PERFORMANCE SHARE UNIT TERMS UNDER THE MERCK & CO., INC. 2004 INCENTIVE STOCK PLAN

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Exhibit 10.1

PERFORMANCE SHARE UNIT TERMS UNDER THE
MERCK & CO., INC. 2004 INCENTIVE STOCK PLAN

Except as otherwise indicated in this schedule, the terms of Performance Shares 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.

I. Definitions For the purpose of this Schedule:

“Award Period” shall mean three years, with the first Award Period commencing on January 1, 2004 and ending December 31, 2006. The next Award Period also shall be three years, commencing January 1, 2005.

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

“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 as described in Article II.

“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 Merck Common Stock. Until distributed pursuant to Article VII, Performance Shares shall not entitle the holder to any of the rights of a holder of Merck 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 Article IV.

“Year” means calendar year.

II. Eligibility

Each Eligible Employee who also is a Grade 1 or Grade 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”).

III. 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.

IV. 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 one 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 one (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.

Notwithstanding the above, for the Award Period commencing January 1, 2005 and ending December 31, 2007 (the “Special Award Period”), the Rank of the Company with respect to the first Year only shall not be based on a comparison to the Leading Healthcare Peers Earnings Per Share but instead be based on the Company’s earnings per share against business plan. [Pre-determined targets established by Company omitted.]

The Rank of each Leading Healthcare Peer for the first Year of the Special Award Period shall be determined using the Performance Measure except that each Leading Healthcare Peer with a Rank that is equal to or lower than the Company’s Rank for the first Year will instead assume a Rank that is one Rank lower than its Rank using the Performance Measure. [Reference to pre-determined targets established by Company omitted.] All Leading Healthcare Peers with Ranks from one to five for the first Year using the Performance Measure will retain their Ranks; the Leading Healthcare Peers with Ranks from six to 11 will instead assume Ranks from seven to 12, respectively. The Company intends that grants be deductible by the Company under Section 162(m) of the Internal Revenue Code and reserves the right to make such adjustments as may be required