicated for the treatment of elevated intraocular pressure in
patients with ocular hypertension or open-angle glaucoma. 'Trusopt' has been
proven effective in the consistent lowering of intraocular pressure in most
patients and may be used both as monotherapy and adjunctive therapy.
On March 14, the FDA gave its fastest ever marketing clearance to 'Crixivan'
(indinavir sulfate), an HIV protease inhibitor. It is indicated in the treatment
of HIV infection in adults when antiretroviral therapy is warranted. 'Crixivan'
can be taken in combination with other anti-HIV therapies or alone. New studies
show that 'Crixivan' decreased HIV in the bloodstream to undetectable levels in
almost 90 percent of patients on triple combination therapy ('Crixivan', AZT and
3TC) for as long as 48 weeks. Overall, clinical trials for 24 weeks and longer
have shown that about 40 percent of patients taking 'Crixivan' alone had virus
levels below the limit of detection.
The Federal Trade Commission (FTC) has recently instituted an investigation into
whether pharmaceutical companies may have violated Federal antitrust laws in
connection with pricing. On March 13, 1996, the Company received a notice from
the FTC that the Company was included in this investigation. Management believes
that the Company is currently operating in all material respects in accordance
with applicable standards. Accordingly, although management cannot predict the
outcome of the investigation, it does not believe that the result of the
investigation will have a material adverse effect on the financial position,
results of operations or liquidity of the Company.
- 8 -
<PAGE> 10
Part II - Other Information
Item 1. Legal Proceedings
The Company, including Medco, is party to a number of antitrust suits, four of
which have been certified as class actions (one at the Federal level and three
at the state level), instituted by most of the nation's retail pharmacies and
consumers in several states, alleging conspiracies in restraint of trade and
challenging the pricing and/or purchasing practices of the Company and Medco,
respectively. A significant number of other pharmaceutical companies and
wholesalers have also been sued in the same or similar litigation. These
actions, except for several actions pending in state courts, have been
consolidated for pre-trial purposes in the United States District Court for the
Northern District of Illinois. Effective January 31, 1996, the Company and
several other defendants entered into an agreement, subject to Court approval,
to settle the Federal class action alleging conspiracy, which represents the
single largest group of retail pharmacy claims, pursuant to which the Company
would pay $51.8 million, payable in four equal annual installments. On April 4,
1996, the Court declined to approve the settlement. Subsequently, the Company
and several other defendants entered into an amended settlement agreement, which
provides for the same monetary payment (the first annual installment of which
has already been paid into escrow) and addresses the Court's concerns as
expressed in its April 4, 1996 opinion. On June 21, 1996, the Court granted
approval of the amended settlement agreement, which will become effective at the
completion of appeals, if any. The Company has not engaged in any conspiracy and
no admission of wrongdoing has been made or is included in the amended
agreement, which was entered into in order to avoid the cost of litigation and
the risk of an inaccurate adverse verdict by a jury presented by a case of this
size and complexity. While it is not feasible to predict the final outcome of
these proceedings, in the opinion of management, such proceedings should not
ultimately result in any liability which would have a material adverse effect on
the financial position, results of operations or liquidity of the Company.
Reference may be made to Part II, Item 1 ("Legal Proceedings") of the Company's
previously filed Form 10-Q for the quarterly period ended March 31, 1996.
Item 4. Submission of Matters to a Vote of Security-Holders
The following matters were voted upon at the Annual Meeting of Stockholders held
on April 23, 1996, and received the votes set forth below:
1. All of the following persons nominated were elected to serve as directors
and received the number of votes set opposite their names:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
H. Brewster Atwater, Jr. 986,764,622 8,548,859
Raymond V. Gilmartin 987,620,143 7,693,338
Samuel O. Thier, M.D. 987,455,725 7,857,756
Dennis Weatherstone 984,098,079 11,213,902
</TABLE>
2. A proposal to ratify the appointment of independent public accountants
received 989,557,551 votes for and 2,674,389 votes against, with 3,081,541
abstentions.
3. A proposal to adopt the 1996 Non-Employee Directors Stock Option Plan
received 815,387,580 votes for and 167,008,234 votes against, with
12,917,667 abstentions.
4. A stockholder proposal concerning prior government/political service of
certain employees and directors received 29,720,343 votes for and
746,210,376 votes against, with 26,282,127 abstentions and 193,100,635
broker non-votes.
5. A stockholder proposal concerning benefits for management and directors
received 43,048,610 votes for and 742,116,117 votes against, with
17,045,619 abstentions and 193,103,135 broker non-votes.
6. A stockholder proposal concerning annual election of directors received
292,292,353 votes for and 495,069,011 votes against, with 14,803,632
abstentions and 193,148,485 broker non-votes.
- 9 -
<PAGE> 11
Item 4. Submission of Matters to a Vote of Security-Holders (continued)
7. A stockholder proposal concerning bonuses received 46,233,844 votes for and
738,245,710 votes against, with 17,736,188 abstentions and 193,097,739
broker non-votes.
8. A stockholder proposal concerning charitable contributions received
34,834,095 votes for and 736,959,699 votes against, with 30,429,851
abstentions and 193,089,836 broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
--------
Number Description Method of Filing
------ ----------- ----------------
<S> <C>
3(a) Restated Certificate of Incorporation of Incorporated by reference to Form
Merck & Co., Inc. (May 6, 1992) 10-K Annual Report for the fiscal
year ended December 31, 1992
3(b) By-Laws of Merck & Co., Inc. (as amended Incorporated by reference to Form
effective June 9, 1994) 10-K Annual Report for the fiscal
year ended December 31, 1994
10(a) 1996 Non-Employee Directors Stock Option Filed with this document
Plan (as adopted on April 23, 1996)
10(b) Plan for Deferred Payment of Directors' Filed with this document
Compensation (amended and restated
June 21, 1996)
10(c) Retirement Plan for the Directors of Filed with this document
Merck & Co., Inc. (amended and restated
June 21, 1996)
10(d) Letter Agreement dated May 24, 1996 with Filed with this document
respect to the Employment Agreement between
Per G. H. Lofberg and Medco dated April 1,
1993 and amended July 27, 1993
11 Computation of Earnings Per Common Share Filed with this document
12 Computation of Ratios of Earnings to Filed with this document
Fixed Charges
27 Financial Data Schedule Filed with this document
</TABLE>
(b) Reports on Form 8-K
During the three-month period ending June 30, 1996, no current reports on
Form 8-K were filed.
- 10 -
<PAGE> 12
Signatures
Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERCK & CO., INC.
Date: August 12, 1996 /s/Mary M. McDonald
------------------------------------------
Mary M. McDonald
Senior Vice President and General Counsel
Date: August 12, 1996 /s/Peter E. Nugent
------------------------------------------
Peter E. Nugent
Vice President, Controller
- 11 -
<PAGE> 13
EXHIBIT INDEX
Exhibits
--------
Number Description
------ -----------
3(a) Restated Certificate of Incorporation of Merck & Co., Inc.
(May 6, 1992) - Incorporated by reference to Form 10-K
Annual Report for the fiscal year ended December 31, 1992
3(b) By-Laws of Merck & Co., Inc. (as amended effective June 9,
1994) - Incorporated by reference to Form 10-K Annual Report
for the fiscal year ended December 31, 1994
10(a) 1996 Non-Employee Directors Stock Option Plan (as adopted on
April 23, 1996)
10(b) Plan for Deferred Payment of Directors' Compensation (amended
and restated June 21, 1996)
10(c) Retirement Plan for the Directors of Merck & Co., Inc.
(amended and restated June 21, 1996)
10(d) Letter Agreement dated May 24, 1996 with respect to the
Employment Agreement between Per G. H. Lofberg and Medco dated
April 1, 1993 and amended July 27, 1993
11 Computation of Earnings Per Common Share
12 Computation of Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
<PAGE> 1
Exhibit 10(a)
MERCK & CO., INC.
1996 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN
(ADOPTED APRIL 23, 1996)
<PAGE> 2
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The 1996 Non-Employee Directors Stock Option Plan (the "Plan") is established to
attract, retain and compensate for service as members of the Board of Directors
of Merck & Co., Inc. (the "Company") highly qualified individuals who are not
current or former employees of the Company and to enable them to increase their
ownership in the Company's Common Stock. The Plan will be beneficial to the
Company and its stockholders since it will allow these directors to have a
greater personal financial stake in the Company through the ownership of Company
stock, in addition to underscoring their common interest with stockholders in
increasing the value of the Company stock longer term.
1. Eligibility
All members of the Company's Board of Directors who are not current or
former employees of the Company or any of its subsidiaries ("Non-Employee
Directors") are eligible to participate in this Plan.
2. Options
Only nonqualified stock options ("NQSOs") may be granted under this Plan.
3. Shares Available
a) Number of Shares Available: There is hereby reserved for issuance
under this Plan 225,000 shares of Merck Common Stock, no par value,
which may be authorized but unissued shares, treasury shares, or
shares purchased on the open market.
b) 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, adjustments in the
number and kind of shares authorized by this Plan, in the number and
kind of shares covered by, and in the option price of outstanding
NQSOs under this Plan shall be made if, and in the same manner as,
such adjustments are made to NQSOs issued under the Company's then
current Incentive Stock Plan.
<PAGE> 3
4. Annual Grant of Nonqualified Stock Options
Each year on the first Friday following the Company's Annual Meeting of
Stockholders, each individual elected, reelected or continuing as a
Non-Employee Director shall automatically receive NQSOs covering one
thousand (1,000) shares of Merck Common Stock. Notwithstanding the
foregoing, if, on that first Friday, the General Counsel of the Company
determines, in her/his sole discretion, that the Company is in possession
of material, undisclosed information about the Company, then the annual
grant of NQSOs to Non-Employee Directors shall be suspended until the
second day after public dissemination of such information and the price,
exercisability date and option period shall then be determined by
reference to such later date. If Merck Common Stock is not traded on the
New York Stock Exchange on any date a grant would otherwise be awarded,
then the grant shall be made the next day thereafter that Merck Common
Stock is so traded.
5. Option Price
The price of the NQSO shall be the closing price on the date of the grant
of the Company's Common Stock as quoted on the composite tape of the New
York Stock Exchange.
6. Option Period
A NQSO granted under this Plan shall become exercisable five years after
date of grant and shall expire ten years after date of grant ("Option
Period").
7. Payment
The NQSO price shall be paid in cash in U.S. dollars at the time the NQSO
is exercised.
8. Cessation of Service
Upon cessation of service as a Non-Employee Director (for reasons other
than retirement or death), only those NQSOs immediately exercisable at the
date of cessation of service shall be exercisable by the grantee. Such
NQSOs must be exercised within ninety days of cessation of service (but in
no event after the expiration of the Option Period) or they shall be
forfeited.
- 2 -
<PAGE> 4
9. Retirement
If a grantee ceases service as a Non-Employee Director and is at least age
65 with ten or more years of service or age 70 with five or more years of
service, then any of his/her outstanding NQSOs shall continue to become
exercisable. All outstanding NQSOs must be exercised by the earlier of (i)
sixty months following the date of such cessation of service or (ii) the
expiration of the Option Period, or such NQSOs shall be forfeited.
10. Death
Upon the death of a grantee, those NQSOs which had been held for at least
twelve months at date of death shall become immediately exercisable upon
death. The NQSOs which become exercisable upon the date of death and those
NQSOs which were exercisable on the date of death may be exercised by the
grantee's legal representatives or heirs by the earlier of (i) thirty-six
months from the date of death or (ii) the expiration of the Option Period;
if not exercised by the earlier of (i) or (ii), such NQSOs shall be
forfeited.
11. Administration and Amendment of the Plan
This Plan shall be administered by the Board of Directors of Merck & Co.,
Inc. This Plan may be terminated or amended by the Board of Directors as
it deems advisable. However, an amendment revising the price, date of
exercisability, option period of, or amount of shares under a NQSO shall
not be made more frequently than every six months unless necessary to
comply with applicable laws or regulations. No amendment may revoke or
alter in a manner unfavorable to the grantees any NQSOs then outstanding,
nor may the Board amend this Plan 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 (the "Act"), or any other
requirement of applicable law or regulation. A NQSO may not be granted
under this Plan after December 31, 2000 but NQSOs granted prior to that
date shall continue to become exercisable and may be exercised according
to their terms.
12. Nontransferability
No NQSO granted under this Plan is transferable other than by will or the
laws of descent and distribution. During the grantee's lifetime, a NQSO
may only be exercised by the grantee or the grantee's guardian or legal
representative.
- 3 -
<PAGE> 5
13. Compliance with SEC Regulations
It is the Company's intent that the Plan comply in all respects with Rule
16b-3 of the Act, and any regulations promulgated thereunder. If any
provision of this Plan is later found not to be in compliance with the
Rule, the provision shall be deemed null and void. All grants and
exercises of NQSOs under this Plan shall be executed in accordance with
the requirements of Section 16 of the Act, as amended, and any regulations
promulgated thereunder.
14. Miscellaneous
Except as provided in this Plan, no Non-Employee Director shall have any
claim or right to be granted a NQSO under this Plan. Neither the Plan nor
any action thereunder shall be construed as giving any director any right
to be retained in the service of the Company.
15. Effective Date
This Plan shall be effective April 23, 1996 or such later date as
shareholder approval is obtained.
- 4 -
<PAGE> 1
Exhibit 10(b)
MERCK & CO., INC.
PLAN FOR DEFERRED PAYMENT OF
DIRECTORS' COMPENSATION
(Amended and Restated June 21, 1996)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article I Purpose 1
Article II Effective Date 1
Article IIII Election of Deferral, Measurement Methods and 1
Distribution Schedule
Article IV Valuation of Deferred Amounts 3
Article V Redesignation Within a Deferral Account 5
Article VI Redesignation of Deferred Amounts Measured by Fidelity Daily 6
Income Trust Shares
Article VII Payment of Deferred Amounts 6
Article VIII Designation of Beneficiary 8
Article IX Plan Amendment or Termination 8
Schedule A - Measurement Methods
</TABLE>
(i)
<PAGE> 3
MERCK & CO., INC.
PLAN FOR DEFERRED PAYMENT OF
DIRECTORS' COMPENSATION
I. PURPOSE
To provide an arrangement under which directors of Merck & Co., Inc. other
than current employees may (i) elect to voluntarily defer payment of the
annual retainer and meeting and committee fees until after termination of
their service as a director, and (ii) choose the measurement method(s)
used to value compensation voluntarily or mandatorily deferred on their
behalf.
II. EFFECTIVE DATE
March 24, 1981; amended and restated June 21,1996.
III. ELECTION OF DEFERRAL, MEASUREMENT METHODS AND
DISTRIBUTION SCHEDULE
A. Mandatory Deferral Amount
1. Each director who (i) was a director on December 31, 1995, and
elects to participate in this Plan in lieu of receiving future
benefit accruals under the Retirement Plan for the Directors of
Merck & Co., Inc. (the "Retirement Plan"), or (ii) first becomes a
director after December 31, 1995, will be credited annually with
$15,000 (the "Mandatory Deferral Amount") to this Plan. Beginning
with April 1, 1997, the Mandatory Deferral Amount shall be credited
on April 1 each year unless April 1 is not a business day, in which
case the Mandatory Deferral Amount shall be credited on the first
business day following April 1 ("Mandatory Deferral Date").
2. A director will not receive the Mandatory Deferral Amount on April 1
of the calendar year in which his or her retirement from the Board
is expected to be effective at the Annual Meeting of Stockholders
for such year. A pro rata adjustment will be made to a director's
account if the effective date of such director's retirement is other
than the date of the Annual Meeting of Stockholders.
3. Prior to December 28 of each year, each director who will receive
the Mandatory Deferral Amount must elect the measurement method or
methods by which the Mandatory Deferral Amount to be credited on
his/her behalf on April 1 of the next calendar year will be measured
in accordance with Article IV, below.
<PAGE> 4
4. Prior to commencement of duties as a director, a director newly
elected or appointed to the Board during a calendar year must make
the election under this paragraph for the pro rata portion of the
Mandatory Deferral Amount applicable to such director's first year
of service (or part thereof). Such pro rata portion shall be
credited to the director's account on the first day of such
director's service.
B. Voluntary Deferral Amount
1. Prior to December 28 of each year, each director is entitled to make
an irrevocable election to defer until termination of service as a
director receipt of payment of (a) 50% or 100% of the retainer for
the 12 months beginning April 1 of the next calendar year, (b) 50%
or 100% of the Committee Chairperson retainer beginning April 1 of
the next calendar year, and (c) 50% or 100% of the meeting and
committee fees for the 12 months beginning April 1 of the next
calendar year.
2. Each such annual election shall include an election as to the
measurement method or methods by which the value of amounts deferred
will be measured in accordance with Article IV, below.
3. Prior to commencement of duties as a director, a director newly
elected or appointed to the Board during a calendar year must make
the election under this paragraph for the portion of the Voluntary
Deferral Amount applicable to such director's first year of service
(or part thereof).
4. The Voluntary Deferral Amount shall be credited as follows: (1)
Meeting and committee fees that are deferred are credited as of the
day the director's services are rendered; (2) if the Board retainer
and/or Committee Chairperson retainer is deferred, a pro-rata share
of the deferred retainer is credited on the last business day of
each calendar quarter. The dates the Voluntary Deferral Amount, or
parts thereof, are credited to the director's deferred account are
hereinafter referred to as the Voluntary Deferral Dates.
C. Election of Distribution Schedule
Each annual election referred to in A and B above shall include an
election to receive payment following termination of service as a
director of all amounts deferred in a lump sum either immediately or
one year after such termination, or in quarterly or annual
installments over five, ten or fifteen years.
2
<PAGE> 5
IV. VALUATION OF DEFERRED AMOUNTS
The value of amounts deferred shall be measured in accordance with each
director's election of measurement methods. The available measurement
methods are set forth on Schedule A hereto. At no time during the deferral
period will any shares of Merck Common Stock, Mutual Fund shares, Treasury
Bills, Salomon 3-Month Treasury Index shares, or Bond Index shares be
purchased or earmarked for such deferred amounts nor will any rights of a
shareholder exist with respect to such amounts.
A. Common Stock
1. Initial Crediting. That portion of the annual Mandatory Deferral
Amount allocated to Merck Common Stock shall be used to determine
the number of full and partial shares of Merck Common Stock which
such amount would purchase at the average of the high and low prices
of the Common Stock on the New York Stock Exchange composite tape on
the Mandatory Deferral Date.
That portion of the Voluntary Deferral Amount allocated to Merck
Common Stock shall be used to determine the number of full and
partial shares of Merck Common Stock which such amount would
purchase at the high and low prices of the Common Stock on the New
York Stock Exchange composite tape on the applicable Voluntary
Deferral Date.
However, should it be determined by the Committee on Directors of
the Board of Directors that a measurement of Merck Common Stock on
any Mandatory or Voluntary Deferral Date would not constitute fair
market value, then the Committee shall decide on which date fair
market value shall be determined using the valuation method set
forth in this Article IV, Section A.1.
2. Dividends. Each director's account will be credited with the
additional number of full and partial shares of Merck Common Stock
which would have been purchasable with the dividends on shares
previously credited to the account at the closing price on the New
York Stock Exchange composite tape on the date each dividend was
paid.
3. Distributions. Distribution from the Merck Common Stock account will
be valued at the closing price on the New York Stock Exchange
composite tape of Merck Common Stock on the distribution date.
3
<PAGE> 6
B. Mutual Funds
1. Initial Crediting. The amount allocated to each Mutual Fund shall be
used to determine the full and partial Mutual Fund shares which such
amount would purchase at the closing net asset value of the Mutual
Fund shares on the Mandatory or Voluntary Deferral Date, whichever
is applicable. The director's account will be credited with the
number of full and partial Mutual Fund shares so determined.
2. Dividends. Each director's account will be credited with the
additional number of full and partial Mutual Fund shares which would
have been purchasable, at the closing net asset value of the Mutual
Fund shares as of the date each dividend is paid on the Mutual Fund
shares, with the dividends which would have been paid on the number
of shares previously credited to such account (including pro rata
dividends on any partial shares).
3. Distributions. Mutual Fund distributions will be valued based on the
closing net asset value of the Mutual Fund shares on the
distribution date.
C. Salomon 3-Month Treasury Bill Index
1. Initial Crediting. The amount allocated to the Salomon 3-Month
Treasury Bill Index will be credited to the director's account at $1
per unit.
2. Interest. Each director's account measured by the Salomon 3-Month
Treasury Bill Index will be credited with interest at the monthly
rate of return on the Salomon 3-Month Treasury Bill Index.
3. Distributions. Distributions will be valued at $1 per unit.
D. Bond Indices
1. Initial Crediting. The amount allocated to each Bond Index shall be
used to determine the number of full and partial Bond Index units
which such amount would purchase at the Bond Index closing quote at
the Mandatory or Voluntary Deferral Date, whichever is applicable,
divided by 100. The director's account will be credited with the
number of Bond Index units so determined.
2. Distributions. Distributions of Bond Index units will be valued at
the Bond Index closing quote on the distribution date divided by
100.
4
<PAGE> 7
E. Adjustments
In the event of a reorganization, recapitalization, stock split,
stock dividend, combination of shares, merger, consolidation, rights
offering or any other change in the corporate structure or shares of
the Company or a Mutual Fund or units of a Bond Index, the Committee
on Directors shall make such adjustment, if any, as it may deem
appropriate in the number and kind of shares or units of such
investment measurement method credited to each director's account.
V. REDESIGNATION WITHIN A DEFERRAL ACCOUNT
A. General
A director may request a change in the measurement methods used to
value all or a portion of his/her account except that no change may
be made to the portion of the account measured by Merck Common
Stock. The change will be effective following receipt of such
written request. AMOUNTS DEFERRED USING THE MERCK COMMON STOCK
METHOD AND ANY EARNINGS ATTRIBUTABLE TO SUCH DEFERRALS MAY NOT BE
REDESIGNATED.
B. When Redesignation May Occur
1. During Active Service. Such redesignation may be made not more than
four times in each calendar year. Each such request shall be
irrevocable and can be designated in whole percentages or as a
dollar amount.
2. After Death. Following the death of a director, the legal
representative or beneficiary of such director may redesignate
subject to the same rules as for active directors set forth in
Article V, Section B.1.
C. Valuation of Amounts to be Redesignated
The portion of the director's account to be redesignated will be
valued at its cash equivalent and such cash equivalent will be
converted into shares or units of the other measurement method(s).
For purposes of such redesignations, the cash equivalent of Mutual
Fund shares, Salomon 3-Month Treasury Bill Index units, or Bond
Index units shall be valued on the date the request to change is
received by the Company (or, if that day is not a business day, then
on the next business day), as follows:
5
<PAGE> 8
1. Mutual Funds. The value for conversion purposes shall be the
net asset value of such Mutual Fund at the close of business.
2. Salomon 3-Month Treasury Bill Index. The value for conversion
purposes shall be $1.
3. Bond Indices. The value for conversion purposes shall be
determined by the Bond Index closing quote divided by 100.
VI. REDESIGNATION OF DEFERRED AMOUNTS MEASURED BY
FIDELITY DAILY INCOME TRUST SHARES
Prior to December 28, 1996, each director who has any part of his/her
deferred amount measured by Fidelity Daily Income Trust shares may elect
the measurement method or methods by which such deferred amount will be
measured as of April 1, 1997.
If a director fails to make an election regarding amounts measured by
Fidelity Daily Income Trust shares, then the amount shall automatically be
redesignated as of April 1, 1997, to the Salomon 3-Month Treasury Bill
Index measurement method. The value of shares of Fidelity Daily Income
Trust to be redesignated shall be the offering price of Fidelity Daily
Income Trust shares on March 31, 1997.
VII. PAYMENT OF DEFERRED AMOUNTS
A. Payment
All payments to directors of amounts deferred will be in cash in
accordance with the distribution schedule elected by the director
pursuant to Article III, Section C. Distributions shall be pro rata
by measurement method. Distributions shall be valued on the tenth
(10th) business day of the distribution month and paid as soon
thereafter as possible.
6
<PAGE> 9
B. Changes to Distribution Schedule Prior to Termination
Upon the request of a director made at any time during the calendar
year immediately preceding the calendar year in which service as a
director terminates, the Committee on Directors of the Board of
Directors ("Committee on Directors"), in its sole discretion, may
authorize: (a) an extension of a payment period beyond that
originally elected by the director not to exceed that otherwise
allowable under Article III, Section C, and/or (b) a payment
frequency different from that originally elected by the director.
Such request may not be made with regard to amounts deferred after
December 31, 1990 using the Merck Common Stock method and to any
earnings attributable to such deferrals. Deferrals into Merck Common
Stock made after December 31, 1990 and any earnings thereon may only
be distributed in accordance with the schedule elected by the
director under Article III, Section C or determined by the Committee
on Directors under Article VIII.
C. Post-Termination Changes to Distribution Schedule
Following termination of service as a director, each director may
make one request for a further extension of the period for
distribution of his/her deferred compensation which may not exceed
the deferral period otherwise allowable under Article III, Section
C. This request may be granted and a new payment schedule determined
in the sole discretion of the Committee on Directors. Such request
may not be made with regard to amounts deferred after December 31,
1990 using the Merck Common Stock Method and to any earnings
attributable to such deferrals. Any retired director who is not
subject to U.S. income tax may petition the Committee on Directors
to change payment frequency, including a lump sum distribution, and
the Committee on Directors may grant such petition if, in its
discretion, it considers there to be reasonable justification
therefor. Deferrals into Merck Common Stock made after December 30,
1990 and any earnings thereon may only be distributed in accordance
with the schedule elected by the director under Article III,
Section C or determined by the Committee on Directors under
Article VIII.
D. Forfeitures
A director's deferred amount attributable to the Mandatory Deferral
Amount and earnings thereon shall be forfeited upon his or her
removal as a director or upon a determination by the Committee on
Directors in its sole discretion, that a director has:
7
<PAGE> 10
(i) joined the Board of, managed, operated, participated in a
material way in, entered employment with, performed consulting
(or any other) services for, or otherwise been connected in any
material manner with a company, corporation, enterprise, firm,
limited partnership, partnership, person, sole proprietorship
or any other business entity determined by the Committee on
Directors in its sole discretion to be competitive with the
business of the Company, its subsidiaries or its affiliates (a
"Competitor");
(ii) directly or indirectly acquired an equity interest of five (5)
percent or greater in a Competitor; or
(iii)disclosed any material trade secrets or other material
confidential information, including customer lists, relating to
the Company or to the business of the Company to others,
including a Competitor.
VIII. DESIGNATION OF BENEFICIARY
In the event of the death of a director, the deferred amount at the date
of death shall be paid to the last named beneficiary or beneficiaries
designated by the director, or, if no beneficiary has been designated, to
the director's legal representative, in one or more installments as the
Committee on Directors in its sole discretion may determine.
IX. PLAN AMENDMENT OR TERMINATION
The Committee on Directors shall have the right to amend or terminate this
Plan at any time for any reason.
8
<PAGE> 11
SCHEDULE A
MEASUREMENT METHODS
MERCK COMMON STOCK
MUTUAL FUNDS
Acorn Fund
Bond Fund of America
Fidelity Destiny I
Fidelity Equity Income Fund
Fidelity Magellan Fund
Fidelity U.S. Equity Index
IDS Global Bond Fund
Merrill Lynch Developing Capital Markets
Scudder Growth & Income
Sequoia Fund
T. Rowe Price Small-Cap Value Fund
T. Rowe Price International Stock Fund
Templeton Growth Fund, Inc.
Vanguard Wellington Fund
SALOMON 3-MONTH TREASURY BILL INDEX
BOND INDICES
Lehman Brothers Treasury Bond Index -- Intermediate Term
Lehman Brothers Treasury Bond Index -- Long Term
<PAGE> 1
Exhibit 10(c)
RETIREMENT PLAN
FOR THE DIRECTORS OF
MERCK & CO., INC.
--------------------
Adopted September 22, 1987, effective April 29, 1987
Amended and Restated June 21, 1996
Schedule A adopted June 21, 1996
<PAGE> 2
SUMMARY
<TABLE>
<S> <C>
ELIGIBILITY TO PARTICIPATE: All Directors, except current and former employees,
who were Directors on December 31, 1995, and who
elected to remain in this Plan, and who have five
years of Board service are eligible.
BENEFITS: At normal retirement (age 70, generally, and a
minimum of five years of Board Service), 50% of last
annual retainer, increasing 10% for each additional
year to lOO% after ten years of Board service. At
early retirement (minimum age of 65 and ten years
of Board service), 100% of last annual retainer;
otherwise, no benefit.
ELIGIBILITY FOR BENEFITS: For normal retirement benefits, must have attained
mandatory retirement age under applicable Board
policy and have completed at least five years of
Board service or for early retirement benefits,
must have attained at least age 65 and completed
at least ten years of Board service.
FORFEITURE: Benefits forfeited if Director engages in
certain activities with a competitor (such as
assuming employment or a directorate, taking
a 5% equity interest, or disclosing certain
information), becomes disabled, is removed
from office, or dies.
FORM OF PAYMENT: Annual income for lifetime of retired Director,
ceasing at his or her death.
DISABILITY AND DEATH BENEFITS: None provided.
SPOUSE'S BENEFIT: None provided.
PLAN ADMINISTRATION: Committee on Directors.
ASSIGNABILITY: Benefits not assignable.
</TABLE>
(i)
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Purpose 1
Article I Definitions 1
Article II Participation 3
Article III Retirement Benefit 3
Article IV Vesting 4
Article V Amount and Commencement of Retirement Benefits 5
Article VI Form of Payment of Benefits 5
Article VII Disability and Death Benefits 6
Article VIII Plan Administration 6
Article IX Plan Amendment and Termination 7
Article X Miscellaneous Provisions 7
</TABLE>
(ii)
<PAGE> 4
PURPOSE
Effective April 29, 1987, Merck & Co., Inc. (the "Company") established the
Retirement Plan for the Directors of Merck & Co., Inc. (the "Plan") to provide
Directors, other than current and former employees, with retirement income for
life in recognition of services performed for the Company. The Plan is a
nonqualified, unfunded arrangement and, as such, is not intended to qualify
under the Internal Revenue Code of 1986, as amended, or comply with the Employee
Retirement Income Security Act of 1974, as amended. The Plan was amended and
restated as of June 21, 1996 to add Schedule A, which lists: (a) those eligible
Directors who were Directors on December 31, 1995, and who, in 1996, elected as
of April 1, 1997 to receive (i) upon Termination of Services, a Retirement
Benefit from the Plan determined in accordance with Schedule A, and (ii) an
amount of compensation to be deferred under the Plan for Deferred Payment of
Directors' Compensation in lieu of accruing additional benefits under the Plan
after March 31, 1997; and (b) the terms applicable to the listed Directors.
Directors who elected to continue to accrue benefits under this Plan after March
31, 1997 are subject to the terms of this Plan without regard to Schedule A.
ARTICLE I
DEFINITIONS
Each of the following terms shall have the meaning set forth in this Article I
for purposes of the Plan and any amendments thereto:
Benefit Commencement Date: The date, determined under Article V, as of which a
Participant begins to receive payment of benefits under the Plan.
Board: The Board of Directors of the Company.
Committee: The Committee on Directors of the Board.
Company: Merck & Co., Inc.
Competitor: A company, corporation, enterprise, firm, limited partnership,
partnership, person, sole proprietorship or any other business entity determined
by the Committee in its sole discretion to be competitive with the business of
the Company, its subsidiaries or its affiliates.
Director: An individual elected to the Board by the stockholders of the Company,
or appointed by the Board under applicable corporate law, on or after April 28,
1987, other than a current or former employee of the Company.
Early Retirement: Termination of Services prior to Normal Retirement Age by a
Participant who has completed at least ten (10) Years of Service and attained
Early Retirement Age.
Early Retirement Age: Age sixty-five (65).
<PAGE> 5
Effective Date: April 29, 1987.
Eligible Director: Each Director of the Company who (i) retired between April
29, 1987 and December 31, 1995 under the terms of this Plan or (ii) is a
Director as of December 31, 1995, and elects in accordance with procedures
established by the Committee on Directors to continue to accrue benefits under
this Plan after March 31, 1997.
Last Annual Retainer: The final annual fee paid to a Director by the Company for
services to the Company as a Director; such amount does not include fees paid
for attending meetings or for chairing committees. In the event a Director does
not complete a Year of Service, for purposes of the Plan only, the Last Annual
Retainer shall be the entire annual retainer in effect on the Director's
retirement date.
Non-Vested Termination: Termination of Services by a Director who does not have
a Vested Right to a Retirement Benefit.
Normal Retirement: Termination of Services by a Participant who has completed at
least five (5) Years of Service and attained Normal Retirement Age.
Normal Retirement Age: Age seventy (70), or such other age as determined by the
Board under its policy relating to retirement of Directors.
Participant: An Eligible Director who has commenced, but not terminated,
participation in the Plan as provided in Article II.
Plan: Retirement Plan for the Directors of Merck & Co., Inc. without regard to
Schedule A.
Plan Year: The period of time between successive annual meetings of the
stockholders of the Company.
Retirement Benefit: The annual retirement benefit, payable in the form of a
straight life annuity at Normal, or Early, Retirement, credited to a Participant
under Article III.
- 2 -
<PAGE> 6
Termination of Services: The end of a Participant's service to the Company as a
Director by reason of his or her retirement, declination to stand for
re-election, resignation, disability, removal from office, death or other event
that has the effect of terminating his or her service to the Company.
Vesting, or Vested Right: A nonforfeitable right obtained by a Participant to
that part of an immediate or deferred benefit under the Plan that arises from
the Participant's service.
Years of Service: An individual's service as a Director commencing on the
effective date of his or her election as a Director and ending with his or her
Termination of Services. A Plan Year or any part thereof shall count as one Year
of Service. Years of Service include those completed prior to the Effective Date
of the Plan.
ARTICLE II
PARTICIPATION
2.1 ADMISSION AS A PARTICIPANT
2.1.1 An Eligible Director shall become a Participant on the date on which he or
she completes five (5) Years of Service.
2.1.2 An individual who has ceased to be a Participant and who again becomes a
Director after December 31, 1995 shall not participate in this Plan.
2.2 TERMINATION OF PARTICIPATION
A Participant shall cease to be such upon his or her:
(a) Non-Vested Termination; or (b) death.
ARTICLE III
RETIREMENT BENEFIT
3.1 RETIREMENT BENEFIT FORMULA
3.1.1 At Normal Retirement, a Participant's Retirement Benefit shall be
determined in accordance with the following schedule:
- 3 -
<PAGE> 7
<TABLE>
<CAPTION>
Percentage of
Last Annual
Years Retainer as
of Service Retirement Benefit
<S> <C> <C>
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
</TABLE>
3.1.2 At Early Retirement, a Participant's Retirement Benefit shall be lOO% of
his or her Last Annual Retainer.
ARTICLE IV
VESTING
4.1 DETERMINATION OF VESTING
A Participant shall have a vested percentage, or Vested Right, of 100% in his or
her Retirement Benefit upon satisfaction of the requirements of Normal, or
Early, Retirement, subject to Section 4.2.
4.2 RETIREMENT BENEFIT FORFEITURES
The Retirement Benefit of a Participant shall be forfeited upon either his or
her removal as a Director or death, or upon a determination by the Committee, in
its sole discretion, that a Participant has:
(a) joined the Board of, managed, operated, participated in a material way in,
entered employment with, performed consulting (or any other) services for, or
otherwise been connected in any material manner with a Competitor;
(b) directly or indirectly acquired an equity interest of five (5) percent or
greater in a Competitor; or
(c) disclosed any material trade secrets or other material confidential
information, including customer lists, relating to the Company or to the
business of the Company to others, including a Competitor.
- 4 -
<PAGE> 8
ARTICLE V
AMOUNT AND COMMENCEMENT OF RETIREMENT BENEFIT
5.1 DETERMINATION OF AMOUNT OF RETIREMENT BENEFIT
5.1.1 Normal or Early Retirement Benefit. A Participant is entitled to receive a
Retirement Benefit upon satisfaction of the requirements of Normal or Early
Retirement. A Participant's benefits upon Normal or Early Retirement shall be
equal to his or her Retirement Benefit.
5.1.2 Non-Vested Termination. A Director shall not be entitled to any Retirement
Benefit upon his or her Non-Vested Termination.
5.2 SUSPENSION OF PAYMENTS ON RESUMPTION OF SERVICE AS A DIRECTOR
5.2.1 If a Participant who elected Early Retirement is receiving a Retirement
Benefit, such payments shall be suspended on the effective date of the
Participant's re-election to the Board.
5.2.2 If the Participant is re-elected to the Board after December 31, 1995,
then the Retirement Benefit payable under this Plan upon resumption of benefit
payments shall be the Retirement Benefit in effect prior to the Participant's
re-election to the Board. Directors who are re-elected to the Board after
December 31, 1995, will not accrue any additional benefits under the Plan but
instead shall participate in the Deferral Plan.
ARTICLE VI
FORM OF PAYMENT OF BENEFITS
6.1 METHOD OF DISTRIBUTION
A Participant may at any time prior to his or her Benefit Commencement Date
elect, in accordance with Section 6.2, that his or her Retirement Benefit be
payable in the form of a straight life annuity under which payments are made to
the Participant (i) during the Participant's lifetime, with no further payments
under the Plan after the Participant's death, (ii) in quarterly installments at
the beginning of each calendar quarter commencing with the first calendar
quarter following Normal or Early Retirement and ending at the date of death of
the Participant, and (iii) without proration of the final payment to the
Participant under the Plan.
- 5 -
<PAGE> 9
6.2 COMMENCEMENT OF BENEFIT PAYMENTS
The Participant's Benefit Commencement Date shall be as soon as practicable
after his or her Termination of Services.
ARTICLE VII
DISABILITY AND DEATH BENEFITS
7.1 DISABILITY AND DEATH BENEFITS
No benefit shall be payable under the Plan on account of a Participant's
disability or death.
ARTICLE VIII
PLAN ADMINISTRATION
8.1 THE COMMITTEE
8.1.1 The Committee may authorize in writing any person to execute any document
or documents on its behalf, and any interested person, upon receipt of notice of
such authorization directed to it, may thereafter accept and rely upon any
document executed by such authorized person until the Committee shall deliver to
such interested person a written revocation of such authorization.
8.2 POWERS, DUTIES, ETC. OF THE COMMITTEE
8.2.1 The Committee shall have the power to construe the Plan and to determine
all questions of fact or interpretation that may arise thereunder, and any such
construction or determination shall be conclusively binding upon all
Participants.
8.2.2 The Committee shall have the power to promulgate such rules and
procedures, to maintain or cause to be maintained such records and to issue such
forms as it shall deem necessary and proper for the administration of the Plan.
8.2.3 Subject to the terms of the Plan, the Committee shall determine the time
and manner in which all elections authorized by the Plan shall be made or
revoked.
8.2.4 The Committee shall direct benefit payments pursuant to the Plan.
- 6 -
<PAGE> 10
8.2.5 The Committee may direct that such amounts be withheld from any payment
due under the Plan as required to conform with applicable income tax law.
8.2.6 The Committee shall have all the rights, powers, duties and obligations
granted or imposed upon it elsewhere in the Plan.
8.3 DELEGATION OF RESPONSIBILITY
The Committee may designate persons to carry out the specified responsibilities
of the Committee.
ARTICLE IX
PLAN AMENDMENT AND TERMINATION
9.1 PLAN AMENDMENT OR TERMINATION
The Committee shall have the right at any time and for any reason to amend or
terminate the Plan.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 SOURCE OF BENEFITS
Benefits under the Plan shall be paid or provided solely from the general assets
of the Company, and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of any benefits under the
Plan. The Company may make such investments as it may deem desirable to aid it
in providing benefits. Participants, however, shall have no right, title or
interest whatsoever in or to such investments, if any.
Nothing contained in the Plan, and no action taken pursuant to the provisions of
the Plan, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company, its employees and its agents and any
Participant or any other person. To the extent that a Participant acquires a
right to receive payments from the Company under the Plan, such right shall be
no greater than the right of an unsecured general creditor of the Company.
- 7 -
<PAGE> 11
10.2 BENEFITS NOT ASSIGNABLE
Benefits provided under the Plan may not be assigned or alienated, either
voluntarily or involuntarily.
10.3 CONTROLLING LAW
The laws of the State of New Jersey shall control the interpretation and
performance of the terms of the Plan. The Plan is not intended to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended, or to comply
with the Employee Retirement Income Security Act of 1974, as amended.
- 8 -
<PAGE> 12
SCHEDULE A
TO THE
RETIREMENT PLAN
FOR THE DIRECTORS OF
MERCK & CO., INC.
Adopted June 21, 1996
<PAGE> 13
SUMMARY OF SCHEDULE A
<TABLE>
<S> <C>
ELIGIBILITY TO PARTICIPATE: All Directors,
except current and former
employees, who were Directors on
December 31, 1995, and who
elected to participate in this
Schedule A and the Deferral Plan
are eligible. Directors who
first became Directors after
December 31, 1995 are not
eligible.
BENEFITS FOR SCHEDULE A PARTICIPANTS: At or after early retirement
age (age 65), the accumulated
benefit determined as of March
31, 1997, without regard to
participation and vesting rules.
ELIGIBILITY FOR BENEFITS FOR SCHEDULE A
PARTICIPANTS: Must have attained at least age 65.
FORFEITURE: Benefits forfeited if Director
engages in certain activities
with a competitor (such as
assuming employment or a
directorate, taking a 5% equity
interest, or disclosing certain
information), becomes disabled,
is removed from office, or dies.
FORM OF PAYMENT: Annual income for lifetime of retired Director, ceasing at his or her
death.
DISABILITY AND DEATH BENEFITS: None provided.
SPOUSE'S BENEFIT: None provided.
PLAN ADMINISTRATION: Committee on Directors.
ASSIGNABILITY: Benefits not assignable.
</TABLE>
(i)
<PAGE> 14
SCHEDULE A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Purpose 1
Section I Definitions 1
Section II Participation 3
Section III Retirement Benefit 3
Section IV Vesting 4
Section V Amount and Commencement of Retirement Benefits 4
Section VI Form of Payment of Benefits 5
Section VII Disability and Death Benefits 5
Section VIII Plan Administration 6
Section IX Plan Amendment and Termination 7
Section X Miscellaneous Provisions 7
</TABLE>
(ii)
<PAGE> 15
SCHEDULE A
PURPOSE
The Retirement Plan for the Directors of Merck & Co., Inc. (the "Plan") was
amended and restated June 21, 1996 to add Schedule A, which lists those
Directors who were Directors on December 31, 1995, and who, in 1996, elected as
of April 1, 1997 to receive (i) upon Termination of Services a Retirement
Benefit determined in accordance with the provisions of this Schedule A, and
(ii) an amount of compensation to be deferred under the Plan for Deferred
Payment of Directors' Compensation in lieu of accruing additional benefits under
the Plan after March 31, 1997. Directors who elected to continue to accrue
benefits under the Plan after March 31, 1997 are subject to the terms of the
Plan without regard to this Schedule A.
SECTION I
DEFINITIONS
Each of the following terms shall have the meaning set forth in this Section I
for purposes of Schedule A and any amendments thereto:
Benefit Commencement Date: The date, determined under Section V, as of which a
Schedule A Participant begins to receive payment of benefits under Schedule A.
Board: The Board of Directors of the Company.
Committee: The Committee on Directors of the Board.
Company: Merck & Co., Inc.
Competitor: A company, corporation, enterprise, firm, limited partnership,
partnership, person, sole proprietorship or any other business entity determined
by the Committee in its sole discretion to be competitive with the business of
the Company, its subsidiaries or its affiliates.
Deferral Plan: The Plan for Deferred Payment of Directors' Compensation.
Director: An individual elected to the Board by the stockholders of the Company,
or appointed by the Board under applicable corporate law, on or after April 28,
1987, other than a current or former employee of the Company.
<PAGE> 16
Early Retirement: Termination of Services prior to Normal Retirement Age by a
Schedule A Participant who has attained Early Retirement Age, without regard to
Years of Service.
Early Retirement Age: Age sixty-five (65).
Normal Retirement: Termination of Services by a Schedule A Participant who has
attained Normal Retirement Age, without regard to Years of Service.
Normal Retirement Age: Age seventy (70), or such other age as determined by the
Board under its policy relating to retirement of Directors.
Plan: Retirement Plan for the Directors of Merck & Co., Inc.
Plan Year: The period of time between successive annual meetings of the
stockholders of the Company.
Retirement Benefit: The annual retirement benefit, payable in the form of a
straight life annuity at Normal, or Early, Retirement, credited to a Participant
under Section III.
Schedule A Participant: A Director as of December 31, 1995 who, in accordance
with procedures established by the Committee, elects as of April 1, 1997, to
receive (i) upon Termination of Services a Retirement Benefit under the Plan as
determined in accordance with the provisions of this Schedule A and (ii) an
amount of compensation to be deferred under the Deferral Plan in lieu of
accruing additional benefits under this Plan after March 31, 1997.
Termination of Services: The end of a Schedule A Participant's service to the
Company as a Director by reason of his or her retirement, declination to stand
for re-election, resignation, disability, removal from office, death or other
event that has the effect of terminating his or her service to the Company.
Vesting, or Vested Right: A nonforfeitable right obtained by a Schedule A
Participant to that part of an immediate or deferred benefit under the Plan.
Years of Service: An individual's service as a Director commencing on the
effective date of his or her election as a Director and ending, for Schedule A
Participants, on March 31, 1997. A Plan Year or any part thereof shall count as
one Year of Service. Years of Service include those completed prior to April 29,
1987, the effective date of the Plan.
-A2-
<PAGE> 17
SECTION II
PARTICIPATION
2.1 ADMISSION AS A PARTICIPANT
A Schedule A Participant shall cease to participate in the Plan and shall
instead participate in this Schedule A as of March 31, 1997.
2.2 TERMINATION OF PARTICIPATION
A Schedule A Participant shall cease to participate in Schedule A upon his or
her death or Termination of Services prior to attaining Early Retirement Age.
SECTION III
RETIREMENT BENEFIT
3.1 RETIREMENT BENEFIT FORMULA
The Retirement Benefit payable to a Schedule A Participant upon Termination of
Services at or after Early Retirement Age shall be the percentage of annual
retainer on March 31, 1997 as determined in accordance with the following
schedule:
<TABLE>
<CAPTION>
Years of Service Percentage of Annual Retainer
as of March 31, 1997 on March 31, 1997
-------------------- -----------------------------
<S> <C>
1 10%
2 20%
3 30%
4 40%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
</TABLE>
- A3 -
<PAGE> 18
SECTION IV
VESTING
4.1 DETERMINATION OF VESTING
A Schedule A Participant shall have a Vested Right of 100% in his or her
Retirement Benefit determined under Section III upon attaining Early Retirement
Age, subject to Section 4.2.
4.2 RETIREMENT BENEFIT FORFEITURES
The Retirement Benefit of a Schedule A Participant shall be forfeited upon
either his or her removal as a Director or death, or upon a determination by the
Committee, in its sole discretion, that a Participant has:
(a) joined the Board of, managed, operated, participated in a material way in,
entered employment with, performed consulting (or any other) services for, or
otherwise been connected in any material manner with a Competitor;
(b) directly or indirectly acquired an equity interest of five (5) percent or
greater in a Competitor; or
(c) disclosed any material trade secrets or other material confidential
information, including customer lists, relating to the Company or to the
business of the Company to others, including a Competitor.
SECTION V
AMOUNT AND COMMENCEMENT OF RETIREMENT BENEFIT
5.1 DETERMINATION OF AMOUNT OF RETIREMENT BENEFIT
5.1.1 Normal or Early Retirement Benefit. A Schedule A Participant is entitled
to receive a Retirement Benefit upon satisfaction of the requirements of Normal
or Early Retirement, as applicable. A Schedule A Participant's benefits upon
Normal or Early Retirement shall be equal to his or her Retirement Benefit as
determined under Section III of this Schedule A.
- A4 -
<PAGE> 19
5.2 SUSPENSION OF PAYMENTS ON RESUMPTION OF SERVICE AS A DIRECTOR
If a Schedule A Participant who elected Early Retirement and is receiving a
Retirement Benefit is re-elected to the Board, such Schedule A Participant's
benefit payments shall be suspended on the effective date of the re-election to
the Board, and shall resume upon the Participant's subsequent Normal or Early
Retirement, without regard to additional years of service or increase in annual
retainer. Directors who are re-elected to the Board after December 31, 1995,
will not accrue any additional benefits under the Plan but instead shall
participate in the Deferral Plan.
SECTION VI
FORM OF PAYMENT OF BENEFITS
6.1 METHOD OF DISTRIBUTION
A Schedule A Participant may at any time prior to his or her applicable Benefit
Commencement Date elect that his or her applicable Retirement Benefit be payable
in the form of a straight life annuity under which payments are made to the
Schedule A Participant (i) during the Schedule A Participant's lifetime, with no
further payments after the Schedule A Participant's death, (ii) in quarterly
installments at the beginning of each calendar quarter commencing with the first
calendar quarter following Normal or Early Retirement and ending at the date of
death of the Schedule A Participant, and (iii) without proration of the final
payment to the Schedule A Participant under this Schedule A.
6.2 COMMENCEMENT OF BENEFIT PAYMENTS
The Schedule A Participant's Benefit Commencement Date shall be as soon as
practicable after his or her Termination of Services.
SECTION VII
DISABILITY AND DEATH BENEFITS
7.1 DISABILITY AND DEATH BENEFITS
No benefit shall be payable under this Schedule A on account of a Schedule A
Participant's disability or death.
- A5 -
<PAGE> 20
SECTION VIII
PLAN ADMINISTRATION
8.1 THE COMMITTEE
The Committee may authorize in writing any person to execute any document or
documents on its behalf, and any interested person, upon receipt of notice of
such authorization directed to it, may thereafter accept and rely upon any
document executed by such authorized person until the Committee shall deliver to
such interested person a written revocation of such authorization.
8.2 POWERS, DUTIES, ETC. OF THE COMMITTEE
8.2.1 The Committee shall have the power to construe Schedule A and to determine
all questions of fact or interpretation that may arise thereunder, and any such
construction or determination shall be conclusively binding upon all Schedule A
Participants.
8.2.2 The Committee shall have the power to promulgate such rules and
procedures, to maintain or cause to be maintained such records and to issue such
forms as it shall deem necessary and proper for the administration of Schedule
A.
8.2.3 Subject to the terms of Schedule A, the Committee shall determine the time
and manner in which all elections authorized by Schedule A shall be made or
revoked.
8.2.4 The Committee shall direct benefit payments pursuant to Schedule A.
8.2.5 The Committee may direct that such amounts be withheld from any payment
due under Schedule A as required to conform with applicable income tax law.
8.2.6 The Committee shall have all the rights, powers, duties and obligations
granted or imposed upon it elsewhere in Schedule A.
8.3 DELEGATION OF RESPONSIBILITY
The Committee may designate persons to carry out the specified responsibilities
of the Committee.
- A6 -
<PAGE> 21
SECTION IX
PLAN AMENDMENT AND TERMINATION
9.1 AMENDMENT OR TERMINATION
The Committee shall have the right at any time and for any reason to amend or
terminate Schedule A.
SECTION X
MISCELLANEOUS PROVISIONS
10.1 SOURCE OF BENEFITS
Benefits under Schedule A shall be paid or provided solely from the general
assets of the Company, and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of any benefits under
Schedule A. The Company may make such investments as it may deem desirable to
aid it in providing benefits. Schedule A Participants, however, shall have no
right, title or interest whatsoever in or to such investments, if any. Nothing
contained in Schedule A, and no action taken pursuant to the provisions of
Schedule A, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company, its employees and its agents and any
Schedule A Participant or any other person. To the extent that a Schedule A
Participant acquires a right to receive payments from the Company under Schedule
A, such right shall be no greater than the right of an unsecured general
creditor of the Company.
10.2 BENEFITS NOT ASSIGNABLE
Benefits provided under Schedule A may not be assigned or alienated, either
voluntarily or involuntarily.
10.3 CONTROLLING LAW
The laws of the State of New Jersey shall control the interpretation and
performance of the terms of the Schedule A. Schedule A is not intended to
qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended,
or to comply with the Employee Retirement Income Security Act of 1974, as
amended.
-A7-
<PAGE> 1
EXHIBIT 10(d)
MERCK-MEDCO MANAGED CARE, INC.
100 SUMMIT AVENUE
MONTVALE, NJ 07645
May 24, 1996
Mr. Per G.H. Lofberg
63 East 92nd Street
New York, NY 10128
Dear Mr. Lofberg:
Reference is made to the employment agreement (the "Employment
Agreement") between you and Medco Containment Services, Inc. ("Medco"), dated as
of April 1, 1993, as amended on July 27, 1993 (the "Amendment"). The parties
hereby agree that the Employment Agreement is hereby terminated, except as set
forth below.
We have further agreed as follows with respect to the terms of your
employment:
1. The covenants contained in Article 9 of the Employment Agreement, as
amended pursuant to the Amendment, shall survive the termination of the
Employment Agreement and remain in full force and effect and shall
continue for a period of five years from the termination of your
employment. Notwithstanding the foregoing, the covenant contained in
Section 9.4 of the Employment Agreement which, among other things,
prohibits you from competing with Merck & Co., Inc. ("Merck") or Medco,
is hereby amended to exclude from the provisions thereof any
pharmaceutical manufacturers or other direct competitors of Merck,
other than those entities which include businesses competing with
Medco.
2. Consistent with the provisions of earlier stock option agreements with
Medco, it is confirmed that if your employment with Merck terminates
prior to June 1, 1996, (i) certain options (collectively, "Stock
Options") to acquire shares of stock of Merck which you hold which vest
on October 14, 1996 will continue to vest and will terminate on October
14, 1998, (ii) the Stock Options which you hold which vest on October
14, 1997 will continue to vest and will terminate on October 14, 1998,
and (iii) the Stock Options which you hold which vest on July 1, 1996
shall terminate in accordance with their terms without vesting. It is
further confirmed that in the event that your employment terminates on
or after June 1, 1996, the Stock Options which vest on July 1, 1996,
October 14, 1996, and
<PAGE> 2
October 14, 1997 which have not vested at such time will continue to
vest on schedule and will be exercisable so that (i) the Stock Options
which vest on July 1, 1996 will terminate 30 days after termination of
your employment, (ii) the Stock Options which vest on October 14, 1996
will terminate on October 14, 1998, and (iii) the Stock Options which
vest on October 14, 1997 will terminate on October 14, 1998. Any Stock
Options granted to you after November 18, 1993 shall terminate upon the
termination of your employment regardless of when such termination
occurs if they have not vested prior to the date of the termination of
your employment. In addition, all Stock Options held by you will
terminate immediately in the event of a breach by you of the covenants
in Article 9 of the Employment Agreement which covenants shall continue
pursuant to paragraph 1 hereof.
3. In addition, you have agreed that, if your employment with Merck
terminates, you will have no right to continue to receive salary or
benefits or severance, and that the right to continue receiving your
base compensation for two years if you terminate your employment, which
right is set forth in Section 8.2 of the Employment Agreement, shall
terminate as of the date hereof and be of no further force or effect.
4. Section 11.10 of the Employment Agreement, which governs the
severability and enforceability of the provisions of the Employment
Agreement, shall remain in full force and effect and shall apply to the
provisions of this letter.
Please confirm that the foregoing represents our understanding by
signing a copy of this letter in the space indicated below and returning it to
me.
Very truly yours,
Merck-Medco Managed Care, Inc.
By: /s/ Mary M. McDonald
---------------------
MARY M. MCDONALD
Accepted and Agreed on this
24th day of May, 1996
/s/ Per G.H. Lofberg
- --------------------
PER G.H. LOFBERG
<PAGE> 1
Exhibit 11
MERCK & CO., INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
(In millions except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
Net Income and Adjusted Earnings:
<S> <C> <C> <C> <C>
Net Income................................................ $ 972.1 $ 858.1 $1,835.9 $1,615.5
Effect on Earnings of Compensation Expense Relating to
Stock Option and Incentive Plans........................ 2.2 4.1 4.2 6.9
-------- --------- -------- --------
Adjusted Earnings for Fully Diluted Earnings Per Share.... $ 974.3 $ 862.2 $1,840.1 $1,622.4
======== ========= ======== ========
Weighted Average Shares and Share Equivalents Outstanding:
Weighted Average Shares Outstanding (As Reported).......... 1,214.9 1,236.8 1,220.7 1,239.9
Common Share Equivalents Issuable Under Stock Option and
Incentive Plans ......................................... 29.7 24.4 29.7 24.4
Common Share Equivalents Issuable on Assumed Conversion of
Debentures............................................... .3 .4 .3 .4
-------- --------- -------- --------
Weighted Average Shares and Share Equivalents Outstanding.. 1,244.9 1,261.6 1,250.7 1,264.7
======== ========= ======== ========
Earnings Per Share (As Reported)........................... $ .80 $ .69 $ 1.50 $ 1.30
======== ========= ======== ========
Fully Diluted Earnings Per Share (a)....................... $ .78 $ .68 $ 1.47 $ 1.28
======== ========= ======== ========
</TABLE>
(a) This calculation is submitted in accordance with the regulations of the
Securities and Exchange Commission although not required by APB Opinion
No. 15 because it results in dilution of less than 3%.
<PAGE> 1
Exhibit 12
MERCK & CO., INC. AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
(In millions except ratio data)
<TABLE>
<CAPTION>
Six Months
Ended
June 30 Years Ended December 31
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income Before Taxes
and Cumulative Effect
of Accounting Changes $2,633.4 $4,797.2 $4,415.2 $3,102.7 $3,563.6 $3,166.7
Add:
One-third of rents 14.8 28.1 36.0 35.0 34.0 31.1
Interest expense, net 53.9 60.3 96.0 48.0 23.6 26.0
Preferred stock dividends 34.8 2.1 - - - -
-------- -------- -------- -------- -------- --------
Earnings $2,736.9 $4,887.7 $4,547.2 $3,185.7 $3,621.2 $3,223.8
======== ======== ======== ======== ======== ========
Fixed Charges
One-third of rents $ 14.8 $ 28.1 $ 36.0 $ 35.0 $ 34.0 $ 31.1
Interest expense 67.3 98.7 124.4 84.7 72.7 68.7
Preferred stock dividends 34.8 2.1 - - - -
-------- -------- -------- -------- -------- --------
Fixed Charges $ 116.9 $ 128.9 $ 160.4 $ 119.7 $ 106.7 $ 99.8
======== ======== ======== ======== ======== ========
Ratio of Earnings
to Fixed Charges 23 38 28 27 34 32
======== ======== ======== ======== ======== ========
</TABLE>
For purposes of computing these ratios, "earnings" consist of income before
taxes, cumulative effect of accounting changes, one-third of rents (deemed by
the Company to be representative of the interest factor inherent in rent),
interest expense, net of amounts capitalized, and dividends on preferred stock
of subsidiary companies. "Fixed charges" consist of one-third of rents, interest
expense as reported in the Company's consolidated financial statements and
dividends on preferred stock of subsidiary companies.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,687
<SECURITIES> 829
<RECEIVABLES> 2,499
<ALLOWANCES> 0<F1>
<INVENTORY> 1,811
<CURRENT-ASSETS> 7,623
<PP&E> 8,249
<DEPRECIATION> (2,679)
<TOTAL-ASSETS> 23,246
<CURRENT-LIABILITIES> 5,274
<BONDS> 1,506
0
0
<COMMON> 4,796
<OTHER-SE> 6,538
<TOTAL-LIABILITY-AND-EQUITY> 23,246
<SALES> 9,439
<TOTAL-REVENUES> 9,439
<CGS> 4,517
<TOTAL-COSTS> 4,517
<OTHER-EXPENSES> 697
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 2,633
<INCOME-TAX> 797
<INCOME-CONTINUING> 1,836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,836
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.47
<FN>
<F1>NOT MATERIAL TO THE CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
