Exhibit 10.30
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
     This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), effective
as of November 1, 2006 (the “Effective Date”), by and between McKesson
Corporation (the “Company”), a Delaware corporation with its principal office at
One Post Street, San Francisco, California, and John H. Hammergren
(“Executive”).
RECITALS
     A. WHEREAS, Executive and the Company have previously entered into that
certain Extended Employment Agreement dated as of April 1, 2004 (the “Prior
Employment Agreement”);
     B. WHEREAS, Executive and the Company wish to amend and restate the terms
of Executive’s employment with the Company, as set forth herein;
     C. WHEREAS, the Company, in its business, develops and uses certain
Confidential Information (as defined in Paragraph 6(c) below). Such Confidential
Information will necessarily be communicated to or acquired by Executive by
virtue of his employment with the Company, and the Company has spent time,
effort and money to develop such Confidential Information and to promote and
increase its goodwill; and
     D. WHEREAS, the Company desires to retain the services of, and employ,
Executive on its own behalf and on behalf of its affiliated companies for the
period provided in this Agreement and, in so doing, to protect its Confidential
Information and goodwill, and Executive is willing to accept employment by the
Company on a full-time basis for such period, upon the terms and conditions
hereinafter set forth.
     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereto agree as follows:

  1.   Employment. Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive, and Executive agrees to accept employment
from, and remain in the employ of, the Company for the period stated in
Paragraph 3 hereof.     2.   Position and Responsibilities. During the period of
his employment hereunder, Executive agrees to serve the Company, and the Company
shall employ Executive, as President and Chief Executive Officer of the Company
and in such other senior corporate executive capacities consistent with such
position as may be specified from time to time by the Board of Directors of the
Company (the “Board”). During the period of his employment hereunder, Executive
shall report directly to the Board. Executive also presently serves as Chairman
of the Board of Directors of the Company (“Chairman”).

1

--------------------------------------------------------------------------------

 

  3.   Term and Duties.

  (a)   Term of Employment. The period of Executive’s employment under this
Agreement shall be deemed to have commenced on the date of this Agreement and
shall continue until the third anniversary of the Effective Date, unless
terminated earlier in accordance with Paragraph 7 below; provided, however, that
this Agreement shall renew automatically, such that the remaining term of this
Agreement is always three (3) years, unless terminated earlier in accordance
with Paragraph 7 below (the “Term”).     (b)   Duties. During the period of his
employment hereunder and except for illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all of his
business time, attention, skill and efforts to the business and affairs of the
Company and its affiliated companies, as such business and affairs now exist and
as they may be hereafter changed or added to, under and pursuant to the general
direction of the Board; provided, however, that, (i) with the approval of the
Board (which will not be unreasonably withheld or delayed), Executive may serve,
or continue to serve, on the boards of directors of, hold any other offices or
positions in, for profit companies or organizations, which, in the Board’s
judgment, will not present any conflict of interest with the Company or any of
its subsidiaries or affiliates or divisions, or materially affect the
performance of Executive’s duties pursuant to this Agreement and (ii) Executive
may devote a portion of his time to the management of his personal affairs or
involvement in charitable activities, which activities shall not materially
affect the performance of Executive’s duties pursuant to this Agreement. The
services which are to be employed by Executive hereunder are to be rendered in
the State of California, or in such other place or places in the United States
or elsewhere as may be determined from time to time by the Board, but are to be
rendered primarily at the Company’s principal place of business at One Post
Street in San Francisco, California. Unless and until otherwise mutually agreed
to between the Company and Executive, Executive shall be at liberty to maintain
his residence in the San Francisco Bay Area, State of California.

  4.   Compensation and Reimbursement of Expenses; Other Benefits.

  (a)   Compensation. During the period of his employment hereunder, Executive
shall be paid a salary, in monthly or semi-monthly installments (in accordance
with the Company’s normal payroll practices for senior executive officers), at
the rate of One Million Three Hundred Seventy-Eight Thousand Two Hundred and
Fifty-Five Dollars ($1,378.255) per year, (or such higher salary as may be from
time to time approved by the Board (or any duly authorized Committee thereof),
any such higher salary so approved to be thereafter the minimum salary payable
to Executive during the remainder of the Term hereof), plus such additional
incentive compensation, if any, as may be awarded to him

2

--------------------------------------------------------------------------------

 

      yearly by the Board (or any duly authorized Committee thereof). For
purposes of the MIP (as defined in subparagraph (c) below), for each of the
Company’s fiscal years ending during the Term of this Agreement, Executive’s
Individual Target Award shall be no less than One Hundred and Thirty-Five
Percent (135%) of his base salary for the applicable Year (as defined in the
MIP).

  (b)   Reimbursement of Expenses. The Company shall pay or reimburse Executive,
in accordance with its normal policies and practices, for all reasonable travel
and other expenses incurred by Executive in performing his obligations
hereunder. The Company further agrees to furnish Executive with such assistance
and accommodations as shall be suitable to the character of Executive’s position
with the Company and adequate for the performance of his duties hereunder.    
(c)   Other Benefits. During the period of his employment hereunder, Executive
shall be entitled to receive all other benefits of employment generally
available to other members of the Company’s management and those benefits for
which key executives are or shall become eligible, when and as he becomes
eligible therefor, including without limitation, group health and life insurance
benefits, short and long-term disability plans, deferred compensation plans, and
participation in the Company’s Profit-Sharing Investment Plan, Employee Stock
Purchase Plan, Executive Medical Plan, Management Incentive Plan (“MIP”), Long
Term Incentive Plan, Executive Benefit Retirement Plan (“EBRP”), Executive
Survivor Benefits Plan (“ESBP”), Stock Purchase Plan and 1994 Stock Option and
Restricted Stock Plan (or any other similar plan or arrangement), and the
Company agrees that none of such benefits shall be altered in any manner or in
such a way as to reduce any then existing entitlement of Executive thereunder or
any entitlement provided for hereunder. For purposes of the EBRP, beginning with
Fiscal Year 2006, Executive’s “Average Final Compensation” shall mean one-fifth
of the sum of (x) the base salary and (y) one hundred and fifty percent (150%)
of the annual bonuses under the MIP or any successor or replacement plans
(including base salary and annual MIP bonuses or portions thereof voluntarily
deferred under a cash or deferred plan or any other tax qualified or
non-qualified salary deferral plan) in each case earned by Executive for the
five consecutive years of full-time continuous employment with the Company which
(a) fall within the 15-year period ending on the first day of the month
following Executive’s Separation from Service with the Company and (b) produce
the highest such sum. To the extent specific provisions of this Agreement that
relate to other plans or arrangements of the Company are more favorable than the
terms and conditions set forth in such other plan or arrangement of the Company,
the provisions of this Agreement shall control. Additionally, to the extent any
other plan or arrangement of the Company contains provisions regarding
noncompetition, unauthorized use of confidential information, or
nonsolicitation, such provisions shall not be

3

--------------------------------------------------------------------------------

 

      deemed to have been violated by Executive except to the extent his
activities would also constitute a violation of similar provisions contained
herein.

  5.   Benefits Payable Upon Disability or Death.

  (a)   Disability Benefits. If, during the term of Executive’s employment
hereunder, Executive shall be prevented from properly performing services
hereunder by reason of his illness or other physical or mental incapacity, the
Company shall continue to pay Executive his then current salary hereunder during
the period of such disability; or, if less, for a period of (12) calendar
months, at which time the Company’s obligations hereunder (other than as
provided herein) shall cease and terminate. Following the expiration of such
12-month period, Executive shall be eligible to receive his benefits pursuant to
the EBRP calculated at the percentage in effect at the time of the disability as
described in Paragraph 8(b)(i)(E) herein, subject to a maximum level of
seventy-five percent (75%), of Average Final Compensation (as defined in
Paragraph 4(c) above) without regard to any reduction for early retirement;
provided that the lump-sum payment for this Approved Retirement shall never be
less than the lump-sum payment that would have been provided under Executive’s
Prior Employment Agreement for an Approved Retirement under EBRP on April 1,
2004 (the “Minimum Lump-Sum Payment”).     (b)   Death Benefits. In the event of
the death of Executive during the term of his employment hereunder,
(i) Executive’s salary payable hereunder shall continue to be paid to
Executive’s surviving spouse, or if there is no spouse surviving, then to
Executive’s designee or representative (as the case may be) through the
six-month period following the end of the calendar month in which Executive’s
death occurs and (ii) the benefits payable under the EBRP, subject to the
Minimum Lump-Sum Payment described in Paragraph 5(a) above, calculated at the
percentage in effect at the time of his death as described in
Paragraph 8(b)(i)(E) herein, subject to a maximum level of seventy-five percent
(75%), of Average Final Compensation (as defined in Paragraph 4(c) above) shall
be payable without regard to any reduction for early retirement. Thereafter, all
of the Company’s obligations hereunder (other than as provided herein) shall
cease and terminate.     (c)   Other Plans. Except as specifically provided
herein, the provisions of this Paragraph 5 shall not affect (i) any rights of
Executive’s heirs, administrators, executors, legatees, beneficiaries or assigns
under the Company’s Profit-Sharing Investment Plan, EBRP, Long Term Incentive
Plan, ESBP, 1994 Stock Option and Restricted Stock Plan (or any similar plan or
arrangement), any stock purchase plan or any other employee benefit plan of the
Company, and any such rights shall be governed by the terms of the respective
plans, or (ii) any rights that exist with respect to

4

--------------------------------------------------------------------------------

 

      indemnification or directors and officers insurance or any other rights
hereunder which are intended to continue after a termination of employment.

  6.   Obligations of Executive During and After Employment.

  (a)   Noncompetition. Executive agrees that during the Term of his employment
hereunder, he will engage in no other business activities, directly or
indirectly, which are or may be competitive with or which might place him in a
competing position to that of the Company; or any affiliated company, without
the prior written consent of the Board. Without any inference as to any other
activity, the foregoing shall not limit ownership by Executive of (i) less than
one percent (1%) of the common stock or public debt of any publicly traded
entity; (ii) less than five percent (5%) in any investment pool, hedge fund,
private equity fund or other similar vehicle in which Executive has no control
over the investments that are made by such investment pool, hedge fund, private
equity fund or other similar vehicle; or (iii) the amount of stock or other
interests Executive holds as of the Effective Date of this Agreement in the
entities listed on Schedule 6(a) hereof, provided that Executive is not actively
engaged in the management of such entities.     (b)   Unauthorized Use of
Confidential Information. Executive acknowledges and agrees that (i) during the
course of his employment Executive will have produced and/or have access to
Confidential Information, of the Company and its affiliated companies, and
(ii) the unauthorized use or sale of any of such confidential or proprietary
information at any time would harm the Company and would constitute unfair
competition with the Company. Executive promises and agrees not to engage in any
unfair competition with the Company by reason of Executive’s use of Confidential
Information either during or after the Term of his employment hereunder.
Therefore, during and subsequent to his employment by the Company and its
affiliated companies, Executive agrees to hold in confidence and not, directly
or indirectly, disclose, use, copy or make lists of any such information, except
(x) pursuant to his duties hereunder during his employment by the Company,
(y) to the extent expressly authorized by the Company in writing or as required
by law or (z) to comply with a legal process, provided Executive promptly
notifies the Company in order that the Company, at its expense, may seek a
protective order and Executive cooperates with the Company in seeking such
order. All records, files, drawings, documents, equipment, and the like, or
copies thereof, relating to the Company’s business, or the business of any of
its affiliated companies, which Executive shall prepare, use, or come into
contact with, shall be and remain the sole property of the Company, and shall
not be removed (except to allow Executive to perform his responsibilities
hereunder while traveling for business purposes or otherwise working away from
his office) from the Company’s or the

5

--------------------------------------------------------------------------------

 

      affiliated company’s premises without its prior written consent, and shall
be promptly returned to the Company upon termination of employment with the
Company and its affiliated companies. This Paragraph 6(b) shall survive the
termination or expiration of the term of Executive’s employment hereunder.

  (c)   Confidential Information Defined. For purposes of this Agreement,
“Confidential Information” means all information (whether reduced to written,
electronic, magnetic or other tangible form) acquired in any way by Executive
during the course of his employment with the Company or any of its affiliated
companies concerning the products, projects, activities, business or affairs of
the Company and its affiliated companies or the Company’s or any of its
affiliated companies’ customers, including, without limitation, (i) all
information concerning trade secrets of the Company and its affiliated
companies, including computer programs, system documentation, special hardware,
product hardware, related software development, manuals, formulae, processes,
methods, machines, compositions, ideas, improvements or inventions of the
Company and its affiliated companies, (ii) all sales and financial information
concerning the Company and its affiliated companies, (iii) all customer and
supplier lists of the Company and its affiliated companies, (iv) all information
concerning products or projects under development of the Company and its
affiliated companies or marketing plans for any of those products or projects,
and (v) all information in any way concerning the products, projects,
activities, business or affairs of customers of the Company and its affiliated
companies which was furnished to him by the Company or any of its agents or
customers; provided, however, that Confidential Information does not include
information which (A) becomes available to the public or the industry in which
the Company operates other than as a result of a disclosure by Executive (other
than in the normal course of Executive’s duties hereunder), (B) was available to
him on a nonconfidential basis outside of his employment with the Company, or
(C) becomes available to him on a non-confidential basis from a source that
Executive believes in good faith is not under an obligation of confidentiality
to the Company.     (d)   Nonsolicitation. Executive recognizes and acknowledges
that it is essential for the proper protection of the business of the Company
and its affiliated companies that Executive be restrained for a reasonable
period following the termination of Executive’s employment with the Company and
its affiliated companies from: (i) soliciting or inducing any employee of the
Company or any of its affiliated companies to leave the employ of the Company or
any of its affiliated companies; or (ii) hiring or attempting to hire any
employee of the Company or any of its affiliated companies. Accordingly,
Executive agrees that during the Term of his employment hereunder, and for the
Restricted Period thereafter following the termination of Executive’s employment
with the Company and its

6

--------------------------------------------------------------------------------

 

      affiliated companies for any reason, Executive shall not, directly or
indirectly, hire, solicit, aid in or encourage the hiring and/or solicitation
of, contract with, aid in or encourage the contracting with, or induce or
encourage to leave the employment of the Company or any of its affiliated
companies, any employee of the Company or any of its affiliated companies.
Notwithstanding the foregoing, nothing in this Paragraph 6(d) shall prohibit
Executive from providing references on an unsolicited basis with respect to
employees of the Company. For purposes of this Paragraph 6(d), the “Restricted
Period” shall be deemed to be equal to the longer of (i) two (2) years following
the termination of Executive’s employment for any reason, or (ii) the period
during which Executive is receiving salary continuation payments hereunder. This
Paragraph 6(d) shall survive the termination or expiration of this Agreement.

  (e)   Nonsolicitation of Customers. Executive recognizes and acknowledges that
it is essential for the proper protection of the business of the Company and its
affiliated companies that Executive be restrained for a reasonable period
following the termination of Executive’s employment with the Company and its
affiliated companies from directly and personally soliciting the trade of or
trading with the customers of the Company or any of its affiliated companies for
any competitive business purpose. Accordingly, Executive agrees that during the
Term of his employment hereunder, and for the Restricted Period thereafter
following the termination of Executive’s employment with the Company and its
affiliated companies for any reason, Executive shall not directly and personally
solicit, or use Confidential Information to aid in the solicitation of, contract
with, or service any person or entity which is, or was, within two (2) years
prior to the termination of Executive’s employment with the Company and its
affiliated companies, a customer or client of the Company or any of its
affiliated companies for the purpose of offering or selling a product or service
competitive with any of those offered by the Company or any of its affiliated
companies. For purposes of this Paragraph 6(e), the “Restricted Period” shall be
deemed to be equal to the longer of (i) two (2) years following the termination
of Executive’s employment for any reason, or (ii) the period during which
Executive is receiving salary continuation payments hereunder. This Paragraph
6(e) shall survive the termination or expiration of this Agreement     (f)  
Remedy for Breach. Executive agrees that in the event of a breach or threatened
breach of any of the covenants contained in this Paragraph 6, the Company shall
have the right and remedy to have such covenants specifically enforced by any
court having jurisdiction, it being acknowledged and agreed that any material
breach of any of the covenants will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company.

7

--------------------------------------------------------------------------------

 

  (g)   Mutual Dependence. Executive understands and agrees that his full
compliance with the provisions of this Section 6 is an express condition for and
mutually dependent upon the obligations of the Company to pay Executive his
compensation and benefits, including severance pay, during the remainder of the
Term. Executive further understands and agrees that in the event that any of the
provisions of this Section 6 are rendered void, invalid, illegal or otherwise
unenforceable, in whole or in substantial part, as a result of actions not
initiated by the Company or its agent, the Company’s obligations to pay
Executive his Base Salary, bonus or any other compensation and benefits,
including severance pay, may be terminated immediately.

  7.   Termination.

  (i)   For Cause. Notwithstanding anything herein to the contrary, the Company
may, without liability, terminate Executive’s employment hereunder for Cause (as
defined below) at any time within ninety (90) days of the date the Board of
Directors, or of any Committee thereof, first has knowledge of the event
justifying such termination by delivery of a Notice of Termination (as defined
in subparagraph (d) below) from the Board (or any duly authorized Committee
thereof) specifying such Cause, and thereafter, the Company’s obligations
hereunder shall cease and terminate.     (ii)   Definition of Cause. Except as
provided in Paragraph 8(c)(iii) below, as used herein, the term “Cause” shall
mean (i) Executive’s willful engaging in misconduct with regard to the Company
or any of its affiliated companies which is demonstrably and materially
injurious to the Company and its affiliated companies taken as a whole,
(ii) Executive’s willful dishonesty of a material nature involving the Company’s
or any of its affiliated companies’ assets, or (iii) a material failure by
Executive to comply with any of the provisions of this Agreement. No act, or
failure to act, on Executive’s part shall be considered “willful” unless done,
or omitted to be done, by Executive not in good faith and without reasonable
belief that Executive’s action or omission was in the best interest of the
Company or its subsidiaries. Notwithstanding the foregoing, Executive shall not
be deemed to have been terminated for Cause pursuant to this Paragraph 7(a)
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three quarters
of the entire membership of the Board at a meeting of the Board called and held
for the purpose of making a determination of whether Cause for termination
exists (after reasonable notice to Executive and an opportunity for Executive to
be heard before the Board), finding that in the good faith opinion

8

--------------------------------------------------------------------------------

 

      of the Board, Executive was guilty of misconduct as set forth above in
this subparagraph 7(a)(i) and specifying the particulars thereof in detail. In
addition, if the conduct alleged to have constituted Cause is curable (as
determined by the Board), the Notice of Termination shall not be delivered until
after the Board (or any duly authorized Committee thereof) shall have given
Executive written notice specifying the conduct alleged to have constituted such
Cause and Executive has failed to cure such conduct, within fifteen (15) days
following receipt of such notice.

  (iii)   Arbitration Required to Confirm Cause. In the event of a termination
for Cause pursuant to this Paragraph 7(a) or pursuant to subparagraph 8(c)(iii),
the Company shall continue to pay Executive’s then current compensation as
specified in this Agreement until the issuance of an arbitration award affirming
the Company’s action. Such arbitration shall be held in accordance with the
provisions of Paragraph 10(c) below. In the event the award upholds the action
of the Company, Executive shall promptly repay to the Company any sums received
pursuant to Paragraph 8 below, following termination of employment.

  (b)   Other than for Cause, Performance, Reorganization; Any Reason or
Reasons. Notwithstanding anything herein to the contrary, the Company may also
terminate Executive’s employment (without regard to any general or specific
policies of the Company relating to the employment or termination of its
employees) (i) should Executive fail to perform his duties hereunder in a manner
satisfactory to the Board, provided that Executive shall first be given written
notice of such unsatisfactory performance and a period of ninety (90) days to
improve such performance to a level deemed acceptable to the Board, (ii) should
Executive’s position be eliminated as a result of a reorganization or
restructuring of the Company or any of its affiliated companies or (iii) for any
other reason or reasons.     (c)   Termination by Executive. Executive may
terminate his employment hereunder with or without Good Reason by delivery of a
Notice of Termination to the Company, provided that any such Notice of
Termination for Good Reason shall be given within ninety (90) days after the
occurrence of the event giving rise to Good Reason, which notice shall specify
the act, or failure to act, alleged to give rise to Good Reason hereunder and
shall otherwise comply with the provisions of subparagraph (d) below. If
Executive gives the Company such Notice of Termination, the Company shall have
fifteen (15) days after receipt of such notice to remedy the facts and
circumstances that allegedly gave rise to Good Reason. In the event Executive
does not provide a Notice of Termination to the Company of termination for Good
Reason, such termination shall be deemed a voluntary resignation by Executive.

9

--------------------------------------------------------------------------------

 

  (i)   Definition of Good Reason. As used herein, the term “Good Reason” shall
mean any of the following acts or failures to act, if taken without the express
written consent of Executive, (A) any material change by the Company in
Executive’s functions, duties or responsibilities as President and Chief
Executive Officer, which change would cause Executive’s position with the
Company to become of less dignity, responsibility, importance, or scope as
compared to the position and attributes that applied to Executive as of the
Effective Date, or an adverse change in Executive’s title, position or his
obligation and right to report directly to the Board, provided, however that
“Good Reason shall not be deemed to exist if Executive ceases to serve as
Chairman; (B) any reduction in Executive’s base annual salary, MIP target or
Long Term Incentive compensation (LTI) targets, which LTI targets include cash
awards with performance periods greater than one year and equity based grants,
except for reductions that are equivalent to reductions applicable to executive
officers of the Company; (C) any material failure by the Company to comply with
any of the provisions of the Agreement; (D) the Company’s requiring Executive to
be based at any office or location more than 25 miles from the office at which
Executive is based as of the Effective Date, except for travel reasonably
required in the performance of Executive’s responsibilities; (E) any failure by
the Company to obtain the express assumption of the Agreement by any successor
or assign of the Company; (F) cancellation of the automatic renewal mechanism
set forth in Paragraph 3(a) above; (G) if the Board removes Executive as
Chairman at or after a Change in Control (or prior to a Change in Control if at
the request of any third party participating in or causing the Change in
Control), unless such removal is required by then-applicable law; or (H) a
change in the majority of the members of the Company’s Board of Directors as it
was construed immediately prior to the change in control. Executive’s right to
terminate employment for Good Reason pursuant to this Paragraph 7 shall not be
affected by Executive’s incapacity due to physical or mental illness.

  (d)   Notice of Termination. Any termination of Executive’s employment by the
Company or by Executive hereunder shall be communicated by a Notice of
Termination to the other party hereto. For purposes of this Agreement, a “Notice
of Termination” shall mean a written notice which shall indicate the specific
termination provisions in this Agreement relied upon and which sets forth (i) in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated and
(ii) the date of Executive’s termination of employment, which shall be no
earlier than sixty (60) days after such Notice is received by the other party.
Any purported termination of Executive’s employment by the Company which

10

--------------------------------------------------------------------------------

 

      is not effected pursuant to a Notice of Termination satisfying the
requirements of this Agreement shall not be effective. In the case of a
termination for Cause, the Notice of Termination shall also satisfy the
requirements set forth in Paragraph 7(a).

  8.   Obligations of the Company on Termination of Employment.

  (a)   For Cause; Voluntary Resignation.

  (i)   For Cause. If (i) the Company terminates Executive’s employment for
Cause hereunder or (ii) Executive terminates his employment with the Company
other than for Good Reason, then, except as otherwise specifically set forth
herein, all of the Company’s obligations hereunder shall immediately cease and
terminate. Executive shall thereupon have no further right or entitlement to
additional salary, incentive compensation payments or awards, or any perquisites
from the Company whatsoever, and Executive’s rights, if any, under the Company’s
employee and executive benefit plans shall be determined solely in accordance
with the express terms of the respective plans. Notwithstanding the foregoing,
Executive shall be entitled to receive any accrued base salary, accrued but
unused vacation and unreimbursed expenses.     (ii)   Voluntary Resignation. If
Executive resigns other than for Good Reason, Executive shall receive (1) the
benefits under Paragraphs 8(b)(i)(C) and 8(b)(i)(H) below and (2) subject to the
express special forfeiture and repayment provisions of the respective plans (or
the terms and conditions applicable thereto), an Approved Retirement (as defined
in the EBRP) commencing on the expiration of this Agreement, which shall be
calculated at the initial level of 60% of Average Final Compensation (as
modified by Paragraph 4(c) above) and increased by 1.5% per full year from
April 1, 2004 until his resignation, with a maximum benefit level of 75% of
Average Final Compensation and without any reduction for early retirement;
provided that the foregoing EBRP benefit shall be subject to the Minimum
Lump-Sum Payment described in Paragraph 5(a) above.

  (b)   Termination Other than for Cause; Termination for Good Reason.

  (i)   If the Company terminates Executive’s employment pursuant to Paragraph
7(b) above or Executive terminates his employment with the Company for Good
Reason, in both cases prior to a Change in Control of the Company or at any time
other than within the two (2) years immediately following a Change in Control,
then in lieu of any benefits payable pursuant to the Company’s Executive
Severance Policy (so long as the compensation and

11

--------------------------------------------------------------------------------

 

      benefits payable hereunder equal or exceed those payable under said
Policy) and in complete satisfaction and discharge of all of its obligations to
Executive hereunder (other than obligations that arise under Paragraphs 9 or 10
hereof), the Company shall, while Executive is not in breach of the provisions
of Paragraph 6 hereof; provided any such suspended payments and/or benefits
shall resume once any such breach has been cured,

(A) provide Executive with monthly cash payments equal to Executive’s final
monthly base salary (“Severance”) for the remainder of the Term (the “Severance
Period”) provided that, if such payment is deferred in accordance with
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”),
it shall accrue interest at the Deferred Compensation Administration Plan III
Rate (the “DCAP Rate”) for the period of such deferral, which interest shall be
paid together with such payment,
(B) provide Executive with a cash payment equal to Executive’s incentive award
compensation under the terms of the Company’s MIP for each fiscal year ending
with or within the Severance Period, such MIP awards to be equal, in each case,
to 100% of Executive’s Individual Target Award existing at the time of his
termination of employment, and to be made at the time and in the manner
applicable to MIP payments for current employees, provided that, if such payment
is deferred in accordance with Section 409A, it shall accrue interest at the
DCAP Rate for the period of such deferral, which interest shall be paid together
with such payment,
(C) provide Executive with lifetime (x) coverage under the Company’s Executive
Medical Plan and financial counseling program under the applicable policies as
they existed on the date of his termination, and (y) office space and
secretarial support services as may be suitable and adequate for Executive’s
needs,
(D) continue Executive’s participation in the Deferred Compensation
Administration Plan III for the Severance Period,
(E) subject to the express special forfeiture and repayment provisions of the
respective plans (or the terms and conditions applicable thereto), continue the
accrual and vesting of Executive’s rights, benefits and existing awards for the
Severance Period for purposes of the EBRP and ESBP (with Executive’s benefits,
for purposes of those two plans only, calculated on the basis of Executive
receiving (x) an Approved Retirement (as defined in the EBRP) commencing on the
expiration of this Agreement, regardless of Executive’s age at termination, and,
(y) with respect

12

--------------------------------------------------------------------------------

 

to the EBRP, a benefit calculated at the initial level of 60% of Average Final
Compensation (as defined in Paragraph 4(c) above) and increased by 0.125% per
completed month (i.e., 1.5% per full year) from April 1, 2004 until the
expiration of the Severance Period, with a maximum benefit level of 75% of
Average Final Compensation under the EBRP without any reduction for early
retirement); provided that, in the event Executive’s employment is terminated in
connection with a Change of Control pursuant to Paragraph 8(c) below, the
foregoing EBRP benefit shall be subject to the Minimum Lump-Sum Payment
described in Paragraph 5(a) above,
(F) subject to both (x) the express special forfeiture and repayment provisions
of the applicable plans or arrangements (or the terms and conditions applicable
thereto) and (y) the provisions of subparagraph (b)(ii) below, accelerate the
vesting of all Executive’s awards granted prior to such termination of
employment pursuant to the Company’s 1994 Stock Option and Restricted Stock Plan
(or any similar plan or arrangement); provided, that Executive shall in no event
be entitled to or receive additional grants or awards subsequent to the date of
his termination of employment,
(G) continue Executive’s participation in the Company’s Long Term Incentive Plan
for the Severance Period (but not thereafter) (pro-rating performance periods as
of the date Executive ceased rendering services to the Company), provided, that
Executive shall not participate in any way whatsoever in any performance period
commencing subsequent to the date of termination,
(H) deem Executive’s termination to have occurred as if the sum of his age and
years of service to the Company is at least 65 for purposes of both the Deferred
Compensation Administration Plan III and the 1994 Stock Option and Restricted
Stock Plan (or any similar plan or arrangement), and
(I) terminate Executive’s participation in the Company’s tax-qualified
profit-sharing plans and stock purchase plans, pursuant to the terms of the
respective plans, as of the date of Executive’s termination of employment.
During the Severance Period, Executive shall have no obligation to seek other
employment and the Company shall not (x) have the right of offset as a result of
any compensation Executive may receive from a subsequent employer or, (y) while
Executive is not in breach of the provisions of Paragraph 6, reduce its payments
pursuant to this Paragraph 8(b)(i).

13

--------------------------------------------------------------------------------

 

  (c)   Termination in Connection with a Change in Control. Notwithstanding the
provisions of Paragraph 8(a) and (b) hereof, in the event of an occurrence of a
Change in Control (which shall include the 1999 Change in Control), the
following provisions shall apply in the event of Executive’s termination of
employment (i) within two (2) years following such Change in Control or
(ii) within the six (6) month period immediately preceding such Change in
Control if such termination of employment occurs at the direction of the person
or entity that is involved in, or otherwise in connection with, such Change in
Control:

  (i)   If the Company terminates Executive’s employment pursuant to Paragraph
7(b) above or otherwise without Cause (as defined in subparagraph 8(c)(iii)
below) or Executive terminates his employment with the Company for Good Reason,
then the Company shall, in lieu of the benefits payable under subparagraphs
(A) and (B) of Paragraph 8(b)(i) above, immediately pay to Executive in a cash
lump sum an amount equal to the greater of: (x) 2.99 multiplied by Executive’s
“base amount” determined pursuant to section 280G of the Internal Revenue Code
of 1986, as amended (the “Code”) and (y) the sum of the amounts described in
clauses (A) and (B) in Paragraph 8(b)(i) above and shall take all actions
described in clauses (C) through (I) in Paragraph 8(b)(i) hereof; provided that,
if such payment is deferred in accordance with Section 409A, it shall accrue
interest at the DCAP Rate for the period of such deferral, which interest shall
be paid together with such payment.     (ii)   Change in Control. For purposes
of this Agreement, a “Change in Control” of the Company shall be deemed to have
occurred if any of the events set forth in any one of the following
subparagraphs shall occur; (A) during any period of not more than twelve
consecutive months, any “person” (as such term is used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
excluding the Company or any of its affiliates, a trustee or any fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates, 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 13(d)(3) under the Exchange Act), directly or indirectly, of securities of
the Company representing 35% or more of the combined voting power of the
Company’s then outstanding securities; (B) during any period of not more than
twelve consecutive months, 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

14

--------------------------------------------------------------------------------

 

      with the Company to effect a transaction described in clause (A), (C) or
(D) of this subparagraph) 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;
(C) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than (x) 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
(y) 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 stockholders 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, in the judgment of the Compensation
Committee of the Board, 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.     (iii)   Notwithstanding anything to the contrary contained in
subparagraph 7(a)(i), for purposes of this Paragraph 8(c), termination by the
Company of Executive’s employment for “Cause” shall mean termination upon
Executive’s willful engaging in misconduct which is demonstrably and materially
injurious to the Company and its subsidiaries taken as a whole. No act, or
failure to act, on Executive’s part shall be considered “willful” unless done,
or omitted to be done, by Executive not in good faith and without reasonable
belief that Executive’s action or omission was in the best interest of the
Company or its subsidiaries. Notwithstanding the foregoing, Executive shall not
be deemed to

15

--------------------------------------------------------------------------------

 

      have been terminated for Cause pursuant to this subparagraph 8(c)(iii)
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three quarters
of the entire membership of the Board at a meeting of the Board called and held
for the purpose of making a determination of whether Cause for termination
exists (after reasonable notice to Executive and an opportunity for Executive to
be heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of misconduct as set forth above in this subparagraph
8(c)(iii) and specifying the particulars thereof in detail. In addition, if the
conduct alleged to have constituted Cause is curable (as determined by the
Board), the Notice of Termination shall not be delivered until after the Board
(or any duly authorized Committee thereof) shall have given Executive written
notice specifying the conduct alleged to have constituted such Cause and
Executive has failed to cure such conduct, within fifteen (15) days following
receipt of such notice.

  (iv)   Remedy by Company. If, within two years following a Change in Control,
Executive terminates employment for Good Reason in accordance with the
provisions of Paragraph 8(c), Executive shall make a good faith reasonable
determination immediately after the fifteen-day period whether the facts and
circumstances that allegedly gave rise to Good Reason have been remedied and
shall communicate such determination in writing to the Company (the “Executive
Determination”). If Executive determines that adequate remedy has not occurred,
then the initial Notice of Termination shall remain in effect. The Company shall
not be bound by any Executive Determination that applies to any termination
other than a termination for Good Reason that occurs within two years following
a Change in Control. Notwithstanding any dispute concerning whether Good Reason
exists for termination of employment or whether adequate remedy has occurred,
the Company shall immediately pay to Executive, as specified in subparagraph
8(c)(i), any amounts otherwise due under this Agreement. Executive may be
required to repay such amounts to the Company if any such dispute is finally
determined adversely to Executive.

  9.   Compliance with Section 409A         Notwithstanding anything in this
Agreement to the contrary, the Company shall administer and construe this
Agreement in accordance with Section 409A, the regulations promulgated
thereunder, and any other published interpretive authority, as issued or amended
from time to time, so as not to subject the Executive to the additional tax and
interest imposed under Section 409A. To the extent that the Company and/or the
Executive reasonably determine that any

16

--------------------------------------------------------------------------------

 

      amount payable under this Agreement would trigger the additional tax
imposed by Section 409A, the Company and Executive shall promptly agree in good
faith on appropriate modifications to the Agreement (including delaying or
restructuring payments) to avoid such additional tax yet preserve (to the
nearest extent reasonably possible) the intended benefit payable to the
Executive. If Executive incurs liability under Section 409A(a)(1)(B) as a direct
result of the Company’s failure to fulfill the foregoing obligations, the
Company will indemnify and hold Executive harmless from such liability;
provided, however, that the Company shall have no obligation under this
provision for any such failures that are attributable to Executive’s own willful
acts or omissions or to Executive’s demand for a distribution of benefits
notwithstanding a recommendation of the Company against the distribution.

  10.   Excise Tax Payment.

  (a)   If, as a result of Executive’s employment with the Company or
termination thereof, the benefits received by Executive (the “Total Payments”)
are subject to the excise tax provision set forth in section 4999 of the Code
(the “Excise Tax”), the Company shall pay to Executive an additional amount (the
“Gross-Up Payment”) such that the net amount retained by Executive, after
deduction of any Excise Tax on the benefits received hereunder and any Federal,
state and local income and employment taxes and Excise Tax upon the Gross-Up
Payment, shall be equal to the Total Payments.     (b)   For purposes of
determining whether any of the Total Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (i) all of the Total Payments shall be
treated as “parachute payments” (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of tax counsel (“Tax Counsel”) reasonably
acceptable to Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company’s independent auditor
(the “Auditor”), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A) of
the Code, (ii) all “excess parachute payments” within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in
the opinion of Tax Counsel, such excess parachute payments (in whole or in part)
represent “reasonable compensation” for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as
defined in section, 280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (iii) the
value of any noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation

17

--------------------------------------------------------------------------------

 

      in the calendar year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in the state and
locality of Executive’s residence on the date of termination (or if there is no
date of termination, then the date on which the Gross-Up Payment is calculated
for purposes of this Paragraph 10(b)), net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.

  (c)   In the event that the Excise Tax is finally determined to be less than
the amount taken into account hereunder in calculating the Gross-Up Payment,
Executive shall repay to the Company, within five (5) business days following
the time that the amount of such reduction in the Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income and employment taxes imposed on the Gross-Up
Payment being repaid by Executive, to the extent that such repayment results in
a reduction in the Excise Tax and a dollar-for-dollar reduction in Executive’s
taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120% of the
rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess plus any interest, penalties or additions payable by Executive with
respect to such excess) within five (5) business days following the time that
the amount of such excess is finally determined. Executive and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total Payments.     (d)   Notwithstanding
anything else herein, this Paragraph 10 shall survive any termination of
employment, any payments hereunder or any termination of obligations hereunder;
provided, however, that this Paragraph 10 shall not survive any termination of
employment for Cause that occurs prior to a Change in Control, or any payments
or termination of obligations in connection with such termination for Cause.

  11.   General Provisions.

  (a)   Executive’s rights and obligations hereunder shall not be transferable
by assignment or otherwise; provided, however, that this Agreement shall inure
to the benefit of and be enforceable by Executive’s personal and legal
representatives, executors, administrator, successors, heirs, distributees,
devisees and legatees. If Executive should die while any

18

--------------------------------------------------------------------------------

 

      amounts are still payable to Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive’s devisee, legatee or other designee or, if there be no
such designee, to Executive’s estate. Nothing in this Agreement shall prevent
the consolidation of the Company with, or its merger into, any other
corporation, or the sale by the Company of all or substantially all of its
properties or assets; and this Agreement shall inure to the benefit of, be
binding upon and be enforceable by, any successor surviving or resulting
corporation, or other entity to which such assets shall be transferred. Unless
otherwise agreed to by Executive, the Company shall require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Executive (such
agreement not to be unreasonably withheld or delayed), to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. This Agreement shall not otherwise be assigned by the Company. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined
and any successor or assign to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this paragraph or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.

  (b)   This Agreement and the rights of Executive with respect to the benefits
of employment referred to in Paragraph 4(c) constitute the entire agreement
between the parties hereto in respect of the employment of Executive by the
Company. This Agreement supersedes and replaces in its entirety all prior oral
and written agreements, understandings, commitments, and practices between the
parties, including, but not limited to, the Prior Employment Agreement and the
Termination Agreement.     (c)   Executive and the Company agree that any
dispute, controversy or claim between them, other than any dispute, controversy
claim or breach arising under Paragraph 6 of this Agreement, 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 statutes of limitations and
remedies, that would apply if the claims were brought in court. The arbitrator
also shall prepare a written decision containing the

19

--------------------------------------------------------------------------------

 

      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. If any proceeding is necessary to
enforce or interpret the terms of this Agreement, or to recover damages for
breach thereof, the prevailing party shall be entitled to reasonable attorneys’
fees and costs and disbursements, not to exceed in aggregate one percent (1%) of
the net worth of the other party, in addition to any other relief to which he or
it may be entitled. The Company agrees to pay the costs and fees of the
arbitrator. THE PARTIES 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.

  (d)   The provisions of this Agreement shall be regarded as divisible, and if
any of said provisions or any part hereof are declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions or parts hereof and the applicability hereof shall
not be affected thereby.     (e)   This Agreement may not be amended or modified
except by a written instrument executed by the Company and Executive.     (f)  
This Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of California without regard
to its principles of conflict of laws.     (g)   For purposes of this Agreement,
notices and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered by messenger
or in person, or when mailed by United States registered mail, return receipt
requested, postage prepaid, as follows:

     
If to the Company:
  McKesson Corporation
 
  One Post Street
 
  San Francisco, CA 94104
 
  Attention: Office of the General Counsel
 
   
If to Executive:
  John H. Hammergren
 
  c/o McKesson Corporation
 
  One Post Street
 
  San Francisco, CA 94104

20

--------------------------------------------------------------------------------

 

or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                  McKesson Corporation         A Delaware Corporation    
 
           
 
  By:        
 
     
 
Paul E. Kirincic    
 
      Executive Vice President, Human         Resources    

ATTEST:

             
 
Executive Vice President and Secretary
     
 
John Hammergren    
 
           
By the Authority of the
           
Compensation Committee of the
           
Board of Directors of
           
McKesson Corporation
           
on November ___, 2006
           

21