exv10w34



 





EXHIBIT 10.34




McKESSON CORPORATION

DEFERRED COMPENSATION ADMINISTRATION PLAN III (“DCAP III”)




(Effective January 1, 2005)




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	A.

	 	PURPOSE
	 	 	1	 
	 
	B.

	 	ERISA PLAN
	 	 	1	 
	 
	C.

	 	PARTICIPATION
	 	 	1	 
	 
	D.

	 	AMOUNTS OF DEFERRAL
	 	 	3	 
	 
	E.

	 	PAYMENT OF DEFERRED COMPENSATION
	 	 	4	 
	 
	F.

	 	SOURCE OF PAYMENT
	 	 	6	 
	 
	G.

	 	MISCELLANEOUS
	 	 	7	 
	 
	H.

	 	ADMINISTRATION OF THE PLAN
	 	 	7	 
	 
	I.

	 	AMENDMENT OR TERMINATION OF THE PLAN
	 	 	8	 
	 
	J.

	 	CLAIMS AND APPEALS
	 	 	8	 
	 
	K.

	 	DEFINITIONS
	 	 	10	 
	 
	L.

	 	SUCCESSORS
	 	 	13	 
	 
	M.

	 	EXECUTION
	 	 	13	 






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McKESSON CORPORATION

DEFERRED COMPENSATION ADMINISTRATION PLAN III




(Effective January 1, 2005)



A. PURPOSE




     1. This Plan was established to enhance the Company’s ability to attract and retain executive
personnel and members of the Board who are not otherwise employees of the Company.



     2. This Plan is the successor plan to the Deferred Compensation Administration Plan II, as
amended through October 28, 2004 (the “Prior Plan”). Effective December 31, 2004, the Prior Plan
was frozen and no new allocations or deferrals are to be made to it; provided, however, that any
vested allocations and deferrals made under the Prior Plan before January 1, 2005 shall continue to
be governed by the terms and conditions of the Prior Plan as in effect on December 31, 2004.



     3. Any allocations and deferrals made under the Prior Plan after December 31, 2004 and any
allocations that were unvested on December 31, 2004 shall be deemed to have been made under this
Plan and all such contributions, accruals and deferrals shall be governed by the terms and
conditions of this Plan as it may be amended from time to time.



     4. This Plan is intended to comply with the requirements of Section 409A of the Code.



     5. Capitalized terms used in this Plan shall have the meaning set forth in Section K hereof.


B. ERISA PLAN




     This Plan is an unfunded deferred compensation program intended primarily for a select group
of management or highly compensated employees of the Company and members of the Board who are not
employees of the Company. The Plan, therefore, is covered by Title I of ERISA except that it is
exempt from Parts 2, 3 and 4 of Title I of ERISA.


C. PARTICIPATION




     1. Eligibility to Participate.



          a. Eligible Executives. The Administrator may, at his or her discretion, and at any
time, and from time to time, select Company executives who may elect to participate in this Plan
(“Eligible Executives”). Selection of Eligible Executives may be evidenced by the terms of the
executive’s employment contract with the Company, or by inclusion among the persons or classes of
persons specified by the Administrator.




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          The Administrator may, at his or her discretion, and at any time, and from time to time,
designate additional Eligible Executives and/or provide that executives previously designated are
no longer Eligible Executives. If the Administrator determines that an executive is no longer an
Eligible Executive, he or she shall remain a Participant in the Plan until all amounts credited to
his or her Account prior to such determination are paid out under the terms of the Plan (or until
death, if earlier).




          b. Eligible Directors. Each individual who is a member of the Board of McKesson and
who is not a Company employee may participate in this Plan (“Eligible Directors”).




     2. Election to Participate. An Eligible Executive or an Eligible Director may become
a Participant in the Plan by electing to defer compensation in accordance with the terms of this
Plan. An election to defer shall be in writing, shall be irrevocable and shall be made at the time
and in the form specified by the Administrator. On electing to defer compensation under this Plan,
the Participant shall be deemed to accept all of the terms and conditions of this Plan. All
elections to defer amounts under this Plan shall be made pursuant to an election executed and filed
with the Administrator before the amounts so deferred are earned.



          a. Annual Election. Subject to the provisions of Sections 2(b) and 2(c) below, an
election to defer compensation must be made and become irrevocable not later than last day of the
Year preceding the Year in which the compensation being deferred is earned. A Participant’s
election to defer compensation shall be suspended during the Year only if such Participant is faced
with an Unforeseeable Emergency. Such suspension shall continue through the end of Year in which
the Participant is faced with an Unforeseeable Emergency and the Participant must submit a new
election to defer compensation, effective the Year after the Year in which the Unforeseeable
Emergency occurred, to resume participation in the Plan.




          b. Initial Election. A newly Eligible Executive or a newly Eligible Director may
elect to participate in the Plan by submitting a an election to defer compensation in such form as
the Company may specify; provided that such election is made and becomes irrevocable not later than
thirty days following the date such newly Eligible Employee or Eligible Director first becomes
eligible to participate in the Plan and provided further that such election to defer compensation
applies only to compensation earned after the date of the election. In compliance with this
Section 2(b), only a prorated portion of an Eligible Executive’s bonus (other than a bonus that is
performance-based compensation as defined in Section 2(c) below) may be deferred if the Eligible
Executive’s initial deferral election is made after the performance period applicable to the bonus
has begun.




          c. Election to Defer Performance-based Compensation. To the extent that compensation
paid under the Management Incentive Plan or the Long-Term Incentive Plan is “performance-based
compensation” as defined in Proposed Treasury Regulation Section 1.409A-1(e), an election to defer
Management Incentive Plan compensation or Long-Term Incentive Plan compensation may be made not
later than six months prior to the end of the applicable performance period; provided, however,
that such election shall be made prior to the date that the Management Incentive Plan compensation
or Long-Term Incentive Plan compensation is substantially certain to be paid or readily
ascertainable.




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     3. Notification of Participants. The Administrator shall annually notify each
Eligible Executive and each Eligible Director that he or she may participate in the Plan for the
next Year. Such notice shall also set forth the Declared Rate for the next Year.



     4. Relation to Other Plans.



          a. Participation in Other Plans. An Eligible Executive or an Eligible Director may
participate in this Plan and may also participate in any other benefit plan of the Company in
effect from time to time for which he or she is eligible, unless the other plan may otherwise
exclude participation on the basis of eligibility for, or participation in, this Plan. No amounts
may be deferred under this Plan which have been deferred under any other plan of the Company.
Deferrals under this Plan may result in a reduction of benefits payable under the Social Security
Act, the Retirement Plan and the PSIP.




          b. Automatic Deferral. An Eligible Executive’s base salary deferrals and annual bonus
award deferrals (but not DCAP housing deferrals, sign-on and retention bonus deferrals and
Long-Term Incentive Plan award deferrals) shall be credited, in a separate Account under the Plan
with an amount calculated to be the Matching Employer Contribution percentage that would have been
credited to the Eligible Executive’s PSIP account if five percent (5%) of such deferrals under DCAP
III had been made under the PSIP. For these purposes, Matching Employer Contribution shall have
the meaning defined in the PSIP.



D. AMOUNTS OF DEFERRAL




     1. Minimum Deferral. The minimum amount that an Eligible Executive may defer under
this Plan for any Year is $5,000 of base salary, or $5,000 of any annual bonus award(s) and $5,000
of any Long-Term Incentive Plan award. The minimum amount of compensation that an Eligible
Director may defer for any Year is $5,000.



     2. Maximum Deferral for Eligible Executives. The maximum amount of compensation which
an Eligible Executive may defer under this Plan for any Year is (i) 75% of the amount of such
Eligible Executive’s base salary for such Year, and (ii) 90% of any annual bonus award and/or any
Long-Term Incentive Plan award determined and payable to him or her in such Year. Additionally,
the Executive Vice President of Human Resources may change the maximum amount (expressed as a
percentage limit) of base salary that Eligible Executives as a group may defer under the Plan for
any Year. Notwithstanding these limits, deferrals may be reduced by the Company to leave
sufficient remaining compensation legally required for taxes and other authorized deductions,
including, but not limited to, those for Company benefit programs.



     3. Maximum Deferral for Eligible Directors. The maximum amount of compensation which
an Eligible Director may defer under this Plan for any Year is the amount of any annual retainer
(other than the portion of the annual retainer subject to Mandatory Deferral under and as defined
in the 1997 Non-Employee Directors’ Equity Compensation and Deferral Plan) and other fees from
McKesson earned by him or her in any such Year.



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E. PAYMENT OF DEFERRED COMPENSATION




     1. Book Account and Interest Credit. Compensation deferred by a Participant under the
Plan shall be credited to a separate bookkeeping account for such Participant (the “Account”).
(Sub-Accounts may be established for each Year for which the Participant elects to defer
compensation.) Interest shall be credited to each Account (including Sub-Accounts established
thereunder) for each Year at a rate equal to a rate declared by the Compensation Committee acting
in its sole discretion after taking into account, among other things, the following factors:
McKesson’s cost of funds, corporate tax brackets, expected amount and duration of deferrals, number
and age of eligible Participants, expected time and manner of payment of deferred amounts, and
expected performance of available fixed-rate insurance contracts covering the lives of Participants
(the “Declared Rate”). Notwithstanding the foregoing, if a Change in Control (as defined in
Section E.12 below) occurs, the Declared Rate for the balance of the calendar year in which the
Change in Control occurs and for the two calendar years immediately following the year in which the
Change in Control occurs shall not be less than the Declared Rate as in effect on the day before
the Change in Control occurs. Interest on each Account balance shall be compounded daily on each
business day within the Year to yield the Declared Rate for the Year. In the case of installment
payments as provided in Section E.3 below, interest shall be credited on all amounts remaining in a
Participant’s Account until all amounts are paid out.



     2. Length of Deferral. An Eligible Executive or Eligible Director shall elect in
writing, and file with the Administrator, at the same time as such Eligible Executive or Eligible
Director makes any election to defer compensation, the period of deferral with respect to such
election, subject to the minimum required period of deferral and the maximum permissible period of
deferral. The minimum required period of deferral is five years after the end of the Year for
which compensation is deferred. Notwithstanding the foregoing, the five-year minimum deferral
period shall not apply to payments made as a result of death, Disability, Retirement, Separation
from Service, a Change in Control or Unforeseeable Emergency. Payment must commence no later than
the end of the maximum period of deferral, which is the January following the year in which the
Eligible Executive reaches age 72 or, in the case of an Eligible Director, the January after
McKesson’s annual meeting of stockholders next following the Eligible Director’s 72nd birthday.
Once such an election has been made, the Eligible Executive or Eligible Director may alter the
period of deferral, provided that:



          a. such alteration is made at least one year prior to the earliest date the Participant could
have received distribution of the amounts credited to his or her Account under the earlier
election, and




          b. such alteration does not provide for the receipt of such amounts earlier than five years
from the originally scheduled distribution date.




     3. Election of Form and Time of Payment. A Participant shall elect in writing, and
file with the Administrator, at the same time as any election to defer compensation, a form and
time of payment of benefits under this Plan from the following:



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          a. Form.




               i. Payment of the amount credited to the Participant’s Account in a single sum.



               ii. Payment of amounts credited to the Participant’s Account in any specified number of
approximately equal annual installments (not in excess of ten). For purposes of this Plan,
installment payments shall be treated as a single distribution under Section 409A of the Code.



          b. Time.




               i. The lump sum or first installment to be paid in January of the year designated by the
Participant.



               ii. The lump sum or first installment to be paid in the January or June that is at least six
months following the earlier of the Participant’s Retirement or of the determination of Disability.



     4. Default Form of Distribution. If no election is made with respect to Section 3,
payment of the amount credited to the Participant’s Account in a single sum to be paid in the
January or June that is at least six months following the earlier of the Participant’s Retirement
or of the determination of Disability.



     5. Payments on Separation from Service. If a Participant Separates from Service with
the Company for any reason other than Retirement, Disability or death, then, notwithstanding the
election made by the Participant pursuant to Sections E.2 and E.3 above, the entire undistributed
amount credited to his or her Account shall be paid in the form of a lump sum in the January or
June that is at least six months following the date the Participant Separates from Service.



     6. Delayed Distribution to Key Employees. Notwithstanding any other provision of this
Section E to the contrary, a distribution scheduled to be made upon Separation from Service to a
Participant who is identified as a Key Employee as of the date he Separates from Service shall be
delayed for a minimum of six months following the Participant’s Separation from Service. Any
payment that otherwise would have been made pursuant to this Section E during such six-month
period, if any, shall be made on the first day of the eighth month following the Participant’s
Separation from Service. The identification of a Participant as a Key Employee shall be made by
the Administrator in his or her sole discretion in accordance with Section K.14 of the Plan and
Sections 416(i) and 409A of the Code and the regulations promulgated thereunder.



     7. Payments on Death. Each Participant shall make an election at the time of any
election to defer compensation under the Plan with respect to the time and form in which any amount
remaining in the Participant’s Account at the time of the Participant’s death shall be paid to his
or her Beneficiary. Such election shall be made in writing and filed with the Administrator.
Benefits shall be paid in one of the forms specified in Section E.3. The Participant may modify
such election, provided that no such modification shall be effective



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unless it is made at least twelve months in advance of the time of the Participant’s death.
The foregoing notwithstanding, the Administrator may, at his or her discretion, distribute all
benefits to a Beneficiary in a single payment as soon as reasonably practicable after the death of
the Participant if the value of the Participant’s Account is less than $10,000 on the date of death
of the Participant. If no election has been made by the Participant at the time of his or her
death, the Participant’s Account shall be paid to his or her Beneficiary in a lump sum in the first
January or June after the Participant’s death.




     8. Designation of Beneficiary. A Participant may designate any person(s) or any
entity as his or her Beneficiary. Designation shall be in writing and shall become effective only
when filed with the Administrator. Such filing must occur before the Participant’s death. A
Participant may change the Beneficiary, from time to time, by filing a new written designation with
the Administrator. If the Participant fails to effectively designate a Beneficiary in accordance
with the Administrator’s procedures or the person designated by the Participant is not living at
the time the distribution is to be made, then the Participant’s Beneficiary shall be the
Participant’s surviving spouse, if any, or, if there is no surviving spouse, the Participant’s
surviving children, if any, in equal shares, or if there are no surviving children, the
Participant’s estate.



     9. Payments on Disability. If the Administrator determines that a Participant has
become Disabled, the entire undistributed amount credited to his or her Account shall be paid in
the form and at the time elected by the Participant, or, if no election has been made, in a lump
sum in the first January or June after such determination is made.



     10. Payments on Hardship. The Administrator may, in his or her sole discretion,
direct payment to a Participant of all or of any portion of the Participant’s Account balance,
notwithstanding an election under Section E.3 above, at any time that he or she determines that
such Participant has suffered an Unforeseeable Emergency which causes an emergency condition in the
Participant’s financial affairs.



     11. Prohibition on Acceleration. Notwithstanding any other provision of the Plan to
the contrary, no distribution will be made from the Plan that would constitute an impermissible
acceleration of payment as defined in Section 409A(a)(3) of the Code and the regulations
promulgated thereunder.



     12. Change in Control. For purposes of this Plan, a Change in Control shall mean the
occurrence of any change in ownership of the Company, change in effective control of the Company,
or change in the ownership of a substantial portion of the assets of the Company, as defined in
Section 409A(a)(2)(A)(v) of the Code, the regulations thereunder, and any other published
interpretive authority, as issued or amended from time to time.


F. SOURCE OF PAYMENT




     Amounts paid under this Plan shall be paid from the general funds of the Company, and each
Participant and his or her Beneficiaries shall be no more than unsecured general creditors of the
Company with no special or prior right to any assets of the Company for payment of any obligations
hereunder. Nothing contained in this Plan shall be deemed to create a trust of any



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kind for the benefit of any Participant or Beneficiary, or create any fiduciary relationship
between the Company and any Participant or Beneficiary with respect to any assets of the Company.



G. MISCELLANEOUS




     1. Withholding. Each Participant and Beneficiary shall make appropriate arrangements
with the Company for the satisfaction of any federal, state or local income tax withholding
requirements and Social Security or other employment tax requirements applicable to the payment of
benefits under this Plan. If no other arrangements are made, the Company may provide, at its
discretion, for such withholding and tax payments as may be required.



     2. No Assignment.



          a. Other than as provided in Section G.2.b below, the benefits provided under this Plan may
not be alienated, assigned, transferred, pledged or hypothecated by any person, at any time or to
any person whatsoever. These benefits shall be exempt from the claims of creditors or other
claimants and from all orders, decrees, levies, garnishments or executions to the fullest extent
allowed by law.




          b. If a court of competent jurisdiction determines pursuant to a judgment, order or approval
of a marital settlement agreement that all or any portion of the benefits payable hereunder to a
Participant constitute community property of the Participant and his or her spouse or former spouse
(hereafter, the “Alternate Payee”) or property which is otherwise subject to division by the
Participant and the Alternate Payee, a division of such property shall not constitute a violation
of Section G.2.a, and any portion of such property may be paid or set aside for payment to the
Alternate Payee. The preceding sentence of this Section G.2.b, however, shall not create any
additional rights and privileges for the Alternate Payee (or the Participant) not already provided
under the Plan; in this regard, the Administrator shall have the right to refuse to recognize any
judgment, order or approval of a martial settlement agreement that provides for any additional
rights and privileges not already provided under the Plan, including without limitation, with
respect to form and time of payment.




     3. Applicable Law and Severability. The Plan hereby created shall be construed,
administered and governed in all respects in accordance with ERISA and the laws of the State of
California to the extent that the latter are not preempted by ERISA. If any provision of this
instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereunder shall continue to be effective.


H. ADMINISTRATION OF THE PLAN




     1. In General. The Administrator of the Plan shall be the Executive Vice President,
Human Resources, of McKesson. If the Executive Vice President, Human Resources, is a Participant,
any discretionary action taken as Administrator which directly affects him or her as a Participant
shall be specifically approved by the Compensation Committee. The Administrator shall have the
authority and responsibility to interpret this Plan and shall adopt such rules and regulations for
carrying out this Plan as it may deem necessary or appropriate. Decisions of the Administrator
shall be final and binding on all parties who have or claim any interest in this Plan.



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     2. Elections and Notices. All elections and notices made under this Plan shall be
filed with the Administrator at the time and in the manner specified by him or her. All elections
to defer compensation under this Plan shall be irrevocable.


I. AMENDMENT OR TERMINATION OF THE PLAN




     1. Amendment. The Compensation Committee may at any time amend this Plan. Such
action shall be prospective only and shall not adversely affect the rights of any Participant or
Beneficiary to any benefit previously earned under this Plan. The foregoing notwithstanding, no
amendment adopted following the occurrence of a Change in Control shall be effective if it (a)
would reduce the Declared Rate for the balance of the calendar year in which the Change in Control
occurs or for the two calendar years immediately following the year in which the Change in Control
occurs to a rate lower than the Declared Rate as in effect on the day before the Change in Control
occurred or (b) modify the provisions of (a) above.



     2. Termination. The Board may terminate this Plan at any time and under the following
conditions:



          a. The Board, in its discretion, may terminate the Plan at any time and in the Board’s
discretion the Accounts of Participants may be distributed within the period beginning twelve
months after the date the Plan was terminated and ending twenty-four months after the date the Plan
was terminated, or pursuant to Section E of the Plan, if earlier. If the Plan is terminated and
Accounts are distributed, the Company shall terminate all account balance non-qualified deferred
compensation plans with respect to all participants and shall not adopt a new account balance
non-qualified deferred compensation plan for at least five years after the date the Plan was
terminated.




          b. The Board, in its discretion, may terminate the Plan thirty days prior to or twelve months
following a Change in Control that is a change in the ownership or effective control of the Company
or a change in the ownership of a substantial portion of the assets of the Company as defined in
the regulations promulgated under Section 409A of the Code and distribute the Accounts of the
Participants within the twelve-month period following the termination of the Plan. If the Plan is
terminated and Accounts are distributed, the Company shall terminate all substantially similar
non-qualified deferred compensation plans sponsored by the Company and all of the benefits of the
terminated plans shall be distributed within twelve months following the termination of the plans.




          c. The Board, in its discretion, may terminate the Plan upon a corporate dissolution of the
Company that is taxed under Section 331 of the Code or with the approval of a bankruptcy court
pursuant to 11 U.S.C. Section 503(b)(1(A), provided that the Participants’ Accounts are distributed
and included in the gross income of the Participants by the latest of (i) the calendar year in
which the Plan terminates or (ii) the first calendar year in which payment of the Accounts is
administratively practicable.



J. CLAIMS AND APPEALS




     1. Informal Resolution of Questions. Any Participant or Beneficiary who has questions
or concerns about his or her benefits under the Plan is encouraged to communicate



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with the Human Resources Department of McKesson. If this discussion does not give the
Participant or Beneficiary satisfactory results, a formal claim for benefits may be made in
accordance with the procedures of this Section J.




     2. Formal Benefits Claim – Review by Executive Vice President, Human Resources. A
Participant or Beneficiary may make a written request for review of any matter concerning his or
her benefits under this Plan. The claim must be addressed to the Executive Vice President, Human
Resources, McKesson Corporation, One Post Street, San Francisco, California 94104. The Executive
Vice President, Human Resources or his or her delegate (“Executive Vice President”) shall decide
the action to be taken with respect to any such request and may require additional information if
necessary to process the request. The Executive Vice President shall review the request and shall
issue his or her decision, in writing, no later than 90 days after the date the request is
received, unless the circumstances require an extension of time. If such an extension is required,
written notice of the extension shall be furnished to the person making the request within the
initial 90-day period, and the notice shall state the circumstances requiring the extension and the
date by which the Executive Vice President expects to reach a decision on the request. In no event
shall the extension exceed a period of 90 days from the end of the initial period.



     3. Notice of Denied Request. If the Executive Vice President denies a request in
whole or in part, he or she shall provide the person making the request with written notice of the
denial within the period specified in Section J.2. The notice shall set forth the specific reason
for the denial, reference to the specific Plan provisions upon which the denial is based, a
description of any additional material or information necessary to perfect the request, an
explanation of why such information is required, and an explanation of the Plan’s appeal procedures
and the time limits applicable to such procedures, including a statement of the claimant’s right to
bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on
review.



     4. Appeal to Executive Vice President.



          a. A person whose request has been denied in whole or in part (or such person’s authorized
representative) may file an appeal of the decision in writing with the Executive Vice President
within 60 days of receipt of the notification of denial. The appeal must be addressed to:
Executive Vice President, Human Resources, McKesson Corporation, One Post Street, San Francisco,
California 94104. The Executive Vice President, for good cause shown, may extend the period during
which the appeal may be filed for another 60 days. The appellant and/or his or her authorized
representative shall be permitted to submit written comments, documents, records and other
information relating to the claim for benefits. Upon request and free of charge, the applicant
should be provided reasonable access to and copies of, all documents, records or other information
relevant to the appellant’s claim.




          b. The Executive Vice President’s review shall take into account all comments, documents,
records and other information submitted by the appellant relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit determination. The
Executive Vice President shall not be restricted in his or her review to those provisions of the
Plan cited in the original denial of the claim.




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          c. The Executive Vice President shall issue a written decision within a reasonable period of
time but not later than 60 days after receipt of the appeal, unless special circumstances require
an extension of time for processing, in which case the written decision shall be issued as soon as
possible, but not later than 120 days after receipt of an appeal. If such an extension is
required, written notice shall be furnished to the appellant within the initial 60-day period.
This notice shall state the circumstances requiring the extension and the date by which the
Executive Vice President expects to reach a decision on the appeal.




          d. If the decision on the appeal denies the claim in whole or in part written notice shall be
furnished to the appellant. Such notice shall state the reason(s) for the denial, including
references to specific Plan provisions upon which the denial was based. The notice shall state
that the appellant is entitled to receive, upon request and free of charge, reasonable access to,
and copies of, all documents, records, and other information relevant to the claim for benefits.
The notice shall describe any voluntary appeal procedures offered by the Plan and the appellant’s
right to obtain the information about such procedures. The notice shall also include a statement
of the appellant’s right to bring an action under Section 502(a) of ERISA.




          e. The decision of the Executive Vice President on the appeal shall be final, conclusive and
binding upon all persons and shall be given the maximum possible deference allowed by law.




     5. Exhaustion of Remedies. No legal or equitable action for benefits under the Plan
shall be brought unless and until the claimant has submitted a written claim for benefits in
accordance with Section J.2, has been notified that the claim is denied in accordance with Section
J.3, has filed a written request for a review of the claim in accordance with Section J.4, and has
been notified in writing that the Executive Vice President has affirmed the denial of the claim in
accordance with Section J.4.


K. DEFINITIONS




     For purposes of this Plan, the following terms shall have the meanings indicated:



     1. “Account” means the Account specified in Section E.1.



     2. “Administrator” shall mean the person specified in Section H.



     3. “Beneficiary” shall mean the person or entity described by Section E.6.



     4. “Board” shall mean the Board of Directors of McKesson.



     5. “Code” shall mean the Internal Revenue Code of 1986, as amended.



     6. “Company” shall mean McKesson and any member of its controlled group as defined by
Section 414(b) and Section 414(c) of the Code.



     7. “Compensation Committee” shall mean the Compensation Committee of the Board.



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     8. “Declared Rate” shall have the meaning described in Section E.1.



     9. “Disabled” or “Disability” shall mean that an individual is disabled within
the meaning of Section 409A(a)(2)(c) of the Code and is eligible for disability benefits under the
Federal Social Security Act as determined by the Social Security Administration.



     10. “Eligible Director” shall mean a member of the Board described by Section C.1.b.



     11. “Eligible Executive” shall mean an employee of the Company selected as being
eligible to participate in this Plan under Section C.1.a.



     12. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.



     13. “Identification Date” shall mean each December 31.



     14. “Key Employee” shall mean a Participant who, on an Identification Date, is:



          a. An officer of the Company having annual compensation greater than the compensation limit in
Section 416(i)(1)(A)(i) of the Code, provided that no more than fifty officers of the Company shall
be determined to be Key Employees as of any Identification Date;




          b. A five percent owner of the Company; or




          c. A one percent owner of the Company having annual compensation from the Company of more than
$150,000.



If a Participant is identified as a Key Employee on an Identification Date, then such Participant
shall be considered a Key Employee for purposes of the Plan during the period beginning on the
first April 1 following the Identification Date and ending on the next March 31.




     15. “McKesson” shall mean McKesson Corporation, a Delaware corporation.



     16. “Participant” shall be any Company executive or member of the Board for whom
amounts are credited to an Account under this Plan. Upon the Participant’s death, the
Participant’s Beneficiary shall be a Participant until all amounts are paid out of the
Participant’s Account.



     17. “Plan” shall mean the McKesson Corporation Deferred Compensation Administration
Plan III (“DCAP III”).



     18. “PSIP” shall mean the McKesson Corporation Profit-Sharing Investment Plan.



     19. “Prior Plan” shall mean the McKesson Corporation Deferred Compensation
Administration Plan II (“DCAP II”)



     20. “Retirement” shall mean Separation from Service after (a) the date on which the
Participant’s number of points under the Retirement Share Plan portion of the PSIP equals 65,



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(b) attaining eligibility for a Retirement Allowance under the terms of the Retirement Plan or
(c) receiving an Approved Retirement under the terms of the McKesson Corporation Executive Benefit
Retirement Plan. Notwithstanding the foregoing, for purposes of this Plan, Retirement for an
Eligible Director shall mean cessation of service as a member of the Board on or after the
completion of at least two successive terms as a member of the Board.




     21. “Retirement Plan” shall mean the McKesson Corporation Retirement Plan.



     22. “Separation from Service” shall mean termination of employment with the Company,
other than by reason of Disability or death. A Participant shall not be deemed to have Separated
from Service if the Participant continues to provide services to the Company in a capacity other
than as an employee and if the former employee is providing services at an annual rate that is
fifty percent or more of the services rendered, on average, during the immediately preceding three
full calendar years of employment with the Company (or if employed by the Company less than three
years, such lesser period) and the annual remuneration for such services is fifty percent or more
of the annual remuneration earned during the final three full calendar years of employment (of if
less, such lesser period); provided, however, that a Separation from Service will be deemed to have
occurred if a Participant’s service with the Company is reduced to an annual rate that is less than
twenty percent of the services rendered, on average, during the immediately preceding three full
calendar years of employment with the Company (or if employed by the Company less than three years,
such lesser period) or the annual remuneration for such services is less than twenty percent of the
annual remuneration earned during the three full calendar years of employment with the Company (or
if less, such lesser period).



     23. “Unforeseeable Emergency” means a severe financial hardship to the Participant
resulting from:



          a. An illness or accident of the Participant, the Participant’s spouse, or the Participant’s
dependent (as defined in Section 152(a) of the Code); or




          b. Loss of the Participant’s property due to casualty (including the need to rebuild a home
following damage to a home not otherwise covered by insurance); or




          c. Other similar extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant.



Hardship shall not constitute an Unforeseeable Emergency under the Plan to the extent that it is,
or may be, relieved by:




          a. Reimbursement or compensation, by insurance or otherwise;




          b. Liquidation of the Participant’s assets to the extent that the liquidation of such assets
would not itself cause severe financial hardship. Such assets shall include but not be limited to
stock options, Company stock, and 401(k) plan balances;




          c. Cessation of deferrals under the Plan.




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An Unforeseeable Emergency under the Plan does not include (among other events) sending a child to
college or purchasing a home.




     24. “Year” is the calendar year.


L. SUCCESSORS




     This Plan shall be binding on the Company and any successors or assigns thereto.


M. EXECUTION




     To record the adoption of the Plan by the Board of Directors of McKesson Corporation at a
meeting held on October 27, 2006.



McKESSON CORPORATION




	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Paul E. Kirincic
	 	 
	 

	 	Executive Vice President, Human Resources	 	 







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