Document:

exv10w2

EXHIBIT 10.2

McKESSON CORPORATION

DEFERRED COMPENSATION ADMINISTRATION PLAN III (“DCAP III”)

Effective January 1, 2009

(Amended and Restated October 24, 2008)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	A.
	 	PURPOSE	 	 	1	 
	 
	B.
	 	ERISA PLAN	 	 	1	 
	 
	C.
	 	PARTICIPATION	 	 	1	 
	 
	D.
	 	AMOUNTS OF DEFERRAL	 	 	3	 
	 
	E.
	 	PAYMENT OF DEFERRED COMPENSATION	 	 	4	 
	 
	F.
	 	SOURCE OF PAYMENT	 	 	7	 
	 
	G.
	 	MISCELLANEOUS	 	 	7	 
	 
	H.
	 	ADMINISTRATION OF THE PLAN	 	 	8	 
	 
	I.
	 	AMENDMENT OR TERMINATION OF THE PLAN	 	 	8	 
	 
	J.
	 	CLAIMS AND APPEALS	 	 	9	 
	 
	K.
	 	DEFINITIONS	 	 	10	 
	 
	L.
	 	SUCCESSORS	 	 	13	 
	 
	M.
	 	EXECUTION	 	 	13	 

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McKESSON CORPORATION

DEFERRED COMPENSATION ADMINISTRATION PLAN III

Effective January 1, 2009

(Amended and Restated October 24, 2008)

A. PURPOSE

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

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

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

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

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

B. ERISA PLAN

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

C. PARTICIPATION

     1. Eligibility to Participate.

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

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

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

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

          a. Annual Election. Subject to the provisions of Sections 2(b) and 2(c) below, an
election to defer compensation must be made and become irrevocable at the time that the
Administrator prescribes, but in no event later than the last day of the Year preceding the Year in
which the compensation being deferred is earned. A Participant’s election to defer compensation
shall be suspended during the Year only if such Participant is faced with an Unforeseeable
Emergency. Such suspension shall continue through the end of the Year in which the Participant is
faced with an Unforeseeable Emergency and the Participant must submit a new election to defer
compensation, effective the Year after the Year in which the Unforeseeable Emergency occurs, to
resume participation in the Plan.

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

          c. Election to Defer Performance-Based Compensation. To the extent that compensation
paid under the Management Incentive Plan, the Long-Term Incentive Plan or any other
Company-sponsored incentive plan is “performance-based compensation” as defined in Treasury
Regulation section 1.409A-1(e), an election to defer payments made pursuant to the Management
Incentive Plan, Long-Term Incentive Plan or other Company-sponsored bonus plan may be made not
later than six months prior to the end of the applicable performance period or

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such earlier time as the Administrator may prescribe; provided, however, that such election
shall be made prior to the date that compensation paid under the Management Incentive Plan
compensation, Long-Term Incentive Plan or other Company-sponsored incentive plan, whichever is
applicable, is substantially certain to be paid or readily ascertainable.

          d. Election to Defer Other Compensation. The Administrator, in its sole discretion,
may permit other types of compensation to be deferred under the Plan; provided, however, the
Administrator terms and conditions of such deferrals shall be included in the applicable deferral
election form and in accordance with Code Section 409A and the regulations promulgated and guidance
issued thereunder.

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

     4. Relation to Other Plans.

          a. Participation in Other Plans. An Eligible Executive or an Eligible Director may
participate in this Plan and may also participate in any other benefit plan of the Company in
effect from time to time for which he or she is eligible, unless the other plan may otherwise
exclude participation on the basis of eligibility for, or participation in, this Plan. No amounts
may be deferred under this Plan which have been deferred under any other plan of the Company and
the Administrator may modify or render invalid a Participant’s election prior to such election
becoming irrevocable to accommodate deferrals made under other plan(s). Deferrals under this Plan
may result in a reduction of benefits payable under the Social Security Act, the Retirement Plan
and the PSIP.

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

D. AMOUNTS OF DEFERRAL

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

     2. Maximum Deferral for Eligible Executives. The maximum amount of compensation which
an Eligible Executive may defer under this Plan for any Year is (i) 75% of the amount of such
Eligible Executive’s base salary for such Year, and (ii) 90% of any annual bonus award and/or any
Long-Term Incentive Plan award determined and payable to him or her in such Year. Additionally,
the Administrator may change the maximum amount (expressed as a percentage limit) of base salary
that Eligible Executives as a group may defer under the Plan for
any Year. Notwithstanding these limits, deferrals may be reduced by the Company as permitted
under Treasury Regulation section 1.409A-3(j)(4).

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

E. PAYMENT OF DEFERRED COMPENSATION

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

     2. Interest shall be credited to each Account (including Sub-Accounts established thereunder)
for each Year at a rate equal to a rate declared by the Compensation Committee acting in its sole
discretion after taking into account, among other things, the following factors: McKesson’s cost of
funds, corporate tax brackets, expected amount and duration of deferrals, number and age of
eligible Participants, expected time and manner of payment of deferred amounts, and expected
performance of available fixed-rate insurance contracts covering the lives of Participants (the
“Declared Rate”). Notwithstanding the foregoing, if a Change in Control (as defined in Section K.5
below) occurs, the Declared Rate for the balance of the calendar year in which the Change in
Control occurs and for the two calendar years immediately following the year in which the Change in
Control occurs shall not be less than the Declared Rate as in effect on the day before the Change
in Control occurs. Interest on each Account balance shall be compounded daily on each business day
within the Year to yield the Declared Rate for the Year. In the case of installment payments as
provided in Section E.4 below, interest shall be credited on all amounts remaining in a
Participant’s Account until all amounts are paid out. Interest shall be credited to each Account
as of the end of each business day .

     3. Length of Deferral. An Eligible Executive or Eligible Director shall elect in
writing, and file with the Administrator, at the same time as such Eligible Executive or Eligible
Director makes any election to defer compensation, the period of deferral with respect to such

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election, subject to the minimum required period of deferral and the maximum permissible
period of deferral. The minimum required period of deferral is five years after the end of the
Year for which compensation is deferred. Notwithstanding the foregoing, the five-year minimum
deferral period shall not apply to payments made as a result of death, Disability, Retirement,
Separation from Service, a Change in Control or Unforeseeable Emergency. Payment must commence no
later than the end of the maximum period of deferral, which is the January following the year in
which the Eligible Executive reaches age 72 or, in the case of an Eligible Director, the January
after McKesson’s annual meeting of stockholders next following the Eligible Director’s 72nd
birthday; provided, however, no payment shall be paid or commence which will cause an impermissible
acceleration of such payment under Treasury Regulation section 1.409A-(3)(j).

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

          a. Form.

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

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

          b. Time.

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

               ii. Subject to Section E.3, the lump sum or first installment to be paid in January of the
year designated by the Participant; provided, however, Participant shall elect a payment date, or
payment commence date, which is no later than the end of the Maximum Period of Deferral and if
Participant elects a distribution date which is subsequent to the Maximum Period of Deferral, the
election as to the time of distribution shall be deemed void immediately prior to the time such
election is irrevocable and distributions shall be made under paragraph i. above.

               iii. Subject to Section E.3, the lump sum or first installment to be paid in two or more
Januarys designated by the Participant following the Year of Participant’s Retirement, Disability
or death.

The Participant may elect a different time and/or form of distribution for Retirement, Disability
or death.

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     5. Modification of Elections. Once such an election has been made, the Eligible
Executive or Eligible Director may modify the the time and/or form of distributions made under the
Plan, provided that:

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

          b. such alteration does not provide for the receipt of such amounts earlier than five years
from the originally scheduled distribution date. A change to the time and form of a distribution
may be modified or revoked until 12 months prior to the time a distribution is originally scheduled
to be made, at which time such change shall become irrevocable. The last valid election accepted
by the Administrator shall govern the payout; provided, however, if a modification under this
Section E.5 is determined immediately prior to such modification becoming irrevocable to cause a
payment date to be, or payment commence date begin, after later than the end of the Maximum Period
of Deferral such modification shall be deemed to be revoked immediately prior to the time such
modification become irrevocable and distributions shall be made as if Participant had not modified
his or her election.

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

     7. Payments on Separation from Service. If a Participant Separates from Service for
any reason other than Retirement, Disability or death, then, notwithstanding the election made by
the Participant pursuant to Section E.4 above, the entire undistributed amount credited to his or
her Account shall be paid in the form of a lump sum in the earlier of the first January or June
that is at least six months following the date the Participant Separates from Service.

     8. Delayed Distribution to Specified Employees. Notwithstanding any other provision
of this Section E to the contrary, a distribution scheduled to be made upon Separation from Service
to a Participant who is identified as a Specified Employee as of the date he Separates from Service
shall not be paid within the time that is six months following the Participant’s Separation from
Service. Any payment that otherwise would have been made pursuant to this Section E during such
six-month period, if any, shall be made in the seventh month following the month in which
Participant’s Separation from Service occurs. The identification of a Participant as a Specified
Employee shall be made by the Administrator in his or her sole discretion in accordance with
Section K.25 of the Plan and Sections 416(i) and 409A of the Code and the regulations promulgated
thereunder.

     9. Payments on Death. An election made as to the the payment of the Participant’s
Account pursuant to Participant’s death shall be paid to his or her Beneficiary if such Participant
has not yet received or begun receiving a distribution under the Plan. If, however, a Participant
is in-pay status at the time of death, distribution of the Account, or portion of the Account, that
is in-pay shall continue to be distributed to the Beneficiary as Participant elected to receive
such
distribution. The Beneficiary shall have to right to elect a different time or form of
payment of distributions made under the Plan.

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     10. Deminimis Cashout. Notwithstanding the Participant’s election, the Administrator
in its sole discretion may distribute an Account to a Participant or a Beneficiary in a single
payment if the value of the Account, and any other plan or arrangement with respect to which
deferrals of compensation are treated as having been deferred under a single nonqualified deferred
compensation plan under Treasury Regulation section 1.409A-1(c)(2), is less than the Code Section
401(g)(1)(B) limit.

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

     12. Payments Due to an Unforeseen Emergency. The Administrator may, in his or her
sole discretion, cancel Participant’s deferral election and direct payment to a Participant of all
or of any portion of the Participant’s Account balance, if necessary, notwithstanding an election
under Section E.4 above, at any time that the Administrator determines that such Participant has
suffered an Unforeseeable Emergency and requires action to be taken under this Section E.12.

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

F. SOURCE OF PAYMENT

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

G. MISCELLANEOUS

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

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     2. No Assignment.

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

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

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

H. ADMINISTRATION OF THE PLAN

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

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

I. AMENDMENT OR TERMINATION OF THE PLAN

     1. Amendment. The Compensation Committee may at any time amend this Plan. Such
action shall be prospective only and shall not adversely affect the rights of any Participant

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or Beneficiary to any benefit previously earned under this Plan. The foregoing
notwithstanding, no amendment adopted following the occurrence of a Change in Control shall be
effective if it (a) would reduce the Declared Rate for the balance of the calendar year in which
the Change in Control occurs or for the two calendar years immediately following the year in which
the Change in Control occurs to a rate lower than the Declared Rate as in effect on the day before
the Change in Control occurred or (b) modify the provisions of (a) above.

     2. Termination. The Board in its discretion may at any time terminate the Plan in
accordance with Treasury Regulation section 1.409A-3(j)(4)(ix).

J. CLAIMS AND APPEALS

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

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

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

     4. Appeal to Executive Vice President.

          a. A person whose request has been denied in whole or in part (or such person’s authorized
representative) may file an appeal of the decision in writing with the Executive Vice President
within 60 days of receipt of the notification of denial. The appeal must

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be addressed to: Executive Vice President, Human Resources, McKesson Corporation, One Post
Street, San Francisco, California 94104. The Executive Vice President, for good cause shown, may
extend the period during which the appeal may be filed for another 60 days. The appellant and/or
his or her authorized representative shall be permitted to submit written comments, documents,
records and other information relating to the claim for benefits. Upon request and free of charge,
the applicant should be provided reasonable access to and copies of, all documents, records or
other information relevant to the appellant’s claim.

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

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

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

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

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

K. DEFINITIONS

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

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

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

     3. “Beneficiary” shall mean the person or entity described by Section E.11.

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

     5. “Change in Control” shall mean the occurrence of any change in ownership of
McKesson, change in effective control of McKesson, or change in the ownership of a substantial
portion of the assets of McKesson, as defined in Treasury Regulation section 1.409A-3(i)(5), the
regulations thereunder, and any other published interpretive authority, as issued or amended from
time to time..

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

     7. “Company” shall mean McKesson and any affiliate that would be considered a service
recipient for purposes of Treasury Regulation section 1.409A-1(g).

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

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

     10. “Disabled” or “Disability” shall mean that an individual is determined by
the Social Security Administration to be totally disabled.

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

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

     13. “Employer” shall mean McKesson and any other affiliate that would be considered a
service recipient or employer for purposes of Treasury Regulation section 1.409A-1(h)(3).

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

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

     16. “Maximum Period of Deferral” shall mean the January following the year in which
the Eligible Executive reaches age 72 or, in the case of an Eligible Director, the January after
McKesson’s annual meeting of stockholders next following the Eligible Director’s 72nd birthday.

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

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

11

 

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

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

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

     22. “Retirement” shall mean Separation from Service after the date in which the
Participant attains age 50 and has at least five Years of Service with the Company.
Notwithstanding the foregoing, for purposes of this Plan, Retirement for an Eligible Director shall
mean cessation of service as a member of the Board on or after the completion of at least six
successive years as a member of the Board.

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

     24. “Separation from Service” or “Separates from Service” shall mean
termination of employment with the Employer, except in the event of death or Disability. A
Participant shall be deemed to have had a Separation from Service if the Participant’s service with
the Employer is reduced to an annual rate that is equal to or less than twenty percent of the
services rendered, on average, during the immediately preceding three years of service with the
Employer (or if providing service to the Employer less than three years, such lesser period).

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

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

          b. A five percent owner of the Company; or

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

For purposes of determining whether a Participant is a Specified Employee, Treasury Regulation
section 1.415(c)-2(d)(11)(ii) shall be used to calculate compensation. If a Participant is
identified as a Specified Employee on an Identification Date, then such Participant shall be
considered a Specified Employee for purposes of the Plan during the period beginning on the first
April 1 following the Identification Date and ending on the next March 31.

     26. “Unforeseeable Emergency” shall have the same meaning as provided in Section
409A(a)(2)(B)(ii) of the Code.

     27. “Year” shall mean the calendar year.

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     28. “Year of Service” shall have the same meaning as “Year of Service” as defined in
the PSIP.

L. SUCCESSORS

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

M. EXECUTION

     To
record the adoption of the Plan by the Compensation Committee of the Board of Directors of McKesson Corporation at a
meeting held on October 24, 2008, effective as of January 1, 2009.

McKESSON CORPORATION

	 	 	 	 	 	 	 
	By:

	 	/s/ Jorge L. Figueredo
 

	 	 	 	 
	 

	 	Jorge L. Figueredo	 	 	 	 
	 	 	Executive Vice President, Human Resources	 	 

13exv10w3

EXHIBIT 10.3

McKESSON CORPORATION

EXECUTIVE BENEFIT RETIREMENT PLAN

Effective January 1, 2009

(Amended and Restated on October 24, 2008)

 

 

Table of Contents

	 	 	 	 	 
	A. PURPOSE
	 	 	1	 
	 
	 	 	 	 
	B. ERISA PLAN
	 	 	1	 
	 
	 	 	 	 
	C. PARTICIPATION
	 	 	1	 
	 
	 	 	 	 
	D. BENEFITS UPON SEPARATION FROM SERVICE
	 	 	2	 
	 
	 	 	 	 
	E. DEATH BENEFITS
	 	 	5	 
	 
	 	 	 	 
	F. FORFEITURE AND REPAYMENT RULES
	 	 	6	 
	 
	 	 	 	 
	G. TIME AND FORM OF PAYMENT
	 	 	8	 
	 
	 	 	 	 
	H. SOURCE OF PAYMENT
	 	 	8	 
	 
	 	 	 	 
	I. MISCELLANEOUS
	 	 	9	 
	 
	 	 	 	 
	J. ADMINISTRATION OF THE PLAN
	 	 	10	 
	 
	 	 	 	 
	K. AMENDMENT OR TERMINATION OF THE PLAN
	 	 	10	 
	 
	 	 	 	 
	L. CLAIMS AND APPEALS
	 	 	11	 
	 
	 	 	 	 
	M. DEFINITIONS
	 	 	13	 
	 
	 	 	 	 
	N. SUCCESSORS
	 	 	17	 
	 
	 	 	 	 
	O. EXECUTION
	 	 	17	 

i

 

McKESSON CORPORATION

EXECUTIVE BENEFIT RETIREMENT PLAN

Effective January 1, 2009

(Amended and Restated on October 24, 2008)

	A.	 	PURPOSE 

     This Plan was established to enable McKesson to attract and retain key executive personnel by
assisting them and their survivors in maintaining their standards of living on the Executive’s
retirement or earlier death. The Plan has been amended and restated on various occasions. The Plan
as set forth in here is amended and restated on October 24, 2008, and effective as of January 1,
2009. The Plan as amended and restated effective January 1, 2009 shall apply to Executives who
Separate from Service on or after January 1, 2009. For Executives who Separate from Service or
terminate employment prior to January 1, 2009, the Plan in effect at the time of such separation or
termination shall apply.

	B.	 	ERISA PLAN 

     This Plan is an unfunded deferred compensation program for a select group of management or
highly compensated employees of McKesson. The Plan, therefore, is covered by Title I of ERISA,
except that it is exempt from Parts 2, 3, and 4 of Title I of ERISA.

	C.	 	PARTICIPATION

	 	1.	 	Selection by the Compensation Committee. The Compensation Committee
may select, at its discretion and from time to time as it decides, the Executives who
participate in this Plan. Participation in the Plan shall be limited to those
Executives of McKesson who are selected by the Compensation Committee. Selection of an
Executive to participate in the Plan may be evidenced by the terms of the Executive’s
written employment contract with McKesson.
	 
	 	2.	 	Addition and Removal of Participants. The Compensation Committee may,
at its discretion and at any time, designate additional Executives to participate in
the Plan and remove Executives from participation in the Plan. If an Executive is
removed from participation, he or she may be entitled to receive benefits, if any, as
specified in Section D.1.e or D.2.b.
	 
	 	3.	 	Relation to Other Plans. If an Executive participates in this Plan, he
or she shall not participate in or receive benefits under any other Company-sponsored
plan, program or agreement that provides McKesson Executives, or the individual
Executive, with retirement benefits that supplement or are in addition to the benefits
under McKesson’s Retirement Plan, Profit-Sharing Investment Plan, or any successor or
replacement plans unless otherwise specifically approved by the Compensation Committee.
This paragraph shall not limit an Executive’s participation in or benefits under any
plan or program under which the Executive voluntarily defers for later payment
compensation otherwise currently payable to

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	 	 	 	the Executive (such as, but not limited to, the Deferred Compensation Administration
Plan III or any successor or replacement plan).

D. BENEFITS UPON SEPARATION FROM SERVICE

	 	1.	 	Separation from Service by Reason of Approved Retirement or Early
Retirement.

	 	a.	 	Approved Retirement. Except as otherwise provided
herein, each Executive who participates in the Plan and Separates from Service
by reason of an Approved Retirement shall be entitled to receive a benefit
determined with reference to the value of monthly payments equal to (1) reduced
by (2), as follows:

	 	(1)	 	the percentage of Average Final Compensation
specified for the Executive, which shall be as provided herein, reduced
by
	 
	 	(2)	 	the Executive’s Basic Retirement Benefits.

	 	 	 	The percentage stated in clause (1) may be specified by the Compensation
Committee at the time that the Executive is selected to participate in the
Plan or may be specified in the Executive’s written employment contract with
the Company. Unless otherwise determined by the Compensation Committee at
the time that the Executive is selected to participate in the Plan or
provided in the Executive’s written employment contract, the percentage of
Average Final Compensation specified in clause (1) shall be 20% plus 0.148
for each completed month (1.77% per completed year) of the Executive’s
full-time continuous employment with the Company, but such percentage shall
not exceed 60%.
	 
	 	b.	 	Early Retirement. Unless if provided otherwise in an
Executive’s employment agreement, if the Compensation Committee grants an
Executive, who Separates from Service by reason of Early Retirement, the
Executive shall receive a benefit in Section D.1.a that is reduced by 0.3% for
each month the Executive’s Early Retirement precedes the date the Executive
will attain age 62. The reduction for Basic Retirement Benefits shall be
applied by calculating all benefits as if they were payable in the form of a
straight life annuity at the date of Executive’s Early Retirement, without
survivor benefits, to determine the net benefit payable under this Plan. See
Appendix A for an example of this calculation.
	 
	 	c.	 	Special Rule. The benefit of an Executive under this
Section D.1 who is a participant in the Plan as of August 28, 1996, shall not
be less than such Executive’s benefit calculated pursuant to Section D.2.a of
the Plan, without regard to any reduction required by Section D.1.b of the
Plan.
	 
	 	d.	 	Effect of Plan Termination. If the Plan is terminated
in accordance with Section L, an Executive who has not yet Separated from
Service shall

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	 	 	 	receive benefits calculated as follows on the date of the Plan termination:
(a) if the Executive qualifies for Approved Retirement on the date of the
Plan termination, payments shall be calculated under Section D.1.a., (b) if
the Executive qualifies for Early Retirement on the date of the Plan
termination, payments shall be calculated under Section D.1.b., or (c) if
the Executive does not qualify for either Approved Retirement or Early
Retirement on the date of the Plan termination, but is vested in the Plan
under Section D.2.a, then payments shall equal to (i) the applicable
percentage of Average Final Compensation under Section D.1.a multiplied by
the Executive’s Pro Rata Percentage, reduced by (ii) the Executive’s Basic
Retirement Benefits. For purposes of this section, the Executive’s Pro Rata
Percentage, Average Final Compensation and Basic Retirement Benefits shall
be calculated by treating the date of the Plan termination as the date that
the Executive Separates from Service with the Company.
	 
	 	e.	 	Removal from Participation.

	 	(1)	 	If an Executive is removed from Plan
participation and later Separates from Service by reason of an Approved
Retirement, such Executive shall be entitled to receive upon such
Approved Retirement monthly payments equal to (1) the applicable
percentage of Average Final Compensation under Section D.1.a multiplied
by the Executive’s Pro Rata Percentage, reduced by (2) the Executive’s
Basic Retirement Benefits. For purposes of this section, the
Executive’s Pro Rata Percentage and Average Final Compensation shall be
calculated by treating the date of removal as the date that the
Executive Separates from Service by reason of an Approved Retirement
except that the Executive’s Basic Retirement Benefits reduction shall
be determined as of the date of the Executive’s Approved Retirement.
	 
	 	(2)	 	If an Executive is removed from Plan
participation and later Separates from Service by reason of an Early
Retirement, but prior to an Approved Retirement, such Executive shall
be entitled to receive upon such Early Retirement monthly payments
equal to (1) the applicable percentage of Average Final Compensation
under Section D.1.b multiplied by the Executive’s Pro Rata Percentage,
reduced by (2) the Executive’s Basic Retirement Benefits. For purposes
of this section, the Executive’s Pro Rata Percentage and Average Final
Compensation shall be calculated by treating the date of removal as the
date that the Executive Separates from Service by reason of an Early
Retirement except that the Executive’s Basic Retirement Benefits
reduction shall be determined as of the date of the Executive’s Early
Retirement.

	 	f.	 	Reduction for Basic Retirement Benefits. Unless
otherwise provided herein, the reduction for the Executive’s Basic Retirement
Benefits shall

3

 

	 	 	 	be applied as the lump sum Actuarial Equivalence to the benefits as if they
were payable in the form of a straight life annuity beginning at the date of
Separation from Service or Plan termination, whichever is applicable,
without survivor benefits.

	 	2.	 	Separation From Service Before Approved Retirement or Early
Retirement. 

	 	a.	 	Termination Benefits. Subject to other applicable
provisions in this Plan, an Executive who Separates from Service with the
Company prior to Approved Retirement, Early Retirement or death shall be
entitled to receive a Termination Benefit equal to (1) the applicable
percentage of Average Final Compensation under Section D.l.a., multiplied by
the Executive’s Pro Rata Percentage and reduced by (2) the Executive’s Basic
Retirement Benefits at the date of Separation from Service. For purposes of the
Plan, Termination Benefits are expressed as the present value of a benefit
payable at age 65, calculated using the GATT interest rate. See Appendix C for
an example of this calculation.
	 
	 	b.	 	Removal from Participation. An Executive who Separates
from Service with the Company prior to Approved Retirement, Early Retirement or
death and who has been removed from Plan participation (“removal”), but would
have received the benefits under Section D.2.a, but for the removal, shall be
entitled to receive the benefits under Section D.2.a, but treating the date of
“removal” as the date of Separation from Service for purposes of calculating
the Executive’s Pro Rata Percentage and Average Final Compensation.
	 
	 	c.	 	Limitations. No benefits shall be paid under this
Section D.2 to an Executive who:

	 	(1)	 	is involuntarily Separated from Service for
Cause;
	 
	 	(2)	 	Separates from Service in violation of the
obligations set forth in Executive’s written employment agreement (if
any); or
	 
	 	(3)	 	has not at the time of his or her Separation
from Service with the Company (i) either (A) completed five Years of
Service, if such Executive was selected to participate in this Plan
prior to May 22, 2007 or (B) completed five Years of Service as an
Executive, as the Company determines in its sole discretion, if such
Executive was selected to participate in this Plan on or after May 22,
2007, or (ii) attained age 65 shall have no vested interest in benefits
under the Plan and upon Separation from Service with the Company shall
forfeit any benefit the Executive had accrued under the Plan. An
Executive who would have such a vested interest, but (1) the Executive
was involuntarily Separated from Service by the Company because of a
violation of the obligations set forth in

4

 

	 	 	 	Executive’s employment agreement or (2) Executive’s Separation from
Service was not for “good reason” under such agreement, shall be
treated as not having a vested interest under this Section D.2. This
Section D.2 shall not apply to any Executive who was a participant in
this Plan on September 29, 1993.

	 	d.	 	Rules of Application.

	 	(1)	 	Periods of Employment. Effective April
26, 1999, for purposes of determining employment with the Company,
Years of Service before a Break in Service (and, at the discretion of
the Administrator, any other periods of Service that would be
disregarded under the Retirement Plan) shall not be counted under this
Section F if the consecutive one-year Breaks in Service equal or exceed
the greater of five or the aggregate number of the Executive’s Years of
Service before the Break in Service.
	 
	 	(2)	 	Basic Retirement Benefits. For
purposes of this Section D.2, an Executive’s Basic Retirement Benefits
shall be determined on the date the Executive’s employment with the
Company Separates from Service. All benefits shall be calculated as if
they were payable in the form of a straight life annuity beginning at
the later of age 65 or the date of actual Separation from Service,
without survivor benefits.

	 	e.	 	Other Agreement. If an Executive’s written employment
contract with the Company provides higher benefits on Separation from Service,
such higher benefits shall be paid.

	 	3.	 	Waiver. Notwithstanding the foregoing, the Executive’s written
employment contract or the Compensation Committee shall have the authority to waive the
age and/or Years of Service requirement for any Executive, such that an Executive may
receive benefits under Section D.1.a, D.1.b, or D.2.a. Such a determination by the
Compensation Committee may occur at the time of the Executive’s Separation from Service
with the Company or at any earlier time.

	E.	 	DEATH BENEFITS 

	 	1.	 	Death After Separation from Service. No benefits shall be paid under
the Plan if an Executive dies after Separation from Service, except for benefits that
are payable under Section D, but have not been paid due to the delay of payment under
Section G.1.
	 
	 	2.	 	Death While Employed. If an Executive dies while employed by the
Company, the Executive’s beneficiary shall be paid the benefit calculated as though the
Executive elected to receive his or her benefits in the actuarially reduced form of a
joint and survivor 100% annuity and Executive Separated from Service due to Early
Retirement immediately prior to death; provided, however, if the

5

 

	 	 	 	Executive would have qualified for Approved Retirement if he or she Separated from
Service immediately prior to death, then the reduced form of benefit will be
calcuated using the benefit that Executive would have received if he or she
Separated from Service immediately prior to death. If the Executive has a spouse on
the date of death, the joint and survivor 100% annuity shall take into account the
age of such spouse; however, if Executive does not have a spouse on the date of
death, the joint and survivor 100% annuity shall be calculated as if Executive’s
spouse was the same age as Executive.

	 	3.	 	Beneficiary.

	 	a.	 	Designation of Beneficiary. An Executive may designate
any natural person as his or her beneficiary, but may not designate more than
one person, or any person not a natural person, without the approval of the
Administrator. Designation shall be made in writing and shall become effective
only when filed with the Administrator. Such filing must occur before the
Executive’s death. An Executive may change his or her beneficiary, from time to
time, by filing a new written designation with the Administrator. If the
Executive is married, any beneficiary designation which does not designate the
Executive’s spouse to receive at least one-half of the benefit payable on the
Executive’s death shall only become effective when approved in writing by the
Executive’s spouse. 
	 
	 	b.	 	No Designated Beneficiary. If an Executive dies without
having designated a beneficiary, the Executive’s surviving spouse shall be the
Executive’s beneficiary, unless otherwise provided by applicable community
property or other laws or court order. If an Executive has no surviving spouse
and has not designated a beneficiary, the Executive’s estate shall be the
Executive’s beneficiary.

	F.	 	FORFEITURE AND REPAYMENT RULES 

     Any other provisions of this Plan to the contrary notwithstanding, if the Compensation
Committee determines that an Executive has engaged in any of the actions described in Section F.3
below, the consequences set forth in Sections F.1 and 2 below shall result.

	 	1.	 	Forfeiture of Benefits. To the extent that the benefit that otherwise
would be payable under the Plan exceeds the benefit, if any, that would have been
payable if the Executive’s Separation from Service had occurred on November 1, 1993,
such excess portion shall be forfeited and shall not be payable at any time under this
Plan.
	 
	 	2.	 	Repayment. If the Executive received a payment under this Plan at any
time within six months prior to the date the Company discovered that the Executive
engaged in any action described in Section F.3 below, the Executive, upon written
notice from the Company, shall repay to the Company in cash the excess portion
of any such payment, such excess portion to be calculated in the manner described in
Section F.1 above.

6

 

	 	3.	 	The consequences described in Sections F.1 and 2 above shall apply if the
Executive, either before or after Separation from Service with the Company, engages in
any of the following:

	 	a.	 	Accepts a position as a consultant to or an employee of a
business enterprise that is in direct competition with any line of business
engaged in by the Company at the time of the Executive’s Separation from
Service.
	 
	 	b.	 	Discloses to others, or takes or uses for the Executive’s own
purpose or the purpose of others, any trade secrets, confidential information,
knowledge, data or know-how belonging to the Company and obtained by the
Executive during the term of the Executive’s employment, whether or not they
are the Executive’s work product. Examples of such confidential information or
trade secrets include (but are not limited to) customer lists, supplier lists,
pricing and cost data, computer programs, delivery routes, advertising plans,
wage and salary data, financial information, research and development plans,
processes, equipment, product information and all other types and categories of
information as to which the Executive knows or has reason to know that the
Company intends or expects secrecy to be maintained.
	 
	 	c.	 	Fails to promptly return all documents and other tangible items
belonging to the Company in the Executive’s possession or control, including
all complete or partial copies, recordings, abstracts, notes or reproductions
of any kind made from or about such documents or information contained therein,
upon Separation from Service.
	 
	 	d.	 	Fails to provide the Company with at least 30 days’ written
notice prior to directly or indirectly engaging in, becoming employed by, or
rendering services, advice or assistance to any business in competition with
the Company. As used herein, “business in competition” means any person,
organization or enterprise which is engaged in or is about to become engaged in
any line of business engaged in by the Company at the time of the Executive’s
Separation from Service with the Company.
	 
	 	e.	 	Fails to inform any new employer, before accepting employment,
of the terms of this Section and of the Executive’s continuing obligation to
maintain the confidentiality of the trade secrets and other confidential
information belonging to the Company and obtained by the Executive during the
term of the Executive’s employment with the Company.
	 
	 	f.	 	Induces or attempts to induce, directly or indirectly, any of
the Company’s customers, employees, representatives or consultants to
terminate, discontinue or cease working with or for the Company, or to breach
any
contract with the Company, in order to work with or for, or enter into a
contract with, the Executive or any third party.

7

 

	 	g.	 	Engages in conduct which is not in good faith and which
disrupts, damages, impairs or interferes with the business, reputation or
employees of the Company.

	 	 	 	The Compensation Committee shall determine in its sole discretion whether the
Executive has engaged in any of the acts set forth in a through g above, and its
determination shall be conclusive and binding on all interested persons.
	 
	 	 	 	Any provision of this Section which is determined by a court of competent
jurisdiction to be invalid or unenforceable shall be construed or limited in a
manner that is valid and enforceable and that comes closest to the business
objectives intended by such invalid or unenforceable provision, without invalidating
or rendering unenforceable the remaining provisions of this Section.

	G.	 	TIME AND FORM OF PAYMENT 

	 	1.	 	Time and Form of Payment.

	 	a.	 	All benefits provided under Section D.1 shall be made in a lump
sum in the seventh month following the month in which the Executive Separates
from Service. Such payment shall include an Interest Credit for Delay, which
shall be paid in the same time and form as the aforementioned benefits.
	 
	 	b.	 	All benefits provided under Section E.2 shall be made in a lump
sum as soon as administratively practicable, but in no event later than 90
days, after Executive’s death.
	 
	 	c.	 	All benefits provided under Section D.2 shall be made in a lump
sum in the seventh month following the month in which the Executive Separates
from Service.

	 	2.	 	No Delayed or Accelerated Retirement Benefit. An Executive may not
elect to delay the commencement date of his or her retirement benefits under the Plan
after the time for payment specified in Section G.1. Notwithstanding any other
provision of the Plan to the contrary, no distribution will be made from the Plan that
would constitute an impermissible acceleration of payment as defined in Section
409A(a)(3) of the Code and the regulations promulgated thereunder.

	H.	 	SOURCE OF PAYMENT 

     The benefits paid under this Plan shall be paid from the general funds of the Company, and the
Executive and the Executive’s beneficiaries shall be no more than unsecured general creditors of
the Company with no special or prior right to any assets of the Company for payment of any
obligations hereunder. Nothing contained in this Plan shall be deemed to create a

8

 

trust of any kind for the benefit of the Executive or any beneficiary, or create any fiduciary
relationship between the Company and the Executive or any beneficiary with respect to any assets of
the Company.

	I.	 	MISCELLANEOUS 

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

	 	a.	 	Other than as provided in Section I.2.b below, benefits
provided under this Plan may not be alienated, assigned, transferred, pledged
or hypothecated by any person, at any time, or to any person whatsoever. These
benefits shall be exempt from the claims of creditors or other claimants and
from all orders, decrees, levies, garnishment or executions to the fullest
extent allowed by law.
	 
	 	b.	 	If a court of competent jurisdiction determines pursuant to a
judgment, order or approval of a marital settlement agreement that all or any
portion of the benefits payable hereunder to an Executive constitute community
property of the Executive and his or her spouse or former spouse (hereafter,
the “Alternate Payee”) or property which is otherwise subject to division by
the Executive and the Alternative Payee, a division of such property shall not
constitute a violation of Section I.2.a, and any portion of such property may
be paid or set aside for payment to the Alternate Payee. The preceding sentence
of this Section I.2.b, however, shall not create any additional rights and
privileges for the Alternate Payee (or the Executive) not already provided
under the Plan; in this regard, the Administrator shall have the right to
refuse to recognize any judgment, order or approval of a martial settlement
agreement that provides for any additional rights and privileges already not
already provided under the Plan, including without limitation with respect to
form and time of payment.

	 	3.	 	Liability Insurance. The Company may purchase insurance for its
directors, officers, employees and agents to cover potential liability arising from
their acts and omissions concerning the Plan.
	 
	 	4.	 	Applicable Law; Severability. The Plan hereby created shall be
construed, administered, and governed in all respects in accordance with the applicable
provisions of ERISA and the laws of the State of California to the extent the latter
are not preempted by ERISA. If any provision of this instrument shall be held by a
court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereof shall continue to be fully effective. The Plan is intended to
comply with the requirements of Section 409A of the Code.

9

 

	 	5.	 	No Right to Continued Employment. Each Executive selected to
participate in the Plan is deemed by the Company to be a bona fide executive or in a
high policy making position for purposes of the Age Discrimination in Employment Act
and state laws of similar effect. Accordingly, the terms of the Plan shall not confer
any legal rights upon any Executive to continued employment or employment past age 65,
nor shall the Plan interfere with the rights of the Company to discharge any Executive
or to treat the Executive without regard to the effect which that treatment might have
upon the Executive as a participant in the Plan.
	 
	 	6.	 	Offset for Indebtedness. To the extent permitted by law, if at the time
an Executive becomes entitled to receive any payment under the Plan the Executive is
indebted to the Company, the amount of the payment shall be reduced by the amount of
any such indebtedness then due and owing to the Company; provided, however, for amounts
paid under this Plan which are subject to Section 409A of the Code, such reduction must
be made in accordance with Treasury Regulation section 1.409A-j(x)(4)(xiii). The
indebtedness shall then be reduced accordingly.

	J.	 	ADMINISTRATION OF THE PLAN 

	 	1.	 	In General. The Plan shall be administered by the Executive Vice
President, Human Resources of McKesson under the direction of the Compensation
Committee. If the Executive Vice President, Human Resources, is an Executive
participating in the Plan, then any discretionary action taken as Administrator which
directly affects the Executive Vice President, Human Resources, as an Executive shall
be specifically approved by the Compensation Committee. The Administrator shall have
the ultimate responsibility to interpret the Plan and shall adopt such rules and
regulations for carrying out the Plan as it may deem necessary or appropriate.
Decisions of the Administrator shall be final and binding on all parties who have an
interest in the Plan.
	 
	 	2.	 	Elections and Notices. All elections and notices made by an Executive
under this Plan shall be in writing and filed with the Administrator.
	 
	 	3.	 	Action by Board of Directors and Compensation Committee. The Board and
the Compensation Committee may act under this Plan in accordance with their normal
procedures and practices, including but not limited to delegation of their authority to
act under the Plan.
	 
	 	4.	 	Plan Year. The plan year shall be the calendar year.

	K.	 	AMENDMENT OR TERMINATION OF THE PLAN 
	 
	 	 	The Compensation Committee may at any time amend, alter or modify the Plan.

10

 

     The Board, in its discretion, may terminate the Plan in accordance with Treasury Regulation
section 1.409A-3(j)(4)(ix).

	L.	 	CLAIMS AND APPEALS 

	 	1.	 	Informal Resolution of Questions. Any Executive or beneficiary who has
questions or concerns about his or her benefits under the Plan is encouraged to
communicate with the Human Resources Department of McKesson. If this discussion does
not give the Executive or beneficiary satisfactory results, a formal claim for benefits
may be made in accordance with the procedures of this Section M.
	 
	 	2.	 	Formal Benefits Claim — Review by Executive Vice President, Human
Resources. An Executive or beneficiary may make a written request for review of any
matter concerning his or her benefits under this Plan. The claim must be addressed to
the Executive Vice President, Human Resources, McKesson Corporation, One Post Street,
San Francisco, California 94104. The Executive Vice President, Human Resources or his
or her delegate (“Executive Vice President”) shall decide the action to be taken with
respect to any such request and may require additional information if necessary to
process the request. The Executive Vice President shall review the request and shall
issue his or her decision, in writing, no later than 90 days after the date the request
is received, unless the circumstances require an extension of time. If such an
extension is required, written notice of the extension shall be furnished to the person
making the request within the initial 90-day period, and the notice shall state the
circumstances requiring the extension and the date by which the Executive Vice
President expects to reach a decision on the request. In no event shall the extension
exceed a period of 90 days from the end of the initial period.
	 
	 	3.	 	Notice of Denied Request. If the Executive Vice President denies a
request in whole or in part, he or she shall provide the person making the request with
written notice of the denial within the period specified in Section M.2. The notice
shall set forth the specific reason for the denial, reference to the specific Plan
provisions upon which the denial is based, a description of any additional material or
information necessary to perfect the request, an explanation of why such information is
required, and an explanation of the Plan’s appeal procedures and the time limits
applicable to such procedures, including a statement of the claimant’s right to bring a
civil action under Section 502(a) of ERISA following an adverse benefit determination
on review.
	 
	 	4.	 	Appeal to Executive Vice President.

	 	a.	 	A person whose request has been denied in whole or in part (or
such person’s authorized representative) may file an appeal of the decision in
writing with the Executive Vice President within 60 days of receipt of the
notification of denial. The appeal must be addressed to: Executive Vice
President, Human Resources, McKesson Corporation, One Post Street,

11

 

	 	 	 	San Francisco, California 94104. The Executive Vice President, for good
cause shown, may extend the period during which the appeal may be filed for
another 60 days. The appellant and/or his or her authorized representative
shall be permitted to submit written comments, documents, records and other
information relating to the claim for benefits. Upon request and free of
charge, the applicant should be provided reasonable access to and copies of,
all documents, records or other information relevant to the appellant’s
claim.

	 	b.	 	The Executive Vice President’s review shall take into account
all comments, documents, records and other information submitted by the
appellant relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination. The Executive
Vice President shall not be restricted in his or her review to those provisions
of the Plan cited in the original denial of the claim.
	 
	 	c.	 	The Executive Vice President shall issue a written decision
within a reasonable period of time but not later than 60 days after receipt of
the appeal, unless special circumstances require an extension of time for
processing, in which case the written decision shall be issued as soon as
possible, but not later than 120 days after receipt of an appeal. If such an
extension is required, written notice shall be furnished to the appellant
within the initial 60-day period. This notice shall state the circumstances
requiring the extension and the date by which the Executive Vice President
expects to reach a decision on the appeal.
	 
	 	d.	 	If the decision on the appeal denies the claim in whole or in
part written notice shall be furnished to the appellant. Such notice shall
state the reason(s) for the denial, including references to specific Plan
provisions upon which the denial was based. The notice shall state that the
appellant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information
relevant to the claim for benefits. The notice shall describe any voluntary
appeal procedures offered by the Plan and the appellant’s right to obtain the
information about such procedures. The notice shall also include a statement of
the appellant’s right to bring an action under Section 502(a) of ERISA.
	 
	 	e.	 	The decision of the Executive Vice President on the appeal
shall be final, conclusive and binding upon all persons and shall be given the
maximum possible deference allowed by law.

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

12

 

	M.	 	DEFINITIONS 

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

	 	1.	 	“Actuarial Equivalence” shall mean the Actuarial Equivalence determined
as follows: (i) the interest rate prescribed by the Pension Benefit Guaranty
Corporation for purposes of determining the present value of a lump sum distribution on
plan termination for the month in which the Executive makes the lump sum distribution
election and (ii) a table based upon a fixed blend of 50 percent of male mortality
rates and 50 percent of female mortality rates from the 1983 Group Annuity Mortality
Table; provided, however, that effective October 28, 2004 the table shall be based on
the 1994 Group Annuity Reserving Table (1994 GAR).
	 
	 	2.	 	“Administrator” shall mean the person specified in Section J.
	 
	 	3.	 	“Approved Retirement” shall mean (i) any Separation from Service with
the Company after attainment of age 62; or (ii) any involuntary Separation from Service
after both attainment of age 55 and completion of fifteen Years of Service.
Notwithstanding the foregoing, “Approved Retirement” shall not include any Separation
from Service for Cause.
	 
	 	4.	 	“Average Final Compensation” shall mean one-fifth of the sum of the
base salary and annual bonuses under the MIP or any successor or replacement plans
(including base salary and annual MIP bonuses or portions thereof voluntarily deferred
under a cash or deferred plan or any other tax qualified or non-qualified salary
deferral plan such as the Deferred Compensation Administration Plan II (or any
successor or replacement plans) or bonuses relinquished in favor of a stock option
grant under the 1994 Stock Option and Restricted Stock Plan) earned by an Executive for
the five consecutive years of full-time continuous employment with the Company which
(a) fall within the fifteen-year period ending on the first day of the month following
the Executive’s Separation from Service with the Company and (b) produce the highest
such sum. If the Executive has had less than five years of full time continuous
employment, Average Final Compensation shall be base salary and annual bonuses,
including amounts voluntarily deferred or relinquished as described in the previous
sentence, for the entire period of such employment with the Company, divided by the
number of whole and partial years of service. Notwithstanding the foregoing, an
Executive’s written employment agreement may provide for, and replace, the definition
of Average Final Compensation as provided herein.
	 
	 	5.	 	“Basic Retirement Benefits” shall mean the lump sum actuarial
equivalent of the monthly annuity benefit payable under the Retirement Plan and a
hypothetical
lump sum actuarial equivalent of the monthly annuity benefit payable to the
Executive under the Profit-Sharing Investment Plan as follows:

13

 

	 	 	 	     Benefits from the Executive’s interest in the Retirement Plan shall be
calculated on a straight life annuity basis payable or that would be payable to the
Executive under the Retirement Plan (i) if Executive terminated employment on the
date of his or her Separation from Service, or (ii) in the event of death, if
Executive terminated employment on the last day of the month prior to the month in
which Executive dies.
	 
	 	 	 	      The hypothetical annuity benefit payable under the Profit-Sharing Investment
Plan shall be calculated by first determining the value of each share credited to
the Executive’s Retirement Share Plan account under the Profit-Sharing Investment
Plan as of the date it was credited and applying an annual rate of 12% to such value
from the date such share was credited to such account to the date the Executive’s
benefit under this Plan is to commence. The aggregate value of all of the shares
credited to the Executive’s Retirement Share Plan account so determined shall then
be converted to a straight life annuity using the factors for determining Actuarial
Equivalence.

	 	6.	 	“Board” shall mean the Board of Directors of McKesson.
	 
	 	7.	 	“Break in Service” shall occur when an Executive does not perform any
Service during a 12 consecutive month period beginning on a date after the Executive
separates from Service. A Break in Service occurs on the earlier of (i) the date on
which the Executive quits, retires, is discharged or dies, or (ii) he or she fails to
return to work as determined at the discretion of the Administrator.
	 
	 	8.	 	“Cause” shall be determined in accordance with the terms of the
Executive’s written employment agreement, if any, or if there is none, “Cause” shall
mean (i) Executive’s misconduct, dishonesty, habitual neglect, or other knowing and
material violation of Company’s policies and procedures in effect from time to time,
(ii) actions (or failures to act) by Executive in bad faith and to the detriment of
Company, or (iii) conviction of a felony or a crime of moral turpitude.
	 
	 	9.	 	“Code” shall mean the Internal Revenue Code of 1986, as amended.
	 
	 	10.	 	“Company” shall mean McKesson and any member of its controlled group as
defined by Section 414(b) and (c) of the Code.
	 
	 	11.	 	“Compensation Committee” shall mean the Compensation Committee of the
Board.
	 
	 	12.	 	“Deferred Compensation Administration Plan II” or “DCAP II”
shall mean the McKesson Corporation Deferred Compensation Administration Plan II or any
successor or replacement plan.

14

 

	 	13.	 	“Early Retirement” shall mean any Separation from Service prior to
Approved Retirement, but after Executive attains age 55 and has completed at least
fifteen Years of Service. Notwithstanding the foregoing, “Early Retirement” shall not
include any Separation from Service for Cause.
	 
	 	14.	 	“ERISA” shall mean the Employee Retirement Income Security Act of 1974,
as amended.
	 
	 	15.	 	“Employer” shall mean McKesson and any other affiliate that would be
considered a service recipient or employer for purposes Treasury Regulation section
1.409A-1(h)(3).
	 
	 	16.	 	“Executive” shall mean an employee of the Company selected to
participate in this Plan.
	 
	 	17.	 	“Interest Credit for Delay” shall mean an additional amount
representing interest credited on the applicable payment at the rate being credited to
accounts under the Company’s Deferred Compensation Administration Plan III during the
period between the Separation from Service and the payment date.
	 
	 	18.	 	“McKesson” shall mean McKesson Corporation, a Delaware corporation.
	 
	 	19.	 	“MIP” shall mean the McKesson Corporation 2005 Management Incentive
Plan or successor or replacement plan.
	 
	 	20.	 	“Plan” or “EBRP” shall mean this McKesson Corporation Executive
Benefit Retirement Plan, as amended from time.
	 
	 	21.	 	“Pro Rata Percentage” shall mean the higher of the following two
percentages (but not greater than 100%):

	 	a.	 	the percentage determined by dividing the number of the
Executive’s whole months of employment with the Company by the number of whole
months from the date that the Executive was first hired by the Company to the
date that the Executive will reach age 65 and multiplying by 100; and
	 
	 	b.	 	the percentage determined by multiplying 4.44% by the number of
the Executive’s whole and partial years of completed employment with the
Company.

	 	22.	 	“Profit-Sharing Investment Plan” or “PSIP” shall mean the
McKesson Corporation Profit-Sharing Investment Plan.
	 
	 	23.	 	“Retirement Plan” shall mean the McKesson Corporation Retirement Plan.
	 
	 	24.	 	“Separation from Service” or “Separated from Service” shall
mean termination of employment with the Employer, except in the event of death. A
Participant shall be deemed to have had a Separation from Service if the

15

 

	 	 	 	Participant’s service with the Employer is reduced to an annual rate that is equal
to or less than twenty percent of the services rendered, on average, during the
immediately preceding three years of service with the Employer (or if providing
service to the Employer less than three years, such lesser period).

	 	25.	 	“Service” shall mean the period commencing with the first day of an
Executive’s employment with the Company and ending with the day he or she Separates
from Service with the Company. For purposes of this Section M.25, an Executive
“Separates from Service” or has a “Separation from Service” on the earlier of the date
he or she resigns, retires, is discharged or dies, or on the first anniversary of his
or her absence from work for any other reason. Notwithstanding the foregoing, an
Executive’s period of Service shall also include certain periods after he or she
Separates from Service:

	 	a.	 	If an Executive Separates from Service by resignation,
discharge or retirement and thereafter returns to the employ of the Company
within one year, the period of separation shall be considered as part of the
Executive’s Service.
	 
	 	b.	 	An Executive’s Service shall also continue during his or her
absence caused by sickness, accident, layoff where rehire is anticipated,
required military service or any other absence authorized by the Company on a
uniform and nondiscriminatory basis. If, after such absence, the individual
fails to return to work as an employee of the Company within the time
prescribed on a uniform and nondiscriminatory basis by the Administrator for
such absences, or within the period during which his or her reemployment rights
are protected by law, Service shall be deemed broken as of the date the
Executive should have returned to work, as determined by the Administrator.
	 
	 	c.	 	If an Executive Separates from Service because of the pregnancy
of the Executive, the birth of a child of the Executive, the placement of a
child with the Executive in connection with the adoption of the child by the
Executive, or for the purpose of caring for such child by the Executive for a
period immediately following birth or placement, the one-year period following
such separation shall be deemed Service of the Executive (“maternity or
paternity absence”). Also, no Separation from Service on account of such
absence shall occur until the earliest of resignation, retirement, death,
discharge or the second anniversary of the date the maternity or paternity
absence began. The period after the first anniversary of such absence and its
second anniversary is neither a period of Service or separation. An Executive
must furnish the Administrator with such timely information as the
Administrator may reasonably require to establish that the absence is for a
reason described herein.
	 
	 	d.	 	Effective as of May 13, 1993, if an Executive who Separates
from Service receives severance pay immediately after such Separation from
Service,
the period for which the Executive receives such severance pay shall be
considered part of the Executive’s Service.

16

 

	 	26.	 	“Supplemental Profit-Sharing Investment Plan” or “Supplemental
PSIP” shall mean the McKesson Corporation Supplemental Profit-Sharing Investment
Plan or any successor or replacement plan.
	 
	 	27.	 	“Termination Benefits” shall mean those benefits specified in Section
D.2.a.
	 
	 	28.	 	“Year of Service” shall mean a period of 365 aggregate days of Service
(including holidays, weekends, and other non-working days). A Year of Service is
measured beginning on the Executive’s first employment commencement date with the
Company. To determine the number of whole years of an Executive’s Service,
nonsuccessive periods of Service must be aggregated and less than whole year periods of
Service must be aggregated. However, both aggregation rules are subject to the Break in
Service and other rules, as set forth in the Retirement Plan, and as applied at the
discretion of the Plan Administrator.

	N.	 	SUCCESSORS 

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

	O.	 	EXECUTION

     To record the amendment and restatement of the Plan by the Compensation Committee of McKesson
Corporation at a meeting held on October 24, 2008.

McKESSON CORPORATION

	 	 	 	 	 
	By:

	 	/s/ Jorge L. Figueredo
 

Jorge L. Figueredo

Executive Vice President, Human Resources
	 	 

17

 

McKESSON CORPORATION

EXECUTIVE BENEFIT RETIREMENT PLAN

APPENDIX A

SAMPLE CALCULATION

EARLY RETIREMENT

Executive retires at age 59, three years early, with 25 Years of Service

Final Average Compensation: $600,000

Percentage of Final Average Compensation
specified under the Plan: 60% (20% + 1.77% for each of 25 years, capped at 60%)

	 	 	 	 	 
	Income Objective
	 	 	 	 
	       (60% x $600,000)
	 	$	360,000	 
	 
	 	 	 	 
	LESS: Early Retirement Reduction

       (0.003 per month x 36 months = 10.8%)
	 	 	(38,800	)
	 
	 	 	 
	 
	 	 	 	 
	Adjusted Objective
	 	 	321,120	 
	 
	 	 	 	 
	LESS: Single Life Retirement Plan Benefit and
annuitized value of PSIP Retirement Share Plan Account
	 	 	(38,000	)
	 
	 	 	 
	 
	 	 	 	 
	Annual Single Life EBRP Benefit
	 	$	283,120	 

NOTE: Retirement Plan benefits are governed by the terms of that plan, and incorporate the
appropriate reduction for Early Retirement. As intended, the Plan provides a retirement income
that, when added to income from the Retirement Plan and the PSIP, if any, provides the executive
with retirement income equal to the adjusted objective.

A-1

 

McKESSON CORPORATION

EXECUTIVE BENEFIT RETIREMENT PLAN

APPENDIX B

SAMPLE CALCULATION

SURVIVOR BENEFIT

Death age 57 with 20 Years of Service

Final Average Compensation: $500,000

Percentage of Final Average Compensation
specified under the Plan: 55.4% (20% + 1.77% for each of 20 years)

	 	 	 	 	 
	Income Objective
	 	 	 	 
	       (55.4% % x $500,000)
	 	$	277,000	 
	 
	 	 	 	 
	LESS: Early Retirement Reduction

       (0.003 per month x 60 months = 18%)
	 	 	(49,860	)
	 
	 	 	 
	 
	 	 	 	 
	Subtotal
	 	$	227,140	 
	 
	 	 	 	 
	Application of 100% J&S Factor
	 	 	80	%
	Adjusted Objective
	 	$	181,712	 
	 
	 	 	 	 
	LESS: Retirement Plan Spouse Allowance and
annuitized value of PSIP Retirement Share Plan Account
	 	 	(25,000	)
	 
	 	 	 
	 
	 	 	 	 
	Annual EBRP Survivor Benefit
	 	$	156,712	 

NOTE: As intended, the Plan Survivor Benefit provides a supplement to the Retirement Plan and the
PSIP so that the total of these sources of Company-provided benefits equals the survivor’s adjusted
income objective. This method would apply even if the Retirement Plan Spouse Allowance were paid to
a minor child, and the Plan benefit were paid to the spouse.

B-1

 

McKESSON CORPORATION

EXECUTIVE BENEFIT RETIREMENT PLAN

APPENDIX C

SAMPLE CALCULATION

TERMINATION BEFORE EARLY RETIREMENT

Executive is hired at age 40 and terminates at age 50.

	 	 	 
	Final Average Compensation:
$600,000 

	 
	 	 
	Percentage of Final Average
Compensation specified under the Plan:
37.7% (20% + 1.77% for each of 10 years)

	 
	 	 
	Pro Rata Percentage Applied:
44.4% (Greater of 120 months/300 months and
4.44% x 10 years

	 
	 	 
	Vested benefit at age 65:
44.4% of 37.7% (or 16.74%) of Final Average
Compensation, less the Executive’s Basic
Retirement Benefit.

The benefit payable at age 50 is equal to the present value of the benefit payable at age 65,
calculated using the GATT interest rate.

C-1

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