8-KLeadership Changes

Merck & Co., Inc. 8-K Report, Executive Changes (Jul 24, 2015)

Filed July 24, 2015For Securities:MRK

Summary

This 8-K filing from Merck & Co., Inc. (MRK) details changes to the compensation arrangements for former General Counsel Bruce Kuhlik following his retirement. The key event is the adjustment of Mr. Kuhlik's incentive compensation due to his intention to join the public sector, which necessitates divesting interests tied to company performance. The Compensation & Benefits Committee authorized these changes to allow Mr. Kuhlik to realize some of the income he would have otherwise received. Specifically, the company accelerated the vesting of a portion of his 2013 stock options, making them fully exercisable sooner. However, he forfeited certain unvested portions of stock options granted in 2014 and 2015. Additionally, his Performance Share Units (PSUs) awarded in 2013, 2014, and 2015 were restructured into fixed cash payments based on pro-rated target performance and a pre-determined stock price. He also forfeited a pro-rated bonus under the Executive Incentive Plan. These adjustments impact future compensation payouts and the immediate exercisability of stock options.

Key Highlights

  • 1Bruce Kuhlik, General Counsel, is retiring effective August 1, 2015.
  • 2Mr. Kuhlik is moving to a public sector position requiring divestiture of company performance-related interests.
  • 3The Compensation Committee approved changes to Mr. Kuhlik's incentive compensation to allow him to realize certain income.
  • 4A portion of Mr. Kuhlik's 2013 stock options will have their vesting accelerated to August 3, 2015.
  • 5Mr. Kuhlik will forfeit certain unvested portions of stock options granted in 2014 and 2015.
  • 6Performance Share Units (PSUs) from 2013, 2014, and 2015 will be settled as fixed cash payments based on pro-rated target performance and a fixed price of $58.98 per share.
  • 7Mr. Kuhlik will forfeit a pro-rated bonus under the Executive Incentive Plan.

Frequently Asked Questions

Mr. Kuhlik's compensation arrangements are being modified because he is retiring and moving to a public sector position that requires him to divest any company interests subject to variability based on Company performance. The Compensation Committee approved these changes to allow him to realize certain income that he would have otherwise been entitled to under existing plans.

A portion of the stock options granted to Mr. Kuhlik in 2013 will have its vesting accelerated, making it fully exercisable by August 3, 2015. However, he will forfeit certain unvested portions of stock options granted in 2014 and 2015, including those that would have vested in May 2016 and the remainder of those grants.

The PSUs awarded in 2013, 2014, and 2015 will no longer be settled based on company performance. Instead, Mr. Kuhlik will receive a fixed cash payment for each PSU, calculated based on a pro-rated number of units assuming target performance and a stock price of $58.98. These cash payments are scheduled for 2016, 2017, and 2018.

No, Mr. Kuhlik will forfeit the pro-rated bonus that would have otherwise been paid to him in March 2016 under the Company's Executive Incentive Plan.