exv10w4



 





Exhibit 10.4




McKESSON CORPORATION

1997 NON-EMPLOYEE DIRECTORS’ EQUITY COMPENSATION

AND DEFERRAL PLAN




(As Amended through January 29, 2003)




     1. Purpose of the Plan. The purpose of the McKesson Corporation 1997
Non-Employee Directors’ Equity Compensation and Deferral Plan (the “Plan”) is
to attract and retain qualified individuals not employed by McKesson
Corporation (the “Company”) or its subsidiaries to serve on the Board of
Directors of the Company and to further align the interests of such
non-employee directors with those of the stockholders of the Company.



     2. Definitions.



     (a) “Annual Meeting” shall mean the annual meeting of the stockholders of
the Company.



     (b) “Annual Retainer” shall mean any retainer fee paid to a non-employee
director for service on the Board during a Director Year.



     (c) “Board” shall mean the Board of Directors of the Company.



     (d) “Change in Control” of the Company shall mean the occurrence of any of
the following events:




     (i) Any “person” (as such term is used in sections 13(d) and 14(d)
of 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 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company’s
then outstanding securities; or




     (ii) During any period of not more than two consecutive years,
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 with the Company to effect a transaction
described in clause (i), (iii) or (iv) of this paragraph) whose election
by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds 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; or




     (iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) 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 (B) 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




     (iv) 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 the holders of the 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.



     (e) Effective July 26, 2000 “Committee” shall mean the Committee on
Directors and Corporate Governance of the Board of Directors.



     (f) “Committee Chairman Retainer” shall mean any fee paid to a
non-employee director for service as the chairman of any committee of the
Board.



     (g) “Common Stock” shall mean shares of Common Stock, par value $0.01 per
share, of the Company.



     (h) “DCAP II” shall mean the McKesson Corporation Deferred Compensation
Administration Plan II, as amended from time to time.



     (i) “Director Year” shall mean a calendar year.



     (j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.



     (k) “Fair Market Value” of a share of Common Stock as of a particular date
shall mean, if the Common Stock is not listed or admitted to trading on a stock
exchange, the average between the lowest reported bid price and highest
reported asked price of the



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Common Stock on such date in the over-the-counter market, or, if the Common Stock is then
listed or admitted to trading on any stock exchange, the composite closing
price on such date as reported in The Wall Street Journal.



     (l) “Fees” shall mean the sum, for any Director Year, of the Annual
Retainer, Meeting Fees and Committee Chairman Retainer.



     (m) “Meeting Fees” shall mean any fees paid to a non-employee director for
attending a meeting of the Board or a committee of the Board, including any
fees paid to a non-employee director for extraordinary or special Board and/or
committee meetings.



     (n) “Participant” shall mean a non-employee director of the Company
participating in the Plan.



     (o) “Restricted Stock Unit” shall mean a right to receive, in accordance
with the conditions set forth herein, a share of the Common Stock or,
alternatively, a cash payment equal to the Fair Market Value of a share of
Common Stock.



     (p) “Retainer Option” shall mean a stock option granted pursuant to the
Plan in lieu of all or a portion of a Participant’s Annual Retainer, as
provided in Sections 6(c) and 6(d)(iv).



     3. Effective Date, Duration of Plan. This Plan shall become effective as
of January 1, 1997, subject to the approval of the Plan by the stockholders of
the Company; provided, that if the Plan is so approved, any election made
hereunder prior to such approval shall be deemed effective as of the date such
election was made. The Plan will terminate on December 31, 2006 or such
earlier date as determined by the Board; provided that no such termination
shall affect rights earned or accrued under the Plan prior to the date of
termination.



     4. Participation. Subject to the prior approval of the Committee, each
member of the Board who is not an employee of the Company or any of its
subsidiaries shall be eligible to participate in the Plan.



     5. Common Stock Subject to the Plan.



     (a) Subject to Section 5(b) below, the maximum aggregate number of shares
authorized to be issued under the Plan shall be 1,286,000. All Restricted
Stock Units issued hereunder, whether or not distributed in the form of Common
Stock, shall count against such maximum. If any options granted hereunder
cease to be exercisable in whole or in part, any shares subject thereto but
with respect to which such option had not been exercised, shall not count
against such maximum. As the Committee shall determine from time to time, the
Common Stock may consist of either shares of authorized but unissued Common
Stock, or shares of authorized and issued Common Stock reacquired by the
Company and held in its treasury.



     (b) In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, stock or other property),
recapitalization, stock



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split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or share exchange or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee may, in its sole discretion and in such
manner as it may deem equitable, adjust any or all of (i) the number of shares
of Common Stock subject to the Plan, (ii) the number of shares of Common Stock
subject to outstanding awards under the Plan, and (iii) the grant or exercise
price with respect to any option.



     6. Restricted Stock Units; Deferrals.



     (a) Transition Grant. As soon as practicable following January 1, 1997,
each Participant shall receive an initial grant (the “Transition Grant”) of a
number of Restricted Stock Units in consideration for the termination of such
Participant’s accrued benefits and rights under the Company’s Director’s
Retirement Program (the “Prior Plan”); provided that the Transition Grant shall
be subject to the receipt by the Company of a written release from the
Participant, in the form approved by the Committee, consenting to such
termination. The number of Restricted Stock Units granted to a Participant in
respect of the Transition Grant shall equal the Accrued Benefit (as defined
below), divided by the Fair Market Value of a share of Common Stock as of
December 31, 1996. A Participant’s Accrued Benefit shall equal his or her
accrued benefit under the Prior Plan, as of December 31, 1996.



     (b) Annual Grant. On the date of each Annual Meeting prior to the
termination or expiration of the Plan, beginning with the 1997 Annual Meeting,
each Participant shall receive a grant of 400 Restricted Stock Units.
Effective January 27, 1999, the annual grants of 400 Restricted Stock Units
shall be discontinued.



     (c) Mandatory Deferral. On each date that any portion of the Annual
Retainer would otherwise be payable to a Participant prior to the termination
or expiration of the Plan, each such Participant shall be required to defer the
receipt of an amount equal to 50% of such portion of Annual Retainer (the
“Mandatory Deferral”), which amount shall be deferred in the form of Restricted
Stock Units or Retainer Options, as elected by the Participant prior to the end
of the calendar year preceding the year in which the Annual Retainer is
payable. In the event that a participant fails to make such an election with
respect to any calendar year in which he or she receives payment of an Annual
Retainer, the Participant shall be deemed to have elected to receive the Annual
Retainer in the form of Restricted Stock Units. The number of Restricted Stock
Units granted to a Participant in respect of such Mandatory Deferral shall
equal the Mandatory Retainer, divided by the Fair Market Value of a share of
Common Stock as of the last trading day of the calendar quarter immediately
preceding the date such Annual Retainer would otherwise be payable. Fractional
Shares shall be rounded up to the nearest whole share. To the extent
applicable, Restricted Stock Units granted pursuant to this paragraph shall be
subject to the same terms and conditions described in Section 6(d)(ii) below.
The number of Retainer Option shares granted to a Participant in respect of
such deferral shall be determined using the same conversion rate as employed in
that year for the purpose of determining the



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number of stock option shares to
be granted to employees in lieu of awards under the Company’s Management
Incentive Plan.



     (d) Optional Deferral. All Fees (other than the portion of Annual Retainer
subject to Mandatory Deferral described above) earned by a Participant in each
Director Year prior to the termination or expiration of the Plan shall be
subject to the following payment and deferral options. Each Participant may
elect by written notice to the Company, in accordance with the procedures
established by the Company, to participate in such payment and deferral
options.




     (i) Cash Alternative. Unless a valid election is made in accordance
with the procedures established by the Company, each Participant shall
receive payment of all Fees (other than the portion of Annual Retainer
subject to Mandatory Deferral described above) in the form of cash.




     (ii) Restricted Stock Unit Alternative. Subject to executing a
valid election with the Company (the “RSU Election”), each Participant
may elect to defer all or any portion of his or her Fees (other than the
portion of Annual Retainer subject to Mandatory Deferral described above)
in the form of Restricted Stock Units. The number of Restricted Stock
Units granted shall equal the amount of Fees so deferred, divided by the
Fair Market Value of the Common Stock as of the last trading day of the
calendar quarter in which such Fees would otherwise be payable.
Fractional Shares shall be rounded up to the nearest whole share. The
RSU Election (A) shall be in the form of a document executed by the
Participant and filed with the Secretary of the Company, (B) shall be
made before the first day of the calendar year in which the applicable
Fees are earned and shall become irrevocable on the last day prior to the
beginning of such calendar year, and (C) shall continue until the
Participant ceases to serve as a director of the Company or until he or
she terminates or modifies such election by written notice to the Company
in accordance with the procedures established by the Company, any such
termination or modification to be effective as of the end of the calendar
year in which such notice is given with respect to Fees otherwise payable
in subsequent calendar years. Any person who becomes a Participant
during any Director Year may execute an RSU Election prior to commencing
service on the Board with respect to Fees to be earned for the remainder
of such year and for future Director Years in accordance with the
procedures established by the Company.




     Each Restricted Stock Unit shall entitle the holder to, upon
distribution thereof (A) receive a cash payment equal to the Fair Market
Value of one share of Common Stock, or (B) have issued in his or her name
one share of Common Stock. In either case, each such Restricted Stock
Unit shall terminate upon distribution.




     The Company shall credit each Participant holding Restricted Stock
Units with a number of additional Restricted Stock Units equal to any
dividends and other distributions paid by the Company on an equivalent
number of shares of Common Stock, as of the date such dividends or
distributions are payable. Such additional Restricted Stock Units shall
thereafter be treated as any other Restricted Stock Units issued under
the Plan. Restricted Stock Units may not be sold,



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transferred, assigned,
pledged or otherwise encumbered or disposed of until such time as share
certificates for Common Stock are issued.




     Each Participant issued Restricted Stock Units shall execute a valid
distribution election in accordance with the procedures established by
the Committee (the “Distribution Election”). The Distribution Election
shall indicate (A) whether distribution shall be made in the form of
Common Stock or cash, (B) whether the distribution shall be made in a
single allotment or in substantially equal annual installments over a
period not to exceed ten (10) years and (C) with respect to Distribution
Elections filed on or after October 28, 1998, the date on which the
distribution shall commence in accordance with the next paragraph. The
Distribution Election (D) shall be in the form of a document executed by
the participant and filed with the Secretary of the Company, (E) shall be
made no later than twelve (12) months prior to the distribution date and
(F) shall become irrevocable twelve (12) months prior to the distribution
date.




     With respect to a
Distribution
Election completed
on or after October
28, 1998, the
Participant shall
elect whether
distributions shall
commence as soon as
practicable after
(i) the first
business day of
January of the
calendar year
following the
Participant’s
cessation from
service as a
director of the
Company; or (ii)
the first business
day of January of
any calendar year,
provided that such
calendar year is
not later than the
calendar year
following the
calendar year in
which the
Participant attains
age 72. All other
distributions shall
commence as soon as
practicable after
the first business
day of the January
following the
Participant’s
cessation from
service as a
director of the
Company. If no
valid Distribution
Election is made,
the Restricted
Stock Units shall
be distributed in a
lump sum as soon as
practicable after
the first business
day of January of
the calendar year
following the
Participant’s
cessation from
service as a
director of the
Company, in the
form of cash.
Participants who
receive Restricted
Stock Units shall
have no rights as
stockholders with
respect to such
Restricted Stock
Units until share
certificates for
Common Stock are
issued.
Notwithstanding any
provision to the
contrary, any
fractional shares of Common Stock issuable hereunder shall be paid in cash.
Upon the occurrence
of a Change in
Control, Common
Stock to be issued
in respect of all
Restricted Stock
Units shall be
immediately
distributed.




     (iii) DCAP II Alternative. Subject to executing an election in
accordance with the procedures established by the Company and the terms
of DCAP II, each Participant may elect to defer all or any portion of his
or her Fees (other than the portion of Annual Retainer subject to
Mandatory Deferral described above) under DCAP II.




     (iv) Retainer Option Alternative. Subject to executing an election
in accordance with the procedures established by the Company, each
Participant may elect to receive the portion of Annual Retainer not
subject to Mandatory Deferral, as described in Section 6(c) above, in the
form of Retainer Options. The number of Retainer Option shares granted
to a Participant with respect to such deferral shall be determined in the
manner described in Section 6(c) above.



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     7. Stock Options.



     (a) Discretionary Grants. The Committee may, in its sole discretion,
grant options to purchase Common Stock to Participants, pursuant to such terms
and conditions that it may deem advisable, so long as not inconsistent with
Section 7(d) below or any other terms of this Plan.



     (b) Formula Grants. Each Participant then serving as a non-employee
director of the Company shall automatically receive, on the date of each
January meeting of the Board, an option to purchase 7,500 shares of Common
Stock (subject to adjustment as provided in Section 5(b) above); provided
however, that a Participant who is elected to the Board after the January
meeting of the Board shall be granted, as of the date of election, a prorated
number of options with respect to the initial year of participation in the
Plan, based on the number of full calendar quarters remaining in the calendar
year in which the Participant is elected to the Board. The options granted
pursuant to this Section 7(b) shall be exercisable in full beginning one year
from the date of grant and have an option term of ten years; provided however,
that shares not vested at the time a Participant terminates service as a
Non-Employee Director shall be cancelled.



     (c) Retainer Option Grants. At the same time that the Company makes stock
option grants annually to eligible employees, each Participant who has made an
election to receive a Retainer Option pursuant to Section 6(c) or 6(d)(iv) with
respect to all or any portion of the Annual Retainer to be paid in such year
shall be granted an option to purchase that number of shares of Common Stock
determined pursuant to Section 6(c) and/or Section 6(d)(iv), as applicable.
The terms of such Retainer Options shall be as prescribed by the Committee, so
long as such terms are not inconsistent with Section 7(d) below or any other
terms of this Plan.



     (d) Terms and Conditions of Options. Except as provided in Section 7(b)
above, the following terms and conditions shall apply to all options granted to
Participants under the Plan.




     (i) The exercise price of each option shall not be less than the
Fair Market Value of the Common Stock covered by the option on the date
the option is granted.




     (ii) Each option granted pursuant to the Plan shall be evidenced by
a written grant agreement (the “Agreement”) executed by the Company and
the person to whom such option is granted which shall provide such terms
and conditions as the Committee may determine, in its sole discretion, so
long as not inconsistent with the terms of this Plan.




     (iii) The term of each option shall be for no more than ten years.




     (iv) The Agreement may contain such other terms, provisions, and
conditions as may be determined by the Committee (not inconsistent with
this Plan). Unless otherwise provided in the Agreement and excluding
options granted under paragraph (b) above, the Committee may, in its sole
discretion, extend the post-



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termination exercise period with respect to
an option (but not beyond the original term of such option).




     (v) Payment of the purchase price upon exercise of any option shall
be made in cash; provided that the Committee, in its sole discretion, may
permit an option holder to pay the option price by such other method that
it may deem appropriate, including, without limitation, by tendering to
the Company shares of Common Stock owned by the option holder, and having
a Fair Market Value equal to the option price. Such stock surrender
method may permit an election by the option holder to have the unrealized
gain with respect to the option denominated in stock units (based on the
fair market value of a share of Common Stock on the date of exercise) and
paid in shares of Common Stock at the time specified by the Participant
at the time of making the stock surrender option gain deferral election.
During the deferral period each such stock unit shall be credited with
additional stock units equal to any dividends or other distributions paid
by the Company on an equivalent number of shares of Common Stock, as of
the date such dividends or distributions are payable. Stock units may
not be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of until such time as share certificates for Common Stock are
issued.




     (vi) All such options shall be designated as stock options which do
not qualify under Section 422 of the Internal Revenue Code of 1986, as
amended.




     (vii) Unless otherwise provided in an Agreement, options granted
under the Plan will become immediately and fully vested and exercisable
upon the occurrence of a Change in Control.



     8. Administration. The Plan shall be administered by the Committee. The
Committee shall have full power to interpret the Plan and formulate additional
details and regulations for carrying out the Plan. Any decision or
interpretation adopted by the Committee shall be final and conclusive.



     9. No Right to Serve. Nothing in the Plan shall confer upon any
Participant the right to remain in service as a member of the Board.



     10. Amendment and Termination. The Board at any time may amend or
terminate the Plan; provided that any such amendment or termination does not
adversely affect the rights of any Participant.



     11. Governing Law. The validity, construction and effect of the Plan and
any such actions taken under or relating to the Plan shall be determined in
accordance with the laws of the State of California.



     12. Notices. All notices under this Plan shall be sent in writing to the
Secretary of the Company. All correspondence to the Participants shall be sent
in writing to the Participant at the address which is their recorded address as
listed on the most recent election form or as specified in the Company’s
records.



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     13. Unfunded Status of Awards. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. Nothing contained
hereunder shall give any Participant any rights that are greater than those of
an unsecured general creditor of the Company.



     14. Assignability.



     (a) General Rule. Each option granted pursuant to this Plan shall, during
the Participant’s lifetime, be exercisable only by him. No option nor any
right thereunder shall be transferable by the Participant by operation of law
or otherwise except to the extent permitted by Section 14(b).



     (b) Exceptions to General Rule. Notwithstanding Section 14(a), this Plan
shall not preclude:




     (i) any Participant from designating a beneficiary to succeed, after
the Participant’s death, to all of the Participant’s options outstanding
on the date of the Participant’s death (including, without limitation,
the right to exercise any unexercised options); or




     (ii) any Participant from transferring an option or any right
thereunder pursuant to a qualified domestic relations order as defined in
the Internal Revenue Code of 1986, as amended, or the Employee Retirement
Income Security Act of 1974, as amended; or




     (iii) any Participant from voluntarily transferring any option
granted pursuant to this Plan to a family member as a gift or through a
transfer to an entity in which more than fifty percent of the voting
interests are owned by family members (or the Participant) in exchange
for an interest in that entity.



     (c) Definitions.




     (i) Beneficiary. The term “beneficiary” shall mean a person or
persons designated by the Participant to succeed to, in the event of
death, all outstanding options granted to the Participant or any right
thereunder. Any Participant, subject to applicable laws and such
limitations as may be prescribed by the Committee, to designate one or
more persons primarily or contingently as beneficiaries in writing by
notice delivered to the Company, and to revoke such designations in
writing. If a Participant fails effectively to designate a beneficiary,
or if the Participant’s designated beneficiary(ies) does not survive the
Participant, the Participant’s estate shall be the Participant’s
beneficiary.




     (ii) Family Member. The term “family member” shall include any
person identified as an “immediate family” member in Rule 16(a)-1(e) of
the Exchange Act, as such Rule may be amended from time to time.
Notwithstanding the foregoing, the Committee may designate any other
person(s) or entity(ies) as a “family member.”




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