AMENDMENT TO LETTER AGREEMENT AND EMPLOYMENT AGREEMENT
Exhibit 99.5
This AMENDMENT (the “Amendment”) to the offer letter from Schering-Plough Corporation, a New
Jersey Corporation (the “Company”), and Xxxxxx X. Xxxxxxxx, Xx. (the “Executive”), dated as of the
11th day of March, 2004, (the “Letter Agreement”), and the change of control Employment
Agreement by and between the Company and the Executive, dated as of the 15th day of
April 2004, (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 Letter Agreement and 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. Paragraph 2 of the Letter Agreement is hereby amended by adding the following sentence at
the end of the Paragraph:
Assuming the applicable performance criteria are met, your bonuses for years after
2004 will be paid to you in a single lump sum by March 15 of the calendar year
following the year in which the bonus was earned.
2. The fourth bullet of Paragraph 7 of the Letter Agreement is hereby amended by adding the
following sentence at the end of the bullet:
Such reimbursement will be made to you promptly after your submission of invoices
for such expenses, but not later than March 15 of the year following the calendar
year in which you incurred the expense.
3. Paragraph 9 of the Letter Agreement is hereby amended by replacing the third sentence of
the Paragraph with the following two sentences:
Provided that you sign such release within 35 days following your termination date
and do not revoke the release within 7 days after you sign it, the severance
benefit describe above will, subject to Xxxxxxxxx 00 xxxxx, xx paid to you in a
single lump sum within 90 days following your termination date, but not later than
March 15 of the calendar year following your termination date. If the 90-day
period described above begins and ends in different calendar years, the Company
will determine the actual payment date, and you will have no right to designate
the year in which the payment will be made.
4. The Letter Agreement is hereby further amended by adding the following new Paragraph 11,
which reads in its entirety as follows:
If the Company determines that you are a “Specified Employee” (as defined in your
Employment Agreement) on your termination date and the Company reasonably
determines that the severance benefit described in Paragraph 9 constitutes
nonqualified deferred compensation (within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended), that will subject you to an additional
tax under Section 409A if the benefit is paid at the time specified in Paragraph
9, the Company will postpone payment of the severance benefit until the first
business day of the seventh month following your termination date (or until the
date of your death, if you die before then). If such a delay is required, you
will be provided interest on the delayed payment for the period of delay at the
prime lending rate then used by CitiBank, N.A., in New York City as of the date
the payment would otherwise have been made.
5. The Employment Agreement is hereby amended to add a new Section 13, which reads in its
entirety as follows:
13. 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) To the extent that any (i) Annual Bonus becomes payable pursuant to
Section 4(b)(ii), or (ii) taxable reimbursement of business expenses becomes
payable pursuant to Section 4(b)(v), or (iii) taxable reimbursement of the cost of
fringe benefits provided during the Employment Period becomes payable pursuant to
Section 4(b)(vi), then such Annual Bonus or taxable reimbursements shall be paid
no later than March 15 of the year following the year in which the Annual Bonus
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 the Annual
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Bonus pursuant to an applicable Section 409A-compliant deferred compensation
plan of the Company.
(c) The Date of Termination for purposes of determining the date that any
payment or benefit which is treated as nonqualified deferred compensation under
Section 409A of the Code is to be paid or provided (or in determining whether an
exemption to such treatment applies), and for purposes of determining whether the
Executive is a Specified Employee on the Date of Termination, shall be the date on
which the Executive has incurred a “separation from service” within the meaning of
Treasury Regulation section 1.409A-1(h), or in subsequent IRS guidance under Code
section 409A.
(d) 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 Section 13(f) 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.
(e) In the event the Executive becomes entitled to a Gross-Up Payment under
Section 9, 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 9 shall be made no later than the end of the
calendar year following the calendar year in which the related work is performed
by the Accounting Firm.
(f) 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
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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.
(g) 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.
(h) 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.
6. Except as otherwise provided above, the Letter Agreement and Employment Agreement shall
continue in full force and effect without alteration as in effect on the date hereof. The Letter
Agreement and 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/ Xxxxxx X. Xxxxxxxx, Xx. | ||||
| Xxxxxx X. Xxxxxxxx, Xx. | ||||
| 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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