<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
--Enter Company Name Here--
- --------------------------------------------------------------------------------
(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 Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(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:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO MERCK
Merck & Co., Inc.
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 23, 1996
<PAGE>
Merck & Co., Inc.
P.O. Box 100
Whitehouse Station, New Jersey 08889-0100
(908) 423-1000
Notice of Annual Meeting of Stockholders
April 23, 1996
----------------
To the Stockholders:
The Annual Meeting of Stockholders of Merck & Co., Inc. will be held on
Tuesday, April 23, 1996, 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 four directors for terms ending in 1999;
. To consider and act upon a proposal to ratify the appointment of
independent public accountants for 1996;
. To consider and act upon a proposal to adopt the 1996 Non-Employee
Directors Stock Option Plan;
. To consider and act upon a stockholder proposal concerning prior
government/political service of certain employees and directors;
. To consider and act upon a stockholder proposal concerning benefits for
management and directors;
. To consider and act upon a stockholder proposal concerning annual
election of directors;
. To consider and act upon a stockholder proposal concerning bonuses;
. To consider and act upon a stockholder proposal concerning charitable
contributions; 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 8, 1996, 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.
The ticket attached to the proxy card will admit you and one guest to the
meeting. 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 18, 1996
<PAGE>
Merck & Co., Inc.
P. O. Box 100
Whitehouse Station, New Jersey 08889-0100
(908) 423-1000
March 18, 1996
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 23, 1996, and all
adjournments thereof. The Company's Annual Report for 1995, including
financial statements, and proxy statement and form of proxy/voting instruction
card ("proxy card" or "proxy") are being mailed to stockholders commencing
March 18, 1996.
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"), ASTRA MERCK,
INC. EMPLOYEE SAVINGS AND SECURITY PLAN ("AMES&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, AMES&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 proxy 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, 1995, 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.
<PAGE>
There are outstanding and entitled to vote as of the record date, March 8,
1996, 1,227,258,113 shares of Common Stock of the Company. The holders of a
majority in interest of all the stock of the 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, when four directors are to be elected,
a holder of 100 shares may cast 400 votes for a single nominee, apportion 200
votes to each of two nominees, or apportion 400 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 and to adopt the 1996 Non-
Employee Directors Stock Option 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
Four directors are to be elected at the meeting for full three-year terms
expiring in 1999. The Board's nominees are Mr. H. Brewster Atwater, Jr., Mr.
Raymond V. Gilmartin, Dr. Samuel O. Thier and Mr. Dennis Weatherstone, all of
whom are currently directors of the Company. After the election of four
directors at the meeting, the Company will have twelve directors, including
the eight directors whose present terms currently extend beyond the meeting.
Information on the nominees and continuing directors follows.
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OR
ELECTED DIRECTOR SIGNIFICANT AFFILIATIONS
---------------- ---------------------------
NOMINEES
For terms expiring in 1999
PHOTO Retired; Chairman of the Board and Chief Executive Officer,
- ------------- General Mills, Inc. (consumer foods and restaurants) for more
H. Brewster than five years
Atwater, Jr.
Age--64 Director, Darden Restaurants, Inc., General Electric Company,
1988 Mayo Foundation, Public Radio International and Walker Art
Center; Member, The Business Council
2
<PAGE>
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OR
ELECTED DIRECTOR SIGNIFICANT AFFILIATIONS
---------------- ----------------------------------------------
Chairman of the Board (since November 1994), President and
PHOTO Chief Executive Officer (since June 1994) of the Company;
- ------------- Chairman, President and Chief Executive Officer (1992 to
Raymond V. 1994), President and Chief Executive Officer (1989 to 1992),
Gilmartin of Becton Dickinson and Company (medical supplies and devices
Age--55 and diagnostic systems)
1994
Director, Providian Corporation and Public Service Enterprise
Group; Member, The Business Council and The Business
Roundtable
President, Massachusetts General Hospital since May 1994;
PHOTO President, Brandeis University from October 1991 to May 1994;
- ------------- President, National Academy of Sciences, Institute of Medicine
Samuel O. from November 1985 to September 1991
Thier, M.D.
Age--58 Director, Fleet Financial Group; Member, Association of
1994 American Physicians, Institute of Medicine of the National
Academy of Sciences; Master, American College of Physicians;
Trustee, Brandeis University, Boston Museum of Science, Johns
Hopkins University and WGBH Public Television; Fellow,
American Academy of Arts and Sciences
Retired; Chairman of the Board, J.P. Morgan & Co. Incorporated
PHOTO and Morgan Guaranty Trust Company of New York (banking and
- ------------- other financial services) for more than five years
Dennis
Weatherstone
Director, J.P. Morgan & Co. Incorporated, Morgan Guaranty
Age--65 Trust Company of New York, General Motors Corporation, L'Air
1988 Liquide, Institute for International Economics; Independent
Member of the Board of Banking Supervision of the Bank of
England; President, Royal College of Surgeons Foundation;
Trustee, Alfred P. Sloan Foundation; Member, The Business
Council
DIRECTORS WHOSE TERMS EXPIRE IN 1997
Chairman of the Board (since January 1992) and Chief Executive
PHOTO Officer (since July 1991), AlliedSignal, Inc. (aerospace,
- ------------- automotive products and engineered materials technology); Vice
Lawrence A. Chairman, General Electric Company from January 1984 to July
Bossidy 1991
Age--61
1992 Director, Champion International Corporation; Member, The
Business Council, The Business Roundtable and International
Council of J.P. Morgan & Co. Incorporated
3
<PAGE>
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OR
ELECTED DIRECTOR SIGNIFICANT AFFILIATIONS
- ---------------- ----------------------------------------------
President, Spelman College for more than five years
PHOTO
- ------------- Director, Coca-Cola Enterprises, The Home Depot, Inc.,
Johnnetta B. Management and Training Corporation and NationsBank South;
Cole, Ph.D. Trustee, Rockefeller Foundation and Wellesley College; Member,
Age--59 Council on Foreign Relations and National Council of Negro
1994 Women; Fellow, American Anthropological Association
Retired; Chairman of the Board and Chief Executive Officer,
PHOTO NCR Corporation (business information processing systems) from
- ------------- January 1988 to September 1991
Charles E.
Exley, Jr.
Director, Banc One Corporation; Trustee, The Andrew W. Mellon
Age--66 Foundation; Member, The Business Council and Board of
1988 Overseers, Columbia University Graduate School of Business
Chief Executive Officer, University of Pennsylvania Medical
Center and Health System and Executive Vice President, Dean of
the School of Medicine and Robert G. Dunlop Professor of
PHOTO Medicine, Biochemistry and Biophysics, University of
- ------------- Pennsylvania, for more than five years
William N.
Kelley, M.D.
Age--56 Director, Beckman Instruments, Greater Philadelphia First and
Philadelphia Orchestra Association; Trustee, Emory University;
1992 Master, American College of Physicians; Fellow, American
Academy of Arts & Sciences; Member, Institute of Medicine of
the National Academy of Sciences, Board of Managers of Wistar
Institute and Board of Governors of Leonard Davis Institute of
Health Economics
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Chairman of the Board, The RTZ Corporation PLC (international
PHOTO mining company) since June 1991; Chief Executive and Deputy
- ------------- Chairman from April 1985 to May 1991
Sir Derek
Birkin
Director, Unilever PLC, Carlton Communications PLC, The
Age--66 Merchants Trust PLC and The Royal Opera House; Member, Council
1992 of The Industrial Society
4
<PAGE>
NAME, AGE AND
YEAR FIRST BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OR
ELECTED DIRECTOR SIGNIFICANT AFFILIATIONS
- ---------------- ----------------------------------------------
PHOTO President, The Andrew W. Mellon Foundation (philanthropic
- ------------- foundation) for more than five years
William G.
Bowen, Ph.D. Director, American Express Company, Reader's Digest, Inc.,
Age--62 Rockefeller Group and Denison University; Member, Board of
1986 Overseers Teachers Insurance and Annuity Association of
America--College Retirement Equities Fund
International Health Care Consultant for more than five years
Director, Beckman Instruments, National Rehabilitation
PHOTO Hospital, Pharmaceutical Marketing Services, Inc., The
- ------------- Prudential Insurance Company of America, Inc. and Science
Carolyne K. Applications International Corp.; Trustee, Georgetown
Davis, Ph.D. University and University of Pennsylvania Medical Center;
Age--64 Member, Institute of Medicine of the National Academy of
1989 Sciences
Professor of Psychiatry, Meharry Medical College for more than
five years
PHOTO
- ------------- Director, BellSouth Telecommunications, Inc., First Union Bank
Lloyd C. of Tennessee, Phoenix Health Systems and Premark International
Elam, M.D. Inc.; Trustee, Fisk University and the Alfred P. Sloan
Age--67 Foundation
1973
5
<PAGE>
BOARD COMMITTEES
There are four standing committees of the Board of Directors: the Committee
on Directors, the Executive Committee, the Audit Committee and the
Compensation and Benefits Committee. Members of the individual committees are
named below:
<TABLE>
<CAPTION>
COMMITTEE
ON COMPENSATION AND
DIRECTORS EXECUTIVE AUDIT BENEFITS
- ---------- --------- ----- ----------------
<S> <C> <C> <C>
D. Birkin H. B. Atwater, Jr. D. Birkin H. B. Atwater, Jr.(a)
L. A. Bossidy W. G. Bowen C. K. Davis (b) L. A. Bossidy (b)
W. G. Bowen (a) L. C. Elam C. E. Exley, Jr.(a) W. G. Bowen
W. N. Kelley C. E. Exley, Jr. W. N. Kelley Jr. J. B. Cole
D. Weatherstone R. V. Gilmartin (a) S. O. Thier L. C. Elam
D. Weatherstone D. Weatherstone
</TABLE>
- --------
(a) Chairman (b) Vice Chairman
The Committee on Directors, consisting entirely of independent directors,
was established July 25, 1995 to consider and make recommendations on matters
related to the practices, policies and procedures of the Board. As part of its
duties, the Committee assesses the size, structure and composition of the
Board and Board committees, evaluates Board performance and reviews Board
compensation. The Committee also acts 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 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.
The Executive Committee acts for the Board of Directors when action is
required between Board meetings, reviews and makes recommendations on
financial policy, and monitors management and Company performance with respect
to matters of public responsibility and interest concerning the Company. The
Committee also oversees 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 in accordance with
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, Deferral
Program 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 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.
6
<PAGE>
BOARD AND BOARD COMMITTEE MEETINGS
In 1995, there were nine meetings held by the Board of Directors. Board
committees met as follows during 1995: the Executive Committee, six times; the
Audit Committee, three times; the Compensation and Benefits Committee, five
times; the Committee on Directors, once. The total combined attendance for all
Board and Committee meetings was 91%. All directors, except Sir Derek Birkin,
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 of the Company, and in 1995 was a director
of J.P. Morgan & Co. Incorporated and Morgan Guaranty Trust Company which
performed financial advisory, commercial and investment banking services for
the Company during 1995 and which are expected to perform such services for
the Company during 1996.
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, the Audit Committee and the Committee
on Directors are compensated for such service by an annual retainer of $3,000.
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 join the Board after December 31, 1995 or are current or
former employees of the Company) who so elect and 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 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. The Company
expects to adopt a plan under which directors who do not participate in the
Retirement Plan will instead defer an equivalent amount of compensation
annually in accordance with the terms of the Plan for Deferred Payment of
Directors' Compensation.
During the term of the Non-Employee Directors Stock Option Plan adopted by
stockholders in 1992 (the "1992 Non-Employee Directors Stock Option Plan"),
directors (excluding those who are current or former employees of the Company)
each received 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 of the options is the higher of (i) the
simple average of the high and low prices at which the Common 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. The 1992 Non-Employee Directors Stock Option Plan terminated on
December 31, 1995 for purposes of granting further options. As more fully
described beginning on page 20, stockholder approval is requested for a new
Non-Employee Directors Stock Option Plan (the "1996 Non-Employee Directors
Stock Option Plan"). If the 1996 Non-Employee Directors Stock Option Plan is
approved by stockholders, the first grants thereunder will be on the first
Friday following the annual meeting at which the Plan is approved. The
exercise price of the options will be the closing price on the date of grant
of the Company's Common Stock as quoted on the composite tape of the New York
Stock Exchange.
7
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Beneficial ownership of Common Stock of the Company as of December 31, 1995
by each director of the Company, each executive officer of the Company named
in the Summary Compensation Table 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 PERCENT
SHARES OWNERSHIP UNDER OPTIONS OF
NAME OF BENEFICIAL OWNER OWNED(a) EXERCISABLE WITHIN 60 DAYS CLASS
------------------------ ------- -------------------------- -------
<S> <C> <C> <C>
Raymond V. Gilmartin............. 94,043(b) -- *
H. Brewster Atwater, Jr.......... 1,500 -- *
Derek Birkin..................... 539 -- *
Lawrence A. Bossidy.............. 10,000 -- *
William G. Bowen................. 10,800 -- *
Johnnetta B. Cole................ 175 -- *
Carolyne K. Davis................ 673(c) -- *
Lloyd C. Elam.................... 6,750 -- *
Charles E. Exley, Jr............. 1,500 -- *
William N. Kelley................ 1,100 -- *
Samuel O. Thier.................. 10(d) -- *
Dennis Weatherstone.............. 10,000 -- *
Edward M. Scolnick............... 109,373(b) 54,000 *
Judy C. Lewent................... 62,705 122,700 *
David W. Anstice................. 13,517(b) 137,100 *
Per G.H. Lofberg................. 43,435 84,591 *
All Directors and Executive
Officers as a Group.............. 491,001(b) 1,022,278 *
</TABLE>
- --------
(a) Includes equivalent shares of Common Stock held by the Trustee of the
Merck & Co., Inc. Employee Savings and Security Plan or shares of Common
Stock held by the Trustee of the Medco 401(k) Savings Plan for the
accounts of individuals as follows: Mr. Gilmartin--579 shares, Dr.
Scolnick--1,598 shares, Ms. Lewent--2,270 shares, Mr. Anstice--1,479
shares, Mr. Lofberg--2,268 shares and all directors and executive officers
as a group--31,360 shares.
(b) Does not include shares of Common Stock held by family members and in
which beneficial ownership is disclaimed by the individuals as follows:
Mr. Gilmartin--11,300 shares, Dr. Scolnick--14,000 shares, Mr. Anstice--
252 shares and all directors and executive officers as a group--25,642
shares.
(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.
* Less than one percent of the Company's outstanding shares of Common Stock.
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.
The Compensation and Benefits Committee is comprised entirely of independent
outside directors.
8
<PAGE>
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; and
. 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"). Prior to 1995, awards of Performance
Shares were made under the Strategic Performance Feature ("SPF"). Those awards
provide for a payment of stock or cash or a combination thereof at the end of
five-year periods, the last of which ends in 1998. Payments in cash are equal
to the market value on the payment date of the stock that the cash replaces.
Payments will be based on the Company's achievement of specified performance
targets.
The Company employs a formal system for developing measures of executive
officer performance and for 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. Current executive compensation plans comply with the legislation on
tax deductibility for the 1995 tax year.
BASE SALARY AND BONUS
Executive officer base salary and 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 measures which permit
comparisons with competitors' performance and internal targets set before the
start of each fiscal year and by comparison to the base salary and bonus award
levels of executive officers of other leading healthcare companies.
Performance measures are compared with leading healthcare companies and
leading companies in other industries. The leading healthcare companies are
the same as those used for SPF measures (see discussion of SPF below).
Performance measures for 1995 were the Company's earnings per share growth
compared to the earnings per share growth of these companies as well as the
Company's sales growth versus the prior year. Additional measures were general
Company productivity, research and manufacturing productivity, progress in
managed care markets with particular reference to Medco and the contribution
of human resources management to achieving Company strategy. The Company met
or exceeded all its performance measure targets in 1995. In addition to
Company-wide measures of performance, the Compensation and Benefits Committee
considered 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.
9
<PAGE>
Base salary and bonus award comparisons are made within the healthcare
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 Committee relies heavily, but not exclusively, on these 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.
The base salary increases and bonuses awarded to the Company's executive
officers in 1995 followed the principles outlined in the preceding paragraphs.
The Committee judged that executive officer salary and bonus compensation for
1995 were consistent with the level of accomplishment and appropriately
reflected individual performance and Company results on earnings per share and
sales growth and continuing strong progress on the strategic performance areas
of research and manufacturing productivity, managed care markets, general
Company productivity and management of human resources.
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.
The level of stock option grants made in February, 1995 to the named
executive officers, excluding the CEO, was increased to recognize the
discontinuation of the SPF (see next paragraph).
STRATEGIC PERFORMANCE FEATURE
AWARDS
The Committee decided to discontinue the SPF which, since 1989, had allowed
for the award of Performance Shares to executive officers based on the level
of position. Awards previously made under the SPF, which were for five-year
periods, will continue to their term. The last payment which may be made,
dependent on Company performance, would be in 1999 for the 1994-1998 Award
Period.
PAYOUTS
In 1995, payouts were made for the 1990-1994 Award Period of the SPF.
Payouts for that period were made in cash or stock.
For the four years, 1990 through 1993, the Committee considered three
measures: earnings per share growth, sales growth and return on assets as
compared to a group of leading healthcare companies selected in 1990. This
group consisted of companies in the Dow Jones Pharmaceutical Index--United
States Owned Companies ("DJPI") other than the Company and also included
Abbott Laboratories, Glaxo Holdings PLC and SmithKline Beecham PLC. For each
of the three measures, the Company placed first or second. The Committee also
compared return on assets performance against eleven other companies
identified as growth companies at the beginning of the four-year period. The
Company placed first in this comparison.
10
<PAGE>
For 1994 the Committee used the measures of net income growth versus the
same group of leading healthcare companies, return on assets against plan and
total stockholder return versus the Standard & Poor's 500 Index. The Company
placed fourth for net income growth, met its planned return on assets and
placed in the top 80-89th percentile of the Standard & Poor's 500 companies
for total stockholder return.
Overall, the result was payment of 146.3% of target out of a possible
payment range from zero to 175%. (See Summary Compensation Table.) The
Committee considered the Company's performance under the measures described
above, and made individual payments using its subjective judgment and
discretion.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
BASE SALARY AND BONUS
Mr. Gilmartin's base salary and bonus award for 1995 were determined with
reference to the same measures used for all executive officers of the Company,
including the Company performance measures of earnings per share and sales
growth, research and manufacturing productivity, progress on managed care
strategy, general Company productivity and management of human resources. The
Company met or exceeded its targets on all Company performance measures. No
change was made in Mr. Gilmartin's base salary in 1995. Mr. Gilmartin's bonus
award was $1,100,000 in comparison to $1,000,000 for 1994. The Compensation
and Benefits Committee exercised its subjective judgment and discretion in
determining the amounts of Mr. Gilmartin's base salary and bonus award for
1995.
STOCK OPTIONS
The stock option grant to Mr. Gilmartin in 1995 was set by his agreement
upon joining the Company.
STRATEGIC PERFORMANCE FEATURE
Mr. Gilmartin was not eligible for any payout under the SPF.
The Company periodically retains outside compensation and benefits
consultants to compare base salary and incentive compensation programs for the
Company's executive officers with those of other leading industrial and
healthcare firms (including those in the DJPI) and to ensure that they are
appropriate to the Company's objectives. The Committee exercises judgment and
discretion in the information it reviews and the analyses it considers.
H. Brewster Atwater, Jr. Lawrence A. Bossidy
Chairman Vice Chairman
William G. Bowen Johnnetta B. Cole
Lloyd C. Elam
11
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------- -----------------------------------------
AWARDS PAYOUTS
----------------------------- -----------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION (a) AWARD(S) OPTIONS/SARS (c) PAYOUTS (d) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ---------------------------- ---- ---------- ---------- ---------------- ---------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond V.
Gilmartin 1995 $1,000,000 $1,100,000 $ -- $ -- 180,000 $ -- $ 6,750(e)
Chairman of the
Board, President 1994 541,671 1,000,000 -- 778,125(b) 500,000 -- 1,368(f)
and Chief
Executive Officer 1993 -- -- -- -- -- -- --
Edward M. Scolnick 1995 643,336 660,000 -- -- 100,000 372,111 2,250(e)
Executive Vice
President, 1994 609,996 600,000 58,955 -- 90,000 311,829 2,250(e)
Science and
Technology and
President, 1993 555,000 500,000 78,861 -- 110,300 401,700 3,433(e)
Merck Research
Laboratories
Judy C. Lewent 1995 393,332 365,000 70,996 -- 70,000 148,213 4,824(e)
Senior Vice
President and 1994 354,996 330,000 55,855 -- 50,000 130,541 3,750(e)
Chief Financial
Officer 1993 305,250 280,000 77,718 -- 60,300 -- 5,876(e)
David W. Anstice 1995 392,668 365,000 -- -- 70,000 128,704 6,468(g)
President, 1994 356,589 325,000 -- -- 40,500 95,542 6,182(g)
Human Health --
U.S. /Canada 1993 336,872 230,000 -- -- 30,300 -- 7,760(g)
Per G.H. Lofberg 1995 324,040 365,000 -- -- 70,000 -- 4,135,107(h)
President, Merck-
Medco 1994 300,000 300,000 -- -- 235,000 -- 4,321(h)
Managed Care,
Inc. 1993 -- -- -- -- -- -- --
</TABLE>
- ----
(a) Includes air commuting services as follows: $52,436 for Ms. Lewent in
1995; $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. Also includes
automobile service as follows: $24,082 for Dr. Scolnick and $17,213 for
Ms. Lewent in 1994.
(b) Represents a Restricted Stock Award of 25,000 shares of stock granted on
June 16, 1994 and vesting on June 16, 1999, on which regular dividends are
being paid. The dollar value of the Restricted Stock Award as of December
31, 1995 was $1,640,625.
(c) No stock appreciation rights were granted.
(d) Strategic Performance Feature payouts in 1995 were for services performed
during the five-year award cycle 1990-1994; Strategic Performance Feature
payouts in 1994 were for services performed during the five-year award
cycle 1989-1993; Strategic Performance Feature payouts in 1993 were for
services performed during the five-year cycle 1988-1992.
(e) Company contribution to the Merck & Co., Inc. Employee Savings and
Security Plan.
(f) Imputed income for group term life insurance.
(g) Includes Company contributions to the Merck & Co., Inc. Employee Savings
and Security Plan of $3,750, $3,750 and $5,894 for 1995, 1994 and 1993,
respectively, and imputed income for survivor income insurance of $2,718,
$2,432 and $1,866 for 1995, 1994 and 1993, respectively.
(h) Includes Company contributions to the Medco 401(k) Employee Savings Plan
of $5,538 and $3,799 for 1995 and 1994, respectively, and imputed income
for survivor insurance of $522 and $522 for 1995 and 1994, respectively.
Also includes $4,129,047 additional compensation paid to Mr. Lofberg in
1995 pursuant to his employment agreement in connection with the
acquisition of Merck-Medco Managed Care, Inc. (formerly Medco Containment
Services, Inc.) by the Company.
12
<PAGE>
The following table sets forth stock options granted in 1995 to each of the
Company's executive officers named in the Summary Compensation Table and to
all employees as a group. The Company did not issue any stock appreciation
rights. The table also sets forth the hypothetical gains that would exist for
the options at the end of their ten-year terms for the executive officers
named in the Summary Compensation Table and for all employees as a group
(assuming their options had ten-year terms), at assumed compound rates of
stock appreciation of 0%, 5% and 10%. The actual future value of the options
will depend on the market value of the Company's Common Stock. All option
exercise prices are based on market price on the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(b)
------------------------------------------------ -----------------------------------
PERCENT
OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED
OPTIONS/ TO EXERCISE
SARS EMPLOYEES OR BASE
DATE OF GRANTED IN FISCAL PRICE EXPIRATION
NAME GRANT (#) YEAR ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ------- ---------- --------- -------- ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin.... 2/28/95 180,000 1.27% $42.375 2/27/05 -- $ 4,796,894 $ 12,156,271
Edward M. Scolnick...... 2/28/95 100,000 0.70% 42.375 2/27/05 -- 2,664,941 6,753,484
Judy C. Lewent.......... 2/28/95 70,000 0.49% 42.375 2/27/05 -- 1,865,459 4,727,439
David W. Anstice........ 2/28/95 70,000 0.49% 42.375 2/27/05 -- 1,865,459 4,727,439
Per G.H. Lofberg........ 2/28/95 70,000 0.49% 42.375 2/27/05 -- 1,865,459 4,727,439
All employees
as a group............. (a) 14,193,077 100.00% (a) (a) -- 378,237,125(c) 958,527,138(c)
</TABLE>
----------------
<TABLE>
<CAPTION>
0% 5% 10%
--- -- ---
<S> <C> <C> <C>
Total potential stock price appreciation from
February 28, 1995 to February 27, 2005 for all
stockholders at assumed rates of stock
price appreciation(d)............................... -- $32,748,088,150 $82,990,085,063
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 February 28, 1995 to
February 27, 2005
for all stockholders at assumed rates of stock price
appreciation........................................ -- 1.15% 1.15%
</TABLE>
- --------
(a) Options were granted under the ISP throughout 1995 at prices ranging from
$38.250 to $63.250 and expire ten years from the date of grant. In
addition, stock options were granted throughout 1995 with prices ranging
from $38.250 to $50.813 under the Medco Containment Services ("Medco")
1990 Special Non-Qualified Employee Stock Option Plan. Options granted
under the Medco 1990 Special Non-Qualified Employee Stock Option Plan are
exercisable three years from date of grant and expire five 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.
(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 $42.375 on February 28, 1995, and a total of
1,228,848,533 shares of Common Stock outstanding.
13
<PAGE>
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized on exercise in 1995 by the
Company's executive officers named in the Summary Compensation Table. The
table also sets forth the number of shares covered by exercisable and
unexercisable options held by such executives on December 31, 1995 and the
aggregate gains that would have been realized had these options been exercised
on December 31, 1995, even though these options were not exercised, and the
unexercisable options could not have been exercised, on December 31, 1995. The
Company did not issue stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FY- THE-MONEY OPTIONS/SARS AT
VALUE END (#) FISCAL YEAR END(b) ($)
SHARES ACQUIRED REALIZED (a) ------------------------- -------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin.... -- $ -- -- 680,000 $ -- $21,435,000
Edward M. Scolnick...... 192,000 4,740,722 54,000 300,600 744,768 7,973,150
Judy C. Lewent.......... -- -- 122,700 180,600 3,545,648 4,741,900
David W. Anstice........ 17,487 727,364 137,100 141,100 3,707,802 3,634,900
Per G.H. Lofberg........ 140,000 3,296,299 84,591 414,263 3,911,370 14,944,445
</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,
1995, 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.
The Long-Term Incentive Plans -- Awards in Last Fiscal Year table has been
eliminated since no SPF Performance Share Awards, or other Long-Term Incentive
Plan awards, were made by the Company in 1995.
ANNUAL BENEFITS PAYABLE UNDER MERCK & CO., INC. RETIREMENT PLANS
Annual benefits payable under the Retirement Plan for Salaried Employees of
Merck & Co., Inc. and the Merck & Co., Inc. Supplemental Retirement Plan are
based on a formula which multiplies the participant's final average
compensation (as defined by the plans) by a multiplier and then by the
participant's years of credited service (as defined by the plans) not to
exceed 35 years of credited service. The multiplier is 2% for years of
credited service earned prior to July 1, 1995, and 1.6% for years of credited
service earned after that date.
The following tables set forth the estimated annual benefits payable using
the 1.6% and 2% multipliers, respectively, 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. Annual benefits payable under
the plans can be estimated by adding the years of service earned prior to July
1, 1995 (Table 2) to those which could be earned after that date (Table 1).
14
<PAGE>
PENSION PLAN TABLES
TABLE 1: 1.6% FORMULA
<TABLE>
<CAPTION>
REMUNERATION
(AVERAGE PENSION COMPENSATION
DURING HIGHEST
FIVE CONSECUTIVE YEARS IN THE YEARS OF SERVICE
LAST TEN YEARS BEFORE (ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS
RETIREMENT) OF CREDITED SERVICE SHOWN BELOW(a))
- ----------------------------- --------------------------------------------------
15 20 25 30 35
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 800,000.................. $192,000 $256,000 $ 320,000 $ 384,000 $ 448,000
1,000,000.................. 240,000 320,000 400,000 480,000 560,000
1,200,000.................. 288,000 384,000 480,000 576,000 672,000
1,400,000.................. 336,000 448,000 560,000 672,000 784,000
1,600,000.................. 384,000 512,000 640,000 768,000 896,000
1,800,000.................. 432,000 576,000 720,000 864,000 1,008,000
2,000,000.................. 480,000 640,000 800,000 960,000 1,120,000
2,200,000.................. 528,000 704,000 880,000 1,056,000 1,232,000
2,400,000.................. 576,000 768,000 960,000 1,152,000 1,344,000
2,600,000.................. 624,000 832,000 1,040,000 1,248,000 1,456,000
2,800,000.................. 672,000 896,000 1,120,000 1,344,000 1,568,000
3,000,000.................. 720,000 960,000 1,200,000 1,440,000 1,680,000
</TABLE>
TABLE 2: 2% FORMULA(b)
<TABLE>
<CAPTION>
REMUNERATION
(AVERAGE PENSION COMPENSATION
DURING HIGHEST YEARS OF SERVICE
FIVE CONSECUTIVE YEARS IN THE (ESTIMATED ANNUAL RETIREMENT BENEFITS
LAST TEN YEARS BEFORE FOR YEARS
RETIREMENT) OF CREDITED SERVICE SHOWN BELOW(a))
- -------------------------------------- ---------------------------------------
10 15 20 25
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
$ 800,000............................ $160,000 $240,000 $ 320,000 $ 400,000
1,000,000............................ 200,000 300,000 400,000 500,000
1,200,000............................ 240,000 360,000 480,000 600,000
1,400,000............................ 280,000 420,000 560,000 700,000
1,600,000............................ 320,000 480,000 640,000 800,000
1,800,000............................ 360,000 540,000 720,000 900,000
2,000,000............................ 400,000 600,000 800,000 1,000,000
2,200,000............................ 440,000 660,000 880,000 1,100,000
2,400,000............................ 480,000 720,000 960,000 1,200,000
2,600,000............................ 520,000 780,000 1,040,000 1,300,000
2,800,000............................ 560,000 840,000 1,120,000 1,400,000
3,000,000............................ 600,000 900,000 1,200,000 1,500,000
</TABLE>
- --------
(a) Benefits shown above are exclusive of the social security offset provided
for by the benefit formula.
(b) Credited Service is shown for the years specified to approximate the
actual years of credited service earned prior to July 1, 1995 (at the 2%
multiplier) by the executive officers named in the Summary Compensation
Table other than Mr. Gilmartin and Mr. Lofberg. Mr. Gilmartin earned 1.0
years prior to July 1, 1995. Mr. Lofberg does not participate in the
Retirement Plan for Salaried Employees but participates in the Medco Cash
Balance Retirement Plan described below.
As of July 1, 1995 and December 31, 1995, years of actual credited service
in the Retirement Plan for Salaried Employees and the Supplemental Retirement
Plan are, respectively: Dr. Scolnick--13 years and 13.5 years; Ms. Lewent--15
years and 15.5 years; Mr. Anstice--21 years and 21.5 years. In addition, if
these
15
<PAGE>
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 prior to
January 1, 1995 up to an aggregate total of 35 years of credited service. As
of July 1, 1995 and December 31, 1995, Mr. Gilmartin had 1.0 and 1.5 years,
respectively, of actual credited service in the Retirement Plan for Salaried
Employees and the Supplemental Retirement Plan and was credited with 28 years
of credited service under the Supplemental Retirement Plan, as provided in and
subject to the employment agreement described below.
Pension compensation, for purposes of the Retirement Plan for Salaried
Employees and the Supplemental Retirement Plan 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 1995 differs
from compensation reported in the Summary Compensation Table in that pension
compensation includes the annual EIP bonus awards received in 1995 for
services in 1994 rather than the EIP bonus awards paid in 1996 for services in
1995. Pension compensation for 1995 was $2,000,000 for Mr. Gilmartin;
$1,243,336 for Dr. Scolnick; $723,332 for Ms. Lewent and $717,668 for Mr.
Anstice.
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.
ANNUAL BENEFIT PAYABLE UNDER MEDCO RETIREMENT PLAN
Mr. Lofberg participates in the Medco Retirement Plan, a defined benefit
plan. His retirement income is determined in accordance with the following
formula: For each calendar year ("Plan Year"), the accrued benefit of each
participant who completes at least 1,000 hours of service in such Plan Year is
increased by an amount equal to the sum of: (i) 250/1535 of 1% of the
participant's compensation, as defined in the Medco Retirement Plan, and (ii)
the amount of credited interest calculated for such Plan Year on the basis of
the participant's accrued benefit stated as a lump sum value as of January 1
of such Plan Year. A participant vests in 20% of such participant's accrued
benefit after the completion of three years of service, with the remainder
vesting 20% upon completion of each year of service thereafter. The estimated
annual retirement income payable as a single life annuity commencing at normal
retirement age for Mr. Lofberg is $21,268.
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
H. Brewster Atwater, Jr., Lawrence A. Bossidy, William G. Bowen, Johnnetta
B. Cole and Lloyd C. Elam served on the Compensation and Benefits Committee
during 1995.
There were no Compensation and Benefits Committee interlocks or insider
(employee) participation during 1995.
EMPLOYMENT CONTRACTS AND ARRANGEMENTS
As of June 9, 1994, the Company and Mr. Gilmartin entered into an employment
agreement (the "Agreement") under which Mr. Gilmartin serves 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.
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 until
June 16, 1999) 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 on February 28,
1995. Both grants become exercisable on the fifth anniversary of the date of
grant, and expire on the tenth anniversary of the date of grant, at the market
price of the Company's Common Stock on the date of grant as determined under
the ISP. Subsequent annual stock option grants are 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 immediately become exercisable 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, he will accrue
additional retirement benefits and his other stock options will become
exercisable on their original vesting dates. If Mr. Gilmartin's employment is
terminated by the Company for "Gross Cause" or is terminated 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.
17
<PAGE>
Under Per G. H. Lofberg's employment agreement dated as of April 1, 1993
(the "Lofberg Employment Agreement") with Merck-Medco Managed Care, Inc.
(formerly Medco Containment Services, Inc.) ("Medco"), which became a
subsidiary of the Company in November 1993, Mr. Lofberg is to be paid a base
salary of $300,000 (which has since been increased by the Company) and is
eligible for annual bonus awards.
The Lofberg Employment Agreement provided for Mr. Lofberg to receive
additional compensation if a "Disposition Transaction" occurred during his
employment period and he remained employed by the acquiring entity for a
period of 18 months thereafter. The acquisition of Medco by Merck on November
18, 1993 (the "Merger") constituted a Disposition Transaction. Accordingly, in
June 1995, Mr. Lofberg received additional compensation in the amount of
$4,129,047.
Pursuant to a letter agreement entered into between Mr. Lofberg and Medco
dated as of July 27, 1993 (the "Letter Agreement"), Mr. Lofberg has invested
13.6% of this additional compensation in Merck Common Stock. In addition,
pursuant to the Letter Agreement, Mr. Lofberg has invested in Merck Common
Stock $145,700 of the proceeds received upon the conversion of certain of his
shares of Medical Marketing Group, Inc. ("MMG") in connection with the merger
of MMG with a subsidiary of Medco on April 6, 1994. In each case, such Merck
Common Stock cannot be sold or transferred until November 18, 1996 or until
the earlier termination of Mr. Lofberg's employment without cause or his
resignation for cause or by reason of death or disability. The Letter
Agreement also requires Mr. Lofberg to purchase Merck Common Stock with 13.6%
of the proceeds from the sale of the shares issuable with respect to options
to purchase 42,000 shares of Synetic, Inc. Such stock cannot be sold or
transferred until November 18, 1996 or until the earlier termination of
Mr. Lofberg's employment without cause or his resignation for cause or by
reason of death or disability. Further, under the Letter Agreement, Mr.
Lofberg agreed to waive the acceleration of vesting that would otherwise have
occurred as a result of the Merger with respect to options to purchase 291,364
shares of Merck Common Stock. Such options shall immediately vest and become
exercisable upon a subsequent termination of Mr. Lofberg's employment without
cause or his resignation for cause or by reason of death or disability.
Termination of employment with cause is defined as: (a) the employee has
materially breached his fiduciary duties to the Company and its subsidiaries;
or (b) the employee's participation in the commission of a fraud (unless such
participation is the result of actions taken by the employee at the express
direction of the Board of Directors); or (c) the employee's conviction of a
crime (other than misdemeanor not involving moral turpitude or the
misappropriation of funds); or (d) the employee's material breach of any of
his representations or any material term or obligation of the Lofberg
Employment Agreement, after any applicable cure period has expired. For
purposes of the Letter Agreement, resignation for cause is defined as a
resignation due to: (a) Medco's material breach of any of the material terms
of the Lofberg Employment Agreement; (b) relocation without Mr. Lofberg's
consent to an office outside the greater New York City metropolitan area; or
(c) any diminution in Mr. Lofberg's title, duties or responsibilities that (i)
results in Mr. Lofberg no longer having senior executive status with Medco or
(ii) requires Mr. Lofberg, without his consent, to devote more than a de
minimis amount of his time to an area of activity that Mr. Lofberg was not
engaged in as of July 27, 1993.
Pursuant to the terms of the Lofberg Employment Agreement, eighteen months
after a change of control of Medco, Mr. Lofberg may terminate his employment
with the Company upon thirty days' written notice. In the event of such
termination, Mr. Lofberg shall be retained as a consultant for the Company for
a period of two (2) years from the date of termination. During the consultancy
period, Mr. Lofberg shall be entitled to receive monthly payments equal to
one-twelfth of his then applicable annual base compensation. In addition,
during the consultancy period, stock options held by Mr. Lofberg shall
continue to vest to the extent provided in the applicable stock option
agreements. The Merger constituted a change of control for purposes of the
Lofberg Employment Agreement. These change of control provisions expire as of
March 31, 1996.
The Lofberg Employment Agreement provides that in the event of a termination
of Mr. Lofberg's employment due to his death or disability, Mr. Lofberg (or
his heirs or his estate in the event of his death) will receive monthly
payments equal to one-twelfth of his annual base compensation as of the time
of termination for a period of one year from the date of such termination.
This provision expires as of March 31, 1996.
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<PAGE>
Pursuant to the Lofberg Employment Agreement, after March 31, 1996, Mr.
Lofberg's employment may be terminated by either party on thirty days' prior
written notice.
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 Dow
Jones Pharmaceutical Index--United States Owned Companies ("DJPI") and the
Standard & Poor's 500 Index ("S&P 500 Index") for the five years ending
December 31, 1995. 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 1995/1990
VALUE CAGR**
------ ---------
<S> <C> <C>
Merck.................................................... $249 20%
DJPI..................................................... 223 17
S&P 500.................................................. 215 17
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
MERCK 100.00 188.77 150.57 123.10 141.39 249.36
DJPI 100.00 156.68 128.26 118.99 136.38 223.29
S&P 500 100.00 130.34 140.25 154.33 156.44 215.02
- --------
* Assumes that the value of the investment in Company Common Stock and
each index was $100 on December 31, 1990 and that all dividends were
reinvested.
** Compound Annual Growth Rate.
19
<PAGE>
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 1996, 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 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
There will be presented to the meeting a proposal to adopt the 1996 Non-
Employee Directors Stock Option Plan (the "Plan"). The Plan will replace the
Non-Employee Directors Stock Option Plan which, by its terms, terminated on
December 31, 1995 for purposes of granting further options. This Plan is
intended to benefit the Company and its stockholders by allowing those members
of the Board of Directors of the Company who are neither current nor former
employees of the Company to increase their financial stake in the Company
through ownership of Common Stock, thus underscoring the directors' mutual
interest with stockholders in increasing the long-term value of the Company's
stock.
Primary aspects of the Plan, the text of which is set forth in Exhibit A,
are as follows.
GENERAL INFORMATION
Participation in this Plan would be limited to members of the Board of
Directors who are not current or former employees of the Company or any of its
subsidiaries ("Non-Employee Directors"). After the election of four directors
on April 23, 1996, there will be eleven Non-Employee Directors.
STOCK OPTION GRANT
The Plan provides that 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 will automatically receive, in
consideration for service as a Director, nonqualified stock options on 1,000
shares of Common Stock. There are 225,000 shares of Common Stock reserved for
issuance under the Plan. Under the Plan's formula, the exercise price for
options granted under the Plan will be the closing price on the date of the
grant of the Company's Common Stock as quoted on the composite tape of the
NYSE. Options become exercisable five years from date of grant and expire ten
years from date of grant. The exercise price must be paid in cash. If, on the
first Friday following the Annual Meeting of Stockholders, the General Counsel
of the Company determines, in her/his sole discretion, that the Company is in
possession of material, undisclosed information that would prevent
20
<PAGE>
it from issuing securities, then the annual grant of options to Non-Employee
Directors will be suspended until the second day after public dissemination of
the information (or the first trading day thereafter). The amount, pricing and
other terms of the grant will remain as set forth in the Plan, with the
exercise price of the option to be determined in accordance with the formula
on the date the option is finally granted.
CESSATION OF SERVICE
Upon retirement, a Non-Employee Director's options will continue to become
exercisable and must be exercised within 60 months from retirement. Upon a
Non-Employee Director's death, those options held by the Non-Employee Director
for at least one year shall become exercisable; his/her legal representatives
or heirs will then have 36 months from the date of death to exercise those
options which were exercisable at the time of death and those options which
become exercisable at the time of death. Should an individual cease to serve
as a Non-Employee Director for any reason other than retirement or death,
he/she will have 90 days within which to exercise those options which were
exercisable as of the date he/she ceased to serve as a director.
FEDERAL INCOME TAX CONSEQUENCES
The grant of a nonqualified stock option will not result in income for the
grantee or in a deduction for the Company. The exercise of a 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.
OTHER INFORMATION
The Plan will become effective on approval of the Company's stockholders and
will terminate, for purposes of granting further options, on December 31, 2000
unless terminated earlier by the Board of Directors or extended by the Board
with the approval of stockholders.
Non-Employee Directors are compensated for their services as directors. For
a description of such compensation see page 7 of this proxy statement. As of
March 8, 1996 the closing price of Company Common Stock, as quoted on the
composite tape of the NYSE, was $64.375.
NEW PLAN BENEFITS
The following table sets forth the stock options that the individuals and
groups referred to below will receive in 1996 if the 1996 Non-Employee
Directors Stock Option Plan is approved by the Company's stockholders at this
Annual Meeting. Executive officers and employee-directors of the Company are
not eligible to participate in the Plan.
21
<PAGE>
NEW PLAN BENEFITS
MERCK & CO., INC. 1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER
DOLLAR OF
NAME AND POSITION VALUE($) UNITS
----------------- -------- ------
<S> <C> <C>
Raymond V. Gilmartin
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............................. -- --
Per G.H. Lofberg
President, Merck-Medco
Managed Care, Inc........................................ -- --
Non-Executive Director Group.............................. (a) 10,000(b)
Non-Executive Officer Employee Group...................... -- --
</TABLE>
- --------
(a) Dollar value is dependent upon the future share price of Company Common
Stock.
(b) Dr. Thier cannot accept stock option grants since, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. STOCKHOLDER PROPOSAL CONCERNING
PRIOR GOVERNMENT/POLITICAL SERVICE OF CERTAIN EMPLOYEES AND DIRECTORS
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W.,
Suite 215, Washington, DC 20037, owner of 225 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 stockholders of Merck assembled in Annual Meeting in
person and by proxy hereby request the Board of Directors to have the
Company furnish the stockholders each year with a list of people employed
by the Corporation with the rank of Vice President or above, or as a
consultant, or as a lobbyist, or as legal counsel or investment banker or
director, who, in the previous five years have served in any governmental
capacity, whether Federal, City or State, or as a staff member of any
CONGRESSIONAL COMMITTEE or regulatory agency, and to disclose to the
stockholders whether such person was engaged in any matter which had a
direct bearing on the business of the Corporation and/or its subsidiaries,
provided that information directly affecting the competitive position of
the Corporation may be omitted.
22
<PAGE>
"REASONS: Full disclosure on these matters is essential at Merck because
of its many dealings with Federal and State agencies, and because of
pending issues forthcoming in Congress and/or State and Regulatory
Agencies.
"If you AGREE, please mark your proxy FOR this resolution."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
Avoiding improper contacts by all Company employees is an ongoing
responsibility of Management and one in which the Company invests significant
efforts in order to avoid both the reality and appearance of any impropriety.
To this end, the Company annually requires directors and key employees to
complete a survey which requires disclosure of all relationships and
transactions that could present a conflict of interest. All such disclosures
are reviewed for compliance with the Company's policies. Similar safeguards
are imposed with respect to law firms and other consultants and advisors
retained by the Company. The Company engages such entities or persons on the
basis of their professional competence and reputation and expects that they
will comply with applicable conflict of interest laws, rules of professional
conduct, and the Company's policies which apply to its relationships with
them. Accordingly, the Board believes that the compilation and distribution of
the information requested by this proposal would involve an unnecessary burden
and expense and would serve no useful purpose.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
5. STOCKHOLDER PROPOSAL CONCERNING
BENEFITS FOR MANAGEMENT AND DIRECTORS
Mr. Robert D. Morse, 212 Highland Avenue, Moorestown, NJ 08057-2717, owner
of 600 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 Company discontinue use of all options, rights,
SAR's, etc. after termination of existing agreements with management and
directors.
"REASONS: These increased benefits have failed to produce the claim that
it holds and retains qualified personel [sic].
"Notice the increasing number of management persons who have left simply
because of better corporate offers.
"We as shareowners are being gradually undervalued with each issuance.
Call a halt by voting YES!
"Many pages of a proxy are expended to promote self-benefits; then there
are unmentioned administrative costs of distribution and record keeping.
"Executives and directors are compensated enough to buy stock on the open
market, just as you and I, if we are so inclined.
"Again: Vote YES."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
The Compensation and Benefits Committee of the Board, which is comprised
entirely of independent directors, oversees the compensation policies of the
Company. The Committee on Directors, which also is comprised entirely of
independent directors, oversees the compensation of the Company's directors.
The
23
<PAGE>
Committees believe that the use of stock options and, when appropriate, other
equity-based incentives ("Incentives"), benefits the Company and its
stockholders by better aligning employee and director interests with those of
the Company's stockholders. The concurrence of stockholders in the use of this
form of compensation was evidenced at the Company's 1995 Annual Meeting where
the stockholders overwhelmingly approved the 1996 Incentive Stock Plan which
broadened opportunities for the grant of Incentives to most employees.
Elimination of Incentives could adversely affect the Company's ability to
attract, retain and motivate the highly qualified employees and board members
necessary to achieve the Company's objectives. It would also remove a crucial
element of flexibility in setting compensation and would place the Company at
a competitive disadvantage.
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.
6. STOCKHOLDER PROPOSAL CONCERNING
ANNUAL ELECTION OF DIRECTORS
Mr. Kenneth Steiner, 14 Stoner Avenue, Suite 2-M, Great Neck, NY 11021,
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: At last year's annual meeting of stockholders a
similar resolution was approved by a significant number of the voting
shares.
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable
for 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 its
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 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.
"I am a founding member of the Investors Rights Association of America
and 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."
24
<PAGE>
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
Similar proposals have been submitted at the last nine Annual Meetings of
Stockholders and have been defeated by a wide margin on each occasion. The
Board of Directors continues to believe that this proposal is not in the best
interests 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.
. 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 1997 Annual Meeting and an 80%
stockholder vote would be necessary for approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
7. STOCKHOLDER PROPOSAL CONCERNING BONUSES
Mr. Fred Wilson and Ms. Mazie M. Wilson, 3011 N. Miles Drive, Edmond, OK
73034-4112, owners of 200 shares of Common Stock of the Company, have given
notice that they intend to present for action at the Annual Meeting the
following resolution:
"RESOLVED: That all bonuses in excess of $30,000 be approved by the
stockholders at the annual stockholders meeting.
"REASONS: It is my opinion that the executives are not justified in
receiving the unusually large incentives and bonuses which are apparently
awarded by the Board of Directors. It seems that the fine salaries that
they already receive should be sufficient justification and incentive for
doing a good job. If the executives cannot get along on the fantastic
salaries that they are being paid then let them move on to `greener'
pastures."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
The Company's compensation policies are approved by the Compensation and
Benefits Committee of the Board, which is comprised entirely of independent
directors. The objectives and policies governing the amount of compensation
that employees receive are highly dependent on the Company's performance and
the performance of its stock. The requirement that all bonuses in excess of
$30,000 be submitted for stockholder approval would substitute an arbitrary
standard for the performance-based criteria currently employed.
25
<PAGE>
Moreover, the compensation of the Company's employees is within a range of
compensation offered by comparable companies. The Company periodically retains
outside compensation and benefit consultants to ensure that its compensation
and benefit programs are not inconsistent with those of other leading
industrial and healthcare companies.
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.
8. STOCKHOLDER PROPOSAL CONCERNING
CHARITABLE CONTRIBUTIONS
Mr. Alan M. Rice, 5 Sycamore Terrace, Springfield, NJ 07801, owner of 10,800
shares of Common Stock of the Company, and Mr. Charles Pope Day, Jr., 93
Highland Avenue, Short Hills, NJ 07078, owner of 650 shares of Common Stock of
the Company, have given notice that they intend to present for action at the
Annual Meeting the following resolution:
"RESOLVED: That the directors of Merck & Co., Inc. present to the
shareholders for approval any charitable contribution commitment to any
single entity which exceeds the per capita gross domestic product for the
most recent year available.
"SUPPORTING STATEMENT: Merck is a `for profit' enterprise, a business.
Investors purchase Merck stock as an investment vehicle, not to participate
in a charitable giveaway. The job of the Board of Directors is to increase
the value of the shareholders' investments. If the Directors of Merck wish
to donate to charity, they should do it from their own very substantial
personal remunerations. In 1993 Merck donated, through the Merck Company
Foundation, over $65 million dollars of stockholders' money to various
charities. This money would better have served the interests of the
stockholders if it had been reinvested in the company or returned to the
shareholders in the form of increased dividends.
"Every current Merck director appears to be actively connected with one
or more charities or quasi-eleemosynary institutions subsidized at least to
some degree by public contributions. The proponents of this proposal feel
that the directors of Merck are using corporate funds at stockholders'
expense so that the aforementioned directors may win election or
appointment to these various boards and subsequently bolster their own
resumes. In so doing, they are forcibly imposing their own charitable
interests upon Merck stockholders by giving away large sums of money,
frequently to a single charity, without stockholders' approval or consent.
"Figures found in the 1994 Statistical Abstract of the United States,
issued by the U.S. Department of Commerce, September 1994, report that the
U.S. population in 1993 was approximately 258,245,000 and the 1993 gross
domestic product was $6,377,900,000,000. Based upon these figures the per
capita gross domestic product for 1993 was about $24,697.09.
"Please vote FOR this proposal."
BOARD OF DIRECTORS' STATEMENT IN OPPOSITION TO THE RESOLUTION
The Company's charitable endeavors, encompassing contributions made directly
by the Company and those made through The Merck Company Foundation, are the
product of a carefully administered program designed to ensure that the nature
and magnitude of the contributions are in the best interests of the Company
and its stockholders and that the recipients are appropriate and deserving. Of
the $65 million in 1993 contributions cited in this proposal, 70% were in the
form of product donations such as providing medicines for disaster relief
efforts and the Company's ongoing contribution of Mectizan to prevent river
blindness in Africa. More than 65% of the remaining contributions were
directed toward support of medical and scientific activities, a major portion
of which supported the educational training of physicians and scientists. In
addition to furthering the medical and
26
<PAGE>
scientific education of the recipients and thereby benefiting society as a
whole, these contributions directly benefit the Company by enhancing and
broadening the pool of scientific talent that the Company draws upon for its
employees. Moreover, the Company's charitable endeavors are consistent with,
and supportive of, the Company's long-standing commitment to health and well-
being and earn the Company respect and good will from the scientific
community, local communities in the vicinity of our sites and the public at
large.
A booklet summarizing the Company's contributions through The Merck Company
Foundation is published annually and is available upon request.
The Board of Directors believes that this proposal would impose an
inappropriate and unwarranted restriction on the Company's charitable
activities and opposes this stockholder resolution.
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 1995
fiscal year.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1997
Stockholder proposals to be presented at the 1997 Annual Meeting must be
received by the Company on or before November 21, 1996 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 18, 1996
27
<PAGE>
EXHIBIT A
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.
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.
A-1
<PAGE>
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.
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.
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<PAGE>
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
stockholder approval is obtained.
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<PAGE>
LOGO
<PAGE>
MERCK & CO., INC.
LOGO MERCK Annual Meeting of Stockholders
Tuesday, April 23, 1996
Edward Nash Theatre at
Raritan Valley Community College
ADMISSION TICKET Route 28 and Lamington Road
North Branch, New Jersey
The Annual Meeting of Stockholders of Merck & Co., Inc.
will be held at 2:00 p.m. on April 23, 1996, in the
Edward Nash Theatre at Raritan Valley Community College
in North Branch, New Jersey. If you plan to attend,
please retain this ticket and MARK THE APPROPRIATE BOX ON
THE PROXY CARD. A map showing directions to the meeting
site is shown on the reverse side of this admission
ticket. This ticket admits the stockholder(s) whose
name(s) appears on it and one guest.
IF DUPLICATE COPIES OF THE COMPANY'S ANNUAL REPORT ARE
SENT TO YOUR HOUSEHOLD, YOU MAY DISCONTINUE THE MAILING
OF SUCH REPORT TO THIS ACCOUNT BY CHECKING THE
APPROPRIATE BOX ON THE PROXY CARD.
THIS TICKET IS NOT TRANSFERABLE
(Detach and Return Proxy Card Below in
the Enclosed Envelope)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<S> <C>
1. Election of Directors: Nominees are H. Brewster Atwater, Jr., Raymond V. Gilmartin, Samuel O. Thier and Dennis
DIRECTORS Weatherstone for terms expiring in 1999. AUTHORITY TO VOTE FOR ANY NOMINEE MAY BE WITHHELD BY LINING THROUGH THE
RECOMMEND NOMINEE'S NAME ABOVE. To cumulate votes as to a particular nominee(s) as explained in the proxy statement,
A VOTE indicate the name(s) and the number of votes to be given to such nominee(s):
FOR
ITEMS [_] FOR all nominees (except as marked to the contrary above) [_] WITHHOLD AUTHORITY to vote for all nominees
1, 2 AND 3 FOR AGAINST ABSTAIN
2. Ratification of Appointment of Independent Public Accountants [_] [_] [_]
3. Proposal to adopt the 1996 Non-Employee Directors Stock Option Plan [_] [_] [_]
- ----------------------------------------------------------------------------------------------------------------------------------
DIRECTORS 4. Stockholder proposal re Prior Government/Political Service of Certain
RECOMMEND Employees and Directors [_] [_] [_]
A VOTE 5. Stockholder proposal re Benefits for Management and Directors [_] [_] [_]
AGAINST 6. Stockholder proposal re Annual Election of Directors [_] [_] [_]
ITEMS 7. Stockholder proposal re Bonuses [_] [_] [_]
4, 5, 8. Stockholder proposal re Charitable Contributions [_] [_] [_]
6, 7
AND 8
Signature(s):
--------------------------------
--------------------------------
--------------------------------
Date: , 1996
--------------------------------
</TABLE>
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. PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
[MAP AND DIRECTIONS]
- --------------------------------------------------------------------------------
LOGO MERCK
PROXY/VOTING INSTRUCTION CARD
ANNUAL MEETING OF STOCKHOLDERS--APRIL 23, 1996
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 23, 1996, and at all
adjournments thereof, upon the matters set forth on the reverse
side, 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 shares represented by this proxy will be voted as directed
by the stockholder. If no specification is made, the shares
will be voted FOR proposals 1, 2 and 3 and AGAINST proposals 4,
5, 6, 7 and 8.
[_] Discontinue mailing the Annual Report to this account.
[_] Will attend the Annual Meeting.
