EXHIBIT 10.13
McKESSON CORPORATION
SEVERANCE POLICY FOR EXECUTIVE EMPLOYEES
(Amended and Restated as of January 1, 2005)

 

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TABLE OF CONTENTS

                    1.    
ADOPTION AND PURPOSE OF POLICY
    3       2.    
SEVERANCE BENEFITS
    3       3.    
FORM OF BENEFIT
    4       4.    
EFFECT OF DEATH OF EMPLOYEE
    4       5.    
STOCKHOLDER APPROVAL
    4       6.    
AMENDMENT AND TERMINATION
    4       7.    
ADMINISTRATION AND FIDUCIARIES
    5       8.    
CLAIMS AND APPEAL PROCEDURES
    5       9.    
ARBITRATION EXCLUSIVE REMEDY
    7       10.    
GENERAL PROVISIONS
    7       11.    
DEFINITIONS
    8       12.    
EXECUTION
    11    

 

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McKESSON CORPORATION
SEVERANCE POLICY FOR EXECUTIVE EMPLOYEES
(Amended and Restated as of January 1, 2005)
1.     ADOPTION AND PURPOSE OF POLICY.
The McKesson Corporation Severance Policy for Executive Employees (the “Policy”)
was adopted effective September 29, 1993 by McKesson Corporation, a Delaware
corporation (the “Company”), to provide a program of severance payments to
certain employees of the Company and its designated subsidiaries. The Policy is
an employee welfare benefit plan within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and
Section 2510.3-1 of the regulations issued there under. The plan administrator
of the Policy for purposes of ERISA is the Company. The Policy was last amended
and restated to read as set forth herein effective as of January 1, 2005.
2.     SEVERANCE BENEFITS.
     (a) Basic Severance Benefits. In the event that the Company terminates the
employment of a Participant under circumstances that (i) constitute a Separation
from Service for any reason other than Cause and (ii) do not make the
Participant eligible for benefits under the Company’s Change in Control
Termination Policy, that Participant shall be entitled to a severance payment
equal to the lesser of (A) 12 months’ Earnings plus one additional month for
each Year of Service or (B) 24 months’ Earnings. In no event shall the number of
months’ Earnings a Participant is entitled to receive hereunder exceed the
number of months remaining between the Participant’s termination date and the
date he or she will attain age 62 (rounded to the next higher whole month).
     (b) Mitigation of Damages. The amount of a Participant’s benefits
calculated under (a) above shall be reduced by the amount of compensation, if
any, the Participant receives from any subsequent employer(s) for work performed
during a period of time following his or her Separation from Service equal to
the number of months of Earnings the Participant is entitled to receive.
     (c) Effect on Other Plans. Except as provided in Section 3(d) below,
nothing in this Policy shall alter or impair any rights a Participant may have
upon Separation from Service under any other plan or program of the Company.
     (d) No Duplication of Benefits. In no event shall a Participant be entitled
to any benefits under this Policy if his or her employment with the Company
terminates under circumstances that entitle the Participant to receive severance
benefits following a change of control of the Company pursuant to the Company’s
Change in Control Policy or the terms of any employment or individual severance
agreement.

 

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3.      FORM OF BENEFIT.
The benefit described in Section 2(a) shall be paid in biweekly installments
over a period commencing on the date of the Participant’s Separation from
Service not to exceed the number of months determined under said Section;
provided, however, that if the Participant is a Key Employee on the date of his
or her Separation from Service, the first payment shall be made as soon as
practicable following the first day of the eighth month following the
Participant’s Separation from Service, but not later than the last day of the
month. Any payment that otherwise would have been made during such eight-month
period if the Participant were not a Key Employee will be made in one lump sum
payment not later than the last day of the second month following the month that
is six months from the date of the Participant’s Separation from Service, and
such payment shall include an additional amount representing interest credited
at the rate being credited to accounts under the Company’s Deferred Compensation
Administration Plan III during the relevant six-month period. The determination
of which Participants are Key Employees will be made by the Company in its sole
discretion in accordance with this Section 3 and Sections 416(i) and 409A of the
Code and the regulations promulgated thereunder.
4.      EFFECT OF DEATH OF EMPLOYEE.
Should a Participant die after Separation from Service and after becoming
eligible to receive the benefits provided in Section 2(a) but prior to the
payment of the entire benefit due hereunder, the balance of the benefit payable
under the Policy shall be paid in a lump sum to the Participant’s surviving
spouse, or, if none, to his or her surviving children or, if none, to his or her
estate, as soon as reasonably practicable after the date of death.
5.      STOCKHOLDER APPROVAL.
The Company shall seek approval or ratification of its stockholders at the
Company’s next annual or special meeting of stockholders for any arrangement
whereby the present value of any Severance Payments for any Participant exceeds
2.99 times such Participant’s Base Salary and Bonus. This provision will apply
to any arrangement or agreement with a Participant entered into after July 30,
2003, including extensions, renewals or modifications (other than modifications
based upon subsequent changes in tax law or other legal requirements) after such
date of arrangements or agreements entered into prior to such date that increase
the Severance Payments (other than increases due to an increase in Base Salary
and Bonus) payable to a Participant under such arrangement or agreement.
6.       AMENDMENT AND TERMINATION.
The Company reserves the right to terminate the Policy at any time by action of
its Board of Directors and to amend the Policy by action of the Compensation
Committee of its Board of Directors; provided, however, that no such action
shall have the effect of decreasing the benefit of a Participant whose
Separation from Service occurred prior to the date of the Board of Directors’ or
Compensation Committee’s action.

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7.      ADMINISTRATION AND FIDUCIARIES.
     (a) Plan Sponsor and Administrator. The Company is the “plan sponsor” and
the “administrator” of the Policy, within the meaning of ERISA.
     (b) Administrative Responsibilities. The Company shall be the named
fiduciary with the power and sole discretion to determine who is eligible for
benefits under the Policy, to determine the value of benefits paid in any form
other than cash or the present value of any cash or other benefits paid over
time, to interpret the Policy and to prescribe such forms, make such rules,
regulations and computations and prescribe such guidelines as it may determine
are necessary or appropriate for the operation and administration of the Policy
and to change the terms of or rescind such rules, regulations or guidelines.
Such determinations of eligibility, rules, regulations, interpretations,
computations and guidelines shall be conclusive and binding upon all persons. In
administering the Policy, the Company shall at all times discharge its duties
with respect to the Policy in accordance with the standards set forth in section
404(a)(1) of ERISA.
     (c) Allocation and Delegation of Responsibilities. The Compensation
Committee may allocate any of the Company’s responsibilities for the operation
and administration of the Policy among the Company’s officers, employees and
agents. It may also delegate any of the Company’s responsibilities under the
Policy by designating, in writing, another person to carry out such
responsibilities.
     (d) No Individual Liability. It is declared to be the express purpose and
intent of the Company that no individual liability shall attach to or be
incurred by any member of the Board of Directors of the Company, or by any
officer, employee representative or agent of the Company, under, or by reason of
the operation of, the Policy.
8.       CLAIMS AND APPEAL PROCEDURES
     (a) Informal Resolution of Questions. Any Participant who has questions or
concerns about his or her benefits under the Plan is encouraged to communicate
with the Human Resources Department of the Company. If this discussion does not
give the Participant satisfactory results, a formal claim for benefits may be
made in accordance with the procedures of this Section 8.
     (b) Formal Benefits Claim – Review by Executive Vice President, Human
Resources. A Participant may make a written request for review of any matter
concerning his or her benefits under this Plan. The claim must be addressed to
the Executive Vice President, Human Resources, McKesson Corporation, One Post
Street, San Francisco, California 94104. The Executive Vice President, Human
Resources or his or her delegate (“Executive Vice President”) shall decide the
action to be taken with respect to any such request and may require additional
information if necessary to process the request. The Executive Vice President
shall review the request and shall issue his or her decision, in writing, no
later than 90 days after the date the request is received, unless the
circumstances require an extension of time. If such an extension is required,
written notice of the extension shall be furnished to the person making the
request within the initial 90-day period, and the notice shall state the
circumstances requiring the

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extension and the date by which the Executive Vice President expects to reach a
decision on the request. In no event shall the extension exceed a period of
90 days from the end of the initial period.
     (c) Notice of Denied Request. If the Executive Vice President denies a
request in whole or in part, he or she shall provide the person making the
request with written notice of the denial within the period specified in
Section 8(b). The notice shall set forth the specific reason for the denial,
reference to the specific Plan provisions upon which the denial is based, a
description of any additional material or information necessary to perfect the
request, an explanation of why such information is required, and an explanation
of the Plan’s appeal procedures and the time limits applicable to such
procedures, including a statement of the claimant’s right to bring a civil
action under Section 502(a) of ERISA following an adverse benefit determination
on review.
     (d) Appeal to Executive Vice President.
          (i) A person whose request has been denied in whole or in part (or
such person’s authorized representative) may file an appeal of the decision in
writing with the Executive Vice President within 60 days of receipt of the
notification of denial. The appeal must be addressed to: Executive Vice
President, Human Resources, McKesson Corporation, One Post Street, San
Francisco, California 94104. The Executive Vice President, for good cause shown,
may extend the period during which the appeal may be filed for another 60 days.
The appellant and/or his or her authorized representative shall be permitted to
submit written comments, documents, records and other information relating to
the claim for benefits. Upon request and free of charge, the applicant should be
provided reasonable access to and copies of, all documents, records or other
information relevant to the appellant’s claim.
          (ii) The Executive Vice President’s review shall take into account all
comments, documents, records and other information submitted by the appellant
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination. The Executive Vice President
shall not be restricted in his or her review to those provisions of the Plan
cited in the original denial of the claim.
          (iii) The Executive Vice President shall issue a written decision
within a reasonable period of time but not later than 60 days after receipt of
the appeal, unless special circumstances require an extension of time for
processing, in which case the written decision shall be issued as soon as
possible, but not later than 120 days after receipt of an appeal. If such an
extension is required, written notice shall be furnished to the appellant within
the initial 60-day period. This notice shall state the circumstances requiring
the extension and the date by which the Executive Vice President expects to
reach a decision on the appeal.
          (iv) If the decision on the appeal denies the claim in whole or in
part written notice shall be furnished to the appellant. Such notice shall state
the reason(s) for the denial, including references to specific Plan provisions
upon which the denial was based. The notice shall state that the appellant is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records, and other information relevant to the claim
for benefits. The notice shall describe any voluntary appeal procedures offered
by the Plan and the

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appellant’s right to obtain the information about such procedures. The notice
shall also include a statement of the appellant’s right to bring an action under
Section 502(a) of ERISA.
          (v) The decision of the Executive Vice President on the appeal shall
be final, conclusive and binding upon all persons and shall be given the maximum
possible deference allowed by law.
     (e) Exhaustion of Remedies. No legal or equitable action for benefits under
the Plan shall be brought unless and until the claimant has submitted a written
claim for benefits in accordance with Section 8(b), has been notified that the
claim is denied in accordance with Section 8(c), has filed a written request for
a review of the claim in accordance with Section 8(d), and has been notified in
writing that the Executive Vice President has affirmed the denial of the claim
in accordance with Section 8(d).
9.     ARBITRATION EXCLUSIVE REMEDY.
     Any dispute, controversy or claim arising under the Policy, shall be
settled exclusively by final and binding arbitration in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association (the “AAA Rules”). A neutral and impartial arbitrator
shall be chosen by mutual agreement of the parties or, if the parties are unable
to agree upon an arbitrator within a reasonable period of time, then a neutral
and impartial arbitrator shall be appointed in accordance with the arbitrator
nomination and selection procedure set forth in the AAA Rules. The arbitrator
shall apply the same substantive law, with the same statures of limitations and
remedies, that would apply if the claims were brought in court. The arbitrator
also shall prepare a written decision containing the essential findings and
conclusions upon which the decision containing the essential findings and
conclusions upon which the decision is based. Either party may bring an action
in court to compel arbitration under this Agreement or to enforce an arbitration
award. Otherwise, neither party shall initiate or prosecute any lawsuit in any
way related to any claim subject to this agreement to arbitrate. Any arbitration
held pursuant to this paragraph shall take place in San Francisco, California.
Each party shall pay its own costs and attorneys’ fees, unless a party prevails
on a statutory claim and the statute provides that the prevailing party is
entitled to payment of its attorneys’ fees. In that case, the arbitrator may
award reasonable attorneys’ fees and costs to the prevailing party as provided
by law. The Company agrees to pay the costs and fees of the arbitrator. THE
PARTICIPANTS UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF
THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS
AGREEMENT.
10.     GENERAL PROVISIONS.
     (a) Basis of Payments to and from Policy. All benefits under the Policy
shall be paid by the Company. The Policy shall be unfunded and benefits
hereunder shall be paid only from the general assets of the Company. Nothing
contained in the Policy shall be deemed to create a trust of any kind for the
benefit of any employee, or create any fiduciary relationship between the
Company and any employee with respect to any assets of the Company. The Company
is under no obligation to fund the benefits provided herein prior to payment,
although it may do so if it

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chooses. Any assets which the Company chooses to use for advance funding shall
not cause the Policy to be a funded plan within the meaning of ERISA.
     (b) No Employment Rights. Nothing in the Policy shall be deemed to give any
individual the right to remain in the employ of the Company or a subsidiary or
to limit in any way the right of the Company or a subsidiary to discharge,
demote, reclassify, transfer, relocate an individual or terminate an
individual’s employment at any time and for any reason, which right is hereby
reserved.
     (c) Non-alienation of Benefits. No benefit payable under the Policy shall
be subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do shall be void.
     (d) Legal Construction. The Policy shall be governed and interpreted in
accordance with ERISA.
     (e) Section 409A. Notwithstanding any other provision of this Policy, the
Company shall administer and construe this Policy in accordance with
Section 409A of the Code, the regulations promulgated thereunder, and any other
published interpretive authority, as issued or amended from time to time. The
Company shall have the authority to delay the payment of any amounts under this
Policy to the extent it deems necessary or appropriate to comply with
Section 409A of the Code.
11.     DEFINITIONS.
Whenever used and capitalized in the text of the Policy, the following terms
shall have the meaning set forth below:
     (a) “Base Salary and Bonus” means the Participant’s annual base salary as
in effect immediately prior to the date of such Participant’s termination and
the target bonus for such Participant for the fiscal year in which such
Participant’s Separation from Service occurs, in each case inclusive of any
amounts deferred by the intended recipient.
     (b) “Cause” means negligent or willful engagement in misconduct which, in
the sole determination of the Chief Executive Officer, is injurious to the
Company, its employees or its customers. No act, or failure to act, on the part
of the Participant shall be considered “willful” unless done, or omitted to be
done, by the Participant not in good faith and without reasonable belief that
the Participant’s action or omission was in the best interest of the Company.
     (c) “Change in Control” shall mean the occurrence of any change in
ownership of the Company, change in effective control of the Company, or change
in the ownership of a substantial portion of the assets of the Company, as
defined in Section 409A(a)(2)(A)(v) of the Code, the regulations thereunder, and
any other published interpretive authority, as issued or amended from time to
time.
     (d) “Code” means the Internal Revenue Code of 1986, as amended.
     (e) “Earnings” means a Participant’s monthly base salary.

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     (f) “Identification Date” means each December 31.
     (g) “Key Employee” means a Participant who, on an Identification Date, is:
          (i) An officer of the Company having annual compensation greater than
the compensation limit in Section 416(i)(1)(A)(i) of the Code, provided that no
more than fifty officers of the Company shall be determined to be Key Employees
as of any Identification Date;
          (ii) A five percent owner of the Company; or
          (iii) A one percent owner of the Company having annual compensation
from the Corporation of more than $150,000.
If a Participant is identified as a Key Employee on an Identification Date, then
such Participant shall be considered a Key Employee for purposes of the Plan
during the period beginning on the first April 1 following the Identification
Date and ending on the next March 31.
     (h) “Participant” means (i) an individual who is designated to be eligible
to participate in the Policy by the Compensation Committee of the Board of
Directors of the Company and (ii) whose employment is terminated under
circumstances that render him or her eligible for the benefits described in
Section 2 of the Policy.
     (i) “Severance Payments” means (i) lump-sum cash payments (including
payments in lieu of medical and other benefits), (ii) the estimated present
value of periodic cash payments under previously established bonus, retirement,
deferred compensation, or other Company benefit plans, (iii) fringe benefits
other than those provided under Company programs or arrangements applicable to
one or more groups of employees in addition to Participants, and (iv) consulting
fees (including reimbursable expenses) other than reasonable fees and expenses
for bona fide services provided to the Company after termination, paid or
payable by the Company to a Participant pursuant to this Policy or otherwise
upon a termination by the Company of employment of such Participant at any time
other than within two years following a Change in Control, excluding Vested,
Accrued or Appropriate Benefits.

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     (j) “Separate from Service” or “Separation from Service” means termination
of employment with the Company, other than by reason of Disability or death. A
Participant shall not be deemed to have Separated from Service if the
Participant continues to provide services to the Company in a capacity other
than as an employee and if the former employee is providing services at an
annual rate that is fifty percent or more of the services rendered, on average,
during the immediately preceding three full calendar years of employment with
the Company (or if employed by the Company less than three years, such lesser
period) and the annual remuneration for such services is fifty percent or more
of the annual remuneration earned during the final three full calendar years of
employment (of if less, such lesser period); provided, however, that a
Separation from Service will be deemed to have occurred if a Participant’s
service with the Company is reduced to an annual rate that is less than twenty
percent of the services rendered, on average, during the immediately preceding
three full calendar years of employment with the Company (or if employed by the
Company less than three years, such lesser period) or the annual remuneration
for such services is less than twenty percent of the annual remuneration earned
during the three full calendar years of employment with the Company (or if less,
such lesser period).
     (k) “Vested, Accrued or Appropriate Benefits” means any benefits paid or
payable by the Company to a Participant upon a termination by the Company of
employment of such Participant at any time other than within two years following
a Change in Control that are (i) earned, accrued, deferred or otherwise received
for employment services rendered through the date of Separation from Service
pursuant to bonus, retirement, deferred compensation, or other Company benefit
plans, (ii) approved under the terms of bonus, retirement, deferred
compensation, or other Company benefit plans existing at the time of such
termination at the reasonable discretion of the Compensation Committee taking
into consideration the age, length of service and other circumstances of such
termination, (iii) payments or benefits required to be provided by law, and
(iv) benefits and perquisites provided by the Company under plans, programs or
arrangements of the Company applicable to one or more groups of employees in
addition to Participants. For the avoidance of doubt, Vested, Accrued or
Appropriate Benefits shall not include benefits payable pursuant to this Policy.
     (l) “Year of Service” means a period of 365 aggregate days of employment
(including holidays, weekends and other non-working days), computed beginning on
the Participant’s employment commencement date. However, if the Participant has
not completed a Year of Service on the first anniversary of his employment
commencement date, he or she shall complete a Year of Service on the date of
completion of 365 aggregate days of Service. If a Participant has at any time
completed at least one Year of Service, he or she shall always be given credit
for completed Years of Service. However, a Participant who has five or more
consecutive Breaks in Service shall be given such credit only upon providing
reasonable evidence to the Company of his or her previous completion of such
service.

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12.      EXECUTION
This Amended and Restated Severance Policy for Executive Employees was adopted
on October 27, 2006, to be effective as of January 1, 2005.
McKESSON CORPORATION

         
By:
       
 
 
 
Paul E. Kirincic    
 
  Executive Vice President, Human Resources    

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