UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 23, 2004
Merck & Co., Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 1-3305 22-1109110
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Merck Drive, P.O. Box
100, Whitehouse Station, New
Jersey 08889
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 908-423-1000
Not Applicable
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Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
1. Adoption of the Merck & Co., Inc. Change in Control Separation
Benefits Plan.
On November 23, 2004, the Board of Directors (the "Board") of Merck &
Co., Inc. (the "Company") adopted the Merck & Co., Inc. Change in Control
Separation Benefits Plan. The following summary is qualified in its entirety
by reference to the text of the plan, a copy of which is filed as an exhibit
to this report. The Board adopted the plan as part of its ongoing, periodic
review of its compensation and benefits programs and in recognition of the
importance to the Company and its shareholders of avoiding the distraction
and loss of key management personnel that may occur in connection with
rumored or actual fundamental corporate changes.
Participants in the plan include members of the Company's Management
Committee and other Vice President-level managers. At the time of adoption
of the plan, there are approximately 230 participants in the plan in the
aggregate.
The plan provides for a participant to receive the following severance
benefits upon qualifying terminations of employment in connection with or
within two years following a change in control of the Company:
o The participant is entitled to receive cash severance pay
equal to a multiple of the sum of his or her base salary
plus target bonus amount. The multiples under the plan are
three, two, or one-and-one-half, depending on tier of
participation under the plan. This multiple is reduced based
on the participant's proximity to age 65 at the time of
termination.
o The participant is entitled to receive a pro rata annual
cash bonus at target levels, paid in a lump sum at
termination.
o If the participant is U.S.-based, the participant is
entitled to receive continued medical, dental and life
insurance benefits at active-employee rates for a period of
full years (or full and partial years) equal to the
multiple, but not beyond age 65. These benefits are reduced
by benefits obtained from a subsequent employer. A benefit
is not available to the extent the participant is eligible
for the same benefit as a retiree.
o If the participant participates in the Company's
Supplemental Retirement Plan, the participant is entitled to
receive enhanced supplemental retirement benefits determined
by increasing both the participant's age and credited
service by the number of years equal to the multiple (but
not more than the participant would have earned had he or
she continued to be employed until age 65) and then
calculating the participant's benefits under the
Supplemental Retirement Plan. This benefit is payable, at
the Company's discretion, either under the Supplemental
Retirement Plan or pursuant to a newly adopted arrangement
or otherwise from the Company's general assets.
o If the participant participates in the Company's
tax-qualified pension plan and would attain specified age
and service levels within two years following the change in
control, then the participant is entitled to subsidized
and/or unreduced pension benefits upon commencement of the
participant's pension benefits in accordance with plan terms
after his or her termination of employment. In addition, if
the participant is U.S.-based and would attain specified age
and service levels within two years following the change in
control, then the participant is entitled to be treated as a
retiree under the Company's medical, dental and life
insurance plans immediately upon his or her termination of
employment. These benefits are referred to below as the
"Retirement Bridge."
o The participant is also entitled to receive continued
financial planning benefits and outplacement benefits.
Terminations of employment that entitle a participant to receive
severance benefits under the plan consist of (1) termination by the Company
without cause or (2) resignation by the participant for good reason (as each
of these terms is defined in the plan), in each case within two years
following a change in control. A participant is not eligible for benefits
under the plan if his or her termination is due to death or permanent
disability.
A "change in control" for purposes of the plan generally consists of
any of the following:
o an acquisition of more than 20% of the Company's voting
securities (other than acquisitions directly from the
Company);
o the current Board (and their approved successors) ceasing to
constitute a majority of the Board or, if applicable, the
board of directors of a successor to the Company;
o the consummation of a merger, consolidation or
reorganization, unless (1) the shareholders of the Company
prior to the transaction hold at least 60% of the voting
securities of the successor, (2) the members of the Board
prior to the transaction constitute at least a majority of
the board of directors of the successor and (3) no person
owns 20% or more of the voting securities of the Company or
the successor; or
o the liquidation or dissolution of the Company or the sale by
the Company of all or substantially all of its assets.
To receive the severance benefits under the plan, a participant must
execute a general release of claims against the Company and its affiliates,
which includes certain restrictive covenants, including a commitment by the
participant not to solicit Company employees for two years following the
change in control. The severance benefits are in lieu of (or offset by) any
other severance benefits to which a participant may be entitled under other
arrangements of the Company. The cash severance pay is paid in the form of
salary continuation, and it and the other benefits under the plan (other
than the tax-qualified pension benefits) are generally subject to
discontinuation in the event of breach by the participant of the
restrictive covenants and other obligations under the release. Participants
have no obligation to mitigate the severance benefits under the plan.
Management Committee members are entitled to full indemnification for
any excise taxes that may be payable under Section 4999 of the Internal
Revenue Code of 1986, as amended, in connection with the change in control.
Other participants are not entitled to this indemnification; rather, if
payments to them are subject to the excise tax, either their severance
benefits would be reduced so that no excise tax is payable or they would
receive the full amount of their severance benefits, whichever is more
advantageous to them. All participants are entitled to payment of their
legal fees if they prevail on a claim for relief in an action to enforce
their rights under the plan or in an action regarding the restrictive
covenants contained in the general release.
In general, the Board may amend or terminate the plan prior to a change
in control. However, neither the amendment of the plan in a manner that
adversely affects participants prior to a change in control nor the
termination of the plan prior to a change in control would be effective if
done within one year of a change in control or at the request of an
acquiror. Following a change in control, the plan may not be amended or
modified in any way that would adversely affect participants in the plan at
the time of the change in control.
2. Amendment of Merck & Co., Inc. 2004 Incentive Stock Plan.
On November 23, 2004, the Board adopted an amendment to the Company's
2004 Incentive Stock Plan. The following summary is qualified in its
entirety by reference to the text of the amendment, a copy of which is filed
as an exhibit to this report.
The amendment applies to equity grants made after November 23, 2004 and
provides for the following:
o Upon a change in control of the Company, all outstanding
stock options and restricted stock units will become fully
vested. However, performance-based stock options held by key
research and development personnel may not fully vest unless
stock options are generally to be cancelled in the
transaction.
o In general, vested stock options may be exercised for five
years following termination of the option holder's
employment following a change in control (but not beyond the
original term of the stock option). This extended exercise
period would not apply in the case of terminations by
reasons of death or retirement or for gross misconduct.
o If stock options do not remain outstanding following the
change in control and are not converted into successor stock
options, then option holders will be entitled to receive
cash for their options in an amount at least equal to the
difference between the exercise price and the price paid to
shareholders in the change in control.
o Upon a change in control of the Company, a portion of
performance share units generally will become vested
determined by reference to the holder's period of employment
during the performance cycle and (1) based on actual
performance as to fiscal years that have been complete for
at least 90 days as of the date of the change in control and
(2) otherwise, based on target performance.
o Provisions limiting the amendment of the plan after a change
in control and regarding the payment of participants' legal
fees in the event of disputes were added to the plan, as
described in "Other Amendments" below.
A "change in control" for purposes of these amendments has the same
meaning that it has under the Change in Control Separation Benefits Plan,
except as to awards that are deferred compensation subject to the American
Jobs Creation Act of 2004 (the "AJCA"), in which event the definition
permitted under the AJCA will apply.
The Company intends to request Board and Compensation and Benefits
Committee action amending the Company's and its subsidiaries' other stock
incentive plans and the outstanding awards thereunder consistent with the
amendment to the Company's 2004 Incentive Stock Plan described above, subject
to a determination that these actions would not give rise to adverse tax
consequences under the AJCA.
3. Other Amendments.
On November 23, 2004, the Board resolved to amend most of the
compensation and employee benefit plans, programs and arrangements of the
Company and its subsidiaries as of immediately prior to a change in control.
The amendments generally provide the following:
o For two years following the change in control, the material
terms of the plans, programs and arrangements (including
terms relating to eligibility, benefit calculation, benefit
accrual, cost to participants, subsidies and rates of
employee contributions) may not be modified in a manner that
is materially adverse to individuals who participated in
them immediately before the change in control.
o The Company will pay the legal fees and expenses of any
participant that prevails on his or her claim for relief in
an action regarding an impermissible amendment to these
plans, programs and arrangements (other than ordinary claims
for benefits) or, if applicable, in an action regarding
restrictive covenants applicable to the participant.
The amendments do not apply to the Company's equity plans (other than
the Company's 2004 Incentive Stock Plan), to plans in which non-employee
directors participate (including to equity awards granted to non-employee
directors under equity plans) or, in general, to plans applicable to
unionized employees. The amendments also do not apply to any deferred
compensation plan subject to the AJCA if the plan is intended to fall within
grandfathering rules available under the AJCA.
The terms of this form amendment were also included in the amendment
to the Company's 2004 Incentive Stock Plan described above and to the
amendment to the Company's Separation Benefits Plan for Nonunion Employees
described below.
On November 23, 2004, the Board resolved to amend the Company's
Separation Benefits Plan for Nonunion Employees to provide that an employee
whose employment is terminated without cause within two years following a
change in control will also be entitled to receive the Retirement Bridge as
discussed above in connection with the adoption of the Change in Control
Separation Benefits Plan. To be eligible for the Retirement Bridge, the
employee must execute the form of general release of claims against the
Company and its affiliates (including restrictive covenants) used by
participants in the Change in Control Separation Benefits Plan. Neither an
amendment of the Retirement Bridge in a manner that adversely affects
employees prior to a change in control nor the termination of the Retirement
Bridge prior to a change in control would be effective if done within one
year of a change in control or at the request of an acquiror. Provisions
regarding the amendment of the plan after the change in control and regarding
the payment of participants' legal fees in the event of disputes were also
added to the plan, as described above.
A "change in control" under these amendments has the same meaning that
it has under the Change in Control Separation Benefits Plan.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit 10.1 - Merck & Co., Inc. Change in Control Separation Benefits Plan
Exhibit 10.2 - Amendment of Merck & Co., Inc. 2004 Incentive Stock Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Merck & Co., Inc.
November 29, 2004 By: /s/ Debra A. Bollwage
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Name: Debra A. Bollwage
Title: Assistant Secretary
Exhibit Index
EXHIBIT NO. DESCRIPTION
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10.1 Merck & Co., Inc. Change in
Control Separation Benefits
Plan
10.2 Amendment of Merck & Co., Inc.
2004 Incentive Stock Plan