PERFORMANCE SHARE UNIT TERMS FOR ANNUAL GRANT UNDER THE MERCK & CO., INC. 2007 INCENTIVE STOCK PLAN

Exhibit 10.4

PERFORMANCE SHARE UNIT TERMS
FOR ANNUAL GRANT
UNDER THE MERCK & CO., INC. 2007 INCENTIVE STOCK PLAN

I. GENERAL. Except as otherwise indicated in this schedule, the terms of Performance Shares Units (“PSUs”) granted under this Schedule are the same as those described in the Rules and Regulations. Except as defined below, defined terms under this Schedule are the same as under the Rules and Regulations.

These Performance Share Unit (PSU) Terms apply to the 2007 Annual PSU Grant. They may be amended by the Merck Compensation and Benefits Committee of the Board of Directors as permitted by the ISP.

II. ELIGIBILITY. Each Eligible Employee who also is a Grade 1 or 2 employee on the Grant Date is eligible to receive Performance Shares if the Committee in its sole and non-reviewable discretion designates him or her to receive a Performance Share Award (“Performance Award Grantee”).

A. Definitions: For the purpose of this Schedule:

“Award Period” shall mean three years, with the first Award Period commencing on January 1, 2007 and ending December 31, 2009. The next Award Period also shall be three years, commencing January 1, 2008.

“Final Award Percentage” for each Award Period shall mean the percentage of Target described in paragraph C of this Article.

“Grant Date” shall mean the date a Performance Share Award is granted, and shall not be later than 90 days after the beginning of an Award Period with respect to that Award Period.

“Leading Healthcare Peers” shall mean the group of healthcare companies used by the Board of Directors in evaluating the Company’s annual performance for that year.

“Leading Healthcare Peers Earnings Per Share” for a Year shall mean the change in Earnings Per Share for each Leading Healthcare Peer from the prior year using the same method applicable to the Board’s evaluation of the Company’s annual performance; provided, however, that the calculation shall be as of the most reasonably practicable date prior to the date on which the Earnings Per Share is calculated.

“Performance Award Grantee” shall mean an Eligible Employee who receives a Performance Share Award.

“Performance Share Award” shall mean an award of Performance Shares as described in this Schedule.

“Performance Measure” shall mean the change in the Company’s Earnings Per Share for a Year and each Leading Healthcare Peers Earnings Per Share for the same Year to the extent data for the same Year is available.

“Performance Share” shall mean a phantom share of Common Stock. Until distributed pursuant to paragraph F of this Article, Performance Shares shall not entitle the holder to any of the rights of a holder of Common Stock; provided, however, that the Committee retains the right to make adjustments in the case of a corporate restructuring as described in Section 6 of the ISP.

“Target Shares” shall mean the number of Performance Shares that will be distributable if the Performance Measures are achieved at the 6 ^th of 12 Final Ranks as described in paragraph C of this Article.

“Year” means calendar year.

B. Establishment of Targets

The Committee, in its sole and non-reviewable discretion, shall determine the Target Shares for each Performance Share Award for each Performance Award Grantee.

Performance Share Unit Terms (2007)
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C. Determination of Performance Share Awards

The Committee expects that there will be 11 Leading Healthcare Peers for each Award Period.

For each Year, the Performance Measure shall be calculated for the Company and each Leading Healthcare Peer. Each Leading Healthcare Peer and the Company shall then be assigned a rank (“Rank”) from 1 to 12, highest to lowest Performance Measure, as appropriate.

After the end of the Award Period, the Ranks of each Leading Healthcare Peer and the Company for all Years within the Award Period shall be averaged, and the averages shall then be ranked (the “Final Rank”) from 1 (the highest rank) to 12 (the lowest rank), as appropriate.

The Final Award Percentage shall be the following percentage of Target Shares based on the Company’s Final Rank for an Award Period.

If at any time the number of Leading Healthcare Peers is not 11, the Committee intends to adjust the above schedule appropriately to retain a similar range of Performance Share Award opportunities with a maximum Final Award Percentage of 200% and a minimum of 0%. The Committee also intends that, in case of multiple changes in the Leading Healthcare Peer group during an Award Period, replacement companies shall be substituted based on the substitutes’ market capitalization relative to the other Leading Healthcare Peer group.

D. Dividends

Dividends shall not be paid, accrued or accumulated on Performance Shares during the Award Period.

E. Termination of Employment

1. General Rule – Upon the termination of the employment of a Performance Award Grantee for any reason other than those specified in paragraphs E.2. through E.6. of this Article (including but not limited to voluntary or involuntary resignation, or failure or refusal to accept relocation or reassignment within the Company or employment with a JV), any Final Award shall be distributed to the Performance Award Grantee with respect to any Award Period that was completed prior to the employment termination. All other Performance Share Awards shall expire and be forfeited in their entirety at the end of the last day of employment. Failure to satisfy each and every condition described in paragraphs E.2. through E.6. (in the Committee’s determination) shall render a Performance Share Award subject to this paragraph E.1. upon termination of employment.

2. Separation – If a Performance Award Grantee’s employment is terminated at an employer’s initiative (as determined by the Company or JV in its sole discretion) due to lack of work because, for example, the Company eliminates the Performance Award Grantee’s job or divests itself of a business resulting in his/her loss of employment with the Company, then the Performance Award Grantee shall be considered “Separated.” In case of Separated Performance Award Grant