FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit 99.3
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This FIRST AMENDMENT (the “Amendment”) to the Employment Agreement by and between
Schering-Plough Corporation, a New Jersey Corporation (the “Company”), and Xxxx Xxxxxx (the
“Executive”), dated as of the 20th day of April, 2003 (the “Employment Agreement”), is
made and entered into as of the 9th day of December, 2008.
WHEREAS, the Compensation Committee of the Company’s Board of Directors has determined that it
is appropriate to amend the Employment Agreement as provided below in order to comply with the
applicable requirements of section 409A of the Internal Revenue Code of 1986, as amended, and the
Executive has agreed to enter into this Amendment.
NOW, THEREFORE, it is hereby agreed as follows:
1. The Employment Agreement is hereby amended to add a new Section 14, which reads in its
entirety as follows:
14. Code Section 409A Provisions.
(a) To the fullest extent applicable, amounts and other benefits payable
under this Agreement are intended to be exempt from the definition of
“nonqualified deferred compensation” under section 409A of the Code (“Section
409A”) in accordance with one or more of the exemptions available under the final
Treasury regulations promulgated under Section 409A and, to the extent that any
such amount or benefit is or becomes subject to Section 409A due to a failure to
qualify for an exemption from the definition of nonqualified deferred compensation
in accordance with such final Treasury regulations, this Agreement is intended to
comply with the applicable requirements of Section 409A with respect to such
amounts or benefits. This Agreement shall be interpreted and administered to the
extent possible in a manner consistent with the foregoing statement of intent. In
this regard, notwithstanding anything in this Agreement to the contrary, the
following provisions shall apply.
(b) Notwithstanding anything in the Agreement to the contrary:
(i) To the extent that any (A) annual incentive compensation becomes
payable pursuant to Paragraph 3(b), (B) taxable reimbursement of business
expenses becomes payable pursuant to Paragraphs 3(f) or (C) taxable
reimbursement of the cost of fringe benefits provided during the
Employment Term becomes payable pursuant to Paragraph 3(g), then such
incentive compensation or taxable reimbursements shall be paid no later
than
March 15 of the year following the year in which the incentive
compensation was earned or the reimbursed costs were incurred, as the case
may be, except to the extent that the Executive elects to defer payment of
incentive compensation pursuant to an applicable Section 409A-compliant
deferred compensation plan of the Company.
(ii) In each case where this Agreement provides for the payment of an
amount that constitutes nonqualified deferred compensation under Section
409A to be made to the Executive within a designated period (e.g., within
30 days after the Date of Termination) and such period begins and ends in
different calendar years, the exact payment date within such range shall,
subject to Paragraph 14(b)(v) below, be determined by the Company, in its
sole discretion, and the Executive shall have no right to designate the
year in which the payment shall be made.
(iii) In the event, and to the extent that, the provision or
reimbursement of costs incurred in connection with any taxable
post-termination welfare or fringe benefits provided under this Agreement
results in the deferral of compensation within the meaning of Section 409A
because the benefits exceed the limits described in section
1.409A-1(b)(9)(v) of the Treasury Regulations for reimbursements and
certain other separation payments, then the reimbursement or provision of
such benefits shall be subject to the requirements of section
1.409A-3(i)(1)(iv) of the Treasury Regulations, and (A) reimbursements or
benefits shall be provided only during the applicable period specified in
the Agreement, (B) the amount of expenses eligible for reimbursement or
the benefits provided in kind during a particular calendar year shall not
affect the expenses eligible for reimbursement or the in-kind benefits to
be provided in any other calendar year, except that any lifetime caps on
reimbursable medical expenses under any applicable Company health or
medical plan shall continue to apply, (C) the reimbursement of any
eligible expense shall be made on or before December 31 of the year
following the year in which the expense was incurred and (D) the
Executive’s right to reimbursement or the provision of in-kind benefits
shall not be subject to liquidation or exchange for another benefit.
(iv) In the event the Executive becomes entitled to a Gross-Up
Payment under Section 8, such Gross-Up Payment shall in no event be made
later than December 31 of the year following the year during which the
related Code section 4999 excise tax is remitted to the Internal Revenue
Service, and all payments to the Accounting Firm pursuant to Section 8
shall be made no later than
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the end of the calendar year following the
calendar year in which the related work is performed by the Accounting
Firm.
(v) If the Executive is a Specified Employee on the Date of
Termination and, due to the failure of an amount or other benefit that is
payable under this Agreement on account of the Executive’s “separation
from service,” within the meaning of Section 409A(a)(2)(A)(i) of the Code
(other than a separation from service as a result of the Executive’s
death), to qualify for any of the exemptions from the definition of
nonqualified deferred compensation available under section 1.409A-1(b) of
the Treasury Regulations, the Company reasonably determines that such
amount or other benefit, constitutes nonqualified deferred compensation
that will subject the Executive to “additional tax” under section
409A(a)(1)(B) of the Code (together with any interest or penalties imposed
with respect to, or in connection with, such tax, a “409A Tax”) with
respect to the payment of such amount or the provision of such benefit if
paid or provided at the time specified in the Agreement, then the payment
or provision thereof shall be postponed to the first business day of the
seventh month following the Date of Termination or, if earlier, the date
of the Executive’s death (the “Delayed Payment Date”). In the event that
this subparagraph (v) requires a delay of any payment, such payment shall
be accumulated and paid in a single lump sum on the Delayed Payment Date
together with interest for the period of delay, compounded monthly, equal
to the prime lending rate then used by CitiBank, N.A., in New York City
and in effect as of the date the payment would otherwise have been
provided.
(vi) In the event a benefit is to be provided during the period
commencing on the Executive’s separation from service and ending on the
Delayed Payment Date and the provision of such benefit during that period
would be treated as a payment of nonqualified deferred compensation in
violation of Section 409A(a)(2)(B)(i) of the Code, then the Company may
condition the continuation of such benefit during that period on payment
by the Executive of the full cost of such benefit up to the Delayed
Payment Date and, on the Delayed Payment Date, the Company shall reimburse
the Executive for the cost of such benefit paid by the Executive, which
but for this paragraph would have been paid by the Company.
(vii) For purposes of this Agreement, the (a) term “Specified
Employee” shall mean a “specified employee” within the meaning of Section
409A(a)(2)(B)(i) of the Code, as determined by the Compensation Committee
and (b) the Executive’s Date of Termination shall in no event be earlier
than
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the date the Executive has incurred a “separation from service”
within the meaning of Section 409A(a)(2)(A)(i) of the Code.
(c) The Company and the Executive may agree to take other actions to avoid
the imposition of a 409A Tax at such time and in such manner as permitted under
Section 409A.
2. Except as otherwise provided above, the Employment Agreement shall continue in full force
and effect without alteration as in effect on the date hereof. The Employment Agreement, as
amended by this Amendment, constitutes the entire agreement of the parties and supersedes all prior
agreements and understandings with respect to the subject matter hereof and thereof.
IN WITNESS WHEREOF, the Executive and, pursuant to the authorization from its Board of
Directors, the Company, have caused this Amendment to be executed as of the day and year first
written above.
| /s/ Xxxx Xxxxxx | ||||
| Xxxx Xxxxxx | ||||
| SCHERING-PLOUGH CORPORATION |
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| By: | /s/ C. Xxx Xxxxxxx | |||
| C. Xxx Xxxxxxx | ||||
| Senior Vice President, Global Human Resources |
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