EXHIBIT 10.9
McKESSON HBOC, INC.
DEFERRED COMPENSATION ADMINISTRATION PLAN II
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(Amended as of January 27, 1999)
A. PURPOSE
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This Plan is established to further enhance the Company's ability to
attract and retain executive personnel and Directors. The Plan replaces and
supersedes the Directors' Deferred Compensation Plan, the Management Deferred
Compensation Plan, the Deferred Compensation Administration Plan, and the PCS,
Inc. Optional Deferred Compensation Administration Plan.
B. ERISA PLAN
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This Plan is an unfunded deferred compensation program for a select group
of management employees and Directors of the Company. The Plan therefore is
covered by Title I of ERISA except that it is exempt from Parts 2, 3 and 4 of
Title I of ERISA.
C. PARTICIPATION
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1. Eligibility to Participate
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a. Eligible Executives. The Administrator may, at its discretion,
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and at any time, and from time to time, select Company executives who may elect
to participate in this Plan ("Eligible Executives"). Selection of Eligible
Executives may be evidenced by the terms of the executive's employment contract
with the Company, or by inclusion among the persons or classes of persons
specified by the Administrator.
The Administrator may, at its discretion, and at any time, and from
time to time, designate additional Eligible Executives and/or provide that
executives previously designated are no longer Eligible Executives. If the
Administrator determines that an executive is no longer an Eligible Executive,
he or she shall remain a Participant in the Plan until all amounts credited to
his or her Account prior to such determination are paid out under the terms of
the Plan (or until death, if earlier).
b. Eligible Directors. Each Director who is not a Company employee
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may participate in this Plan ("Eligible Directors").
2. Election to Participate. An Eligible Executive or an Eligible
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Director may become a Participant in the Plan by electing to defer compensation
in accordance with the terms of this Plan. An election to defer shall be in
writing, shall be irrevocable and shall be made at the time and in the form
specified by the Administrator. On electing to defer compensation under this
Plan, the Participant shall be deemed to accept all of the terms and conditions
of this Plan. All elections to defer amounts under
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this Plan shall be made pursuant to an election executed and filed with the
Administrator before the amounts so deferred are earned.
3. Notification of Participants. The Administrator shall annually notify
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each Eligible Executive and each Eligible Director that he or she may
participate in the Plan for the next Year. Such notice shall also set forth the
Declared Rate for the next Year.
4. Relation to Other Plans.
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a. Participation in Other Plans. An Eligible Executive or a
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Director may participate in this Plan and may also participate in any other
benefit plan of the Company in effect from time to time for which he or she is
eligible, unless the other plan may otherwise exclude participation on the basis
of eligibility for, or participation in, this Plan. No amounts may be deferred
under this Plan which have been deferred under any other plan of the Company.
Deferrals under this Plan may result in a reduction of benefits payable under
the Social Security Act, the Company's Retirement Plan and the Company's Profit-
Sharing Investment Plan.
b. Automatic Deferral to Supplemental PSIP. Subject to the last
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sentence of Section D.2. below, an Eligible Executive who makes an election to
defer compensation under this Plan shall have an additional amount automatically
deferred from his or her remaining compensation. The amount of such additional
deferral will be an amount equal to (x) the amount deferred by the Eligible
Executive into the Plan, multiplied by (y) the percentage rate of the Eligible
Executive's deferrals into the McKesson HBOC, Inc. Profit-Sharing Investment
Plan ("PSIP"), as in effect at the beginning of each Year. The additional
deferrals will be credited to the Eligible Executive's account in the McKesson
HBOC, Inc. Supplemental PSIP and governed by the terms of that plan.
D. AMOUNTS OF DEFERRAL
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1. Minimum Deferral. The minimum amount that an Eligible Executive may
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defer under this Plan for any Year is $5,000 of base salary, or $5,000 of any
annual bonuses and $5,000 of any Long-Term Incentive Plan award. The minimum
amount of compensation that an Eligible Director may defer for any Year is
$5,000.
2. Maximum Deferral for Eligible Executives. The maximum amount of
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compensation which an Eligible Executive may defer under this Plan for any Year
is (i) eighty percent (80%) of the amount of such Eligible Executive's base
salary for such Year, and (ii) one hundred percent (100%) of any annual bonus
award and/or any Long-Term Incentive Plan Award determined and payable to him or
her in such Year. Notwithstanding these limits, deferrals may be reduced by the
Company to leave sufficient remaining compensation legally required for taxes
and other authorized deductions, including, but not limited to, those for
Company benefit programs.
3. Maximum Deferral for Eligible Directors. The maximum amount of
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compensation which an Eligible Director may defer under this Plan for any Year
is the amount of any annual retainer (other than the portion of the annual
retainer subject to Mandatory Deferral under the 1997 Non-Employee Directors'
Equity Compensation and Deferral Plan) and other fees from the Company earned by
him or her in any such Year.
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E. PAYMENT OF DEFERRED COMPENSATION
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1. Book Account and Interest Credit. Compensation deferred by a
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Participant under the Plan shall be credited to a separate bookkeeping account
for such Participant (the "Account"). (Sub-Accounts may be established for each
Year for which the Participant elects to defer compensation.) Interest shall be
credited to each Account (including Sub-Accounts established thereunder) for
each Year at a rate equal to a rate declared by the Administrator acting in its
sole discretion after taking into account, among other things, the following
factors: the Company's cost of funds, corporate tax brackets, expected amount
and duration of deferrals, number and age of eligible Participants, expected
time and manner of payment of deferred amounts, and expected performance of
available fixed-rate insurance contracts covering the lives of Participants (the
"Declared Rate"). Each Account balance shall be compounded monthly at the
twelfth root of the annual Declared Rate of interest provided for under this
Plan. In the case of installment payments as provided in Section E.3. below,
interest shall be credited on all amounts remaining in a Participant's Account
until all amounts are paid out.
2. Length of Deferral. An Eligible Executive or Eligible Director shall
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elect in writing, and file with the Administrator, at the same time as such
Eligible Executive or Eligible Director makes any election to defer
compensation, the period of deferral with respect to such election, subject to
the minimum required period of deferral and the maximum permissible period of
deferral. The minimum required period of deferral is five years after the end of
the Year for which compensation is deferred. Notwithstanding the foregoing, the
five-year minimum deferral period shall not apply to payments made as a result
of death, Disability, Retirement, pre-retirement termination, a Change in
Control or hardship. Payment must commence no later than the end of the maximum
period of deferral, which is the January following the year in which the
Eligible Executive reaches age 72 or, in the case of an Eligible Director, the
January after the Company's annual meeting of stockholders next following the
Eligible Director's 72nd birthday. Once such an election has been made, the
Eligible Executive or Eligible Director may alter the period of deferral,
provided that:
a. such alteration is made at least one year prior to the earliest
date the Participant could have received distribution of the amounts credited to
his or her Account under the earlier election, and
b. such alteration does not provide for the receipt of such amounts
earlier than one year from the date of the alteration, subject to the five-year
minimum deferral rule stated above.
3. Election of Methods of Payment. A Participant shall elect in writing,
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and file with the Administrator, at the same time as any election to defer
compensation, a method of payment of benefits under this Plan from the following
methods:
a. Payment of amounts credited to the Participant's Account in any
specified number of approximately equal annual installments (not in excess of
10), the first installment to be paid in January of the Year designated by the
Participant.
b. Payment of the amounts credited to the Participant's Account in
any specified number of approximately equal annual installments (not in excess
of ten), the first installment to be paid in January after the designated
interval following the earlier of Participant's Retirement or of the
determination disability.
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c. Payment of the amount credited to the Participant's Account in a
single sum.
4. Payments on Termination.
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a. Director Termination. If an Eligible Director ceases to be a
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Director of the Company for any reason other than death, the entire
undistributed amount credited to his or her Account will be paid in the form
elected by the Participant, or, if no election has been made, in a lump sum in
the January of the calendar year following the calendar year in which the
Eligible Director ceased to be a Director.
b. Executive Termination. If an Eligible Executive terminates
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employment with the Company for any reason other than Retirement, disability or
death, then, notwithstanding the election made by the Eligible Executive
pursuant to Sections E.2 and 3 above, the entire undistributed amount credited
to his or her Account will be paid in the form of a lump sum in the January of
the calendar year following the calendar year of termination of employment.
5. Payments on Death.
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a. Death After Payments Have Begun. If a Participant dies after
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payments from his or her Account have begun, the remainder of the amounts
credited to the Participant's Account shall be paid to his or her Beneficiary at
the same time and in the same manner as they would have been paid had the
Participant survived.
b. Death Before Payments Have Begun. If a Participant dies before
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payments from his or her Account have begun, the amount credited to his or her
Account shall be paid to his or her Beneficiary at the time and in the manner
elected by the Participant. Such election shall be made in writing and filed
with the Administrator at the time of any election to defer compensation.
Benefits shall be paid in one of the methods specified in paragraphs a. and c.
of Section E.3. The Administrator, at his or her discretion, may distribute all
benefits to a Beneficiary in a single payment if the value of his or her Account
balance is less than $5,000.
6. Payments on Disability. If the Administrator determines that a
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Participant has become Disabled, the entire undistributed amount credited to his
or her Account will be paid in the form and at the time elected by the
Participant, or, if no election has been made, in a lump sum as soon as
practicable after such determination is made.
7. Payments on Hardship. The Administrator may in his or her sole
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discretion direct payment to a Participant of all or of any portion of the
Participant's Account balance, notwithstanding an election under Section E.3.
above, at any time that he or she determines that such Participant has suffered
an event of undue hardship which causes an emergency condition in his or her
financial affairs.
8. Change in Control. For purposes of this Plan, a Change in Control of
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the Company shall be deemed to have occurred if any of the events set forth in
any of the following paragraphs shall occur:
a. any "person" (as defined in section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding the Company
or any of its subsidiaries, a trustee or any fiduciary holding
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securities under an employee benefit plan of the Company or any of its
subsidiaries, an underwriter temporarily holding securities pursuant to an
offering of such securities or a corporation owned, directly or indirectly, by
stockholders of the Company in substantially the same proportions as their
ownership of the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the Company's
then outstanding securities; or
b. during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in clause a., c.,
or d. of this paragraph) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
or
c. the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (I) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (II) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
d. the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Notwithstanding the foregoing, no Change in Control shall be deemed to
have occurred if there is consummated any transaction or series of integrated
transactions immediately following which the holders of the Company's Common
Stock immediately prior to such transaction or series of transactions continue
to have the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately prior to such
transaction or series of transactions.
With respect to deferrals made prior to January 1, 1994, deferred
funds will be distributed upon a Change in Control, if the Participant has so
elected.
9. Designation of Beneficiary. A Participant may designate any person(s)
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or any entity as his or her Beneficiary. Designation shall be in writing and
shall become effective only when filed with the Administrator. Such filing must
occur before the Participant's death. A Participant may change the Beneficiary,
from time to time, by filing a new written designation with the Administrator.
If the Participant is married, any Beneficiary designation which does not
designate the Participant's spouse to receive at least one-half of the
Participant's Account shall only become effective when approved in writing by
the Participant's spouse.
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F. SOURCE OF PAYMENT
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Amounts paid under this Plan shall be paid from the general funds of the
Company, and each Participant and his or her Beneficiaries shall be no more than
unsecured general creditors of the Company with no special or prior right to any
assets of the Company (whose claims may be subordinated to those of creditors of
Company subsidiaries) for payment of any obligations hereunder. Nothing
contained in this Plan shall be deemed to create a trust of any kind for the
benefit of any Participant or Beneficiary, or create any fiduciary relationship
between the Company and any Participant or Beneficiary with respect to any
assets of the Company.
G. MISCELLANEOUS
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1. Withholding. Each Participant and Beneficiary shall make appropriate
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arrangements with the Company for the satisfaction of any federal, state or
local income tax withholding requirements and Social Security or other
employment tax requirements applicable to the payment of benefits under this
Plan. If no other arrangements are made, the Company may provide, at its
discretion, for such withholding and tax payments as may be required.
2. No Assignment. The benefits provided under this Plan may not be
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alienated, assigned, transferred, pledged or hypothecated by any person, at any
time. These benefits shall be exempt from the claims of creditors or other
claimants and from all orders, decrees, levies, garnishments or executions.
3. Applicable Law; Severability. The Plan hereby created shall be
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construed, administered and governed in all respects in accordance with ERISA
and the laws of the State of California to the extent that the latter are not
preempted by ERISA. If any provision of this instrument shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereunder shall continue to be effective.
H. ADMINISTRATION OF THE PLAN
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1. In General. The Administrator of the Plan shall be the Senior Vice
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President, Human Resources and Administration, of the Company. If the Senior
Vice President, Human Resources and Administration, is a Participant, any
discretionary action taken as Administrator which directly affects him or her as
a Participant shall be specifically approved by the Compensation Committee. The
Administrator shall have the authority and responsibility to interpret this Plan
and shall adopt such rules and regulations for carrying out this Plan as it may
deem necessary or appropriate. Decisions of the Administrator shall be final and
binding on all parties who have or claim any interest in this Plan.
2. Elections and Notices. All elections and notices made under this Plan
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shall be in writing and filed with the Administrator at the time and in the
manner specified by him or her. All elections to defer under this Plan shall be
irrevocable.
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I. AMENDMENT OR TERMINATION OF THE PLAN
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The Board may at any time amend this Plan. Such action shall be prospective
only and shall not adversely affect the rights of any Participant or Beneficiary
to any benefit previously earned under this Plan. The Board may at any time
terminate this Plan; thereupon compensation previously deferred plus interest
credited thereon shall promptly be paid, on termination, in single lump sums to
the respective Participants or Beneficiaries entitled thereto.
J. EFFECTIVE DATE
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This Plan is effective as of January 27, 1993, the date on which this Plan
was approved by the Board.
K. DEFINITIONS
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For purposes of this Plan, the following terms shall have the meanings
indicated:
1. "Account" means the Account specified in Section E.1.
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2. "Administrator" shall mean the person specified in Section H.
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3. "Beneficiary" shall mean the person or entity described by Section
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E.9.
4. "Board" shall mean the Board of Directors of McKesson HBOC, Inc., a
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Delaware corporation.
5. "Company" shall mean McKesson HBOC, Inc., a Delaware corporation and
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any subsidiary in which it owns at least 50% of the issued and outstanding stock
(and any subsidiary 50% of the issued and outstanding stock of which is owned by
such a subsidiary).
6. "Compensation Committee" shall mean the Compensation Committee of the
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Board.
7. "Declared Rate" shall have the meaning described in Section E.1.
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8. "Disabled" or "Disability" shall mean (1) a physical or mental
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condition which, in the judgment of the Administrator, based on competent
medical evidence satisfactory to the Administrator, renders a Participant unable
to perform the work of his or her regular occupation for the Company and which
impairment is likely to result in death or to be of long, continued and
indefinite duration, or (2) a judicial declaration of incompetence.
9. "Eligible Director" shall mean a Director described by Section C.1.b.
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10. "Eligible Executive" shall mean an employee of the Company selected as
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being eligible to participate in this Plan under Section C.1.a.
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11. "ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended.
12. "Participant" shall be any Company executive or member of the Board
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for whom amounts are credited to an Account under this Plan. Upon his or her
death, his or her Beneficiary shall be a Participant until all amounts are paid
out of his or her Account.
13. "Plan" shall mean the McKesson HBOC, Inc. Deferred Compensation
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Administration Plan II (DCAP II).
14. "Retirement" shall mean termination of employment after (a) the date
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on which the Participant's number of points under the Retirement Share Plan
portion of the McKesson HBOC, Inc. Profit-Sharing Investment Plan equals 65, (b)
attaining eligibility for a Retirement Allowance under the terms of the McKesson
HBOC, Inc. Retirement Plan or (c) receiving an Approved Retirement under the
terms of the Executive Benefit Retirement Plan.
15. "Year" is the calendar year.
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Executed effective as of January 27, 1999.
McKESSON HBOC, INC.
By _____________________________________________
E. Christine Rumsey
Senior Vice President, Human Resources and Administration
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APPENDIX A
DEFERRAL OF RESTRICTED STOCK PROCEEDS
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Any other provision of the Plan to the contrary notwithstanding, the following
provisions shall apply to the cash paid to the Company by Eli Lilly and Company
("Lilly") upon the tender of certain shares of restricted stock (the
"Transaction Proceeds"), which had been granted to executives under the
Company's 1988 Restricted Stock Plan, at the completion of the transaction
involving the acquisition of PCS Health Systems, Inc. ("PCS") by Lilly (the
"Transaction").
1. Former executives of the Company may be selected to participate in the
Plan, and, if so selected, shall be deemed Eligible Executives.
2. The Transaction Proceeds shall be automatically deferred into the Plan
on behalf of those Eligible Executives who hold outstanding Restricted
Stock Grants under the Company's 1988 Restricted Stock Plan. Such
Eligible Executives shall be deemed to have elected the deferral of
the Transaction Proceeds.
3. The five-year minimum deferral period required by paragraph E.2. of
the Plan shall not apply to the deferral of the Transaction Proceeds.
4. Transaction Proceeds shall not be deferred on behalf of Eligible
Executives who are also employees of PCS.
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