<PAGE>
SCHEDULE 14A
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 Under Rule 14a-12
MERCK & CO., INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO] MERCK
Merck & Co., Inc.
Notice of Annual Meeting of Stockholders
April 25, 2000
----------------
To the Stockholders:
The Annual Meeting of Stockholders of Merck & Co., Inc. will be
held on Tuesday, April 25, 2000, at 2:00 p.m., in the Edward Nash
Theatre at Raritan Valley Community College, Route 28 and Lamington
Road, North Branch, New Jersey, for the following purposes:
. To elect one director for a term ending in 2001, one director
for a term ending in 2002 and four directors for terms ending
in 2003;
. To consider and act upon a proposal to ratify the appointment
of independent public accountants for 2000;
. To consider and act upon a proposal to adopt the 2001
Incentive Stock Plan;
. To consider and act upon a stockholder proposal concerning
appointment of directors from outside the Company;
. To consider and act upon a stockholder proposal concerning
annual election of directors;
. To consider and act upon a stockholder proposal concerning
bonuses for management;
. To consider and act upon a stockholder proposal concerning
pharmaceutical pricing;
. To consider and act upon a stockholder proposal concerning
stock ownership of director candidates; 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 3,
2000, 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.
In order that your stock may be represented at the meeting if you
are not personally present, you are urged to vote your shares by (1)
a toll-free telephone call, (2) the Internet or (3) completing,
signing and dating the enclosed proxy card and returning it promptly
in the accompanying addressed envelope. If you are voting by
telephone or the Internet, follow the instructions on the attachment
to the proxy card.
Admission to the meeting will be by ticket only. 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.
By order of the Board of Directors,
Celia A. Colbert
Vice President, Secretary and
Assistant General Counsel
March 16, 2000
<PAGE>
Merck & Co., Inc.
P. O. Box 100
Whitehouse Station, New Jersey 08889-0100
(908) 423-1000
March 16, 2000
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 which will be held
on Tuesday, April 25, 2000, in the Edward Nash Theatre at Raritan Valley
Community College, Route 28 and Lamington Road, North Branch, New Jersey, and
all adjournments thereof. The Company's Annual Report for 1999, including
financial statements, and proxy statement and proxy/voting instruction card
("proxy card" or "proxy") are being mailed to stockholders beginning March 16,
2000.
If a stockholder is a participant in the Merck Stock Investment 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 Merck & Co., Inc. Employee Savings and
Security Plan, Merck & Co., Inc. Employee Stock Purchase and Savings Plan,
Hubbard ISA LLC Employee Savings Plan, Merck-Medco Managed Care 401(k) Savings
Plan, Merck Puerto Rico Employee Savings and Security Plan, Merck Frosst
Canada Inc. Stock Purchase Plan and Merial 401(k) Savings Plan ("Merial
Plan"). Instead, these participants will receive from the plan trustees
separate voting instruction cards covering these shares. If voting instruction
cards for the Merial Plan are not signed and returned, the plan trustee will
vote the shares in the same proportion as it voted the shares for which voting
instructions were received. Voting instruction cards for all other plans must
be signed and returned or the shares will not be voted.
Any proxy cards returned without specification will be voted as to each
proposal in accordance with the recommendations of the Board of Directors.
Stockholders of record can also vote their shares by telephone or the
Internet. The telephone and Internet voting procedures are designed to
authenticate stockholders' identities, to allow stockholders to give their
voting instructions and to confirm that these instructions have been properly
recorded. If your shares are held in the name of a bank or broker, the
availability of telephone and Internet voting will depend on their voting
processes; therefore, it is recommended that you follow the voting
instructions on the form you receive. The Company has been advised by legal
counsel that the procedures which have been put in place are consistent with
the requirements of applicable law.
The Proxy
Any person giving a proxy has the power to revoke it at any time before it
is voted by submitting a later-dated proxy (including a proxy by telephone or
the Internet) or by giving timely written notice to Celia A. Colbert, Vice
President, 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 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.,
Inc., 445 Park Avenue, New York, New York 10022, to aid in the solicitation of
proxies at an anticipated fee of $25,000 plus reasonable expenses.
<PAGE>
Beneficial Ownership of Securities and Voting Rights
On December 31, 1999, no individual, corporation or other entity was known
by the Company to own beneficially more than five percent of the Company's
outstanding Common Stock.
There were outstanding and entitled to vote as of the record date, March 3,
2000, 2,316,574,249 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 six directors are to be elected, a
holder of 100 shares may cast 600 votes for a single nominee, apportion 200
votes to each of three nominees or apportion 600 votes in any other manner by
so noting in the space provided on the accompanying proxy card. The cumulative
voting feature applicable to the election of directors is only available by
voting the proxy card; it is not available by telephone or the Internet.
A stockholder may withhold votes from any or all nominees. Except to the
extent that a stockholder withholds votes from any or all nominees, the
persons named in the proxy card, 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 for election,
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 proxy will vote such proxy in
accordance with the specification made 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 2001 Incentive
Stock 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
Six directors are to be elected at the meeting. One director is to be
elected for the remaining year of a term expiring in 2001, one director is to
be elected for the two remaining years of a term expiring in 2002 and four
directors are to be elected for three-year terms expiring in 2003. The Board's
nominees are Mr. Niall FitzGerald for a term expiring in 2001, Ms. Anne M.
Tatlock for a term expiring in 2002 and Mr. Lawrence A. Bossidy, Dr. Johnnetta
B. Cole, Mr. William B. Harrison, Jr. and Dr. William N. Kelley for terms
expiring in 2003. Mr. FitzGerald is a new candidate for election by
stockholders at this Annual Meeting. Mr. Harrison and Ms. Tatlock were elected
to the Board on December 21, 1999 and February 22, 2000, respectively, to
serve until this Annual Meeting and to stand for election by stockholders at
the meeting. All other candidates have previously been elected by
stockholders. Sir Derek Birkin and Mr. Charles E. Exley, Jr. will retire from
the Board at the Annual Meeting in accordance with the retirement policy for
the Board of Directors. Dr. Carolyne K. Davis will retire from the Board at
the Annual Meeting for health reasons. After the election of six directors at
the Annual Meeting, the Company will have fourteen directors, including the
eight continuing directors whose present terms extend beyond the meeting.
Information on the nominees and continuing directors follows.
2
<PAGE>
Name, Age and
Year First Business Experience and Other Directorships
Elected Director or Significant Affiliations
- ---------------- -----------------------------
Nominees
For a term expiring in 2001
[PHOTO] Chairman, Unilever PLC (foods and home and personal care)
since September 1996; Vice-Chairman, Unilever PLC (1994 to
1996); Vice-Chairman, Unilever NV (since September 1996)
Niall
FitzGerald Director, Telefonaktiebolaget LM Ericsson and Leverhulme
Age--54 Trust; Governor, National Institute of Economic and Social
Research; Trustee, The Conference Board; Member, The Business
Council, Council of British Executive Services Overseas, EU-
China Business Council, Hong Kong-European Business Co-
operation Committee, Trilateral Commission and World Economic
Forum
For a term expiring in 2002
[PHOTO] President (since 1994) and Chief Executive Officer (since
September 1999), Fiduciary Trust Company International (global
asset management services)
Anne M.
Tatlock Director, Fiduciary Trust Company International, American
Age--60 General Corporation and Fortune Brands, Inc.; Chairman,
2000 Cultural Institutions Retirement Systems; President, American
Ballet Theatre Foundation; Trustee, The Andrew W. Mellon
Foundation, Teagle Foundation and Vassar College
For terms expiring in 2003
[PHOTO] Chairman, Honeywell International Inc. (aerospace, home and
industrial controls, specialty chemicals and transportation
products) since December 1999; Chairman of the Board and Chief
Executive Officer, AlliedSignal, Inc. (aerospace, automotive
products and engineered materials technology) for more than
five years
Lawrence A.
Bossidy Director, Champion International Corporation and J.P. Morgan &
Age--65 Co. Incorporated; Member, The Business Council and The
1992 Business Roundtable
[PHOTO] Presidential Distinguished Professor, Emory University since
September 1998; President, Spelman College (1987 to June 1997)
Johnnetta B.
Cole, Ph.D. Director, Coca-Cola Enterprises; Trustee, Rockefeller
Age--63 Foundation and Gallaudet University; Member, Council on
1994 Foreign Relations and National Council of Negro Women; Fellow,
American Anthropological Association
3
<PAGE>
Name, Age and
Year First Business Experience and Other Directorships
Elected Director or Significant Affiliations
- ---------------- -----------------------------
[PHOTO] Chairman (since January 2000) and Chief Executive Officer
(since June 1999), The Chase Manhattan Corporation and The
Chase Manhattan Bank (financial services); President (June
1999 to December 1999) and Vice Chairman (1991 to December
William B. 1999), The Chase Manhattan Corporation and The Chase Manhattan
Harrison, Bank
Jr.
Age--56 Director, Dillard's Inc.
1999
[PHOTO] Professor of Medicine, Biochemistry and Biophysics, University
of Pennsylvania School of Medicine since February 2000; Chief
Executive Officer, University of Pennsylvania Health System,
William N. Dean of the School of Medicine and Executive Vice President,
Kelley, M.D. University of Pennsylvania (1989 to February 2000)
Age--60
1992 Director, Beckman Coulter, Inc. and Philadelphia Orchestra
Association; Trustee, Emory University; Fellow, American
Academy of Arts and Sciences; Member, American Philosophical
Society, Institute of Medicine of the National Academy of
Sciences, Board of Managers of Wistar Institute; Master,
American College of Physicians
Directors Whose Terms Expire in 2001
[PHOTO] President, The Andrew W. Mellon Foundation (philanthropic
foundation) for more than five years
William G. Director, American Express Company; Member, Board of
Bowen, Ph.D. Overseers, Teachers Insurance and Annuity Association of
Age--66 America-College Retirement Equities Fund; Trustee, Denison
1986 University
[PHOTO] Professor of Psychiatry, Meharry Medical College for more than
five years
Lloyd C. Trustee, The Alfred P. Sloan Foundation
Elam, M.D.
Age--71
1973
4
<PAGE>
Name, Age and
Year First Business Experience and Other Directorships
Elected Director or Significant Affiliations
- ---------------- -----------------------------
President and Chief Executive Officer, Hewlett-Packard Company
(computing and imaging products and services) since July 1999;
[PHOTO] Group President, Global Services Provider Business, Lucent
Technologies Inc. (communications systems and technology)
Carleton S. (October 1997 to July 1999); President, Lucent Technologies
Fiorina Consumer Products (October 1996 to October 1997); Executive
Age--45 Vice President, Corporate Operations, Lucent Technologies Inc.
1999 (January 1996 to October 1996); President, North America
Region of the Network Systems Group, AT&T (January 1995 to
January 1996)
Director, Hewlett-Packard Company and Kellogg Company
Directors Whose Terms Expire in 2002
Retired (1995); Chairman of the Board and Chief Executive
Officer, General Mills, Inc. (consumer foods and restaurants)
[PHOTO] for more than five years
H. Brewster Director, American Express Funds and Mayo Foundation; Member,
Atwater, Jr. The Business Council
Age--68
1988
Chairman of the Board (since November 1994), President and
Chief Executive Officer (since June 1994) of the Company
[PHOTO]
Director, General Mills, Inc. and Public Service Enterprise
Raymond V. Group; Immediate Past Chairman, Pharmaceutical Research and
Gilmartin Manufacturers of America; Member, The Business Council and The
Age--59 Business Roundtable
1994
[PHOTO] Executive Vice President, Science and Technology and
President, Merck Research Laboratories for more than five
Edward M. years
Scolnick,
M.D.
Age--59 Member, National Academy of Sciences and its Institute of
1997 Medicine
5
<PAGE>
Name, Age and
Year First Business Experience and Other Directorships
Elected Director or Significant Affiliations
- ---------------- -----------------------------
[PHOTO] President (since April 1997) and Chief Executive Officer
(since July 1996), Partners HealthCare System, Inc.;
Samuel O. President, Massachusetts General Hospital (May 1994 to April
Thier, M.D. 1997)
Age--62
1994
Director, Partners HealthCare System, Inc. and Charles River
Laboratories, Inc.; Member, Institute of Medicine of the
National Academy of Sciences; Fellow, American Academy of Arts
and Sciences; Trustee, Brandeis University, Boston Museum of
Science, Cornell University, The Commonwealth Fund and WGBH
Public Television; Master, American College of Physicians
[PHOTO] Retired (1995); Chairman of the Board, J.P. Morgan & Co.
Incorporated and Morgan Guaranty Trust Company of New York
Dennis (banking and other financial services) for more than five
Weatherstone years
Age--69
1988
Director, General Motors Corporation, L'Air Liquide and
Institute for International Economics; Independent Member of
the Board of Banking Supervision of the Financial Services
Authority, London; President, Royal College of Surgeons
Foundation; Trustee, The Alfred P. Sloan Foundation; Member,
The Business Council
Board Committees
There are five standing committees of the Board of Directors: the Committee
on Directors, the Finance Committee, 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 Finance Executive Audit Benefits
------------ ------- --------- ----- ----------------
<S> <C> <C> <C> <C>
D. Birkin H. B. Atwater, Jr. H. B. Atwater, Jr. D. Birkin H. B. Atwater, Jr.(*)
L. A. Bossidy L. A. Bossidy W. G. Bowen C. K. Davis L. A. Bossidy
W. G. Bowen(*) J. B. Cole C. K. Davis C. E. Exley, Jr.(*) W. G. Bowen
W. N. Kelley C. E. Exley, Jr. L. C. Elam C. S. Fiorina J. B. Cole
D. Weatherstone D. Weatherstone(*) R. V. Gilmartin(*) W. B. Harrison, Jr. L. C. Elam
S. O. Thier W. N. Kelley
S. O. Thier
</TABLE>
- --------
(*) Chairman
6
<PAGE>
The Committee on Directors, consisting entirely of independent directors,
considers and makes 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, coordinates evaluation of 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 comply with procedures set forth in the
Company's By-Laws.
The Finance Committee, consisting entirely of independent directors,
considers and makes recommendations on matters related to the financial
affairs and policies of the Company, including capital structure issues,
dividend policy, investment and debt policies, asset and portfolio management
and financial transactions, as necessary.
The Executive Committee acts for the Board of Directors when formal Board
action is required between meetings in connection with matters already
approved in principle by the full Board or to fulfill the formal duties of the
Board.
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, Base Salary
Deferral 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.
Board and Board Committee Meetings
In 1999, there were nine meetings held by the Board of Directors. Board
committees met as follows during 1999: the Committee on Directors, six times;
the Compensation and Benefits Committee, five times; the Audit Committee, four
times; the Finance Committee, twice. No meetings of the Executive Committee
were held in 1999. The average combined attendance for all Board and Committee
meetings was 95%. All directors, except Carleton S. Fiorina, attended at least
75% of the meetings of the Board and of the Committees on which they served.
7
<PAGE>
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 $45,000 and a meeting fee of
$1,200 for each Board and Committee meeting attended. In addition, Chairmen of
the Committee on Directors, the Finance Committee, the Audit Committee and the
Compensation and Benefits Committee are compensated for such services by an
annual retainer of $5,000. 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 Merck & Co., Inc. Plan for Deferred Payment of Directors'
Compensation ("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 any of 18
investment measures, including the Company's Common Stock, and is payable in
cash in installments or as a lump-sum on or after termination of services as a
director. In addition, effective as of April 27, 1999, on the first Friday
following the Annual Meeting of Stockholders, each director receives a credit
to his/her Merck stock account of an amount equal to the value of one-third of
the annual cash retainer.
In 1996, the Retirement Plan for the Directors of Merck & Co., Inc. (the
"Directors' Retirement Plan") (which excludes current or former employees of
the Company) was discontinued for directors who join the Board after December
31, 1995. Directors at the time of the change were asked to elect to either
continue to accrue benefits under the Directors' Retirement Plan or, in lieu
of accruing benefits under the Directors' Retirement Plan, to receive
additional compensation to be deferred in accordance with the terms of the
Plan for Deferred Payment of Directors' Compensation. Only Sir Derek Birkin
elected to continue to participate in the Directors' Retirement Plan. Upon his
retirement from the Board on April 25, 2000, he will receive an annual
retirement benefit of 80% of his last annual retainer. The benefit under the
Directors' Retirement Plan is payable for the lifetime of the retired
director. Eligible directors who elected not to accrue additional retirement
benefits under the Directors' Retirement Plan will receive at retirement a
pension benefit based on the amount of service accrued as of March 31, 1997.
Such directors, and directors who joined the Board after December 1995 and
through April 27, 1999, were credited annually with an additional $15,000 of
compensation to be deferred under the Plan for Deferred Payment of Directors'
Compensation. These additional annual compensation credits were discontinued
effective April 30, 1999.
Under the Non-Employee Directors Stock Option Plan adopted by stockholders
in 1996 and amended in 1999, (the "1996 Non-Employee Directors Stock Option
Plan"), directors (excluding those who are current or former employees of the
Company) each receive options to purchase 5,000 shares of Common Stock every
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
closing price of the Company's Common Stock on the date of grant as quoted on
the composite tape of the New York Stock Exchange. The exercise price is
payable in cash at the time the stock options are exercised. In addition, the
1996 Non-Employee Directors Stock Option Plan and the prior Non-Employee
Directors Stock Option Plan allow directors under certain circumstances to
transfer stock options to members of their immediate family, family
partnerships and family trusts.
8
<PAGE>
Security Ownership of Directors and Executive Officers
Beneficial ownership of Common Stock of the Company as of December 31, 1999
by each director and nominee for director of the Company, each executive
officer of the Company named in the Summary Compensation Table and by all
directors, nominees 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....... 243,280(b)(c) 1,360,000 *
H. Brewster Atwater, Jr. .. 34,498 10,000 *
Derek Birkin............... 1,358 4,000 *
Lawrence A. Bossidy........ 33,888 4,000 *
William G. Bowen........... 27,888(b) 2,000 *
Johnnetta B. Cole.......... 5,529 -- *
Carolyne K. Davis.......... 9,132 -- *
Lloyd C. Elam.............. 48,970(c) 8,000 *
Charles E. Exley, Jr. ..... 32,484 10,000 *
Carleton S. Fiorina........ 1,244 -- *
Niall FitzGerald........... -- -- *
William B. Harrison, Jr. .. 1,481 -- *
William N. Kelley.......... 16,114 4,000 *
Edward M. Scolnick......... 250,118(b) 381,200 *
Anne M. Tatlock............ 911(c)(d) -- *
Samuel O. Thier............ 1,110(e) -- *
Dennis Weatherstone........ 31,008 10,000 *
David W. Anstice........... 61,227(b) 484,200 *
Judy C. Lewent............. 173,924 517,200 *
Per G.H. Lofberg........... 172,028 682,842 *
All Directors, Nominees and
Executive Officers
as a Group................ 1,295,003(b) 4,465,442 *
</TABLE>
- --------
(a) Includes equivalent shares of Common Stock held by the Trustee of the
Merck & Co., Inc. Employee Savings and Security Plan or by the Trustee of
the Merck-Medco Managed Care 401(k) Savings Plan for the accounts of
individuals as follows: Mr. Gilmartin--3,723 shares, Dr. Scolnick--3,538
shares, Mr. Anstice--3,665 shares, Ms. Lewent--5,116 shares, Mr. Lofberg--
5,360 shares and all directors and executive officers as a group--58,792
shares. Also includes shares of phantom Common Stock held in the Plan for
Deferred Payment of Directors' Compensation or in the Merck & Co., Inc.
Deferral Program as follows: Mr. Gilmartin--62,712 shares, Mr. Atwater--
31,498 shares, Sir Derek Birkin--214 shares, Mr. Bossidy--3,888 shares,
Dr. Bowen--2,923 shares, Dr. Cole--5,069 shares, Dr. Davis--1,611 shares,
Dr. Elam--33,470 shares, Mr. Exley--29,484 shares, Ms. Fiorina--1,026
shares, Mr. Harrison--81 shares, Dr. Kelley--14,414 shares, Dr. Thier--
1,090 shares, Mr. Weatherstone--1,008 shares, Mr. Anstice--5,863 shares,
Ms. Lewent--7,896 shares, Mr. Lofberg--9,456 shares and all directors and
executive officers as a group--228,247 shares.
(b) Excludes shares of Common Stock held by family members in which beneficial
ownership is disclaimed by the individuals as follows: Mr. Gilmartin--
22,600 shares, Dr. Scolnick--28,000 shares, Mr. Anstice--528 shares and
all directors and executive officers as a group--76,443 shares. Excludes
1,800 shares held by a trust of which Dr. Bowen is a trustee and in which
he disclaims beneficial ownership. Excludes 23,335
9
<PAGE>
shares beneficially held by a family limited partnership in a trust for the
benefit of Mr. Gilmartin's family; Mr. Gilmartin disclaims beneficial
ownership in the trust of which his spouse is a trustee.
(c) Includes shares of Common Stock as follows: 132,235 shares held by Mr.
Gilmartin in a family limited partnership in which he shares voting and
investment power, 1,320 shares held by Dr. Elam in a trust in which he and
his spouse are trustees and beneficiaries and 511 shares held by Ms.
Tatlock's spouse in which she shares voting and investment power.
(d) Ms. Tatlock is the investment manager for certain customer accounts at
Fiduciary Trust Company International. Those accounts may, at times, hold
shares of Merck Common Stock. However, Ms. Tatlock has divested all voting
and/or investment power over any shares of Merck Common Stock held in those
accounts and she disclaims beneficial ownership of any such shares.
(e) Prior to the end of 1998, under the policy of his employer, Dr. Thier was
allowed to 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 (the "Committee")
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 Committee is comprised entirely of independent outside directors.
Objectives and Policies
The Committee seeks to ensure that:
. rewards are closely linked to Company-wide, division, area, team and
individual performance;
. the interests of the Company's employees are aligned with those of its
stockholders through potential stock ownership; and
. compensation and benefits are set at levels that enable the Company to
attract and retain the high-quality employees it needs.
The Committee applies these objectives and policies 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 Committee to make a high proportion of executive officer
compensation dependent on long-term performance and on enhancing stockholder
value.
Executive officer compensation programs have both short-term and longer-term
components. Short-term components include base salary and annual bonus awards
under the stockholder-approved Executive Incentive Plan ("EIP"). Longer-term
components include stock option grants 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 payment of
stock or cash or a combination thereof at the end of five-year periods, the
last of which ended in 1998. Payments in cash are equal to the market value on
the payment date of the stock that the cash replaces. Payments are based on the
Company's achievement of specified performance targets.
10
<PAGE>
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.
Base Salary and Bonus
Executive officer base salary and bonus awards are determined with reference
to Company-wide, division, area, team and individual performance for the
previous fiscal year, based on a wide range of measures that 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 for 1999 covered operational, strategic and human
resources areas. The operational measures were earnings per share growth and
sales growth compared to other leading healthcare companies (Abbott
Laboratories, American Home Products, Bristol-Myers Squibb, Glaxo Wellcome,
Johnson & Johnson, Eli Lilly, Pfizer, Pharmacia & Upjohn, Roche Holding,
Schering-Plough, SmithKline Beecham and Warner-Lambert) and the change in the
Company's return on operating assets versus the prior year. The strategic
measures refer to the Company's communicated goal of being a top-tier growth
company by continuing a strong commitment to research, achieving the full
potential of managed pharmaceutical care, with particular reference to Merck-
Medco, and preserving profitability through productivity in manufacturing. The
human resources measures refer to teamwork, respect for the individual,
flexibility and agility. These were assessed through a review of Company
achievements in fostering a productive work environment and strengthening
individual competencies so that the Company can attract, develop and retain
employees with the skills, abilities and attitudes to meet business
requirements now and in the future. The Company met its overall performance
target in 1999. In addition to Company-wide measures of performance, the
Committee considered those performance factors particular to each executive
officer--i.e., the performance of the division or area for which such officer
had management responsibility and individual managerial accomplishments.
Base salary and bonus award comparisons were made within the healthcare
industry using the following United States owned companies as comparisons:
Abbott Laboratories, American Home Products, Bristol-Myers Squibb, Johnson &
Johnson, Eli Lilly, Pfizer, Pharmacia & Upjohn, Schering-Plough and Warner-
Lambert. Generally, 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 that it judges to be appropriate.
The Committee judged that executive officer salary and bonus compensation
for 1999 was consistent with the level of accomplishment and appropriately
reflected Company performance, including earnings per share growth, sales
growth, return on operating assets and strong progress in research, managed
pharmaceutical care, manufacturing productivity and the management of human
resources. 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.
Stock Options
Within the total number of shares authorized by stockholders, the Committee
aims to provide stock option grants broadly and deeply throughout the
organization.
Executive officer stock option grants are based on level of position and
individual contribution. 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
11
<PAGE>
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 exercises are entirely dependent on the long-term growth of
the Company's stock price.
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 gain on stock option exercise after deducting option price,
taxes and transaction costs.
Strategic Performance Feature
Awards
No awards were made in 1999 consistent with the Committee's decision to
discontinue the SPF in 1995 and to rely on stock option awards as the only
long-term incentive. Since 1989, the SPF had allowed for the award of
Performance Shares to executive officers based on the level of position.
Awards made under the SPF were for five-year periods. Payments at the end of
each period were dependent on Company performance. The last payment was made
in 1999 for the 1994-1998 Award Period.
Payments
In 1999, payments were made for the 1994-1998 Award Period of the SPF.
Payments for that period were made in cash or stock.
For 1995-1998, the Committee considered earnings per share growth compared
to a group of leading healthcare companies selected in 1995, return on assets
against that same group and total stockholder return versus the Standard &
Poor's 500 Index. The Company placed third for earnings per share growth,
fourth for return on assets and in the top 80-89th percentile for total
stockholder return. The group of leading healthcare companies consisted of
companies in the Dow Jones Pharmaceutical Index--United States Owned Companies
("DJPI") during the applicable time period, other than the Company, and also
included Abbott Laboratories, Glaxo Wellcome and SmithKline Beecham.
For 1994, the Committee used the measures of net income growth versus a
group of leading healthcare companies (as defined in the prior paragraph),
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 115.1% 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 1999 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, return on operating assets and continuing strong progress in research,
managed pharmaceutical care, manufacturing productivity and the management of
human resources. The Company met its overall performance target in 1999.
Effective March 1, 1999, Mr. Gilmartin's base salary was increased to
$1,200,000 from $1,100,004. His last base salary increase was effective
January 1, 1997. Mr. Gilmartin's bonus award was $1,500,000 for 1999, in
comparison to $1,450,000 for 1998. The Committee exercised its subjective
judgment and discretion in determining Mr. Gilmartin's base salary and bonus
award for 1999.
12
<PAGE>
Stock Options
The stock option grant to Mr. Gilmartin in 1999 was determined with
reference to the same criteria used for all executive officers of the Company,
as described in the "Stock Options" section above.
Strategic Performance Feature
Mr. Gilmartin was not eligible for any payment in 1999 under the SPF since
he was not employed by the Company at the time the 1994-1998 SPF award was
made.
Compensation Analyses and Reviews
The Company periodically retains outside compensation and benefits
consultants to compare base salary and incentive compensation programs for the
Company's executive officers with those of other leading healthcare companies
(including those in the DJPI) and leading industrial companies to ensure that
they are appropriate to the Company's objectives. The Committee exercises
judgment and discretion in the information it reviews and the analyses it
considers.
Compensation and Benefits Committee
H. Brewster Atwater, Jr.
Chairman
Lawrence A. Bossidy William G. Bowen
Johnnetta B. Cole Lloyd C. Elam
13
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------------- ---------------------------------------
Awards Payouts
--------------------------- -----------
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Stock Options/SARs (a) Payouts (b) Compensation
Position Year ($) ($) ($) Awards ($) (#) ($) ($)
- ----------------------- ---- ---------- ---------- ------------ ---------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin 1999 $1,183,334 $1,500,000 -- -- 400,000 $ -- $3,438,450(c)
Chairman of the Board, 1998 1,100,004 1,450,000 -- -- 350,000 -- 7,200(d)
President and Chief 1997 1,100,004 1,500,000 -- -- 350,000 -- 7,200(d)
Executive Officer
Edward M. Scolnick 1999 759,334 825,000 -- -- 185,000 1,419,744 3,600(d)
Executive Vice 1998 724,004 815,000 -- -- 200,000 864,510 3,600(d)
President, Science and 1997 689,004 825,000 -- -- 200,000 855,592 3,600(d)
Technology and
President, Merck
Research Laboratories
David W. Anstice 1999 506,334 510,000 -- -- 130,000 757,134 7,200(e)
President, Human 1998 483,338 360,000 -- -- 140,000 461,042 11,959(e)
Health--The Americas 1997 456,508 450,000 -- -- 180,000 440,288 9,557(e)
Judy C. Lewent 1999 500,840 505,000 -- -- 160,000 757,134 7,200(d)
Senior Vice President 1998 475,000 490,000 -- -- 140,000 461,042 7,200(d)
and Chief Financial 1997 443,334 500,000 -- -- 140,000 366,998 7,200(d)
Officer
Per G.H. Lofberg 1999 502,976 500,000 -- -- 130,000 -- 9,329(f)
Chairman, Merck- 1998 455,778 490,000 -- -- 140,000 -- 8,632(f)
Medco Managed Care, 1997 412,778 500,000 -- -- 180,000 -- 5,992(f)
L.L.C.
</TABLE>
- --------
(a) No stock appreciation rights were granted to the executive officers named
in the Summary Compensation Table.
(b) SPF payouts in 1999 were for services performed during the five-year
award cycle 1994-1998; SPF payouts in 1998 were for services performed
during the five-year award cycle 1993-1997; SPF payouts in 1997 were for
services performed during the five-year award cycle 1992-1996.
(c) Includes Company contribution of $7,200 to the Merck & Co., Inc. Employee
Savings and Security Plan and $3,431,250, which was the value of 50,000
shares of restricted stock held by Mr. Gilmartin at $68.625 per share
(the closing price of the Company's Common Stock on June 16, 1999, the
date on which the restricted stock vested).
(d) Company contribution to the Merck & Co., Inc. Employee Savings and
Security Plan.
(e) Includes Company contributions to the Merck & Co., Inc. Employee Savings
and Security Plan of $7,200 for each of 1999, 1998 and 1997 and imputed
income for survivor income insurance of $4,759 and $2,357 for 1998 and
1997, respectively.
(f) Includes Company contributions to the Merck-Medco Managed Care 401(k)
Savings Plan of $7,436, $6,040 and $3,400 for 1999, 1998 and 1997,
respectively, and imputed income for survivor income insurance of $1,893
for 1999 and $2,592 for each of 1998 and 1997.
14
<PAGE>
The following table sets forth stock options granted in 1999 to each of the
Company's executive officers named in the Summary Compensation Table and stock
options granted to all employees as a group. The table also sets forth the
hypothetical gains that would exist for the options at the end of their ten-
year terms for the executive officers named in the Summary Compensation Table
and for all employees as a group (assuming their options had ten-year terms)
at assumed compound rates of stock appreciation of 5% and 10%. The actual
future value of the options will depend on the market value of the Company's
Common Stock. All option exercise prices are based on market price on the date
of grant.
Option/SAR Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants(a)
------------------------------------------------
Percent
of Total
Number of Options/
Securities SARs Potential Realizable Value
Underlying Granted at Assumed Annual Rates
Options/ To Exercise of Stock Price Appreciation
SARs Employees or Base For Option Term(b)
Date of Granted in Fiscal Price Expiration --------------------------------------
Name Grant (#) Year ($/Sh) Date 0%($) 5%($) 10% ($)
---- ------- ---------- --------- -------- ---------- ----- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin.... 2/23/99 400,000 1.39% $81.0625 2/22/09 -- $ 20,391,908 $ 51,677,099
Edward M. Scolnick...... 2/23/99 185,000 0.64% 81.0625 2/22/09 -- 9,431,258 23,900,658
David W. Anstice........ 2/23/99 130,000 0.45% 81.0625 2/22/09 -- 6,627,370 16,795,057
Judy C. Lewent.......... 2/23/99 160,000 0.55% 81.0625 2/22/09 -- 8,156,763 20,670,840
Per G.H. Lofberg........ 2/23/99 130,000 0.45% 81.0625 2/22/09 -- 6,627,370 16,795,057
All Employees as a
Group.................. (c) 28,866,950 100.00% (c) (c) -- 1,453,429,020(d) 3,683,274,501(d)
</TABLE>
----------------
<TABLE>
<CAPTION>
0% 5% 10%
--- ----------------- -----------------
<S> <C> <C> <C>
Total potential stock price
appreciation from February 23, 1999
to February 22, 2009 for all
stockholders at assumed rates of
stock price appreciation(e)........ -- $118,735,825,791 $300,899,894,895
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 23, 1999 to February 22,
2009 for all stockholders at
assumed rates of stock price
appreciation....................... -- 1.22% 1.22%
</TABLE>
- --------
(a) Options granted under the ISP to the Company's executive officers named in
the Summary Compensation Table are first exercisable five years from date
of grant and include a transferable stock option feature that allows the
transfer of stock options to immediate family members, family partnerships
and family trusts. The Company did not issue stock appreciation rights in
1999 to any of the executive officers named in the Summary Compensation
Table.
(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) Options and stock appreciation rights were granted under the Company's
stock option programs throughout 1999 with various vesting schedules and
expiration dates through the year 2009. The average exercise price of all
options granted to employees in 1999 is $80.0599.
(d) No gain to the optionees is possible without an increase in stock price,
which will benefit all stockholders.
(e) Based on a price of $81.0625 on February 23, 1999, and a total of
2,329,077,283 shares of Common Stock outstanding.
15
<PAGE>
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized on exercise in 1999 by the
Company's executive officers named in the Summary Compensation Table. The
table also sets forth the number of shares covered by exercisable and
unexercisable options held by such executives on December 31, 1999 and the
aggregate gains that would have been realized had these options been exercised
on December 31, 1999, even though these options were not exercised and the
unexercisable options could not have been exercised on December 31, 1999.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options/SARs at
Value Options/SARs at FY-End Fiscal Year-End (b)
Shares Acquired Realized (#) ($)
On Exercise (a) ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond V. Gilmartin.... -- $ -- 1,000,000 1,760,000 $51,625,000 $28,933,325
Edward M. Scolnick...... 220,000 12,787,500 181,200 985,000 8,810,650 17,864,333
David W. Anstice........ -- -- 344,200 730,000 16,051,288 13,230,595
Judy C. Lewent.......... 60,450 4,183,492 377,200 720,000 17,779,785 12,081,830
Per G.H. Lofberg........ -- -- 542,842 730,000 28,577,967 13,230,595
</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,
1999 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 1999.
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 (i) multiplies (a) the participant's final average
compensation (as defined in the plans) by (b) a multiplier of 2% for years of
credited service (as defined in the plans) earned prior to July 1, 1995 and a
multiplier of 1.6% for years of credited service earned after that date (total
credited service not to exceed 35 years) and then (ii) subtracts 1.6% of the
participant's Social Security benefits (not to exceed 50% of the primary
Social Security benefit).
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 and without regard to the
Social Security offset. 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).
16
<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.
17
<PAGE>
Years of actual credited service in the Retirement Plan for Salaried
Employees and the Supplemental Retirement Plan as of July 1, 1995 and December
31, 1999, respectively, are: Dr. Scolnick--13 years and 17.5 years; Mr.
Anstice--20.5 years and 25 years; Ms. Lewent--15 years and 19.5 years. In
addition, if these individuals retire from service with the Company at age 65
and with less than 35 years of actual credited service, 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, 1999, Mr. Gilmartin had 1.0 and
5.5 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.
For purposes of the Retirement Plan for Salaried Employees and the
Supplemental Retirement Plan, pension compensation for a particular year, as
used for the calculation of retirement benefits, includes salaries and annual
EIP bonus awards received during the year. Pension compensation for 1999
differs from compensation reported in the Summary Compensation Table in that
pension compensation includes the annual EIP bonus awards received in 1999 for
services in 1998 rather than the EIP bonus awards paid in 2000 for services in
1999. Pension compensation in 1999 was $2,633,334 for Mr. Gilmartin;
$1,574,334 for Dr. Scolnick; $866,334 for Mr. Anstice and $990,840 for Ms.
Lewent.
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 includes 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, prior to January 1,
1995, occupied bona fide executive or high policymaking positions and who do
not have 35 years of credited service, an enhanced benefit payable upon
retirement from active service at age 65 (unless the Compensation and Benefits
Committee of the Board consents to 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 prior to
January 1, 1995, 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 Cash Balance Retirement Plan
Mr. Lofberg participates in the Medco Cash Balance 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 Cash Balance
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 $27,492.
The Medco Cash Balance Retirement Plan does not provide for an offset for
Social Security benefits.
18
<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 1999. There were no Compensation and Benefits Committee interlocks or
insider (employee) participation during 1999.
Employment Contracts and Arrangements
From June 9, 1994 until October 31, 1999, Mr. Gilmartin served as President,
Chief Executive Officer, Director and Chairman of the Board of Directors of
the Company pursuant to an employment agreement (the "Agreement") with the
Company. The Agreement terminated by its terms on October 31, 1999. Mr.
Gilmartin continues to serve as President, Chief Executive Officer, Director
and Chairman of the Board of Directors at the will of the Board.
The Agreement provided that Mr. Gilmartin would be paid a base salary of
$1.0 million per year (or such higher salary as the Board from time-to-time
determined), and that he would be eligible for annual bonus awards under the
Company's EIP or any successor plan.
In recognition of the forfeiture by Mr. Gilmartin of common stock ownership
rights provided by his previous employer, on June 16, 1994, Mr. Gilmartin was
granted 50,000 shares of restricted Company Common Stock, which remained
restricted until June 16, 1999. (The number of shares in this paragraph and
the next has been adjusted to reflect the Company's 2-for-1 stock split on
February 16, 1999.) When the restricted stock vested on June 16, 1999,
$3,431,250--the value of 50,000 shares at $68.625 per share, the closing price
of the Company's Common Stock on that date--was reported as income to Mr.
Gilmartin. Under a Stock Purchase Agreement with the Company, Mr. Gilmartin
sold 18,225 shares to the Company at $68.625 per share to pay applicable
withholding taxes due upon vesting.
In addition, Mr. Gilmartin was granted options under the Company's ISP to
acquire 1,000,000 shares of the Company's Common Stock on June 16, 1994 and
360,000 shares on February 28, 1995 at the market price of the Company's
Common Stock on the date of grant as determined under the ISP. Both grants
became exercisable on the fifth anniversary of the date of grant and expire on
the tenth anniversary of the date of grant. Subsequent annual stock option
grants to Mr. Gilmartin have been determined by the Board of Directors.
Mr. Gilmartin participates in the Retirement Plan for Salaried Employees of
Merck & Co., Inc. and the Supplemental Retirement Plan. Pursuant to the
Agreement, in determining benefits payable under the Supplemental Retirement
Plan, 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.
As of May 24, 1996, the Company and Per G. H. Lofberg entered into a letter
agreement with respect to the terms of Mr. Lofberg's employment (the "Letter
Agreement"). The Letter Agreement terminated, in most respects, Mr. Lofberg's
employment agreement dated as of April 1, 1993, as amended on July 27, 1993.
The Letter Agreement sets forth exercise periods post-termination for certain
stock options that vested in 1996 and 1997 in the event that Mr. Lofberg's
employment with the Company terminates after June 1, 1996. Any stock options
granted by the Company to Mr. Lofberg after November 18, 1993 shall terminate
upon the termination of Mr. Lofberg's employment if such stock options have
not vested prior to the date of termination. Additionally, the Letter
Agreement provides for the immediate forfeiture of all stock options in the
event of a breach of certain covenants, including covenants addressing
proprietary information and noncompetition.
Indebtedness of Management
Dr. Roger M. Perlmutter, Executive Vice President, Worldwide Basic Research
and Preclinical Development, who became an executive officer of the Company in
July 1999, received a loan from the Company in connection with his relocation
when he first joined the Company in 1997. During 1999, the largest aggregate
amount outstanding under the loan was $205,000 and as of December 31, 1999,
$150,000 was still outstanding. The loan from the Company is interest free.
19
<PAGE>
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, 1999. 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 1999/1994
Value CAGR**
------ ---------
<S> <C> <C>
Merck.................................................... $387 31%
DJPI..................................................... 424 33
S&P 500.................................................. 351 29
</TABLE>
[LINE GRAPH]
- ------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------
MERCK 100.00 176.370 218.610 296.250 418.330 387.180
- ------------------------------------------------------------------------
DJPI 100.00 163.722 205.703 319.563 475.224 423.858
- ------------------------------------------------------------------------
S&P 500 100.00 137.450 168.920 225.260 289.630 350.560
- ------------------------------------------------------------------------
- --------
* Assumes that the value of the investment in Company Common Stock and each
index was $100 on December 31, 1994 and that all dividends were reinvested.
** Compound Annual Growth Rate.
20
<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 2000, 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 interest 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 2001 INCENTIVE STOCK PLAN
There will be presented to the meeting a proposal to adopt the 2001
Incentive Stock Plan (the "Plan"). The Plan will replace the 1996 Incentive
Stock Plan which, by its terms, expires on December 31, 2000. The Board of
Directors believes stock options and other stock-based incentives play an
important role in retaining the services of outstanding personnel and in
encouraging such employees to have a greater financial investment in the
Company (although the Plan does not necessarily require them to hold for
investment stock received under the Plan). The Board of Directors has approved
the 2001 Incentive Stock Plan and directed that it be submitted to
stockholders for approval.
The proposed Plan is set forth in Exhibit A. Primary aspects of the proposed
Plan are as follows:
General Information
Plan Administration. The Plan is administered by the Compensation and
Benefits Committee of the Board of Directors, which is comprised of non-
employee directors, none of whom may receive any awards under the Plan (the
"Committee"). The Committee establishes the terms and conditions of awards
granted under the Plan, subject to certain limitations in the Plan. The
Committee may delegate to the CEO or other executive officers of the Company
certain authority under the Plan, including the authority to grant awards to
eligible employees who are not officers subject to Section 16 of the
Securities Exchange Act of 1934. There are approximately 69,800 individuals
eligible to participate in the Plan.
Eligible Employees. The Committee may grant incentive stock options under
the Internal Revenue Code of 1986, nonqualified stock options, stock
appreciation rights, performance share awards and restricted stock grants to
regular employees of the Company, its subsidiaries, joint ventures, joint
venture partners or affiliates who are designated by the Committee. No
employee may receive grants under this Plan in any given year which, singly or
in the aggregate, cover more than three million shares of Company Common
Stock. Grants of Performance Share Awards and Restricted Stock are limited to
six million shares in the aggregate during the term of the Plan.
Shares Available. The aggregate number of shares of the Company's Common
Stock that may be issued or transferred to grantees under the Plan shall not
exceed 95 million shares plus shares authorized but unissued under the 1996
Incentive Stock Plan and the 1991 Incentive Stock Plan. Options may be granted
under the 1996 Incentive Stock Plan until it expires on December 31, 2000; any
outstanding options or other benefits under that
21
<PAGE>
plan may be exercised in accordance with the terms thereof. No further options
or other benefits are to be granted under the 1991 Incentive Stock Plan;
provided, however, that any outstanding options or other benefits under such
plan may be exercised in accordance with the terms thereof. If there is a
stock split, stock dividend or other relevant change affecting the Company's
shares, appropriate adjustments will be made in the number of shares that may
be issued or transferred in the future and in the number of shares and price
of all outstanding grants made before such event. If shares under a grant are
not issued or transferred, those shares would again be available for inclusion
in future grants. Payment of cash in lieu of shares would be considered an
issuance or transfer of the shares. On March 1, 2000, the closing price of the
Company's Common Stock on the New York Stock Exchange was $60.0625.
Grants Under the Plan
Stock Options. The Committee may grant options qualifying as incentive stock
options under the Internal Revenue Code of 1986, other statutory stock options
and nonqualified stock options. The term of an option shall be fixed by the
Committee, but shall not exceed ten years. The option price shall not be less
than the fair market value of the Company's Common Stock on the date of grant.
Stock Appreciation Rights. The Committee may grant stock appreciation rights
("SARs") either singly or in combination with an underlying stock option under
the Plan, the 1996 Incentive Stock Plan or the 1991 Incentive Stock Plan. The
term of a SAR shall be fixed by the Committee. SARs entitle the grantee to
receipt of the same economic value that would have been derived from exercise
of an option. Payment may be made in cash, in shares or a combination of both
at the discretion of the Committee. If a SAR granted in combination with an
underlying stock option is exercised, the right under the underlying option to
purchase shares would terminate.
Performance Share Awards. The Committee may grant Performance Share Awards
under which payment may be made in shares of the Company's Common Stock, a
combination of shares and cash or cash if the performance of the Company or
any subsidiary, division, affiliate or joint venture of the Company selected
by the Committee meets certain goals established by the Committee during an
award period. The Committee would determine the goals, the length of an award
period, the maximum payment value of an award and the minimum performance
required before a payment would be made. The Committee may revise the goals
and the computation of payment at any time to account for unforeseen events
which occur during an award period and which have a substantial effect on the
performance of the Company, subsidiary or division. In order to receive
payment, a grantee must remain in the employ of the Company until the
completion of the award period, except that the Committee may provide complete
or partial exceptions to that requirement as it deems equitable.
Restricted Stock Grants. The Committee may also award shares under a
Restricted Stock Grant. The grant would set forth a restriction period during
which the grantee must remain in the employ of the Company in order to retain
the shares under grant. If the grantee's employment terminates during the
period, the grant would terminate and the grantee would be required to return
the shares to the Company. However, the Committee may provide complete or
partial exceptions to this requirement as it deems equitable. The grantee
could not dispose of the shares prior to the expiration of the restriction
period. During this period, the grantee would be entitled to vote the shares
and, at the discretion of the Committee, receive dividends. Each certificate
would bear a legend giving notice of the restrictions in the grant.
U.S. Federal Income Tax Consequences
Following is an explanation of the U.S. federal income tax consequences for
optionholders who are subject to tax in the United States.
Stock Options. The grant of an incentive stock option or a nonqualified
stock option would not result in income for the grantee or in a deduction for
the Company.
22
<PAGE>
The exercise of a nonqualified stock option would result in ordinary income
for the grantee and a deduction for the Company measured by the difference
between the option price and the fair market value of the shares received at
the time of exercise. Income tax withholding would be required.
The exercise of an incentive stock option would not result in income for the
grantee if the grantee (i) does not dispose of the shares within two years
after the date of grant or one year after the transfer of shares upon
exercise, and (ii) is an employee of the Company or a subsidiary of the
Company from the date of grant and through and until three months before the
exercise date. If these requirements are met, the basis of the shares upon
later disposition would be the option price. Any gain will be taxed to the
employee as long-term capital gain and the Company would not be entitled to a
deduction. The excess of the market value on the exercise date over the option
price is an item of tax preference, potentially subject to the alternative
minimum tax.
If the grantee disposes of the shares prior to the expiration of either of
the holding periods, the grantee would recognize ordinary income and the
Company would be entitled to a deduction equal to the lesser of the fair
market value of the shares on the exercise date minus the option price or the
amount realized on disposition minus the option price. Any gain in excess of
the ordinary income portion would be taxable as long-term or short-term
capital gain.
SARs and Performance Share Awards. The grant of a SAR or a Performance Share
Award would not result in income for the grantee or in a deduction for the
Company. Upon the exercise of a SAR or the receipt of shares or cash under a
Performance Share Award, the grantee would recognize ordinary income and the
Company would be entitled to a deduction measured by the fair market value of
the shares plus any cash received. Income tax withholding would be required.
Restricted Stock Grants. The grant of Restricted Stock should not result in
income for the grantee or in a deduction for the Company for federal income
tax purposes, assuming the shares transferred are subject to restrictions
resulting in a "substantial risk of forfeiture" as intended by the Company. If
there are no such restrictions, the grantee would recognize ordinary income
upon receipt of the shares. Dividends paid to the grantee while the stock
remained subject to restriction would be treated as compensation for federal
income tax purposes. At the time the restrictions lapse, the grantee would
receive ordinary income and the Company would be entitled to a deduction
measured by the fair market value of the shares at the time of lapse. Income
tax withholding would be required.
Other Information
Upon approval by the Company's stockholders, the Plan will be effective on
January 1, 2001 and will terminate on December 31, 2003, unless terminated
earlier by the Board of Directors or extended by the Board with the approval
of the stockholders. The Board may amend the Plan as it deems advisable but,
if the Securities Exchange Act of 1934 requires the Company to obtain
stockholder approval, then such approval will be sought. No adjustments or
reductions of the exercise price of options granted under the Plan shall be
made, by cancellation of outstanding options and the subsequent regranting of
options at a lower price, without stockholders' approval. Options are not
assignable or transferable except for limited circumstances upon death, or
pursuant to rules that may be adopted by the Committee. The Committee may
establish rules and procedures to permit an optionholder to defer recognition
of gain upon the exercise of a stock option.
Employees who will participate in the Plan in the future and the amounts of
their allotments are to be determined by the Committee subject to any
restrictions outlined above. Since no such determinations have yet been made,
it is not possible to state the terms of any individual options which may be
issued under the Plan or the names or positions of, or respective amounts of
the allotments to, any individuals who may participate.
The Board of Directors recommends a vote FOR this proposal.
23
<PAGE>
4. STOCKHOLDER PROPOSAL CONCERNING APPOINTMENT OF DIRECTORS
FROM OUTSIDE THE COMPANY
Mr. John P. Olsen, 1302 Sutton Place Drive, Palm Harbor, Florida 34683,
owner of 871 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 all members of the Board of Directors be appointed from
outside of Merck and its subsidiary companies. At the present time, the CEO
and Executive VP are both members of the Board.
"STOCKHOLDERS STATEMENT: I believe that election of all Board of
Directors from outside the company (Merck and subsidiaries) would give a
much higher degree of objectivity to the Board. It would be freer to review
the overall performance of the company and to recommend changes in company
management and operations if performance failed to meet predetermined
standards. A Board of Directors made up of non-company (Merck and
subsidiaries) members would be more accountable to shareholders than is a
Board on which the two highest ranking Merck officers currently sit. A
totally objective Board is particularly important in this day and age when
competition to bring new drugs and drug-related products to the market-
place, and, where failure to do so in a timely and expedient manner, can
have a significant impact on company (Merck and subsidiaries) operations
and its ability to satisfy shareholders."
Board of Directors' Statement in Opposition to the Resolution
Merck has had a long tradition of having an independent Board consisting
primarily of outsiders not employed by the Company. At the present time, the
Merck Board of Directors consists of 16 members and only the Chief Executive
Officer and Executive Vice President, Science and Technology, are members of
the Board of Directors. The Executive Vice President, Science and Technology,
is also President of the Merck Research Laboratories.
The Company's Board of Directors is strengthened by the presence of these
senior Merck officers, who provide strategic, operational and technical
expertise and context for the matters considered by the Board. Recently,
Business Week magazine conducted a survey of the best and worst boards in
America. The Company's Board, which was ranked as the twelfth best in the
country, was awarded the maximum score possible in the area of board
independence.
The Board believes that this proposal is not in the best interest of the
Company or its stockholders.
The Board of Directors recommends a vote AGAINST this proposal.
5. STOCKHOLDER PROPOSAL CONCERNING ANNUAL ELECTION OF DIRECTORS
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue N.W.,
Suite 215, Washington, D.C. 20037, owner of 450 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 recommend that the Board of
Directors take the necessary steps to reinstate the election of directors
ANNUALLY, instead of the stagger system which was recently adopted.
"REASONS: Until recently, directors of Merck were elected annually by all
shareholders.
"The great majority of New York Stock Exchange listed corporations elect
all their directors each year.
"This insures that ALL directors will be more accountable to ALL
shareholders each year and to a certain extent prevents the self-
perpetuation of the Board.
24
<PAGE>
"Last year the owners of 771,798,032 shares, representing approximately
50.1% of shares voting, voted FOR this proposal.
"If you AGREE, please mark your proxy FOR this resolution."
Board of Directors' Statement in Opposition to the Resolution
The Company currently has three classes of directors, with members of each
class serving three-year terms. This system for electing directors was
approved by the Board and adopted by the Company's stockholders in 1985 by an
affirmative vote of 79%.
Last year an identical proposal was considered by the stockholders and
received the affirmative vote of 50.1% of the shares voting. That proposal was
a recommendation that the Board take the necessary steps to reinstate the
annual election of directors. The steps necessary to eliminate the classified
board are adoption of an amendment to the Company's Certificate of
Incorporation by the Board and then approval by the affirmative vote of 80% of
the shares entitled to vote. After that recommendation was received, the Board
of Directors carefully considered whether to take those steps. For the reasons
noted below, the Board decided that it was not in the best interest of the
Company or its stockholders to do so.
The Board continues to believe 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 annual
meetings will 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.
In addition, the Board believes that directors who are elected to three-year
terms are just as accountable to stockholders as directors who are elected on
an annual basis. The directors have fiduciary duties that do not depend on how
often they are elected.
The Board believes that this proposal is not in the best interest of the
Company or its stockholders.
The Board of Directors recommends a vote AGAINST this proposal.
6. STOCKHOLDER PROPOSAL CONCERNING BONUSES FOR MANAGEMENT
Mr. Robert D. Morse, 212 Highland Avenue, Moorestown, NJ 08057, whose
shareholdings will be furnished by the Company promptly upon receiving an oral
or written request from a stockholder addressed to the Secretary of the
Company, has given notice that he intends to present for action at the Annual
Meeting the following resolution:
"I propose that the Officers and Directors consider the discontinuance of
all bonuses immediately, and options, rights, SAR's, etc., after
termination of any existing programs for top management. I must also
include discontinuance request of "Severance Contracts', which overpay a
person no longer satisfactory to the Company, just to leave!
"This does not include any programs for employees.
"REASONS: Management and Directors are compensated enough to buy on open
market, just as You and I, if they are so motivated.
25
<PAGE>
"Management is already well paid with base pay, life insurance,
retirement plans, paid vacations, free use of vehicles and other perks.
"Options, rights, SAR's, are available elsewhere, and a higher offer
would induce transfers, not necessarily "attain and hold' qualified
persons.
"Who writes the objections to my proposal? Is it not the same persons who
nominate and pay the directors who in turn will provide Management these
exorbitant extras above a good base salary? Shareowners should start
reading and realizing that these persons are not providing them
entertainment on an individual choice basis, as do athletes, movie stars,
and similar able performers.
" 'Align management with shareowners' is a repeated ploy or 'line' to
lull us as to continually increasing their take of our assets. Do we get
any options to purchase at previous [presumed] lower rates, expecting
prices to increase?
"After taxes, present base salaries are way above the $200,000.00 our
President receives plus free lodging, and Management only looks after a
Company, not the USA and some of the world problems. If they filled out a
daily work or production sheet, what would it show?
"Please vote 'YES' for this proposal."
Board of Directors' Statement in Opposition to the Resolution
A substantially similar proposal was submitted by the same stockholder at
the 1997 Annual Meeting of Stockholders and was soundly defeated. 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
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 and 1996 Annual
Meetings where the stockholders overwhelmingly approved, respectively, the
1996 Incentive Stock Plan which broadened opportunities for the grant of
Incentives and the 1996 Non-Employee Directors Stock Option Plan.
Moreover, the compensation of the Company's executive officers 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 competitive with those of other
leading healthcare and industrial companies.
Elimination of Incentives and the payment of bonuses 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 interest of the
Company or its stockholders.
The Board of Directors recommends a vote AGAINST this proposal.
26
<PAGE>
7. STOCKHOLDER PROPOSAL CONCERNING PHARMACEUTICAL PRICING
The Province of St. Joseph of the Capuchin Order, 1015 North Ninth Street,
Milwaukee, Wisconsin 53233, owner of 200 shares of Common Stock of the
Company, and 16 co-proponents, whose names, addresses and shareholdings will
be furnished by the Company promptly upon receiving an oral or written request
from a stockholder addressed to the Secretary of the Company, have given
notice that they intend to present for action at the Annual Meeting the
following resolution:
"WHEREAS: Health Care Financing Administration data, based on five year
figures through 1998, shows spending on prescription drugs rising 12% per
year, more than double the 5.1% increase in national health expenditures;
"A 1998 House Committee Report found that:
-- Older Americans and other individuals (e.g., the uninsured and the
underinsured) who buy prescription drugs in the retail market pay
substantially more for drugs than drug manufacturers' 'favored
customers' (federal government agencies and large HMO's);
-- Pharmacies appear to have small mark-ups in prices in prescription
drugs;
"These higher prices are also borne by institutional health care
facilities;
"Drug prices are consistently higher in the US retail market than in
other industrialized countries. Recent studies reveal that eight
antidepressants and anti-psychotic drugs cost, on average, twice as much in
the US as in European and other North American industrialized countries.
"Our company has paid $19.5 million as part of a settlement of a class
action law suit that accused several companies of using an unfair two-
tiered system to price wholesale drugs;
"RESOLVED: Shareholders request the Board of Directors to:
1. Create and implement a policy of price restraint on pharmaceutical
products for individual consumers and institutional purchasers,
utilizing a combination of approaches to keep drug prices at reasonable
levels.
2. Report to shareholders by September, 2000 on changes in policies
and pricing procedures for pharmaceutical products (withholding any
competitive information, and at reasonable cost).
"SUPPORTING STATEMENT: We suggest that the policy include a restraint on
each individual drug and that it not be based on averages which can mask
tremendous disparities: a low price increase for one compound and a high
price increase for another; one price for a 'favored customer' (usually
low) and another for the retail customer (usually high).
"We understand the need for ongoing research and appreciate the role that
our company has played in the development of new medicines. We are also
aware that the cost of research is only one determinant for the final price
of a drug. The manufacturing, selling, marketing and administrative costs
often contribute far more to the price of a drug than research costs. Thus,
we believe that price restraint can be achieved without sacrificing
necessary research efforts."
Board of Directors' Statement in Opposition to the Resolution
The price of a medicine, like that of other products resulting from research
and creativity, is determined by the value of the knowledge it represents--
knowledge that prevents and cures disease and relieves suffering. Such
knowledge does not come cheaply. The process is expensive, time-consuming and
risky. Studies show that it can take nearly 15 years and cost nearly $500
million to bring a new drug to patients.
For those in the United States who have prescription drug coverage, the
emergence of powerful buyers through managed care organizations and health
plans has intensified the competition in this market. The Company believes
that we need to make sure that all Americans benefit from the free market and
have access to the competitive pricing that comes with prescription drug
coverage.
27
<PAGE>
For seniors in the United States, the Company supports adding an outpatient
prescription drug benefit to a modernized and strengthened Medicare program.
Beneficiaries should be able to choose among private-sector health plans that
include prescription drug coverage. Recognizing that change may take time, in
the interim we support federal legislation that would provide all seniors with
access to affordable pharmaceutical coverage. With respect to individuals who
are not eligible for coverage under Medicaid, state children's health programs
or other initiatives, the problem of the lack of coverage affects all health
services--not just drugs--and the issue needs to be addressed in this broader
context. The Company is interested in participating in such a debate.
Concerns about access to pharmaceuticals are best addressed by continuing
the Company's commitment to leadership in advocating pharmaceutical insurance
coverage based on competition and choice. In conclusion, the Board believes
that the imposition of a restraint on pricing pharmaceutical products is
unnecessary.
The Board believes that this proposal is not in the best interest of the
Company or its stockholders.
The Board of Directors recommends a vote AGAINST this proposal.
8. STOCKHOLDER PROPOSAL CONCERNING STOCK OWNERSHIP
OF DIRECTOR CANDIDATES
Mr. Thomas O. Moloney III, 10510 West 131st Street, Overland Park, Kansas
66213-3610, owner of 694 shares of Common Stock of the Company, has given
notice that he intends to present for action at the Annual Meeting the
following resolution:
"WHEREAS senior management already has the power to hire competent,
insightful, and knowledgeable people to various positions within the corpo-
ration;
"WHEREAS in addition to those traits, a Director should also have a large
position of ownership--to ensure his/her actions will be in the best
interests of the corporation;
"WHEREAS the Board of Directors are supposed to represent owners--not be
the 'yes-men' of senior management;
"WHEREAS packing the board with celebrities or friends who have few or no
shares is at least unethical, if not illegal;
"RESOLVED: Before a nominee can be considered for the Board of
Directors, he/she must be the beneficial owner of at least 500 shares of
the corporation."
Board of Directors' Statement in Opposition to the Resolution
The Board believes in aligning the interests of the Company's directors with
those of its stockholders and, in fact, has established a target ownership
level of 5,000 shares for each of the Company's directors. However, the Board
opposes the stockholder proposal because it makes ownership of 500 shares a
condition of becoming a director. The Board believes that its approach is
preferable since it allows directors five years to achieve the sizable
investment of 5,000 shares that is set forth in its Policies of the Board.
Mr. Moloney's proposal does not provide flexibility with respect to the
timing of attaining his recommended share ownership nor does it recognize the
different personal circumstances that could make it difficult or impossible
for a director to achieve the proposed target. The Board's policy avoids these
shortcomings, while also requiring a substantial investment in stock by those
directors who are able to do so. The Board's approach facilitates the
recruitment of directors of various backgrounds, thereby better aligning the
interests of the Board with the Company's stockholders than the approach
advocated by the proponent.
The Board believes that this proposal is not in the best interest of the
Company or its stockholders.
The Board of Directors recommends a vote AGAINST this proposal.
28
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1999
fiscal year except for an inadvertent reporting error in the initial holdings
on Form 3 by Dr. Adel Mahmoud, President, Merck Vaccines, which was
subsequently corrected by filing an amended Form 3, and the inadvertent
failure to file a Form 4 by Mr. Peter E. Nugent, former Vice President,
Controller, to report an acquisition of stock after his retirement from the
Company, which was subsequently reported on Form 5 for 1999.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
If a shareholder notifies the Company after January 31, 2001 of an intent to
present a proposal at the Company's 2001 Annual Meeting, the Company will have
the right to exercise its discretionary voting authority with respect to such
proposal, if presented at the meeting, without including information regarding
such proposal in its proxy materials. Stockholder proposals to be presented at
the 2001 Annual Meeting must be received by the Company on or before November
17, 2000 for inclusion in the proxy statement and proxy card 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 proxy to vote said proxy in
accordance with their judgment in such matters.
Merck & Co., Inc.
March 16, 2000
29
<PAGE>
EXHIBIT A
MERCK & CO., INC.
2001 INCENTIVE STOCK PLAN
(Effective January 1, 2001)
The 2001 Incentive Stock Plan ("ISP"), effective January 1, 2001, is
established to encourage employees of Merck & Co., Inc. (the "Company"), its
subsidiaries, its affiliates and its joint ventures to acquire Common Stock in
the Company ("Common Stock"). It is believed that the ISP will stimulate
employees' efforts on the Company's behalf, will tend to maintain and
strengthen their desire to remain with the Company, will be in the interest of
the Company and its Stockholders and will encourage such employees to have a
greater personal financial investment in the Company through ownership of its
Common Stock.
1. Incentives
Incentives under the ISP may be granted in any one or a combination of (a)
Incentive Stock Options (or other statutory stock options); (b) Nonqualified
Stock Options; (c) Stock Appreciation Rights; (d) Restricted Stock Grants and
(e) Performance Shares (collectively "Incentives"). All Incentives shall be
subject to the terms and conditions set forth herein and to such other terms
and conditions as may be established by the Compensation and Benefits
Committee of the Board of Directors (the "Committee").
2. Eligibility
Regular full-time and part-time employees of the Company, its subsidiaries,
its affiliates and its joint ventures, including officers, whether or not
directors of the Company, and employees of a joint venture partner or
affiliate of the Company who provide services to the joint venture with such
partner or affiliate, shall be eligible to participate in the ISP ("Eligible
Employees") if designated by the Committee. Directors of the Company who are
not regular employees are not eligible to participate in the ISP.
3. Administration
The ISP shall be administered by the Committee. The Committee shall be
responsible for the administration of the ISP including, without limitation,
determining which Eligible Employees receive Incentives, what kind of
Incentives are made under the ISP and for what number of shares, and the other
terms and conditions of such Incentives. Determinations by the Committee under
the ISP including, without limitation, determinations of the Eligible
Employees, the form, amount and timing of Incentives, the terms and provisions
of Incentives and the agreements evidencing Incentives, need not be uniform
and may be made selectively among Eligible Employees who receive, or are
eligible to receive, Incentives hereunder, whether or not such Eligible
Employees are similarly situated.
The Committee shall have the responsibility of construing and interpreting
the ISP and of establishing and amending such rules and regulations as it may
deem necessary or desirable for the proper administration of the ISP. Any
decision or action taken or to be taken by the Committee, arising out of or in
connection with the construction, administration, interpretation and effect of
the ISP and of its rules and regulations, shall, to the maximum extent
permitted by applicable law, be within its absolute discretion (except as
otherwise specifically provided herein) and shall be conclusive and binding
upon the Company, all Eligible Employees and any person claiming under or
through any Eligible Employee.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other senior member of management as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its authority with regard to any matter or action affecting an
officer subject to Section 16 of the Securities Exchange Act of 1934.
A-1
<PAGE>
For the purpose of this section and all subsequent sections, the ISP shall
be deemed to include this plan and any comparable sub-plans established by
subsidiaries which, in the aggregate, shall constitute one plan governed by
the terms set forth herein.
4. Shares Available for Incentives
(a) Shares Subject to Issuance or Transfer. Subject to adjustment as
provided in Section 4(c) hereof, there is hereby reserved for issuance under
the ISP 95 million shares of Common Stock. The shares available for granting
awards shall be increased by the number of shares as to which options or other
benefits granted under the ISP have lapsed, expired, terminated or been
canceled. In addition, any shares reserved for issuance under the Company's
1996 Incentive Stock Plan and 1991 Incentive Stock Plan ("Prior Plans") in
excess of the number of shares as to which options or other benefits have been
awarded thereunder, plus any such shares as to which options or other benefits
granted under the Prior Plans may lapse, expire, terminate or be canceled,
shall also be reserved and available for issuance or reissuance under the ISP.
Shares under this ISP may be delivered by the Company from its authorized but
unissued shares of Common Stock or from Common Stock held in the Treasury.
(b) Limit on an Individual's Incentives. In any given year, no Eligible
Employee may receive Incentives covering more than three (3) million shares of
the Company's Common Stock (such number of shares shall be adjusted in
accordance with Section 4(c)).
(c) Adjustment of Shares. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering or other similar change in the capital
structure of the Company, then (i) the number of shares authorized for
issuance under the ISP, and (ii) the number of shares subject to outstanding
Incentives and, in the case of Stock Options, the option price, and in the
case of stock appreciation rights, the fair market value, will be
proportionately adjusted, provided that fractions of a share will be rounded
down to the nearest whole share.
5. Stock Options
The Committee may grant options qualifying as Incentive Stock Options under
the Internal Revenue Code of 1986, as amended, or any successor code thereto
(the "Code"), other statutory options under the Code and Nonqualified Options
(collectively "Stock Options"). Such Stock Options shall be subject to the
following terms and conditions and such other terms and conditions as the
Committee may prescribe:
(a) Option Price. The option price per share with respect to each Stock
Option shall be determined by the Committee, but shall not be less than
100% of the fair market value of the Common Stock on the date the Stock
Option is granted, as determined by the Committee.
(b) Period of Option. The period of each Stock Option shall be fixed by
the Committee, but shall not exceed ten (10) years.
(c) Payment. No shares shall be issued until full payment of the option
price has been made. The option prices may be paid in cash or, if the
Committee determines, in shares of Common Stock or a combination of cash
and shares. If the Committee approves the use of shares of Common Stock as
a payment method, the Committee shall establish such conditions as it deems
appropriate for the use of Common Stock to exercise a stock option. Stock
options awarded under the ISP shall be exercised through the Company's
broker-assisted stock option exercise program, provided such program is
available at the time of the option exercise, or by such other means as the
Committee may determine from time to time. The Committee may establish
rules and procedures to permit an optionholder to defer recognition of gain
upon the exercise of a stock option.
(d) Exercise of Option. The Committee shall determine how and when shares
covered by a Stock Option may be purchased. The Committee may establish
waiting periods, the dates on which options
A-2
<PAGE>
become exercisable or "vested" and exercise periods, provided that in no
event (including those specified in paragraphs (e), (f) and (g) of this
section) shall any Stock Option be exercisable after its specified
expiration period.
(e) Termination of Employment. Upon the termination of a Stock Option
grantee's employment (for any reason other than retirement, death or
termination for deliberate, willful or gross misconduct), Stock Option
privileges shall be limited to the shares which were immediately
exercisable at the date of such termination. The Committee, however, in its
discretion, may provide that any Stock Options outstanding but not yet
exercisable upon the termination of a Stock Option grantee's employment may
become exercisable in accordance with a schedule as may be determined by
the Committee. Such Stock Option privileges shall expire unless exercised
or surrendered under a Stock Appreciation Right within such period of time
after the date of termination of employment as may be established by the
Committee, but in no event later than the expiration date of the Stock
Option.
(f) Retirement. Upon retirement of a Stock Option grantee, Stock Option
privileges shall apply to those shares immediately exercisable at the date
of retirement. The Committee, however, in its discretion, may provide that
any Stock Options outstanding but not yet exercisable upon the retirement
of a Stock Option grantee may become exercisable in accordance with a
schedule as may be determined by the Committee. Stock Option privileges
shall expire unless exercised within such period of time as may be
established by the Committee, but in no event later than the expiration
date of the Stock Option.
(g) Death. Upon the death of a Stock Option grantee, Stock Option
privileges shall apply to those shares which were immediately exercisable
at the time of death. The Committee, however, in its discretion, may
provide that any Stock Options outstanding but not yet exercisable upon the
death of a Stock Option grantee may become exercisable in accordance with a
schedule as may be determined by the Committee. Such privileges shall
expire unless exercised by legal representative(s) within a period of time
as determined by the Committee, but in no event later than the expiration
date of the Stock Option.
(h) Termination due to Misconduct. If a Stock Option grantee's employment
is terminated for deliberate, willful or gross misconduct, as determined by
the Company, all rights under the Stock Option shall expire upon receipt of
the notice of such termination.
(i) Limits on Incentive Stock Options. Except as may otherwise be
permitted by the Code, the Committee shall not grant to an Eligible
Employee Incentive Stock Options that, in the aggregate, are first
exercisable during any one calendar year to the extent that the aggregate
fair market value of the Common Stock, at the time the Incentive Stock
Options are granted, exceeds $100,000, or such other amount as the Internal
Revenue Service may decide from time to time.
6. Stock Appreciation Rights
The Committee may, in its discretion, grant a right to receive the
appreciation in the fair market value of shares of Common Stock ("Stock
Appreciation Right") either singly or in combination with an underlying Stock
Option granted hereunder or under the Prior Plans. Such Stock Appreciation
Rights shall be subject to the following terms and conditions and such other
terms and conditions as the Committee may prescribe:
(a) Time and Period of Grant. If a Stock Appreciation Right is granted
with respect to an underlying Stock Option, it may be granted at the time
of the Stock Option grant or at any time thereafter but prior to the
expiration of the Stock Option grant. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, at the time the Stock
Appreciation Right is granted the Committee may limit the exercise period
for such Stock Appreciation Right, before and after which period no Stock
Appreciation Right shall attach to the underlying Stock Option. In no event
shall the exercise period for a Stock Appreciation Right granted with
respect to an underlying Stock Option exceed the exercise period for such
Stock Option. If a Stock Appreciation Right is granted without an
underlying Stock Option, the period for exercise of the Stock Appreciation
Right shall be set by the Committee.
A-3
<PAGE>
(b) Value of Stock Appreciation Right. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, the grantee will be
entitled to surrender the Stock Option which is then exercisable and
receive in exchange therefor an amount equal to the excess of the fair
market value of the Common Stock on the date the election to surrender is
received by the Company over the Stock Option price multiplied by the
number of shares covered by the Stock Option which is surrendered. If a
Stock Appreciation Right is granted without an underlying Stock Option, the
grantee will receive upon exercise of the Stock Appreciation Right an
amount equal to the excess of the fair market value of the Common Stock on
the date the election to surrender such Stock Appreciation Right is
received by the Company over the fair market value of the Common Stock on
the date of grant multiplied by the number of shares covered by the grant
of the Stock Appreciation Right.
(c) Payment of Stock Appreciation Right. Payment of a Stock Appreciation
Right shall be in the form of shares of Common Stock, cash or any
combination of shares and cash. The form of payment upon exercise of such a
right shall be determined by the Committee either at the time of grant of
the Stock Appreciation Right or at the time of exercise of the Stock
Appreciation Right.
7. Performance Share Awards
The Committee may grant awards under which payment may be made in shares of
Common Stock, cash or any combination of shares and cash if the performance of
the Company or any subsidiary, division, affiliate or joint venture of the
Company selected by the Committee during the Award Period meets certain goals
established by the Committee ("Performance Share Awards"). Such Performance
Share Awards shall be subject to the following terms and conditions and such
other terms and conditions as the Committee may prescribe:
(a) Award Period and Performance Goals. The Committee shall determine and
include in a Performance Share Award grant the period of time for which a
Performance Share Award is made ("Award Period"). The Committee shall also
establish performance objectives ("Performance Goals") to be met by the
Company, subsidiary, division or joint venture during the Award Period as a
condition to payment of the Performance Share Award. The Performance Goals
may include earnings per share, return on stockholders' equity, return on
assets, net income or any other financial or other measurement established
by the Committee. The Performance Goals may include minimum and optimum
objectives or a single set of objectives.
(b) Payment of Performance Share Awards. The Committee shall establish
the method of calculating the amount of payment to be made under a
Performance Share Award if the Performance Goals are met, including the
fixing of a maximum payment. The Performance Share Award shall be expressed
in terms of shares of Common Stock and referred to as "Performance Shares."
After the completion of an Award Period, the performance of the Company,
subsidiary, division or joint venture shall be measured against the
Performance Goals, and the Committee shall determine whether all, none or
any portion of a Performance Share Award shall be paid. The Committee, in
its discretion, may elect to make payment in shares of Common Stock, cash
or a combination of shares and cash. Any cash payment shall be based on the
fair market value of Performance Shares on, or as soon as practicable prior
to, the date of payment.
(c) Revision of Performance Goals. At any time prior to the end of an
Award Period, the Committee may revise the Performance Goals and the
computation of payment if unforeseen events occur which have a substantial
effect on the performance of the Company, subsidiary, division or joint
venture and which, in the judgment of the Committee, make the application
of the Performance Goals unfair unless a revision is made.
(d) Requirement of Employment. A grantee of a Performance Share Award
must remain in the employ of the Company until the completion of the Award
Period in order to be entitled to payment under the Performance Share
Award; provided that the Committee may, in its discretion, provide for a
full or partial payment where such an exception is deemed equitable.
A-4
<PAGE>
(e) Dividends. The Committee may, in its discretion, at the time of the
granting of a Performance Share Award, provide that any dividends declared
on the Common Stock during the Award Period, and which would have been paid
with respect to Performance Shares had they been owned by a grantee, be (i)
paid to the grantee, or (ii) accumulated for the benefit of the grantee and
used to increase the number of Performance Shares of the grantee.
(f) Limit on Performance Share Awards. Incentives granted as Performance
Share Awards under this section and Restricted Stock Grants under Section 8
shall not exceed, in the aggregate, six (6) million shares of Common Stock
(such number of shares shall be adjusted in accordance with Section 4(c)).
8. Restricted Stock Grants
The Committee may award shares of Common Stock to a grantee, which shares
shall be subject to the following terms and conditions and such other terms
and conditions as the Committee may prescribe ("Restricted Stock Grant"):
(a) Requirement of Employment. A grantee of a Restricted Stock Grant must
remain in the employment of the Company during a period designated by the
Committee ("Restriction Period") in order to retain the shares under the
Restricted Stock Grant. If the grantee leaves the employment of the Company
prior to the end of the Restriction Period, the Restricted Stock Grant
shall terminate and the shares of Common Stock shall be returned
immediately to the Company provided that the Committee may, at the time of
the grant, provide for the employment restriction to lapse with respect to
a portion or portions of the Restricted Stock Grant at different times
during the Restriction Period. The Committee may, in its discretion, also
provide for such complete or partial exceptions to the employment
restriction as it deems equitable.
(b) Restrictions on Transfer and Legend on Stock Certificates. During the
Restriction Period, the grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Common Stock. Each certificate for
shares of Common Stock issued hereunder shall contain a legend giving
appropriate notice of the restrictions in the grant.
(c) Escrow Agreement. The Committee may require the grantee to enter into
an escrow agreement providing that the certificates representing the
Restricted Stock Grant will remain in the physical custody of an escrow
holder until all restrictions are removed or expire.
(d) Lapse of Restrictions. All restrictions imposed under the Restricted
Stock Grant shall lapse upon the expiration of the Restriction Period if
the conditions as to employment set forth above have been met. The grantee
shall then be entitled to have the legend removed from the certificates.
(e) Dividends. The Committee shall, in its discretion, at the time of the
Restricted Stock Grant, provide that any dividends declared on the Common
Stock during the Restriction Period shall either be (i) paid to the
grantee, or (ii) accumulated for the benefit of the grantee and paid to the
grantee only after the expiration of the Restriction Period.
(f) Limit on Restricted Stock Grant. Incentives granted as Restricted
Stock Grants under this section and Performance Share Awards under Section
7 shall not exceed, in the aggregate, six (6) million shares of Common
Stock (such number of shares shall be adjusted in accordance with Section
4(c)).
9. Transferability
Each Incentive Stock Option granted under the ISP shall not be transferable
other than by will or the laws of descent and distribution; each other
Incentive granted under the ISP will not be transferable or assignable by the
recipient, and may not be made subject to execution, attachment or similar
procedures, other than by will or the laws of descent and distribution or as
determined by the Committee in accordance with regulations promulgated under
the Securities Exchange Act of 1934, or any other applicable law or
regulation.
A-5
<PAGE>
10. Discontinuance or Amendment of the Plan
The Board of Directors may discontinue the ISP at any time and may from time
to time amend or revise the terms of the ISP as permitted by applicable
statutes, except that it may not revoke or alter, in a manner unfavorable to
the grantees of any Incentives hereunder, any Incentives then outstanding, nor
may the Board amend the ISP without stockholder approval where the absence of
such approval would cause the Plan to fail to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, or any other requirement of applicable law or
regulation. Unless approved by the Company's stockholders, no adjustments or
reduction of the exercise price of any outstanding Incentives shall be made by
cancellation of outstanding Incentives and the subsequent regranting of
Incentives at a lower price to the same individual. No Incentive shall be
granted under the ISP after December 31, 2003, but Incentives granted
theretofore may extend beyond that date.
11. No Right of Employment or Participation
The ISP and the Incentives granted hereunder shall not confer upon any
Eligible Employee the right to continued employment with the Company, its
subsidiaries, its affiliates or its joint ventures or affect in any way the
right of such entities to terminate the employment of an Eligible Employee at
any time and for any reason. No individual shall have a right to be granted an
Incentive, or having been granted an Incentive, to receive any future
Incentives.
12. No Limitation on Compensation
Nothing in the ISP shall be construed to limit the right of the Company to
establish other plans or to pay compensation to its employees, in cash or
property, in a manner which is not expressly authorized under the ISP.
13. No Impact on Benefits
Except as may otherwise be specifically stated under any employee benefit
plan, policy or program, no amount payable in respect of any Incentive shall
be treated as compensation for purposes of calculating an employee's right
under any such plan, policy or program.
14. No Constraint on Corporate Action
Nothing in the ISP shall be construed (i) to limit, impair or otherwise
affect the Company's right or power to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, or to merge
or consolidate, or dissolve, liquidate, sell or transfer all or any part of
its business or assets, or (ii) except as provided in Section 10, to limit the
right or power of the Company or any subsidiary to take any action which such
entity deems to be necessary or appropriate.
15. Withholding Taxes
The Company shall be entitled to deduct from any payment under the ISP,
regardless of the form of such payment, the amount of all applicable income
and employment taxes required by law to be withheld with respect to such
payment or may require the Eligible Employee to pay to it such tax prior to
and as a condition of the making of such payment. In accordance with any
applicable administrative guidelines it establishes, the Committee may allow
an Eligible Employee to pay the amount of taxes required by law to be withheld
from an Incentive by withholding from any payment of Common Stock due as a
result of such Incentive, or by permitting the Eligible Employee to deliver to
the Company, shares of Common Stock having a fair market value, as determined
by the Committee, equal to the amount of such required withholding taxes.
16. Governing Law
The ISP, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of New Jersey.
A-6
<PAGE>
[LOGO] MERCK
Merck & Co., Inc.
<PAGE>
[LOGO] MERCK YOUR VOTE IS IMPORTANT
VOTE BY TELEPHONE / INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
VOTE BY PHONE: Call TOLL-FREE On a Touch-Tone telephone 1-888-297-9639.
There is no charge to you for this call. You will be asked
to enter the number located in the box marked "Control
Number."
OPTION A: To vote as the Board of Directors recommends on
ALL items, press 1.
OPTION B: If you choose to vote on each item separately,
press 0.
Item 1: To vote FOR ALL nominees, press 1; to WITHHOLD
FOR ALL nominees, press 9. To WITHHOLD FOR AN INDIVIDUAL
nominee, press 0 and listen to the instructions.
Items 2-8: To vote FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0. When Asked, You Must Confirm Your Vote By Pressing
1.
VOTE BY INTERNET: The Web Address is: http://www.proxyvoting.com/merck
Follow the instructions that appear on your computer screen.
You will be asked to enter the number located in the box
marked "Control Number."
IF YOU VOTE BY TELEPHONE OR BY INTERNET, DO NOT MAIL THE PROXY CARD. YOUR
TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN
THE SAME MANNER AS IF YOU VOTED YOUR PROXY CARD EXCEPT FOR THE CUMULATIVE VOTING
FEATURE APPLICABLE TO THE ELECTION OF DIRECTORS, WHICH IS ONLY AVAILABLE BY
VOTING THE PROXY CARD. THE TELEPHONE AND INTERNET VOTING FACILITIES WILL CLOSE
AT 8:00 A.M. ON APRIL 25, 2000.
--------------------------
CONTROL NUMBER FOR
TELEPHONE/INTERNET VOTING
--------------------------
\/ DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR BY INTERNET \/
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
<TABLE>
<CAPTION>
1. Election of Directors - The Board of Directors recommends a vote FOR the
nominees listed below:
<S> <C> <C>
Nominees: 01 - Niall FitzGerald* 02 - Anne M. Tatlock**
03 - Lawrence A. Bossidy*** 04 - Johnnetta B. Cole, Ph.D.***
05 - William B. Harrison, Jr.*** 06 - William N. Kelley, M.D.***
*Term expiring 2001 **Term expiring 2002 ***Term expiring 2003
FOR all WITHHOLD AUTHORITY
nominees listed to vote for all nominees listed EXCEPTIONS
[ ] [ ] [ ]
To withhold authority to vote for any individual nominee, mark the "Exceptions"
box and write that nominee's name in the space provided below.
Exceptions ________________________________________________________________
To cumulate votes as to a particular nominee(s) as explained in the Proxy
Statement, indicate the name(s) and the number of votes to be given to such
nominee(s).
Cumulate _________________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of the Appointment of Independent [ ] [ ] [ ]
Public Accountants
3. Adoption of the 2001 Incentive Stock Plan [ ] [ ] [ ]
- ---------------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST Items 4, 5, 6, 7 and 8.
4. Stockholder Proposal Concerning Appointment of [ ] [ ] [ ]
Directors from Outside the Company
5. Stockholder Proposal Concerning Annual Election [ ] [ ] [ ]
of Directors
6. Stockholder Proposal Concerning Bonuses for [ ] [ ] [ ]
Management
7. Stockholder Proposal Concerning Pharmaceutical [ ] [ ] [ ]
Pricing
8. Stockholder Proposal Concerning Stock [ ] [ ] [ ]
Ownership of Director Candidates
<CAPTION>
Proxy Card
<S> <C> I do not wish to receive an Annual Report for this account at this
address. [ ]
I plan to attend the Annual Meeting. [ ]
I would like to access future Proxy Statements and Annual Reports
electronically. [ ]
Please sign exactly as name or names appear on this Proxy Card. When signing as
attorney, executor, administrator, trustee, custodian or guardian, give full
title. If there is more than one named stockholder, all should sign unless
evidence of authority to sign on behalf of others is attached.
Dated: _______________________________________________________________________
------------------------------------------------------------------------------
Signature of Stockholder
------------------------------------------------------------------------------
Signature of Stockholder
Please complete, sign, date and return the Proxy Card promptly using the
enclosed envelope.
</TABLE>
<PAGE>
[LOGO] MERCK ADMISSION TICKET
Annual Meeting of Stockholders
Tuesday, April 25, 2000, 2:00 p.m.
Edward Nash Theatre, Raritan Valley Community College
Route 28 and Lamington Road, North Branch, New Jersey
[ROAD MAP APPEARS HERE]
Follow Raritan Valley Community College signs at Exit 26 of Route 78 and on
Route 22 in North Branch. Enter Raritan Valley Community College at Lamington
Road entrance. Proceed to Parking Lot 5 which is reserved for Merck
stockholders. A continuous shuttle bus service from the parking lot to the
theatre will be available.
This ticket admits the named Stockholder(s) and one guest.
- --------------------------------------------------------------------------------
[LOGO] MERCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RAYMOND V. GILMARTIN, KENNETH C. FRAZIER and
CELIA A. COLBERT as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them to represent and to vote ALL of the stock
of MERCK & CO., INC. standing in the name of the undersigned at the ANNUAL
MEETING OF STOCKHOLDERS to be held on April 25, 2000, 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 Merck Stock Investment 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.
(Continued, and to be signed and dated on the reverse side.)
