Document:

exv10w32

 

Exhibit 10.32

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), dated as of November 1, 2006
(the “Effective Date”), is by and between McKesson Corporation (the “Company”), a Delaware
corporation with its principal office at One Post Street, San Francisco, California, and Paul C.
Julian (“Executive”).

RECITALS

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

     B. WHEREAS, Executive and the Company wish to amend and restate the terms of Executive’s
employment with the Company, as set forth herein;

     C. The Company, in its business, develops and uses certain Confidential Information (as
defined in Paragraph 7(c) below). Such Confidential Information will necessarily be communicated
to or acquired by Executive by virtue of his employment with the Company, and the Company has spent
time, effort and money to develop such Confidential Information and to promote and increase its
goodwill; and

     D. 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 Executive Vice
President and Group President, or in such other senior corporate executive capacity or capacities
as may be specified from time to time by the Chief Executive Officer of the Company (the “Chief
Executive Officer”).

          3. Terms and Duties:

               (a) Term of Employment. The period of Executive’s employment under this Agreement
shall be deemed to have commenced on the date of this Agreement and shall continue until the third
anniversary of the Effective Date; provided, however, that the term of this Agreement shall
automatically be extended for one (1) additional year on each

 

 

anniversary of the Effective Date, unless terminated earlier in accordance with Paragraph 8
below (the “Term”).

               (b) Duties. During the period of his employment hereunder and except for illness,
reasonable vacation periods and reasonable leaves of absence, Executive shall devote his best
efforts and all his business time, attention and skill to the business and affairs of the Company
and its affiliated companies, as such business and affairs now exist and as they may be hereafter
changed or added to, under and pursuant to the general direction of the Board of Directors of the
Company (the “Board”); provided, however, that, with the approval of the Chief Executive Officer,
Executive may serve, or continue to serve, on the boards of directors of, hold any other offices or
positions in, companies or organizations which, in such officer’s judgment, will not present any
conflict of interest with the Company or any of its subsidiaries or affiliates or divisions, or
materially affect the performance of Executive’s duties pursuant to this Agreement. The Company
shall retain full direction and control of the means and methods by which Executive performs the
services for which he is employed hereunder. The services which are to be employed by Executive
hereunder are to be rendered in the State of California, or in such other place or places in the
United States or elsewhere as may be determined from time to time by the Board, but are to be
rendered primarily at the headquarters of the Company in San Francisco, California.

          4. Compensation and Reimbursement of Expenses.

               (a) Compensation. During the period of his employment hereunder, Executive shall be
paid a salary, in monthly or semi-monthly installments (in accordance with the Company’s normal
payroll practices for senior executive officers), at the rate of Eight Hundred Forty Thousand,
Eight Hundred and Twenty-Nine Dollars ($840,829) per year, or such higher salary as may be from
time to time approved by the Board (or any duly authorized Committee thereof) (any such higher
salary so approved to be thereafter the minimum salary payable to Executive during the remainder of
the term hereof), plus such additional incentive compensation, if any, as may be awarded to him
yearly by the Board (or any duly authorized Committee thereof). For purposes of the MIP (as
defined in paragraph 5 below), for each of the Company’s fiscal years ending during the term of
this Agreement, Executive’s Individual Target Award shall be 100% during fiscal year 2007 and 110%
thereafter of his base salary for the applicable Year (as defined in the MIP).

               (b) Reimbursement of Expenses. The Company shall pay or reimburse Executive, in
accordance with its normal policies and practices, for all reasonable travel and other expenses
incurred by Executive in performing his obligations hereunder.

          5. Other Benefits. During the period of his employment hereunder, Executive shall be
entitled to receive all other benefits of employment generally available to other members of the
Company’s senior management and those benefits for which key executives are or shall become
eligible, when and as he becomes eligible therefore, including without limitation, group health and
life insurance benefits, short and long-term disability plans, deferred compensation plans, and
participation in the Company’s Profit-Sharing Investment Plan, Employee Stock Purchase Plan,
Executive Medical Plan, Management Incentive Plan (“MIP”), Executive Benefit Retirement Plan
(“EBRP”), Executive Survivor Benefits Plan

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(“ESBP”), Stock Purchase Plan and 1994 Stock Option and Restricted Stock Plan (or any other
similar plan or arrangement).

          6. Benefits Payable Upon Disability or Death.

               (a) Disability Benefits. If, during the term of this Agreement, 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 shall cease and terminate.

               (b) Death Benefits. In the event of the death of Executive during the term of this
Agreement, Executive’s salary payable hereunder shall continue to be paid to Executive’s surviving
spouse or, if there is no spouse surviving, then to Executive’s designee or representative (as the
case may be) through the six-month period following the end of the calendar month in which
Executive’s death occurs. Thereafter, all of the Company’s obligations hereunder shall cease and
terminate.

               (c) Other Plans. The provisions of this Paragraph 6 shall not affect any rights of
Executive’s heirs, administrators, executors, legatees, beneficiaries or assigns under the
Company’s Profit-Sharing Investment Plan, EBRP, ESBP, 1994 Stock Option and Restricted Stock Plan
(or any other similar plan or arrangement), any stock purchase plan or any other employee benefit
plan of the Company, and any such rights shall be governed by the terms of the respective plans.

          7. Obligations of Executive During and After Employment.

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

               (b) Unauthorized Use of Confidential Information. Executive acknowledges and agrees
that (i) during the course of his employment Executive will have produced and/or have access to
Confidential Information (as defined in subparagraph (c) hereof), of the Company and its affiliated
companies, and (ii) the unauthorized use or sale of any of such

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confidential or proprietary information at any time would harm the Company and would
constitute unfair competition with the Company either during or after the term of this Agreement.
Therefore, during and subsequent to his employment by the Company and its affiliated companies,
Executive agrees to hold in confidence and not, directly or indirectly, disclose, use, copy or make
lists of any such information, except to the extent expressly authorized by the Company in writing
or as required by law. All records, files, drawings, documents, equipment, and the like, or copies
thereof, relating to the Company’s business, or the business of any of its affiliated companies,
which Executive shall prepare, use, or come into contact with, shall be and remain the sole
property of the Company, and shall not be removed (except to allow Executive to perform his
responsibilities hereunder while traveling for business purposes or otherwise working away from his
office) from the Company’s or the affiliated company’s premises without its prior written consent,
and shall be promptly returned to the Company upon termination of employment with the Company and
its affiliated companies. This Paragraph 7 (b) shall survive the termination or expiration of this
Agreement.

               (c) Confidential Information Defined. For purposes of this Agreement, “Confidential
Information” means all information (whether reduced to written, electronic, magnetic or other
tangible form) acquired in any way by Executive during the course of his employment with the
Company or any of its affiliated companies concerning the products, projects, activities, business
or affairs of the Company and its affiliated companies, or the Company’s or any of its affiliated
company’s customers, including without limitation, (i) all information concerning trade secrets of
the Company and its affiliated companies, including computer programs, system documentation,
special hardware, product hardware, related software development, manuals, formulae, processes,
methods, machines, compositions, ideas, improvements or inventions of the Company and its
affiliated companies, (ii) all sales and financial information concerning the Company and its
affiliated companies, (iii) all customer and supplier lists of the Company and its affiliated
companies, (iv) all information concerning products or projects under development by the Company or
any of its affiliated companies or marketing plans for any of those products or projects, and (v)
all information in any way concerning the products, projects, activities, business or affairs of
customers of the Company or any of its affiliated companies which was furnished to him by the
Company or any of its agents or customers; provided, however, that Confidential Information does
not include information which (A) becomes available to the public other than as a result of a
disclosure by Executive, (B) was available to him on a non-confidential basis outside of his
employment with the Company, or (C) becomes available to him on a non-confidential basis from a
source other than the Company or any of its agents, creditors, suppliers, lessors, lessees or
customers.

               (d) Nonsolicitation of Employees. Executive recognizes and acknowledges that it is
essential for the proper protection of the business of the Company and its affiliated companies
that Executive be restrained for a reasonable period following the termination of Executive’s
employment with the Company and its affiliated companies from (i) soliciting or inducing any
employee of the Company or any of its affiliated companies to leave the employ of the Company or
any of its affiliated companies, and (ii) hiring or attempting to hire any employee of the Company
or any of its affiliated companies. Accordingly, Executive agrees that during the term of his
employment hereunder, and for the Nonsolicitation Period thereafter following the termination of
Executive’s employment with the Company and its affiliated companies for any reason, Executive
shall not, directly or indirectly, hire, solicit, aid in

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or encourage the hiring and/or solicitation of, contract with, aid in or encourage the
contracting with, or induce or encourage to leave the employment of the Company or any its
affiliated companies any employee of the Company or any of its affiliated Companies. For purposes
of this Paragraph 7(d), the “Nonsolicitation Period” shall be deemed to be the longer of (i) two
(2) years following termination of Executive’s employment for any reason, or (ii) the period
during which Executive is receiving salary continuation payments hereunder. Should Executive
violate his obligations under this Paragraph 7(d), any further salary continuation payments or
other severance benefits shall immediately cease. This Paragraph 7(d) shall survive the
termination or expiration of this Agreement.

               (e) Nonsolicitation of Customers. Executive recognizes and acknowledges that it is
essential for the proper protection of the business of the Company and its affiliated companies
that Executive be restrained for a reasonable period following the termination of Executive’s
employment with the Company and its affiliated companies from soliciting the trade of or trading
with the customers of the Company or any of its affiliated companies for any competitive business
purpose. Accordingly, Executive agrees that during the term of his employment hereunder, and for
the Nonsolicitation Period thereafter following the termination of Executive’s employment with the
Company and its affiliated companies for any reason, Executive shall not, directly or indirectly,
solicit, aid in or encourage the solicitation of, contract with, aid in or encourage the
contracting with, service, or contact any person or entity which is, or was, within three years
prior to the termination of Executive’s employment with the Company and its affiliated companies, a
customer or client of the Company or any of its affiliated companies for the purpose of offering or
selling a product or service competitive with any of those offered by the Company or any of its
affiliated companies. For purposes of this Paragraph 7(e), the “Nonsolicitation Period” shall be
deemed to be the longer of (i) two (2) years following termination of Executive’s employment for
any reason, or (ii) the period during which Executive is receiving salary continuation payments
hereunder. Should Executive violate his obligations under this Paragraph 7(e), any further salary
continuation payments or other severance benefits shall immediately cease. This Paragraph 7(e)
shall survive the termination or expiration of this Agreement

               (f) Remedy for Breach. Executive agrees that in the event of a breach or threatened
breach of any of the covenants contained in this Paragraph 7, the Company shall have the right and
remedy to have such covenants specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that any material breach of any of the covenants will cause irreparable
injury to the Company and that money damages will not provide an adequate remedy to the Company.

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

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reduced form, such provision shall then be enforceable to the maximum extent permitted by
applicable law.

               (h) Mutual Dependence. Executive understands and agrees that her full compliance with
Section 7 of this Agreement is an express condition for and mutually dependent upon the obligations
of the Company to pay Executive her compensation and benefits, including severance pay, during the
remainder of the Term. Executive further understands and agrees that in the event that any
provisions of Section 7 of this Agreement are rendered void, invalid, illegal or otherwise
unenforceable, in whole or in substantial part, as a result of actions not initiated by the
Company or its agent, the Company’s obligations to pay Executive her Base Salary, bonus or any other
compensation and benefits, including severance pay, may be terminated immediately.

          8. Termination.

               (a) For Cause. Notwithstanding anything herein to the contrary, the Company may,
without liability, terminate Executive’s employment hereunder for Cause (as defined below) at any
time upon written notice from the Board (or any duly authorized Committee thereof) specifying such
Cause, and thereafter, the Company’s obligations hereunder shall cease and terminate; provided,
however, that such written notice shall not be delivered until after the Board (or any duly
authorized Committee thereof) shall have given Executive written notice specifying the conduct
alleged to have constituted such Cause and Executive has failed to cure such conduct, if curable,
within fifteen (15) days following receipt of such notice. As used herein, the term “Cause” shall
mean negligent or willful engagement in misconduct which, in the sole determination of the Chief
Executive Officer (or his designee), is injurious to the Company, its employees, or its customers.

               (b) Arbitration Required to Confirm Cause. In the event of a termination for Cause
pursuant to subparagraph (a) above, the Company shall continue to pay Executive’s then current
compensation as specified in this Agreement until the issuance of an arbitration award affirming
the Company’s action. Such arbitration shall be held in accordance with the provisions of
Paragraph 12(d) below. In the event the award upholds the action of the Company, Executive shall
promptly repay to the Company any sums received pursuant to this subparagraph 8(b), following
termination of employment.

               (c) Other than For Cause, Performance, Reorganization. Notwithstanding anything
herein to the contrary, the Company may also terminate Executive’s employment (without regard to
any general or specific policies of the Company relating to the employment or termination of its
employees) (i) should Executive fail to perform his duties hereunder in a manner satisfactory to
the Chief Executive Officer, (ii) should Executive’s position be eliminated as a result of a
reorganization or restructuring of the Company or any of its affiliated companies, or (iii) for any
other reason or reasons, in the Company’s sole discretion.

               (d) Obligations of the Company on Termination of Employment.

                    (i) If the Company terminates Executive’s employment pursuant to subparagraph 8(a) above and
the Company’s action is affirmed as specified in subparagraph 8(b) above or Executive terminates
his employment with the Company other than

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for Good Reason (as defined in subparagraph (d)(iii) below), then all of the Company’s
obligations hereunder shall immediately cease and terminate. Executive shall thereupon have no
further right or entitlement to additional salary, incentive compensation payments or awards, or
any perquisites from the Company whatsoever, and Executive’s rights, if any, under the Company’s
employee and executive benefit plans shall be determined solely in accordance with the express
terms of the respective plans.

                    (ii) If the Company terminates Executive’s employment pursuant to subparagraph 8(c) above or
Executive terminates his employment with the Company for Good Reason prior to the expiration of the
Term, then in lieu of any benefits payable pursuant to the Company’s Executive Severance Policy (so
long as the compensation and benefits payable hereunder equal or exceed those payable under said
Policy) and in complete satisfaction and discharge of all of its obligations to Executive
hereunder, the Company shall, provided Executive is not in breach of the provisions of Paragraph 7
hereof and except as provided in Paragraph 9 below, and conditioned upon Executive’s execution of a
full release of claims, (A) provide Executive with monthly cash payments equal to Executive’s final
monthly base salary (“Severance”) for the remainder of the Term (the “Severance Period”); provided
that, if such payment is deferred in accordance with Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), it shall accrue interest at the Deferred Compensation Administration
Plan III Rate (the “DCAP Rate”) for the period of such deferral, which interest shall be paid
together with such payment, and further provided that the Company’s obligation to make such
Severance payments shall be reduced by any compensation received by Executive from a subsequent
employer during the Severance Period, (B) consider Executive for a bonus under the terms of the
Company’s MIP for the fiscal year in which termination occurs (but not for any subsequent year)
provided that any such bonus, if earned, shall be pro-rated to reflect the portion of the year for
which Executive was actively employed, and shall be made at the time and in the manner applicable
to MIP payments for current employees; provided, however, that, if such payment is deferred in
accordance with Section 409A of the Code (“Section 409A”), it shall accrue interest at the DCAP
Rate for the period of such deferral, which interest shall be paid together with such payment, (C)
continue Executive’s Executive Medical Plan benefits until the end of the Severance Period, (D)
subject to the express special forfeiture and repayment provisions of the respective plans (or the
terms and conditions applicable thereto), continue the accrual and vesting of Executive’s rights,
benefits and existing awards for the remainder of the Severance Period for purposes of the EBRP,
ESBP, and the Stock Option and Restricted Stock Plan (or any other similar plan or arrangement);
provided, however, that (unless otherwise provided by the terms of the applicable plan; or unless
the Board, or any duly authorized Committee thereof, in its sole discretion determines otherwise)
Executive shall in no event receive or be entitled either to additional grants or awards subsequent
to the date of termination, nor “Approved Retirement” status, under the foregoing plans, and (E)
terminate Executive’s participation in the Company’s tax-qualified profit-sharing plans, long-term
incentive plan, and stock purchase plans, pursuant to the terms of the respective plans, as of the
date of Executive’s termination of employment.

                    (iii) For purposes of this Agreement, “Good Reason” shall mean any of the following actions,
if taken without the express written consent of Executive: (A) any material change by the Company
in Executive’s functions, duties or responsibilities as Executive Vice President and Group
President, which change would cause Executive’s position

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with the Company to become of less dignity, responsibility, importance, or scope as compared
to the position and attributes that applied to Executive as of the Effective Date; (B) any
reduction in Executive’s base salary, other than a proportional reduction effected as part of an
across-the board reduction affecting all executive employees of the Company; (C) any material
failure by the Company to comply with any of the provisions of the Agreement; (D) the Company’s
requiring Executive to be based at any office or location more than 25 miles from the office at
which Executive is based as of the Effective Date, except for travel reasonably required in the
performance of Executive’s responsibilities; or (E) in the event of a Change in Control, any change
in the level of officer within the Company to whom Executive reports, as this reporting
relationship existed immediately prior to a Change in Control.

          9. Termination in Connection with a Change in Control. Notwithstanding the provisions
of Paragraph 8(d), in the event of an occurrence of a 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:

               (a) If the Company terminates Executive’s employment pursuant to Paragraph 8(c) above or
otherwise without Cause or Executive terminates his employment with the Company for Good Reason,
then the Company shall, in lieu of the benefits payable under Paragraph 8(d)(ii) above, immediately
pay to Executive in a cash lump sum an amount equal to 2.99 multiplied by Executive’s Earnings and
shall take all actions described in clauses (C) through (E) in Paragraph 8(d)(ii) hereof; provided
that, if such payment is deferred in accordance with Section 409A, it shall accrue interest at the
DCAP Rate for the period of such deferral, which interest shall be paid together with such payment.
For purposes of this Section 9(a), “Earnings” shall mean the sum of (i) Executive’s annual base
salary and (ii) the greater of Executive’s target bonus under the MIP or the average MIP bonus paid
Executive over the prior three fiscal years.

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

          10. Excise Tax Payment

               (a) If, as a result of Executive’s employment with the Company or termination thereof, the
benefits received by Executive under Section 9 above (the “Total Payments”) are subject to the
excise tax provision set forth in Section 4999 of the Code (the “Excise Tax”), the Company shall
pay to Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by
Executive, after deduction of any Excise Tax on the benefits received hereunder and any Federal,
state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be
equal to the Total Payments.

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               (b) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as
“parachute payments” (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion
of tax counsel (“Tax Counsel”) reasonably acceptable to Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the
“Auditor”), such payments or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (ii) all “excess parachute payments”
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax
unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part)
represent “reasonable compensation” for services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in Section, 280G(b)(3) of the
Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax,
and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay
federal income tax at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Executive’s residence on the date of termination (or
if there is no date of termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Paragraph 10(b)), net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.

               (c) In the event that the Excise Tax is finally determined to be less than the amount taken
into account hereunder in calculating the Gross-Up Payment, Executive shall repay to the Company,
within five (5) business days following the time that the amount of such reduction in the Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and
local income and employment taxes imposed on the Gross-Up Payment being repaid by Executive, to
the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in Executive’s taxable income and wages for purposes of federal, state and local income
and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided
in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed
the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason
of any payment the existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of such excess plus any
interest, penalties or additions payable by Executive with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally determined. Executive
and the Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.

               (d) Notwithstanding anything else herein, this Paragraph 10 shall survive any termination of
employment, any payments hereunder or any termination of obligations hereunder; provided, however,
that this Paragraph 10 shall not survive any

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termination of employment for Cause that occurs prior to a Change in Control or any payments
or termination of obligations in connection with such termination for Cause.

          11. Compliance with Section 409A

     Notwithstanding anything in this Agreement to the contrary, the Company shall administer and
construe this Agreement in accordance with Section 409A, the regulations promulgated thereunder,
and any other published interpretive authority, as issued or amended from time to time, so as not
to subject Executive to the additional tax and interest imposed under Section 409A. To the extent
that the Company and/or Executive reasonably determine that any amount payable under this Agreement
would trigger the additional tax imposed by Section 409A, the Company and Executive shall promptly
agree in good faith on appropriate modifications to the Agreement (including delaying or
restructuring payments) to avoid such additional tax yet preserve (to the nearest extent reasonably
possible) the intended benefit payable to Executive. If Executive incurs liability under Section
409A(a)(1)(B) as a direct result of the Company’s failure to fulfill the foregoing obligations, the
Company will indemnify and hold Executive harmless from such liability; provided, however, that the
Company shall have no obligation under this provision for any such failures that are attributable
to Executive’s own willful acts or omissions or to Executive’s demand for a distribution of
benefits notwithstanding a recommendation of the Company against the distribution.

          12. General Provisions

               (a) Executive’s rights and obligations hereunder shall not be transferable by assignment or
otherwise. Nothing in this Agreement shall prevent the consolidation of the Company with, or its
merger into, any other corporation, or the sale by the Company of all or substantially all of its
properties or assets; and this Agreement shall inure to the benefit of, be binding upon and be
enforceable by, any successor surviving or resulting corporation, or other entity to which such
assets shall be transferred. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.

               (b) This Agreement constitutes the entire agreement between the parties hereto in respect of
the employment of Executive by the Company. This Agreement supersedes and replaces all prior oral
and written agreements, understandings, commitments, and practices between the parties including,
but not limited to, the Prior Employment Agreement.

               (c) In the event Executive’s employment with the Company shall terminate under circumstances
otherwise providing Executive with a right to benefits under both the Company’s Executive Severance
Policy and Paragraph 8(d)(ii) of this Agreement, Executive shall be entitled to receive the greater
of the benefits provided therein or herein, calculated individually, without duplication.

               (d) Executive and the Company agree that any dispute, controversy or claim between them, other
than any dispute, controversy claim or breach arising under Paragraph 7 of this Agreement, shall be
settled exclusively by final and binding arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (the “AAA Rules”). A
neutral and impartial arbitrator shall be chosen

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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. Each party shall pay its own
costs and attorneys’ fees, unless a party prevails on a statutory claim and the statute provides
that the prevailing party is entitled to payment of its attorneys’ fees. In that case, the
arbitrator may award reasonable attorneys’ fees and costs to the prevailing party as provided by
law. The Company agrees to pay any administrative costs and fees of the AAA, as well as the costs
and fees of the arbitrator. THE PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A
WAIVER OF THEIR RIGHT TO A TRIAL BY JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT.

               (e) Executive expressly acknowledges and agrees that, in the event the benefits provided
hereunder are subject to the excise tax provision set forth in Section 4999 of the Internal Revenue
Code of 1986, as amended, (i) Executive shall be responsible for, and (ii) Executive shall not be
entitled to any additional payment from the Company for any Federal, state, and local income and
employment taxes, interest or penalties that may arise in connection with such benefits.

               (f) The provisions of this Agreement shall be regarded as divisible, and if any of said
provisions or any part hereof are declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof
and the applicability hereof shall not be affected thereby.

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

               (h) This Agreement and the rights and obligations hereunder shall be governed by and construed
in accordance with the laws of the State of California without regard to its principles of conflict
of laws.

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

	 	 	 	 	 	 	 
	 	 	McKesson Corporation

A Delaware Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Paul E. Kirincic
	 	 
	 

	 	 	 	Executive Vice President, Human Resources	 	 

11

 

ATTEST:

	 	 	 	 	 	 	 
	 

                    Executive Vice President

	 	 
	 	 

Executive
	 	 
	                    and Secretary
	 	 	 	 	 	 

By the Authority of the

Compensation Committee

of the Board of Directors

of McKesson Corporation on

November ___, 2006

12exv10w33

 

EXHIBIT 10.33

McKESSON CORPORATION

CHANGE IN CONTROL POLICY FOR SELECTED EXECUTIVE EMPLOYEES

(Effective as of November 1, 2006)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	1.

	 	ADOPTION AND PURPOSE OF POLICY
	 	 	1	 
	 
	 	 	 	 	 	 
	2.

	 	CHANGE IN CONTROL BENEFITS
	 	 	1	 
	 
	 	 	 	 	 	 
	3.

	 	FORM OF BENEFIT
	 	 	3	 
	 
	 	 	 	 	 	 
	4.

	 	EFFECT OF DEATH OF EMPLOYEE
	 	 	3	 
	 
	 	 	 	 	 	 
	5.

	 	AMENDMENT AND TERMINATION
	 	 	3	 
	 
	 	 	 	 	 	 
	6.

	 	ADMINISTRATION AND FIDUCIARIES
	 	 	4	 
	 
	 	 	 	 	 	 
	7.

	 	CLAIMS AND APPEAL PROCEDURES
	 	 	4	 
	 
	 	 	 	 	 	 
	8.

	 	ARBITRATION EXCLUSIVE REMEDY
	 	 	6	 
	 
	 	 	 	 	 	 
	9.

	 	GENERAL PROVISIONS
	 	 	7	 
	 
	 	 	 	 	 	 
	10.

	 	DEFINITIONS
	 	 	7	 
	 
	 	 	 	 	 	 
	11.

	 	EXECUTION
	 	 	9	 

 i 

 

 

McKESSON CORPORATION

CHANGE IN CONTROL POLICY FOR SELECTED EXECUTIVE EMPLOYEES

(Effective as of November 1, 2006)

	1.	 	ADOPTION AND PURPOSE OF POLICY.

The McKesson Corporation Change in Control Policy for Selected Executive Employees (the “Policy”)
was adopted effective November 1, 2006 by McKesson Corporation, a Delaware corporation (the
“Company”), to provide a program of severance payments to certain employees of the Company and its
designated subsidiaries whose employment is terminated as the result of a Change in Control. The
Policy is an employee welfare benefit plan within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) and Section 2510.3-1 of the
regulations issued there under. The plan administrator of the Policy for purposes of ERISA is the
Company. The Policy was adopted to read as set forth herein effective as of November 1, 2006.

	2.	 	CHANGE IN CONTROL BENEFITS.

     (a) Basic Change in Control Benefits. In the event of the occurrence of a Change in Control
where a Participant’s employment is terminated under circumstances that constitute a Separation
from Service (i) initiated at the direction of the person or entity that is involved in, or
otherwise in connection with, such Change in Control, for any reason other than Cause or (ii)
initiated by the Participant for Good Reason, and if such termination of employment occurs within
the period 6 months preceding or 24 months following a Change in Control, that Participant shall be
entitled to a Change in Control benefit equal to the following:

	 	 	 
	Tier One Participant

	 	2.99 times Earnings
	Tier Two Participant

	 	2 times Earnings
	Tier Three Participant

	 	1 times Earnings

     (b) Other Change in Control Benefits. A Participant who is entitled to the basic Change in
Control benefit provided in (a) above also shall be entitled to the following:

          (i) If the Participant is a Tier One Participant and is covered by the Executive Benefit
Retirement Plan, his or her straight life annuity benefits under that Plan shall be calculated by
adding three additional years of age and three additional years of service to the Participant’s
actual age and service; provided, however, that the actuarially equivalent lump sum value amount
shall be based on the Participant’s actual age; and

          (ii) The Participant is and his or her eligible dependents are eligible to have continued
coverage under the health plan in which the Participant was a participant at the time of
termination for the number of years set forth below from the date of termination, at a cost no
greater than the cost in effect at the time of the Change in Control:

1

 

	 	 	 
	Tier One Participant

	 	3 years
	Tier Two Participant

	 	2 years
	Tier Three Participant

	 	1 year

          and

          (iii) The Participant is eligible to have continued Company-paid life insurance at the level
in effect on the date of the Change in Control for the number of years set forth below from the
date of termination:

	 	 	 
	Tier One Participant

	 	3 years
	Tier Two Participant

	 	2 years
	Tier Three Participant

	 	1 year

          (iv) The Participant is eligible for outplacement services, in an amount not to exceed the
amount determined by the Executive Vice President, Human Resources.

          (v) If, as a result of the Participant’s employment with the Company or termination thereof,
the benefits received by the Participant (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
Participant an additional amount (the “Gross-Up Payment”) such that the net amount retained by
Participant, 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. For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (A) 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 the Participant 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, (B) all
“excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent “reasonable compensation” for services actually rendered (within
the meaning of Section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as defined in
Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (C) 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, the
Participant 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 the
Participant’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, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such state and local
taxes). 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, the Participant shall repay to the

2

 

Company, within five 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 the
Participant, to the extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Participant’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 the Participant with respect to
such excess) within five business days following the time that the amount of such excess is finally
determined. The Participant 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.

     (c) Nothing in this Policy shall alter or impair any rights a Participant may have upon
Separation from Service under any other plan or program of the Company.

	3.	 	FORM OF BENEFIT.

The benefit described in Section 2(a) shall be paid in a lump sum on the first day of the eighth
month following the date of the Participant’s Separation from Service. Such payment shall include
an additional amount representing interest credited at the rate being credited to accounts under
the Company’s Deferred Compensation Administration Plan III during the relevant seven-month period.

	4.	 	EFFECT OF DEATH OF EMPLOYEE.

Should a Participant die after Separation from Service and becoming eligible to receive the
benefits provided in Section 2(a) and prior to the payment of the entire benefit due hereunder, the
balance of the benefit payable under Section 2(a) shall be paid in a lump sum to the Participant’s
surviving spouse, or, if none, to his or her surviving children or, if none, to his or her estate,
as soon as reasonably practicable after the date of death. The provisions of Section 2(b) (other
than subsection (iv)) shall continue to apply following the Participant’s death.

	5.	 	AMENDMENT AND TERMINATION.

The Company reserves the right to terminate the Policy at any time by action of its Board of
Directors and to amend the Policy or increase or decrease the amount of any benefit provided under
the Policy by action of the Compensation Committee of its Board of Directors; provided, however,
that no such action shall have the effect of decreasing the benefit of a Participant whose
Separation from Service following a Change in Control occurred prior to the date of the Board of
Directors’ or Compensation Committee’s action; provided, further, that no action taken within six
months before or 24 months after a Change in Control shall be effective if the result of

3

 

such action would be to decrease the benefit of any individual who has been designated a
Participant pursuant to Section 10(g)(i).

	6.	 	ADMINISTRATION AND FIDUCIARIES.

     (a) Plan Sponsor and Administrator. The Company is the “plan sponsor” and the “administrator”
of the Policy, within the meaning of ERISA.

     (b) Administrative Responsibilities. The Company shall be the named fiduciary with the power
and sole discretion to determine who is eligible for benefits under the Policy, to determine the
value of benefits paid in any form other than cash or the present value of any cash or other
benefits paid over time, to interpret the Policy and to prescribe such forms, make such rules,
regulations and computations and prescribe such guidelines as it may determine are necessary or
appropriate for the operation and administration of the Policy and to change the terms of or
rescind such rules, regulations or guidelines. Such determinations of eligibility, rules,
regulations, interpretations, computations and guidelines shall be conclusive and binding upon all
persons. In administering the Policy, the Company shall at all times discharge its duties with
respect to the Policy in accordance with the standards set forth in Section 404(a)(1) of ERISA.

     (c) Allocation and Delegation of Responsibilities. The Compensation Committee may allocate
any of the Company’s responsibilities for the operation and administration of the Policy among the
Company’s officers, employees and agents. It may also delegate any of the Company’s
responsibilities under the Policy by designating, in writing, another person to carry out such
responsibilities.

     (d) No Individual Liability. It is declared to be the express purpose and intent of the
Company that no individual liability shall attach to or be incurred by any member of the Board of
Directors of the Company, or by any officer, employee representative or agent of the Company,
under, or by reason of the operation of, the Policy.

	7.	 	CLAIMS AND APPEAL PROCEDURES

     (a) Informal Resolution of Questions. Any Participant who has questions or concerns about his
or her benefits under the Plan is encouraged to communicate with the Human Resources Department of
the Company. If this discussion does not give the Participant satisfactory results, a formal claim
for benefits may be made in accordance with the procedures of this Section 7.

     (b) Formal
Benefits Claim – Review by Executive Vice President, Human Resources.*
A Participant 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

 

			
	*	 	For purposes of this Section 7, if the
Executive Vice President, Human Resources is the claimant the General Counsel
shall perform the claim and appeal functions of the Executive Vice President,
Human Resources.

4

 

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.

     (c) 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 7(b). 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.

     (d) Appeal to Executive Vice President.

          (i) 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.

          (ii) 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.

          (iii) 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.

5

 

          (iv) 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.

          (v) 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.

     (e) 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 7(b), has been notified that the claim is denied in accordance with Section 7(c), has filed
a written request for a review of the claim in accordance with Section 7(d), and has been notified
in writing that the Executive Vice President has affirmed the denial of the claim in accordance
with Section 7(d).

	8.	 	ARBITRATION EXCLUSIVE REMEDY.

     Any dispute, controversy or claim arising under the Policy, shall be settled exclusively by
final and binding arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association (the “AAA Rules”). A neutral and
impartial arbitrator shall be chosen by mutual agreement of the parties or, if the parties are
unable to agree upon an arbitrator within a reasonable period of time, then a neutral and impartial
arbitrator shall be appointed in accordance with the arbitrator nomination and selection procedure
set forth in the AAA Rules. The arbitrator shall apply the same substantive law, with the same
statures 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 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. Each party shall pay its
own costs and attorneys’ fees, unless a party prevails on a statutory claim and the statute
provides that the prevailing party is entitled to payment of its attorneys’ fees. In that case,
the arbitrator may award reasonable attorneys’ fees and costs to the prevailing party as provided
by law. The Company agrees to pay the costs and fees of the arbitrator. THE PARTICIPANTS
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.

6

 

	9.	 	GENERAL PROVISIONS.

     (a) Basis of Payments to and from Policy. All benefits under the Policy shall be paid by the
Company. The Policy shall be unfunded and benefits hereunder shall be paid only from the general
assets of the Company. Nothing contained in the Policy shall be deemed to create a trust of any
kind for the benefit of any employee, or create any fiduciary relationship between the Company and
any employee with respect to any assets of the Company. The Company is under no obligation to fund
the benefits provided herein prior to payment, although it may do so if it chooses. Any assets
which the Company chooses to use for advance funding shall not cause the Policy to be a funded plan
within the meaning of ERISA.

     (b) No Employment Rights. Nothing in the Policy shall be deemed to give any individual the
right to remain in the employ of the Company or a subsidiary or to limit in any way the right of
the Company or a subsidiary to discharge, demote, reclassify, transfer, relocate an individual or
terminate an individual’s employment at any time and for any reason, which right is hereby
reserved.

     (c) Non-alienation of Benefits. No benefit payable under the Policy shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to do shall be void.

     (d) Legal Construction. The Policy shall be governed and interpreted in accordance with
ERISA.

     (e) Successors to the Company. 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 to assume and agree to perform the obligations of the
Company under the Policy in the same manner and to the same extent that the Company would be
required to perform if no such succession or assignment had taken place.

     (f) Section 409A. Notwithstanding any other provision of this Policy, the Company shall
administer and construe this Policy in accordance with Section 409A of the Code, the regulations
promulgated thereunder, and any other published interpretive authority, as issued or amended from
time to time. The Company shall have the authority to delay the payment of any amounts under this
Policy to the extent it deems necessary or appropriate to comply with Section 409A of the Code.

	10.	 	DEFINITIONS.

Whenever used and capitalized in the text of the Policy, the following terms shall have the meaning
set forth below:

     (a) “Base Salary and Bonus” means the Participant’s annual base salary as in effect
immediately prior to the date of such Participant’s termination and the target bonus for such
Participant for the fiscal year in which such Participant’s Separation from Service occurs, in each
case inclusive of any amounts deferred by the intended recipient.

7

 

     (b) “Cause” means termination of the Participant’s employment upon the Participant’s willful
engagement in misconduct which is demonstrably and materially injurious to the Company. No act, or
failure to act, on the part of the Participant shall be considered “willful” unless done, or
omitted to be done, by the Participant not in good faith and without reasonable belief that the
Participant’s action or omission was in the best interest of the Company.

     (c) 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.

     (d) “Code” means the Internal Revenue Code of 1986, as amended.

     (e) “Earnings” means a Participant’s (i) annual base salary and (ii) the greater of (A) the
Participant’s target bonus under the Company’s Management Incentive Plan or (B) the average of the
Participant’s bonus for the latest three years for which the Participant was eligible to receive a
bonus (or such lesser period of time during which the Participant was eligible to receive a bonus).

     (f) “Good Reason” means any of the following actions, if taken without the express written
consent of the Participant, which shall not be affected by the Participant’s incapacity due to
physical or mental illness:

          (i) Any material change by the Corporation in the Participant ‘s functions, duties or
responsibilities, which change would cause the Participant ‘s position with the Corporation to
become of less dignity, responsibility, importance, or scope as compared to the position and
attributes that applied to the Participant immediately prior to the Change in Control;

          (ii) Any significant reduction in the Participant ‘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 a reduction effected as part of
an across-the-board reduction affecting all executive officers of the Corporation;

          (iii) Any material failure by the Corporation to comply with any of the provisions of an award
(or of any employment agreement between the parties) subsequent to a Change in Control;

          (iv) The Corporation’s requiring the Participant to be based at any office or location more
than 25 miles from the office at which the Participant is based on the date immediately preceding
the Change in Control, except for travel reasonably required in the performance of the
Participant’s responsibilities;

          (v) For Tier 1 employees only, any change in the person to whom the Participant reports, as
this relationship existed immediately prior to a Change in Control.

8

 

     (g) “Participant” means (i) an individual who is designated to be eligible to participate in
the Policy by the Compensation Committee of the Board of Directors of the Company (the “Committee”)
and (ii) whose employment is terminated under circumstances that render him or her eligible for the
benefits described in Section 2 of the Policy. “Participant” shall not include any individual
covered by an agreement with the Company or an affiliate that provides for benefits in the event of
a change in control or similar event. When designating an individual or a group as Participant(s),
the Committee shall specify whether such individual shall be a Tier One Participant, a Tier Two
Participant or a Tier Three Participant.

     (h) “Separate from Service” or “Separation from Service” means 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).

	11.	 	EXECUTION

This Change in Control Policy was adopted on October 27, 2006, to be effective as of November 1,
2006.

McKESSON CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Paul E. Kirincic
	 	 
	 

	 	Executive Vice President, Human Resources	 	 

9

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