exv10w12






EXHIBIT 10.12




AMENDED
AND RESTATED EMPLOYMENT AGREEMENT




     This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), effective as of November 1,
2008 (the “Effective Date”), is by and between McKesson Corporation (the “Company”), a Delaware
corporation with its principal office at One Post Street, San Francisco, California, and Paul C.
Julian (“Executive”).



RECITALS




     A. WHEREAS, Executive and the Company have previously entered into that certain Employment
Agreement dated as of April 1, 2004 (the “Prior Employment Agreement”);



     B. WHEREAS, Executive and the Company have previously amended and restated the terms of the
Prior Employment Agreement, effective as of November 1, 2006;



     C. WHEREAS, the Company, in its business, develops and uses certain Confidential Information
(as defined in Paragraph 7(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;



     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; and



     E. WHEREAS, Executive and the Company wish to amend and restate the terms of the Agreement to
comply with the final regulations promulgated under Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”) and preserve deductibility of certain compensation under Section
162(m) of the Code in accordance with Revenue Ruling 2008-13.



     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 below.



2. Position and Responsibilities. During the period of his employment hereunder, Executive
agrees to serve the Company, and the Company shall employ Executive, as Executive Vice President
and Group President or in such other senior corporate executive capacity or capacities as may be
specified from time to time by the Chief Executive Officer of the Company (the “Chief Executive
Officer”).




 









 




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
(3rd) anniversary of the Effective Date; unless terminated earlier in accordance with
Paragraphs 6-9 below; provided, however, that the term of this Agreement shall automatically be
extended for one (1) additional year on each anniversary of the Effective Date, unless terminated
earlier in accordance with Paragraphs 6-9 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 his best
efforts and all his business time, attention and skill 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 of Directors of the
Company (the “Board”); provided, however, that, with the approval of the Chief Executive Officer,
Executive may serve, or continue to serve, on the boards of directors of, hold any other offices or
positions in, companies or organizations which, in such officer’s judgment, will not present any
conflict of interest with the Company or any of its subsidiaries or affiliates or divisions, or
materially adversely affect the performance of Executive’s duties pursuant to this Agreement. The
Company shall retain full direction and control of the means and methods by which Executive
performs the services for which he is employed hereunder. 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 headquarters of the Company in San Francisco, California.


4. Compensation and Reimbursement of Expenses.




     (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 Nine Hundred Eighty-Six Thousand
Dollars ($986,000) 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 yearly by the Board (or
any duly authorized Committee thereof). For purposes of the MIP (as defined in Paragraph 5 below),
for each of the Company’s fiscal years ending during the Term of this Agreement, Executive’s
Individual Target Award (as defined in the MIP) shall be 100% during fiscal year 2007 and 110%
thereafter 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; provided, however, any such expenses
eligible for reimbursement that are taxable to Executive and incurred during the course of
Executive’s employment may not affect the expenses eligible for reimbursement in any other taxable
year.



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5. 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 senior management and those benefits for which key executives are or shall become
eligible, when and as he becomes eligible therefore, 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, Company-sponsored medical plan,
Executive Medical Plan, Management Incentive Plan (“MIP”), Executive Benefit Retirement Plan
(“EBRP”), Executive Survivor Benefits Plan (“ESBP”), Long-Term Incentive Plan, Employee Stock
Purchase Plan and the 1994 Stock Option and Restricted Stock Plan, the 2005 Stock Plan, and any
other similar plan or arrangement (collectively, the “Stock Incentive Plans”).



6. Benefits Payable Upon Disability or Death.




     (a) Disability Benefits. If, during the term of this Agreement, Executive sustains a
disability, as defined in Treasury Regulation section 1.409A-3(i)(4)(i) or -3(i)(4)(iii), the
Company shall continue to pay Executive his then current salary hereunder at the time of the
regular payroll schedule during the period of such disability or, if less, for a period of twelve
(12) calendar months, at which time the Company’s obligations hereunder shall cease and terminate.



     (b) Death Benefits. In the event of the death of Executive during the Term of this
Agreement, 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) at the time of the regular payroll schedule through the six-month period following the
end of the calendar month in which Executive’s death occurs. Thereafter, all of the Company’s
obligations hereunder shall cease and terminate.



     (c) Other Plans. The provisions of this Paragraph 6 shall not affect any rights of
Executive’s heirs, administrators, executors, legatees, beneficiaries or assigns under the
Company’s Profit-Sharing Investment Plan, EBRP, ESBP, Stock Incentive Plans, any Employee Stock
Purchase Plan (or any other 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.


7. Obligations of Executive During and After Employment.




     (a) Noncompetition. Executive agrees that during the term of his employment hereunder,
and for the “Noncompetition Period” (as hereinafter defined) thereafter following the termination
of Executive’s employment with the Company for any reason, he will not, within the United States,
participate, engage or have any interest in, directly or indirectly, any person, firm, corporation,
or business (where as an employee, officer, director, agent, creditor, or consultant or in any
capacity which calls for the rendering of personal services, advice, acts of management, operation
or control) which carries on any business or activity competitive with the Company or any
affiliated company (including, without limitation, any products or services sold, investigated,
developed or otherwise pursued by the Company or any affiliated company at any time or from time to
time) without the prior written consent of the Chief Executive Officer. For purposes of this
Paragraph 7 (a), the “Noncompetition Period” shall be deemed to be the period during which



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Executive is receiving salary continuation payments hereunder. Should Executive violate his
obligations under this Paragraph 7(a), any further salary continuation payments or other severance
benefits shall immediately cease. This Paragraph 7(a) shall survive the termination or expiration
of this Agreement.



     (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 (as defined in subparagraph (c) hereof), 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 either during or after the term of this Agreement. 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 to
the extent expressly authorized by the Company in writing or as required by law. 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 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 7 (b)
shall survive the termination or expiration of this Agreement.



     (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
company’s 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 by the Company or
any of 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 or any of 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 other than as a result of a
disclosure by Executive, (B) was available to him on a non-confidential basis outside of his
employment with the Company, or (C) becomes available to him on a non-confidential basis from a
source other than the Company or any of its agents, creditors, suppliers, lessors, lessees or
customers.



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     (d) Nonsolicitation of Employees. 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, and (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 Nonsolicitation Period thereafter following the termination of
Executive’s employment with the Company and its 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 its affiliated companies any employee of the Company or
any of its affiliated Companies. For purposes of this Paragraph 7(d), the “Nonsolicitation Period”
shall be deemed to be the longer of (i) two (2) years following termination of Executive’s
employment for any reason, or (ii) the period during which Executive is receiving salary
continuation payments hereunder. Should Executive violate his obligations under this Paragraph
7(d), any further salary continuation payments or other severance benefits shall immediately cease.
This Paragraph 7(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 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 Nonsolicitation Period thereafter following the termination of Executive’s employment with the
Company and its affiliated companies for any reason, Executive shall not, directly or indirectly,
solicit, aid in or encourage the solicitation of, contract with, aid in or encourage the
contracting with, service, or contact any person or entity which is, or was, within three 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 7(e), the “Nonsolicitation Period” shall be
deemed to be the longer of (i) two (2) years following termination of Executive’s employment for
any reason, or (ii) the period during which Executive is receiving salary continuation payments
hereunder. Should Executive violate his obligations under this Paragraph 7(e), any further salary
continuation payments or other severance benefits shall immediately cease. This Paragraph 7(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 7, 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.



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     (g) Blue-Penciling. Executive acknowledges and agrees that the noncompetition and
nonsolicitation provisions contained herein are reasonable and valid in geographic, temporal and
subject matter scope and in all other respects, and do not impose limitations greater than are
necessary to protect the goodwill, Confidential Information and other business interests of the
Company. Nevertheless, if any court determines that any of said noncompetition and other
restrictive covenants and agreements, or any part thereof, is unenforceable because of the duration
or geographic scope of such provision, such court shall have the power to reduce the duration or
scope of such provision, as the case may be, and, in its reduced form, such provision shall then be
enforceable to the maximum extent permitted by applicable law.



     (h) Mutual Dependence. Executive understands and agrees that his full compliance with
Section 7 of this Agreement 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
provisions of Section 7 of this Agreement 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.



     (i) Right to Resign. The parties expressly acknowledge that Executive may terminate
his employment at any time for any reason upon giving written notice of termination to the Company,
and that such resignation shall not constitute a breach of this Agreement.


8. Termination.




     (a) 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 upon written notice from the Board (or any duly authorized Committee thereof) specifying such
Cause, and thereafter, the Company’s obligations hereunder shall cease and terminate; provided,
however, that such written notice 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 nave constituted such Cause and Executive has tailed to cure such conduct, if curable,
within fifteen (15) days following receipt of such notice. As used herein, the term “Cause” shall
mean (i) Executive’s willful misconduct, habitual neglect or dishonesty with respect to matters
involving the Company or its subsidiaries which is materially and demonstrably injurious to the
Company, or (ii) a material breach by Executive of one or more terms of this Agreement.



     (b) Arbitration Required to Confirm Cause. In the event of a termination for Cause
pursuant to Paragraph 8(a) above, 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
12(d) below. In the event the award upholds the action of the Company, Executive shall promptly
repay to the Company any sums received pursuant to this subparagraph (b), following termination of
employment.



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     (c) Other Than for Cause, Performance, Reorganization. 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 Chief Executive Officer, (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, in the Company’s sole discretion.



     (d) Obligations of the Company on Termination of Employment or Separation from
Service.



          (i) If the Company terminates Executive’s employment pursuant to Paragraph 8(a) above and the
Company’s action is affirmed as specified in Paragraph 8(b) above or Executive terminates his
employment with the Company other than for Good Reason (as defined in subparagraph (d)(iii) below),
then 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.




          (ii) If the Executive has a separation from service (as defined in Treasury Regulation section
1.409A-1(h) (“Separation from Service”), which is involuntary and pursuant to Paragraph 8(c) above
or Executive has a Separation from Service with the Company for Good Reason prior to the expiration
of the Term, then in lieu of any benefits payable pursuant to the Company’s Executive Severance
Policy (so long as the compensation and 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, the Company shall, provided Executive is not in breach of the provisions of
Paragraph 7 above and except as provided in Paragraph 9 below, and conditioned upon Executive’s
execution of a standard, full release of claims (it being understood that such release shall be
mutual, and shall contain standard “carve-outs” from Executive’s release for indemnification
rights, vested rights under pension, insurance and other benefit plans, and the like) and such
release becoming effective within forty-five (45) days of Executive’s Separation from Service, or
such longer period of time as required by law, (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, any such payment that would be paid in the six-month period
beginning from Executive’s Separation from Service shall be paid in the seventh (7th)
month following the month in which such Separation from Service occurs and the amount subject to
the six-month delay shall accrue interest at the Deferred Compensation Administration Plan III Rate
(the “DCAP Rate”) for the period of such delay, which interest shall be paid together with such
payment, and further provided that the Company’s obligation to make such Severance payments shall
be reduced by any compensation received by Executive from a subsequent employer during the
Severance Period, (B) consider Executive for a bonus under the terms of the Company’s MIP for the
fiscal year in which termination occurs (but not for any subsequent year) provided that any such
bonus shall be based on performance metrics established fro the applicable performance period and
shall be pro-rated to reflect the portion of the year for which Executive was actively employed,
and shall be made




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at the time and in the manner applicable to MIP payments for current employees unless validly
deferred under a Company-sponsored deferred compensation program, then the payment shall be made in
accordance with the applicable program, (C) continue Executive’s Company-sponsored medic al plan
benefits or provide comparable medical plan benefits until the end of the Severance Period, (D)
subject to the express special forfeiture and repayment provisions of the respective plans (or the
terms and conditions applicable thereto), (1) continue the accrual and vesting of Executive’s
rights, benefits and outstanding awards for the remainder of the Severance Period for purposes of
the ESBP, and the Incentive Plans provided, however, that (unless otherwise provided by the terms
of the applicable plan, or unless the Board, or any duly authorized Committee thereof, in its sole
discretion determines otherwise), Executive shall in no event receive or be entitled to either
additional grants or awards subsequent to the date of termination, or “Approved Retirement” status,
under the foregoing plans, and (2) calculate Executive’s EBRP benefit as if she continued
employment until the end of the Severance Period, and (E) terminate Executive’s participation in
the Company’s tax-qualified profit-sharing plans, long-term incentive plan, and Employee Stock
Purchase Plan, pursuant to the terms of the respective plans, as of the date of Executive’s
termination of employment.




          (iii) For purposes of this Agreement, “Good Reason” shall mean any of the following actions,
if taken without the express written consent of Executive: (A) any material change by the Company
in Executive’s functions, duties or responsibilities as Executive Vice President and Group
President, 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; (B) any reduction in Executive’s base salary, other
than a proportional reduction effected as part of an across-the board reduction affecting all
executive employees 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 twenty-five (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 and consistent with practices as of the Effective Date; or (E) in the event of a
Change in Control, any change in the level of officer within the Company to whom Executive reports,
as this reporting relationship existed immediately prior to a Change in Control.



9. Separation from Service in Connection with a Change in Control. Notwithstanding the
provisions of Paragraph 8(d) above, in the event of an occurrence of a Change in Control, the
following provisions shall apply in the event of Executive’s Separation from Service (i) within two
(2) years following such Change in Control, or (ii) within the six-month period immediately
preceding and proximate to such Change in Control if such Separation from Service occurs at the
direction of the person or entity that is involved in, or otherwise in connection with, such Change
in Control:




     (a) If Executive has a Separation from Service, which is involuntary and pursuant to Paragraph
8(c) above or otherwise without Cause or Executive has a Separation from Service with the Company
for Good Reason, then the Company shall, in lieu of the benefits payable under Paragraph 8(d)(ii)
above, immediately pay to Executive in a cash lump sum an amount equal to 2.99 multiplied by
Executive’s Earnings (as defined in the Company’s Change in Control Policy for Selected Executive
Employees) and shall take all actions described in clauses



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(C) through (E) in Paragraph 8(d)(ii) above; provided however, any such payment that would be
paid in the six-month period beginning from Executive’s Separation from Service) shall be paid in
the seventh (7th) month following the month in which such Separation from Service occurs and the
amount subject to the six-month delay shall accrue interest at the DCAP Rate for the period of such
delay, which interest shall be paid together with such payment.




     (b) Change in Control. For purposes of this Agreement, a “Change in Control” of the Company
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), the regulations thereunder, and any other published
interpretive authority, as issued or amended from time to time.


10. Excise Tax Payment.




     (a) If, as a result of Executive’s employment with the Company or termination thereof, the
benefits received by Executive under Section 9 above (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. Subject to Paragraph 11(b) below, the Company shall pay to Executive
as soon as administratively practicable, but in no event later than by end of the calendar year
following the year in which Executive remits the Excise Tax, and Gross-Up Payment due under this
subparagraph (a).



     (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 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 subparagraph (b)), net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.



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     (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 one hundred twenty percent
(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, but in no event later than the end of the calendar year following the year in which
Executive remits the Excise Tax, subject to Paragraph 11(b) below. 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. Compliance with Section 409A.




     (a) Separate Payments. Each payment or benefit provided for in this Agreement is a separate
“payment” within the meaning of Treasury Regulation section 1.409A-2(b)(2)(i).



     (b) Delay of Payments. Notwithstanding the foregoing, if any of the payments or benefits
payable to Executive under this Agreement when considered together with any other payments or
benefits which may be considered deferred compensation under Section 409A would result in the
imposition of additional tax under Section 409A if paid to Executive on or within the six (6) month
period following her Separation from Service, then to the extent such portion of the payments or
benefits resulting in the imposition of additional tax would otherwise have been payable on or
within the first six (6) months following her Separation from Service, shall be paid in a lump sum
in the seventh (7th) month following the month in which such Separation occurs (or such
longer period as is required to avoid the imposition of additional tax under Section 409A), and
such lump sum amount shall accrue interest at the DCAP Rate for the period of such deferral, which
interest shall be paid together with such payment. All subsequent payment or benefits will be
payable in accordance with the payment schedule applicable to each such payment of benefits.



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     (c) Administration. 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 Executive to the additional tax and interest imposed under
Section 409A. To the extent that the Company and/or Executive reasonably determine that any 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 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.


12. General Provisions.




     (a) Executive’s rights and obligations hereunder shall not be transferable by assignment or
otherwise. 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. This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.



     (b) This Agreement and Executive’s “Indemnification Agreement” (as defined below) constitutes
the entire agreement between the parties hereto in respect of the matters addressed herein
regarding the employment of Executive by the Company. This Agreement and Executive’s
Indemnification Agreement supersedes and replaces all prior oral and written agreements,
understandings, commitments, and practices between the parties pertaining to Executive’s employment
by the Company, including, but not limited to, the Prior Employment Agreement. “For purposes of
this Agreement, “Indemnification Agreement” means the Company’s standard form of indemnification
agreement for executives, as amended, restated and revised from time to time.



     (c) In the event Executive’s employment with the Company shall terminate under circumstances
otherwise providing Executive with a right to benefits under both the Company’s Severance Policy
for Executive Employees and Paragraph 8(d)(ii) above, Executive shall be entitled to receive the
greater of the benefits provided therein or herein, calculated individually, without duplication;
provided, however, if the benefits are greater under the Severance policy for Executive Employees,
such greater amount shall be paid in the same time and form provided for payment under Paragraph
8(d)(ii) above.



     (d) Executive and the Company agree that any dispute, controversy or claim between them, other
than any dispute, controversy claim or breach arising under Paragraph 7 of this Agreement, shall be
settled exclusively by final and binding arbitration in accordance with the



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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 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
subparagraph (d) 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 or his 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 any administrative costs and fees of the AAA, as well as 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.



     (e) Executive expressly acknowledges and agrees that, except as expressly set forth in
Paragraph 10 of this Agreement, in the event the benefits provided hereunder are subject to the
excise tax provision set forth in Section 4999 of the Code, (i) Executive shall be responsible for,
and (ii) Executive shall not be entitled to any additional payment from the Company for, any
Federal, state, and local income and employment taxes, interest or penalties that may arise in
connection with such benefits.



     (f) 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.



     (g) This Agreement may not be amended or modified except by a written instrument executed by
the Company and Executive.



     (h) 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.



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     IN WITNESS WHEREOF, The parties have executed this Agreement as of the date first above
written.



	 	 	 	 	 
	ATTEST:

	 	McKesson Corporation
	 	 
	 

	 	A Delaware Corporation	 	 
	 
	 	 	 	 
	/s/ Laureen E. Seeger

	 	/s/ Jorge L. Figueredo	 	 
	 

	 	 	 	 
	Laureen E. Seeger

	 	Jorge L. Figueredo	 	 
	Executive Vice President, General Counsel
and Secretary

	 	Executive Vice President,

Human Resources	 	 
	 
	 	 	 	 
	 

	 	/s/ Paul C. Julian	 	 
	 

	 	 	 	 
	By the Authority of the Compensation

	 	Paul C. Julian	 	 
	Committee of the McKesson Corporation 

On October 24, 2008

	 	Executive Vice President and
Group President	 	 







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