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[Merk & Co. Logo]

Notice of Annual Meeting of Stockholders

April 24, 2007

To the Stockholders:

The stockholders of Merck & Co., Inc. will hold their Annual Meeting on Tuesday, April 24, 2007, at 2:00 p.m., in the Edward Nash Theatre at Raritan Valley Community College, Route 28 and Lamington Road, North Branch, New Jersey. The purposes of the meeting are to:

  • elect ten directors;
  • consider and act upon a proposal to ratify the appointment of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for 2007;
  • consider and act upon a proposal to amend the Restated Certificate of Incorporation to eliminate supermajority voting requirements contained in the Restated Certificate of Incorporation;
  • consider and act upon a proposal to amend the Restated Certificate of Incorporation to eliminate supermajority voting requirements imposed under New Jersey law on corporations organized before 1969;
  • consider and act upon a proposal to amend the Restated Certificate of Incorporation to limit the size of the Board to no more than 18 directors;
  • consider and act upon a proposal to amend the Restated Certificate of Incorporation to replace its cumulative voting feature with a majority vote standard for the election of directors;
  • consider and act upon a stockholder proposal concerning publication of political contributions;
  • consider and act upon a stockholder proposal concerning advisory vote on executive compensation; and
  • transact such other business as may properly come before the meeting.
Only stockholders listed on the Companys records at the close of business on XXXXX, 2007 are entitled to vote.

By order of the Board of Directors,

CELIA A. COLBERT

Vice President, Secretary and

Assistant General Counsel

XXXXX, 2007

SEC Filing Excerpt
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Compensation Discussion and Analysis

The following Compensation Discussion and Analysis describes the material elements of compensation for the Merck executive officers identified in the Summary Compensation Table (Named Executive Officers). As more fully described on page [xx], the Compensation and Benefits Committee of the Board (the Committee) makes all decisions for the total direct compensationthat is, the base salary, executive incentive plan and other bonus awards, stock options, restricted stock and performance stock unitsof the Companys executive officers, including the Named Executive Officers. The Committees recommendations for the total direct compensation of the Companys Chief Executive Officer are subject to approval of the Board of Directors.

The day-to-day design and administration of pension, savings, health, welfare and paid time-off plans and policies applicable to salaried U.S.-based employees in general are handled by teams of Company Human Resources, Finance and Legal Department employees. The Committee (or Board) remains responsible for certain fundamental changes outside the day-to-day requirements necessary to maintain these plans and policies.

Mercks Business Environment

Merck is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs. The Company also devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them.

Our Mission.    Mercks mission is to provide society with superior products and services by developing innovations and solutions that improve the quality of life and satisfy customer needs, and to provide employees with meaningful work and advancement opportunities, and investors with a superior rate of return.

Our Values.    Our business is preserving and improving human life. All of our actions must be measured by our success in achieving this goal. We value, above all, our ability to serve everyone who can benefit from the appropriate use of our products and services, thereby providing lasting consumer satisfaction.

We are committed to the highest standards of ethics and integrity. We are responsible to our customers, to Merck employees and their families, to the environments we inhabit, and to the societies we serve worldwide. In discharging our responsibilities, we do not take professional or ethical shortcuts. We are dedicated to the highest level of scientific excellence and commit our research to improving human and animal health and the quality of life. We strive to identify the most critical needs of consumers and customers, and we devote our resources to meeting those needs. Our ability to meet our responsibilities depends on maintaining a financial position that allows for investment in leading-edge research and that makes possible effective delivery of research results. We recognize that the ability to excelto most competitively meet societys and customers needsdepends on the integrity, knowledge, imagination, skill, diversity and teamwork of our employees, and we value these qualities most highly. To this end, we strive to create an environment of mutual respect, encouragement and teamworkan environment that rewards commitment and performance and is responsive to the needs of our employees and their families.

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Compensation Program Objectives and Rewards

Mercks compensation and benefits programs are driven by Mercks business environment and are designed to enable us to achieve our mission and adhere to Company values. The programs objectives are to:

  • Reflect Mercks position as an industry leader in the development of innovative medicines;
  • Attract, engage and retain the workforce that helps ensure our future success;
  • Motivate and inspire employee behavior that fosters a high-performance culture;
  • Support a one-company culture as well as a lean and flexible business model;
  • Support overall business objectives; and
  • Provide shareholders with a superior rate of return.

Consequently, the guiding principles of our programs are:

  • Enabling a high-performance organization;  
  • Competitiveness in the marketplace in which we compete for talent;  
  • Optimization of cost to the Company and value to employees;  
  • Global consistency with business-driven flexibility; and  
  • Simplicity, clarity and flawless delivery.

To this end, the Company will measure success of our programs by:

  • Overall business performance and employee engagement;  
  • Ability to attract and retain key talent;  
  • Costs and business risks that are limited to levels that optimize risk and return; and  
  • Employee understanding and perceptions that ensure program value equals or exceeds program cost.

All of Mercks compensation and benefits for its Named Executive Officers described below have as a primary purpose the Companys need to attract, retain and motivate the highly talented individuals who will engage in the behaviors necessary to enable the Company to succeed in its mission while upholding our values in a highly competitive marketplace. Beyond that, different elements are designed to engender different behaviors.

  • Base salary and benefits are designed to attract and retain employees over time.  
  • Long-Term Incentivesstock options, performance stock units (PSUs) and restricted stock units (RSUs) under the stockholder-approved Incentive Stock Plan (ISP)focus executives efforts on the behaviors within the recipients control that they believe are necessary to ensure the long-term success of the Company, as reflected in increases to the Companys stock prices over a period of several years, growth in its earnings per share and other elements.  
  • Annual cash awards under the stockholder-approved Executive Incentive Plan (EIP) are designed to focus employees on the objectives listed in the Company Scorecard for a particular year, the important divisional goals for division heads, and individual objectives set at the start of the year in connection with their Personal Performance Grids (PPGs). Other types of bonuses, such as those described below for Mr. Loescher, Mr. Wold-Olsen and Dr. Sheares, are individually designed to address business needs related to attracting and separating employees.  
  • Severance and change in control plans are designed to facilitate the Companys ability to attract and retain executives as the Company competes for talented employees in a marketplace where such

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protections are commonly offered. The Separation Benefits Plan described below provides benefits to ease an employees transition due to an unexpected employment termination by the Company due to on-going changes in the Companys employment needs. The Change in Control Separation Benefits Plan encourages employees to remain focused on the Companys business in the event of rumored or actual fundamental corporate changes.

The Elements of Mercks compensation program

Base Salary

Executive officer base salaries are based on job responsibilities and individual contribution, with reference to base salary levels of executives at peer pharmaceutical companies. Base salaries are included in determining an employees retirement benefits (as more fully described on page xx).

In February 2006, the Committee established Mr. Clarks base salary after reviewing his PPG and compensation history as provided by the Companys Senior Vice President, Human Resources. Base salaries for individual executive officers are compared to the healthcare industry by reference to peer pharmaceutical companies that participate in an industry compensation survey conducted by an independent consulting firm. In 2005, the companies participating in that survey other than Merck were: Abbott Laboratories, Amgen, AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline, Hoffmann-LaRoche, Johnson & Johnson, Eli Lilly, Novartis, Pfizer, Sanofi-Aventis, Schering-Plough and Wyeth (collectively, the Peer Companies). In general, the Company targets base salaries for executive officers including the CEO at the 50th percentile compared to the Peer Companies.

The Committee determines base salaries for other executives officers, including the Named Executive Officers, early every year. The Companys CEO proposes new base salary amounts based on:

  • his evaluation of individual performance and expected future contributions;
  • a review of survey data to ensure competitive compensation against the external market defined as the Peer Companies; and
  • comparison of the base salaries of the executive officers who report directly to the CEO to ensure internal equity.

Mr. Clark recommended, and the Committee approved, base salary increases ranging from 4% to 8% for the Named Executive Officers. In addition, the Committee recommended and the Board approved a 9.1% increase in Mr. Clarks base salary, from $1,100,004 to $1,200,000. While Mr. Clarks base salary remains below the general target, the Committee examined the market data for chief executive officers of the Peer Companies and considered the significant increase in his base salary upon being promoted to CEO and his relatively short tenure serving in that capacity.

Base salaries paid to executive officers are deductible for federal income tax purposes except to the extent that the executive is a covered employee under Section 162(m) of the Internal Revenue Code (the Code)generally, the Named Executive Officers from year to yearthe executives aggregate compensation which is subject to Section 162(m) exceeds $1 million, and the executive does not defer the excess under the Merck & Co., Inc. Deferral Program. Mr. Clark is paid more than $1 million in base salary but he defers a portion into the Deferral Program and will receive distribution in a future year or years when it will be deductible to the Company. No other employee received base salary in excess of $1 million in 2006.

Base salary is the only element of compensation that is used in determining the amount of contributions permitted under the Companys Employee Savings and Security Plan (the 401(k) Plan).

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EIP Awards

Amounts shown as Non-Equity Incentive Plan Compensation in the Summary Compensation Table are based on job responsibilities, with reference to the levels of total cash compensation (that is, base salary plus EIP awards) of executives at the Peer Companies. Actual EIP awards are paid at a level commensurate with performance against objectives. Individual EIP awards are determined with reference to Company-wide, division, area, team and individual goals, based on measures that permit comparisons with competitors performances, if appropriate, and internal targets set at the start of each fiscal year.

As approved by the Board, the Company Scorecard for 2006 contained more than 40 specific measures and associated targets in order to begin the realization of the Companys strategy. Achieving the target performance for all measures would yield a score of 100 points. Consistent with the Companys new Strategy Map, which is focused on reclaiming our leadership in the discovery, development and commercialization of innovative medicines and vaccines that are highly valued by patients, providers and payers for their unparalleled contributions to healthcare, there were four sections in the 2006 Company scorecard:

Category

 Target Points Earned Points

Financial Outcomes

 55 62.0

Internal Business Drivers

 20 20.1

Customer Outcomes

 15 16.0

People & Culture

 10 9.6

Total

 100 107.7

The Company Scorecard is calibrated so that results typically fall in the range of 80 to 120 points, commensurate with performance. However, results below 80 points are possible if performance is significantly below expectations.

The Strategy Map emphasizes:

  • Financial Outcomes, which refers to maximizing shareholder value by growing revenue, optimizing cost structure, growing earnings, and maximizing pipeline value.
  • Internal Business Drivers, which refers to building an effective and efficient business model by focusing on selected therapeutic clusters and reestablishing Mercks scientific leadership; designing a future R&D model and implementing a customer-driven, end-to-end product lifecycle process; evolving to a new commercial model and investing in emerging markets; and creating a lean and flexible business model.
  • Customer Outcomes, which refers to becoming an industry leader in delivering value to customers by focusing on safety, efficacy, patient care solutions and pharmacological value.
  • People and Culture, which refers to creating a high-performance organization by fostering a high-performance culture, developing transformational leaders and building the talent to win.

The Company also uses scorecards for assessing divisional performance. Like the Company Scorecard, results typically fall in the range of 80 to 120 points, commensurate with performance.

In determining EIP awards for executive officers, the executives annual base salary is multiplied by the target EIP award percentage. The resulting amount is then multiplied by the combined scorecard result (i.e., an average of the Company and division results converted to a percentage). For example, if the Company result is 107.7 and an executives divisional result is 102.3, then the combined result is 105.0 and the multiplier is therefore 105.0%. The CEOs only scorecard result is for the Company. This calculation provides a target EIP award adjusted for scorecard results, as shown in the following table. The CEOs recommendations to the Compensation and Benefits Committee for EIP awards also take into account the individual accomplishments for

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each executive as reflected by their PPG. The approved EIP awards for the Named Executive Officers, as determined under this process, are shown in the far right column. The CEOs EIP award was decided solely by the Compensation and Benefits Committee and approved by the full Board of Directors.

Named Executive Officer*

Annual

Base Salary

 Target EIP
Award (%)		     Target EIP
Award ($)		 Overall
Scorecard
Result		     Target EIP
Award ($)
Adjusted for
Scorecard
Result		   Actual
(Approved)
EIP Award		  

R. Clark

 $ 1,200,000 115 %   $ 1,380,000 107.7     $ 1,486,260   $ x,xxx,xxx  

J. Lewent

   834,756 95 %     793,018 110.3       874,303     xxx.xxx  

P. Kim

   831,600 100 %     831,600 107.5       893,970     xxx,xxx  

D. Anstice

   690,108 95 %     655,603 106.4       697,725        

P. Loescher

   1,100,004 105 %     1,155,004 NA **     NA **   x,xxx,xxx **
* No amount is shown for Mr. Wold-Olsen and Dr. Sheares because they are no longer eligible for EIP Awards.
** Guaranteed to be at least 118% of annual base salary for 2006 only.

The Committee believes that EIP awards paid to executive officers for 2006, in aggregate, were consistent with the level of accomplishment and appropriately reflected Company performance.

In early 2007, the Compensation and Benefits Committee [describe any update necessary to understanding].

The Company intends that executive officer compensation be fully deductible for federal income tax purposes, taking into account Section 162(m), provided that other compensation objectives are met. EIP awards paid to executive officers under the stockholder-approved Executive Incentive Plan generally are deductible for federal income tax purposes because they qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. However, as an enticement to leave his former employer and join the Company, Mr. Loescher was guaranteed an EIP award of at least 118% of annual base salary (which equates to $1,298,005) for 2006, his first performance year, which would not qualify as performance-based and therefore will not be deductible as performance based. The Company believes that the need to provide adequate assurances to Mr. Loescher in connection with his acceptance of our offer of employment was paramount, and the requirements of Section 162(m) under the circumstances were not consistent with that objective.

EIP awards are included in determining an employees retirement benefits in the year paid whether or not deferred into the Deferral Program (as more fully described on page xx).

Bonus Awards

As a new hire in 2006, Peter Loescher was provided with a sign-on bonus of $250,000. This bonus was part of the offer made to attract Mr. Loescher, recognizing that he was then president and chief executive officer of GE Healthcare Bio-Sciences, a global medical diagnostics and life sciences business headquartered in the United Kingdom with $3 billion in sales and 10,000 employees.

In addition, Per Wold-Olsen and Bradley Sheares were paid $680,000 and $550,000, respectively, as part of a larger separation package in connection with their separation from the Company.

Long-Term Incentives

Long-term incentive (LTI) grants to executive officers are based on job responsibilities and potential for individual contribution, with reference to the levels of total direct compensation (total cash compensation plus the value of LTI) of executives at the Peer Companies. When it makes grants, the Committee also considers previous LTI grants. As with the determination of base salaries and EIP Awards, the Committee exercises judgment and discretion in view of the above criteria and its general policies.

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The Company provides performance share units (PSUs) and/or restricted stock units (RSUs) to certain employees, including the Named Executive Officers. The combination of stock-based incentives is intended to benefit stockholders by enabling the Company to better attract and retain top talent in a marketplace where such incentives are prevalent. PSUs closely align senior management with the Companys achievement of longer-term financial objectives that enhance stockholder value.

In 2006, the Committee increased the LTI grant guidelines by 20% for executive officers and certain other management employees. This increase was made to ensure that the Companys compensation levels are sufficiently competitive in order to be able to attract, retain and motivate the highly qualified employees necessary to achieve the Companys objectives. The 20% increase was based on competitive need on the basis of LTI alone and as part of total direct compensation. The LTI guidelines continued to be expressed in number of shares (rather than financial value). The last time the Company reset the LTI grant guidelines prior to the 20% increase was in 1999.

The Committee in 2006 also approved a revision to the proportion of stock options, PSUs and RSUs. The PSUs were set at 30% of the LTI grant. The Named Executive Officers except the CEO were offered a choice between (a) 70% stock options and (b) 40% stock options and 30% RSUs for the remainder of the LTI grant. All planning was denominated in stock options, with a 4-to-1 exchange ratio between options and share units. (The ratio used for LTI grants in 2004 and 2005 was 3-to-1; the Company changed the ratio for the grant in 2006 in order to better reflect the decreased value of options relative to share units on a trend basis. Specifically, the five-year average Black-Scholes ratio of Merck stock options had declined from about 33% to 26% since Merck began granting share units.) For example, the CEO was planned for LTI at 600,000 (his target denominated in stock options), which translated into a stock option grant of 240,000 shares (600,000 * 40%); an RSU grant of 45,000 (600,000 * 30% 4) and a PSU grant also of 45,000 shares. (The LTI proportion for the CEO was decided by the Board and not subject to choice by the CEO.) The target LTI for Dr. Kim was 240,000 (denominated in stock options); the target LTI for the remaining Named Executive Officers was 156,000. (Mr. Loescher had not joined Merck as of the time of the annual LTI grant).

Senior management globally (about 240 employees), including Mr. Clark and all other executive officers, received stock options, PSUs and, if elected, RSUs. Certain other management employees received stock options and, if elected, RSUs. All other employees, except U.S.-based employees covered by collective bargaining agreements, were considered for stock options only.

LTI grants have no effect on the amount of an employees retirement benefits.

Stock Options

Stock options provide for financial gain derived from the potential appreciation in stock price from the date that the option is granted until the date that the option is exercised. The exercise price of stock option grants is set at fair market value on grant date. Under the stockholder-approved Incentive Stock Plan, the Company may not grant stock options at a discount to fair market value or reduce the exercise price of outstanding stock options except in the case of a stock split or other similar event. The Company does not grant stock options with a so-called reload feature, nor does it loan funds to employees to enable them to exercise stock options. The Companys long-term performance ultimately determines the value of stock options, because gains from stock option exercises are entirely dependent on the long-term appreciation of the Companys stock price. Stock options granted since 2002 are exercisable in equal installments on the first, second and third anniversaries of the grant date and expire ten years from the grant date.

Because a financial gain from stock options is only possible after the price of Merck common stock has increased, the Company believes grants encourage executives and other employees to focus on behaviors and initiatives that should lead to an increase in the price of Merck common stock, which benefits all Merck shareholders.

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No Backdating or Spring Loading:    Merck does not backdate options or grant options retroactively. In addition, we do not plan to coordinate grants of options so that they are made before announcement of favorable information, or after announcement of unfavorable information. Mercks options are granted at fair market value on a fixed date or event (such as the first Friday following an employees hire), with all required approvals obtained in advance of or on the actual grant date. All grants to executive officers require the approval of the Compensation and Benefits Committee. The Companys general practice is to grant options only on the annual grant date and on a specified date each quarter, although there are occasions when grants have been made on other dates. The Company is working to eliminate off cycle grants to the extent possible.

Fair market value has been consistently determined as the average of the high and low on the New York Stock exchange on the grant date. Starting in 2007, fair market value will be determined as the closing price on the grant date. In order to ensure that its exercise price fairly reflects all material informationwithout regard to whether the information seems positive or negativeevery grant of options is contingent upon an assurance by the Companys General Counsel that the Company is not in possession of material undisclosed information. If the Company is in possession of such information, grants are suspended until the second business day after public dissemination of the information. In certain countries outside the United States, a higher, but not lower, grant price may be used to satisfy provisions of local applicable law.

Grants were made to the Named Executive Officers as part of an annual process that encompasses in excess of 50,000 Company employees worldwide. In 2006and consistent with the process in place for every year since 2000annual grants of options described in the Summary Compensation Table were made by the Compensation and Benefits Committee of the Board to the Named Executive Officers as of the first Friday following the Boards meeting on the last Tuesday in February. The Company also routinely makes quarterly grants, on a selective basis, to other Company employees on the first business day of February, May, August and November. In addition, pursuant to his offer letter, Peter Loescher received options to purchase 175,000 shares of Merck common stock on May 5, 2006, which was the first Friday following his first day of employment. The stock option grant vests in equal installments on the first, second and third anniversaries of the grant date and expire ten years from the grant date.

Except for stock options granted as part of the regular annual process and the stock options granted to Mr. Loescher, no option grants were made to the Named Executive Officers in 2006.

Share Units

PSU and RSU grants provide for the payout of shares of Merck Common Stock, generally in three years, if the recipient has met certain continued service requirements.

PSUs.    PSU payouts are contingent on the Companys performance against a pre-set objective or set of objectives. The performance period for all PSUs granted to date is three years. The payout range is a number of shares equal to 0 percent to 200 percent of the number of target shares covered by the PSU grant. Payouts generally depend on earnings per share (EPS) growth compared to other leading healthcare companies over the three-year award period. No dividends or dividend equivalents are paid during or after the award period. To date, the Company has made three PSU grants, in 2004, 2005 and 2006. For the 2006 PSU grant, EPS growth will be calculated (on a percentage basis) and a rank will be determined for Merck and each company in the peer group. At the end of the performance period, the three annual ranks will be averaged for each company. Mercks final rank will be determined by its three-year average rank within the peer group. The payout will then be determined according to the following table.

Final Rank

    1     2     3     4     5     6     7     8     9     10     11     12  

Payout

    200 %   180 %   160 %   140 %   120 %   100 %   80 %   60 %   40 %   0 %   0 %   0 %

The Committee may adopt different performance measures for PSU grants from time to time, as it deems appropriate at the time of each grant. PSUs focus managements attention on earnings per share and create

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additional alignment between employees and shareholders. Additional information regarding PSUs is provided under Long-Term Incentive PlansAwards in Last Fiscal Year on page [XX].

Payouts of all PSUs granted in 2006 to executive officers under the stockholder-approved Incentive Stock Plan are expected to be fully deductible for federal income tax purposes because they qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code.

RSUs.    As part of the 2006 annual LTI grant process, executives and certain other management employees could elect to receive one RSU in lieu of receiving four options for a portion of their annual grant (if any). The election is made several months before the amount of any persons LTI grant is determined. The replacement ratio was decreased to four options to one RSU for the 2006 annual grant to reflect a decrease over time in the value of an option relative to an RSU. Prior to 2006, the replacement ratio was three options for one RSU.

The Company also grants RSUs to employees under special circumstances outside of the annual LTI process. Grants under its Leader Shares program are made from time to time to selected employees in connection with talent management objectives, giving particular attention to employees leadership potential and potential future contributions in achieving critical business goals and objectives. For example, on the same day as the annual grant, Dr. Kim was granted 32,500 Leader Shares. All Leader Share grants vest in their entirety three years after grant date (earlier in the case of a separation or retirement).

The Company may also grant RSUs, as deemed appropriate, in new-hire situations. As part of his employment offer, Mr. Loescher was granted 80,000 RSUs as of May 5, 2006 that vest May 5, 2009.

Dividend equivalents are paid on RSUs. RSUs generally do not qualify as performance based compensation under Section 162(m) of the Internal Revenue Code, and so may not be deductible to the extent that when they vest, their fair market value when aggregated with a Named Executive Officers other aggregate compensation which is subject to Section 162(m) exceeds $1 million, and the executive does not defer the excess under the Merck & Co., Inc. Deferral Program.

Stock Ownership Guidelines

In addition to aligning interests between employees and shareholders through potential stock ownership, the CEO and other senior management globally are expected to acquire and hold Merck Common Stock in an amount representing a multiple of base salary. There are four tiers within senior management globally covered by the guidelines. For the CEO, the multiple is ten; for the second tier (including all other Named Executive Officers), the multiple is five; and for the remaining two tiers, depending on level of position, the multiple is either two and one-half or one. Furthermore, until those multiples are reached, these employees are expected to hold a proportion of shares that may be purchased with the net gain from the exercise of stock options or that may be paid by the Company in connection with PSU and/or RSU grants, after deducting the exercise price (for stock options only), taxes and transaction costs. For the CEO, the proportion is 70 percent; for the second tier (including all other Named Executive Officers), the proportion is 60 percent; and for the remaining two tiers, depending on level of position, the proportion is either 50 percent or 40 percent.

Derivatives Trading.    The Company grants stock-based incentives in order to align the interests of Mercks employees with those of its stockholders. Accordingly, the Company strongly discourages executive officers from buying or selling derivative securities related to Merck common stock such as puts or calls on Merck Common stock since such securities may diminish the alignment that the Company is trying to foster. Company-issued options are not transferable during the executives life, other than certain gifts to family members (or trusts, partnerships, etc. that benefit family members). PSUs and RSUs are not transferable while the executive is alive under any circumstances.

Return of Incentive Compensation by an Executive.    In 2007, the Compensation and Benefits Committee adopted the following policies to address the possibility that incentive compensation may be provided

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to certain executives, including Named Executive Officers based on financial results that may become the subject of a significant restatement. For performance year 2007 and thereafter, in the case of a significant restatement of financial results caused by executive fraud or willful misconduct, the Board will

  • Review the annual bonus compensation received by executives with respect to the performance period which occurred during the restatement period;
  • Recalculate the Companys results for any performance period with respect to PSUs that included a performance period which occurred during the restatement period; and
  • Seek reimbursement from the executive(s) whose fraud or willful misconduct was a cause of the restatement of that portion of
    • the annual bonus that was based on the erroneous financial results and received by the executive within 18 months of the restatement; and
    • the payout of the PSU that was based on the erroneous financial results and received by the executive within 18 months of the restatement.

For these policies, executives means executive officers as defined under the Securities Exchange Act of 1934, as amended, and includes the Named Executive Officers.

The Audit Committee of the Board will determine whether a financial restatement is significant and will make an initial determination of the cause of the restatement. If the Audit Committee determines that fraud or willful misconduct may have been a factor causing the restatement, the Audit Committee will appoint an independent investigator whose decision will be final and binding to determine if an executives fraud or willful misconduct was a cause of the restatement. These policies do not apply to restatements that the Audit Committee determines are

  • Required or permitted under generally accepted accounting principles (GAAP) in connection with the adoption or implementation of a new accounting standard; or
  • Caused by the Companys decision to change its accounting practice as permitted under GAAP.

For years before 2007, the Board will apply the above policies to the extent permitted by applicable law.

Benefits

As salaried, U.S.-based employees, the Named Executive Officers participate in a variety of retirement, health and welfare, and paid time-off benefits designed to enable the Company to attract and retain its workforce in a competitive marketplace. Health and welfare and paid time-off benefits help ensure that the Company has a productive and focused workforce through reliable and competitive health and other benefits. Pension and savings plans help employees, especially long-service employees, save and prepare financially for retirement.

Mercks qualified 401(k) Plan allows highly compensated employees to contribute up to 15 percent of their base salary, up to the limits imposed by the Internal Revenue Code$225,000 for 2007on a pre- or after-tax basis. The Company provides a 75 percent match on the first 6 percent of employee contributions, which vests immediately. Participants choose to invest their account balances from an array of investment options as selected by plan fiduciaries from time to time, plus a Company stock fund. The 401(k) Plan is designed to provide for distributions in a lump sum or up to 10 installments after termination of service. However, loansand in-service distributions under certain circumstances such as a hardship, attainment of age 59 1/2 or a disabilityare permitted. Named Executive Officers and other senior level executives also may defer EIP and Annual Incentive Plan Awards, base salary, PSUs and RSUs into the Merck Deferral Program described under Nonqualified Deferred Compensation Plans on page [xx]. The Company does not make contributions to the Deferral Program.

The pension plans are more fully described under Retirement Plan Benefits on page [xx]. The Supplemental Retirement Plan (SRP) provides benefits that would be provided under the Retirement Plan for the Salaried

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Employees of Merck & Co., Inc. (the Qualified Retirement Plan) but for the limits imposed on similar plans by the Internal Revenue Code. In addition, the SRPrather than the Qualified Retirement Planincludes in Final Average Compensation (one of the factors for the amount of benefit) compensation that is deferred into the Merck Deferral Program. The SRP provides a $50,000 minimum benefit to certain employees subject to mandatory retirement, but no Named Executive Officer is expected to benefit from that minimum. The only other difference between the Qualified Plan and the SRP is that additional credited service was provided for certain employees subject to mandatory retirement, a feature which was deleted for future accruals, effective in 1995. Ms. Lewent is the only Named Executive Officer who might benefit from this legacy provision.

Perquisites

Mercks Named Executive Officers, along with other senior management employees, are provided a limited number of perquisites whose primary purpose is the Companys desire to minimize distractions from the executives attention to important Merck initiatives. An item is not a perquisite if it is integrally and directly related to the performance of the executives duties. An item is a perquisite if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the Company, unless it is generally available on a non-discriminatory basis to all employees.

The Company provides the following, all of which are quantified in the Summary Compensation Table on page xx.

  • Reimbursement for financial counseling and tax preparation. The value is taxable to executives, and is limited to $12,500 for the first year of participation and $10,000 per year thereafter. This perquisite is intended to encourage executives to engage knowledgeable experts to assist with financial and tax planning.
  • Limited personal use of Company aircraft if approved by the Chief Executive Officer. The Company believes that this benefit provides better security for executives and allows executives to devote additional time to Merck business.
    • An executives spouse may accompany the executive, in which case the spouses personal use of the aircraft is considered a personal benefit to the executive.
    • When Company aircraft is used, the amount of personal use is based on the aggregate incremental per-hour cost to the Company based on the flight time flown from origination to destination.
    • When an aircraft is leased, the charge reflects the cost to charter the aircraft.
    • This benefit generally is taxable to the executives.
  • Limited personal use of Company limousine services. The Company believes that this benefit provides better security and allows executives to devote additional time to Merck business.
    • An executives spouse may accompany an executive, in which case the spouses personal use is considered a personal benefit to the executive.
    • The value is based on either
      • The recipients cost if equivalent assets were used independent of the Company or
      • An allocation based on the value of the car, the value of the gasoline used, and the value of the chauffeurs time.
    • This benefit generally is taxable to the executives.
  • Reimbursement for security alarm monitoring systems for selected executives, including Mr. Clark, Mr. Loescher and Dr. Kim. Providing this benefit allows the Company to ensure that its executives have appropriate safety measures. This benefit generally is taxable to the executives other than the CEO.

29

  • Physical examination by Company medical staff. The Company believes it benefits from this perquisite by encouraging its executive officers to protect their health.

In addition, Mr. Loescher will be reimbursed certain reasonable expenses associated with his move from the United Kingdom in accordance with Mercks Relocation Policy. To date, approximately $332,256 has been reimbursed under that policy for amounts including: relocation allowance, transportation of family members and household goods; house hunting trips; temporary maintenance; consulting and educational expenses; lease-breaking payments; and closing costs of residence. This amount includes a tax gross up of approximately $103,160 that reimburses Mr. Loescher for the taxes incurred in connection with his relocation expenses.

Amounts payable as perquisites are not included in determining an employees retirement benefits (as more fully described on page xx).

The Company does not provide the Named Executive Officers with other perquisites such as split-dollar life insurance, reimbursement for legal counseling for personal matters, or tax reimbursement payments. The Company does not now provide loans to executive officers. It does provide other employees with relocation loans in certain circumstances. Dr. Kim, who joined the Company and became an executive officer in February 2001, received such an interest-free loan from the Company in connection with his relocation. This loan was made to Dr. Kim prior to the effective date of the prohibition of loans to executive officers under the Sarbanes-Oxley Act of 2002, and was grandfathered under that Act. During 2006, the largest aggregate amount outstanding under the loan was $75,000. Pursuant to its terms, the arrangement ended during 2006.

Separation and Change in Control Arrangements

The Named Executive Officers are eligible for the benefits and payments if employment terminates in a Separation or if there is a Change in Control, as described under Payments on Termination or Change in Control beginning on page [xx].

Separation Benefits.    The Separation Benefits Program covers regular full- and part-time non-unionized U.S. employees whose employment is terminated by the Company due to reorganization or reduction in workforce (i.e., a Separation). Until 2006, the plan had covered all employee levels except the most senior executive level of the Company (including all Named Executive Officers). In 2006, the Company extended its Separation Benefits Program to those senior executives on the terms previously provided to certain other high-level management employees. The extension was intended to facilitate extensive reorganization efforts Merck is undertaking to ensure that it has the right personnel to guide it in the competitive marketplace in which it operates.

The Separation Benefits Program provides severance payments and other benefits in an amount the Company believes is appropriate, taking into account the time it is expected to take a separated employee to find another job. The payments and other benefits are provided because the Company considers a Separation to be a Company-initiated termination of employment that under different circumstances would not have occurred and which is beyond the control of a separated employee. Separation benefits are intended to ease the consequences to an employee of an unexpected termination of employment. The Company benefits by requiring a general release from separated employees. In addition, the Company may request non-compete and non-solicitation provisions in connection with individual separation agreements. Severance payments are not included in determining an employees retirement benefits (as more fully described on page xx).

The Company considers it likely that it will take more time for higher-level employees to find new employment, and therefore senior management generally are paid severance for a longer period. The Separation Benefits Program also provides an amount measured by previous annual bonuses to recognize the separated employees efforts undertaken during the year during the time he or she was employed by the Company. It also provides different levels of protection from a pension and health and welfare benefit perspective, taking into

30

account a persons age and service and also whether or not he or she is then eligible to retire. Additional payments may be permitted in some circumstances as a result of negotiations with executives, especially where the Company desires particular nondisparagement, cooperation with litigation, noncompetition and nonsolicitation terms. For example, in connection with reorganizations implemented in 2006, the Company entered into agreements specifying severance pay and benefits with Mr. Anstice, whose employment continues, and Mr. Wold-Olsen and Dr. Sheares, whose employment has ended. See Individual Agreements under the Potential Payments on Termination or Change in Control beginning on page [xx] for additional information.

Change in Control.    The Board adopted the Change in Control Separation Benefits Plan in 2004. The Board adopted the plan as part of its ongoing, periodic review of the Companys 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. A properly designed change in control program protects shareholder interests by enhancing employee focus during rumored or actual change in control activity through:

  • Incentives to remain with company despite uncertainties while a transaction is under consideration or pending;
  • Assurance of severance and benefits for terminated employees; and
  • Access to equity component of total compensation after a change in control.

Merck stock options, RSUs and PSUs generally vest upon a change in control, either in whole or in part (as fully described on page [xx]). The remainder of benefits generally requires a change in control, followed by a termination of an executives employment. In adopting the so-called single trigger treatment for equity vehicles, the Company was guided by three principles:

  • Be consistent with current market practice among pharmaceutical peers.    All but one of the Peer Companies have change in control protection and all provide for single trigger equity vesting.
  • Keep employees relatively whole for a reasonable period but avoid creating a windfall.
    • Single trigger vesting ensures that ongoing employees are treated the same as terminated employees with respect to outstanding equity grants.
    • Single trigger vesting provides employees with the same opportunities as shareholders, who are free to sell their equity at the time of the change in control event and thereby realize the value created at the time of the deal.
    • The Company that made the original equity grant will no longer exist after a change in control and employees should not be required to have the fate of their outstanding equity tied to the new companys future success.
    • Single trigger vesting on performance-contingent equity, in particular, is appropriate given the difficulty of replicating the underlying performance goals.
  • Support the compelling business need to retain key employees during uncertain times.
  • A single trigger on equity vesting can be a powerful retention device during change in control discussions, especially for more senior executives where equity represents a significant portion of their total pay package.
  • A double trigger on equity provides no certainty of what will happen when the transaction closes.

As shown on page xx under Severance, Change in Control Payments, the Company will provide gross-ups for the Named Executive Officers from any taxes due under Section 4999 of the Code. The effects of Section 4999 generally are unpredictable and can have widely divergent and unexpected effects based on an executives personal compensation history. Therefore, to provide an equal level of benefit across individuals without regard to the effect of the excise tax, the Company determined that 4999 gross up payments are appropriate for the Companys most senior level executives.

31

Compensation Committee Report

The Compensation and Benefits Committee, comprised of independent directors, reviewed and discussed the above Compensation Discussion and Analysis (CD&A) with the Companys management. Based on the review and discussions, the Compensation and Benefits Committee recommended to the Companys Board of Directors that the CD&A be included in these Proxy Materials.

     
Compensation and Benefits Committee
Lawrence A. Bossidy
(Chairperson)
Johnnetta B. Cole   Peter C. Wendell
William N. Kelley    

32

The following table summarizes the compensation of the Named Executive Officers for the fiscal year end December 31, 2006. The Named Executive Officers are the Companys Chief Executive Officer, Chief Financial Officer, and three other most highly compensated executive officers ranked by their total compensation in the table below (reduced by the amount in column (h)). In addition, two additional officers whose employment ended in 2006 are included because their compensation exceeds that of other Named Executive Officers.

[INFORMATION IS BASED ON CURRENT DATA AND SUBJECT TO FURTHER BOARD DETERMINATION]

Summary Compensation Table

for Fiscal Year End December 31, 2006

Name and Principal Position

(a)

  

Year

(b)

  

Salary

($)

(c)(1)

  

Bonus

($)

(d)(2)

  

Stock
Awards

($)

(e)(3)

  

Option
Awards

($)

(f)(4)

  

Non-Equity
Incentive

Plan
Compensa-
tion

($)

(g)(5)

  

Change in
Pension
Value and
Nonquali-
fied
Deferred
Compen-
sation
Earnings

($)

(h)(6)

  

All Other
Compensa-
tion

($)

(i)(7)

  

Total

($)

(j)

Richard T. Clark,
Chief Executive Officer and President

   2006   $ 1,183,334   -0-   $ 2,359,616   $ 2,425,584   $            $ 2,257,670   $ 210,536    

Judy C. Lewent,
Executive Vice President and Chief Financial Officer

   2006     828,130   -0-     735,135     966,444           673,032     102,083    

Peter S. Kim, Ph.D.,
President, Merck Research Laboratories

   2006     821,334   -0-     1,697,749     860,070           147,507     319,240    

David W. Anstice,
Executive Vice President, Strategy Initiatives

   2006     686,758   -0-     180,900     1,306,859           496,508     1,070,095    

Peter H. Loescher,
President, Global Human Health

   2006     733,336   250,000     609,778     269,742           36,090     452,651    

Per Wold-Olsen

   2006     518,137   680,000     174,195     1,248,449     0     576,283     1,395,007    

Bradley T. Sheares

   2006     483,337   550,000     1,048,508     811,871     0     389,605     1,112,299    
(1) Amounts shown are not reduced to reflect the Named Executive Officers elections, if any, to defer receipt of salary into the Deferral Program.

(2) Bonuses include amounts paid as sign on bonus for Mr. Loescher and amounts paid to Mr. Wold-Olsen and Dr. Sheares in connection with their separations from employment. Amounts paid under the Companys Executive Incentive Plan are reported in Column (g) as Non-Equity Incentive Plan Compensation.

(3) Represents the compensation costs of RSUs and PSUs for financial reporting purposes for the year under FAS 123R, rather than an amount paid to or realized by the Named Executive Officer. See [where the assumptions are discussed in the financial statements, of MD&A] for the assumptions made in determining FAS 123R values. The FAS 123R value as of the grant date for RSUs and PSUs is spread over the number of months of service required for the grant to become non-forfeitable. For retirement eligible grantees (Messrs. Clark, Anstice and Wold-Olsen, and Ms. Lewent) the entire amount is expensed in the year of grant. In addition, ratable amounts expensed for grants that were granted in prior years are includedthat is, amounts in respect of grants made in 2004 and 2005. For Dr. Sheares, all unvested amounts were recognized in 2006 because he became retirement eligible during 2006 as a result of his separation. There can be no assurance that the FAS 123R amounts will ever be realized.

33

(4) Represents the compensation costs of stock options for financial reporting purposes for the year under FAS 123R, rather than an amount paid to or realized by the Named Executive Officer. See [where the assumptions are discussed in the financial statements, of MD&A] for the assumptions made in determining FAS 123R values. The FAS 123R value as of the grant date for options is spread over the number of months of service required for the grant to become non-forfeitable. For retirement eligible grantees the entire amount is expensed in the year of grant. In addition, ratable amounts expensed for grants that were granted in prior years are includedthat is, amounts in respect of grants made in 2001, 2003, 2004 and 2005. For Dr. Sheares, all unvested amounts were recognized in 2006 because he became retirement eligible during 2006 as a result of his separation. There can be no assurance that the FAS 123R amounts will ever by realized.

(5) Represents amounts paid under the Companys Executive Incentive Plan during 2007 in respect of service performed in 2006. Amounts shown are not reduced to reflect the Named Executive Officers elections, if any, to defer receipt of awards into the Merck Deferral Program.

(6) Amounts shown are solely an estimate of the increase in actuarial present value of the Named Executive Officers age 65 accrued benefit under the Companys retirement plans for 2006. Assumptions are further described under Retirement Plan Benefits on page XX. No amount is payable from the plans before a participant attains age 55 (except in the case of a disability retirement). There can be no assurance that the amounts shown will ever be realized by the Named Executive Officers.

Column (h) also reports the amount of above market earnings on compensation that is deferred outside of tax-qualified plans such as the 401(k) Plan. No amount is reported because above market rates are not possible under the Deferral Program, the only such plan at Merck.

(7) See All Other Compensation chart below for amounts, which include perquisites, dividend equivalents and Company match on employee contributions to the Employee Savings and Security Plan, the Companys 401(k) plan.

All Other Compensation2006

NEO

   Financial
Counsel.
& Tax
Prep.		     Aircraft  

Commut

-ing

  

Security
Alarm

Monitoring
System

  

Relo-
cation

Expenses

    

Forgiven
Interest

on Loan

   Forgiven
Loan		  

Dividend
Equivalents

(1)

   Accrued
Severance		     Savings
Plan
Company
Match		   TOTAL

R. T. Clark

   $ 0     $ 30,878   $ 16,055   $ 373   $ 0     $ 0   $ 0   $ 153,330   $ 0     $ 9,900   $ 210,536

J. C. Lewent

     0       27,448     11,859     1,417     0       0     0     51,459     0       9,900     102,083

P. S. Kim

     10,000       12,490     2,812     0     0       2,000     75,000     207,038     0       9,900     319,240

D. W. Anstice

     10,000       257     2,701     0     0       0     0     17,100     1,030,137 (3)     9,990     1,070,095

P. H. Loescher

     0       495     4,982     44,243     332,256 (2)     0     0     60,800     0       9,875     452,651

Per Wold-Olsen

     95,000 (4)     0     0     0     183,153 (2)     0     0     61,748     1,045,206 (3)     9,900     1,395,007

B. T. Sheares

     20,000 (5)     11,202     2,835     326     0       0     0     93,036     975,000 (3)     9,990     1,112,299
(1) Dividend equivalents paid during 2006 on RSUs that have not vested.

(2) The amounts include amounts paid or accrued during 2006 in connection with the relocation to the United States for Mr. Loescher in connection with his commencement of employment and from the United States for Mr. Wold-Olsen whose employment ended. Further details are included in the chart below.

(3) Amount represents severance the Company accrued in 2006 due to the agreement described under Potential Payments on Termination or Change in Control on page XX.

(4) Amount represents amounts paid or accrued (up to $10,000 financial counseling for each of two years and $75,000 tax service until 2009) as described under Potential Payments on Termination or Change in Control on page XX. Actual amount paid in 2006 was $58,750.

34

(5) Amount represents amounts paid or accrued (up to $10,000 financial counseling for each of two years) described under Potential Payments on Termination or Change in Control on page XX. Actual amount paid in 2006 was $10,000.
  Detail of Relocation
Expenses2006
   Loescher    Wold-Olsen

Relocation Expenses:

           

Relocation allowance

 $ 15,000        

Family transport

   24,976    $ 3,153

Household goods transport

   52,165      15,000

House hunting

   3,933        

Appliance replacement

   6,000        

Temp. Maintenance

   23,552        

Spousal allowance

   5,000        

Education consultant

   23,835        

Cross cultural training

   5,750        

Destination Services

   4,950        

Lease breaking

   29,568        

Storage

   2,733        

Tax Gross-Up

   103,160        

Closing cost & home purchase

   31,634      165,000
            

Total

 $ 332,256      183,153
            

35

The following table provides information on stock options, restricted stock units and performance stock units granted in 2006 to each of the Companys Named Executive Officers. There can be no assurance that the Grant Date Fair Value of Stock and Option Awards will ever by realized. The amount of these awards that were expensed is shown in the Summary Compensation Table on page xx.

Grants of Plan-Based Awards
for Fiscal Year End

December 31, 2006

  

Grant
Date

(b)

Board
approval
date

(c)

  

Estimated
Future
Payouts
Under
Non
-Equity
Incentive
Plan
Target

($)

(d)

   Estimated Future Payouts
Under Equity Incentive Plan
Awards		  

All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units

(#)

(h)

  

All Other
Option
Awards:
Number
of
Securities
Under-

lying
Options

(#)

(i)

  

Exercise
or Base
Price of
Option
Awards
($/Sh)

(j)

  

Closing
Price
on
Grant
Date

($)

(k)

  

Grant
Date Fair
Value of
Stock and
Option
Awards

($)

(l)

  
    
    

Name
(a)

  

Threshold

(#)

(e)

    

Target
(#)

(f)

    

Maximum

(#)

(g)

  

Richard T. Clark

 3/3/06 2/28/06         18,000 (1)   45,000 (1)   90,000 (1)                     $ 1,579,050 (1)
  3/3/06 2/28/06                         45,000 (2)                   1,579,050 (2)
  3/3/06 2/28/06                             240,000 (3) $ 35.09 (3) $ 35.19 (3)   1,687,200 (3)
        $ 1,380,000 (4)                                          

Judy C. Lewent

 3/3/06 2/28/06         4,500 (1)   11,250 (1)   22,500 (1)                       394,763 (1)
  3/3/06 2/28/06                         11,250 (2)                   394,763 (2)
  3/3/06 2/28/06                             60,000 (3)   35.09 (3)   35.19 (3)   421,800 (3)
          793,000 (4)                                          

Peter S. Kim

 3/3/06 2/28/06         7,200 (1)   18,000 (1)   36,000 (1)                       631,620 (1)
  3/3/06 2/28/06                         18,000 (2)                   631,620 (2)
  3/3/06 2/28/06                         32,500 (5)                   1,140,425 (5)
  3/3/06 2/28/06                             96,000 (3)   35.09 (3)   35.19 (3)   674,880 (3)
          831,600 (4)                                          

David W. Anstice

 3/3/06 2/28/06         4,200 (1)   10,500 (1)   21,000 (1)                       368,445 (1)
  3/3/06 2/28/06                             98,000 (3)   35.09 (3)   35.19 (3)   688,940 (3)
          655,600 (4)                                          

Peter H. Loescher

 5/5/06 2/28/06         -0- (1)   -0- (1)   -0- (1)                          
  5/5/06 3/15/06                         80,000 (2)                   2,744,000 (2)
                                  175,000 (3)   34.30 (3)   34.48 (3)   1,214,500 (3)
          1,155,000 (4)                                          

Per Wold-Olsen

 3/3/06 2/28/06         4,200 (1)   10,500 (1)   21,000 (1)                       368,445 (1)
  3/3/06 2/28/06                             98,000 (3)   35.09 (3)   35.19 (3)   688,940 (3)
          0 (4)                                          

Bradley T. Sheares

 3/3/06 2/28/06         4,200 (1)   10,500 (1)   21,000 (1)                       368,445 (1)
  3/3/06 2/28/06                         10,500 (2)                   368,445 (2)
  3/3/06 2/28/06                             56,000 (3)   35.09 (3)   35.19 (3)   393,680 (3)
          0 (4)                                          
(1) Performance Share Units are phantom shares of Merck Common Stock that vest over time in an amount depending on performance criteria. The amount of actual shares of Merck Common Stock that will be payable for the 2006 grants depends on the Companys earnings per share (EPS) growth compared to 11 other leading healthcare peer companies over a three-year period. The Company granted target awards to eligible executives for the award period beginning January 1, 2006. During each year of the award period, EPS growth will be calculated for the Company and each peer company. The companies will then be ranked by EPS growth, from one (highest) to 12. After the end of the award period, the rank of each company will be averaged for the three years, and that result will again be ranked from one to 12 to determine the final rank. The Companys final rank is associated with a predetermined percentage to be applied to the target

36

 

award (column (f)). If the Companys final rank is 1, Maximum (column (g))equal to 200 percent of Targetwill be paid. If the Companys final rank is 6, Target will be paid. If the Companys final rank is 9, the threshold amount (column (e)), or 40% of Target, will be paid. No amount will be paid if the Companys final rank is lower than nine. Change in control protections are described at page [xx]. Column (l) shows the grant date FAS 123R value for the PSUs. See [where the assumptions are discussed in the financial statements, of MD&A] for the assumptions made in determining FAS 123R values.

PSUs held by a retirement-eligible participant (Messrs. Clark, Anstice, and Wold-Olsen, Dr. Sheares and Ms. Lewent) are forfeited if retirement occurs within six months of grant, but otherwise a pro-rata portionbased on the number of completed months of service during the award periodwill be payable at the same time as active grantees are paid. If a grantee dies, a pro-rata portion of Target is payable to the estate soon after the grantee dies. If a grantees employment is terminated by the Company due to elimination of the grantees job, or the sale of his or her subsidiary, division or joint venture (a Separation), a pro-rata portion of the grant is distributable at the same time as active grantees, and the remainder is forfeited. If a grantees employment is terminated due to gross misconduct, the entire award is forfeited.

All PSUs have a grant date per-PSU FAS 123R value of $35.09. There can be no assurance that any amount will be paid in respect of PSUs.

(2) Restricted stock units are phantom shares of Merck Common Stock that vest and are payable as shares of Merck Common Stock after the Restricted Periodi.e. between grant and the third anniversary of their grant (or a change in control of the Company, if earlier). Dividend equivalents are paid during the Restricted Period.

RSUs held by a retirement-eligible participant are forfeited if retirement occurs within six months of grant, but otherwise will be payable as if employment had continued. If a grantee dies during the Restricted Period, a pro rata portion is distributed to his or her estate. If a grantees employment is terminated by the Company in a Separation (as described in (1) above), a pro-rata portion of the grant is distributable soon after the separation date, and the remainder is forfeited. If a grantees employment is terminated due to gross misconduct, the entire award is forfeited. Column (l) shows the grant date FAS 123R value for the RSUs. The per-RSU FAS 123R value was $35.09 for all RSUs other than Mr. Loeschers grant, which was $34.30 per RSU. See [where the assumptions are discussed in the financial statements, of MD&A] for the assumptions made in determining FAS 123R values. There can be no assurance that the value on distribution will equal the FAS 123R value.

(3) Options allow the grantee to purchase a share of Merck Common Stock for the fair market value of a share of Merck Common Stock on the grant date. Options become exercisable in equal installments on the first, second and third anniversaries of the grant date. Certain executives, including those named above, may transfer options to immediate family members, family partnerships and family trusts.

Options held by retirement-eligible participants who retire continue as if employment had continued. The options of grantees who die vest in their entirety and expire on the earlier of the day before the third anniversary of death, or the original expiration date. If a grantees employment is terminated by the Company in a Separation (as described in (1) above), all options vest and expire the day before the second anniversary of the separation date. If a grantees employment is terminated due to gross misconduct, the entire award is forfeited. For other employment terminations, options that are then vested expire within three months of termination and unvested options expire immediately.

The exercise price of all options granted in 2006 equals the average of the high and low of Merck Common Stock on the grant date, so the exercise price of the stock options as reported under column (j) was less than the closing price of Merck Common Stock on the grant date as reported under column (k).

Column (l) represents the aggregate FAS 123R values of options granted during the year. The per-option FAS 123R grant date value was $7.03 each for all options other than Mr. Loeschers, which was $6.94 per option. See [where the assumptions are discussed in the financial statements, of MD&A] for the assumptions made in determining FAS 123R values. There can be no assurance that the options will ever be exercised (in which case no value will be realized by the executive) or that the value on exercise will equal the FAS 123R value.

37

(4) Amounts represent target awards under the Executive Incentive Plan, which equal a specified percentage of base salary as in effect on December 31 of the year before payment is made. The EIP does not have threshold or maximum amounts. EIP awards of up to 150% of target could be paid for extraordinary performance and amounts significantly below target could be awarded for less than adequate performance. For 2006 only, Mr. Loescher was guaranteed an EIP award of at least $1,298,004. The actual amount of the EIP awards made in 2006 was paid in the amount shown in column (g) of the Summary Compensation Table on page xx. Mr. Wold-Olsen and Dr. Sheares are no longer employed and therefore do not have target EIP awards.

(5) Dr. Kim received a Leader Share Grant of RSUs the terms of which are identical to the RSUs described above in footnote (2) except that service must continue for at least a year (rather than six months) in the case of a retiree. Dr. Kim is not retirement eligible.

The following table shows the number of shares covered by exercisable and unexercisable options and unvested RSUs and PSUs held by the Companys Named Executive Officers on December 31, 2006.

Outstanding Equity Awards at Fiscal Year-End

December 31, 2006

    Option Awards Stock Awards

Name
(a)

  

Number

of

Securities

Underlying
Unexercised
Options
(#)

Exercisable
(b)

    

Number of

Securities

Underlying

Unexercised
Options
(#)

Unexercisable
(c)

     Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)		   Option
Exercise
Price
($)
(e)		   

Option
Expiration
Date

(f)

 Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
(g)		   Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)
(h)		   Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
(i)		     Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
(j)

Clark

   73,849 (1)             $ 46.33    02/24/07                  
    42,200 (1)               49.32    06/30/07                  
    84,399 (1)               60.63    02/23/08                  
    73,849 (1)               76.84    02/22/09                  
    89,674 (1)               62.09    02/21/10                  
    89,674 (2)               75.76    03/01/11                  
    105,499 (3)               58.91    02/29/12                  
    105,499 (3)               49.96    02/27/13                  
    34,166 (3)   17,084           48.24    02/26/14                  
    14,166 (3)   28,334           31.84    02/24/15                  
    41,666 (3)   83,334           34.70    05/04/15                  
          240,000 (3)*         35.09    03/02/16                  
                                     8,542 (4)   $ 372,431
                                     7,083 (5)     308,819
                                     29,000 (6)     1,264,400
                                     22,500 (7)     981,000
                                     45,000 (8)*     1,962,000
                                     59,166 (9)   $ 2,579,638
                                     18,000 (10)*     784,800

Lewent

   147,699 (1)             $ 46.33    02/24/07                  
    147,699 (1)               60.63    02/23/08                  
    168,798 (1)               76.84    02/22/09                  
  &n