exv10w30



 





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”).




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	 	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




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	 	 	 	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




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	 	 	 	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




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	 	 	 	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




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	 	 	 	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




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	 	 	 	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.




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	 	(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




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	 	 	 	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.




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	 	(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




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	 	 	 	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




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	 	 	 	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).



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	 	(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
	 	 	 	 	 	 






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