Exhibit 10.1
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT is made this 2nd day of February, 1996, between SHARED MEDICAL
SYSTEMS CORPORATION (the "Company") and XXXXXXXXX X. XXXXX ("Employee"), who is
a member of a select group of management or highly compensated employees within
the meaning of section 201(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
The parties hereto, intending to be legally bound, agree as follows:
1. GRANTOR TRUST; DEFERRED COMPENSATION ACCOUNT.
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The Company has established an irrevocable grantor trust (the "Trust")
within the meaning of section 671 of the Internal Revenue Code of 1986, as
amended (the "Code"), pursuant to a trust agreement (the "Trust Agreement")
executed on February 2, 1996 with a trustee selected by the Company (the
"Trustee"). Concurrent with the execution of this Agreement, the Company will
contribute to the Trust 10,000 newly-issued shares of Company Common Stock
("Original Shares") by delivery of such Shares to the Trustee.
The Trustee shall, on behalf of the Company, hold a deferred compensation
account for Employee (the "Deferred Compensation Account" or the "Account").
The Account shall have two sub-accounts, the Stock Account and the Cash Account.
The Trustee shall hold the Original Shares in the Stock Account. Any stock
dividends, stock splits, and other non-cash distributions received on the
Original Shares shall be held in the Stock Account, while any cash dividends
received on the Original Shares shall be held in the Cash Account and shall be
invested in accordance with investment guidelines established by the Company.
The Accounts shall also be reduced for distributions made under the terms of
this Agreement.
Notwithstanding the foregoing, the Trust assets shall be treated as assets
of the Company and shall remain, in the event the Company becomes Insolvent (as
such term is defined in Section 5(a)(i) of the Trust Agreement) subject to the
claims of the Insolvency Creditors (within the meaning of Section 5(a)(ii) of
the Trust Agreement) of the Company. Employee shall not have any property
interest in the assets held in the Trust. Employee shall have only the rights of
an unsecured creditor against the Company for any distribution due under this
Agreement, and this Agreement shall constitute a mere promise by the Company to
make such distributions in the future. It is the intention of the parties
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that the Agreement be unfunded for Federal income tax purposes and for purposes
of Title I of ERISA.
2. ENTITLEMENT TO BENEFITS.
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(a) BENEFITS AT NORMAL RETIREMENT.
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Upon the termination of Employee's employment with the Company
occurring on or after the Employee attains the age of 60 (his "Normal
Retirement Age"), Employee shall be entitled to receive and shall have
distributed to him the balance in his sub-accounts, as provided in
Exhibit A.
(b) TERMINATION BEFORE NORMAL RETIREMENT AGE.
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If Employee's employment with the Company is terminated for any
reason prior to his Normal Retirement Age, Employee shall not be entitled
to receive any amount in his Account, and no distributions shall be made to
Employee, except under the following circumstances:
(i) DISABILITY.
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If Employee's termination of employment results from his
permanent disability prior to his Normal Retirement Age, Employee
shall be entitled to receive and shall have distributed to him the
balance in his sub-accounts, as provided in Exhibit A. Employee shall
be deemed "permanently disabled," only if he can no longer perform the
duties of his position, as determined by the Management and
Compensation Committee of the Company's Board of Directors, in his or
their sole discretion.
(ii) DEATH.
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If Employee's termination of employment results from the
Employee's death prior to his Normal Retirement Age, Employee's
beneficiary designated pursuant to Section 3(b) below shall be
entitled to receive within 30 days of Employee's death and shall have
distributed to him or her the balance in Employee's sub-accounts, in a
lump sum.
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(iii) DISCHARGE AFTER AGE 50.
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Except as otherwise provided in Section 2(b)(iv) below, if
Employee is discharged by the Company for any reason other than
"cause" after he reaches age 50 but prior to his Normal Retirement
Age, the balance in his sub-accounts shall be reduced to the balance
in his sub-accounts as of his date of termination multiplied by the
Adjustment Fraction. For purposes of this subsection only, "Adjustment
Fraction" shall mean a fraction, the numerator of which shall be the
number of full months the Employee worked for the Company after
attaining age 50, and the denominator of which shall be 120. The
balance in his sub-accounts shall be distributed to the Employee, as
provided in Exhibit A.
As used herein, the term "cause" shall mean Employee's (A)
dishonest or illegal conduct, (B) conduct contrary to the best
interests of the Company, (C) insubordination, incompetence,
misconduct, or neglect of his duties, or (D) willful violation of any
express direction of the senior management or the Board of Directors
of the Company, as determined by the Management and Compensation
Committee of the Company's Board of Directors, in his or their sole
discretion.
(iv) CHANGE IN CONTROL.
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(A) ACCELERATION OF ACCOUNT.
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If, prior to Employee's Normal Retirement Age, (aa)
there is a "Change in Control" of the Company, (bb) the Chief
Executive Officer of the Company immediately prior to the Change
in Control is replaced, and (cc) within 3 months subsequent
thereto Employee is discharged by the Company or Employee resigns
because his place of work is changed such that his commute would
be increased by 50 miles or more or his responsibilities or his
aggregate compensation is reduced, Employee shall be entitled to
receive and shall have distributed to him the balance in his sub-
accounts, as provided in Exhibit A.
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(B) DEFINITION.
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As used herein, the term "Change in Control" shall mean
the acquisition by any person (other than the Company or any
affiliate or associate of the Company), as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), of beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of 40% or more
of the combined voting power of the Company's then outstanding
securities, or the approval by the stockholders of the Company of
(aa) any merger or consolidation where stockholders of the
Company immediately prior to the merger or consolidation do not
immediately thereafter hold more than 50% of the combined voting
power of the surviving company's then outstanding securities,
(bb) a liquidation or dissolution of the Company, or (cc) a sale
of all or substantially all of the Company's assets.
(c) FORFEITURE OF BENEFITS.
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Notwithstanding the foregoing, if at any time after the date
hereof, Employee, without the express written consent of the Company,
manages, operates, or controls, or becomes an officer, director or employee
of, or consultant to, any business or enterprise determined by the Company
to be engaged in the manufacture, distribution or marketing of any product,
or the provision of any service, substantially similar to or in competition
with any product or service offered by the Company, Employee shall forfeit
all rights to receive any benefits under this Agreement, and no
distributions under this Agreement shall be made to Employee, or continued
to be made, as the case may be.
(d) ACCELERATION OF PAYMENTS.
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Notwithstanding any other provision of this Agreement or the
Trust Agreement, if the Company's independent public accountants determine,
based on a change in the tax or revenue laws of the United States of
America, a published ruling or similar announcement issued by the Internal
Revenue Service, a regulation issued by the Secretary of the Treasury or
his delegate, a final decision by a court of competent jurisdiction
involving the Employee, or a closing agreement
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involving the Employee made under section 7121 of the Code that is approved
by the Commissioner, that the Employee has recognized or will recognize
income for Federal income tax purposes with respect to benefits that are or
will be payable to the Employee hereunder, before they otherwise would be
paid to the Employee, the Company shall discuss with the Employee
appropriate measures to eliminate a negative economic impact on the
Employee, including if approved by the Company, an immediate distribution
by the Trustee from the Trust to the Employee or Beneficiary of the amount
so taxable.
3. BENEFICIARIES.
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(a) DEATH OF EMPLOYEE ENTITLED TO BENEFITS.
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If Employee dies after becoming entitled to benefits under
Section 2(a) or 2(b)(i), 2(b)(iii) or 2(b)(iv), the balance then in his
Account, shall, within 30 days of Employee's death, be distributed in a
lump sum to Employee's beneficiary designated pursuant to Section 3(b)
below.
(b) BENEFICIARY DESIGNATION.
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Employee shall have the right to designate a beneficiary or
beneficiaries to receive any benefits hereunder which may be distributed
upon Employee's death. Employee shall have the right to change any
beneficiaries so designated, provided, however, that a change of a
beneficiary designation will be effective only if made in a manner
acceptable to the Company. If Employee fails to designate a beneficiary or
if no designated beneficiary survives the Employee, his estate shall be his
beneficiary.
4. CLAIMS AND APPEALS PROCEDURE.
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The Company has provided to the Employee a copy of the Claims and
Appeals procedures which will be followed under this Agreement and which are
incorporated herein by reference.
5. NON-ALIENATION.
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No benefits under this Agreement shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, or encumbrance,
and any attempt to do so shall be void and unenforceable. Such benefits shall
not be subject to or liable for the debts, contracts, liabilities, engagements,
or torts of Employee or his beneficiary or beneficiaries.
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6. INVESTMENT PURPOSES.
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Unless the Company has theretofore notified Employee that a
registration statement covering Shares deposited with the Trustee has become
effective under the Securities Act of 1933 and the Company has not thereafter
notified Employee that such registration is no longer effective, it shall be a
condition of this Agreement that any Shares to be distributed to Employee
hereunder shall be acquired for investment and not with a view to distribution
in violation of the Securities Act of 1933 (or of any rules or regulations
promulgated thereunder), and Employee hereby agrees to submit to the Company a
certificate of such investment intent, together with such other evidence
supporting the same as the Company may request. The Company shall be entitled to
restrict the transferability of any Shares distributed hereunder to the extent
necessary to avoid a risk of violations of the Securities Act of 1933 (or of any
rules or regulations promulgated thereunder) or of any state laws or regulation.
Such restrictions may, at the option of the Company, be noted or set forth in
full on the Share certificates.
7. AMENDMENT OR TERMINATION OF AGREEMENT.
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This Agreement may be amended or terminated upon the mutual agreement
of Company, by resolution of the Management and Compensation Committee of its
Board of Directors adopted at a duly held meeting of said Committee or by
unanimous written consent of said Committee, and Employee.
8. AUTHORITY TO INTERPRET AGREEMENT VESTED IN COMPANY.
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The Company shall have full power and authority to interpret,
construe, administer and make factual determinations with respect to this
Agreement, and the interpretation and construction thereof, and actions
thereunder, including any valuation of the Deferred Compensation Account, or any
decisions regarding the amount or recipient of any distribution to be made
therefrom, shall be binding and conclusive on all persons for all purposes. The
Company shall not be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Agreement unless
attributable to its own willful misconduct or lack of good faith.
9. NO CONTRACT OF EMPLOYMENT.
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Nothing contained herein shall be construed as conferring upon the
Employee the right to continue in the employ of the Company.
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10. RIGHT TO WITHHOLD.
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The Company and the Trustee shall have the right to withhold from all
distributions under the Agreement any Federal, state, or local taxes required by
law to be withheld with respect to such distributions.
11. GOVERNING LAW.
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This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania to the extent not preempted by
federal law.
12. AGREEMENT BINDING.
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This Agreement shall be binding upon and inure to the benefit of the
Company, its successors and assigns, and Employee and his heirs, executors,
administrators and legal representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
ATTEST: SHARED MEDICAL SYSTEMS CORPORATION
[SEAL]
/S/Xxxxxx Xxxxxx By:/S/Xxxxxxxx X. Xxxx
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Assistant Secretary Name:Xxxxxxxx X. Xxxx
Title:Vice President of Finance
WITNESS:
/S/Xxxx X. Xxxxxxxxx /S/Xxxxxxxxx X. Xxxxx
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Xxxxxxxxx X. Xxxxx
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EXHIBIT A
I. DISTRIBUTION OF BENEFITS.
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(a) TIMING OF DISTRIBUTIONS.
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Distributions pursuant to Section 2(a) shall be made in 20 annual
installment payments, commencing on a date no later than 30 days after the date
of Employee's termination of employment. Distributions pursuant to Sections
2(b)(i), 2(b)(iii), and 2(b)(iv) shall be made in 20 annual installment
payments, commencing on a date no later than 30 days after the date the Employee
reaches his Normal Retirement Age. Annual installments shall be distributed on
the anniversary of the first such distribution.
(b) AMOUNT OF DISTRIBUTIONS UNDER SECTIONS 2(A), 2(B)(I) AND 2(B)(IV).
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For each installment payment made pursuant to Sections 2(a), 2(b)(i)
and 2(b)(iv), the Employee shall receive (i) an amount (payable in Shares, or
with respect to non-cash assets other than Company stock, in kind) equal to the
percentage of the Original Shares (and the stock dividends, stock splits and
other non-cash distributions deemed received on the Original Shares) as
indicated for the installment under II below, and (ii) cash in the amount of
$13,600. In the event that the amount of cash to be distributed in an
installment exceeds the current balance in the Cash Account on the date of such
distribution, then the amount of the cash distribution shall be limited to the
balance in the Cash Account on such date. In the event that the balance in the
Cash Account on the date of the last installment is greater than $13,600 then
the entire balance in the Cash Account shall be distributed with such last
installment.
Fractional Shares shall be disregarded in computing the amount of
distributions hereunder. All applicable taxes shall be withheld from
distributions under the Agreement.
(c) AMOUNT OF DISTRIBUTIONS UNDER SECTION 2(B)(III).
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For each installment payment made pursuant to Section 2(b)(iii), the
Employee shall receive (i) an amount (payable in Shares, or with respect to non-
cash assets other than Company stock, in kind)) equal to the percentage of the
Original Shares then remaining in the Stock Account, as provided in Section
2(b)(iii) (and the stock dividends, stock splits and other non-cash
distributions received on such remaining Original Shares) indicated
A-i
for the installment under II below, and (ii) cash in an amount equal to (aa)
$13,600, multiplied by (bb) the Adjustment Fraction set forth in Section
2(b)(iii). In the event that the amount of cash to be distributed in an
installment exceeds the current balance in the Cash Account on the date of such
distribution, then the amount of the cash distribution shall be limited to the
balance in the Cash Account on such date. In the event that the balance in the
Cash Account on the date of the last installment is greater than the amount of
cash determined pursuant to subclause (ii) of the preceding sentence, then the
entire balance in the Cash Account shall be distributed with such last
installment.
Fractional Shares shall be disregarded in computing the amount of
distributions hereunder. All applicable taxes shall be withheld from
distributions under the Agreement.
II. DISTRIBUTION SCHEDULE.
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PERCENTAGE OF ORIGINAL SHARES
(AND OTHER ASSETS IN STOCK ACCOUNT)
INSTALLMENT DISTRIBUTED
#1 8.5%
#2 7.9%
#3 7.3%
#4 6.8%
#5 6.3%
#6 5.9%
#7 5.6%
#8 5.3%
#9 5.0%
#10 4.7%
#11 4.4%
#12 4.2%
#13 4.0%
#14 3.9%
#15 3.7%
#16 3.6%
#17 3.4%
#18 3.3%
#19 3.2%
#20 3.0%
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Total: 100%
A-ii
