exv10w43



 





EXHIBIT 10.43




EXTENDED EMPLOYMENT AGREEMENT




     This EXTENDED EMPLOYMENT AGREEMENT (the “Agreement”), effective as of
April 1, 2004 (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 Amended and Restated Employment Agreement dated as of June 21, 1999
(the “Prior Employment Agreement”);



     B. WHEREAS, the Prior Employment Agreement required the Company to offer
to continue Executive’s employment on certain terms and conditions identical to
those contained in the Prior Employment Agreement;



     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 March 31, 2009, unless terminated earlier in accordance
with Paragraph 7 below; provided, however, that beginning on
April 1, 2006, this Agreement shall begin renewing
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 Nine Hundred and Ninety-Five
Thousand Dollars ($995,000) per year, or such higher salary as
may be from time to time approved by the Board (or any duly
authorized Committee thereof) (any such higher salary so
approved to be thereafter the minimum salary payable to
Executive during the remainder of the Term hereof), plus such
additional incentive compensation, if any, as may be awarded
to him




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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 One Hundred and Thirty-Five
Percent (135%) of his base salary for the applicable Year (as
defined in the MIP). In addition, in years when the Company
achieves one hundred percent (100%) of the Business Scorecard
Target applicable to Executive, Executive will receive an
award of restricted stock (or a similar equity equivalent)
equal in value on the date of grant to fifty percent (50%) of
Executive’s actual MIP award. The value of such award, on
the date of grant (i.e., the number of shares multiplied by
the fair market value of each share on the date of grant)
shall be considered compensation in determining “Average
Final Compensation” for purposes of the McKesson Executive
Benefit Retirement Plan (“EBRP”). Executive shall also
receive an automobile allowance from the Company of One
Thousand Dollars ($1,000.00) per month during the Term of
this Agreement.
	 
	 	(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. 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 deemed to
have been violated




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	 	 	 	by Executive except to the extent his activities would also
constitute a violation of similar provisions contained
herein. In addition to the foregoing:






	 	(i)	 	Sign-On Bonus. Executive will
receive a special, one-time sign-on bonus in the amount
of One Million Dollars ($1,000,000) upon execution and
delivery of this Agreement.
	 
	 	(ii)	 	Housing Loan. Executive and the
Company acknowledge and agree that the terms and
conditions of the housing loan between Executive and the
Company remain in full force and effect.






	 	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(a) 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(a) 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.




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	 	(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 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




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	 	 	 	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 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




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	 	 	 	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; (ii) hiring or attempting to hire any
employee of the Company or any of its affiliated companies;
or (iii) 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, (x) 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; or (y) 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.
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)	 	Remedy for Breach. Executive agrees that in the
event of a breach or threatened breach of any of the covenants
contained in this Paragraph 6, the Company shall have the
right and remedy to have such covenants specifically enforced
by any court having jurisdiction, it being acknowledged and
agreed that any material breach of any of the covenants will
cause irreparable injury to the Company and that money damages
will not provide an adequate remedy to the Company.






	 	7.	 	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




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	 	 	 	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 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.




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	 	(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.






	 	(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




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	 	 	 	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; or (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. 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 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.




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	 	(ii)	 	Voluntary Resignation.
	 
	 	 	 	(A) If Executive resigns other than for Good Reason
prior to April 1, 2006, 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), a pension
benefit under the EBRP calculated at the initial level
of 60% of Average Final Compensation (as modified by
Paragraph 4(a) above) and increased by 1.5% per full
year from April 1, 2004 until his resignation, which
shall be payable at age 65, with the right to elect an
immediate lump-sum payout of this EBRP benefit
reflecting a full actuarial reduction (using the
interest and mortality assumptions then in effect for
determining immediate lump sum payouts of EBRP
benefits).
	 
	 	 	 	(B) If Executive resigns other than for Good Reason
after March 31, 2006, 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(a) 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 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,




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	 	 	 	(A) continue Executive’s then base salary, without
increase, for the remainder of the Term (the “Severance
Period”),
	 
	 	 	 	(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 (plus a cash-value equivalent
of restricted stock equal to 50% of such Individual
Target Award) existing at the time of his termination
of employment,
	 
	 	 	 	(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 II, and Executive’s
automobile allowance 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 to the EBRP, a
benefit calculated at the initial level of 60% of
Average Final Compensation (as defined in Paragraph
4(a) 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




12









 






	 	 	 	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 II 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).






	 	(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




13









 






	 	 	 	(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.
	 
	 	(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) any Person (as defined in section
3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and as such term is
modified in sections 13(d) and 14(d) of the Exchange
Act), excluding the Company or any of its subsidiaries,
a trustee or any fiduciary holding securities under an
employee benefit plan of the Company or any of its
subsidiaries, 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
30% or more of the combined voting power of the
Company’s then outstanding securities; (B) 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 (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,




14









 






	 	 	 	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 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.




15









 






	 	(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.	 	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




16









 






	 	 	 	Code) in excess of the Base Amount (as defined in section,
280G(b)(3) of the Code) allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax,
and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in
accordance with the principles of sections 280G(d)(3) and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of
Executive’s residence on the date of termination (or if there
is no date of termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Paragraph
9(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 9 shall survive any termination of employment, any
payments hereunder or any termination of obligations
hereunder; provided, however, that this Paragraph 9 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.




17









 












	 	10.	 	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 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




18









 






	 	 	 	be chosen by mutual agreement of the parties or, if the
parties are unable to agree upon an arbitrator within a
reasonable period of time, then a neutral and impartial
arbitrator shall be appointed in accordance with the
arbitrator nomination and selection procedure set forth in
the AAA Rules. The arbitrator shall apply the same
substantive law, with the same statutes of limitations and
remedies, that would apply if the claims were brought in
court. The arbitrator also shall prepare a written decision
containing the essential findings and conclusions upon which
the decision is based. Either party may bring an action in
court to compel arbitration under this Agreement or to
enforce an arbitration award. Otherwise, neither party shall
initiate or prosecute any lawsuit in any way related to any
claim subject to this agreement to arbitrate. Any
arbitration held pursuant to this 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







19









 






	 	 	 
	

	 	Attention: Office of the General Counsel
	 
	 	 
	If to Executive:

	 	John H. Hammergren
	

	 	c/o McKesson Corporation
	

	 	One Post Street
	

	 	San Francisco, CA 94104








	 	 	 	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
	

	 	 	 	Senior Vice President, Human Resources
	 
	 	 	 	 
	ATTEST:
	 	 	 	 
	 
	 	 	 	 
	


	 	 	

	Senior Vice President and Secretary

	 	 	John Hammergren
	 
	 	 	 	 
	By the Authority of the
	 	 	 	 
	Compensation Committee of the
	 	 	 	 
	Board of Directors of
	 	 	 	 
	McKesson Corporation
	 	 	 	 
	on March     , 2004
	 	 	 	 








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