<PAGE> 1
================================================================================
Exhibit 10(a)
MERCK & CO., INC.
2001 INCENTIVE STOCK PLAN
(effective January 1, 2001)
================================================================================
<PAGE> 2
2001 INCENTIVE STOCK PLAN
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.
<PAGE> 3
The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer or other senior member of management as
the Committee deems appropriate; provided, however, that the Committee may not
delegate its authority with regard to any matter or action affecting an officer
subject to Section 16 of the Securities Exchange Act of 1934.
For the purpose of this section and all subsequent sections, the ISP
shall be deemed to include this plan and any comparable sub-plans established by
subsidiaries which, in the aggregate, shall constitute one plan governed by the
terms set forth herein.
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.
- 2 -
<PAGE> 4
(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 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.
- 3 -
<PAGE> 5
6. STOCK APPRECIATION RIGHTS
The Committee may, in its discretion, grant a right to receive the
appreciation in the fair market value of shares of Common Stock ("Stock
Appreciation Right") either singly or in combination with an underlying Stock
Option granted hereunder or under the Prior Plans. Such Stock Appreciation
Rights shall be subject to the following terms and conditions and such other
terms and conditions as the Committee may prescribe:
(a) TIME AND PERIOD OF GRANT. If a Stock Appreciation Right is
granted with respect to an underlying Stock Option, it may be granted at
the time of the Stock Option grant or at any time thereafter but prior to
the expiration of the Stock Option grant. If a Stock Appreciation Right
is granted with respect to an underlying Stock Option, at the time the
Stock Appreciation Right is granted the Committee may limit the exercise
period for such Stock Appreciation Right, before and after which period
no Stock Appreciation Right shall attach to the underlying Stock Option.
In no event shall the exercise period for a Stock Appreciation Right
granted with respect to an underlying Stock Option exceed the exercise
period for such Stock Option. If a Stock Appreciation Right is granted
without an underlying Stock Option, the period for exercise of the Stock
Appreciation Right shall be set by the Committee.
(b) VALUE OF STOCK APPRECIATION RIGHT. If a Stock Appreciation
Right is granted with respect to an underlying Stock Option, the grantee
will be entitled to surrender the Stock Option which is then exercisable
and receive in exchange therefor an amount equal to the excess of the
fair market value of the Common Stock on the date the election to
surrender is received by the Company over the Stock Option price
multiplied by the number of shares covered by the Stock Option which 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
- 4 -
<PAGE> 6
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.
(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.
- 5 -
<PAGE> 7
(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.
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.
- 6 -
<PAGE> 8
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.
- 7 -
