Exhibit
10.5


 


December 20, 2006


Ronald A. Pepin, Ph.D.

Medarex, Inc.

707 State Road

Princeton, NJ 08540


Dear Dr. Pepin:


Medarex, Inc. (“Medarex”)
has previously granted to you the stock options set forth on the attached Exhibit
A (the “Options”) to purchase shares of Medarex’s common stock.  Medarex and you hereby agree to certain
amendments to your Options on the terms and conditions set forth in this letter
agreement.


1.             Determination of the Committee.  Medarex’s Special Investigation Committee
(the “Committee”) has determined that the Options were issued on terms
that did not reflect an exercise price equal to 100% of the fair market value
of Medarex’s common stock on the appropriate measurement date.  Exhibit A hereto sets forth the
determination of Medarex as to the appropriate measurement date (as determined
by Medarex, the “Revised Measurement Date”) and the average of high and
low sales price per share of Medarex’s common stock on the Revised Measurement
Date (such average being 100% of the fair market value of Medarex’s common
stock on that date and herein referred to as the “Corrected Exercise Price”).  Medarex and you acknowledge and agree that
the Revised Measurement Date and the Corrected Exercise Price set forth on Exhibit
A are subject to change and will not be considered final until included in
Medarex’s restated financial statements, which statements have not yet been
filed with the Securities and Exchange Commission (the “SEC”).  Upon such filing, Exhibit A shall be
automatically amended without any action by you or Medarex to reflect any
changes to the Revised Measurement Date, the Corrected Exercise Price and the
Per Share Discount as included in Medarex’s restated financial statements as
filed with the SEC.


2.             Amendment to the Options.  As the applicable Corrected Exercise Price
for each Option is greater than the original exercise price per share set forth
in the applicable stock option agreement for each Option (as set forth on Exhibit
A, the “Original Exercise Price”), each Option may be subject to
adverse tax consequences under Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”) to the extent that the Option (a)
vested after December 31, 2004 and (b) was not exercised or otherwise cancelled
on or before December 31, 2005.  Exhibit
A indicates the number of shares subject to each Option held by you that
have not yet been exercised (the “Outstanding Unexercised Shares”) as
well as the number of Outstanding Unexercised Shares that are at risk for
adverse tax consequences under Section 409A (the “409A Shares”).  Medarex and you hereby amend each of your
Options to increase the exercise price of the 409A Shares to the applicable
Corrected Exercise Price and to provide that each Option may not be exercised
as to any of the 409A Shares prior to the later of (a) the six (6) month
anniversary of the “Letter Agreement Date” (as defined below) and (b) the date
on which Medarex’s restated financial statements are filed with the SEC (the “Filing
Date”) (the later date of (a) and (b), the “Earliest Exercise Date”).  Notwithstanding the foregoing, you may
exercise the Options as to the 409A Shares prior to the six (6) month
anniversary of the Letter Agreement Date in the event of (i) the termination of
your employment (x) by Medarex without “Cause” (as defined in Medarex’s 2005
Equity Incentive Plan), (y) by you for “good reason” (as such term is defined
in Exhibit A hereto,), provided your resignation occurs not later than 30 days
following the event giving rise to good reason, or (z) by either party by
reason of your death or “Disability” (as defined in Medarex’s 2005 Equity
Incentive Plan), or (ii) a “Change in Control” (as defined in the 2005 Equity
Incentive Plan), but in each case only if, by 









 



 


such time, the Filing Date
has occurred.


3.             Effect of Option Amendments.  Except as expressly set forth in this letter
agreement, all other terms and conditions of your Options will remain
unchanged.  Nothing in this letter
agreement shall be deemed to extend the date on which your Options would
otherwise expire.  The amendment of your
Options will be effective as of the date you sign this letter agreement as
indicated below (the “Letter Agreement Date”).  Your ability to exercise the Options, as
amended, will remain subject to the terms of the applicable option agreements
(as amended by this letter agreement), your compliance with applicable laws and
requirements (including any legal limitations, requirements or restrictions
arising from Medarex’s legal situation in relation to its equity compensation
practices) and Medarex’s policies on trading in Medarex securities.


4.             Section 409A Consequences.  While we believe that the actions
contemplated by this letter agreement should minimize the potential adverse tax
consequences under Section 409A with respect to your Options, and should not
otherwise give rise to adverse tax consequences under Section 409A in respect
of the Options, such interpretation is not free from doubt.  You are encouraged to
consult with your personal financial, tax and legal advisors regarding this
letter agreement.  No representation or
warranty is made by Medarex with respect to the tax consequences of this letter
agreement.


5.             General Terms.  This letter agreement supersedes any or all
prior representations and agreements regarding the subject matter that are
inconsistent with the terms of this letter agreement.  However, this letter agreement does not
modify, amend or supersede written agreements that are consistent with the enforceable
provisions of this letter agreement. 
Once effective and enforceable, this letter agreement can be changed
only by another written agreement signed by you and a duly authorized executive
of Medarex.  Medarex and you acknowledge
and agree that nothing in this letter agreement shall be construed or
interpreted as an admission or conclusion of wrongdoing or liability (or the
lack thereof) on the part of either Medarex or you, and you expressly agree
that you shall not use the offer or the acceptance of this letter agreement as
a defense in any proceeding or action that may be brought or threatened at any
time and to which Medarex is a party. 
Should any provision of this letter agreement be determined by any court
of competent jurisdiction or arbitrator to be wholly or partially invalid or unenforceable,
the legality, validity and enforceability of the remaining parts, terms, or
provisions are intended to remain in full force and effect.


Please sign this letter
agreement in the space provided below, and return an original copy to me on or
before December 29, 2006.  If you have
any questions regarding this letter agreement, please contact Brad Middlekauff
at (609) 430-2880.


Best regards,


/s/ Christian S. Schade


Christian
S. Schade

Senior Vice President and Chief Financial Officer


ACKNOWLEDGED
& AGREED:


	
  /s/ Ronald A. Pepin

  	
   

  
	
  Ronald A. Pepin

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  12/21/2006

  	
   

  
			



 









 



 


Exhibit A


List of Options 


	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  	
  D

  	
   

  	
  E

  	
   

  	
  F

  	
   

  	
  G

  	
   

  	
  H

  	
   

  
	
  Stock Plan

  	
   

  	
  Original

  Grant

  Date

  	
   

  	
  Revised

  Measurement

  Date

  	
   

  	
  Original

  Exercise

  Price

  	
   

  	
  Corrected

  Exercise

  Price

  	
   

  	
  Outstanding

  Unexercised

  Shares

  	
   

  	
  409A

  Shares

  	
   

  	
  Per Share

  Discount

  (E-D)

  	
   

  
	
  2001

  	
   

  	
  9.19.01

  	
   

  	
  9.28.01

  	
   

  	
  $

  	
  12.90

  	
   

  	
  $

  	
  14.90

  	
   

  	
  50,000

  	
   

  	
  9,375

  	
   

  	
  $

  	
  1.99

  	
   

  
	
  2001

  	
   

  	
  7.11.02

  	
   

  	
  7.31.02

  	
   

  	
  $

  	
  6.37

  	
   

  	
  $

  	
  8.11

  	
   

  	
  100,000

  	
   

  	
  35,584

  	
   

  	
  $

  	
  1.74

  	
   

  



 


Note:  Does not include 1.19.01 grant because no
409A issues.


For
purposes of this letter agreement, “good reason” shall mean the
occurrence of one or more of the following actions by Medarex without your
express written consent:  (a) the
assignment to you of any duties or responsibilities that result in a material
diminution in your position or function; provided, however,
that a change in your title or reporting relationships shall not provide the
basis for a termination with good reason; (b) a relocation of your business
office to a location more than fifty (50) miles from the location at which you
perform duties as of the Letter Agreement Date, except for required business
travel to the extent substantially consistent with your Medarex business travel
obligations as of the Letter Agreement Date; or (c) a material breach by
Medarex of any provision of this letter agreement or any other material
agreement between you and Medarex concerning the terms and conditions of your
employment or service with Medarex.