Document:

EX-10.D

 

SCHERING-PLOUGH CORPORATION

2006 STOCK INCENTIVE PLAN

(As Amended and Restated Effective as of February 29, 2008)

 

 

SCHERING-PLOUGH CORPORATION

2006 STOCK INCENTIVE PLAN

(As Amended and Restated Effective as of February 29, 2008)

I. ESTABLISHMENT AND PURPOSE

1.1 Purpose. The purpose of this Schering-Plough Corporation 2006 Stock Incentive Plan (the
“Plan”) is to enable Schering-Plough Corporation to achieve superior financial performance, as
reflected in the performance of its Shares and other key financial or operating indicators by (i)
providing incentives and rewards to certain Employees who are in a position to contribute
materially to the success and long-term objectives of Schering-Plough, (ii) aiding in the
recruitment and retention of Employees of outstanding ability and (iii) providing Employees an
opportunity to acquire or expand equity interests in Schering-Plough, thus aligning the interests
of such Employees with those of Schering-Plough’s shareholders. Schering-Plough expects that it
will benefit from the added interest that such Employees will have in the welfare of
Schering-Plough as a result of their ownership or increased ownership of Schering-Plough’s Shares.

1.2 Effective Date; Shareholder Approval. The Plan is effective as of May 19, 2006, subject
to the approval of the Plan by the affirmative vote of the holders of a majority of the Shares
present in person or by proxy and entitled to vote at the 2006 Annual Meeting of Shareholders of
Schering-Plough, or any adjournment of such meeting. Any Awards granted under the Plan prior to the
approval of the Plan by Schering-Plough’s shareholders, as provided herein, shall be contingent on
such approval; if such approval is not obtained, the Plan shall have no effect, and any Awards
granted under the Plan shall be rescinded.

II. DEFINITIONS

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

     “Acquired Company” means any business, corporation or other entity acquired by Schering-Plough
or its Affiliates or Subsidiaries.

     “Acquired Grantee” means the grantee of a stock-based award of an Acquired Company.

     “Affiliate” means a corporation or other entity controlled by, controlling or under common
control with Schering-Plough.

     “Award” means any form of incentive or performance award granted under the Plan, whether
singly or in combination, to a Participant by the Committee pursuant to such

 

 

terms, conditions, restrictions and/or limitations (if any) as the Committee may establish and
set forth in the applicable Award Certificate. Awards granted under the Plan may consist of:

          (a) “Stock Options” awarded pursuant to Section 4.4;

          (b) “Restricted Stock” awarded pursuant to Section 4.5;

          (c) “Deferred Stock Units” awarded pursuant to Section 4.6;

          (d) “Other Stock-Based Awards” awarded pursuant to Section 4.7;

          (e) “Performance Awards”, including “Qualified Performance Awards,” awarded
pursuant to Section 4.8; and

          (f) “Substitute Awards” awarded pursuant to Section 4.9.

     “Award Certificate” means the document issued, either in writing or by electronic means, by
Schering-Plough to a Participant evidencing the grant of an Award and setting forth the specific
terms, conditions, restrictions and limitations applicable to the Award.

     “Beneficiary” means the person or persons designated by the Participant in accordance with
Section 7.6 to acquire the Participant’s right in the Plan in the event of the Participant’s death.

     “Board” means the Board of Directors of Schering-Plough.

     “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 in 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

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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 the
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 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

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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; provided, however, that in the case of Stock Options, the
Change in Control Price shall be in all cases the Fair Market Value of a Share on the date such
Stock Option is exercised or cancelled. 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 shall be determined in
the sole discretion of the Committee.

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

     “Committee” means the Compensation Committee of the Board of Directors, or such other
successor committee or subcommittee of the Board formed to act on performance-based compensation
for Covered Employees, which is comprised solely of two or more persons who are outside directors
within the meaning of Section 162(m)(4)(C)(i) of the Code and the applicable regulations and
non-employee directors within the meaning of Rule 16b-3(b)(3) under the Exchange Act.

     “Controlled Group Member” means Schering-Plough and each other company that is required to be
aggregated with Schering-Plough under Code Sections 414(b), (c) and (m).

     “Corporation” means Schering-Plough Corporation.

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     “Covered Employee” means an Employee who is, or who the Committee determines may be, a
“covered employee” within the meaning of Section 162(m)(3) of the Code in the fiscal year in which
Schering-Plough would expect to be able to claim a tax deduction with respect to a Performance
Award.

     “Deferred Stock Account” means a hypothetical bookkeeping account established and maintained
by Schering-Plough on behalf of a Participant pursuant to Section 4.6(a) to track Deferred Stock
Units awarded to the Participant pending the distribution of Shares in settlement of such units.

     “Deferred Stock Unit” means the Award of an unfunded contractual right granted under Section
4.6 to receive one Share in the future, subject to any restrictions, as the Committee, in its
discretion, may determine.

     “Disabled” or “Disability” 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.

     “Dividend Equivalent” means an amount equal to the cash dividend or the Fair Market Value of
the stock dividend that would be paid on each Share underlying an Award if the Share were duly
issued and outstanding on the dividend record date.

     “Effective Date” means May 19, 2006.

     “Employee” means any individual who performs services as a common law employee for
Schering-Plough or an Affiliate or Subsidiary.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Exercise Price” means the price per Share, as fixed by the Committee, at which Shares may be
purchased under a Stock Option.

     “Fair Market Value” of a Share means either:

     (a) The closing sales price of a Share as reported on the New York Stock Exchange on the
applicable date,

     (b) If no sales of Shares are reported for such date, the mean between the bid and asked
price of a Share on such Exchange at the close of the market on such date, or

     (c) In the event that the method for determining fair market value described in clauses (a)
or (b) is not practicable, the fair market value of a Share determined in

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accordance with any other reasonable method approved by the Committee in its discretion.

     “GAAP” means United States generally accepted accounting principles.

     “Incentive Stock Option” means a Stock Option granted under Section 4.4 of the Plan that meets
the requirements of Section 422 of the Code and any regulations or rules promulgated thereunder and
is designated in the Award Certificate to be an Incentive Stock Option.

     “Involuntary Termination” means a Termination of Employment initiated by Schering-Plough or an
Affiliate or Subsidiary other than a Termination for Cause or a Termination Due to Business
Divestiture.

     “Nonqualified Stock Option” means any Stock Option granted under Section 4.4 of the Plan that
is not an Incentive Stock Option.

     “Other Stock-Based Award” means an Award (other than a Stock Option, Restricted Stock or
Deferred Stock Unit) granted under Section 4.7 of the Plan that consists of, or is denominated in,
payable in, valued in whole or in part by reference to, or otherwise based on or related to,
Shares.

     “Participant” means an Employee or Acquired Grantee who has been granted an Award under the
Plan.

     “Performance Award” means an Award granted under Section 4.8 of the Plan that is granted,
vested or paid solely on account of the attainment of a specified performance target in relation to
one or more Performance Measures.

     “Performance Cycle” means a period typically measured by Schering-Plough’s fiscal year or
years over which the level of attainment of one or more Performance Measures shall be assessed;
provided, however, that the Committee, in its discretion, may determine to designate a Performance
Cycle that is less than a full fiscal year.

     “Performance Measure” means, with respect to any Performance Award, the business criteria
selected by the Committee to measure the level of performance of Schering-Plough during a
Performance Cycle. The Committee may select as the Performance Measure for a Performance Cycle any
one or combination of the following corporate measures, as interpreted by the Committee:

     (a) Net operating profit after taxes;

     (b) Operating profit before taxes;

     (c) Return on equity;

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     (d) Return on assets or net assets;

     (e) Total shareholder return;

     (f) Total shareholder return (as compared with a peer group of Schering-Plough);

     (g) Earnings before income taxes;

     (h) Earnings per Share;

     (i) Net income;

     (j) Free cash flow;

     (k) Free cash flow per Share;

     (l) Revenue (or any component thereof);

     (m) Revenue growth;

     (n) Share performance;

     (o) Relative Share performance;

     (p) Economic value added; and/or

     (q) Return on capital.

     “Plan” means the Schering-Plough Corporation 2006 Stock Incentive Plan, as set forth in this
document and as may be amended from time to time.

     “Prior Plan” means the Schering-Plough Corporation 2002 Stock Incentive Plan.

     “Qualified Performance Award” means a Performance Award that is intended by the Committee to
meet the requirements for “qualified performance-based compensation” within the meaning of Code
Section 162(m) and Treasury Regulation Section 1.162-27(e).

     “Qualified Performance Award Determination Period” means the period within which Committee
determinations regarding Performance Measures, targets and payout formulas in connection with a
Qualified Performance Award must be made. The Qualified Performance Award Determination Period is
the period beginning on the first day of a Performance Cycle and ending no later than 90 days after
commencement of the Performance Cycle; provided, however, that in the case of a Performance Cycle
that is less than 12 months in duration, the Qualified Performance Award Determination Period shall
end no later than the date on which 25% of the Performance Cycle has elapsed.

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     “Reporting Person” means an Employee who is subject to the reporting requirements of Section
16(a) of the Exchange Act.

     “Restricted Stock” means Shares issued pursuant to Section 4.5, which are subject to such
restrictions as the Committee, in its discretion, shall impose.

     “Restriction Period” means the period of time during which the Restricted Stock Awards will
remain subject to restrictions imposed by the Committee and set forth in the Award Certificate.

     “Retirement” means, for purposes of a particular Award, an Employee’s “retirement” as defined
in the Committee’s grant guidelines in effect as of the date the Award is granted to the Employee
or, if no such grant guidelines are in effect as of the date of grant (or if such guidelines are in
effect, but do not define “retirement”), an Employee’s Termination of Employment on or after the
earliest date the Employee is eligible to retire under Schering-Plough’s tax-qualified retirement
plans, or in the case of a non-U.S. Employee, under the Worldwide Retirement Plan.

     “Section 409A Specified Employee” means, with respect to Terminations of Employment that occur
between April 1st of a calendar year (beginning with the 2006 calendar year) and the following
March 31st, any Employee who meets the requirements of paragraphs (a), (b) or (c) below at any time
during the 12-month period ending on December 31st of the calendar year immediately preceding such
April 1st.

     (a) An officer of Schering-Plough or any other Controlled Group Member having annual
compensation greater than $135,000 in 2005 or $140,000 in 2006 (and as adjusted under Section
416(i)(1) of the Code for years after 2006). Notwithstanding the foregoing, an Employee will be
treated as an officer for purposes of the Plan only if such Employee is one of the top 50
highest paid employees of Schering-Plough and all other Controlled Group Members who exceed the
applicable annual compensation threshold described herein at any time during a calendar year.

     (b) A “5% owner” of Schering-Plough. A “5% owner” means any person who owns (or is
considered as owning within the meaning of Code Section 318) more than 5% of the outstanding
stock of Schering-Plough or stock possessing more than 5% of the total combined voting power of
all stock of Schering-Plough. In determining percentage ownership hereunder, Controlled Group
Members shall be treated as separate employers.

     (c) A “1% owner” of Schering-Plough having an annual compensation from Schering-Plough of
more than $150,000. “1% owner” means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than 1% of the outstanding stock of Schering-Plough or stock
possessing more than 1% of the total combined voting power of all stock of Schering-Plough. In
determining percentage ownership, Controlled Group Members shall be treated as separate
employers.

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However, in determining whether an individual has annual compensation or more than
$150,000, compensation from each Controlled Group Member shall be taken into account.

     (d) For purposes of paragraphs (a), (b) and (c) above, “annual compensation” shall mean
the Form W-2 compensation of a Participant for the applicable calendar year.

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

     “Stock Option” means a right granted under Section 4.4 of the Plan to purchase from
Schering-Plough a stated number of Shares at the Exercise Price. Stock Options awarded under the
Plan shall be in the form of either Incentive Stock Options or Nonqualified Stock Options.

     “Subsidiary” means any corporation, partnership, joint venture or other entity during any
period in which at least a 50% voting or profit interest is owned, directly or indirectly, by
Schering-Plough or any successor to Schering-Plough.

     “Termination Due to Business Divestiture” means a Termination of Employment due to a
transaction or series of related transactions (other than a transaction or series of transactions
that are a part of a Change in Control) that result in a divestiture, sale, transfer, assignment or
other disposition of any division, subsidiary, business unit, product line or group, or any other
asset of Schering-Plough or any of its affiliates.

     “Termination for Cause” shall have the definition prescribed in the current employment
agreement, if any, between Schering-Plough and the relevant Employee or, in the absence of such
definition, shall mean a Termination of Employment initiated by Schering-Plough or an Affiliate or
Subsidiary incident to or connected with a determination that the Employee has engaged in
misappropriation, theft, embezzlement, kick-backs, bribery or similar deliberate, gross or willful
misconduct or dishonest acts or omissions. Termination for Cause shall also include such a
Termination of Employment incident to or in connection with acts or omissions of the Employee that
the Committee reasonably determines to be willfully or wantonly harmful to, or detrimental to the
interests of, Schering-Plough or any of its Affiliates or Subsidiaries, monetarily or otherwise.

     “Termination of Employment” means the date of cessation of an Employee’s employment
relationship with Schering-Plough and any Affiliate or Subsidiary for any reason, with or without
cause, as determined by Schering-Plough. A transfer of an Employee between and among
Schering-Plough, an Affiliate or a Subsidiary shall not be deemed a Termination of Employment for
purposes of the Plan.

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III. ADMINISTRATION

3.1 The Committee. The Plan shall be administered by the Committee.

3.2 Authority of the Committee. The Committee shall have authority, in its sole and
absolute discretion and consistent with applicable law and regulation, and subject to the terms of
the Plan, to:

     (a) Interpret and administer the Plan and any instrument or agreement relating to the Plan;

     (b) Prescribe the rules and regulations that it deems necessary for the proper operation
and administration of the Plan, and amend or rescind any existing rules or regulations relating
the Plan;

     (c) Select Employees to receive Awards under the Plan;

     (d) Determine the form of an Award, the number of Shares subject to each Award, all the
terms and conditions of an Award, including, without limitation, the conditions on exercise or
vesting, the designation of Stock Options as Incentive Stock Options or Nonqualified Stock
Options, and the circumstances in which an Award may be settled in cash or Shares or may be
cancelled, forfeited or suspended, and the terms of the Award Certificate;

     (e) Determine whether Awards will be granted singly, in combination or in tandem;

     (f) Establish and interpret Performance Measures in connection with Performance Awards,
evaluate the level of performance over a Performance Cycle and, in the case of Qualified
Performance Awards, certify the level of performance attained with respect to Performance
Measures;

     (g) Waive or amend any terms, conditions, restrictions or limitations on an Award, except
that the prohibition on the repricing of Stock Options, as described in Section 4.4(h), and the
limitations on elections to defer payment of Deferred Stock Units, as described in Section
4.6(e), may not be waived;

     (h) Except to the extent that any such action would result in the imposition on a
Participant of an “additional tax” under Section 409A of the Code, accelerate the vesting,
exercise or lapse of restrictions on an Award when such action or actions would be in the best
interest of Schering-Plough;

     (i) Make any adjustments permitted by the Plan (including but not limited to adjustment of
the number of Shares available under the Plan or any Award) and any Award granted under the Plan
as may be appropriate pursuant to Article V;

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     (j) Subject to the requirements of Section 409A of the Code, determine under which
circumstances Awards may be deferred and the extent to which a deferral will be credited with
Dividend Equivalents and interest thereon;

     (k) Determine whether a Nonqualified Stock Option or Restricted Stock Award may be
transferable to family members, a family trust or a family partnership;

     (l) Establish any sub-plans and make any modifications to the Plan that the Committee may
determine to be necessary to implement and administer the Plan in countries outside the United
States;

     (m) Appoint such agents as it shall deem appropriate for proper administration of the Plan;
and

     (n) Take any and all other actions it deems necessary or advisable for the proper operation
or administration of the Plan.

3.3 Committee Determinations. All determinations of the Committee shall be made in its sole
discretion, in the best interest of Schering-Plough, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated individuals. Committee
determinations shall be made by a majority of its members present at a meeting at which a quorum is
present and shall be final, conclusive and binding on all persons having an interest in the Plan
and any Awards granted under the Plan. Any determination of the Committee that is reduced to
writing and signed by all of the members of the Committee shall be as fully effective as if it had
been made at a meeting duly held.

3.4 Delegation of Authority. The Committee, in its discretion and consistent with
applicable law and regulations, may delegate some or all of its authority and duties under the Plan
to such other individual, individuals or committee as it may deem advisable, under such conditions
and subject to such limitations as the Committee may establish. Notwithstanding the foregoing, only
the Committee shall have authority to grant and administer Awards to Covered Employees and other
Reporting Persons, to establish and certify Performance Measures for Qualified Performance Awards
and to grant Awards to any Employee who is acting as a delegate of the Committee in respect of the
Plan.

3.5 Employment of Advisors. The Committee may employ attorneys, consultants, accountants
and other advisors, and the Committee, Schering-Plough and the officers and directors of
Schering-Plough may rely upon the advice, opinions or valuations of the advisors employed.

3.6 No Liability. No member of the Committee, nor any person acting as a delegate of the
Committee in respect of the Plan, shall be liable for any losses incurred by any person resulting
from any action, interpretation or construction made in good faith with respect to the Plan or any
Award granted under the Plan.

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     IV. AWARDS

4.1 Eligibility. All Employees shall be eligible to receive Awards under the Plan.

4.2 Participation. The Committee, at its sole discretion, shall select from time to time
Participants from those persons eligible under Section 4.1 to receive Awards under the Plan.

4.3 Forms of Award. Awards shall be in the form determined by the Committee, in its
discretion, and shall be evidenced by an Award Certificate. Awards may be granted singly or in
combination or tandem with other Awards.

4.4 Stock Options. The Committee may grant Stock Options under the Plan to those Employees
whom the Committee may from time to time select, in the amounts and pursuant to such other terms
and conditions that the Committee, in its discretion, may determine and set forth in the Award
Certificate, subject to the following provisions.

     (a) Form. Stock Options granted under the Plan may, at the discretion of the
Committee, be in the form of Nonqualified Stock Options, Incentive Stock Options or a
combination of the two, subject to the restrictions set forth in paragraph (g) below with
respect to grants of Incentive Stock Options. The Committee shall designate the form of the
Stock Option at the time of grant and such form shall be specified in the Award Certificate.
Where both a Nonqualified Stock Option and an Incentive Stock Option are granted to an
Employee at the same time, such Awards shall be deemed to have been granted in separate
grants, shall be clearly identified, and in no event will the exercise of one such Award
affect the right to exercise the other Award.

     (b) Amount of Shares. The Committee may grant Stock Options to an Employee in
such amounts as the Committee may determine, subject to the limitations set forth in Section
5.1 of the Plan. The number of Shares subject to a Stock Option shall be set forth in the
Award Certificate.

     (c) Exercise Price. The Exercise Price of Stock Options granted under the Plan
shall be determined by the Committee at the time of grant and set forth in the Award
Certificate. In no event shall the Exercise Price with respect to any Share subject to a Stock
Option be set at a price that is less than the grant date Fair Market Value of a Share.

     (d) Option Term. Except as otherwise provided in paragraph (e)(iv) of this
Section 4.4, all Stock Options granted under the Plan shall lapse no later than the tenth
anniversary of the date of grant.

     (e) Timing of Exercise. Except as the Committee may otherwise determine at the
time of grant, and subject to (1) the Committee’s authority under Section 3.2(g) to waive or
amend any terms, conditions, limitations or restrictions of an Award, (2)

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Section 5.4 relating to Changes in Control and (3) the special forfeiture provisions of
Section 7.2, each Stock Option granted under the Plan shall be exercisable in whole or in
part, subject to the following conditions, limitations and restrictions.

     (i) Vesting. The Committee will determine and set forth in the Award Certificate the
date on which the Stock Options subject to the Award may first be exercised. Unless the
Award Certificate provides otherwise, and except as otherwise provided in this Section
4.4(e) and in Section 5.4 relating to Changes in Control, no Stock Option shall be
exercisable prior to the one-year anniversary of the date of grant.

     (ii) Retirement. Upon a Participant’s Retirement,

     (A) All Stock Options granted to the Participant during the one-year period
immediately preceding the Participant’s Retirement date that have not become
exercisable as of the such Retirement date shall be forfeited;

     (B) All Stock Options granted to the Participant more than one year prior to the
Participant’s Retirement date that have not become exercisable as of such Retirement
date shall continue to become exercisable in accordance with the vesting schedule set
out in the applicable Award Certificate; and

     (C) To the extent that Stock Options have become exercisable as of the
Participant’s Retirement date, or become exercisable after such date in accordance with
paragraph (B) above, such Stock Options must be exercised, if at all, within five years
after the Participant’s Retirement date, or, if earlier, no later than the original
expiration date of the Stock Option.

     (D) In the event the Participant’s death occurs after Retirement, the
Participant’s Stock Options that have not become exercisable in accordance with
paragraph (B) as of the date of the Participant’s death shall become immediately
exercisable and all of the Participant’s Stock Options must be exercised, if at all,
within the later of (x) five years from the Participant’s Retirement date or, if
earlier, the original expiration date of Stock Option and (y) one year from the
Participant’s date of death.

     (iii) Termination Due to Business Divestiture. Upon a Participant’s Termination Due
to Business Divestiture, all Stock Options granted to the Participant that have not become
exercisable as of the date of such Termination Due to Business Divestiture shall become
immediately exercisable and must be exercised, if at all, within five years after such
termination date, but in no event later than the original expiration date of the Stock
Option.

     (iv) Disability. Upon the Disability of a Participant, all Stock Options granted to
the Participant that have not become exercisable as of the date of

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Disability shall become immediately exercisable and shall remain exercisable for the
full duration of the Stock Option’s original term.

     (v) Death. Upon a Participant’s Termination of Employment due to his or her death
during the term of a Stock Option, all Stock Options held by the Participant at the time
of his or her death that are not already exercisable shall become immediately exercisable
and all Stock Options shall remain exercisable for the longer of (A) the full duration of
the Stock Option’s original term and (B) one year from the Participant’s date of death.
Stock Options of a deceased Participant may be exercised only by the Participant’s
Beneficiary or, if none, by the legal representative of the Participant’s estate or by the
person given authority to exercise such Stock Options by the Participant’s will or by
operation of law. In the event a Stock Option is exercised by the executor or
administrator of a deceased Participant, or by the person or persons to whom the Stock
Option has been transferred under the Participant’s will or the applicable laws of descent
and distribution, Schering-Plough shall be under no obligation to deliver Shares unless
and until Schering-Plough is satisfied that the person or persons exercising the Stock
Option is or are the duly appointed executor(s) or administrator(s) of the deceased
Participant or the person to whom the Stock Option has been transferred under the
Participant’s will or by the applicable laws of descent and distribution.

     (vi) Other Terminations. Upon an Employee’s Termination of Employment for any
reason other than death, Disability, Retirement, Termination Due to Business Divestiture
or Termination for Cause, all Stock Options that have not become exercisable as of the
date of termination shall be forfeited and to the extent that Stock Options have become
exercisable as of such date, such Stock Options must be exercised, if at all, within three
months after such Termination of Employment (one year in the case of an Involuntary
Termination), but in no event later than the original expiration date of the Stock Option.

     (f) Method of Exercise; Payment of Exercise Price. A Stock Option may be
exercised by giving written notice to Schering-Plough specifying the number of Shares to be
purchased, which shall be accompanied by full payment of the Exercise Price plus applicable
taxes, if any. No Stock Option shall be exercised for less than the lesser of 100 Shares or
the full number of Shares for which the Stock Option is then exercisable. No stock
certificates shall be registered and delivered, and no Participant shall have any rights to
dividends or other rights of a shareholder with respect to Shares subject to the Stock Option
until the Participant has given written notice of exercise, made full payment of the Exercise
Price for such Shares (including taxes) and, if requested by Schering-Plough, has given the
representation described in Section 7.4. Payment of the Exercise Price may be made in cash or
by certified check, bank draft, wire transfer, or postal or express money order. In addition,
at the discretion of the Committee, payment of all or a portion of the Exercise Price may be
made by —

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     (i) Delivering a properly executed exercise notice to Schering-Plough or its
agent, together with irrevocable instructions to a broker to deliver promptly to
Schering-Plough the amount of sale proceeds with respect to the portion of the Shares to be
acquired having a Fair Market Value on the date of exercise equal to the sum of the
applicable portion of the Exercise Price being so paid;

     (ii) Tendering (actually or by attestation) to Schering-Plough previously
acquired Shares that have been held by the Participant for at least six months, subject to
paragraph (iv), and that have a Fair Market Value on the day prior to the date of exercise
equal to the applicable portion of the Exercise Price being so paid, provided that the
Board has specifically approved the repurchase of such Shares (unless such approval is not
required by the terms of the By-Laws of Schering-Plough) and the Committee has determined
that, as of the date of repurchase, Schering-Plough is, and after the repurchase will
continue to be, able to pay its liabilities as they become due; or

     (iii) Provided such payment method has been expressly authorized by the Board or
the Committee in advance and subject to any requirements of applicable law and regulations,
instructing Schering-Plough to reduce the number of Shares that would otherwise be issued
by such number of Shares as have in the aggregate a Fair Market Value on the date of
exercise equal to the applicable portion of the Exercise Price being so paid.

     (iv) The Committee, in consideration of applicable accounting standards, may waive
any holding period on Shares required to tender pursuant to clause (ii).

     (g) Incentive Stock Options. Incentive Stock Options granted under the Plan
shall be subject to the following additional conditions, limitations and restrictions:

     (i) Eligibility. Incentive Stock Options may be granted only to Employees of
Schering-Plough or an Affiliate or Subsidiary that is a “subsidiary” or “parent
corporation”, within the meaning of Code Section 424, of Schering-Plough. In no event may
an Incentive Stock Option be granted to an Employee who owns stock possessing more than 10%
of the total combined voting power of all classes of stock of Schering-Plough or such
Affiliate or Subsidiary.

     (ii) Timing of Grant. No Incentive Stock Option shall be granted under the Plan
after the 10-year anniversary of earlier of (A) the date the Plan is adopted by the Board
and (B) the date the Plan is approved by Schering-Plough’s shareholders.

     (iii) Amount of Award. The aggregate Fair Market Value on the date of grant of the
Shares with respect to which such Incentive Stock Options first become exercisable during
any calendar year under the terms of the Plan for any Participant may not exceed $100,000.
For purposes of this $100,000 limit, the Participant’s Incentive Stock Options under this
Plan and all Plans maintained by

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Schering-Plough and its Affiliates and Subsidiaries shall be aggregated. To the extent
any Incentive Stock Option first becomes exercisable in a calendar year and such limit
would be exceeded, such Incentive Stock Option shall thereafter be treated as a
Nonqualified Stock Option for all purposes.

     (iv) Timing of Exercise. In the event that an Incentive Stock Option is exercised by
a Participant more than three months after a Participant’s Termination of Employment (or
more than 12 months after the Participant is Disabled), such Incentive Stock Option shall
thereafter be treated as a Nonqualified Stock Option for all purposes. For this purpose, an
Employee’s employment relationship shall be treated as continuing intact while the Employee
is on military leave, sick leave or other bona fide leave of absence (such as temporary
employment with the Government) duly authorized in writing by Schering-Plough if the period
of such leave does not exceed three months or, if longer, so long as the Employee’s right
to reemployment with Schering-Plough or an Affiliate or Subsidiary is guaranteed either by
statute or by contract. If the period of leave exceeds three months and the Employee’s
right to reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to terminate on the first date immediately following such
three-month period.

     (v) Transfer Restrictions. In no event shall the Committee permit an Incentive Stock
Option to be transferred by a Participant other than by will or the laws of descent and
distribution, and any Incentive Stock Option granted hereunder shall be exercisable, during
his or her lifetime, only by the Participant.

     (h) No Repricing. Except as otherwise provided in Section 5.3, in no event
shall the Committee decrease the Exercise Price of a Stock Option after the date of grant or
cancel outstanding Stock Options and grant replacement Stock Options with a lower Exercise
Price without first obtaining the approval of the holders of a majority of the Shares present
in person or by proxy at a meeting of Schering-Plough’s shareholders and entitled to vote at
such meeting.

4.5 Restricted Stock. The Committee may grant Restricted Stock under the Plan to such
Employees as the Committee may from time to time select, in such amounts and subject to such terms,
conditions and restrictions (including, without limitation, transfer restrictions) and Restriction
Periods as the Committee, in its discretion, may determine and set forth in the Award Certificate.
The Committee, in its discretion, may condition an Award of Restricted Stock on the Participant
giving the representation described in Section 7.4.

     (a) Payment of Restricted Stock. As soon as practicable after Restricted
Stock is awarded, a certificate or certificates for all such Shares of Restricted Stock shall
be registered in the name of the Participant and, at the discretion of Schering-Plough, be
either (i) delivered to the Participant or (ii) held by Schering-Plough on behalf of the
Participant until all restrictions have lapsed. The Participant shall

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thereupon have all the rights of a shareholder with respect to such Shares, including
the right to vote and receive dividends or other distributions made or paid with respect to
such Shares, except that such Shares shall be subject to the forfeiture provisions of clause
(i) below. The Committee may, in its discretion, impose and set forth in the Award
Certificate such other restrictions on Restricted Stock for such Restriction Period or
Periods as it deems appropriate. Except as the Committee may otherwise determine, and subject
to (1) the Committee’s authority under Section 3.2 to waive or amend any terms, conditions,
limitations or restrictions of an Award, (2) Section 5.4 relating to Changes in Control and
(3) the special forfeiture provisions of Section 7.2, such Shares shall be subject to the
following provisions.

     (i) Forfeiture and Lapse of Restriction. Shares of Restricted Stock shall be
forfeited by a Participant upon the Participant’s Termination of Employment during the
Restriction Period for any reason other than the Participant’s death, Disability or
Termination Due to Business Divestiture. Subject to clause (ii) below and Section 5.4
relating to Changes in Control, restrictions on Shares of Restricted Stock shall lapse at
the end of the Restriction Period set forth in the Award Certificate.

     (ii) Accelerated Lapse. Notwithstanding the foregoing, all restrictions on Shares
of Restricted Stock shall immediately lapse upon the death or Disability of the
Participant. The Committee may, in its discretion, provide in the applicable Award
Certificate that restrictions on Shares of Restricted Stock shall also lapse upon the
Participant’s Retirement or Involuntary Termination.

     (b) Legend. In order to enforce any restrictions that the Committee may
impose on Restricted Stock, the Committee shall cause a legend or legends setting forth a
specific reference to such restrictions to be placed on all certificates for Shares of
Restricted Stock. As restrictions are released, a new certificate, without the legend, for
the number of Shares with respect to which restrictions have been released shall be issued
and delivered to the Participant as soon as possible thereafter.

4.6 Deferred Stock Units. The Committee may grant Deferred Stock Units under the Plan
to those Employees whom the Committee may from time to time select, in such amounts and pursuant to
such other terms and conditions that the Committee, in its discretion, may determine and set forth
in the Award Certificate, subject to the following provisions.

     (a) Deferred Stock Account. Deferred Stock Units awarded to a Participant
shall be credited to a Deferred Stock Account established and maintained by Schering-Plough on
behalf of the Participant. No Participant shall be a shareholder with respect to any Shares
underlying Deferred Stock Units credited to his Deferred Stock Account, nor shall the
Participant (or the Participant’s Beneficiary) have any right to or interest in any specific
assets of Schering-Plough or its Affiliates or

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Subsidiaries, including any Shares reserved for issuance under the Plan, until such
Shares are actually distributed to the Participant.

     (b) Dividend Equivalents. Unless the Committee determines otherwise at the time
of grant and sets forth in the applicable Award Certificate, in the event of Schering-Plough’s
payment of dividends on Shares, Dividend Equivalents shall be applied as follows.

     (i) Stock Dividends. Dividend Equivalents relating to stock dividends shall be
credited to a Participant’s Deferred Stock Account as of the dividend payment date in the
form of additional Deferred Stock Units, based on the Fair Market Value of a Share on the
dividend payment date.

     (ii) Non-Stock Dividends. Dividend Equivalents relating to dividends other than
stock dividends shall be distributed immediately to the Participant as additional
compensation on the dividend payment date.

     (c) Payment of Shares. Subject to paragraph (d) below and Section 5.4 relating to
Changes in Control, Deferred Stock Units shall be paid in Shares, at the rate of one Share per
each Deferred Stock Unit, at such time or times and in such manner as the Committee shall
determine at the time of grant and set forth in the applicable Award Certificate, which can be
either:

     (i) Lump Sum. A single lump sum payable on a specified date not earlier than the
six-month anniversary of the date the Deferred Stock Units were awarded to the
Participant, or

     (ii) Installments. In a set number of equal or unequal periodic installments
commencing on a specified date not earlier than the six-month anniversary of the date the
Deferred Stock Units were awarded to the Participant.

The timing and form of payment of Shares in settlement of Deferred Stock Units shall be set
forth in the Award Certificate at the time of grant and, to the extent such Deferred Stock Units
are subject to the requirements of Section 409A of the Code, shall not be subject to
modification or acceleration by the Committee, except as provided in paragraph (d) below and in
Section 5.4. The Committee, in its discretion, may condition the issuance of Shares in
connection with Deferred Stock Units on the Participant giving the representation described in
Section 7.4.

     (d) Termination and Forfeiture. Unless the Award Certificate provides otherwise,
and subject to (1) the Committee’s authority under Section 3.2 to waive or amend any terms,
conditions, limitations or restrictions of an Award, (2) Section 5.4 relating to Changes in
Control and (3) the special forfeiture provisions of Section 7.2, any undistributed Deferred
Stock Units remaining in a Participant’s Deferred Stock Account shall be forfeited by the
Participant upon the Participant’s Termination of Employment for any reason other than other
than the death,

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Disability, Retirement, Termination Due to Business Divestiture or Involuntary
Termination of the Participant.

     (i) Death. Upon the death of a Participant prior to full payment of the
Participant’s Deferred Stock Account, the remaining balance of the Participant’s Deferred
Stock Account shall be paid in Shares to the Participant’s Beneficiary or, if none, to the
legal representative of the Participant’s estate or to the person to whom the
Participant’s Deferred Stock Unit payment rights are transferred under Participant’s will
or by operation of law, in a single lump sum payment as soon as administratively feasible
after the Participant’s death. Schering-Plough shall be under no obligation to deliver
Shares in satisfaction of a Deferred Stock Unit unless and until Schering-Plough is
satisfied that the person or persons to whom the Shares are being transferred are the duly
appointed executor(s) or administrator(s) of the deceased Participant or the person to
whom the Deferred Stock Units have been transferred under the Participant’s will or by the
applicable laws of descent and distribution.

     (ii) Disability. In the event a Participant becomes Disabled prior to full payment
of the Participant’s Deferred Stock Account, the remaining balance of the Participant’s
Deferred Stock Account shall be paid in Shares at the scheduled time and in the scheduled
manner set out in the applicable Award Certificate at the time of grant; provided, however
that the Committee may determine at the time of grant and set forth in an Award
Certificate that if the Participant becomes Disabled prior to the scheduled payment date
or dates of the Deferred Stock Units, the remaining balance the Participant’s Deferred
Stock Account shall be paid to the Participant in a single lump sum distribution as soon
as administratively feasible after the date the Participant becomes Disabled.

     (iii) Retirement. Upon the Retirement of a Participant prior to full payment of the
Participant’s Deferred Stock Account, the Participant shall forfeit all unpaid Deferred
Stock Units that were awarded to the Participant during the one-year period immediately
preceding the Participant’s Retirement date and all other Deferred Stock Units remaining
in the Participant’s Deferred Stock Account shall be paid at the scheduled time and in the
scheduled manner set out in the applicable Award Certificate at the time of grant;
provided, however that the Committee may determine at the time of grant and set forth in
an Award Certificate that the entire unpaid balance of the a Participant’s Deferred Stock
Account shall be forfeited upon the Participant’s Retirement. Alternatively, to the extent
permitted under Section 409A of the Code, the Committee may determine at the time of grant
and set forth in an Award Certificate that, in the event of the Participant’s Retirement
prior to the scheduled payment date or dates of the Deferred Stock Units, the remaining
balance the Participant’s Deferred Stock Account shall be paid to the Participant in a
single lump sum distribution as soon as administratively feasible after the Participant’s
Retirement date, but not earlier than the six-month anniversary of the Participant’s
Retirement date if the Participant is a Section 409A Specified Employee.

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     (iv) Termination Due to Business Divestiture. Upon a Participant’s Termination Due
to Business Divestiture prior to full payment of the Participant’s Deferred Stock Account,
the remaining balance of the Participant’s Deferred Stock Account shall be paid in Shares
at the scheduled time and in the scheduled manner set out in the applicable Award
Certificate at the time of grant. Alternatively, to the extent permitted under Section
409A of the Code, the Committee may determine at the time of grant and set forth in an
Award Certificate that, in the event of the Participant’s Termination Due to Business
Divestiture prior to the scheduled payment date or dates of the Deferred Stock Units, the
remaining balance the Participant’s Deferred Stock Account shall be paid to the
Participant in a single lump sum distribution as soon as administratively feasible after
the Participant’s termination date, but not earlier than the six-month anniversary of the
Participant’s termination date if the Participant is a Section 409A Specified Employee.

     (v) Involuntary Termination. Upon the Involuntary Termination of a Participant
prior to full payment of the Participant’s Deferred Stock Account, the Participant shall
forfeit —

     (A) All unpaid Deferred Stock Units that were awarded to the Participant during
the one-year period immediately preceding the Participant’s Involuntary Termination
date; and

     (B) A prorated portion of the remaining Deferred Stock Units under each
Deferred Stock Unit Award determined by subtracting from the number of unpaid Deferred
Stock Units remaining under such Award the product of (I) the number of unpaid Deferred
Stock Units remaining under such Award, multiplied by (II) a fraction, the numerator of
which is the number of full months worked by the Participant between the date of grant
and the Involuntary Termination date, and the denominator of which is the total number
of full months between the date of grant and the originally scheduled payment date.

     All other Deferred Stock Units remaining in the Participant’s Deferred Stock
Account shall be paid at the scheduled time and in the scheduled manner set out in the
applicable Award Certificate at the time of grant.

     (e) Payment Deferrals. Subject to the requirements of Section 409A of the
Code, the Committee may from time to time and on a case by case basis permit a Participant to
elect to defer payment of his Deferred Stock Units, or change the form of payment of Shares
issued in connection with Deferred Stock Units. Elections to defer the payment date or change
the form of payment shall be subject to the following limitations, which may not be waived by
the Committee:

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     (i) Such election must be made, if at all, no less than 12 months prior to the
originally scheduled payment date set out in the Award Certificate for the Deferred Stock
Units with respect to which the election is made;

     (ii) Such election may not take effect until at least 12 months after the date on
which the election is made; and

     (iii) Except with respect to an election to receive payment upon Disability, the
first scheduled payment must be deferred pursuant to the election for a period of at least
five years from the original payment date set out in the Award Certificate for the
Deferred Stock Units with respect to which the election is made.

For purposes of this paragraph (e), each scheduled installment payment under a Deferred Stock
Unit Award shall be deemed to be a separate payment.

     (f) Committee Discretion. Notwithstanding anything in the Plan to the contrary
(including anything in Section 3.2 relating to the authority of the Committee or Section 5.4
relating to Changes in Control) in no event shall the Committee have discretion under the Plan
to accelerate the payment date or deferred payment date of Deferred Stock Units, except to the
extent permitted under Section 409A of the Code and applicable U.S. Treasury Department or
Internal Revenue Service guidance issued in connection with Section 409A of the Code.

4.7 Other Stock-Based Awards. Subject to compliance with the requirements of Section
409A of the Code, the Committee may, from time to time, grant to an Employee Other Stock-Based
Awards under the Plan. These Awards may include, among other things Shares, restricted stock
options, stock appreciation rights that are settled in Shares, and phantom or hypothetical Shares.
The Committee shall determine, in its discretion, the terms, conditions, restrictions and
limitations, if any, that shall apply to Other Stock-Based Awards granted pursuant to this Section
4.7 (including whether Dividend Equivalents shall be credited or paid with respect to any such
Award), which terms, conditions, restrictions and/or limitations shall be set forth in the Award
Certificate. The Committee, in its discretion, may condition the delivery of Shares in connection
with an Award under this Section 4.7 on the Participant giving the representation described in
Section 7.4.

4.8 Performance Awards. The Committee may grant Performance Awards under the Plan only to
such Employees as the Committee may from time to time select, in such amounts and subject to such
terms and conditions as the Committee, in its discretion, may determine. Performance Awards granted
under the Plan shall be subject to the following provisions.

     (a) General. Performance Awards that are not Qualified Performance Awards
shall be based on such Performance Cycles, Performance Measures and vesting or payout formulas
(which may be the same as or different than those applicable to

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Performance Awards that are designated as Qualified Performance Awards) as the Committee,
in its discretion, may establish for such purposes.

     (b) Form of Payment. Performance Awards may be paid in cash, Shares, Stock
Options, Restricted Stock, Deferred Stock Units, Other Stock-Based Awards or any combination
of the foregoing in such proportions as the Committee may determine, in its discretion, and
set forth in the Award Certificate. To the extent that a Performance Award is paid in Shares,
Stock Options, Restricted Stock, Deferred Stock Units and/or Other Stock-Based Awards, the
amount of each such form of Award that is payable shall be based on the Fair Market Value of a
Share on the date of grant, subject to such reasonable Restricted Stock and Deferred Stock
Unit discount factors and/or Stock Option valuation methodologies as the Committee may, in its
discretion, apply. Stock Options, Restricted Stock, Deferred Stock Units and Other Stock-Based
Awards granted in connection with a Performance Award shall be subject to the provisions of
Sections 4.4, 4.5, 4.6 and 4.7, respectively.

     (c) Qualified Performance Awards. A Performance Award granted to a Covered
Employee under the Plan may, at the discretion of the Committee, be designated as a Qualified
Performance Award. Qualified Performance Awards under the Plan may be granted either
separately or at the same time as Awards that are not designated as Qualified Performance
Awards; provided, however, that in no event may the payment of an Award that is not a
Qualified Performance Award be contingent upon the failure to attain a specific level of
performance on the Performance Measure(s) applicable to a Qualified Performance Award for the
same Performance Cycle. In the event the Committee designates an Award as a Qualified
Performance Award, any determinations of the Committee pertaining to Performance Measures and
other terms and conditions of such Qualified Performance Award (other than a determination
under paragraph (iii)(D) below to reduce the amount of the Award) shall be in writing and made
within the Qualified Performance Award Determination Period. A Performance Award that the
Committee designates as a Qualified Performance Award shall be subject to the following
additional requirements.

     (i) Performance Cycles. Performance Awards that are designated as Qualified
Performance Awards shall be awarded in connection with a Performance Cycle. The Committee
shall determine the length of a Performance Cycle within the Qualified Performance Award
Determination Period. In the event that the Committee determines that a Performance Cycle
shall be a period greater than one fiscal year, a new Qualified Performance Award may be
granted and a new Performance Cycle may commence prior to the completion of the
Performance Cycle associated with the prior Qualified Performance Award.

     (ii) Participants. Within the Qualified Performance Award Determination Period,
the Committee shall determine the Covered Employees who shall be eligible to receive a
Qualified Performance Award for such Performance Cycle.

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     (iii) Performance Measures; Targets; Vesting and Payout Formulas.

     (A) Within the Qualified Performance Award Determination Period, the Committee
shall fix and establish, in writing, (1) the Performance Measure(s) that shall apply to
the Qualified Performance Award for the Performance Cycle; (2) the target amount of
such Qualified Performance Award that shall be payable to each such Covered Employee;
and (3) the vesting and/or payout formula for computing the actual amount of such
Qualified Performance Award that shall become vested and/or payable with respect to
each level of attained performance. Towards this end, such vesting and/or payout
formula shall, based on objective criteria, set forth for the applicable Performance
Measure(s) the minimum level of performance that must be attained during the
Performance Cycle before any such Qualified Performance Award shall become vested
and/or payable and the percentage of the target amount of such Award that shall be
vested and/or payable to each Covered Employee upon attainment of various levels of
performance that equal or exceed the minimum required level.

     (B) The Committee may, in its discretion, select Performance Measures that
measure the performance of Schering-Plough or one or more business units, divisions,
Affiliates or Subsidiaries of Schering-Plough. The Committee may select Performance
Measures that are absolute or relative to the performance of one or more comparable
companies or an index of comparable companies.

     (C) In applying Performance Measures, the Committee may, in its discretion,
exclude unanticipated, unusual or infrequently occurring items (including any event
described in Section 5.3 and the cumulative effect of changes in the law, regulations
or accounting rules), and may determine within the Qualified Performance Award
Determination Period to exclude other items.

     (D) Notwithstanding anything in this paragraph (c)(iii) to the contrary, the
Committee may, on a case by case basis and in its sole discretion, reduce, but not
increase, the amount of any Qualified Performance Award that is payable to a Covered
Employee with respect to a Performance Cycle, provided, however, that no such reduction
shall result in an increase in the dollar amount of any such Qualified Performance
Award payable to any other Covered Employee.

     (iv) Committee Certification. No Qualified Performance Award shall vest or be
paid to a Covered Employee under the Plan unless and until the Committee certifies in
writing the level of attainment of the applicable Performance Measure(s) for the
applicable Performance Cycle.

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     (v) Limitation on Awards. Subject to Sections 5.1 and 5.3, the dollar value of
any Qualified Performance Award payable in cash to any Covered Employee shall not exceed
$3 million (or, in the case of the Chief Executive Officer, $6,000,000) for any 12-month
Performance Cycle; provided that for any Performance Cycle that is the same as a
performance period under the Operations Management Team Incentive Plan, such amounts shall
serve as combined limits under both this Plan and the Operations Management Team Incentive
Plan. For any Performance Cycle greater than 12 months in duration, this maximum will be
adjusted proportionately.

     (vi) Code Section 162(m). It is the intent of Schering-Plough that Qualified
Performance Awards granted to Covered Employees under the Plan shall satisfy the
applicable requirements of Code Section 162(m) and the regulations thereunder so that
Schering-Plough’s tax deduction for Qualified Performance Awards is not disallowed in
whole or in part by operation of Code Section 162(m). If any provision of this Plan
pertaining to Qualified Performance Awards, or any Award to a Covered Employee under the
Plan that the Committee designates as a Qualified Performance Award, would otherwise
frustrate or conflict with such intent, that provision or Award shall be interpreted and
deemed amended so as to avoid such conflict.

4.9 Substitute Awards. The Committee may make Awards under the Plan to Acquired
Grantees through the assumption of, or in substitution for, outstanding stock-based awards
previously granted to such Acquired Grantees. Such assumed or substituted Awards will be subject to
the terms and conditions of the original awards made by the Acquired Company, with such adjustments
therein as the Committee considers appropriate to give effect to the relevant provisions of any
agreement for the acquisition of the Acquired Company. Any grant of Stock Options pursuant to this
Section 4.9 will be subject to the rules set out in Section 424 of the Code and any final
regulations published thereunder, regardless of whether the Stock Option is intended to be an
Incentive Stock Option or a Nonqualified Stock Option.

4.10 Termination for Cause. Notwithstanding anything to the contrary herein, if a
Participant incurs a Termination for Cause, then all of the Participant’s outstanding Awards under
the Plan (whether or not vested or exercisable) will immediately be cancelled and forfeited and the
special forfeiture provisions of Section 7.2 shall apply. The exercise of any Stock Option or the
payment of any Award may be delayed, in the Committee’s discretion, in the event that a potential
Termination for Cause is pending.

V. SHARES SUBJECT TO THE PLAN; ADJUSTMENTS

5.1 Shares Available. The Shares issuable under the Plan are authorized but unissued
Shares or Shares held in Schering-Plough’s treasury. Subject to adjustment in accordance with
Section 5.3, the total number of Shares with respect to which Awards may be issued under the Plan
may not exceed 92,000,000 Shares, which includes the number of Shares that have been approved by
Schering-Plough shareholders for issuance under the Prior

-24-

 

Plan, but which have not been awarded under the Prior Plan as of the Effective Date and which are
no longer available for issuance under Prior Plan for any reason (including without limitation, the
discontinuance or termination of the Prior Plan). Subject to adjustment in accordance with Section
5.3, from such aggregate limit:

     (a) No more than an aggregate of 46,000,000 Shares may be issued under Incentive Stock
Options during the term of the Plan;

     (b) No more than an aggregate of 46,000,000 Shares may be issued in the form of
Restricted Stock, Deferred Stock Units or Other Stock-Based Awards payable in Shares during
the term of the Plan; and

     (c) The maximum aggregate number of Shares with respect to which Stock Options may be
granted to any one Participant during any fiscal year of Schering-Plough may not exceed
3,000,000 Shares.

5.2 Counting Rules.

     (a) Shares Counted. For purposes of determining the number of Shares remaining
available for issuance under the Plan (including Shares originally approved under the Prior
Plan, but made available for issuance under this Plan in accordance with Section 5.1), only
Awards payable in Shares shall be counted. In addition, Shares that are tendered or withheld
in payment of all or part of the Exercise Price of a Stock Option, or in satisfaction of the
withholding obligations of an Award shall be counted against the remaining Shares and shall no
longer be available for issuance under the Plan.

     (b) Shares Not Counted. The following Shares relating to Awards under this Plan
(or Awards under the Prior Plan that are outstanding as of the Effective Date) are not counted
as issued Shares for purposes of determining the number of Shares remaining available for
issuance under the Plan, and shall remain available for issuance under the Plan.

     (i) Shares underlying awards that are settled in cash in lieu of Shares;

     (ii) Shares underlying Awards that expire, are forfeited, cancelled or terminate for
any other reason without the issuance of Shares;

     (iii) Shares issued in connection with Awards that are assumed, converted or
substituted as the result of Schering-Plough’s acquisition of an Acquired Company or the
combination of Schering-Plough with another company; and

     (iv) Shares of Restricted Stock that are forfeited and returned to Schering-Plough
upon a Participant’s Termination of Employment.

-25-

 

5.3 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, 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, the number of Shares underlying an outstanding
Award, the Exercise price of a Stock Option or the number of Deferred Stock Units credited to a
Deferred Stock Account will be made by the Committee and such adjustment will be conclusive and
binding for all purposes under the Plan. Notwithstanding the foregoing, no adjustments shall be
made with respect to Qualified Performance Awards granted to a Covered Employee to the extent such
adjustment would cause the Award to fail to qualify as performance-based compensation under Section
162(m) of the Code.

5.4 Consequences of a Change in Control. Notwithstanding any other provision of the
Plan, Awards that are outstanding as of the effective date of a Change in Control shall be subject
to the following provisions.

     (a) Replacement Awards. Any Award granted hereunder shall be deemed to apply
to the securities, cash or other property (subject to adjustment by cash payment in lieu of
fractional interests) to which a holder of the number of Shares equal to the number of Shares
underlying the Participant’s Awards would have been entitled pursuant to the Change in
Control, and proper provisions shall be made to ensure that this clause is a condition to any
transaction that would result in a Change in Control; provided, however, that during the
60-day period beginning on the date of Change in Control, the Committee (or, if applicable,
the board of directors of the entity assuming Schering-Plough’s obligations under the Plan)
may, in its discretion, take any of the following actions with respect to each Award that is
outstanding as of the effective date of Change in Control:

     (i) Modify or adjust the Award to reflect the Change in Control; or

     (ii) Cancel the Award and cause the acquiring or surviving corporation to replace
it with an equivalent right after the Change in Control.

     (b) Stock Options. All outstanding Stock Options that have not become
exercisable as of the effective date of a Change in Control shall continue to become
exercisable in accordance with the vesting schedule set out in the applicable Award
Certificate. Notwithstanding the foregoing, in the event a Participant incurs an Involuntary
Termination within two years after the effective date of a Change in Control, all of the
Participant’s outstanding Stock Options shall become immediately vested and exercisable as of
the date of such Involuntary Termination and shall remain exercisable for the full duration
of the Stock Option’s original term, notwithstanding the Participant’s Termination of
Employment. In addition,

-26-

 

during the 60-day period beginning on the date of Change in Control, the Committee may,
in its discretion, cancel all or a portion of a Participant’s remaining Stock Options and, in
consideration of such cancellation, pay the Participant with respect to each Share issuable
under the cancelled Stock Option an amount in cash equal to the amount by which the Change in
Control Price exceeds the Exercise Price of the cancelled Stock Option.

     (c) Deferred Stock Units. All Deferred Stock Units credited to a
Participant’s Deferred Stock Account but not yet distributed as of the effective date of the
Change in Control shall be paid in Shares at the scheduled time and in the scheduled manner
set out in the applicable Award Certificate at the time of grant. Notwithstanding the
foregoing, in the event a Participant incurs an Involuntary Termination within two years
after the effective date of a Change in Control, all Deferred Stock Units credited to a
Participant’s Deferred Stock Account but not yet distributed as of the date of such
Involuntary Termination shall become immediately vested and non-forfeitable and shall be
distributed in a single lump sum cash payment, in lieu of Shares, as soon practicable
thereafter (but in no event more than 30 days after the date of such Involuntary
Termination) at a dollar value per Deferred Stock Unit equal to the Fair Market Value of a
Share on the date of termination.

     (d) Restricted Stock and Other Stock-Based Awards. All restrictions and
conditions on any Shares of Restricted Stock or Other Stock-Based Awards shall continue to
apply for the duration of the Restriction Period. Notwithstanding the foregoing, in the
event a Participant incurs an Involuntary Termination within two years after the effective
date of a Change in Control, all restrictions and conditions on any Shares of Restricted
Stock or Other Stock-Based Awards shall immediately lapse or be deemed satisfied, as the case
may be, as of the date of such Involuntary Termination and all such Awards shall become
vested and non-forfeitable as of such date.

     (e) Performance Awards. The Committee shall set out in the Award Certificate
for each Performance Award the terms and conditions that shall apply to such Performance
Award in the event the Award is outstanding as of the effective date of a Change in Control.

5.5 Fractional Shares. No fractional Shares shall be issued under the Plan. In the
event that a Participant acquires the right to receive a fractional Share under the Plan, such
Participant shall receive, in lieu of such fractional Share, cash equal to the Fair Market Value of
the fractional Share as of the date of settlement.

VI. AMENDMENT AND TERMINATION

6.1 Amendment. The Plan may be amended at any time and from time to time by the Board
without the approval of shareholders of Schering-Plough, except that no material revision to the
terms of the Plan will be effective without first obtaining the approval of

-27-

 

the amendment by the holders of a majority of the Shares present in person or by proxy at a meeting
of Schering-Plough’s shareholders and entitled to vote at such meeting. A revision is “material”
for this purpose if, among other changes, it (a) materially increases the number of Shares that may
be issued under the Plan (other than an increase pursuant to Section 5.3 of the Plan), (b) changes
the types of Awards available under the Plan, (c) expands the class of persons eligible to receive
Awards under the Plan, (d) extends the term of the Plan, (e) decreases the Exercise Price at which
Stock Options may be granted, (f) reduces the Exercise Price of outstanding Stock Options, or (g)
results in the replacement of outstanding Stock Options with new Awards that have an Exercise Price
that is lower than the Exercise Price of the replaced Stock Options. No amendment of the Plan made
without the Participant’s written consent may adversely affect any right of a Participant with
respect to an outstanding Award. Notwithstanding the foregoing, this Plan is intended to
incorporate all applicable requirements of Section 409A of the Code and guidance issued thereunder
by the U.S. Treasury Department and the Internal Revenue Service, and the Plan will be deemed to be
amended as necessary to comply with those requirements.

6.2 Termination. The Plan shall terminate upon the earlier of the following dates or
events to occur:

	 	     (a)	 	The adoption of a resolution of the Board terminating the Plan; or
	 
	 	     (b)	 	December 31, 2011.

     No Awards shall be granted under this Plan after it has been terminated. However, the
termination of the Plan shall not alter or impair any of the rights or obligations of any person,
without such person’s consent, under any Award theretofore granted under the Plan. After the
termination of the Plan, any previously granted Awards shall remain in effect and shall continue to
be governed by the terms of the Plan and the applicable Award Certificate.

VII. GENERAL PROVISIONS

7.1 Nontransferability of Awards. No Award under the Plan shall be subject in any manner
to alienation, anticipation, sale, assignment, pledge, encumbrance or transfer, and no other
persons will otherwise acquire any rights therein, except as provided below.

     (a) Any Award may be transferred by will or by the laws of descent or distribution.

     (b) The Committee may provide in the Award Certificate that all or any part of the
vested portion of a Nonqualified Stock Option may, subject to the prior written consent of
the Committee, be transferred to one or more of the following classes of donees:

          (i) a family member;

-28-

 

          (ii) a trust for the benefit of a family member; or

          (iii) a limited partnership whose partners are solely family members, or any other legal
entity set up for the benefit of family members.

          For purposes of this paragraph (b), a family member means a Participant’s spouse, children,
grandchildren, parents, grandparents, siblings, nieces, nephews, grandnieces and grandnephews,
including adopted, in-laws and step family members.

     (c) Any transferred Award will be subject to all of the same terms and conditions as
provided in the Plan and the applicable Award Certificate. The Participant or the
Participant’s estate will remain liable for any withholding tax that may be imposed by any
federal, state or local tax authority. The Committee may, in its discretion, disallow all or
a part of any transfer of an Award pursuant to paragraph (b) above unless and until the
Participant makes arrangements satisfactory to the Committee for the payment of any
withholding tax. The Participant must immediately notify the Committee, in the form and
manner required by the Committee, of any proposed transfer of an Award pursuant to paragraph
(b). No transfer will be effective until the Committee consents to the transfer in writing.

     (d) Except as otherwise provided in the Award Certificate, any Nonqualified Stock
Option transferred by a Participant pursuant to this paragraph (d) may be exercised by the
transferee only to the extent that the Award would have been exercisable by the Participant
had no transfer occurred. The transfer of Shares upon exercise of the Award will be
conditioned on the payment of any withholding tax.

     (e) Restricted Stock may be freely transferred after the restrictions lapse or are
satisfied and the Shares are delivered; provided, however, that Restricted Stock awarded to
an affiliate of Schering-Plough may be transferred only pursuant to Rule 144 under the
Securities Act, or pursuant to an effective registration for resale under the Securities Act.
For purposes of this paragraph (e), “affiliate” will have the meaning assigned to that term
under Rule 144.

     (f) In no event may a Participant transfer an Incentive Stock Option other than by
will or the laws of descent and distribution.

7.2 Special Forfeiture Provision. Except as otherwise provided in the current employment
agreement between Schering-Plough and the relevant Employee (which agreement shall take precedent
over this Section 7.2), and if the Committee, in its discretion, provides otherwise in the
applicable Award Certificate, if a Participant either —

     (a) incurs a Termination for Cause or

-29-

 

     (b) incurs a Termination of Employment for any reason other than other than death,
Disability, Retirement, Termination Due to Business Divestiture or Involuntary Termination
and, within one year after such Termination of Employment, without prior written approval of
the Committee, enters into an employment or consulting arrangement (including service as an
agent, partner, stockholder, consultant, officer or director) with any entity or person
engaged in any business in which Schering-Plough or its Affiliates or Subsidiaries is engaged
that, in the sole judgment of the Committee, is competitive with Schering-Plough or any
Affiliate or Subsidiary, then the Participant shall forfeit and return to Schering-Plough —

     (i) the amount of any profit realized upon the exercise of any Stock Options at any
time on or after the date that is ninety (90) days immediately prior to the date of the
Participant’s Termination of Employment;

     (ii) all shares of Restricted Stock that are not then vested or which vested during
the three-month period immediately preceding such Termination of Employment; and

     (iii) all Shares issued to the Participant in payment of the Participant’s Deferred
Stock Units during the three-month period immediately preceding such Termination of
Employment.

7.3 Withholding of Taxes. The Committee, in its discretion, may satisfy a Participant’s
tax withholding obligations by any of the following methods or any method as it determines to be in
accordance with the laws of the jurisdiction in which the Participant resides, has domicile or
performs services.

     (a) Stock Options. As a condition to the delivery of Shares pursuant to the
exercise of a Stock Option, the Committee may require that the Participant, at the time of
exercise, pay to Schering-Plough by cash, certified check, bank draft, wire transfer or
postal or express money order an amount sufficient to satisfy any applicable tax withholding
obligations. The Committee may, however, in its discretion, accept payment of tax withholding
obligations through any of the Exercise Price payment methods described in Section 4.4(f).

     (b) Other Awards Payable in Shares. The Participant shall satisfy the
Participant’s tax withholding obligations arising in connection with the release of
restrictions on Restricted Stock or the payment of Deferred Stock Units or Other Stock-Based
Awards by payment to Schering-Plough by cash, certified check, bank draft, wire transfer or
postal or express money order an amount sufficient to satisfy any applicable tax withholding
obligations, provided that the format is approved by Schering-Plough or a designated
third-party administrator. Notwithstanding the foregoing, subject to the requirements of
applicable law, Schering-Plough may also satisfy the Participant’s tax withholding
obligations by other methods, including selling or withholding Shares that would otherwise be
available for delivery,

-30-

 

provided that the Committee has specifically approved such payment method in advance.

     (c) Cash Awards. Schering-Plough may satisfy a Participant’s tax withholding
obligations arising in connection with the payment of any Award in cash by withholding cash
from such payment.

7.4 Investment Representation. As a condition to any distribution of Shares pursuant to
Awards under the Plan, Schering-Plough may require a Participant to represent in writing that such
Shares are being acquired for the Participant’s own account for investment and not with a view to,
or for sale in connection with, the distribution of any part thereof.

7.5 Code Section 83(b) Elections. Neither Schering-Plough, any Affiliate or Subsidiary, nor
the Committee shall have any responsibility in connection with a Participant’s election, or attempt
to elect, under Code Section 83(b) to include the value of a Restricted Stock Award in the
Participant’s gross income for the year of payment. Any Participant who makes a Code Section 83(b)
election with respect to any such Award shall promptly notify the Committee of such election and
provide the Committee with a copy thereof.

7.6 Beneficiary Designations. Designations of Beneficiaries by a Participant shall be
made in writing and filed with Schering-Plough in such form and in such manner as the Committee may
from time to time prescribe. A Participant may change his or her Beneficiaries in the same manner
at any time prior to the death of the Participant. If a Participant dies without having designated
any surviving Beneficiaries, the Participant’s remaining interests in Awards under the Plan shall
be distributed to the legal representative of his estate or in accordance with the Participant’s
will.

7.7 No Implied Rights. The establishment and operation of the Plan, including eligibility
as a Participant, shall not be construed as conferring any legal or other right upon any Employee
for the continuation of his or her employment for any Performance Cycle or any other period.
Schering-Plough expressly reserves the right, which may be exercised at any time and in
Schering-Plough’s sole discretion, to discharge any individual and/or treat him or her without
regard to the effect which such treatment might have upon him or her as a Participant in the Plan.

7.8 No Obligation to Exercise Options. The granting of a Stock Option shall impose no
obligation upon the Participant to exercise such Stock Option.

7.9 No Rights as Shareholders. A Participant granted an Award under the Plan shall have no
rights as a shareholder of Schering-Plough with respect to the Award unless and until such time as
certificates for the Shares underlying the Award are registered in such Participant’s name. The
right of any Participant to receive an Award by virtue of participation in the Plan shall be no
greater than the right of any unsecured general creditor of Schering-Plough.

-31-

 

7.10 Indemnification of Committee. Schering-Plough shall indemnify, to the full extent
permitted by law, each person made or threatened to be made a party to any civil or criminal action
or proceeding by reason of the fact that he, or his testator or intestate, is or was a member of
the Committee or a delegate of the Committee so acting.

7.11 No Required Segregation of Assets. Neither Schering-Plough nor any Affiliate or
Subsidiary shall be required to segregate any assets that may at any time be represented by Awards
granted pursuant to the Plan. In no event shall any interest be paid or accrued on any Award,
including unpaid installments of an Award.

7.12 Nature of Payments. All Awards made pursuant to the Plan are in consideration of
services for Schering-Plough or its Affiliates or Subsidiaries. Any gain realized pursuant to
Awards under the Plan constitutes a special incentive payment to the Participant and shall not be
taken into account as compensation for purposes of any of the employee benefit plans of Schering-
Plough or any Affiliate or Subsidiary except as may otherwise be specifically provided in the
applicable employee benefit plan.

7.13 Compliance with Applicable Law. The obligations of Schering-Plough to issue or
transfer Shares pursuant to Awards shall be subject to (a) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to the Shares, (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 and (c) compliance with all applicable laws
and approvals by all governmental or regulatory agency as may be required. With respect to
Reporting Persons, it is the intent of Schering-Plough that the Plan and all transactions under the
Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
If any provision or this Plan or of any grant of an Award would otherwise frustrate or conflict
with such intent, that provision shall be interpreted and deemed amended so as to avoid such
conflict. No Participant will be entitled to a grant, exercise, transfer or payment of any Award if
the grant, exercise, transfer or payment would violate the provisions of the Sarbanes-Oxley Act of
2002 or any other applicable law. In addition, it is the intent of Schering-Plough that the Plan
and applicable Awards under the Plan comply with the applicable provisions of Sections 162(m) and
422 of the Code, and to the extent an Award is subject to the requirements of Section 409A of the
Code, it is the intent of Schering-Plough that the Award be administered in a manner that satisfies
such requirements. To the extent that any legal requirement of Section 16 of the Exchange Act or
Section 162(m), 409A or 422 of the Code as set forth in the Plan ceases to be required under such
Section, that Plan provision shall cease to apply. The Committee may revoke any Award if it is
contrary to law or modify a Award (to the extent permitted by applicable law) to bring it into
compliance with any valid and mandatory government regulation.

7.14 Headings. Section and paragraph headings are for reference only. In the event of a
conflict between the title and content of a section or paragraph, the content shall control.

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

-33-EX-10.E.VIII

 

Exhibit
10(e)(viii)

EMPLOYMENT AGREEMENT

     This Agreement is made by and between Schering-Plough Corporation, a New Jersey Corporation
(the “Company”), and Brent Saunders (the “Executive”), as of the 19th day of December, 2006 (the
“Commencement Date”). This Agreement is a restatement of and supersedes and replaces (i) the
letter from the Company to Executive dated October 6, 2003 offering employment as Senior Vice
President, Global Compliance and Business Practices and (ii) the change of control Employment
Agreement between the Company and the Executive dated as of November 1, 2003.

     Definitions applicable to capitalized terms not defined where first mentioned below are set
forth in Section 7 of this Agreement.

1. Employment Period.

     Executive joined the Company on November 1, 2003. Beginning on the Commencement Date until
the later of the fifth anniversary thereof and for successive one-year periods thereafter (the
“Employment Period”), the Company agrees to continue in its employ and the Executive hereby agrees
to remain in the employ of the Company in accordance with the terms and conditions of this
Agreement, provided, however, that either party may terminate the Employment Period by providing
the other party with written notice of such termination at least one-year prior to the fifth
anniversary (or a subsequent anniversary) of the Commencement Date on which such termination is to
be effective. Subject to the Company’s obligation to provide severance benefits as may be specified
in this Agreement and except as otherwise specifically provided in this Agreement, Executive and
the Company acknowledge that this employment relationship may be terminated at any time and for any
or no cause or reason, at the option of either the Company or Executive.

2. Duties and Scope of Employment.

     (a) Position. During the Employment Period, the Company shall continue to employ
Executive as Senior Vice President, Global Compliance and Business Practices of the Company or in
such other substantially equivalent position requested by the Company’s Chief Executive Officer
(“CEO”) for which the Executive is qualified by education, training, and experience. Executive
shall continue to serve as an officer of the Company and be a member of the Executive Management
Team (the “EMT”). Further, so long as Executive is required on the Company’s behalf to make (i)
Certifications pursuant to the Corporate Integrity Agreement between the Company and the Office of
Inspector General of the U.S. Department of Health and Human Services, effective July 29, 2004, or
(ii) the CMS-required ASP certification under Medicare, Part B, Executive shall not be required to
report to anyone other than Mr. Hassan and shall, be provided with the opportunity to report to
and discuss related matters directly with the Board of Directors (or an appropriate sub-committee
thereof) at the regular meetings of the Board held during the time period covered by his required
certifications.

 

 

     (b) Duties. During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention
and time during normal business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities and duties assigned to the Executive hereunder, to use
the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities
and duties. During the Employment Period it shall not be a violation of this Agreement for the
Executive to (i) serve on civic or charitable boards or committees, or with the written approval of
the CEO, on corporate boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (iii) manage personal investments, so long as such
activities do not significantly interfere with the performance of the Executive’s responsibilities
as an employee of the Company in accordance with this Agreement.

3. Compensation.

     During the Employment Period, the Company shall pay Executive the following as compensation
for services to the Company:

     (a) Base Salary. Executive’s annualized base salary is currently $500,000 less
applicable deductions payable in accordance with the Company’s normal payroll practices as in
effect from time to time for its senior executives. From time to time and at least annually,
Executive’s base salary shall be subject to review and increase above Executive’s then current base
salary pursuant to the Company’s normal review policy for other similarly situated senior
executives of the Company. Executive’s base salary shall not be subject to any decrease without
Executive’s consent.

     (b) Operations Management Team Incentive Plan. During the Employment Period,
Executive shall be eligible to participate in the Company’s Operations Management Team
Incentive Plan or any successor or replacement plan (the “Incentive Plan”) at a level
determined by the Compensation Committee of the Board of Directors or its delegate (the
“Compensation Committee”) to be appropriate based on Executive’s position, job performance and
Company policy. Executive’s current target annual incentive under the Incentive Plan is 55% of
Executive’s annual base salary. Executive’s target annual incentive as a percentage of base salary
shall not be subject to any decrease without Executive’s consent. Payment of incentive
compensation, if the performance criteria determined by the Compensation Committee are met, will be
made by March 15 of the year following the relevant Incentive Plan year, unless Executive elects to
defer payment pursuant to an applicable deferred compensation plan of the Company.

     (c) Long Term Incentive Plans. Executive is, and shall remain, a participant at the
levels determined by the Compensation Committee, in the (i) Schering-Plough Corporation Cash Long
Term Incentive Plan and the Schering-Plough Corporation Long-Term Performance Share Unit Incentive
Plan for the performance period beginning January 1, 2004 and ending December 31, 2006, and (ii)
Schering-Plough Corporation Transformational Performance Contingent Shares Program for the
performance period beginning January 1, 2004 and ending December 31, 2008. Executive shall
participate in successor or replacement plans at a level determined by the Compensation Committee.

-2-

 

     (d) Incentive Equity Awards. During the Employment Period, Executive shall be
eligible to participate in the Company’s 2006 Stock Incentive Plan and any successor or replacement
plan, in accordance with the terms of the Stock Plan and any applicable grants (except as provided
herein), at a level determined by the Compensation Committee.

4. Enhanced Benefits and Perquisites.

     (a) General Benefits. During the Employment Period, Executive shall, to the extent
eligible, be entitled to participate in all employee welfare and retirement benefit plans and
programs provided by the Company to its senior executives in accordance with the terms of those
plans or programs as they may be modified from time to time. Executive shall be entitled to
post-retirement welfare benefits on the same terms as such benefits are made available by the
Company to its senior executives at the time of Executive’s retirement. If, however, Executive’s
participation in any such plan or program could result in adverse or unintended tax consequences to
any participant in such plan or program, the Company shall be entitled to pay to Executive the cost
of equivalent benefits outside such plan or program or provide Executive with substantially
equivalent benefits through a separate program without regard to the tax treatment applicable to
such payment or separate program in lieu of permitting the Executive to participate in such
program.

     (b) Supplemental Executive Retirement Plan. Executive shall participate in the
Company’s SERP.

     (c) Executive Life Insurance. During the Employment Period, Executive shall be
eligible for Executive Life Insurance coverage with a face amount of $1,750,000 in accordance with
the terms of the Company’s Executive Life Insurance program.

     (d) Vacation. During the Employment Period, Executive shall be entitled to four weeks
paid vacation per annum, subject to adjustment in accordance with the Company’s normal vacation
policies applicable to senior executives.

     (e) Relocation Benefits. Executive acknowledges that the Company may, at any time
during the Employment Period, relocate his place of employment to such location as may at that time
constitute the Company’s principal offices. Executive shall be entitled to relocation benefits
pursuant to the Company’s relocation benefit program.

     (f) Expenses. Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by Executive during the Employment Period for business purposes in
accordance with the policies, practices, and procedures of the Company and its Affiliated Companies
provided generally to other peer executives of the Company and its Affiliated Companies.

     (g) Fringe Benefits. During the Employment Period, Executive shall be entitled to
fringe benefits as in effect generally with respect to senior executives of the Company and its
Affiliated Companies. As of the date of this Agreement, these fringe benefits include tax and
financial planning services. Executive shall be entitled to prompt reimbursement (in no event to
be made later than two and one half months after the year in which the costs were incurred) for

-3-

 

(i) financial planning services in an amount up to $8,000 in the first year of utilization and
up to $5,000 annually thereafter as needed, and (ii) tax preparation in an amount up to $2,500
annually. Executive shall first submit invoices for such services to the Company for payment and
seek reimbursement if unpaid. To the extent required by applicable law, such fringe benefits shall
result in imputed income which shall be subject to withholding from the Executive’s wages in the
amount and manner prescribed by such law.

     (h) Office and Support Staff. During the Employment Period, Executive shall be
entitled to an office or offices of a size and with furnishings and other appointments, and to
personal secretarial and other assistance on the same or similar terms as those provided generally
to senior executives of the Company and its Affiliated Companies.

     (i) Directors and Officers Insurance. The Company will not diminish the amount or
change the type of Directors and Officers Liability insurance coverage applicable to Executive (as
an executive during the Employment Period and as a former executive thereafter), as in effect on
the date of this Agreement, without his advance written consent.

5. Cause, Voluntary, Involuntary and Good Reason Terminations.

     (a) Death, Disability, Cause and Voluntary Terminations without Good Reason. If,
during the Employment Period, Executive’s employment is terminated due to Executive’s death or
Disability, by the Executive without Good Reason or by the Company for Cause, the Company shall
have no obligation to the Executive other than the obligation to promptly pay to the Executive his
unpaid accrued base salary through the Termination Date and to pay or provide, promptly when due,
any Other Benefits, as well as payments or benefits required by applicable law.

     (b) Involuntary and Good Reason Terminations. If, during the Employment Period,
Executive’s employment is terminated by the Company other than for Cause, Disability or by
non-renewal of the Employment Period pursuant to Section 1, or if the Executive terminates
employment for Good Reason, the Company shall provide the Executive with the Other Benefits
promptly when due. In addition, provided that the Executive signs a Satisfactory Release within 35
days following the Termination Date and the Executive does not revoke it within 7 days after the
date he executes such Release, then Executive shall be entitled to:

          (i) payment, within 30 days following the effective date of the Satisfactory Release, of a
severance benefit equal to the product of two multiplied by the sum of the Executive’s current base
salary plus the highest target incentive opportunity under the Incentive Plan for any of the past
three years (each as in effect immediately prior to the Executive’s Termination Date but without
regard for any reduction that constituted the grounds, or part of the grounds, for Executive’s Good
Reason termination);

          (ii) during the 2-year period following Executive’s employment termination, continue to
participate in the Company’s health and welfare programs applicable to, and (to the extent
permissible under applicable law) on the same terms as, other senior executives of the Company at
the time of the termination of the Executive’s employment; provided, however that such benefits
shall cease on the date that Executive becomes eligible for similar benefits from a

-4-

 

new employer and Executive shall notify the Company in writing of such benefits eligibility within
30 days following the effective date of Executive’s benefits eligibility from the new employer; and
provided further, that if Executive’s participation in any such program of the Company could result
in adverse or unintended tax consequences to any participant in such program (including the
Executive), the Company shall be entitled to provide Executive with substantially equivalent
benefits through a separate program (including the provision of such benefits through the purchase
of insurance) without regard to the tax treatment applicable to such separate program in lieu of
permitting the Executive to participate in such program;

          (iii) payment, within 30 days following the effective date of the Satisfactory Release, of the
Enhanced SERP Benefit; and

          (iv) credit for two additional years of service and age for purposes of determining
eligibility for coverage and rate of contribution under the Company’s retiree medical plan or any
replacement or successor plan.

For purposes of this provision, “Satisfactory Release” shall mean a release of claims in a form
reasonably prescribed by the Company that (1) releases, and forever discharges, all claims that
Executive has or may have against the Company and its Affiliated Companies and its and their
employees, directors and agents (other than claims relating to Other Benefits), and (2) becomes
irrevocable if not revoked by Executive within seven (7) days after he signs it; provided that the
form of release shall not contain any post-employment covenants, including those covenants to which
the Executive may be subject pursuant to Subsection 5(c) below or otherwise.

     (c) Non-competition and Non-solicitation. In the event of voluntary termination of
the Executive’s employment during the Employment Period by the Executive without Good Reason (i)
the Executive shall not engage in Competition (as defined below) during the one-year period
immediately following Executive’s termination of employment, and (ii) the Executive shall not
engage in Solicitation (as defined below) during the two-year period immediately following
Executive’s termination of employment. For purposes of this Section 5, the term Competition shall
mean that Executive, without the written approval of the CEO, commences employment with, or
provides consulting services to, any pharmaceutical enterprise that is engaged in research,
development, and/or sales of human and/or pharmaceutical products (unless sales from pharmaceutical
products constitute less than 20% of total sales of the company conducting the enterprise and the
consolidated affiliates of that company); provided that service solely as a member of the Board of
Directors of a company whose annual sales are less than $100 million on a consolidated basis with
all affiliated companies shall not be considered Competition. Further, the term Competition
specifically excludes (i) companies whose primary purpose is to provide consulting and/or audit
services so long as those companies have revenues in excess of $100 million, and (ii) law firms
whose primary purpose is to provide legal services. For purposes of this Section 5, the term
Solicitation shall mean that without the written approval of the CEO or his delegate, the
Executive, directly or indirectly, solicits, encourages or participates in the solicitation or
hiring of, any person who is currently an employee of the Company or independent contractor doing
business with the Company or who was an employee of the Company at any time during the last three
(3) months of the Employment Period by any employer other than the Company for any position as an
employee, independent contractor, consultant or otherwise; provided that the Executive shall not be
considered to have engaged in

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Solicitation for purposes of this Section 5 if an employer other than the Company solicits or
hires, with no participation or involvement by the Executive, any current or former employee,
independent contractor or consultant of the Company who is not or was not employed in, or providing
direct services to, a business area of the Company for which Executive (immediately prior to the
termination of his employment) had no direct authority or responsibility; and provided further that
the term Solicitation shall not preclude Executive from giving references.

6. Change of Control.

     (a) General. In the event of any Change of Control following the effective date of
this Agreement and during the Employment Period, Subsection 6(b) shall supersede Section 2;
Subsection 6(d) shall supersede Subsection 3(a); Subsection 6(e) shall supersede Subsections 3(b);
Subsections 6(f) through (i) shall supersede Section 5; and the other provisions of this Section 6
shall supplement the other provisions of Sections 3 and 4; in each case until the expiration of the
COC Employment Period triggered by such Change of Control. If the Executive’s employment is not
terminated before the end of the applicable COC Employment Period, immediately following such COC
Employment Period, the provisions of this Section 6 shall cease to apply unless and until another
Change of Control occurs during the Employment Period and the provisions of Sections 2, 3(a), 3(b)
and 5 shall again apply if the Employment Period has not yet expired. Effective upon the
termination of Executive’s employment for any reason during a COC Employment Period, any previous
restrictions imposed under this Agreement or any other agreement upon the Executive regarding
engaging in post-termination competitive activity against the Company or soliciting current or
former employees or independent contractors of the Company shall immediately cease to be
applicable.

     For purposes of this Section 6, if (i) the Executive’s employment with the Company is
terminated prior to a Change of Control, (ii) the Executive reasonably demonstrates that such
termination of employment either (A) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or a Section 409A Change in Control Event or
(B) otherwise arose in connection with or in anticipation of a Change of Control or a Section 409A
Change in Control Event and (iii) a Section 409A Change in Control Event is actually consummated,
then such termination shall be deemed to have occurred during a COC Employment Period.

     (b) Position and Duties. During a COC Employment Period, (i) the Executive’s position
(including status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day period immediately preceding
the COC Employment Period; and (ii) the Executive’s services shall be performed at the location
where the Executive was employed immediately preceding any such Change of Control or any office or
location less than 35 miles from such location and that is not in a different state than such
location. It is expressly understood and agreed that to the extent that any activities have been
conducted by the Executive during the three years immediately prior to a Change of Control, the
reinstatement or continued conduct of such activities (or the reinstatement or conduct of
activities similar in nature and scope thereto) subsequent to any related Change of Control shall
not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to
the Company and its subsidiaries.

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     (c) Incentive Compensation, Employee Benefits and Fringe Benefits. Except as
otherwise set forth in this Agreement, during a COC Employment Period, the Executive (and eligible
family members or dependents, as applicable) shall be entitled to participate in all incentive,
profit-sharing, stock option, stock award, savings and retirement, and health and welfare benefit
plans (including, without limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and programs) practices, policies
and programs and to receive paid vacation, fringe benefits, and expense reimbursement, all as
applicable generally to other peer executives of the Company and its Affiliated Companies, but in
no event shall such plans, practices, policies, programs and benefits provide the Executive with
incentive opportunities (cash or equity), savings opportunities, retirement benefit opportunities,
health and welfare benefits, vacation pay, fringe benefits, and expense reimbursement, which are,
in each case, less favorable in the aggregate, than the most favorable of those provided by the
Company and its Affiliated Companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 120-day period immediately preceding the Change of
Control, or if more favorable to the Executive, those provided generally at any time thereafter to
other senior executives of the Company and its Affiliated Companies.

     (d) Annual Base Salary. During a COC Employment Period, the Executive shall receive,
in accordance with the Company’s normal payroll practices in effect from time to time for its
senior executives, an Annual Base Salary which shall be reviewed no more than 12 months after the
last salary increase awarded to the Executive prior to the beginning of the COC Employment Period
and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be
reduced after such an increase and the term Annual Base Salary as used in this Section 6 shall
refer to Annual Base Salary as so increased.

     (e) Annual Bonus. In addition to Annual Base Salary, for each fiscal year ending
during a COC Employment Period, Executive shall be awarded an annual bonus in cash at least equal
to the Executive’s highest target incentive opportunity under the Incentive Plan for any of the
past three years (the “Annual Bonus”). Each such Annual Bonus shall be paid no later than the
15th day of the third month of the fiscal year next following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall have elected to defer the receipt of such
Annual Bonus in accordance with an applicable deferred compensation plan of the Company.

     (f) Death. The Executive’s employment shall terminate automatically upon the
Executive’s death during a COC Employment Period without further obligation to the Executive’s
legal representative’s under this Agreement other than for payment of any Unpaid Accrued
Obligations and any Other Benefits which shall be at least equal to the most favorable benefits
provided by the Company and Affiliated Companies to the estates and beneficiaries of senior
executives of the Company and such affiliated companies under such plans, programs, and policies
relating to death benefits and survivor benefits as in effect at any time during the 120-day period
immediately prior to the COC Employment Period, or if more favorable to the Executive’s estate
and/or beneficiaries, as in effect on the date of the Executive’s death with respect to other peer
executives of the Company and their beneficiaries. Unpaid Accrued Obligations shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in

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cash within 30 days of the Termination Date, and the Other Benefits shall be provided promptly
when due.

     (g) Disability. If the Company determines in good faith that the Disability of the
Executive has occurred during a COC Employment Period, it may give the Executive Notice of
Termination. In such event, the Executive’s employment with the Company shall terminate effective
on the Termination Date, provided that, within the 30 days after Executive’s receipt of the Notice
of Termination, the Executive shall not have returned to full-time performance of the Executive’s
duties. In the event of Executive’s termination of employment due to Disability, Unpaid Accrued
Obligations shall be paid in cash to the Executive within 30 days following the Termination Date,
and the Other Benefits shall be provided promptly when due.

     (h) Termination for Cause or Voluntary Termination without Good Reason. If the
Executive’s employment shall be terminated by the Company for Cause or voluntarily by the Executive
without Good Reason during the COC Employment Period, the Employment Period shall terminate and the
Company shall have no further obligations to the Executive other than the obligation to pay the
Executive (i) his unpaid Annual Base Salary through the Termination Date, and (ii) any unpaid Other
Benefits. In such case, all Unpaid Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days following the Termination Date, and the Other Benefits shall be provided
promptly when due.

     (i) Termination for Good Reason or without Cause. If, during the COC Employment
Period, the Executive’s employment shall be terminated by the Company other than for Cause or
Disability or by the Executive for Good Reason, the Company shall:

          (1) within 30 days following the Executive’s Termination Date, pay the Executive a single sum
cash amount equal to the sum of (i) the Unpaid Accrued Obligations; (ii) the product of three (or
the number of whole and partial years from the Executive’s Termination Date until his
65th birthday, if less) multiplied by the sum of the Executive’s Annual Base Salary,
plus the Executive’s Annual Bonus, plus the greater of the Highest Profit Sharing Contribution or
the highest aggregate Company contribution to the Executive’s account under the Company’s
qualified and nonqualified defined contribution retirement plans for any of the three years
immediately preceding the Executive’s Termination Date; and (iii) the Executive’s Enhanced SERP
Benefit; and

          (2) for the lesser of (x) three years after the Executive’s Termination Date and (y) the
period through the Executive’s 65th birthday, continue health and welfare benefits to
the Executive (and the Executive’s family, if applicable) at least equal to those which would have
been provided in accordance with Subsection 6(c) hereof had the Executive not been terminated or,
if more favorable to the Executive, as in effect generally at any time thereafter with respect to
other senior executives of the Company and its Affiliated Companies and their families; provided
that such benefits coverage shall be secondary to any health and welfare benefits coverage for
which the Executive becomes eligible under any plan or arrangement sponsored by a subsequent
employer of the Executive; and provided further, that if Executive’s participation in any such
program could result in adverse or unintended tax consequences to any participant in such program
(including the Executive), the Company shall be entitled to provide Executive, with substantially
equivalent benefits through a separate program (including the provision of

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such benefits through the purchase of insurance) without regard to the tax treatment
applicable to such separate program in lieu of permitting the Executive to participate in such
program;

          (3) to the extent not theretofore paid or provided, pay or provide to the Executive all Other
Benefits promptly when due;

          (4) waive any and all “reduction factors” imposed as a result of Executive’s age with respect
to the Executive’s nonqualified supplemental or excess employee pension benefit plan if the
Executive is at least age 50 as of the Termination Date; and

          (5) if the Executive is age 50 or greater as of the Termination Date, provide the Executive
with coverage under the terms of the Company’s retiree medical plan (effective at the end of the
post-employment period of extended health coverage) without regard to years of service for
eligibility purposes but assuming the maximum Company-provided subsidy (if any) applies and
applying 3 additional years of service credit for purposes of rate of contribution under such plan
or any replacement or successor plan; provided, however that if the Executive is age 45 or older at
the end of the post-employment period of extended health coverage, provide the Executive, upon
reaching age 55 and upon reaching the end of the period of extended health coverage following
Executive’s Termination Date pursuant to Subsection 6(i)(2) hereof, with eligibility for the
Company’s retiree medical plan or any replacement or successor plan (including, without limitation,
any supplemental coverage applicable to executives) as if the Executive had, as of the Termination
Date, satisfied the age and service conditions for such plans and assuming the maximum
Company-provided subsidy (if any) applies.

7. Definitions.

     (a) “Affiliated Company” shall mean any corporation or other entity controlled by, controlling
or under common control with the Company.

     (b) “Annual Base Salary” shall mean an annual base salary at least equal to 24 times the
highest semi-monthly base salary paid or payable, including (without limitation) any base salary
which has been earned but deferred, to Executive by the Company and its Affiliated Companies in
respect of any month in the 12-month period immediately preceding the month in which a Change of
Control occurs.

     (c) “Annual Bonus” shall have the meaning set forth in Subsection 6(e) of this Agreement.

     (d) “Cause” shall mean termination initiated by the Company (with advance approval by the
Compensation Committee of the Board of Directors) or by the Executive incident to or connected (i)
Executive’s conviction relating to charges that Executive engaged in misappropriation, theft,
embezzlement, kick-backs, or bribery whether in connection with Executive’s employment with the
Company or otherwise, , or (ii) the Company’s reasonable determination that Executive engaged in
other deliberate, gross or willful misconduct or dishonest acts or omissions (including, but not
limited to, commission of a felony) resulting in significant harm to the Company.

     (e) “Change of Control” shall mean the happening of any of the following events:

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          (1) the acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a
“Person”) of beneficial ownership (within the meaning of Rule 13d 3 promulgated under the Exchange
Act) of securities of the Company where such acquisition causes such Person to own 20% or more of
either (x) the then outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (y) the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (1), the following
acquisitions shall not be deemed to result in a Change of Control: (A) any acquisition directly
from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (D) any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (3) of this Section 7(e); and provided, further, that
if any Person’s beneficial ownership of the Outstanding Company Voting Securities reaches or
exceeds 20% as a result of a transaction described in clause (A) or (B) above, and such Person
subsequently acquires beneficial ownership of additional voting securities of the Company, such
subsequent acquisition shall be treated as an acquisition that causes such Person to own 20% or
more of the Outstanding Company Voting Securities; or

          (2) individuals who, as of the date hereof, 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 date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

          (3) consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company or any of its subsidiaries, or a sale or other
disposition of all or substantially all of the assets of the Company or the acquisition of assets
or stock of another entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of 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 the Company or all or
substantially all of the Company’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 Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any corporation resulting from such Business Combination
or any employee benefit plan (or related trust) of the

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Company or such corporation resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, 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 (C) 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 at the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or

          (4) approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

     (f) “COC Employment Period” shall mean the period from the date on which a Change of Control
occurs until the earlier of the third anniversary of such date or the Executive’s 65th
birthday.

     (g) “Confidential Information” shall mean information in any form whose unauthorized or
unintended publication or disclosure will adversely affect the interests of the Company. It
includes, but is not limited to, the following:

	 	•	 	Third party information provided under a confidentiality agreement;
	 
	 	•	 	Long-range strategic plans;
	 
	 	•	 	Critical formulas and trade secrets;
	 
	 	•	 	Merger and acquisition plans;
	 
	 	•	 	Operational plans;
	 
	 	•	 	Research — Information relating to Company sponsored research and development projects,
including a product’s regulatory status;
	 
	 	•	 	Technical — Product or process specifications, manufacturing processes, test results,
performance characteristics, special formulations, unique designs, unique software and
identity of vendors and suppliers of unique materials;
	 
	 	•	 	Marketing — Customer lists, schedules of new product availability and delivery periods,
pending price changes, strategic plans, in-house marketing forecasts and other marketing
plans;
	 
	 	•	 	Financial — Budgets, product costs and profit margins on specific products; and other
non-public financial audit and accounting information;
	 
	 	•	 	Organization — Information regarding opening, closing, expanding, or modifying of
Company facilities until the time and date specifically authorized for public disclosure;
transfer of responsibilities or transfer of key employees until formal announcements;
policy manuals; telephone directories; organization charts;

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	 	•	 	Human Resources — Sensitive personal data pertaining to employees, such as salaries and
compensation, medical records, performance appraisals or reviews, personal history
statements and personnel files, letters of a personal and/or professional nature;
	 
	 	•	 	Other information not generally known and relating to any phase of Company business
which provides an opportunity to obtain an advantage over competitors who do not have or
know the information.

     (h) “Disability” shall mean the absence of the Executive from the Executive’s duties with the
Company on a full-time basis for 180 consecutive days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

     (i) “Enhanced SERP Benefit” shall mean an amount equal to the excess of (i) the sum of (A) the
lump-sum actuarial equivalent (as of the date that the Enhanced SERP Benefit is paid to the
Executive or his beneficiaries (the “SERP Payout Date”)) of the normal retirement benefit under the
Company’s Retirement Plan (utilizing actuarial assumptions no less favorable to the Executive than
those in effect under the Retirement Plan immediately prior to the Executive’s Termination Date)
and (B) the lump-sum actuarial equivalent of the normal retirement benefit under the SERP (as of
the SERP Payout Date and utilizing actuarial assumptions no less favorable to the Executive than
those in effect under the SERP immediately prior to the Executive’s Termination Date) which the
Executive would have received if the Executive’s employment had continued for two years (or three
years if the Date of Termination occurs during a COC Employment Period) after the Executive’s
Termination Date or through age 65, if sooner, assuming for this purpose that all accrued benefits
were fully vested, and, if the Termination Date occurs during a COC Employment Period, assuming
that the Executive’s compensation in each of the three years (or the shorter period to age 65, if
applicable) would have been that required by Subsections 6(d) and 6(e) of this Agreement, over (ii)
the lump-sum actuarial equivalent (as of the SERP Payout Date) of the Executive’s actual normal
retirement benefit (paid or payable), if any, under the Retirement Plan and the SERP based on
actual age, service and compensation as of the Executive’s Termination Date.

     (j) “Good Reason” shall mean any of the events described in (1)-(5) below if the Company fails
to cure such events within 20 business days after receiving notice thereof from the Executive:

          (1) the assignment to the Executive of any duties that are materially inconsistent with the
Executive’s education, training and experience, or a significant diminution in the Executive’s
authorities, responsibilities, status or title (as described in Section 2 or Subsection 6(b) of
this Agreement, as applicable), it being understood that (x) a change in the person to whom the
Executive reports (other than as described in (2) or (3) below) or (y) modifications to
organizational responsibilities resulting in changes to Executive’s functional areas of
responsibility that do not significantly diminish Executive’s core role in the Company would not
constitute “Good Reason”;

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          (2) a change in the status of the person to whom the Executive reports from the CEO of a
publicly-traded company to the CEO of a non-publicly traded company; or

          (3) for so long as Executive is required on the Company’s behalf to make (i) Certifications
pursuant to the Corporate Integrity Agreement between the Company and the Office of Inspector
General of the U.S. Department of Health and Human Services, effective July 29, 2004, or (ii) the
CMS-required ASP certification under Medicare, Part B, a change in the person holding the title of
CEO, and to whom the Executive reports, to a person other than Mr. Fred Hassan; or

          (4) any significant reduction by the Company of the Executive’s total compensation in the
aggregate, unless such reduction was part of a reduction approved by the Company’s Board of
Directors (or a Committee thereof) for a group of senior executives in addition to the Executive;
or

          (5) during a COC Employment Period, any failure by the Company to comply with any of the
provisions of Subsections 6(b) through 6(e) of this Agreement.

     (k) “Highest Profit Sharing Contribution” shall mean the annual aggregate of the highest
contributions made under the Company’s Profit Sharing Incentive Plan and the highest hypothetical
contributions made under the Company’s Profit Sharing Benefits Equalization Plan or any successor
or replacement plans thereto, for any of the three calendar years preceding the Executive’s
Termination Date.

     (l) “Invention(s)” shall mean any design, discovery, idea, process, product, device,
substance, compound, biological or chemical entity, machine or article or process of manufacture,
or any improvement of the foregoing, whether patentable or not, which is:

          (1) Conceived, discovered or made by a Company employee either solely or jointly with others
either (A) during the term of his/her employment or (B) after the term of his/her employment, based
on Confidential Information; and

          (2) Related to the Company’s actual or anticipated business or activities, or is related to
the Company’s actual or anticipated research and development efforts, or is suggested by, or
results from any tasks assigned to any employee and/or temporary worker or from work performed by
an employee for, or on behalf of, the Company, whether or not such conception, discovery or making
occurs during regularly scheduled work hours or results from the use of the Company’s facilities,
materials, resources or personnel.

     (m) “Notice of Termination” shall mean a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (iii) if the Termination Date (as
defined below) is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice). The failure by
the Executive or the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the Company,

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respectively, from asserting such fact or circumstance in enforcing the Executive’s or the
Company’s rights hereunder.

     (n) “Other Benefits” shall mean all amounts or benefits other than Unpaid Accrued Obligations
required to be paid or provided or which the Executive (or his beneficiaries) is eligible to
receive under the applicable terms of any plan, program, agreement, corporate governance document,
or other arrangement of the Company or any Affiliated Company.

     (0) “Retirement Plan” shall mean the Company’s defined benefit retirement plan.

     (p) “Section 409A Change in Control Event” shall mean the happening of any of the following
events:

          (1) 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 the Company where such
acquisition causes such Person to own more than 50% of either (x) the then outstanding Shares of
the Company (the “Outstanding Shares”) or (y) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of directors (the
“Outstanding Voting Securities”); provided, however, that for purposes of this subsection (1) the
following acquisitions will not constitute a Section 409A Change in Control Event: (A) any
acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection (3) 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 the Company,
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;

          (2) 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 the Company’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;

          (3) consummation of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company, or the acquisition of assets or stock of
another entity by the Company (each a “Business Combination”), in each case, unless, following such
Business Combination, (A) 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

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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 the Company or substantially all of the Company’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 case
may be, (B) no Person (excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company 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
(C) 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 (x) the time of the
execution of the initial agreement, (y) the action of the Board providing for such Business
Combination or (z) the beginning of the 12-month period ending on the effective date of the
Business Combination;

          (4) 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 the Company having a fair market value equal
to or more than 40% of the total gross fair market value of all of the assets of the Company
immediately prior to such sale, other than an acquisition by (A) a Person who was a shareholder of
the Company immediately before the asset acquisition in exchange for or with respect to such
Person’s Shares, (B) an entity whose total or voting power immediately after the transfer is at
least 50% owned, directly or indirectly, by the Company, (C) 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 the Company or (D) 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 (C) above; or

          (5) the complete liquidation of the Company.

     The definition of Section 409A Change in Control Event for purposes of this Agreement 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 Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
Accordingly, no Section 409A Change in Control Event will be deemed to occur with respect to a
transaction or event described in paragraphs (1) through (5) 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.

     (q) “SERP” shall mean any excess or supplemental retirement plans in which the Executive
participates.

     (r) “Termination Date” shall mean (i) if the Executive’s employment is terminated by the
Company for Cause, or by the Executive for Good Reason, the date of the other party’s receipt of
the Notice of Termination or any later date specified therein, (ii) if the Executive’s employment
is terminated by the Company other than for Cause or Disability, or by the

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Executive other than for Good Reason, the Termination Date shall be the date on which the
Notice of Termination is delivered or any later date as may be mutually agreed upon; (iii) if the
Executive’s employment is terminated by reason of death, the Termination Date shall be the date of
the death; and (iv) if the Executive’s employment is terminated by reason of Disability of the
Executive, the Termination Date shall be the 30th day after Executive’s receipt of the
Notice of Termination from the Company.

     (s) “Unpaid Accrued Obligations” shall mean unpaid Annual Base Salary accrued through the
termination date, any unpaid accrued vacation pay, and the Executive’s Annual Bonus multiplied by a
fraction, the numerator of which is the number of days in the current fiscal year through the
Termination Date, and the denominator of which is 365.

8. Certain Additional Payments.

     (a) Except as set forth below, in the event it shall be determined that any payment or
distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the “Code”)) made or provided to or for the benefit of
the Executive, whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (each, a “Payment”) would be subject to the excise tax imposed by
Section 4999 of the Code (together with any interest or penalties imposed with respect to such
excise tax, the “Excise Tax”), then the Executive shall be entitled to receive an additional
payment (“Gross-Up Payment”), at or before the time the Excise Tax is due (whether by withholding
or otherwise) in an amount such that after payment by the Executive of all taxes (and any interest
or penalties imposed with respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. The Company’s obligation to make Gross-Up Payments under this Section 8
shall not be conditioned upon the Executive’s termination of employment.

     (b) Subject to the provisions of Subsection 8(c), all determinations required to be made under
this Section 8, including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by such nationally recognized certified public accounting firm that the Company may designate
(the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both
to the Company and the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment or such earlier time as is requested by the Company. In
the event that the Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting a Change of Control, the Executive may appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Executive within ten days of the receipt of the Accounting
Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company
and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments

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which will not have been made by the Company should have been made (“Underpayment”), consistent
with the calculations required to be made hereunder. In the event the Company exhausts or does not
seek to pursue its remedies pursuant to Subsection 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.

     (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive shall:

               (i) give the Company any information reasonably requested by the Company
relating to such claim,

               (ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

               (iii) cooperate with the Company in good faith in order effectively to contest
such claim, and

               (iv) permit the Company to participate in any proceedings relating to such
claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest, and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax, income tax or other tax
(including interest and penalties with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing provisions of this
Subsection 8(c), the Company shall control all proceedings taken in connection with such contest
and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the applicable taxing authority in respect of such claim and may, at
its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall determine; provided, however, that, if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall pay the amount of
such payment to the Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or

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 income tax (including interest or penalties with respect thereto) imposed with respect to such
payment or with respect to any imputed income in connection with such payment; and further
provided, that any extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company’s control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

     (d) If, after the receipt by the Executive of a Gross-Up Payment or an amount paid by the
Company pursuant to Subsection 8(c), the Executive becomes entitled to receive any refund with
respect to the Excise Tax to which such Gross-Up Payment relates or with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Subsection 8(c), if
applicable) promptly pay to the Company the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an
amount paid by the Company pursuant to Subsection 8(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the expiration of 30
days after such determination, then such payment shall be forgiven and shall not be required to be
repaid and the amount of such payment shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.

     (e) Notwithstanding any other provision of this Agreement, the Company may, in its sole
discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing
authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.

9. Code Section 409A Provisions.

     Notwithstanding anything in this Agreement or elsewhere to the contrary, if, based on Internal
Revenue Service guidance available as of the date the payment or provision of any amount or other
benefit is specified to be made under this Agreement or elsewhere, the Company reasonably
determines that the payment or provision of such amount or other benefit at such specified time may
potentially subject the Executive to “additional tax” under Section 409A(a)(1)(B) of the Code
(together with any interest or penalties imposed with respect to, or in connection with, such tax,
a “409A Tax”) with respect to the payment of such amount or the provision of such benefit, and if
payment or provision thereof at a later date would likely avoid any such 409A Tax, then the payment
or provision thereof shall be postponed to the earliest business day on which the Company
reasonably determines such amount or benefit can be paid or provided without incurring any such
409A Tax, but in no event later than the first business day after the six-month anniversary of the
Termination Date (the “Delayed Payment Date”). In addition, if the Company reasonably determines
that such 409A Tax with respect to the provision of a benefit can likely be avoided by replacing
the benefit with the payment of an amount in cash equal to the cost of a substantially equivalent
benefit then, in lieu providing such benefit, the Company may make such cash payment, subject to
the preceding sentence. In the event a benefit is to be provided during the period commencing on
the Executive’s separation from service and

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ending on the Delayed Payment Date and the provision of such benefit during that period would
be treated as a payment of nonqualified deferred compensation in violation of Section
409A(a)(2)(B)(i) of the Code, then continuation of such benefit during that period shall be
conditioned on payment by the Executive of the full premium or other cost of coverage and as of the
Delayed Payment Date the Company shall reimburse the Executive for the premiums or other cost of
coverage paid by the Executive, which but for this paragraph would have been paid by the Company.
Any such reimbursement shall include interest at the rate set out in the last sentence of this
paragraph. The Company and the Executive may agree to take other actions to avoid the imposition
of 409A Tax at such time and in such manner as permitted under Section 409A. In the event that this
Section 9 requires a delay of any payment, such payment shall be accumulated and paid in a single
lump sum on the Delayed Payment Date together with interest for the period of delay, compounded
monthly, equal to the prime or base lending rate then used by CitiBank, N.A., in New York City and
in effect as of the date the payment would otherwise have been provided.

10. Directorships, Other Offices.

     In the event of termination of employment, Executive shall immediately, unless otherwise
requested by the Company’s Board of Directors, resign from all directorships, trusteeships, other
offices and employment held at that time with the Company or any of its Affiliated Companies.

11. Confidentiality and Inventions.

     The Company’s most valuable assets include its Confidential Information and Inventions (which
are defined in Section 7). As a condition of employment, and in exchange for payment of the
Executive’s salary, wages, and other compensation, the Executive (including the Executive’s heirs,
executors, administrators and assigns) and the Company agree that:

     (a) Obligation to Others. The Executive has no obligation to any former employer or
third party which is inconsistent with this Agreement or which restricts the Executive’s activities
with the Company in any way. Also, the Executive shall not at any time disclose to the Company or
cause the Company to use any confidential information belonging to others, including the
Executive’s former employers.

     (b) Obligations to Company During Employment.

          (1) Company’s Confidential Information. Unauthorized disclosure of the Company’s
Confidential Information, either to outsiders, including temporary workers or to co-employees who
do not have a legitimate need to know of it, could irreparably harm the Company and subject it to
significant competitive disadvantage. To protect the Company’s Confidential Information, the
Executive will not:

	 	(A)	 	disclose it to any co-worker, unless he/she has a business need to know of it;
	 
	 	(B)	 	disclose it to any non-employee for any reason; and

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	 	(C)	 	use it for the Executive’s own benefit or profit.

This restriction shall not apply to Confidential Information that:

	 	(A)	 	a Company officer authorizes the Executive, in writing, to release;
	 
	 	(B)	 	is or becomes public knowledge through no fault of the Executive;
	 
	 	(C)	 	is made lawfully available to the Executive by an independent third party
(provided there is no agreement between the Company and that third party which
obligates the Company’s employees to keep it in confidence);
	 
	 	(D)	 	the Executive lawfully already knew of when the Executive received it from the
Company and the Executive can demonstrate such prior knowledge; or
	 
	 	(E)	 	the Executive is required by law, regulation, rule, act or order of any
governmental authority or agency to disclose, provided however, that the Executive
gives the Company sufficient advance written notice to permit it to take appropriate
lawful recourse to protect its interests.

          (2) Confidential Information of Third Parties. On occasion, a third party may share its
confidential information with the Company for their mutual benefit (e.g., in connection with a
licensing arrangement or potential merger or acquisition). Should such information be entrusted to
the Executive, the Executive shall not disclose it, either to co-workers (unless they have a
business need to know of it) or to outsiders.

          (3) Ownership of Inventions, Patents, Trademarks, Trade Secrets, and Tangible Work Product.
Since the Company is paying a salary, wages and other compensation to the Executive, the Company
owns all of the rights to the inventions and work product that the Executive creates or conceives
during the Employment Period. To ensure that the Company’s rights to its property are protected,
the Executive shall promptly disclose to the Company and keep adequate records on any invention
that the Executive conceives, discovers or makes during the Employment Period. Without further
payment from or charge to the Company, the Executive agrees that the following, if created or
conceived during the Employment Period, shall be the Company’s exclusive property and the Executive
shall assign to the Company all of the following:

	 	(A)	 	any Invention conceived, discovered or made by the Executive;
	 
	 	(B)	 	any patent, patent application or record relating to any Invention that the
Executive makes;
	 
	 	(C)	 	any trade secrets developed by or disclosed to the Executive during the course
of the Executive’s employment; and
	 
	 	(D)	 	any tangible work product prepared by the Executive in the course and scope of
the Executive’s employment, including but not limited to, any copyrightable subject
matter, research, research and/or business data.

-20-

 

          (4) Ownership of Copyrights. All works made for hire shall vest in the Company. All other
works, whether copyrightable or not, that the Executive creates in the course of the Executive’s
employment, are deemed, upon their creation, to be assigned to the Company. This includes, but is
not limited to, all rights in and to the copyright throughout the world, all of its renewals and
extensions, the right to make and distribute copies of it, the right to translate it, and the right
to all derivative works from it. The Executive will execute all documents which are necessary or
desirable to record any assignment of copyright or other transfer of ownership in any work that the
Executive creates in the course of the Executive’s employment, without further charge to the
Company.

          (5) Obtaining and Enforcement of Patents, Trademarks and Copyrights. At the Company’s
request, and without charge, the Executive shall execute any patent applications, assignments, or
other instruments which the Company considers necessary to apply for and obtain Letters Patent in
the United States and any foreign country and take all necessary action to protect the Company’s
interest in them. The Executive shall execute any documents or instruments which the Company
considers necessary to vest title in the Company to any invention, patents, patent applications or
records relating to any invention and/or tangible work product.

          (6) Removal of Company Property. The Executive shall not remove any of the Company’s
property from its premises, unless the Executive needs it to perform the Executive’s duties for the
Company or the Executive is specifically authorized to do so.

     (c) Obligations to Company When Your Employment Terminates.

          (1) Continuing Obligations. Each party’s obligations described in Section 11(b) above
survive the termination of the Executive’s employment.

          (2) Return of Company Property. The Executive will turn over all of the Company’s property
to a designated Company representative prior to the Executive’s separation. The Executive will not
retain any copies or reproductions of correspondence, memoranda, reports, notebooks, drawings,
data, photographs or other documents relating in any way to the Company’s business.

12. Remedies; Injunction.

     (a) Executive acknowledges and agrees that the restrictions contained in Sections 5 and 11 of
this Agreement are reasonable and necessary to protect and preserve the legitimate interests,
properties, goodwill and business of the Company and its Affiliated Companies, that the Company
would not have entered into this Agreement in the absence of such restrictions and that irreparable
injury will be suffered by the Company should Executive breach any of the provisions of those
sections. Executive represents and acknowledges that (i) Executive has been advised by the Company
to consult legal counsel with respect to this Agreement, and (ii) that Executive has had full
opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with
counsel.

     (b) Executive further acknowledges and agrees that a breach of any of the restrictions in
Sections 5 or 11 cannot be adequately compensated by monetary damages. Executive agrees

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that the Company will be entitled to a return of the cash consideration set forth in this
Agreement as being conditioned on the covenants contained in Sections 5 and 11 and that all
remaining stock options will be forfeited if Executive breaches the provisions of either of those
sections and that, in any event, the Company will be entitled to preliminary and permanent
injunctive relief, without the necessity of proving actual damages, as well as provable damages and
an equitable accounting of all earnings, profits and other benefits arising from any violation of
Sections 5 or 11, which rights will be cumulative and in addition to any other rights or remedies
to which the Company and/or its Affiliated Companies may be entitled. In the event that any of the
provisions of Sections 5 or 11 should ever be adjudicated to exceed the time, geographic, service,
or other limitations permitted by applicable law in any jurisdiction, it is the intention of the
parties that the provision will be amended to the extent of the maximum time, geographic, service,
or other limitations permitted by applicable law, that such amendment will apply only within the
jurisdiction of the court that made such adjudication and that the provision otherwise be enforced
to the maximum extent permitted by law.

     (c) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal
proceeding arising out of Sections 5 or 10, including without limitation, any action commenced by
the Company and/or its Affiliated Companies for preliminary and permanent injunctive relief and
other equitable relief, may be brought in the United States District Court for the District of New
Jersey, or if such court does not have jurisdiction or will not accept jurisdiction, in any court
of competent jurisdiction, (ii) consents to the non-exclusive jurisdiction of any such court in any
such suit, action or proceeding, and (iii) waives any objection which Executive may have to the
laying of venue of any such suit, action or proceeding in any such court.

13. Intellectual Property.

     To the fullest extent permitted by applicable law, all intellectual property (including
patents, trademarks, and copyrights) which are made, developed or acquired by Executive in the
course of Executive’s employment with the Company will be and remain the absolute property of the
Company, and Executive shall assist the Company in perfecting and defending its rights to such
intellectual property.

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14. Non-Exclusivity.

     Except as specifically expressed herein, nothing contained herein is intended to alter the
terms of any benefit plan or program. Notwithstanding anything in this Agreement, the Company or
its Affiliated Companies, as applicable, reserves the right to amend or terminate any of its or
their employee benefit plans at any time. In the event that an amendment to an employee benefit
plan adopted after the effective date of this Agreement specifically conflicts with an express
promise made in this Agreement, the Company shall have the right to honor the promise through
comparable means outside the affected employee benefit plan without regard to any differences in
the tax impact to the Executive. Nothing in this Agreement shall prevent or limit the Executive’s
continuing or future participation in any benefit plan provided by the Company or any of its
affiliates for which the Executive may qualify.

15. Full Settlement.

     In no event shall the Executive be obligated to seek other employment or take any other action
by way of mitigation of the amounts and benefits (other than as required pursuant to Section
5(b)(ii)) payable to the Executive under any of the provisions of this Agreement and such amounts
and benefits (other than as required pursuant to Section 5(b)(ii)) shall not be reduced whether or
not the Executive obtains other employment. In the event of a Change of Control, the Company
agrees to pay, to the full extent permitted by law and with respect to disputes that arise out of
events occurring during the applicable COC Employment Period, all legal fees and expenses up to
$25,000 which the Executive may reasonably incur as a result of any contest by the Company, the
Executive or others of the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement); provided, however that if
the Company ultimately prevails in a court of competent jurisdiction with regard to any such
contest, the Executive agrees to reimburse the Company for any and all legal fees and expenses paid
by the Company in accordance with this sentence. Such reimbursement shall become payable within 30
days after the expiration of the applicable period to appeal such outcome or, if an appeal is
taken, 30 days after final resolution of such appeal. Interest shall accrue on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

16. Governing Law.

     This Agreement will be governed by and construed in accordance with the laws of the State of
New Jersey.

17. Assignments; Transfers; Effect of Merger.

     (a) No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Company is not the continuing entity, or
pursuant to the sale or transfer of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of the assets of the
Company.

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     (b) This Agreement will not be terminated by any merger, consolidation or transfer of assets
of the Company referred to above. In the event of any such merger, consolidation or transfer of
assets, the provisions of this Agreement will be binding upon the surviving or resulting
corporation or the person or entity to which such assets are transferred.

     (c) The Company agrees that concurrently with any merger, consolidation or transfer of assets
referred to above, it will cause any successor or transferee unconditionally to assume, either
contractually or as a matter of law, all of the obligations of the Company hereunder.

     (d) This Agreement will inure to the benefit of, and be enforceable by or against, Executive
or Executive’s personal or legal representatives, executors, administrators, successors, heirs,
distributes, designees and legatees. None of Executive’s rights or obligations under this
Agreement may be assigned or transferred by Executive other than Executive’s rights to compensation
and benefits, which may be transferred only by will or operation of law. If Executive should die
while any amounts or benefits have been accrued by Executive but not yet paid as of the date of
Executive’s death and which would be payable to Executive hereunder had Executive continued to
live, all such amounts and benefits unless otherwise provided herein will be paid or provided in
accordance with the terms of this Agreement to such person or persons appointed in writing by
Executive to receive such amounts or, if no such person is so appointed, to Executive’s estate. In
the event of Executive’s death or a judicial determination of his incompetence, references in this
Agreement to “Executive” shall be deemed to refer, as appropriate, to his heirs, beneficiaries,
estate, executor, or other legal representative.

18. Modification.

     No provisions of this Agreement may be waived, modified or discharged unless such waiver,
modification or discharge is agreed to in writing signed by both Executive and the CEO. No waiver
by any party hereto at any time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party will be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time.

19. Notices.

     All notices and other communications hereunder shall be writing and shall be given delivery to
the other party in person or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

If to the Executive:

Brent Saunders

[Address]

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If to the Company:

Schering-Plough Corporation

2000 Galloping Hill Road

Kenilworth, New Jersey 07033

Attention: Corporate Secretary

20. Entire Agreement.

     This Agreement sets forth the entire agreement of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any officer, employee or
representative of any party hereto in respect of the subject matter contained herein. There shall
be no contractual or similar restrictions on Executive’s right to terminate his employment with the
Company, or on his post-employment activities, other than those expressly set forth in this
Agreement or in the terms of grant of any Schering-Plough equity compensation award held by the
Executive. Except as otherwise set forth in this Agreement, the respective rights and obligations
of the parties under this Agreement shall survive any termination of Executive’s employment. This
Agreement may be executed in counterparts, each of which shall be deemed an original and all of
which together shall be deemed to be one and the same document. Signatures delivered by facsimile
shall be effective for all purposes.

     The undersigned hereby execute this Agreement as of the date first above written.

	 	 	 	 	 
	 	SCHERING—PLOUGH CORPORATION

 	 
	Dated:                                          	By  	 	 
	 	 	C. Ron Cheeley 	 
	 	 	Senior Vice President,

Global Human Resources 	 
	 
	 	 	 
	Dated:                                          	  	 	 
	 	 	Brent Saunders 	 
	 	 	 	 
	 

-25-

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