Document:

EX-10.H.III

 

Exhibit 10(h)(iii)

DIRECTORS COMPENSATION PLAN

(Effective June 1, 2006)

			
	I.	 	ESTABLISHMENT AND PURPOSE

1.1 Purpose. The purposes of the Schering-Plough Corporation Directors Compensation Plan (the
“Plan”) are (a) to attract, retain and fairly compensate highly qualified and talented individuals
to serve as non-employee directors, whose present and future contributions to the welfare, growth
and continued business success of the Schering-Plough Corporation will be of benefit to the
Schering-Plough, (b) to more closely align the interests of the Schering-Plough’s non-employee
directors with the interests of the Schering-Plough’s shareholders by increasing non-employee
directors’ stock ownership in the Schering-Plough and (c) to consolidate prior Directors
compensation plans and programs into one comprehensive and transparent compensation plan.

1.2 Effective Date. The Plan is effective on June 1, 2006 (the “Effective Date”).

			
	II.	 	DEFINITIONS

Capitalized terms used in the Plan have the following meanings, unless another definition is
indicated clearly by particular usage and context.

“Additional Service Fee” means annual fees, in addition to the Base Director Fee, payable to an
Eligible Director for services as a member of the Audit Committee or as chairman of any Board
Committee, other than the Executive Committee of the Board.

“Annual Meeting” means the Annual Meeting of Shareholders of Schering-Plough, as specified in the
Schering-Plough’s By-Laws.

“Base Director Fee” means the annual fee payable to an Eligible Director for services as a general
member of the Board.

“Board Committee” means any of the committees of the Board in place from time to time, which, as of
the Effective Date, are (a) the Audit Committee, (b) the Business Practices Oversight Committee,
(c) the Compensation Committee, (d) the Executive Committee, (e) the Finance Committee, (f) the
Nominating and Corporate Governance Committee and (g) the Science and Technology Committee.

“Cash Deferral” means a deferral in accordance with Section 4.3(b) of the cash portion of the
Director Fees payable to an Eligible Director.

“Cash Deferral Sub-Account” means the sub-account under a Deferral Account that tracks Cash
Deferrals.

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“Change in Control” means the happening of any of the following events:

(a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of securities of Schering-Plough where such
acquisition causes such Person to own more than 50% of either (x) the then outstanding Shares of
Schering-Plough (the “Outstanding Shares”) or (y) the combined voting power of the then
outstanding voting securities of Schering-Plough entitled to vote generally in the election of
directors (the “Outstanding Voting Securities”); provided, however, that for purposes of this
subsection (a) the following acquisitions will not constitute a Change of Control: (i) any
acquisition directly from Schering-Plough, (ii) any acquisition by Schering-Plough, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or maintained by
Schering-Plough or any corporation controlled by Schering-Plough or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) below; and provided, further, that if any Person’s beneficial ownership of the
Outstanding Shares or Outstanding Voting Securities reaches or exceeds 50% as a result of a
prior transaction, and such Person subsequently acquires beneficial ownership of additional
Shares or additional voting securities of Schering-Plough, such subsequent acquisition will not
be treated as an acquisition that causes such Person to own more than 50% of the Outstanding
Shares or Outstanding Voting Securities;

(b) during any 12-month period, individuals who, as of the first day of such period,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a director subsequent to
the beginning of such 12-month period whose election, or nomination for election by
Schering-Plough’s shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board will be considered as though such individual were a member
of the Incumbent Board;

(c) consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving Schering-Plough, or the acquisition of assets or stock
of another entity by Schering-Plough (each a “Business Combination”), in each case, unless,
following such Business Combination, (i) all or substantially all of the individuals and
entities who were beneficial owners, respectively, of the Outstanding Shares or Outstanding
Voting Securities immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectfully, the then outstanding shares of the common stock and
the combined voting power of the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a result of such
transaction owns Schering-Plough or substantially all of Schering-Plough’s assets either
directly or through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding Shares and
Outstanding Voting Securities, as the

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case may be, (ii) no Person (excluding any corporation resulting from such Business Combination
or any employee benefit plan (or related trust) of Schering-Plough or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, more than 50% of,
respectfully, the then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting securities of
such corporation, except to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the Incumbent Board on the
later of (A) the time of the execution of the initial agreement, (B) the action of the Board
providing for such Business Combination or (C) the beginning of the 12-month period ending on
the effective date of the Business Combination;

(d) any one Person acquires (or has acquired during any 12-month period ending on the date of
the most recent acquisition by such Person) assets of Schering-Plough having a fair market value
equal to or more than 40% of the total gross fair market value of all of the assets of
Schering-Plough immediately prior to such sale, other than an acquisition by (i) a Person who
was a shareholder of Schering-Plough immediately before the asset acquisition in exchange for or
with respect to such Person’s Shares, (ii) an entity whose total or voting power immediately
after the transfer is at least 50% owned, directly or indirectly, by Schering-Plough, (iii) a
person or group that, immediately after the transfer, directly or indirectly owns at least 50%
of the total value or voting power of the outstanding stock of Schering-Plough or (iv) an entity
whose total value or voting power immediately after the transfer is at least 50% owned, directly
or indirectly, by a person described in clause (iii) above; or

(e) the complete liquidation of Schering-Plough.

The definition of Change in Control for purposes of the Plan is intended to conform to the
description of “Change in Control Events” in Treas. Prop. Reg. 1.409A-3(g)(5), or in subsequent IRS
guidance describing what constitutes a change in control event for purposes of Code section 409A.
Accordingly, no Change in Control will be deemed to occur with respect to a transaction or event
described in paragraphs (a) through (e) above unless the transaction or event would constitute a
“Change in Control Event” as described in Treas. Prop. Reg. 1.409A-3(g)(5), or in subsequent IRS
guidance under Code section 409A.

“Change in Control Price” means the higher of (a) the highest reported sales price of a Share in
any transaction reported on the New York Stock Exchange Composite Tape or other national exchange
on which Shares may then be listed during the 60-day period prior to and including the effective
date of a Change in Control or (b) if the Change in Control is the result of a tender or exchange
offer or a business combination, the highest price per Share paid in such tender or exchange offer
or business combination. To the extent that the consideration paid in any transaction described in
clause (b) above consists all or in part of securities or other non-cash consideration, the value
of such securities or other non-cash consideration will be determined in the sole discretion of the
Committee.

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“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Nominating and Corporate Governance Committee.

“Deferral Account” means the bookkeeping account maintained by Schering-Plough to track Fee
Deferrals in accordance with Section 4.4.

“Deferred Stock Unit” means an unfunded contractual right of a Participant to receive one Share or
one Prior Plan Share in the future.

“Director Fees” means the Base Director Fee plus the Additional Service Fee, if any, payable to an
Eligible Director.

“Disabled” means an inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death or can
be expected to last for a continuous period of not less than 12 months.

“DSU Fund” means the bookkeeping fund under a Share Deferral Sub-Account or Prior Plan Account in
which Deferred Stock Units payable in Shares or Prior Plan Shares are allocated in accordance with
Sections 4.4(b) and 5.1(c).

“Eligible Director” means any Board member who is not an employee of Schering-Plough or a
subsidiary of Schering-Plough.

“Fair Market Value” means the closing sales price of a Share, as reported on the New York Stock
Exchange Composite Tape or other national exchange on which Shares are listed, on the last trading
day before the date the determination is being made or, if no sale of Shares is reported on that
date, on the last trading day on which sales of Shares were reported.

“Fee Deferrals” means the sum of a Participant’s Cash Deferrals and Share Deferrals.

“Method of Payment” means any of the payment methods permitted under Section 4.5(c) for amounts
credited to a Participant’s Deferral Account and/or Prior Plan Account.

“Participant” means an Eligible Director or a former director whose Deferral Account or Prior Plan
Account has an unpaid balance.

“Payment Commencement Date” means the date payment of amounts credited to a Participant’s Deferral
Account and/or Prior Plan Account are scheduled to begin under Section 4.5 or 5.3.

“Phantom Stock Unit” means an unfunded contractual right of a Participant to receive cash in the
future equal to the Fair Market Value of one Share on the payment date.

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“Prior Plan Account” means the bookkeeping account maintained by Schering-Plough to track
Schering-Plough’s outstanding deferred compensation obligations under the Prior Plans that were
transferred to and assumed by this Plan under Section 5.1.

“Prior Plans” means the Schering-Plough Directors Stock Award Plan, the Schering-Plough Directors
Deferred Stock Equivalency Program, the Schering-Plough Directors Deferred Compensation Plan, and
the prior cash compensation program, each of which are hereby terminated as of the Effective Date.

“Prior Plan Shares” means Shares that have been reserved for issuance under a Prior Plan but have
not been issued under the Prior Plan as of the Effective Date.

“Share Deferral” means a deferral in accordance with Section 4.3(a) of the Share portion of the
Director Fees payable to an Eligible Director.

“Share Deferral Sub-Account” means the sub-account under a Deferral Account that tracks Share
Deferrals.

“Shares” means shares of Common Stock, $.50 par value per share, of Schering-Plough.

“Simple Interest Fund” means the bookkeeping fund under a Cash Deferral Sub-Account or Prior Plan
Account in which account balances are adjusted by reference to a pre-determined bank interest rate.

“Stock Equivalency Fund” means the fund under a Prior Plan Account in which Phantom Stock Units
payable in cash are allocated in accordance with Section 5.1(b).

“Unforeseeable Emergency” means a severe financial hardship to a Participant resulting from (a) an
illness or accident of the Participant, the Participant’s spouse or a dependent (as defined in Code
section 152(a)) of the Participant, (b) loss of the Participant’s property due to casualty or (c)
other similar extraordinary and unforeseeable circumstances arising as a result of events beyond
the control of the Participant, all as determined by the Committee in its sole discretion.

			
	III.	 	DIRECTOR FEES

The Plan is the exclusive means for the payment of Director Fees to Eligible Directors. All
Director Fees payable under the Plan are in consideration of services rendered for Schering-Plough
as a member of the Board and are subject to the following terms and conditions.

3.1 Amount of Director Fees; Form of Payment. The Base Director Fee will be payable one-third
in Shares and two-thirds in cash. The Additional Service Fee will be payable entirely in cash. The
Board, upon the recommendation of the Committee, will set from time to time the amount of annual
Director Fees; provided, however, that:

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	(a)	 	the annual Base Director Fee is initially set at $200,000.00; and

	(b)	 	the annual Additional Service Fee is initially set at $15,000.00 for service on the Audit
Committee or as chairman of any Board Committee; provided, however, that the chairman of any
Board Committee who is also a member of the Audit Committee (including the Audit Committee
Chairman) is entitled to receive only the Additional Service Fee for serving as chairman of
the Board Committee, and not an Additional Service Fee for also serving as a member of the
Audit Committee. No Additional Service Fee will be paid in connection with service as a member
of the Executive Committee of the Board.

The amount of Director Fees and form of payment will be reviewed annually and disclosed in
Schering-Plough’s annual proxy statement. The number of Shares that will be issued to an Eligible
Director in payment of the Share portion of the Base Director Fee is the whole number of Shares
determined by dividing the dollar amount of the Share portion of the Base Director Fee payable on a
given date by the Fair Market Value of a Share on that date.

3.2 Timing of Payments. Unless an Eligible Director elects a Fee Deferral, annual Director Fees
will be paid in advance to each Eligible Director in substantially equal semi-annual payments on
the first day of June and December, beginning June 2006, unless such first day is not a business
day, in which case it will be paid on the most recent prior business day. Notwithstanding the
foregoing, (a) the first semi-annual payment of the Base Director Fee to a newly-elected Eligible
Director will be paid (without proration) on the date that the Eligible Director first becomes a
member of the Board and (c) the first semi-annual payment of an Additional Service Fee to a newly
appointed Audit Committee member and/or Board Committee chairman will be paid (without proration)
on the date the Eligible Director is first appointed in that capacity.

			
	IV.	 	FEE DEFERRALS

4.1 Deferral Elections. An Eligible Director may elect to defer receipt of all or a portion of
the Director Fees payable under the Plan. Each deferral election by an Eligible Director is
irrevocable for the year(s) covered by the election and will automatically renew and remain in full
force and effect for all subsequent years unless and until the Eligible Director submits a change
in deferral election, as provided in Section 4.2(b), covering such subsequent years. All elections
under the Plan must be made on a form and in the manner prescribed by the Committee.

4.2 Election Due Dates

	(a)	 	Initial Deferral Elections. The deferral election of an Eligible Director who wishes to make
a Fee Deferral effective for the June 2006 payment must be received by the Committee prior to
the Effective Date. The deferral election of an individual who is first nominated as a
director after the Effective Date and who wishes to make a Fee Deferral effective for the
first semi-annual Director Fee payment to which he is

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entitled under Section 3.2 must be received by the Committee prior to the date he or she
becomes an Eligible Director. Alternatively, the initial deferral election of a newly-elected
Eligible Director may be received by the Committee up to thirty days after he or she first
becomes an Eligible Director, but such election will apply only to Director Fee payments made
after the date of the deferral election.

	(b)	 	Change in Deferral Elections. An Eligible Director who either (i) did not make an initial
deferral election under paragraph (a) above or (ii) who has made a prior deferral election
that is still effective, but wishes to change that election for future years, must submit a
new deferral election form that is received by the Committee no later than December 31 of the
calendar year prior to the year in which the deferral election takes effect.

4.3 Deferral Designations. An Eligible Director may elect to make either a Cash Deferral, a
Share Deferral or both.

(a) Share Deferrals. Subject to Section 7.4, an Eligible Director may designate the amount of a
Share Deferral as (i) a fixed dollar amount on each payment date, not to exceed the dollar amount
of the Base Director Fee otherwise payable in Shares on that payment date, (ii) as a percentage, up
to 100%, of the amount of the Base Director Fee otherwise payable in Shares or (iii) in a fixed
number of Shares on each payment date, not to exceed the number of Shares otherwise payable to the
Eligible Director on that payment date.

(b) Cash Deferrals. An Eligible Director may designate the amount of a Cash Deferral either as
(i) a fixed dollar amount on each payment date, not to exceed the amount of Director Fees otherwise
payable in cash on that payment date or (ii) a percentage, up to 100%, of the amount of the
Director Fees otherwise payable in cash.

4.4 Deferral Accounts. Schering-Plough will establish and maintain a Deferral Account in the
name of each Eligible Director whose payment of Director Fees has been deferred. Fee Deferrals will
be credited to Deferral Accounts as of the date the Director Fees would otherwise have been paid
under Section 3.2. Each Deferral Account will be comprised of two sub-accounts:

	(a)	 	Share Deferral Sub-Account. Amounts are credited to the Share Deferral Sub-Account as
Deferred Stock Units. If, under Section 4.3(a), the Eligible Director designates his Share
Deferral as a fixed number of Shares, the number of Deferred Stock Units credited to his or
her Share Deferral Sub-Account on each date Director Fees are otherwise paid will be equal to
the number of Shares designated for deferral or, if less, the number of Shares that are
otherwise payable. Otherwise, the number of Deferred Stock Units credited (including fraction
units) will be determined by dividing the dollar amount being deferred by the Fair Market
Value of a Share on the payment date. Each Share Deferral Sub-Account is adjusted annually as
of December 31, and on any date on which a distribution from the sub-account is made, to
reflect dividends paid during the year on Shares, based on the

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assumption that an equivalent dividend or distribution is paid on Deferred Stock Units and
such dividend is reinvested in additional Deferred Stock Units (including fractional units) at
Fair Market Value on the dividend payment date.

	(b)	 	Cash Deferral Sub-Account. Each Cash Deferral Sub-Account is comprised of two funds:

(i) Simple Interest Fund. Amounts allocated to the Simple Interest Fund are credited as cash
and are adjusted annually as of the December 31, and on any date on which a distribution from
the sub-account is made, to reflect hypothetical interest earnings based on the interest rate
offered by JPMorgan Chase Bank, New York, New York, to its preferred risk commercial
borrowers, as published by said bank from time to time.

(ii) DSU Fund. Amounts allocated to the DSU Fund are credited as Deferred Stock Units in the
same manner that Deferred Stock Units are credited and adjusted under the Share Deferral
Sub-Account.

(iii) Allocation of Cash Deferrals Among Funds. Cash Deferrals will be allocated to the
Simple Interest Fund and DSU Fund in such proportion as the Eligible Director elects when he
or she makes a Fee Deferral. If no allocation election is made on the deferral election form,
100% of the Eligible Director’s Cash Deferrals will be allocated to the Simple Interest Fund.
An Eligible Director may change his Cash Deferral allocations prospectively with respect to
prior and/or future Cash Deferrals by submitting a new election no later than December 31 of
the year prior to the year in which the change will take effect. Any such change in
allocation will take effect on the next January 1 following the date the election is made.

4.5 Distribution of Fee Deferrals. When an Eligible Director makes a Fee Deferral election, he
or she may elect the Payment Commencement Date and method of payment that will apply to the amounts
credited to his Deferral Account.

(a) Payment Commencement Date. Payment of Fee Deferrals to an Eligible Director may commence no
later than the fifth business day following any of the Payment Commencement Dates below, as elected
by the Eligible Director:

	 	(i)	 	upon termination of Board membership for any reason;
	 
	 	(ii)	 	on a specified anniversary of his termination of Board membership, up to the 15th
anniversary;
	 
	 	(iii)	 	upon attaining a specified age;
	 
	 	(iv)	 	on any other specified date, which must be an actual date and not a date tied to
a contingent event;

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	 	(v)	 	upon the earlier of termination of Board membership or attainment of a specified
age or date;
	 
	 	(vi)	 	upon the later of termination of Board membership or attainment of a specified
age or date; or
	 
	 	(vii)	 	upon the earlier of becoming Disabled or any of the other permissible Payment
Commencement Dates under the Plan.

If an Eligible Director does not timely elect a Payment Commencement Date, then, except as provided
in Section 7.4(b), the Payment Commencement Date will be the date the Eligible Director terminates
service with the Board for any reason.

(b) Form of Payment. Amounts credited to the Simple Interest Fund will be paid in cash only and,
except as provided in Section 6.1(b) in the event of a Change in Control, amounts credited as
Deferred Stock Units will be paid in whole Shares.

(c) Method of Payment. All amounts credited to the Eligible Director’s Deferral Account will be
distributed to the Eligible Director in a single lump sum; except that an Eligible Director may
elect when he or she makes a Fee Deferral election to receive payment of the amounts credited to
his or her Deferral Account in either 5, 10 or 15 substantially equal annual installments. If an
Eligible Director elects to receive his or her distribution in installments, the number of Shares
issued in connection with Deferred Stock Units on each installment date will be determined by
multiplying (x) the number of Deferred Stock Units remaining in the Deferral Account on the date
the installment is paid by (y) a fraction, the numerator of which is one (1) and the denominator of
which is the number of remaining unpaid installments, and by rounding such result to the nearest
whole number of Shares. The Eligible Director’s Deferral Account will be reduced to reflect each
installment payment.

(d) Changes to Distributions Elections.

(i) Future Deferrals. An Eligible Director may, with respect to future Fee Deferrals, elect to
have a different Payment Commencement Date and/or Method of Payment from that in effect with
respect to prior Fee Deferrals by submitting a new deferral election form no later than
December 31 of the year prior to the year in which the election takes effect. Any election
will apply only to amounts in the Eligible Director’s Deferral Account that are attributable
to Fee Deferrals credited after the date of the new election.

(ii) Previously Deferred Amounts. An Eligible Director or former Eligible Director may elect
to change his Payment Commencement Date and/or Method of Payment with respect to prior Fee
Deferrals only if the following requirements are met:

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	 	A.	 	The election to change the Payment Commencement Date and/or
Method of Payment must be received by the Committee no later than 12 months
prior to the current Payment Commencement Date;
	 
	 	B.	 	The change in election will not be effective until 12 months
after the date the change in election is received by the Committee; and
	 
	 	C.	 	The new Payment Commencement Date is no earlier than the fifth
anniversary after the current Payment Commencement Date.

			
	V.	 	PRIOR PLAN ACCOUNTS

5.1 Establishment of Prior Plan Accounts; Transfer of Balances From Prior Plans. Schering-Plough
will establish and maintain a Prior Plan Account in the name of each Participant who, as of the day
prior to the Effective Date, had an outstanding account balance under a Prior Plan. Each
Participant’s outstanding account balances under all Prior Plans will be transferred and credited
to the Participant’s Prior Plan Account as of the Effective Date and, as a result of such transfer
and crediting, all of Schering-Plough’s obligations and Participant’s rights under each Prior Plan
will be extinguished and become obligations and rights under this Plan. Each Prior Plan Account is
comprised of three funds:

	(a)	 	Simple Interest Fund. The Simple Interest Fund of each Participant will be credited on the
Effective Date with amounts transferred on his or her behalf from his or her simple interest
fund under the prior Directors Deferred Compensation Plan. Amounts credited to the Simple
Interest Fund are credited as cash and are adjusted annually in the same manner as the Simple
Interest Fund under a Cash Deferral Sub-Account, as provided in Section 4.4(b)(i).

	(b)	 	Stock Equivalency Fund. The Stock Equivalency Fund of each Participant will be credited on
the Effective Date with amounts transferred on his or her behalf from his or her deferred
account under the prior Directors Deferred Stock Equivalency Program and from his or her
Schering-Plough Stock Equivalency Fund under the prior Directors Deferred Compensation Plan.
Amounts credited to the Stock Equivalency Fund are credited as Phantom Stock Units and are
adjusted annually in the same manner as the Share Deferral Sub-Account, as provided in Section
4.4(a).

	(c)	 	DSU Fund. The DSU Fund of each Participant will be credited on the Effective Date with
amounts transferred on his or her behalf from his or her stock unit account under the prior
Directors Stock Award Plan. Amounts credited to the DSU Fund are credited as Deferred Stock
Units that are payable in Prior Plan Shares and are adjusted annually in the same manner as
the Share Deferral Sub-Account, as provided in Section 4.4(a).

	(d)	 	Reallocation of Amounts Credited to Simple Interest Fund and Stock Equivalency Fund. A
Participant may elect to reallocate among his or her Simple Interest Fund

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and Stock Equivalency Fund all or a portion of amounts currently allocated to those funds, but
no reallocations into or out of the Participant’s DSU Fund is permitted. Reallocation
elections may be made no more than once each year and must be received by the Committee no
later than December 31 of the year prior to the year in which the reallocation takes effect.
Any such reallocation will take effect on the next January 1 after the election is made.

5.2 Application of Plan to Plan Prior Accounts. Notwithstanding any provision of a Prior Plan
to the contrary, or any elections made by a Participant under a Prior Plan, the provisions of this
Plan, including without limitation the provisions of Article VI, will govern and control the
payment of all amounts credited to a Prior Plan Account, and a Participant’s rights with respect to
any amounts transferred from an account under a Prior Plan to this Plan in accordance with Section
5.1 will be determined exclusively under this Plan.

5.3 Distribution of Prior Plan Accounts. Each Participant may elect the Payment Commencement
Date and Method of Payment that will apply to the amounts credited to his or her Prior Plan Account
under the same terms and conditions applicable to distribution elections for amounts credited to
Deferral Accounts, as provided in Section 4.5. This election must be received by the Committee no
later than the December 31, 2006. If a Participant does not timely submit a distribution election
for amounts credited to his Prior Plan Account, then the amounts will be distributed in accordance
with the Participant’s distribution elections in effect under the Prior Plans as of the Effective
Date or, if no such election is in effective with respect to amounts transferred from one or more
of the Prior Plans, in a single lump sum no later than the fifth business day following the date
that the Participant terminates service with the Board for any reason.

			
	VI.	 	PERMITTED ACCELERATIONS

6.1 Accelerated Payment of Plan Accounts. Except as provided in this Article VI, in no event may
the payment of amounts credited to a Participant’s Deferral Account or Prior Plan Account be made
prior to the Payment Commencement Dates determined under Articles IV or V. Accelerated payment of
amounts credited to a Participant’s Deferral Account or Prior Plan Account will be permitted only
in the following circumstances:

	(a)	 	Death. Upon the Participant’s death, any amounts remaining in the deceased Participant’s
Deferral Account and Prior Plan Account will be paid in a single lump sum to the beneficiary
or beneficiaries designated by the Participant on his most current deferral election form (or,
absent such designation, to the Participant’s estate) as soon as practicable after the
Committee receives satisfactory verification of the Participant’s death.

	(b)	 	Change in Control. Within 30 days after a Change in Control, all amounts remaining in a
Participant’s Deferral Account and Prior Plan Account as of the date of the Change of Control
will be paid to the Participant in an immediate lump sum

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cash payment. For this purpose, the dollar value of Deferred Stock Units and Phantom Stock
Units will be determined based on the Change in Control Price.

	(c)	 	Unforeseeable Emergencies. If a Participant experiences an Unforeseeable Emergency, the
Participant may request a hardship withdrawal of all or a portion of the amounts credited to
the Participant’s Deferral Account and/or Prior Plan Account. In such event, the Participant
will provide the Committee with such evidence as the Committee deems necessary and appropriate
to review and confirm the existence of the Unforeseeable Emergency. Upon completion of its
review, the Committee will determine, in its sole discretion, whether the requested hardship
withdrawal will be approved and the amount that may be distributed to the Participant in
connection with the Unforeseeable Emergency. The amount distributed in connection with an
Unforeseeable Emergency may not exceed the lesser of (i) the amount necessary to satisfy the
Unforeseen Emergency, plus amounts necessary to pay taxes reasonably anticipated as a result
of the distribution and (ii) the dollar value of amounts that remain credited to Participant’s
Deferral Account and Prior Plan Account. In making its determination, the Committee will be
guided by the prevailing authorities under the Code and will take into account the extent to
which the Unforeseeable Emergency is or may be relieved through reimbursement or compensation
by insurance or otherwise, or by liquidation of the Participant’s assets (to the extent the
liquidation of such assets would not itself cause severe financial hardship). If the hardship
withdrawal does not result in a complete distribution of the amounts credited to the
Participant’s Deferral Account and Prior Plan Account, amounts that are payable in cash will
be distributed first. Hardship withdrawals on account of an Unforeseeable Emergency will be
distributed as soon as practicable after the date that the Committee, in its discretion,
approves the withdrawal. An Eligible Director may not participate in any decision of the Board
regarding his or her request for a hardship withdrawal under this Section 6.1(c).

			
	VII.	 	SHARES SUBJECT TO THE PLAN; ADJUSTMENTS

7.1 Shares Available. The Shares issuable under the Plan are authorized but unissued Shares or
Shares held in Schering-Plough’s treasury. The total number of Shares that may be issued under the
Plan may not exceed 1,000,000 Shares, as adjusted in accordance with Section 7.2. In addition, any
Prior Plan Shares underlying Deferred Stock Units credited to the DSU Fund under a Prior Plan
Account on the Effective Date and that have not been issued under a Prior Plan are available for
issuance under this Plan, but such Prior Plan Shares may be issued only in connection with Deferred
Stock Units credited to the DSU Fund under a Prior Plan Account.

7.2 Adjustments. If there is a change in the outstanding Shares by reason of any stock split,
reverse stock split, dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), extraordinary cash dividend, recapitalization, split-up, spin-off,
reorganization, combination, repurchase or exchange of Shares or other securities, the issuance of
warrants or other rights to purchase Shares or other securities,

12

 

or other similar corporate transaction or event, then in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the Plan, an adjustment
in the number or kind of Shares that may be issued under the Plan, in the number of Deferred Stock
Units credited to a Deferral Account or Prior Plan Account, in the number of Phantom Stock Units
credited to a Prior Plan Account, or in the kind of Shares underlying Deferred Stock Units and
Phantom Stock Units will be made by the Committee and such adjustment will be conclusive and
binding for all purposes under the Plan.

7.3 Fractional Shares. No fractional Shares will be issued under the Plan. If a Participant is
owed a fractional Share under the Plan, he or she will receive instead cash equal to the Fair
Market Value of the fractional Share on the date of settlement.

7.4 Shareholder Approval Requirement For Shares. Notwithstanding anything in the Plan to the
contrary, unless and until the Plan is approved by a vote of the holders of at least a majority of
the Shares present in person or by proxy and entitled to vote at Schering-Plough’ 2006 Annual
Meeting, no Shares may be issued under the Plan, except that Prior Plan Shares may be issued under
Article V in payment of Deferred Stock Units credited to the DSU Fund under a Prior Plan Account.

(a) Consequences of Non-Approval. If the Plan is not approved by shareholders at the 2006 Annual
Meeting, then:

(i) All Director Fees payable after the 2006 Annual Meeting will be paid exclusively in cash;

(ii) All Share Deferrals elections under the Plan shall immediately convert to Cash Deferrals
elections and no Share Deferral Sub-Accounts will be opened;

(iii) The DSU Fund under the Cash Deferral Sub-Account will be replaced by a Stock
Equivalency Fund that holds Phantom Stock Units; and

(iv) The DSU Fund under each Prior Plan Account will remain open and continue to hold
Deferred Share Units payable in Prior Plan Shares.

			
	VIII.	 	AMENDMENT AND TERMINATION

8.1 Amendment. The Board may amend the Plan at any time without the approval of
Schering-Plough’s shareholders, except that none of the following amendments will be effective
unless and until it is approved by the holders of at least a majority of the Shares present in
person or by proxy and entitled to vote at a meeting of Schering-Plough’s shareholders: (a) an
increase to the aggregate number of Shares that may be issued under the Plan, (b) a material
modification to the eligibility requirements for participation in the Plan, (c) a provision
allowing the payment of Director Fees to be made in a form of equity other than Shares or (d) a
change to the percentage of Base Director Fees that is payable in Shares. Notwithstanding the
foregoing, this Plan is intended to incorporate all

13

 

applicable restrictions of Section 409A of the Code and guidance issued by the Department of the
Treasury thereunder, and this Plan will be deemed to be amended as necessary to comply with those
requirements.

8.2 Termination. The Plan will terminate on May 31, 2016 or, if earlier, upon the adoption of a
resolution of the Board terminating the Plan. No Director Fees will be paid and no Fee Deferrals
will be credited to any Deferral Accounts under this Plan after it has been terminated. Any
existing Fee Deferrals will remain in effect and will continue to be governed by the terms of the
Plan after the Plan is terminated.

			
	IX.	 	GENERAL PROVISIONS

9.1 Nontransferability of Rights. A Participant’s, or his or her beneficiary’s, right to
receive payments under the Plan may not, in any manner, be any manner alienated, anticipated, sold,
assigned, pledged, encumbered or transferred, other than by will or by the laws of descent or
distribution, by the Participant, and no other persons may otherwise acquire any rights to those
payments; except that all or a portion of a Participant’s Director Fees, or Deferral Account and
Prior Plan Account balances may be paid to the Participant’s spouse pursuant to a qualified
domestic relations order, as defined in Section 414(p) of the Code.

9.2 No Implied Rights. Neither the establishment and subsequent operation of the Plan, nor the
payment of Director Fees, nor the crediting of Fee Deferrals to a Deferral Account, nor any other
action taken pursuant to the Plan, constitutes or is evidence of any agreement or understanding,
express or implied, that an individual has a right to continue as an Eligible Director for any
period of time or at any particular rate of compensation.

9.3 No Rights as Stockholders. No person has any rights as a shareholder of Schering-Plough
with respect to any Shares or Prior Plan Shares payable under the Plan unless and until such time
as certificates for the Shares are registered in the person’s name.

9.4 Nature of Deferral Accounts and Prior Plan Accounts. Deferral Accounts and Prior Plan
Accounts (and all sub-accounts and funds under those accounts) established and maintained under the
Plan, and all credits and adjustments to those accounts, sub-accounts and funds, are bookkeeping
entries only and reflect a mere unfunded and unsecured promise by Schering-Plough to issue Shares
or make cash payments in the future. No Shares or other assets or funds of Schering-Plough will be
removed from the claims of Schering-Plough’s general or judgment creditors or otherwise be made
available until Shares are actually issued or cash is actually paid to Participants or their
beneficiaries as provided in the Plan. The Participants and their beneficiaries have the status of
general unsecured creditors of Schering-Plough. The Corporation may, however, in its discretion and
subject to the requirements of Section 409A of the Code, set aside funds in a trust or other
vehicle, which funds will remain subject to the claims of its creditors, in order to assist it in
meeting its obligations under the Plan, if such

14

 

arrangement will not cause the Plan to be considered a funded deferred compensation plan under the
Code.

9.5 Compliance with Applicable Law. The obligations of Schering-Plough to issue Shares and
permit Fee Deferrals under the Plan are subject to (a) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to the Shares and Fee
Deferrals, (b) the condition that the Shares be listed (or authorized for listing upon official
notice of issuance) upon each stock exchange upon which Shares are listed, (c) compliance with
Section 409A of the Code and (d) all other applicable laws, regulations, rules and orders then in
effect. The issuance of Shares and Deferred Stock Units under the Plan is intended to satisfy the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934. If any provision or this Plan
would otherwise frustrate or conflict with such intent, that provision will be interpreted and
deemed amended so as to avoid such conflict.

9.6 Headings. Section and paragraph headings are for reference only. In the event of a conflict
between the heading and content of a section or paragraph, the content will control.

9.7 Governing Law; Severability. The Plan and all determinations made and actions taken under
the Plan are governed by the internal substantive laws, and not the choice of law rules, of the
State of New Jersey and will be construed accordingly, to the extent not superseded by applicable
federal law. If any provision of the Plan is held unlawful or otherwise invalid or unenforceable in
whole or in part, the unlawfulness, invalidity or unenforceability will not affect any other
provision of the Plan or part thereof, each of which will remain in full force and effect.

15EX-10.M.II

 

Exhibit 10(m)(ii)

SCHERING-PLOUGH CORPORATION

OPERATIONS MANAGEMENT TEAM INCENTIVE PLAN

(As Amended and Restated Effective June 26, 2006)

1. Plan Objective

The Schering-Plough Corporation Operations Management Team Incentive Plan, as amended from time to
time (alternatively referred to as the “OMTIP” or the “Plan”), is designed to encourage
results-oriented actions on the part of members of the Operations Management Team (“OMT”) of
Schering-Plough Corporation (the “Company”). The Plan is intended to align closely financial
rewards with the achievement of specific performance objectives.

2. Eligibility

All management employees of the Company and its subsidiaries who are members of the OMT are
eligible to participate in the Plan. The Administrator (as defined in Section 3 below) may select
any other management employees 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 (the “Committee”) with respect to employees who are executives of the Company who are
subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934
(“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 other committee. The term “Administrator” shall mean the
Committee, as applied to Section 16 Executives, and the CEO or an individual or committee to which
authority has been delegated, as applied to all other employees.

     (b) The Administrator shall have full power 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 or power, where appropriate. Only the Committee shall
take the foregoing actions with respect to Section 16 Executives.

     (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, including the
Participants and their respective beneficiaries.

1

 

4. Target Awards and Performance Goals

     (a) At the beginning of each plan year designated by the Administrator (a “Plan
Year”), the Administrator shall establish for each Participant a target incentive award, which
shall be expressed as a dollar amount, a percentage of salary or otherwise. The Administrator
shall establish for each Section 16 Executive a maximum award that may be paid for the Plan Year.
The maximum award amount for Section 16 Executives will remain fixed for the entire Plan Year and
may not be increased based on an increase in salary during the Plan Year or otherwise. The target
awards will be based on a number of factors, including but not limited to:

	•	 	Market competitiveness of the position
	 
	•	 	Job level
	 
	•	 	Base salary level
	 
	•	 	Past individual performance
	 
	•	 	Expected contribution to future Company performance and business impact

     (b) At the beginning of each Plan Year, the Administrator shall establish for each
Participant performance goals that must be met in order for an award to be payable for the Plan
Year. The Administrator shall establish in writing (i) the performance goals that must be met,
(ii) the threshold, target and maximum amounts that may be paid if the performance goals are met,
and (iii) any other conditions that the Administrator deems appropriate and consistent with the
Plan and, in the case of Section 16 Executives, the exception for “qualified performance-based
compensation” (the “Section 162(m) Exception”) under Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”). The Administrator shall establish objective performance goals for
each Participant related to the Participant’s business unit or the performance of the Company and
its parents, subsidiaries and affiliates as a whole, or any combination of the foregoing. The
Administrator may also establish subjective performance goals for Participants; provided that, for
Section 16 Executives, the subjective performance goals may only be used to reduce, and not
increase, the award otherwise payable under the Plan. The Company shall notify each Participant of
his or her target award and the performance goals for the Plan Year.

     (c) The objectively determinable performance goals shall be based on one or more
of the following criteria related to the Participant’s business unit or the performance of the
Company and its parents, subsidiaries and affiliates as a whole, or any combination of the
foregoing: stock price, earnings per share, net earnings, operating or other earnings, profits,
revenues, net cash flow, financial return ratios, return on assets, stockholder return, return on
equity, growth in assets, unit volume, sales, market share, drug discovery or other scientific
goals, pre-clinical or clinical goals, regulatory approvals, or strategic business criteria
consisting of one or more objectives based on meeting specified revenue goals, market penetration
goals, geographic business expansion goals, cost targets, goals relating to acquisitions or
divestitures, or strategic partnerships.

     (d) For Section 16 Executives, the Administrator must establish the target awards
and performance goals no later than the earlier of (i) 90 days after the beginning of the Plan Year
or (ii) the date on which 25% of the Plan Year has been completed, or such other date as may be
required or permitted under applicable regulations under section 162(m) of the Code. The
performance goals for each Section 16 Executive for each Plan Year are intended to satisfy the
requirements for the Section 162(m) Exception, including the requirement that the achievement of
the performance goals be substantially uncertain at the time they are established and that the
performance goals be established in such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the performance goals have been met.

2

 

     (e) Each Participant will earn an award for a Plan Year based on the achievement
of the performance goals established by the Administrator. The Administrator may adjust, upward or
downward, the award for each Participant who is not a Section 16 Executive, based on the
Administrator’s determination of the Participant’s achievement of personal and other performance
goals established by the Administrator and other factors as the Administrator determines. The
Administrator may reduce (but not increase) the award for each Section 16 Executive based on the
Administrator’s determination of the Participant’s achievement of personal and other performance
goals established by the Administrator and other factors as the Administrator determines. The
Administrator shall not be authorized to increase the amount of any award of a Section 16 Executive
that would otherwise be payable pursuant to the terms of the Plan.

     (f) The maximum award that a Participant may receive for any Plan Year is
$9,000,000.

5. Payment of Incentive Awards

     (a) The Administrator shall certify and announce to the Participants the awards
that will be paid by the Company as soon as practicable following the final determination of the
Company’s financial results for the Plan Year. Payment of the awards certified by the
Administrator shall be made in a single lump sum cash payment by March 15th of the year
immediately following the close of the Plan Year.

     (b) Participants must be employed on the last day of the Plan Year to be eligible
for an award from the Plan, except as described in subsections (c) and (d) below. Notwithstanding
any other provision of this Plan, in no event may the Administrator waive the achievement of
performance goals for any Section 16 Executive except in the event of such Section 16 Executive’s
death or disability.

     (c) Participants who terminate employment prior to the last day of the Plan Year
will not be eligible for any award payment for that Plan Year, except as the Administrator may
otherwise determine. Unless the Administrator determines otherwise:

          (i) Participants who die or who retire under a Company-sponsored retirement
program during the Plan Year will be eligible for a prorated award based on the achievement of the
performance goals for the Plan Year and appropriate adjustment as described in Section 4. The
prorated award will be calculated from the date when they became eligible for the Plan to the date
of death or retirement rounded to the nearest whole month. Payment will be made in a single
payment at the same time as all other incentive awards for the Plan Year are distributed. In the
case of the death of a Participant, any award payable to the Participant shall be paid to his or
her beneficiary. For this purpose, the Company will use the beneficiary named under the
Company-sponsored life insurance plan. If no life insurance beneficiary is designated, the
beneficiary will be the decedent’s estate.

          (ii) Participants who leave the Company under a Company-sponsored disability
program, separation program (other than in the case of termination for cause) or other program
approved by the Management Committee will be eligible for a prorated award based on achievement of
the performance goals for the year and appropriate adjustment as described in Section 4. The
awards will be calculated from the date when they became eligible for the Plan to the effective
date of separation rounded to the nearest whole month. Payment will be made in a single payment at
the same time as all other incentive awards for the Plan Year are distributed.

     (d) The Administrator may establish appropriate terms and conditions to
accommodate newly hired and transferred employees, consistent, in the case of Section 16
Executives, with the requirements of the Section 162(m) Exception.

3

 

6. Changes to Performance Goals and Target Awards

At any time prior to the final determination of awards, for Participants other than Section 16
Executives, 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. The Administrator may make the
foregoing adjustments with respect to Section 16 Executives’ awards to the extent the Administrator
deems appropriate, but only to the extent consistent with the requirements of the Section 162(m)
Exception.

7. Amendments and Termination

     (a) The Company may at any time amend or terminate the Plan by action of the
Committee; provided, however, that the Committee shall not amend the Plan without stockholder
approval if such approval is required in order for awards under the Plan to qualify for the Section
162(m) Exception. Without limiting the foregoing, the Company, by action of 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.

     (b) The Plan must be reapproved by the stockholders no later than the first
stockholders meeting that occurs in the fifth year following the year in which the stockholders
previously approved the Plan, if required in order for awards under the Plan to qualify for the
Section 162(m) Exception under the Code or the regulations thereunder.

8. 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 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(c) 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.

4

 

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

     (e) It is the intent of the Company that the Plan and awards under the Plan for
Section 16 Executives comply with the requirements for the Section 162(m) Exception. To the extent
that any requirement of the Section 162(m) Exception as set forth in the Plan ceases to be required
under Section 162(m) of the Code, that Plan provision shall cease to apply.

     (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) 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.

5

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