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	Notice of Annual Meeting
	of Shareholders
	May 19, 2006

Proposal One:		Elect five Directors for a one-year term (unless proposal three does not pass, in which case the term will be three years). The Board recommends a vote FOR this proposal.
Proposal Two:		Ratify the designation of Deloitte & Touche LLP to audit Schering-Plough’s books and accounts for 2006. The Board recommends a vote FOR this proposal.
Proposal Three:		Approve amendments to Schering-Plough’s governing instruments to provide for the annual election of Directors. The Board recommends a vote FOR this proposal.
Proposal Four:		Approve the Directors Compensation Plan. The Board recommends a vote FOR this proposal.
Proposal Five:		Approve the 2006 Stock Incentive Plan. The Board recommends a vote FOR this proposal.
Proposals Six and Seven:		Consider shareholder proposals, if each is brought before the meeting. The Board recommends a vote AGAINST each proposal.

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	Proxy Statement

Proposal One:		Elect five Directors for a one-year term (unless proposal three does not pass, in which case the term will be three years). The Board recommends a vote FOR this proposal.
Proposal Two:		Ratify the designation of Deloitte & Touche LLP to audit Schering-Plough’s books and accounts for 2006. The Board recommends a vote FOR this proposal.
Proposal Three:		Approve amendments to Schering-Plough’s governing instruments to provide for the annual election of Directors. The Board recommends a vote FOR this proposal.
Proposal Four:		Approve the Directors Compensation Plan. The Board recommends a vote FOR this proposal.
Proposal Five:		Approve the 2006 Stock Incentive Plan. The Board recommends a vote FOR this proposal.
Proposals Six and Seven:		Consider shareholder proposals, if each is brought before the meeting. The Board recommends a vote AGAINST each proposal.

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•	Record shareholders wishing to discontinue or begin householding, or any record shareholder residing at a household address wanting to request delivery of a copy of the Proxy Statement, 2005 Annual Report to Shareholders and Company Overview, should contact our transfer agent, The Bank of New York, at 877-429-1240 (U.S.), 212-815-3700 (outside of

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	the U.S.) or www.stockbny.com or may write to them at P.O. Box 11002, Church Street Station, New York, New York 10286-1002.
•	Shareholders owning their shares through a bank, broker or other holder of record who wish to either discontinue or begin householding should contact their record holder. Any shareholder in the household may request prompt delivery of a copy of the Proxy Statement, 2005 Annual Report to Shareholders and Company Overview by contacting Schering-Plough at 908-298-3636 or may write to Schering-Plough at Office of the Corporate Secretary, Schering-Plough Corporation, 2000 Galloping Hill Road, Mail Stop: K-1-4-4525, Kenilworth, New Jersey 07033.

Email:		bmincey@bankofny.com
Mail:		The Bank of New York c/o Investor Services Correspondence P.O. Box 11598 New York, NY 10277-2075 Attn: Barbara Mincey

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[THOMAS J. COLLIGAN PHOTO]		THOMAS J. COLLIGAN, Age 61, Retired Vice Chairman of PricewaterhouseCoopers, LLP (accounting firm). Prior History: Mr. Colligan was associated with PricewaterhouseCoopers from 1969 until his retirement in 2004. Other Directorships: Education Management Corporation and Corgentech, Inc. Other: Managing Director of Duke Corporate Education, Board of Trustees of Newark Boys Chorus School, Board of Advisors of the Silberman College of Business at Farleigh Dickinson University. Director since: 2005
[C. ROBERT KIDDER PHOTO]		C. ROBERT KIDDER, Age 61, Principal of Stonehenge Partners (private investment firm). Prior History: Mr. Kidder was Chairman and Chief Executive Officer of Borden, Inc. from 1995 to 2003. He was also a Founding Partner of Borden Capital Management Partners. Prior to that, he was at Duracell International Inc. from 1980 to 1994, assuming the role of President and Chief Executive Officer in 1984. Other Directorships: Morgan Stanley Other: Board of Trustees of Columbus Children’s Hospital and Ohio University, and President of Wexner Center Foundation. Director since: 2005
[CARL E. MUNDY, JR. PHOTO]		CARL E. MUNDY, JR., Age 70, Retired General, Former Commandant of the Marine Corps. Prior History: General Mundy entered the Marine Corps in 1953. He held senior positions of operational command and top-level management prior to appointment as Commandant and Joint Chiefs of Staff member in 1991. He led the Marine Corps and served as military adviser to the President and Secretary of Defense from 1991 to 1995. Other Directorships: General Dynamics Corporation Other: Chairman of the Marine Corps University Foundation, member of the boards of advisors to the Comptroller General of the United States and the Navy League of the United States, and member of the Council on Foreign Relations. Past president of Worldwide Operations of the United Services Organization. Director since: 1995

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[PATRICIA F. RUSSO PHOTO]		PATRICIA F. RUSSO, Age 53, Chairman and Chief Executive Officer of Lucent Technologies Inc. (communications company). Ms. Russo assumed the position of Chairman in 2003 and the positions of Chief Executive Officer and President in January 2002. Prior History: Ms. Russo was President and Chief Operating Officer of Eastman Kodak Company from April 2001 and Director from July 2001, and also Chairman of Avaya Inc. since December 2000, until she rejoined Lucent in January 2002. Ms. Russo was Executive Vice President and Chief Executive Officer of the Service Provider Networks business of Lucent from November 1999 to August 2000 and served as Executive Vice President from 1996 to 1999. Prior to that she held various executive positions with Lucent and AT&T. Director since: 1995
[ARTHUR F. WEINBACH PHOTO]		ARTHUR F. WEINBACH, Age 62, Chairman and Chief Executive Officer of Automatic Data Processing, Inc. (ADP) (independent computing services company). Mr. Weinbach has been associated with ADP since 1980, assuming his current position in April 1998. Mr. Weinbach will retire as chief executive officer of ADP effective August 31, 2006, but will serve as a non-executive chairman. Other Directorships: First Data Corp. Other: Trustee of New Jersey Seeds. Director since: 1999
Directors Continuing in Office — Term to Expire 2007
[FRED HASSAN PHOTO]		FRED HASSAN, Age 60, Chairman of the Board and Chief Executive Officer since April 2003. Prior History: Mr. Hassan was Chairman of the Board and Chief Executive Officer of Pharmacia Corporation from February 2001 until April 2003, President and Chief Executive Officer of Pharmacia from March 2000 to February 2001, and President and Chief Executive Officer of Pharmacia & Upjohn, Inc. from May 1997 until March 2000. Mr. Hassan was Executive Vice President and a member of the Board of Directors of Wyeth, Inc. (formerly American Home Products Corporation), from 1995 to 1997. Other Directorships: Avon Products, Inc. Director since: 2003
[PHILIP LEDER, M.D. PHOTO]		PHILIP LEDER, M.D., Age 71, Chairman, Department of Genetics, Harvard Medical School. Dr. Leder has been Chairman, Department of Genetics, Harvard Medical School, since 1980; John Emory Andrus Professor of Genetics since 1980. Other: Honorary Trustee of the Massachusetts General Hospital, Trustee and Chairman of the Board of the Charles A. Revson Foundation. Director since: 2003
[EUGENE R. MCGRATH PHOTO]		EUGENE R. MCGRATH, Age 64, Chairman of Consolidated Edison, Inc. (energy company). Prior History: Mr. McGrath has been associated with Con Edison since 1963. He served as Chairman, President and Chief Executive Officer from October 1997 until 2005, and served as Chairman and Chief Executive Officer of Con Edison’s subsidiary, Consolidated Edison Company of New York, Inc., since September 1990. Other: Director or Trustee of AEGIS Insurance Services, Atlantic Mutual Insurance Services, Barnard College, Manhattan College and the Wildlife Conservation Society. Director since: 2000

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Directors Continuing in Office — Term to Expire 2008
[HANS W. BECHERER PHOTO]		HANS W. BECHERER, Age 70, Retired Chairman, Chief Executive Officer and Chief Operating Officer of Deere & Company (manufacturer of mobile power machinery and supplier of financial and health care services). Prior History: Mr. Becherer was associated with Deere & Company from 1962 until his retirement in 2000. He was elected President and Chief Operating Officer of Deere & Company in 1987, President and Chief Executive Officer in 1989, and Chairman and Chief Executive Officer in May 1990. Other Directorships: J.P. Morgan Chase & Co., until his retirement in April 2006. Other: Member of the Business Council and Council on Foreign Relations. Director since: 1989
[KATHRYN C. TURNER PHOTO]		KATHRYN C. TURNER, Age 58, Chairperson, Chief Executive Officer and President of Standard Technology, Inc. (management and technology solutions firm). Ms. Turner has served in her present position since 1985. Other Directorships: ConocoPhillips, Carpenter Technology Corporation and Tribune Company (until May 2006). Other: Board member of National Capital Area Council of the Boy Scouts of America and Children’s Hospice International. Director since: 2001
[ROBERT F.W. VAN OORDT PHOTO]		ROBERT F.W. VAN OORDT, Age 69, Chairman of the Supervisory Board of Rodamco Europe N.V. (largest retail real estate investment company in Europe). Prior History: Mr. van Oordt served as Chief Executive Officer of Rodamco from March 2000 to June 2001. Prior to this assignment, Mr. van Oordt served as Chairman of the Executive Board of NV Koninklijke KNP BT (producer of paper and distributor of graphic and office products) from March 1993, following the merger of three Dutch-based industrial corporations, including Bührmann-Tetterode N.V., until his retirement in April 1996. Former Director of Nokia Corporation. Other Directorships: Fortis Bank N.V. and Supervisory Board of Draka Holding N.V. Other: Member of the International Advisory Board of Nijenrode University and senior member of the Conference Board. Director since: 1992

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Business

Nominating

Science

Practices

& Corporate

&

Audit

Oversight

Compensation

Finance

Governance

Technology

Mr. Becherer

M

C

M

Mr. Colligan

C

M

Mr. Hassan

Mr. Kidder

M

M

Dr. Leder

M

C

Mr. McGrath

M

M

General Mundy

M

M

M

Mr. Osborne*

M

M

M

Ms. Russo

M

C

Ms. Turner

M

M

M

M

Mr. van Oordt

M

C

M

Mr. Weinbach

M

C

Total meetings in fiscal year 2005

13

6

6

4

5

0

*	Retiring at Annual Meeting, pursuant to the retirement requirement in the Corporate Governance Guidelines.

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	•	Directors Stock Award Plan under which Directors receive 3,000 common shares annually, increased from 2,500 shares. Directors have the option to defer the award into Deferred Stock Units, which grow/diminish in value as if invested in Schering-Plough common shares (with dividends reinvested) and are paid out in common shares at the end of a specified deferral period.
	•	Directors Stock Equivalency Program under which Directors receive an annual award of phantom stock equivalent units valued at $25,000 (no increase from prior years), which grow/diminish in value as if invested in Schering-Plough common shares (with dividends reinvested) until termination of service as a Director, at which time they are paid out in cash.

	•	Board Retainer of $50,000.
	•	Committee Retainer of $15,000 for the Audit Committee and $10,000 for each of the other Board Committees (there was no retainer for the Executive Committee).
	•	Committee Chair Retainer of $5,000 paid to the Chair of each Committee (there was no Committee Chair retainer for the Executive Committee).

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	•	Deferral option under the Directors Deferred Compensation Plan, which permits Directors to defer any cash compensation. They may elect whether deferred cash compensation grows/diminishes in value as if invested in Schering-Plough common shares (with dividends reinvested) or earns interest at a market rate. Deferred amounts are paid in cash at the end of a specified deferral period.

Name		Total				Cash Feesa												Non-Stock
										Stock				Option				Incentive Plan				All Other
										Awardsb				Awards				Compensation				Compensationc
Mr. Becherer		$	189,145			$	75,000			$	111,650			$	0			$	0			$	2,495
Mr. Colligan			114,696				37,500				76,233				0				0				962
Mr. Kidder			91,650				17,500				74,150				0				0				0
Dr. Leder			150,400				63,750				87,650				0				0				0
Mr. McGrath			161,650				0				161,650				0				0				0
General Mundy			166,650				80,000				86,650				0				0				0
Mr. Osborne			171,650				85,000				86,650				0				0				0
Ms. Russo			162,586				28,125				133,525				0				0				936
Ms. Turner			169,150				82,500				86,650				0				0				0
Mr. van Oordt			176,650				90,000				86,650				0				0				0
Mr. Weinbach			166,650				0				166,650				0				0				0

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		Common Shares
		Beneficially				Percent
Name and Address of Beneficial Owner		Owned				of Class
Wellington Management Company, LLP (a) 75 State Street Boston, MA 02109			156,897,180				10.6	%
Capital Research and Management Company (b) 333 South Hope Street Los Angeles, CA 90071			102,640,720				6.9	%
FMR Corp. and Edward C. Johnson 3d (c) 82 Devonshire Street Boston, MA 02109			81,876,390				5.5	%

a	As reported on Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2006, Wellington Management Company, LLP, through one of its subsidiaries, has (i) shared power to vote or direct the vote of 69,130,053 common shares and (ii) shared dispositive power as to 156,897,180 common shares.
b	As reported on Schedule 13G filed with the Securities and Exchange Commission on February 10, 2006, Capital Research and Management Company has (i) sole power to vote 24,588,900 common shares and (ii) sole power to direct the disposition of 102,640,720 common shares.
c	As reported on Schedule 13G/ A filed with the Securities and Exchange Commission on February 14, 2006, FMR Corp. has sole power to vote or direct the vote of 5,252,686 common shares and sole power to direct the disposition of 81,876,390 common shares; and Edward C. Johnson 3d and other family members own certain shares of FMR Corp. as specified in the Schedule 13G/A.

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						Number of
		Number of				Common
		Common				Share
Name		Shares(a)				Equivalents(d)
Hans W. Becherer			19,900				47,591
Thomas J. Colligan			0				5,434
Fred Hassan			2,503,501	(b)			0
C. Robert Kidder			0				4,851
Philip Leder, M.D.			7,250				4,162
Eugene R. McGrath			11,901				32,133
Carl E. Mundy, Jr.			15,866				19,877
Richard de J. Osborne			75,335				15,499
Patricia F. Russo			22,800				33,192
Kathryn C. Turner			5,213				14,913
Robert F. W. van Oordt			16,718				74,313
Arthur F. Weinbach			8,750				37,337
Robert J. Bertolini			489,214	(b,c)
Carrie S. Cox			983,334	(b)
Cecil B. Pickett			1,146,939	(b)
Thomas J. Sabatino, Jr.			233,335	(b)
All Directors and Executive Officers as a group including those above (19 persons)			6,513,656	(b,c)			289,302

a	The total for each individual, and for the group of all Directors and Executive Officers (19 persons), is less than one percent of the outstanding common shares (including shares which could be acquired within 60 days of March 1, 2006 through the exercise of outstanding options or the distribution of shares under the Stock Incentive Plans). The information shown is based upon information furnished by the respective Directors and Executive Officers.
b	Includes shares which could be acquired within 60 days of March 1, 2006 through the exercise of employee stock options as follows: Mr. Bertolini (83,334); Ms. Cox (283,334); Mr. Hassan (516,668); Dr. Pickett (75,000); Mr. Sabatino (150,001); all Directors and Executive Officers as a group (1,251,673).
c	Includes 5,880 shares beneficially owned by Mr. Bertolini and 3,946 shares beneficially owned by two other executive officers as of December 31, 2005 in a qualified 401(k) plan, over which they have voting and investment power. Also includes 60 common share equivalents credited to one executive officer’s account as of December 31, 2005 in Schering-Plough’s non-qualified deferred compensation plan.
d	Includes common share equivalents credited to non-employee Directors under the Directors Deferred Compensation Plan and to participating non-employee Directors under the Directors Deferred Stock Equivalency Program, plus dividends credited, rounded to the nearest whole number. The equivalents are paid in cash following termination of service as a Director based on the market value of Schering-Plough common shares at that time. Of the totals shown, these include 38,883 for Mr. Becherer; 2,418 for Mr. Colligan; 1,851 for Mr. Kidder; 4,162 for Dr. Leder; 26,046 for Mr. McGrath; 11,168 for General Mundy; 15,497 for Mr. Osborne; 30,168 for Ms. Russo; 6,204 for Ms. Turner; 68,630 for Mr. van Oordt; and 28,628 for Mr. Weinbach.

	Also includes common share equivalents credited to participating non-employee Directors under a deferral feature of the Directors Stock Award Plan. The equivalents are paid in stock at the end of the deferral period. Of the totals shown, these include 8,709 each for Directors Becherer, Mundy, Turner and Weinbach; 6,087 for McGrath; 5,684 for van Oordt; 3,025 for Russo; 3,016 for Colligan and 3,000 for Kidder.
	For additional information, see “Director Compensation” on page      .

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	•	Forms 3 and 4 filed during 2005, and amendments to those Forms; and
	•	representation letters from those who did not file a Form 5 stating that no Form 5 was due.

15

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	The graph above assumes a $100 investment in January 1, 2004, and reinvestment of all dividends, in each of the Company’s common shares and a composite peer group of the major U.S.-based pharmaceutical companies, which are: Abbott Laboratories, Bristol-Myers Squibb Company, Johnson & Johnson, Eli Lilly and Company, Merck & Co., Inc., Pfizer Inc. and Wyeth.

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																				Long-Term Compensation
																				Awards
Name and								Annual Compensation																								Total (e)
Principal																				Restricted				Securities
Position in																Other Annual				Stock Awards				Underlying				All Other				Actual				Opportunity
2005				Year				Salary				Bonus				Compensation (b)				(c)				Options				Compensation (d)				Received				to Earn
Fred Hassan					2005			$	1,556,250	(a)		$	TBD			$	332,850			$	4,140,000				1,100,000			$	218,324			$
	Chairman of the Board &				2004			$	1,500,000	(a)		$	1,556,300			$	398,939			$	3,640,000				1,100,000			$	185,416			$
	Chief Executive Officer				2003			$	1,046,154	(a)		$	—	(f)		$	349,156			$	3,486,000				900,000			$	14,926			$
Robert J. Bertolini					2005			$	801,175			$	TBD			$	25,340			$	931,500				250,000			$	88,381			$
	Executive Vice President &				2004			$	775,000			$	542,500			$	19,457			$	819,000				250,000			$	66,655			$
		Chief Financial Officer			2003			$	96,875			$	100,000	(g)			—			$	1,031,000				350,000				—			$
Carrie S. Cox					2005			$	937,500			$	TBD			$	46,499			$	1,573,200				400,000			$	109,427			$
	Executive Vice President &				2004			$	900,000			$	622,300			$	38,393			$	1,274,000				450,000			$	104,213			$
		President, Global			2003			$	565,962			$	452,770	(g)			—			$	1,850,000				450,000			$	14,926			$
		Pharmaceuticals
Cecil B. Pickett, Ph.D.					2005			$	733,375			$	TBD			$	16,622			$	852,840				225,000			$	134,628			$
	Senior Vice President &				2004			$	712,000			$	408,500			$	19,829			$	728,000				225,000			$	155,414			$
		President, Schering-Plough			2003				699,500				—				—			$	297,024				253,000			$	8,982			$
		Research Institute Division
Thomas J. Sabatino, Jr.					2005			$	675,875			$	TBD			$	17,395			$	724,500				200,000			$	78,497			$
	Executive Vice President &				2004			$	462,917			$	455,000	(g)		$	18,419			$	1,215,900				250,000			$	177,437			$
		General Counsel (h)			2003				—				—				—			$	—				—				—			$

a	Includes a portion of salary deferred at the election of Mr. Hassan.
b	Personal benefits provided to the Named Executive Officers include financial planning, tax preparation, installation and operation of home security systems, personal security services, payment of legal fees for negotiation of terms of employment agreements, personal use of corporate-owned aircraft and use of a car and driver. These benefits are valued at the incremental cost to Schering-Plough of providing the benefit to the executive.

	The Chairman of the Board and CEO has been directed by the Board to use the corporate-owned aircraft for all travel. This provides several business benefits to Schering-Plough. First, the policy is intended to ensure the personal safety of Mr. Hassan, who maintains a significant public role as the leader of Schering-Plough. Second, the policy is intended to ensure his availability and to maximize the time available for Schering-Plough business. Certain of the other Named Executive Officers (and other key executives) use the corporate-owned aircraft for business travel, and on occasion for personal travel.
	Schering-Plough calculates the incremental cost of the personal use of corporate-owned aircraft based on a methodology developed in 2004 by an independent consultant in connection with Schering-Plough’s cost savings initiatives. The methodology includes the average weighted cost of fuel, crew hotels and meals, on-board catering, trip-related maintenance, landing fees, trip-related hangar/parking costs and smaller variable costs. Since the corporate-owned aircraft are used primarily for business travel, the methodology excludes the fixed costs which do not change based on usage, such as pilots’ salaries, the purchase costs of the corporate-owned aircraft and the cost of maintenance not related to personal travel.
	Schering-Plough makes one car and driver available to Mr. Hassan. This provides several business benefits to Schering- Plough. First, the policy is intended to ensure the personal safety of Mr. Hassan, who maintains a significant public role as the leader of Schering-Plough. Second, the policy is intended to ensure his availability and to maximize the time available for Schering-Plough business. The other Named Executive Officers occasionally use cars and drivers from a pool. All executives use the cars primarily for business purposes, and the cars (including Mr. Hassan’s car) are also used by other Company personnel for business purposes. Schering-Plough calculates the incremental cost of executives’

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	personal use of corporate-owned cars driven by Company personnel based on a methodology developed in 2005 which includes driver overtime, meals and travel pay and fuel costs. Since the cars are used primarily for business travel, the methodology excludes the fixed costs which do not change based on personal usage, such as drivers’ salaries, maintenance, and the purchase costs of the cars.
	Following is a table which itemizes the total personal benefits provided to each Named Executive Officer in 2005 as set forth in the column titled “Other Annual Compensation” – all amounts have been included in that column of the Summary Compensation Table above.

		Corporate-				Corporate				Personal				Home				Financial				Tax
		owned				car and				security				security				planning				preparation
		aircraft				driver				services				system				services				services				TOTAL
Hassan		$	151,923			$	18,064			$	152,819			$	10,044			$	0			$	0				$332,850
Bertolini			0				2,330				0				15,510				5,000				2,500				$25,340
Cox			33,545				1,742				0				712				8,000				2,500				$46,499
Pickett			6,806				1,213				0				1,103				5,000				2,500				$16,622
Sabatino			0				573				0				7,822				6,500				2,500				$17,395

c

For 2005, Messrs. Hassan, Bertolini and Sabatino, Ms. Cox and Dr. Pickett each received performance stock awards which were granted as phantom stock units. These units are earned and become distributable to the executive only upon, and to the extent of, the achievement of applicable corporate performance goals. Because the corporate performance goals were satisfied, 100% of the 2005 performance stock awards granted to such executives were earned as follows: Mr. Hassan, 200,000 shares; Mr. Bertolini, 45,000 shares; Ms. Cox, 76,000 shares; Dr. Pickett, 41,200 shares; and Mr. Sabatino, 35,000 shares. The amounts shown in the table for these executives represents the award that were earned, valued at the share price on the award grant date. The earned portion of the awards are generally distributed in full on the third anniversary of the grant date.

	At December 30, 2005, the total number and value of earned but undistributed performance shares was 400,000 shares ($8,340,000) for Mr. Hassan, 155,000 shares ($3,231,750) for Mr. Bertolini, 146,000 shares ($3,044,100) for Ms. Cox, 91,616 shares ($1,910,194) for Dr. Pickett, and 35,000 shares ($729,750) for Mr. Sabatino.
	Under the terms of their employment agreements, Messrs. Bertolini and Sabatino each received a grant of phantom stock units at the time of hire which grants were not subject to the attainment of performance goals and are included in the table at fair market value on the date of grants. Mr. Bertolini received 65,000 units and Mr. Sabatino received 70,000 units which were valued at $1,355,250 and $1,459,500, respectively, as of December 30, 2005.
	Under the terms of his employment agreement, Mr. Hassan received a grant of 200,000 shares of restricted stock in 2003 which shares are included in the table at fair market value on the date of grant. The value of those shares as of December 30, 2005 was $4,170,000. Under the terms of her employment agreement, Ms. Cox received a grant of 100,000 shares of restricted stock in 2003 which shares are included in the table at fair market value on the date of grant. The value of those shares as of December 30, 2005 was $2,085,000.
	Cash equivalent to the amount of all dividends paid on the common shares is paid on all shares of restricted stock and all phantom stock units before they are distributed or forfeited.

d	For each of the Named Executive Officers, the amount shown for 2005 includes: contributions to savings plans for Mr. Hassan, $155,628; Mr. Bertolini, $67,184; Ms. Cox, $77,990; Dr. Pickett, $57,094; and Mr. Sabatino, $52,344; and executive life insurance for Mr. Hassan, $62,696; Mr. Bertolini, $21,197; Ms. Cox, $31,437; Dr. Pickett, $77,534; and Mr. Sabatino, $26,153.
e	Schering-Plough voluntarily introduced these columns. The Actual Received column includes the amounts in the columns titled Salary, Bonus, Other Annual Compensation and All Other Compensation. The Opportunity to Earn column includes amounts that will change in value, or may never be realized, depending on future performance. The amounts in the Opportunity to Earn reflect the total of the amounts in the columns titled Restricted Stock Awards (value as provided in note(c)) and Securities Underlying Options (valued as provided in the table on page     ).
f	Five months after his arrival in April 2003, Mr. Hassan announced major actions to protect Schering-Plough’s financial position. These include a freeze on salary increases and no profit sharing payments for 2003 and no regular bonuses for 2003. Even though he achieved his objectives for 2003, he voluntarily gave up the opportunity to earn an incentive as high as $2 million in light of Schering-Plough’s financial position.
g	These payment amounts were required under each executive’s employment agreement.

h	Mr. Sabatino joined Schering-Plough on April 15, 2004.

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	•	a cash payment equal to his base salary through the date of termination of employment to the extent not paid, any compensation previously deferred and due upon his termination of employment, any accrued vacation pay, and any unreimbursed expenses;
	•	a pro-rata bonus payment based upon the greater of the highest annual bonus paid in the three most recent fiscal years or the target annual bonus then in effect;
	•	a severance payment equal to three times the sum of (a) his annual base salary, (b) the greater of his highest annual bonus paid in the three most recent fiscal years or his target annual bonus then in effect, and (c) the amount of the contribution by Schering-Plough on his behalf under Schering-Plough’s qualified and nonqualified profit-sharing plans;
	•	continued welfare benefits for at least three years following termination;
	•	full vesting of the option and restricted stock awards granted to him at the time of his employment; and
	•	a minimum benefit under Schering-Plough’s supplemental executive retirement plan equal to 32% of Mr. Hassan’s average final earnings calculated as if his employment continued through December 31, 2010 and without reduction for early payment. Mr. Hassan’s agreement gives him the right to terminate for good reason and receive the benefits described in the immediately preceding sentence if Schering-Plough gives him notice of its election to terminate or otherwise not extend his employment at any time before December 31, 2010. The amount of Mr. Hassan’s severance payment under his employment agreement will be either reduced by the amount due Mr. Hassan under any other severance program of Schering-Plough or paid in full in lieu of any such other severance payment.

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	•	a cash payment equal to his base salary through the date of termination of employment to the extent not paid, any compensation previously deferred and due upon his termination of employment, any accrued vacation pay, and any unreimbursed expenses;
	•	a pro-rata bonus payment based upon the greater of the highest annual bonus paid in the three most recent fiscal years or the target annual bonus then in effect;
	•	a severance payment equal to three times the sum of (a) his annual base salary, (b) his highest annual bonus paid in the three most recent fiscal years, and (c) the amount of the highest contribution by Schering-Plough on his behalf under Schering-Plough’s qualified and nonqualified profit-sharing plans made in the three years preceding his termination date;
	•	a lump sum supplemental pension amount based on three years of deemed employment or to age 65, if sooner;
	•	continued welfare benefits following termination for a period of three years or to age 65, if sooner;
	•	full vesting of the option and deferred stock awards;
	•	supplemental pension payments calculated without application of any early retirement reduction factors if termination is at or after age 50, provided that if his termination occurs prior to his reaching age 50, Mr. Bertolini will be entitled to a SERP benefit reduced for each year prior to this 50th birthday by the same annual reduction factors as are applicable under the SERP’s pre-age 62 early retirement reduction schedule; and
	•	if he is at least age 45 as of his termination date, he will be entitled to retiree medical coverage upon attainment of age 55 and following the end of his other welfare benefit coverage provided by Schering-Plough.

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	•	a cash payment equal to her base salary through the date of termination of employment to the extent not paid, any compensation previously deferred and due upon her termination of employment, any accrued vacation pay, and any unreimbursed expenses;
	•	a pro-rata bonus payment based upon the greater of the highest annual bonus paid in the three most recent fiscal years or the target annual bonus then in effect;
	•	a severance payment equal to two times (or three times, if the qualifying termination occurs within three years following a change of control) the sum of (a) her annual base salary, (b) the greater of her highest annual bonus paid in the three most recent fiscal years or her target annual bonus then in effect, and (c) the amount of the contribution by Schering-Plough on her behalf under Schering-Plough’s qualified and nonqualified profit-sharing plans;
	•	continued welfare benefits for at least two years following her termination;
	•	full vesting of the option and restricted stock awards granted to Ms. Cox at the time of her employment; and
	•	a minimum benefit under Schering-Plough’s supplemental executive retirement plan equal to 26% of Ms. Cox’s average final earnings calculated using average final earnings as defined in the supplemental executive retirement plan and modified by her employment agreement. Ms. Cox’s agreement gives her the right to terminate for good reason and receive the benefits described in the immediately preceding sentence if Schering-Plough gives her notice of its election to terminate or otherwise not extend her employment at any time before October 1, 2022.

	•	a cash payment equal to his base salary through the date of termination of employment to the extent not paid, any compensation previously deferred and due upon his termination of employment, any accrued vacation pay, and any unreimbursed expenses;
	•	a pro-rata bonus payment based upon the greater of the highest annual bonus paid in the three most recent fiscal years or the target annual bonus then in effect;
	•	a severance payment equal to three times the sum of (a) his annual base salary, (b) his highest annual bonus paid in the three most recent fiscal years, and (c) the amount of the highest contribution by Schering-Plough on his behalf under Schering-Plough’s qualified and nonqualified profit-sharing plans made in the three years preceding his termination date;

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	•	a lump sum supplemental pension amount based on three years of deemed employment or to age 65, if sooner;
	•	continued welfare benefits following termination for a period of three years or to age 65, if sooner;
	•	supplemental pension payments calculated without application of any early retirement reduction factors if termination is at or after age 50; and
	•	if he is at least age 45 as of his termination date, Dr. Pickett will be entitled to retiree medical coverage upon attainment of age 55 and following the end of his other welfare benefit coverage provided by Schering-Plough.

	•	a cash payment equal to his base salary through the date of termination of employment to the extent not paid, any compensation previously deferred and due upon his termination of employment, any accrued vacation pay, and any unreimbursed expenses;
	•	a pro-rata bonus payment based upon the greater of the highest annual bonus paid in the three most recent fiscal years or the target annual bonus then in effect;
	•	a severance payment equal to three times the sum of (a) his annual base salary, (b) his highest annual bonus paid in the three most recent fiscal years, and (c) the amount of the highest contribution by Schering-Plough on his behalf under Schering-Plough’s qualified and nonqualified profit-sharing plans made in the three years preceding his termination date;
	•	a lump sum supplemental pension amount based on three years of deemed employment or to age 65, if sooner;
	•	continued welfare benefits following termination for a period of three years or to age 65, if sooner;
	•	supplemental pension payments calculated without application of any early retirement reduction factors if termination is at or after age 50; and
	•	if he is at least age 45 as of his termination date, Mr. Sabatino will be entitled to retiree medical coverage upon attainment of age 55 and following the end of his other welfare benefit coverage provided by Schering-Plough.

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		Individual Grants
		Number
		of
		Securities				% of Total
		Underlying				Options Granted
		Options				to Employees in				Exercise				Expiration				Grant Date
Name		Granted(a)				Fiscal Year				Price				Date				Present Value(b)
Fred Hassan			1,100,000				9.61	%		$	20.70				4/24/15			$	8,624,000
Robert J. Bertolini			250,000				2.19				20.70				4/24/15				1,960,000
Carrie S. Cox			400,000				3.50				20.70				4/24/15				3,136,000
Cecil B. Pickett			225,000				1.97				20.70				4/24/15				1,764,000
Thomas J. Sabatino, Jr.			200,000				1.75				20.70				4/24/15				1,568,000

a	Option grants for the Named Executive Officers who received grants in 2005 are exercisable in installments of 331/3% per year on each of the first through third anniversaries of the grant date, except that transferable options which are transferred become exercisable immediately upon transfer. The exercise price of the options is the fair market value of the common shares on the date of grant. Options have a term of 10 years, and after the occurrence of a change of control, they become exercisable and may be cashed out for a period of 60 days. If an optionee’s employment is involuntarily terminated after a change of control, any then-outstanding options that he or she held at the time of the change of control will remain exercisable for their full remaining term, notwithstanding the termination. The options granted during 2005 to Mr. Hassan, Mr. Bertolini, and Ms. Cox are transferable in accordance with the terms of the plan.
b	The valuation calculations are solely for purposes of compliance with the rules and regulations promulgated under the Exchange Act, and are not intended to forecast possible future appreciation, if any, of Schering-Plough’s stock price. The grant date present value for the options expiring on February 22, 2014 is derived by using the Black-Scholes option pricing model with the following assumptions: the annualized dividend yield at the time of grant (1.21%); volatility of the common shares based on monthly total returns for the three years ended January 31, 2003 (26.77%); an annualized risk-free interest rate of 4.38%; and an option term of 10 years. If the named Executive Officers should realize the grant date values shown in the table for the options listed, the equivalent value of the appreciation of all common shares of Schering-Plough outstanding on the grant date of those options would be approximately $11.5 billion, of which the value of the named Executive Officers’ options would be 0.15%. This valuation model was not adjusted for risk of forfeiture or the vesting restrictions of the options. This valuation model does not necessarily represent the fair market value of individual options. At the expiration date, the options will have no actual value unless, and only to the extent that, the price of the common shares appreciates from the grant date to the exercise date.

										Number of Securities								Value of Unexercised
										Underlying Unexercised								In-the-Money
		Shares								Options at FY-End(a)								Options at FY-End(a)
		Acquired on				Value
Name		Exercise				Realized				Exercisable				Unexercisable				Exercisable				Unexercisable
Fred Hassan			—0—			$	—0—				1,116,667				1,983,333			$	3,536,668			$	2,621,332
Robert J. Bertolini			—0—				—0—				316,667				533,333				1,382,833				1,060,167
Carrie S. Cox			—0—				—0—				450,000				850,000				1,102,500				1,207,500
Cecil B. Pickett			—0—				—0—				915,133				388,267				1,731,939				471,051
Thomas J. Sabatino, Jr.			—0—				—0—				83,334				366,666				290,002				609,998

a	Based on the difference between the closing price of common shares on the New York Stock Exchange on December 30, 2005 of $20.85 and the exercise price of the option.

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	Pension Plan Table

						Years of Service
Remuneration						15				20				25				30				35
$	200,000					$	70,000			$	80,000			$	90,000			$	100,000			$	110,000
	400,000						140,000				160,000				180,000				200,000				220,000
	600,000						210,000				240,000				270,000				300,000				330,000
	800,000						280,000				320,000				360,000				400,000				440,000
	1,000,000						350,000				400,000				450,000				500,000				550,000
	1,200,000						420,000				480,000				540,000				600,000				660,000
	1,400,000						490,000				560,000				630,000				700,000				770,000
	1,600,000						560,000				640,000				720,000				800,000				880,000
	1,800,000						630,000				720,000				810,000				900,000				990,000
	2,000,000						700,000				800,000				900,000				1,000,000				1,100,000
	2,200,000						770,000				880,000				990,000				1,100,000				1,210,000
	2,400,000						840,000				960,000				1,080,000				1,200,000				1,320,000
	2,600,000						910,000				1,040,000				1,170,000				1,300,000				1,430,000
	2,800,000						980,000				1,120,000				1,260,000				1,400,000				1,540,000
	3,000,000						1,050,000				1,200,000				1,350,000				1,500,000				1,650,000
	3,200,000						1,120,000				1,280,000				1,440,000				1,600,000				1,760,000
	3,400,000						1,190,000				1,360,000				1,530,000				1,700,000				1,870,000
	3,600,000						1,260,000				1,440,000				1,620,000				1,800,000				1,980,000

	Total Compensation Philosophy

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	Total Compensation Program

	•	ensure Schering-Plough’s ability to attract and retain superior executives;
	•	strongly align the interests of Schering-Plough’s executives with those of its shareholders; and
	•	provide a compensation package that balances individual contributions and overall business results.

	Base Salary

	•	Competitive labor market position determined from market surveys
	•	Level of job responsibility
	•	Individual and team performance
	•	Demonstration of Schering-Plough’s Leader Behaviors

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	Annual Incentive Bonus

	Long-Term Incentives

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	Employee Benefits

	Compensation of the Chief Executive Officer for 2005

	Factors influencing Compensation:

	Compensation Actions:

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Type Services Provided		2005 Fees				2004 Fees
Audit Fees(1)		$	8,262.600			$	7,597,500
Audit-Related Fees(2)		$	841,200			$	902,500
Tax Fees(3)		$	738,800			$	825,000
All Other Fees		$	0			$	0

1.	Audit fees were for professional services rendered for the integrated audit of Schering-Plough’s annual consolidated financial statements, review of financial statements included in Schering-Plough’s 10-Qs, the Sarbanes-Oxley Section 404 attestation and services that are normally provided by the independent accountant in connection with statutory and regulatory filings and engagements.
2.	Audit-related fees were for assurance and related services that are reasonably related to the performance of the audit of the annual financial statements and the review of the financial statements in the 10-Qs such as audits of employee benefits plans, consultation on accounting and auditing matters, agreed-upon procedures under commercial contracts and requested audits or agreed upon procedures regarding corporate matters or subsidiaries.
3.	Tax fees were for preparation of international tax returns and other tax compliance services directly related to such returns. (In situations where the tax return in question has not yet been completed because it is not yet due, the work relates to the 2005 tax year and the related fees have been pre-approved but will not be billed until the tax return is completed.)

	•	The independent auditors, Schering-Plough management and Schering-Plough counsel all confirm that the proposed services are not prohibited services by regulations of the SEC or the Public Company Accounting Oversight Board.
	•	The Committee determines that neither the nature of the services provided nor the related fees would impair the independence of Deloitte.
	•	Deloitte provides a written report to the Committee at least quarterly listing the services that have been pre-approved and the related fees, broken down by project and classified into categories of audit, audit-related, tax and other non-audit.
	•	The Committee has specified that it will not approve any fees for general tax planning or tax strategy services.

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	•	Base Director Fee: The annual Base Director Fee will be paid to all eligible Directors for service as a member of the Board.
	•	Additional Service Fee: The annual Additional Service Fee will be paid, in addition to the Base Director Fee, to each eligible Director who serves either as a member of the Audit Committee or as the chair of any other Board Committee, other than the Executive Committee. However, Committee chairmen who are also members of the Audit Committee will be paid the Additional Service Fee for service as the chairman of the Board Committee, but not the Additional Service Fee for service as a member of the Audit Committee.
	•	Amount of Director Fees: The Base Director Fee will be set initially at $200,000 per year and the Additional Service Fee will be set initially at $15,000 per year. For each subsequent year after the 2006 Plan year, the Board will review the amount of Director Fees and set the amount of the Base Director Fee and Additional Service Fee that will be payable for that year, taking into account the recommendations of the Committee. The amount of Directors Fees payable with respect to a given year will be disclosed in Schering-Plough’s Proxy Statement for that year.
	•	Form of Payment: If shareholders approve the Plan, the Base Director Fee will be paid initially two-thirds in cash and one-third in Common Shares, and the Additional Service Fee will be paid entirely in cash. If shareholders do not approve the Plan, all future Director Fees, including the Base Director Fee, will be paid entirely in cash.
	•	Time of Payment: All annual Director Fees will be paid in advance in two equal semi-annually payments on June 1 and December 1 of each year. If June 1 or December 1 is not a business day, payment will be made on the last business day prior to that date. The first semi-annual payment of the Base Director Fee to an eligible Director who is first elected to the Board between payment dates (or of the Additional Service Fee to an eligible Director who is first appointed to the Audit Committee or as a Committee chairman between payment dates) will be made, without proration, on the date the Director is first elected (or appointed) in that capacity.

	•	Fee Deferral Election Deadlines: Fee Deferral elections must be made by December 31 of the year prior to the year in which the election is to take effect, except that (i) the initial Fee Deferral election of an individual who will be an eligible Director as of the June 1, 2006 effective date of the Plan and who wishes to defer the June 2006 Director Fee payment must be made no later than May 31, 2006 and (ii) the initial Fee Deferral election for an eligible Director who is first elected to the Board after June 1, 2006 and who wants to immediately begin deferring Director Fee payments must be made prior to the date the Director is elected to the Board.
	•	Irrevocable Elections: Fee Deferrals elections are irrevocable for the year(s) covered by the election and will automatically renew and be effective for all future years unless and until the Director submits a new Fee Deferral election that modifies and supersedes the existing election for such future years.
	•	Cash Deferrals: An eligible Director may designate the amount of a Cash Deferral either as (i) a fixed dollar amount on each semi-annual payment date or (ii) a percentage, up to 100%, of the amount of the cash portion of each semi-annual payment.
	•	Share Deferrals: An eligible Director may designate the amount of a Share Deferral as either (i) a fixed dollar amount on each semi-annual payment date (ii) a percentage, up to 100%, of the amount of the Share portion of the annual Base Director Fee, or (iii) in a fixed number of Shares on each payment date. If a Director elects to defer either a fixed dollar amount or a percentage of the Share portion, then the Director’s Deferral Account will be credited on each semi-annual payment date with a number of Deferred Stock Units equal to the dollar amount of the Share Deferral divided by the closing price of a Common Share on the previous trading day.

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	•	Deferral Accounts: Schering-Plough will maintain a Deferral Account for each eligible Director who elects to make a Fee Deferral. The Deferral Account will not hold any assets; rather, it will be a bookkeeping account used to track the Director’s Fee Deferrals. Fee Deferrals will be credited to each Deferral Account as of the date the Director Fees would otherwise have been paid to the Director had no Fee Deferral election been made. Each Deferral Account will be comprised of two sub-accounts: a Cash Deferral Sub-Account and a Share-Deferral Sub-Account.

	-	Cash-Deferral Sub-Account: The Cash Deferral Sub-Account will track an eligible Director’s Cash Deferrals and hypothetical earnings on those deferrals based on the performance of two available “investment funds”—the Simple Interest Fund and the DSU Fund—as elected by the Director. Amounts allocated to the Simple Interest Fund will be adjusted to reflect hypothetical interest earnings based on the published interest rate offered by JP Morgan Chase Bank, New York, New York to its preferred risk commercial borrowers. Amounts allocated to the DSU Fund are credited as Deferred Stock Units based on the dollar amount being allocated to the DSU Fund divided by the closing price of a Common Share on the last trading date prior to the allocation date. Amounts allocated to the DSU Fund will be adjusted annually as of the December 31, and on any date on which a distribution from the sub-account is made, to reflect dividends paid during the year on Common Shares, based on the assumption that an equivalent dividend or distribution is paid on Deferred Stock Units and such dividend is reinvested in additional Deferred Stock Units based on the closing price of a Common Share on the last trading date prior to the dividend payment date.
	-	Share Deferral Sub-Account: The Share Deferral Sub-Account will track an eligible Director’s Share Deferrals in the form of Deferred Stock Units based on the dollar amount being credited to the Share Deferral Sub-Account divided by the closing price of a Share on the last trading date prior to the crediting date. Deferred Stock Units credited to the Share Deferral Sub-Account will be adjusted annually as of the December 31, and on any date on which a distribution from the sub-account is made, to reflect dividends paid during the year on Common Shares in the same manner that amounts allocated to the DSU Fund under the Cash Deferral Sub-Account are adjusted.

	•	Payment of Fee Deferrals; Distribution Elections: At the time an eligible Director makes a Fee Deferral election, the Director will elect the date when payment of the amounts credited to the Director’s Deferral Account will be made or begin (referred to as the “Payment Commencement Date”) and the method of payment of those amounts.

	-	Payment Commencement Dates: An eligible Director may elect a Payment Commencement Date from among the following:

	-	Termination of Board membership (this is the default);
	-	Anniversary of termination (up to the 15th anniversary);
	-	Specified age or date;
	-	Earlier of termination and specified age or date;
	-	Later of termination and specified age or date; or
	-	Earlier of becoming Disabled or any other permissible payment date under Plan.

	-	Methods of Payment: An eligible Director may elect to receive payment in the form of either:

	-	a single lump sum payment (this is the default); or
	-	in either 5, 10 or 15 substantially equal annual installments.

	-	Form of Payment: Amounts credited to the Simple Interest Fund under the Cash Deferral Sub-Account will be paid in cash only and, except in the event of a Change in Control (see “Permitted Payment Accelerations” below), amounts credited as Deferred Stock Units to the Share Deferral Sub-Account and the DSU Fund under the Cash Deferral Sub-Account will be paid in whole Common Shares, with fractional Common Shares paid in cash.

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	•	Changes to Distribution Elections: An eligible Director may elect to have a different Payment Commencement Date and/or method of payment apply to future Fee Deferrals by submitting a new Fee Deferral election no later than December 31 of the year prior to the year in which the change will take effect. Changes to the Payment Commencement Date and/or method of payment for prior Fee Deferrals may be made only if all of the following requirements are met: (i) the change in election must be received at least 12 months prior to original Payment Commencement Date, (ii) the change will not be effective for 12 months after the date of the change in election and (iii) the new Payment Commencement Date must be at least 5 years later than original Payment Commencement Date.
	•	Permitted Payment Accelerations: An eligible Director will not be permitted to receive payment of amounts credited to the Deferral Account prior to the Director’s applicable Payment Commencement Date, except under the following circumstances.

	-	Death: Any amounts remaining in the a Director’s Deferral Account will be paid in a single lump sum to the Director’s designated beneficiary (or, if no beneficiary is designated, to the Director’s estate).
	-	Unforeseeable Emergency: At its discretion, the Committee may permit early withdrawals of amounts credited to a Director’s Deferral Account if the Director provides satisfactory evidence that an early withdrawal is needed to meet an Unforeseeable Emergency, which is a severe financial hardship to the Director resulting from (i) an illness or accident affecting the Director, the Director’s spouse or the Director’s dependent, (ii) loss of the Director’s property due to casualty or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Director’s control. The amount a Director can withdraw in connection with an Unforeseeable Emergency may not exceed the lesser of (i) the amount necessary to satisfy the Unforeseen Emergency, plus amounts necessary to pay taxes reasonably anticipated as a result of the withdrawal and (ii) the dollar value of amounts that remain credited to the Director’s Deferral Account.
	-	Change in Control: In the event of a Change in Control, all amounts remaining in a Director’s Deferral Account will be paid to the Director in a lump sum cash payment within 30 days. For this purpose, the dollar value of Deferred Stock Units will be determined based on the “Change in Control Price,” which will be the higher of (i) the highest reported sales price of a Common 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 the Change in Control or (ii) if the Change in Control is the result of a tender or exchange offer or a business combination, the highest price per Common Share paid in such tender or exchange offer or business combination.

	•	Simple Interest Fund: Amounts previously credited to a Director’s simple interest fund under the prior Directors Deferred Compensation Plan will be transferred to the Simple Interest Fund under the Prior Plan Account. Like the Simple Interest Fund under the Cash Deferral Sub-Account of the Deferral Account, this fund will be credited with annual interest at a rate equal to the JP Morgan Chase Bank interest rate for preferred risk commercial borrowers and is paid in cash at distribution.
	•	Stock Equivalency Fund: “Units” previously credited to a Director’s deferred account under the prior Directors Deferred Stock Equivalency Program and the Director’s stock equivalency fund under the prior Directors Deferred Compensation Plan will be transferred to the Stock Equivalency Fund under the Prior Plan Account and credited as Phantom Stock Units that are paid in cash at distribution. Phantom Stock Units will earn the same dividends that Common Shares earn, which will be deemed reinvested in the Stock Equivalency Fund as additional Phantom Stock Units.

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	•	DSU Fund: “Stock units” previously credited to a Director’s stock unit account under the prior Directors Stock Award Plan will be transferred to the DSU Fund under the Prior Plan Account and credited as Deferred Stock Units that are paid in Common Shares at distribution. Deferred Stock Units will earn the same dividends that Common Shares earn, which will be deemed reinvested in the DSU Fund as additional Deferred Stock Units.
	•	Reallocation of Amounts in Prior Plan Account: A Director will be permitted to elect once each year to reallocate all or a portion of the amounts allocated to the Simple Interest Fund and Stock Equivalency Fund under the Prior Plan Account, but no reallocations into or out of the DSU Fund under the Prior Plan Account will be permitted.
	•	Payment of Prior Plan Accounts: Each Director (or former Director) with a Prior Plan Account will be given a one-time opportunity to elect a new Payment Commencement Date and method of payment that will apply to the amounts credited to the Prior Plan Account under the same terms and conditions applicable to distribution elections for Deferral Accounts (see “Payment of Deferral Fees; Distribution Elections” above), without the need to comply with the requirements applicable to “Changes in Distribution Elections” described above. The deadline for making this election will be December 31, 2006. Distribution elections made under the Directors Compensation Plan with respect to amounts credited to the Director’s Prior Plan Account will override and supersede any previous distributions elections made under each of the Prior Plans with respect to amounts previously deferred under those plans and transferred to the Director’s Prior Plan Account under the Plan. If a Director does not submit a distribution election for the amounts credited to his or her Prior Plan Account by the election deadline, such amounts will be distributed in accordance with the distribution elections in effect under the applicable Prior Plan as of May 31, 2006. If no distribution election was made under the Prior Plan prior to June 1, 2006 with respect to amounts transferred to the Directors Prior Plan Account, then those amounts will be distributed in a single lump sum payment upon the Director’s termination of Board membership.

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Name and Position *		Dollar Value
Director [but not a Committee Chair and not on Audit Committee]		$	200,000
Director [and Committee Chair or Audit Committee member]		$	215,000
Non-Executive Director Group		$	2,105,000

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	•	Form, Amount and Exercise Price: At the time of grant, the Compensation Committee will designate in the Award Certificate the form of a Stock Option, the amount of Common Shares that will be subject to the Stock Option and the Exercise Price. The Exercise Price cannot, however, be less than the Fair Market Value of a Common Share on the date of grant.
	•	No Repricing: The Stock Incentive Plan contains a prohibition against decreasing the Exercise Price of a Stock Option after grant without shareholder approval (other than in connection with permitted Plan adjustments (see “Adjustments” below).
	•	Term: Stock Options will automatically lapse on the expiration date set out in the Award Certificate, which can be no later than 10 years after the date of grant. Initially, it is expected that Stock Options granted under the Plan will have a seven year term.
	•	Vesting: Stock Options will become exercisable (vest) in accordance with the vesting schedule determined by the Compensation Committee and set out in the Award Certificate at the time of grant. Initially, it is expected that one-third of each Stock Option will vest ratably on each of the first three one-year anniversaries of the grant date. Stock Options will immediately vest, however, upon a Participant’s death, Disability or Termination Due to Business Divestiture, or upon a Change in Control. Upon a Participant’s Retirement, those Stock Options that the Participant has held for at least one year prior to Retirement will continue to vest in accordance with the vesting schedule in the Award Certificate; Stock Options held for less than one year prior to Retirement will be forfeited.
	•	Post-Termination Exercise: Stock Options that have not vested as of the date of a Participant’s Termination of Employment for any reason other than death, Disability, Termination Due to Business Divestiture or Retirement will be forfeited as of such Termination of Employment. Unless the Compensation Committee provides otherwise in an Award Certificate, any vested Stock Option that has not already been exercised as of the date of termination must be exercised by the following dates:

		• Death: Later of expiration of Stock Option’s original term and one year from date of death;
		• Disability: Expiration of Stock Option’s original term;

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		• Termination Due to Business Divestiture: Earlier of five years after termination date and expiration of Stock Option’s original term;
		• Retirement: Earlier of five years after termination date and expiration of Stock Option’s original term;
		• Involuntary Termination: Earlier of one year after termination date and expiration of Stock Option’s original term;
		• Other Terminations: Earlier of three months after termination date and expiration of Stock Option’s original term;

	•	Payment of Exercise Price: Payment of the Exercise Price may be made in cash, certified check, bank draft, wire transfer, or money order or, if permitted by the Compensation Committee, (i) by delivering irrevocable instructions to a broker to deliver to Schering-Plough the amount of sale proceeds with respect to Shares having a Fair Market Value equal to the Exercise Price, (ii) by tendering to the Common Shares owned by the Participant for at least six months having a Fair Market Value equal to the Exercise Price, or (iii) by instructing Schering-Plough to withhold Common Shares having a Fair Market Value equal to the Exercise Price.
	•	Special Rules For Incentive Stock Options: Incentive Stock Options may not be granted under the Stock Incentive Plan to any Employee who is a 10% or more shareholder of Schering-Plough. Also, the aggregate Fair Market Value on the date of grant of the Common Shares with respect to which Incentive Stock Options first become exercisable during any calendar year under the terms of the Stock Incentive Plan for any Participant may not exceed $100,000. For purposes of this $100,000 limit, the Participant’s Incentive Stock Options under the Stock Incentive Plan and all other plans maintained by Schering-Plough and its Affiliates and Subsidiaries are aggregated. A Stock Option that is intended to be an Incentive Stock Option will be treated as a Nonqualified Stock Option to the extent it is exercised more than three months after a Participant’s Termination of Employment (12 months in the case of Disability).

	•	Payment: When Restricted Stock becomes payable, Schering-Plough will register stock certificates in the Participant’s name and, at Schering-Plough’s discretion, will either deliver the certificates to the Participant or hold the certificates on behalf of the Participant until all restrictions have lapsed. At the time the stock certificates are registered in the Participant’s name, the Participant will have all the rights of a shareholder with respect to the Common Shares (including the right to vote and receive dividends), except that the Common Shares will be subject to vesting and forfeiture upon the Participant’s Termination of Employment during the Restriction Period for any reason other than death, Disability or Termination Due to Business Divestiture. Stock certificates for Restricted Stock will include appropriate legends listing any applicable restrictions that the Compensation Committee may, in its discretion, impose.
	•	Restriction Period: The Compensation Committee will determine the Restriction Period or Periods applicable to an award of Restricted Stock at the time of grant.
	•	Accelerated Lapse: All restrictions on shares of Restricted Stock will immediately lapse upon the death or Disability of the Participant or a Change in Control. The Compensation Committee may also provide in an Award Certificate at the time of grant that restrictions will lapse upon a Participant’s Retirement or Involuntary Termination.

	•	Deferred Stock Accounts: Schering-Plough will maintain a Deferred Stock Account for each Participant who is granted an Award of Deferred Stock Units. The Deferred Stock Account will not hold any assets; rather, it will be a bookkeeping account used to track the Participants Deferred Stock Units.
	•	Dividend Equivalents: Dividend Equivalents in connection with cash dividends paid on Common Shares will be paid currently on each dividend payment date to each Participant holding undistributed Deferred Stock Units. If a stock dividend is declared, the Participants’ Deferred Stock Accounts will be credited with a corresponding number of additional Deferred Stock Units on the dividend payment date.
	•	Shareholder Rights: Except for the right to receive Dividend Equivalents, Participants will not acquire any rights as a shareholder with respect to the Common Shares underlying a Deferred Stock Award credited to the Participant’s Deferred Stock Account until the Common Shares are distributed.

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	•	Payment. At the time of grant, the Compensation Committee with set out in the Award Certificate the date or dates that the Common Shares underlying Deferred Stock Units will be distributed, which can be no earlier than the six-month anniversary of the grant date, and the manner of payment, which can be either a single lump sum payment or a set number of equal or unequal periodic installments. Common Shares will be issued in payment of a Participant’s Deferred Stock Units at a rate of one share per each Deferred Stock Unit scheduled to be paid.
	•	Termination and Forfeiture. Unless the Compensation Committee provides otherwise in an Award Certificate at the time of grant, all undistributed Deferred Stock Units will be forfeited upon a Participant’s Termination of Employment for any reason other than death, Disability, Retirement, Termination Due to Business Divestiture or Involuntary Termination. In the event of any of these other types of terminations, the following will apply (unless the Award Certificate provides otherwise):

		• Death: Undistributed Units vest and are distributed in a single lump sum to the Participant’s Beneficiary as soon as administratively feasible after Participant’s death.
		• Disability and Termination Due to Business Divestiture: Undistributed Units vest and continue to be distributed in accordance with original schedule set out in Award Certificate (although the Compensation Committee can provide in the Award Certificate that remaining Units will be distributed in a single lump sum at Disability or Termination Due to Business Divestiture).
		• Retirement: Undistributed Units held less than one year are forfeited; Units held at least one year will vest and continue to be distributed in accordance with the original schedule set out in the Award Certificate (although the Compensation Committee can provide in the Award Certificate that all Units will be forfeited at Retirement or that Units held at least one year will be distributed in a single lump sum at Retirement).
		• Involuntary Termination: Undistributed Units held less than one year are forfeited; prorated portion of Units held at least one-year vest and continue to be distributed in accordance with original schedule set out in Award Certificate.

	•	Payment Deferral: The Compensation Committee may permit Participant’s to elect to defer receipt of the Common Shares that are schedule to be distributed in connection with Deferred Stock Units. Elections to defer the receipt of Common Shares in payment of Deferred Stock Units will be subject to the requirements of Section 409A of the Code, including, for example, the requirements that any such election be made at least 12 months prior to the originally scheduled payment date and not be effective for at least 12 months from the date the election is made, and that the new payment date be at least five years later than the originally schedule payment date.

	•	Performance Cycles: The Compensation Committee must establish the length of the Performance Cycle for Qualified Performance Awards in writing during the Qualified Performance Award Determination Period, which generally is the 90-day period beginning on the first day of the Performance Cycle for Performance Cycles that are at least one year in length.
	•	Performance Measures: The amount of any Qualified Performance Award payable to a Covered Employee under the Plan will be determined by reference to the degree of attainment of one or more Performance Measures selected by the Compensation Committee in writing during the Qualified Performance Award Determination Period to measure the level of performance of Schering-Plough during the applicable Performance Cycle. Performance Measures that the

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		Compensation Committee may select under the Plan include one or more of the following (in absolute values or relative to the performance of one or more comparable companies or an index of comparable companies):

		• Net operating profit after taxes;
		• Operating profit before taxes;
		• Return on equity;
		• Return on assets or net assets;
		• Total shareholder return;
		• Relative total shareholder return;
		• Earnings before income taxes;
		• Earnings per Share;
		• Net income;
		• Free cash flow;
		• Free cash flow per Share;
		• Revenue (or any component thereof);
		• Revenue growth;
		• Share performance;
		• Relative Share performance;
		• Economic value added; or
		• Return on capital.

The Compensation Committee can determine, in its discretion, that the selected Performance Measures apply to all of Schering-Plough, or solely to one or more its business units, divisions, Affiliates or Subsidiaries. In applying Performance Measures, the Compensation Committee has the discretion to exclude unanticipated, unusual or infrequently occurring items, and may determine during the Qualified Award Determination Period to exclude other items.

	•	Target Awards and Payout Formulas: During the Qualified Performance Award Determination Period, the Compensation Committee will set a target amount of Qualified Performance Award for each Covered Employee selected to receive an Award and an objective vesting and/or payout formula. The vesting and/or payout formula will set the minimum level of performance attainment that must be achieved on the applicable Performance Measure(s) before any of that Qualified Performance Award vests or becomes payable, and the percentage of the target Award that will vest or become payable upon attainment of various levels of performance in excess of the minimum required amount.
	•	Committee Discretion: The Compensation Committee has the discretion, which it may apply on a case by case basis, to reduce (but not increase) the amount of any Qualified Performance Award payable to a Covered Employee.
	•	Required Certification: No Qualified Performance Award to any Covered Employee will be payable in respect of a Performance Cycle until the Compensation Committee certifies, in writing, the level of attainment of the applicable Performance Measure(s) for that Performance Cycle.
	•	Maximum Award: The maximum amount of any Qualified Performance Award payable in cash paid to any one Covered Employee under the Stock Incentive Plan during any 12-month Performance Cycle is $3 million (or, in the case of the Chief Executive Officer, $6,000,000); 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. This maximum amount will be adjusted proportionately for Performance Cycles that are longer than 12 months. The Plan must set “caps” to ensure deductibility of compensation under Code Section 162(m). Such amounts are not indicative of actual targets that may be set from time to time.

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	•	All Stock Options will immediately vest and, during the 60-day period beginning on the effective date of the Change in Control, the Compensation Committee may, in its discretion, cancel all or a portion of a Participant’s remaining Stock Options and pay the Participant an amount per Share equal to the amount by which the Change in Control Price (as defined in the Plan) exceeds the Exercise Price of the option. Also, if a Participant incurs an Involuntary Termination after a Change in Control, all of the Participant’s Stock Options will remain exercisable for the full duration of the options’ original term.
	•	All Deferred Stock Units credited to a Participant’s Deferred Stock Account will immediately vest and be distributed in a single lump sum cash payment (instead of Common Shares) at a dollar value per Unit equal to the Change in Control Price.
	•	All restrictions and conditions on any shares of Restricted Stock or Other Stock-Based Awards will immediately lapse or be deemed satisfied, and all such Awards will become vested and non-forfeitable.
	•	Each Employee who has been granted a Performance Award will be deemed to have achieved a level of performance that would result in a payout of 100% of the target Performance Award and all restrictions and vesting conditions on the Award payout will be waived.

	•	Incentive Stock Options: No more than 46 million Common Shares may be issued under grants of Incentive Stock Options during the term of the Stock Incentive Plan.
	•	Restricted Stock: No more than an aggregate of 46 million Common Shares may be issued under grants of Restricted Stock, Deferred Stock Units or Other Stock-Based Awards payable in Common Shares during the term of the Stock Incentive Plan.
	•	Annual Participant Limitation: No more than an aggregate of three million Common Shares may be awarded in any form to any one Participant during any fiscal year of Schering-Plough.

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44

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45

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Category		Column A		Column B		Column C
		Number of		Weighted-average		Number of securities
		securities to be		exercise price of		remaining available for
		issued upon exercise		outstanding options,		future issuance under equity
		of outstanding		warrants and rights		compensation plans
		options, warrants				(excluding securities
		and rights				reflected in Column A)
Equity compensation plans approved by security holders 2002 Stock Incentive Plan and Predecessor Plans		82,483,524		$27.00		11,163,695
Equity compensation plans not approved by security holders Directors Stock Award Plan*		N/A		N/A		544,008
Schering-Plough (Ireland) Share Purchase Scheme**		N/A		N/A		**
Non-plan inducement awards not approved by security holders		300,000 restricted shares***		N/A		0
Total						11,707,703

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47

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48

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	•	Any Director receiving a majority withhold vote would offer to resign.
	•	Within 30 days of the vote, the Nominating and Corporate Governance Committee would accept the resignation unless it determined that (a) the issue giving rise to the withhold vote had been cured, or (b) the best interests of the Company would be harmed by accepting the resignation.
	•	The Committee would publish a report on Schering-Plough’s website including the reasons for the Committee’s judgment to accept or reject the resignation.

49

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50

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	•	One interpretation is to add a voting requirement where none is provided under New Jersey corporation law or the New York Stock Exchange listing standards, any time a governance issue is involved, such as approval of Committee Charters.
	•	A second, very different, interpretation is to reduce higher voting thresholds, like the 80% vote required to change the Certificate of Incorporation, to a 51% vote standard.

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52

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53

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A-1

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	1.	Select Independent Auditors. Select the independent auditors annually.
	2.	Matters Concerning the Independence of Independent Auditors. Review and discuss with the independent auditors the written disclosures required by Independence Standards Board Standard No. 1 regarding their independence and, where appropriate, recommend that the Board take appropriate action in response to the disclosures to satisfy itself of the independence of the independent auditors.

	Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.
	Set policies for the Company’s hiring of employees or former employees of the independent auditor.
	Preapprove all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant preapprovals shall be presented to the full Committee at its next scheduled meeting.

	3.	Review Quality Control Process of Independent Auditor. Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditors’ internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent auditor and the Company. Present the conclusions of its review with respect to the independent auditors to the Board.
	4.	Review Audit Plan. Review with the independent auditors their plans for, and the scope of, their annual audit.
	5.	Conduct of Audit. Discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards Nos. 61, 89 and 90 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work and management’s response, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
	6.	Review Audit Results. Review with the independent auditors the report of their annual audit, or proposed report of their annual audit, the accompanying management letter, if any, and the reports of their reviews of the Company’s interim financial statements conducted in accordance with Statement on Auditing Standards No. 100.
	7.	Review Annual Financial Statements. Review and discuss with management and the independent auditors the audited financial statements and the disclosures to be made in management’s discussion and analysis. Recommend to the Board whether the audited financial statements should be included in the 10-K.
	8.	Review Quarterly Financial Results. Review and discuss with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information. Review with management generally the types of financial information and presentation to be provided to analysts and rating agencies, including whether earnings guidance will be provided.
	9.	Review Quarterly Financial Statements. Review and discuss with management and the independent auditor the quarterly financial statements and the disclosures to be made in the MD&A prior to filing the 10-Q. Discuss with the independent auditors their review of the quarterly financial statements.

	10.	Financial Reporting Issues and Judgments; Related Matters. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any

A-2

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		major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies.

	(a)	All critical accounting policies and practices to be used.
	(b)	All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
	(c)	Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
	(d)	Reports and disclosures of any insider or affiliated party transactions.

	Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.
	Discuss with management and the independent auditor any correspondence or published report which raises material issues regarding the Company’s financial statements or accounting policies that is issued by the U.S. Securities and Exchange Commission or the New York Stock Exchange or other governmental agencies.

	11.	Review Corporate Audit Program. Review annually with the senior corporate auditing executive the budget, staffing and proposed scope of the corporate auditing department activities. Review annually the results of the corporate audit activities.

	Approve a matrix for the timing and scope of reporting by Corporate Audit to the Committee and the Business Practices Oversight Committee (in consultation with the Chair of that Committee); receive and review reports to the Committee pursuant to such matrix from the senior corporate auditing executive.

	12.	Complaints regarding Accounting and Auditing Matters. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
	13.	Review Systems of Internal Controls Over Financial Reporting. Review with management, the senior corporate auditing executive and the independent auditors the adequacy of the Company’s internal controls over financial reporting that could significantly affect the Company’s financial statements.

Review disclosures made to the Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls over financial reporting or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls over financial reporting. Review and discuss with the Chief Financial Officer, the senior Corporate Audits executive and the independent accountants the Company’s report on internal controls over financial reporting and the auditors attestation relating thereto, prior to such documents being included in the 10-K.

	14.	Securities Exchange Act of 1934. Obtain assurance from the independent auditor that Section 10A(b) of the Securities Exchange Act of 1934 has not been implicated.

	•	At least annually, the Committee or its Chair will meet with the Business Practices Oversight Committee or its Chair to review compliance and risk matters, including material reports or inquiries received from governmental agencies and material litigation. When such meetings are held by the Committee Chair, he or she will report on such meetings to the full Committee.

A-3

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	•	Review with the Company’s General Counsel legal matters that may have a material impact on the financial statements and legal and compliance matters that involve financial reporting or SEC compliance.
	•	Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.

	16.	Prepare Proxy Statement Report. Prepare the report of the Committee required by the rules of the SEC to be included in the Company’s annual proxy statement.
	17.	Review Other Matters. Review such other matters in relation to the accounting, auditing, financial reporting and related compliance practices and procedures of the Company as the Committee may, in its own discretion, deem desirable in connection with the review functions described above.
	18.	Board Reports. Regularly report its activities to the Board in such manner and at such times as it deems appropriate. The Committee shall review with the Board any issues that arise with respect to the quality or integrity of Schering-Plough’s financial statements, compliance with legal or regulatory requirements, the performance and independence of the independent auditors or the performance of the corporate auditors.
	19.	Review Committee Performance. Annually review its own performance.
	20.	Review Charter. Review and reassess the adequacy of this Charter annually and submit it to the Nominating and Corporate Governance Committee and the Board for approval.

	•	compensation to the independent auditor for the purpose of rendering or issuing an audit report and for any other services approved by the Committee,
	•	compensation for any other advisors retained by the Committee, and
	•	ordinary administrative expenses that are necessary or appropriate in carrying out the Committee’s duties.

A-4

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3.	Statement on Accounting Standards No. 100

4.	Section 10A(b) of Securities Exchange Act of 1934

A-5

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	1.	Assist with Board structure, function and composition including:

	b.	recommending to the Board Director nominees for the next annual meeting of shareholders

	2.	Assist with Committee structure, function and composition including:

	a.	recommending Committee assignments for Directors, and

	b.	recommending Committee Charters to each Committee and to the Board for approval.

	3.	Develop and recommend the Company’s Corporate Governance Guidelines to the Board for approval.

	1.	Director Recruitment. Seek individuals qualified to become Directors for recommendation to the Board.
	2.	Criteria for Selecting Directors. Recommend the Board’s criteria for selecting Directors and recommend that the criteria be reflected in the Corporate Governance Guidelines.

	a.	A majority of Directors are independent, as required by the New York Stock Exchange and the Company’s Corporate Governance Guidelines.

B-1

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	b.	The Board represents a diversity of expertise in areas needed to foster Schering-Plough’s business success including science, finance, marketing, international affairs and public service.

	c.	The Board represents a diversity of personal characteristics, including gender and race.

	d.	The size and composition of the Board lends itself to efficient operation.

	e.	Outside Directors retire on the date of the annual meeting of shareholders when they are age 72.

	f.	Outside directors offer to resign, and are re-evaluated, when they have changes in employment or board memberships and committee assignments at other companies.

	3.	Nominees. Recommend to the Board nominees for Director to be elected at the annual meeting. Consider nominees suggested by shareholders in accordance with the Company’s By-Laws.
	4.	Committee Assignments. Recommend Committee assignments, within the following guidelines:

	a.	The independence requirements of New York Stock Exchange and the Company’s Corporate Governance Guidelines.

	b.	Other legal and regulatory considerations, including Rule 16b-3 and Section 162(m).

	c.	Expertise and diversity characteristics appropriate for each Committee.

	d.	Size and composition lending itself to efficient operation of each Committee.

	5.	Independence Assessments and Director Conflicts of Interest. Recommend an independence standard to the Board. Assist the Board with independence assessments of individual Directors. Recommend policies regarding the conduct of business between the Company and any Director, his/her affiliates and other Director conflict of interest matters.
	6.	Director Compensation. Conduct an annual assessment of non-management Director compensation and benefits.
	7.	Corporate Governance Guidelines. Review and reassess the adequacy of the Corporate Governance Guidelines of the Company and recommend any proposed changes to the Board for approval.
	8.	Board Performance Process. Recommend the scope of the annual Board performance assessment, including whether the performance of individual Directors will be assessed in addition to the assessment of the performance of the Board as a group. Receive comments from all Directors and report annually to the Board with an assessment of the Board’s performance, to be discussed with the full Board following the end of each fiscal year.

	9.	Reports to the Board. Regularly report its activities to the Board in such manner and at such times as it deems appropriate.

	10.	Review Committee Performance. Annually review its own performance.
	11.	Review Charter. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.

	1.	Director Search Consultants. The Committee shall have sole authority to retain and terminate any search firm to be used to identify Director candidates, including sole authority to approve such search firm’s fees and other retention terms.

B-2

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	2.	Director Compensation Consultants. The Committee shall have the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of Director compensation and shall have the authority to approve the consultant’s fees and other retention terms.
	3.	Legal, Accounting and Other Consultants. The Committee shall have authority to obtain advice and assistance from in-house or outside legal, accounting and other advisors.
	4.	Funding. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the consultants and advisors retained by the Committee.

B-3

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	a.	The Committee shall review and make recommendations to the Board with respect to incentive compensation plans and equity-based plans.

	b.	As part of the determination of the CEO’s compensation, the Committee shall, after receiving input from the full Board, annually review the CEO’s performance in light of corporate goals and objectives and set the CEO’s compensation levels based on this evaluation.

	c.	The Committee shall, after receiving input from the full Board, annually review and approve, for the CEO and the senior executives of the Company:

•	corporate goals and objectives relevant to compensation,
•	compensation levels and the mix of compensation instruments, including short-term and long-term incentive awards (and in making this determination, the Committee shall consider the Company’s performance and relative shareholder return, the value of similar compensation instruments at comparable companies and the value of awards to such executive in past years),

C-1

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•	the annual base salary level,
•	the annual incentive opportunity level,
•	the long-term incentive opportunity level,
•	employment agreements, severance arrangements, and change in control agreements/provisions, in each case as, when and if appropriate, and
•	any special or supplemental benefits.

	2.	Report for Proxy Statement. Produce the annual report on executive compensation as required to be included in the Company’s proxy statement in accordance with Securities and Exchange Commission regulations.
	3.	Plans. Review and make recommendations to the Board and the shareholders regarding equity-based and incentive plans. Administer or approve administration of equity-based and incentive plans. Determine the Company’s policy regarding deductibility of compensation under Section 162m of the Internal Revenue Code. Determine that the Company has established an appropriate governance structure for the employee benefit plans of the Company and its affiliates.
	4.	Management Performance Process. Oversee the annual management performance assessment.
	5.	Reports to the Board. Regularly reports its activities to the Board in such manner and at such times as it deems appropriate.
	6.	Review Committee Performance. Review annually its own performance.
	7.	Review Charter. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Nominating and Corporate Governance Committee and the Board.

	1.	Executive Compensation Consultants. The Committee shall have the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of CEO or senior executive compensation and shall have sole authority to approve the consultant’s fees and other retention terms.
	2.	Legal Accounting and Other Advisors. The Committee shall have authority to obtain advice and assistance from in-house or outside legal, accounting and other advisors.
	3.	Funding. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the consultants and advisors retained by the Committee.

C-2

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	•	The Company’s non-financial compliance systems and practices and related management activities, including Good Manufacturing Practices.
	•	Systems for compliance with the Company’s Standards of Global Business Practices.
	•	Regulatory and government affairs and developments regarding material litigation and investigations involving compliance with laws and regulations.

	1.	Review of Policies and Systems regarding Compliance with Laws, Regulations and Standards of Global Business Practices. Review and assess the adequacy of the Company’s policies and systems designed to obtain compliance with laws and regulations and the Company’s Standards of Global Business Practices; receive reports relating to all significant compliance areas; and meet periodically with the Company’s management, compliance officers, General Counsel, Corporate Audits, and outside advisors, as appropriate, to review:

	(a)	the components of the Company’s compliance programs and how those programs are communicated to employees,

	(b)	the results of any audits of those compliance programs,

	(c)	any compliance issues, problems or trends identified by those compliance programs or audits,

	(d)	the steps taken to address any significant violations of those compliance programs,

	(e)	the resources allocated to those compliance programs, and

D-1

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	(f)	significant reports or inquiries received from governmental agencies, and any material litigation or investigations involving the Company’s compliance with any law or regulation.

	2.	Good Manufacturing Practices. Review periodic reports on Good Manufacturing Practices and the Company’s compliance with the Consent Decree with the Food and Drug Administration entered May 17, 2002.
	3.	Non-Financial Risk Management Matters. Discuss with management the Company’s major non-financial risk exposures and the steps management has taken to monitor and control such risk exposures, including the Company’s risk assessment and risk management policies.
	4.	Reports. Regularly report its activities to the Board at such times and in such manner as it deems appropriate. At least annually, the Committee or its Chair will meet with the Audit Committee or its Chair to review compliance and risk matters, including material reports or inquiries received from governmental agencies and material litigation.
	5.	Review Committee Performance. Annually review its own performance.
	6.	Review Charter. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Nominating and Corporate Governance Committee and the Board.

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	1.	Capital Structure. Receiving reports from management about the current capital structure and proposed changes to the capital structure.
	2.	Dividend Policy. Reviewing analyses from management about the dividend policy of the Company and making recommendations to the Board of Directors.
	3.	Financing Activities. Reviewing analyses from management about proposed financing strategies and report to the Board of Directors.
	4.	Capital Expenditures. At the request of the Board, review specific projects proposed by management.
	5.	Benefit Plan Funding Matters. Reviewing reports from management concerning the funding requirements for the Company’s employee benefit plans.
	6.	Insurance. Reviewing the Company’s insurance coverage and the related costs.
	7.	Board Reports. Regularly report its activities to the Board in such manner and at such times as it deems appropriate.
	8.	Review Committee Performance. Review annually its own performance.
	9.	Review Charter. Review and reassess the adequacy of this Charter periodically and recommend any proposed changes to the Nominating and Corporate Governance Committee and the Board.

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	1.	Receive an annual presentation from R&D or Technical Operations management regarding the product pipeline, the scientific and/or technology platforms and the strategic plans for research and development.
	2.	Discuss the scientific aspects of certain strategic acquisitions and in-licensing activities.
	3.	Provide advice to the Chief Executive Officer concerning the membership and functions of the Scientific Review Panel of outside advisors and meet with the Panel at least twice a year.
	4.	With input from the Scientific Review Panel, provide input to the Board regarding the scientific aspects of the company’s R&D portfolio and how developments in science and technology may impact the Company.
	5.	Report on its activities to the Board.

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	1.	Nominees have the highest ethical character and share the values of Schering-Plough as reflected in the Leader Behaviors: shared accountability and transparency, cross-functional teamwork and collaboration, listening and learning, benchmark and continuously improve, coaching and developing others and business integrity.
	2.	Nominees are highly accomplished in their respective field, with superior credentials and recognition.
	3.	The majority of Directors on the Board are required to be independent as required by the New York Stock Exchange listing standards and the more restrictive Schering-Plough Board Independence Standard set forth below.
	4.	Nominees are selected so that the Board of Directors represents a diversity of expertise in areas needed to foster Schering-Plough’s business success, including science, medicine, finance, manufacturing, technology, commercial activities, international affairs and public service. Nominees are also selected so that the Board of Directors represents a diversity of personal characteristics, including gender, race, ethnic origin and national background.
	5.	Nominees must indicate they have the time and commitment to provide energetic and diligent service to Schering-Plough. New Directors should be willing and able to serve at least one three-year term prior to the mandatory retirement age of 72.

	1.	A Director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, Schering-Plough for property which, in any single fiscal year, exceeds the greater of $500,000 or 2% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold.
	2.	Directors are independent of any particular constituency and are able to represent all shareholders of Schering-Plough.
	3.	In the event that a Director is an executive officer or an employee, or his/her immediate family member is an executive officer, of a charitable organization that receives payments from Schering-Plough which, in any single fiscal year, exceed the greater of $500,000 or 2% of the charitable organization’s gross revenues, such payments will be disclosed in the proxy statement.

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	4.	A Director who was, or whose immediate family member was:

	a.	an executive officer of Schering-Plough, or

	b.	affiliated with or employed by the independent auditor, or

	c.	an executive officer of another company where any of Schering-Plough’s current executives serve on that company’s compensation committee will not be independent until four years after the end of such relationship.

	•	Audit Committee,
	•	Compensation Committee, and
	•	Nominating and Corporate Governance Committee.

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(a)

Number, Election and Terms. The business and affairs of the Corporation shall be managed by a Board of Directors which, subject to any rights of the holders of any series of Preferred Shares of the Corporation (“Preferred Shares”) then outstanding to elect additional directors under specified circumstances, shall consist of not less than nine (9) nor more than twenty-one (21) persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by either (i) the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors or (ii) the affirmative vote of the holders of at least 80% of the voting power of all of the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

At the 1985 annual meeting of shareholders, the directors shall be divided into three classes, as nearly equal in number as possible (but with not less than three directors in each class), with the term of office of the first class to expire at the 1986 annual meeting of shareholders, the term of office of the second class to expire at the 1987 annual meeting of shareholders and the term of office of the third class to expire at the 1988 annual meeting of shareholders, and with the members of each class to hold office until their successors shall have been elected and qualified. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire 2006 Annual Meeting of shareholders, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the 2007 annual meeting of shareholders and until such director’s successor shall have been elected and qualified. At the 2007 annual meeting of shareholders, the successors of the directors whose terms expire at that meeting shall be elected for a term expiring at the 2008 annual meeting of shareholders and until such director’s successor shall have been elected and qualified. At each annual meeting of shareholders in 2008 and thereafter, all directors shall be elected to hold office for a term expiring at the next annual meeting of shareholders and until such director’s successor shall have been elected and qualified.

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I.	ESTABLISHMENT AND PURPOSE

II.	DEFINITIONS

	(a)       the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of Schering-Plough where such acquisition causes such Person to own more than 50% of either (x) the then outstanding Shares of Schering-Plough (the “Outstanding Shares”) or (y) the combined voting power of the then outstanding voting securities of Schering-Plough entitled to vote generally in the election of directors (the “Outstanding Voting Securities”); provided, however, that for purposes of this subsection (a) the following acquisitions will not constitute a Change of Control: (i) any acquisition directly from Schering-Plough, (ii) any acquisition by Schering-Plough, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Schering-Plough or any corporation controlled by Schering-Plough or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) below; and provided, further, that if any Person’s beneficial ownership of the Outstanding Shares or Outstanding Voting Securities reaches or exceeds 50% as a result of a prior transaction, and such Person subsequently acquires beneficial ownership of additional Shares or additional voting securities of Schering-Plough, such subsequent acquisition will not be treated as an acquisition that causes such Person to own more than 50% of the Outstanding Shares or Outstanding Voting Securities;
	(b)       during any 12-month period, individuals who, as of the first day of such period, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the beginning of such 12-month period whose election, or nomination for

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	election by Schering-Plough’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though such individual were a member of the Incumbent Board;
	(c)       consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving Schering-Plough, or the acquisition of assets or stock of another entity by Schering-Plough (each a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were beneficial owners, respectively, of the Outstanding Shares or Outstanding Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectfully, the then outstanding shares of the common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Schering-Plough or substantially all of Schering-Plough’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Shares and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Schering-Plough or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, more than 50% of, respectfully, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board on the later of (A) the time of the execution of the initial agreement, (B) the action of the Board providing for such Business Combination or (C) the beginning of the 12-month period ending on the effective date of the Business Combination;
	(d)       any one Person acquires (or has acquired during any 12-month period ending on the date of the most recent acquisition by such Person) assets of Schering-Plough having a fair market value equal to or more than 40% of the total gross fair market value of all of the assets of Schering-Plough immediately prior to such sale, other than an acquisition by (i) a Person who was a shareholder of Schering-Plough immediately before the asset acquisition in exchange for or with respect to such Person’s Shares, (ii) an entity whose total or voting power immediately after the transfer is at least 50% owned, directly or indirectly, by Schering-Plough, (iii) a person or group that, immediately after the transfer, directly or indirectly owns at least 50% of the total value or voting power of the outstanding stock of Schering-Plough or (iv) an entity whose total value or voting power immediately after the transfer is at least 50% owned, directly or indirectly, by a person described in clause (iii) above; or
	(e)       the complete liquidation of Schering-Plough.

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III.	DIRECTOR FEES

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

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

IV.	FEE DEFERRALS

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

	(i)                 Simple Interest Fund. Amounts allocated to the Simple Interest Fund are credited as cash and are adjusted annually as of the December 31, and on any date on which a distribution from the sub-account is made, to reflect hypothetical interest earnings based on the interest rate offered by JPMorgan Chase Bank, New York, New York, to its preferred risk commercial borrowers, as published by said bank from time to time.
	(ii)                 DSU Fund. Amounts allocated to the DSU Fund are credited as Deferred Stock Units in the same manner that Deferred Stock Units are credited and adjusted under the Share Deferral Sub-Account.
	(iii)                 Allocation of Cash Deferrals Among Funds. Cash Deferrals will be allocated to the Simple Interest Fund and DSU Fund in such proportion as the Eligible Director elects when he or she makes a Fee Deferral. If no allocation election is made on the deferral election form, 100% of the Eligible Director’s Cash Deferrals will be allocated to the Simple Interest Fund. An Eligible Director may change his Cash Deferral allocations prospectively with respect to prior and/or future Cash Deferrals by submitting a new election no later than December 31 of the year prior to the year in which the change will take effect. Any such change in allocation will take effect on the next January 1 following the date the election is made.

	(i)	upon termination of Board membership for any reason;
	(ii)	on a specified anniversary of his termination of Board membership, up to the 15th anniversary;
	(iii)	upon attaining a specified age;
	(iv)	on any other specified date, which must be an actual date and not a date tied to a contingent event;
	(v)	upon the earlier of termination of Board membership or attainment of a specified age or date;
	(vi)	upon the later of termination of Board membership or attainment of a specified age or date; or
	(vii)	upon the earlier of becoming Disabled or any of the other permissible Payment Commencement Dates under the Plan.

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

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

V.	PRIOR PLAN ACCOUNTS

(a)	Simple Interest Fund. The Simple Interest Fund of each Participant will be credited on the Effective Date with amounts transferred on his or her behalf from his or her simple interest fund under the prior Directors Deferred Compensation Plan. Amounts credited to the Simple Interest Fund are credited as cash and are adjusted annually in the same manner as the Simple Interest Fund under a Cash Deferral Sub-Account, as provided in Section 4.4(b)(i).
(b)	Stock Equivalency Fund. The Stock Equivalency Fund of each Participant will be credited on the Effective Date with amounts transferred on his or her behalf from his or her deferred account under the prior Directors Deferred Stock Equivalency Program and from his or her Schering-Plough Stock Equivalency Fund under the prior Directors Deferred Compensation Plan. Amounts credited to the Stock Equivalency Fund are credited as Phantom Stock Units and are adjusted annually in the same manner as the Share Deferral Sub-Account, as provided in Section 4.4(a).
(c)	DSU Fund. The DSU Fund of each Participant will be credited on the Effective Date with amounts transferred on his or her behalf from his or her stock unit account under the prior Directors Stock Award Plan. Amounts credited to the DSU Fund are credited as Deferred Stock Units that are payable in Prior Plan Shares and are adjusted annually in the same manner as the Share Deferral Sub-Account, as provided in Section 4.4(a).
(d)	Reallocation of Amounts Credited to Simple Interest Fund and Stock Equivalency Fund. A Participant may elect to reallocate among his or her Simple Interest Fund and Stock Equivalency Fund all or a portion of amounts currently allocated to those funds, but no reallocations into or out of the Participant’s DSU Fund is permitted. Reallocation elections may be made no more than once each year and must be received by the Committee no later than December 31

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	of the year prior to the year in which the reallocation takes effect. Any such reallocation will take effect on the next January 1 after the election is made.

VI.	PERMITTED ACCELERATIONS

(a)	Death. Upon the Participant’s death, any amounts remaining in the deceased Participant’s Deferral Account and Prior Plan Account will be paid in a single lump sum to the beneficiary or beneficiaries designated by the Participant on his most current deferral election form (or, absent such designation, to the Participant’s estate) as soon as practicable after the Committee receives satisfactory verification of the Participant’s death.
(b)	Change in Control. Within 30 days after a Change in Control, all amounts remaining in a Participant’s Deferral Account and Prior Plan Account as of the date of the Change of Control will be paid to the Participant in an immediate lump sum cash payment. For this purpose, the dollar value of Deferred Stock Units and Phantom Stock Units will be determined based on the Change in Control Price.
(c)	Unforeseeable Emergencies. If a Participant experiences an Unforeseeable Emergency, the Participant may request a hardship withdrawal of all or a portion of the amounts credited to the Participant’s Deferral Account and/or Prior Plan Account. In such event, the Participant will provide the Committee with such evidence as the Committee deems necessary and appropriate to review and confirm the existence of the Unforeseeable Emergency. Upon completion of its review, the Committee will determine, in its sole discretion, whether the requested hardship withdrawal will be approved and the amount that may be distributed to the Participant in connection with the Unforeseeable Emergency. The amount distributed in connection with an Unforeseeable Emergency may not exceed the lesser of (i) the amount necessary to satisfy the Unforeseen Emergency, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution and (ii) the dollar value of amounts that remain credited to Participant’s Deferral Account and Prior Plan Account. In making its determination, the Committee will be guided by the prevailing authorities under the Code and will take into account the extent to which the Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). If the hardship withdrawal does not result in a complete distribution of the amounts credited to the Participant’s Deferral Account and Prior Plan Account, amounts that are payable in cash will be distributed first. Hardship withdrawals on account of an Unforeseeable Emergency will be distributed as soon as practicable after the date that the Committee, in its discretion, approves the withdrawal. An Eligible Director may not participate in any decision of the Board regarding his or her request for a hardship withdrawal under this Section 6.1(c).

VII.	SHARES SUBJECT TO THE PLAN; ADJUSTMENTS

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

	(i)        All Director Fees payable after the 2006 Annual Meeting will be paid exclusively in cash;
	(ii)        All Share Deferrals elections under the Plan shall immediately convert to Cash Deferrals elections and no Share Deferral Sub-Accounts will be opened;
	(iii)       The DSU Fund under the Cash Deferral Sub-Account will be replaced by a Stock Equivalency Fund that holds Phantom Stock Units; and
	(iv)       The DSU Fund under each Prior Plan Account will remain open and continue to hold Deferred Share Units payable in Prior Plan Shares.

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

	(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

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	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 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 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.

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

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	(a)     Net operating profit after taxes;
	(b)     Operating profit before taxes;
	(c)     Return on equity;
	(d)     Return on assets or net assets;
	(e)     Total shareholder return;
	(f)      Relative 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; and/or
	(o)     Relative Share performance.
	(p)     Economic value added; and/or

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	(q)     Return on capital.

	(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. 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.

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	(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;

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	(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;
	(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.

(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

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

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	(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 –

	(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

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	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 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.

(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 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.

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	(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.

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

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	(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.
	(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.

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(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:

	(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.

	(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 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

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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.
	(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.
	(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.

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(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.

	(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.

	(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;

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	(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.

(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 shall become immediately vested and exercisable as of the effective date of a Change in Control. In addition, 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. Finally in the event an Employee incurs an Involuntary Termination after a Change in Control, all of the Participant’s outstanding Stock Options as of the date of such Involuntary Termination (which became exercisable as of the effective date of the Change in Control, if not already exercisable before such time), shall remain exercisable for the full duration of the Stock Option’s original term, notwithstanding the Participant’s Termination of Employment.
	(c)     Deferred Stock Units. All Deferred Stock Units credited to a Participant’s Deferred Stock Account but not yet distributed as of the date of the Change in Control shall become immediately vested and non-forfeitable as of the effective date of a Change in Control 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 effective date of the Change in Control) at a dollar value per Deferred Stock Unit equal to the Change in Control Price.
	(d)     Restricted Stock and Other Stock-Based Awards. 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 effective date of a Change in Control and all such Awards shall become vested and non-forfeitable as of such date.
	(e)     Performance Awards. Each Employee who has been granted a Performance Award that is outstanding as of the effective date of a Change in Control shall be deemed to have achieved a level of performance, as of the Change

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	in Control, that would cause all (100%) of the Participant’s target amounts to become payable and all restrictions and vesting conditions, if any, on the form of Award or Awards payable to the Employee in connection with the Performance Award shall be waived.

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

	(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;
	(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.

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	(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.

	(a) incurs a Termination for Cause or
	(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.

	(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,

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	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, 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.

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