LONG-TERM PERFORMANCE SHARE UNIT INCENTIVE PLAN



 





Exhibit 10(o)




SCHERING-PLOUGH CORPORATION

LONG-TERM PERFORMANCE SHARE UNIT INCENTIVE PLAN




1. Plan Objective




     Schering-Plough Corporation (the “Company”) has established the
Schering-Plough Corporation Long-Term Performance Share Unit Incentive Plan
(referred to as the “Plan”) which is designed to encourage results-oriented
actions on the part of elected officers and certain other key executives of the
Company that will drive the achievement of specific business objectives.



2. Eligibility




     Management employees of the Company and its subsidiaries who are elected
officers of the Company or other key executives are eligible to participate in
the Plan. The Administrator (as defined in Section 3 below) shall select the
elected officers and other key executives who shall participate in the Plan
(the “Participants”).



3. Administration




     (a) The Plan shall be administered by the Compensation Committee of the
Board of Directors with respect to executives who are subject to the reporting
requirements of Section 16 of the Exchange Act of 1934, as amended (“Section 16
Executives”), and the Plan shall be administered by the Chief Executive Officer
of the Company (“CEO”) with respect to all other employees. The CEO may
delegate his authority to administer the Plan to an individual or committee.
The term “Administrator” shall mean the Compensation Committee, as applied to
Section 16 Executives, and the CEO or such individual or committee to which
authority has been delegated, as applied to all other employees.



     (b) The Administrator shall have full power, discretion and authority to
establish the rules and regulations relating to the Plan, to interpret the Plan
and those rules and regulations, to select Participants for the Plan, to
determine each Participant’s target award, performance goals and final award,
to make all factual and other determinations in connection with the Plan, and
to take all other actions necessary or appropriate for the proper
administration of the Plan, including the delegation of such authority,
discretion or power, where appropriate.



     (c) All powers of the Administrator shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals. The Administrator’s administration of the Plan, including
all such rules and regulations, interpretations, selections, determinations,
approvals, decisions, delegations, amendments, terminations and other actions,
shall be final and binding on the Company and all employees of the Company and
its subsidiaries, including the Participants and their respective
beneficiaries.



 









 





4. Target Awards and Performance Goals




     (a) The Administrator shall establish for each Participant a target award,
which shall be expressed as phantom stock units and shall be payable if and to
the extent that the Company attains the performance goals for the performance
period as described below or otherwise in connection with a change in control
(as defined in the Company’s 2002 Stock Incentive Plan (hereinafter referred to
as a “Change in Control”). The target award shall be equal to three times the
annual incentive target amount in effect for the Participant at the beginning
of the performance period under the Company’s annual incentive plan applicable
to the Participant, or such other amount as the Administrator determines,
divided by the Company’s stock price on January 2, 2004. The Company’s stock
price shall be the closing price of the Company’s common stock on January 2,
2004 as reported on the New York Stock Exchange. The target award shall be
expressed as phantom stock units, each of which shall represent one
hypothetical share of common stock of the Company.



     (b) The performance period is the three-year period beginning January 1,
2004 and ending December 31, 2006. The Administrator shall establish the
performance goals for the performance period. Unless the Administrator
determines otherwise, the performance goals shall be based on (i) the Company’s
achievement of its targeted three-year compounded total shareholder return for
the performance period, and (ii) the Company’s total shareholder return ranking
as compared to its peer group for the performance period all as set forth on
Exhibit A. The performance period is the three-year period beginning January
1, 2004 and ending December 31, 2006. The Administrator may adjust the
performance goals as it deems appropriate to take into account corporate
transactions or other extraordinary events that occur during the performance
period. For purposes of this plan total shareholder return means the price of
the common stock of the Company at the end of the performance period plus
dividends paid on the common stock during the Performance Period, divided by
the price of the common stock of the Company at the beginning of the
Performance Period. The price of the common stock of the Company is determined
by the average closing quotation price of the Company stock on the New York
Stock Exchange (NYSE) or such other national securities exchange as may be
designated by the Committee, during the 30 days of quotation immediately prior
to the applicable date (the “Fair Market Value”).



     (c) The peer group consists of the following companies:



	 
	Abbott Laboratories

	Bristol-Myers Squibb Company

	Eli Lilly and Company

	Johnson & Johnson

	Merck & Company, Inc.

	Pfizer, Inc.

	Wyeth








 









 






     The Administrator may adjust the peer group from time to time as it deems
appropriate, including the addition, deletion or replacement of companies, to
take into account mergers and other changes in the companies comprising the
peer group.



     (d) The Administrator may establish appropriate terms and conditions to
accommodate newly hired and transferred employees. Unless otherwise determined
by the Administrator, the target award for a newly hired or transferred
employee shall be prorated based on a fraction, the numerator of which is the
number of months such Participant will participate in the Plan during the
performance period (rounded to the nearest whole month) and the denominator of
which is 36. The target award shall be equal to three times the annual
incentive target amount in effect for the Participant on his or her first date
of employment with the Company or on the date of transfer, as applicable, or
such other amount as the Administrator determines, divided by the Company’s
stock price on the first date of employment with the Company or the date of
transfer, as applicable. The Company’s stock price shall be the closing price
of the Company’s common stock on the applicable date, as reported on the New
York Stock Exchange.



5. Calculation of Incentive Awards




     (a) At the end of the performance period, the Administrator shall
determine whether and to what extent the performance goals have been met and
the percentage of the target awards that are earned.



     (b) The Administrator shall rely on the audited financial statements of
the Company and its subsidiaries to determine whether and to what extent the
performance goals are met.



     (c) The Administrator shall compute each Participant’s incentive award for
the performance period based on the Company’s achievement of the performance
goals. Each Participant’s incentive award will be subject to vesting as
described in Section 6 below. As a Participant’s incentive award vests
pursuant to Section 6 of this Plan, the Company shall credit the Fair Market
Value of each Participant’s vested incentive award to the Participant’s account
under the Schering-Plough Corporation Savings Advantage Plan (the “Savings
Advantage Plan”). Such credited amount shall be deemed to be invested in the
investment options available under the Savings Advantage Plan in accordance
with the Participant’s then current election applicable to new deferrals under
that plan. All amounts credited to a Participant’s book account under the
Savings Advantage Plan shall be administered according to the terms and
conditions of the Savings Advantage Plan. Savings Advantage Plan distributions
shall be made exclusively in accordance with the terms and conditions of the
Savings Advantage Plan.



     (d) Participants must be employed on December 31, 2006 in order to be
eligible for an incentive award under the Plan, except as described below or
except as the Administrator may otherwise determine. Unless the Administrator
determines otherwise:



          (i) Participants who die during the performance period will receive a
pro-rated award, which will be calculated at the end of the performance period
and will be based on the Company’s performance during the entire performance
period. The pro-rated award will be



 









 







the award calculated for the entire performance period, multiplied by a
fraction, the numerator of which is the number of months during which the
Participant participated in the Plan during the performance period before the
Participant’s death (rounded to the nearest whole month) and the denominator of
which is 36. The Company will credit the Fair Market Value of the pro-rated
award to a book account established for the Participant under the Savings
Advantage Plan on or around March 15, 2007.



          (ii) Participants who retire during the performance period will receive a
pro-rated award, which will be calculated at the end of the performance period
and will be based on the Company’s performance during the entire performance
period. Retirement age is age 65, or, if the Participant has at least ten years
of service, age 55. The pro-rated award will be the award calculated for the
entire performance period, multiplied by a fraction, the numerator of which is
the number of months during which the Participant participated in the Plan
during the performance period before the Participant’s retirement (rounded to
the nearest whole month) and the denominator of which is 36. The Company will
credit the Fair Market Value of the pro-rated award to a book account
established for the Participant under the Savings Advantage Plan on or around
March 15, 2007.



          (iii) Participants who leave the Company under a Company-sponsored
disability program during the performance period will receive a pro-rated
award, which will be calculated at the end of the performance period and will
be based on the Company’s performance during the entire performance period. The
pro-rated award will be the award calculated for the entire performance period,
multiplied by a fraction, the numerator of which is the number of months during
which the Participant participated in the Plan during the performance period
before the Participant’s termination date (rounded to the nearest whole month)
and the denominator of which is 36. The Company will credit the Fair Market
Value of the pro-rated award to a book account established for the Participant
under the Savings Advantage Plan on or around March 15, 2007.



          (iv) If a Change in Control of the Company occurs during the performance
period, the following provisions shall apply:



               (A) Participants who are then employed by the Company or an Affiliate (as
defined below) will receive a pro-rated award. The award will first be
calculated as of the date of the Change in Control based on the greater of (i)
the Participant’s target award or (ii) an award calculated by the Administrator
based on period-to-date performance by the Company as of the date of the Change
in Control. The pro-rated award will be the award computed pursuant to the
preceding sentence multiplied by a fraction, the numerator of which is the
number of months during which the Participant participated in the Plan during
the performance period before the effective date of the Change in Control
(rounded to the nearest whole month), and the denominator of which is 36.
Participants who retired, died or were disabled during the performance period
as described above shall receive pro-rated incentive awards as described in
subsections (i), (ii) and (iii) above but based on the Company’s performance to
the date of the Change in Control. The Company will credit the Fair Market
Value of the pro-rated award to a book account established for the Participant
under the Savings



 









 







Advantage Plan as soon as administratively feasible upon the effective
date of the Change in Control and such amount will be fully vested and
non-forfeitable.



               (B) If a Participant remains employed by the Company or an Affiliate for a
period of two years following the Change in Control or is involuntarily
terminated (which term shall be deemed to include for all purposes under this
Plan, as applicable, a termination for Good Reason (as such term is defined in
the Participant’s employment agreement) other than for cause (as defined
below), within two years of a Change in Control, the Participant shall be
credited with an additional award equal to an amount calculated by subtracting
the amount of the prorated award earned as of the date of the Change in Control
in accordance with Subsection (A) above (without regard to any subsequent
earnings or losses thereon) from an amount equal to 200% of the Participant’s
target award for the performance period, if such amount is greater than the
award previously calculated for the performance period pursuant to paragraph
(A) above. The Company will credit the Fair Market Value of any additional
award amount to the book account established for the Participant under the
Savings Advantage Plan immediately upon the earlier of (i) the second
anniversary of the Change in Control or (ii) the date the Participant’s
employment is involuntarily terminated without cause. Any earnings or other
amounts previously credited to the Participant’s account under the Savings
Advantage Plan with respect to the previously calculated award will remain in
the Participant’s account.



          (v) For purposes of this Plan, the term “Affiliate” shall have the meaning
given that term in the Savings Advantage Plan. The term “cause” shall have the
meaning given that term, if applicable to the Participant, in the written
employment agreement between the Participant and the Company or an Affiliate as
in effect on the date of the Participant’s termination of employment or in the
Schering-Plough Corporation 2002 Stock Incentive Plan.



6. Vesting of Incentive Awards




     (a) If a Participant earns an incentive award as described in Section 5
for the performance period, 25% of the incentive award will be vested as of the
end of the performance period. The remaining portion of the Participant’s
incentive award will vest over a two-year period, as follows, if the
Participant continues to be employed by the Company or an Affiliate through the
applicable vesting date:



	 	 	 	 	 
	Vesting Date
	Portion of the Incentive Award that Vests

	December 31, 2007
	 	 	50	%
	December 31, 2008
	 	 	25	%







          (b) If a Participant retires, leaves the Company under a Company-sponsored
disability program or dies while employed by the Company or an Affiliate, the
Participant’s incentive award shall be fully vested at the end of the
performance period or at the time such event occurs, whichever is later. If a
Participant’s employment with the Company and its



 









 







Affiliates terminates for any other reason, any unvested incentive award,
shall be forfeited to the Company as of his or her termination date. A transfer
of employment among the Company and its Affiliates shall not be considered a
termination of employment for purposes of the Plan.



     (c) The Administrator reserves the right to accelerate vesting on a
pro-rata basis or in full whenever the Administrator deems such action
appropriate.



     (d) Notwithstanding the foregoing, the incentive award of each Participant
who is employed by the Company or an Affiliate at the time of a Change in
Control, or who retired, died or left the Company under a Company-sponsored
disability program on or before the date of the Change in Control, shall become
fully vested upon a Change in Control.



7. Changes to Performance Goals and Target Awards




     At any time prior to the final determination of awards, the Administrator
may adjust the performance goals and target awards to reflect a change in
corporate capitalization (such as a stock split or stock dividend), or a
corporate transaction (such as a merger, consolidation, separation,
reorganization or partial or complete liquidation), or to reflect equitably the
occurrence of any extraordinary event, any change in applicable accounting
rules or principles, any change in the Company’s method of accounting, any
change in applicable law, any change due to any merger, consolidation,
acquisition, reorganization, stock split, stock dividend, combination of shares
or other changes in the Company’s corporate structure or shares, or any other
change of a similar nature.



8. Amendments and Termination




     The Company may at any time amend or terminate the Plan by action of the
Executive Compensation and Organization Committee; provided that no amendment
or termination may be made after a Change in Control that adversely affects
Participants’ benefits computed under Section 5(d) for the performance period.
The Administrator shall have the right to modify the terms of the Plan as may
be necessary or desirable to comply with the laws or local customs of countries
in which the Company operates or has employees.



9. Miscellaneous Provisions




     (a) This Plan is not a contract between the Company and the Participants.
Neither the establishment of this Plan, nor any action taken hereunder, shall
be construed as giving any Participant any right to be retained in the employ
of the Company or any of its subsidiaries. Nothing in the Plan, and no action
taken pursuant to the Plan, shall affect the right of the Company or a
subsidiary to terminate a Participant’s employment at any time and for any or
no reason. The Company is under no obligation to continue the Plan.



     (b) A Participant’s right and interest under the Plan may not be assigned
or transferred, except as provided in Section 5(d) of the Plan upon death, and
any attempted assignment or transfer shall be null and void and shall
extinguish, in the Company’s sole discretion, the Company’s obligation under
the Plan to pay awards with respect to the



 









 







Participant. The Company’s obligations under the Plan may be assigned to
any corporation which acquires all or substantially all of the Company’s assets
or any corporation into which the Company may be merged or consolidated.



     (c) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund, or to make any other segregation of
assets, to assure payment of awards. The Company’s obligations hereunder shall
constitute a general, unsecured obligation, awards shall be paid solely out of
the Company’s general assets, and no Participant shall have any right to any
specific assets of the Company.



     (d) All claims for benefits under this Plan shall be reviewed pursuant to
the claims procedures contained in the Savings Advantage Plan.



     (e) The Company shall have the right to deduct from awards or any other
payments of wages any and all federal, state and local taxes or other amounts
required by law to be withheld.



     (f) The Company’s obligation to pay compensation as herein provided is
subject to any applicable orders, rules or regulations of any government agency
or office having authority to regulate the payment of wages, salaries, and
other forms of compensation.



     (g) A Participant’s acceptance of benefits under the Plan shall constitute
the Participant’s acceptance of all terms of the Plan, including the
discretionary authority of the Administrator.



     (h) The validity, construction, interpretation and effect of the Plan
shall exclusively be governed by and determined in accordance with the laws of
the State of New Jersey.