Document:

exv10w4

EXHIBIT 10.4

McKESSON CORPORATION

SEVERANCE POLICY FOR EXECUTIVE EMPLOYEES

Effective January 1, 2009

(Amended and Restated October 24, 2008)

 

 

McKESSON CORPORATION

SEVERANCE POLICY FOR EXECUTIVE EMPLOYEES

Effective January 1, 2009

(Amended and Restated October 24, 2008)

	1.	 	ADOPTION AND PURPOSE OF POLICY.

The McKesson Corporation Severance Policy for Executive Employees (the “Policy”) was adopted
effective September 29, 1993 by McKesson to provide a program of severance payments to certain
employees of McKesson and its designated subsidiaries. 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 thereunder. This document
constitutes both the plan document and the summary plan description of the Policy. The plan
administrator of the Policy for purposes of ERISA is McKesson. The Policy was amended and restated
effective as of January 1, 2005 and last amended and restated to read as set forth herein effective
as of January 1, 2009.

	2.	 	SEVERANCE BENEFITS.

	 	(a)	 	Basic Severance Benefits. In the event that the Company terminates the
employment of a Participant under circumstances that (i) constitute a Separation from
Service for any reason other than Cause and (ii) do not make the Participant eligible
for benefits under the McKesson’s Change in Control Policy for Selected Executive
Employees, that Participant shall be entitled to a severance payment equal to the
lesser of (A) 12 months’ Earnings plus one additional month for each Year of Service or
(B) 24 months’ Earnings. In no event shall the number of months’ Earnings a Participant
is entitled to receive hereunder exceed the number of months remaining between the date
of Participant’s Separation from Service and the date he or she will attain age 62
(rounded to the next higher whole month).
	 
	 	(b)	 	Mitigation of Benefits. The amount of a Participant’s benefits calculated under
(a) above shall be reduced by the amount of compensation, if any, the Participant
receives from any subsequent employer(s) for work performed during a period of time
following his or her Separation from Service equal to the number of months of Earnings
the Participant is entitled to receive.
	 
	 	(c)	 	Effect on Other Plans. Except as provided in Section 3 below, 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.
	 
	 	(d)	 	No Duplication of Benefits. In no event shall a Participant be entitled to any
benefits under this Policy if his or her employment with the Company terminates under
circumstances that entitle the Participant to receive severance benefits following a
change of control of the Company pursuant to the McKesson’s Change in Control Policy
for Executive Employees or the terms of any individual

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	 	 	 	written employment or severance agreement; provided, however, to the extent that the
benefits provided in this Policy are greater than the benefits provided in such
written employment agreement, the benefits shall be paid under this Policy in lieu
of the benefits provided in the individual written employment agreement.

	3.	 	FORM OF BENEFIT.

The benefit described in Section 2(a) shall be paid in biweekly installments over a period
commencing on the date of the Participant’s Separation from Service not to exceed the number of
months determined under Section 2(a)(ii); provided, however, that if the Participant is a Specified
Employee on the date of his or her Separation from Service, any payment that is scheduled to be
made in the six-month period following the Participant’s Separation from Service shall be made in
the seventh month following the month in which the Participant’s Separation from Service occurs.
Any payment that is subject to the delay shall include an additional amount representing interest
credited at the rate being credited to accounts under the McKesson’s Deferred Compensation
Administration Plan III during the relevant period of delay and such interest shall be paid in a
lump sum at the same time that the delayed payments are made. All subsequent payment or benefits
will be payable in accordance with the payment schedule applicable to each such payment or
benefits. Each installment payment provided for in this Policy is a separate “payment” within the
meaning of Treasury Regulation section 1.409A-2(b)(2)(i).

Notwithstanding the foregoing, no payment under this Policy shall be made later than the last day
of the second calendar year following the year in which the Separation from Service occurs.

	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), but prior to the payment of the entire benefit due hereunder,
the balance of the benefit payable under the Policy 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, but no later than 90 days, after the date of
Participant’s death. If a Participant dies prior to Separation from Service, no benefits will be
paid under this Policy.

	5.	 	STOCKHOLDER APPROVAL.

McKesson shall seek approval or ratification of its stockholders at McKesson’s next annual or
special meeting of stockholders for any arrangement whereby the present value of any Severance
Payments for any Participant exceeds 2.99 times such Participant’s Base Salary and Bonus. This
provision will apply to any arrangement or agreement with a Participant entered into after July 30,
2003, including extensions, renewals or modifications (other than modifications based upon
subsequent changes in tax law or other legal requirements) after such date of arrangements or
agreements entered into prior to such date that increase the Severance Payments (other than
increases due to an increase in Base Salary and Bonus) payable to a Participant under such
arrangement or agreement.

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	6.	 	AMENDMENT AND TERMINATION.

McKesson reserves the right to amend the Policy by action of the Compensation Committee of the
Board; provided, however, that no such action shall have the effect of decreasing the benefit of a
Participant whose Separation from Service occurred prior to the date of the Board’s or Compensation
Committee’s action.

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

	7.	 	ADMINISTRATION AND FIDUCIARIES.

	 	(a)	 	Plan Sponsor and Administrator. McKesson is the “plan sponsor” and the
“Administrator” of the Policy, within the meaning of ERISA.
	 
	 	(b)	 	Administrative Responsibilities. McKesson shall be the named fiduciary within
the meaning of ERISA, 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, McKesson 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 McKesson’s responsibilities for the operation and administration of the
Policy among McKesson’s officers, employees and agents. It may also delegate any of
McKesson’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
McKesson that no individual liability shall attach to or be incurred by any member of
the Board of McKesson, or by any officer, employee representative or agent of the
Company, under, or by reason of the operation of, the Policy.
	 
	 	(e)	 	Employer Identification Number and Policy Number. The employer identification
number (EIN) assigned to McKesson by the Internal Revenue Service is 94-3207296. The
plan number (PIN) assigned to the Policy by McKesson is ___.
	 
	 	(f)	 	Policy Year. All records with respect to the Policy are kept on a calendar
year basis.
	 
	 	(g)	 	Legal Actions. No lawsuit can be brought to recover a benefit under the Policy

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	 	 	 	until an individual or his or her representative has done all of the following: (i)
filed a written claim as required by the Policy, (ii) received a written denial of
the claim (or the claim is deemed denied as described below), (iii) filed a written
request for a review of the denied claim with the Administrator, and (iv) received
written notification that the denial of the claim has been affirmed (or the denial
is deemed to be affirmed as described below).

	 	(h)	 	Agent for Service of Legal Process. If an individual wish to take legal action
after exhausting the Policy’s claims and appeal procedures, legal process should be
served on: Senior Vice President, Human Resources, McKesson Corporation, One Post
Street, San Francisco, California 94104. The individual may also serve process on the
Policy by serving the Administrator at the address shown above.
	 
	 	(i)	 	ERISA Rights.

	 	(i)	 	Participant’s are entitled to certain rights and protections
under Title I of ERISA.
	 
	 	(ii)	 	Participant’s may examine without charge all official Policy
documents during business hours in the McKesson Benefits Department. These
documents include the legal texts of the plans, Policy descriptions and annual
reports that McKesson files with the U.S. Department of Labor.
	 
	 	(iii)	 	Participant’s may also obtain a copy of any of these documents
by writing to the Administrator, and may be charged a reasonable fee for
copies.
	 
	 	(iv)	 	Participant’s have the right to receive a summary of the
Policy’s annual financial report. The Administrator is required by law to
furnish each Participant with a copy of this summary annual report.
	 
	 	(v)	 	Questions about this Policy should be directed to the
Administrator. Participant’s that have any questions about this statement or
about his or her rights under ERISA, or if he or she needs assistance in
obtaining documents from the Administrator, the Participant should contact the
nearest office of the Employee Benefits Security Administration, U.S.
Department of Labor, listed in the telephone directory, or the Division of
Technical Assistance and Inquiries, Employee Benefits Security Administration,
U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
Participants may also obtain certain publications about their rights and
responsibilities under ERISA by calling the publications hotline of the
Employee Benefits Security Administration.
	 
	 	(vi)	 	No right to a benefit under the Policy shall depend (or shall
be deemed to depend) upon whether a Participant retires or elects to receive
retirement benefits under the terms of any employee pension benefit plan.
	 
	 	(vii)	 	The Policy shall contain no terms or provisions except those
set forth herein, or as hereafter amended in accordance with the provisions of

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	 	 	 	Section 6. If any description made in any other document is deemed to be in
conflict with any provision of the Policy, the provisions of the Policy
shall control.

	8.	 	CLAIMS AND APPEAL PROCEDURES

	 	(a)	 	Informal Resolution of Questions. Any Participant who has questions or concerns
about his or her benefits under the Policy is encouraged to communicate with the Human
Resources Department of McKesson. 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 8.
	 
	 	(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 Policy. 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. Any claim under this Policy must be brought
within two years of the date the events giving rise to the claim first occurred.
	 
	 	(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 8(b). The notice shall set
forth the specific reason for the denial, reference to the specific Policy 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 Policy’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.
	 
	 	 	 	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,

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	 	 	 	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.

	 	 	 	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 Policy cited in the original denial
of the claim.
	 
	 	 	 	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.
	 
	 	 	 	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 Policy 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 Policy 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.
	 
	 	 	 	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
Policy shall be brought unless and until the claimant has submitted a written claim for
benefits in accordance with Section 8(b), has been notified that the claim is denied in
accordance with Section 8(c), has filed a written request for a review of the claim in
accordance with Section 8(d), and has been notified in writing that the Executive Vice
President has affirmed the denial of the claim in accordance with Section 8(d).

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	9.	 	GENERAL PROVISIONS.

	 	(a)	 	Basis of Payments to and from Policy. All benefits under the Policy shall be
paid by McKesson. The Policy shall be unfunded and benefits hereunder shall be paid
only from the general assets of McKesson. 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. McKesson is under no obligation to fund the benefits provided herein
prior to payment, although it may do so if it chooses. Any assets which McKesson
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)	 	Section 409A. Notwithstanding any other provision of this Policy, McKesson
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. McKesson 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)	 	“Administrator” shall mean the person specified in Section 7.
	 
	 	(b)	 	“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.
	 
	 	(c)	 	“Board” shall mean the Board of Directors of McKesson.

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	 	(d)	 	“Cause” means negligent or willful engagement in misconduct which, in the sole
determination of the Chief Executive Officer, is injurious to the Employer, its
employees or its customers. 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 Employer.
	 
	 	(e)	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	(f)	 	“Company” means McKesson and any affiliate that would be considered a service
recipient for purposes of Treasury Regulation section 1.409A-1(g).
	 
	 	(g)	 	“Earnings” means a Participant’s monthly base salary.
	 
	 	(h)	 	“Employer” means 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).
	 
	 	(i)	 	“Identification Date” means each December 31.
	 
	 	(j)	 	“McKesson” means McKesson Corporation, a Delaware corporation.
	 
	 	(k)	 	“Participant” means (i) an individual who is designated to be eligible to
participate in the Policy by the Compensation Committee of the Board of McKesson and
(ii) whose employment is terminated under circumstances that render him or her eligible
for the benefits described in Section 2 of the Policy.
	 
	 	(l)	 	“Severance Payments” means (i) lump-sum cash payments (including payments in
lieu of medical and other benefits), (ii) the estimated present value of periodic cash
payments under previously established bonus, retirement, deferred compensation, or
other Company benefit plans, (iii) fringe benefits other than those provided under
Company programs or arrangements applicable to one or more groups of employees in
addition to Participants, and (iv) consulting fees (including reimbursable expenses)
other than reasonable fees and expenses for bona fide services provided to the Company
after termination, paid or payable by the Company to a Participant pursuant to this
Policy or otherwise upon a termination by the Company of employment of such Participant
at any time other than within two years following a Change in Control, excluding
Vested, Accrued or Appropriate Benefits.
	 
	 	(m)	 	“Separate from Service” or “Separation from Service” means 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 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).

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	 	(n)	 	“Specified Employee” means a Participant who, on an Identification Date, is:

	 	(i)	 	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;
	 
	 	(ii)	 	A five percent owner of the Company; or
	 
	 	(iii)	 	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
Policy during the period beginning on the first April 1 following the Identification
Date and ending on the next March 31.
	 
	 	(o)	 	“Vested, Accrued or Appropriate Benefits” means any benefits paid or payable by
the Company to a Participant upon a termination by the Company of employment of such
Participant at any time other than within two years following a Change in Control that
are (i) earned, accrued, deferred or otherwise received for employment services
rendered through the date of Separation from Service pursuant to bonus, retirement,
deferred compensation, or other Company benefit plans, (ii) approved under the terms of
bonus, retirement, deferred compensation, or other Company benefit plans existing at
the time of such termination at the reasonable discretion of the Compensation Committee
taking into consideration the age, length of service and other circumstances of such
termination, (iii) payments or benefits required to be provided by law, and (iv)
benefits and perquisites provided by the Company under plans, programs or arrangements
of the Company applicable to one or more groups of employees in addition to
Participants. For the avoidance of doubt, Vested, Accrued or Appropriate Benefits shall
not include benefits payable pursuant to this Policy.
	 
	 	(p)	 	“Year of Service” means a period of 365 aggregate days of employment (including
holidays, weekends and other non-working days), computed beginning on the Participant’s
employment commencement date. However, if the Participant has not completed a Year of
Service on the first anniversary of his employment commencement date, he or she shall
complete a Year of Service on the date of completion of 365 aggregate days of Service.
If a Participant has at any time completed at least one Year of Service, he or she
shall always be given credit for completed Years of Service. However, a Participant who
has five or more consecutive Breaks in Service, as defined in the McKesson
Profit-Sharing Investment Plan, as amended from time to time, shall be given such
credit only upon providing reasonable evidence to the Company of his or her previous
completion of such service.

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	11.	 	EXECUTION

This Amended and Restated Severance Policy for Executive Employees was adopted 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	 	 

10exv10w5

EXHIBIT 10.5

McKESSON CORPORATION

2005 MANAGEMENT INCENTIVE PLAN

Adopted by the Board of Directors May 25, 2005

Approved by the Stockholders July 27, 2005

Amended Effective May 25, 2005

Amended and Restated Effective October 27, 2006

Amended and Restated October 24, 2008, effective January 1, 2009

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	A.
	 	NAME; EFFECTIVE TIME	 	 	1	 
	 
	 	 	 	 	 	 
	B.
	 	PURPOSE	 	 	1	 
	 
	 	 	 	 	 	 
	C.
	 	ADMINISTRATION	 	 	1	 
	 
	 	 	 	 	 	 
	D.
	 	PARTICIPATION	 	 	2	 
	 
	 	 	 	 	 	 
	E.
	 	INDIVIDUAL TARGET AWARDS FOR PARTICIPANTS	 	 	2	 
	 
	 	 	 	 	 	 
	F.
	 	BASIS OF AWARDS	 	 	2	 
	 
	 	 	 	 	 	 
	G.
	 	AWARD DETERMINATION	 	 	3	 
	 
	 	 	 	 	 	 
	H.
	 	PROCEDURES APPLICABLE TO COVERED EMPLOYEES	 	 	4	 
	 
	 	 	 	 	 	 
	I.
	 	PAYMENT OF AWARDS	 	 	5	 
	 
	 	 	 	 	 	 
	J.
	 	EMPLOYMENT ON PAYMENT DATE	 	 	5	 
	 
	 	 	 	 	 	 
	K.
	 	CHANGE IN CONTROL	 	 	5	 
	 
	 	 	 	 	 	 
	L.
	 	FORFEITURE	 	 	5	 
	 
	 	 	 	 	 	 
	M.
	 	WITHHOLDING TAXES	 	 	7	 
	 
	 	 	 	 	 	 
	N.
	 	EMPLOYMENT RIGHTS	 	 	7	 
	 
	 	 	 	 	 	 
	O.
	 	NONASSIGNMENT; PARTICIPANTS ARE GENERAL CREDITORS	 	 	7	 
	 
	 	 	 	 	 	 
	P.
	 	AMENDMENT OR TERMINATION	 	 	7	 
	 
	 	 	 	 	 	 
	Q.
	 	SUCCESSORS AND ASSIGNS	 	 	8	 
	 
	 	 	 	 	 	 
	R.
	 	INTERPRETATION AND SEVERABILITY,	 	 	8	 
	 
	 	 	 	 	 	 
	S.
	 	DEFINITIONS	 	 	8	 
	 
	 	 	 	 	 	 
	T.
	 	EXECUTION	 	 	10	 

i.

 

McKESSON CORPORATION

2005 MANAGEMENT INCENTIVE PLAN

Adopted by the Board of Directors May 25, 2005

Approved by the Stockholders July 27, 2005

Amended Effective May 25, 2005

Amended and Restated Effective October 27, 2006

Amended and Restated October 24, 2008, effective January 1, 2009

A. NAME; EFFECTIVE TIME 

     The name of this plan is the McKesson Corporation 2005 Management Incentive Plan. The Plan
replaces in its entirety the Company’s 1989 Management Incentive Plan. The Plan is effective,
subject to approval by the Company’s stockholders, for fiscal years of the Company commencing on
and after April 1, 2005.

B. PURPOSE 

     The purpose of the Plan is to advance and promote the interests of the Company and its
stockholders by providing performance-based incentives to certain employees and to motivate those
employees to set and achieve above-average financial and non-financial objectives.

C. ADMINISTRATION 

     The Committee shall have full power and authority, subject to the provisions of the Plan, (i)
to designate employees as Participants, (ii) to add and delete employees from the list of
designated Participants, (iii) to establish Individual Target Awards for Participants, (iv) to
establish performance goals upon achievement of which the Individual Target Awards will be based,
and (v) to take all action in connection with the foregoing or in relation to the Plan as it deems
necessary or advisable. Decisions and selections of the Committee shall be made by a majority of
its members and, if made pursuant to the provisions of the Plan, shall be final.

     Notwithstanding the foregoing, the Committee may delegate to the Chief Executive Officer (the
“CEO”) the power and authority, subject to the provisions of the Plan, (i) to designate employees
who are not members of the Officer Group as Participants, (ii) to recommend members of the Officer
Group to the Committee for designation as Participants; provided that the Committee shall review
and approve members of the Officer Group as Plan Participants recommended by the CEO, (iii) to add
and delete employees who are not members of the Officer Group from the list of designated
Participants, (iv) to establish Individual Target Awards for Participants who are not members of
the Officer Group, (v) to establish performance goals upon achievement of which such Individual
Target Awards will be based, and (vi) to review and approve, modify or disapprove, or otherwise
adjust or determine the amount, if any, to be paid to Participants who are not members of the
Officer Group for the applicable Plan Year based on such Participants’ performance goals and
individual performance. In addition to the forgoing, the CEO may further delegate his authority to
other executive offices of the Company, except that the CEO may not delegate his authority to
recommend members of the Officer Group to the Committee for designation as Participants. References
to the Committee herein shall include references to the CEO and his designees to the extent that
the Committee has delegated power and authority under the Plan to the CEO and to the extent that the CEO has further
delegated power and authority under the Plan to other executive officers of the Company.

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     The Committee may promulgate such rules and regulations as it deems necessary for the proper
administration of the Plan and the CEO (but not his designees) may promulgate rules and regulations
as he deems necessary for the proper administration of the Plan with respect to Participants who
are not members of the Officer Group. The Committee may interpret the provisions and supervise the
administration of the Plan, and take all action in connection therewith or in relation to the Plan
as it deems necessary or advisable. The interpretation and construction by the Committee of any
provision of the Plan or of any award shall be final.

D. PARTICIPATION

1. Eligibility—Executives, Managers and Professionals 

     Only active employees of the Company who are employed in an executive, managerial or
professional capacity may be designated as Participants under the Plan.

2. Designation of Participants

     No person shall be entitled to any award under the Plan for any Plan Year unless he or she is
so designated as a Participant for that Plan Year.

E. INDIVIDUAL TARGET AWARDS FOR PARTICIPANTS 

     At the beginning of each Plan Year, the Committee shall establish an Individual Target Award
for each Participant. An Individual Target Award shall only be a target and the amount of the
target may or may not be paid to the Participant. Establishment of an Individual Target Award for
an employee for any Plan Year shall not imply or require that an Individual Target Award or an
Individual Target Award at any specified level will be set for any subsequent year. The amount of
any actual award paid to any Participant may be greater or less than this target. As set forth in
paragraph G.4 below (but subject to the limitations applicable to Covered Employees contained in
Article H), the actual award may be as much as three times target or as low as zero for any Plan
Year.

F. BASIS OF AWARDS 

1. Performance Goals 

     The Committee shall establish measures, which may include financial and non-financial
objectives (“Performance Goals”) for each segment of the Company. These Performance Goals shall be
determined by the Committee in advance of each Plan Year or within such period as may be permitted
by the regulations issued under Section 162(m), and to the extent that awards are paid to Covered
Employees, the performance criteria to be used shall be any of the following, either alone or in
any combination, which may be expressed with respect to the Company or one or more operating units
or groups, as the Committee may determine: cash flow; cash flow from operations; total earnings;
earnings per share, diluted or basic; earnings per share from continuing operations, diluted or
basic; earnings before interest and taxes; earnings before

2

 

interest, taxes, depreciation, and amortization; earnings from operations; net asset turnover;
inventory turnover; capital expenditures; net earnings; operating earnings; gross or operating
margin; debt; working capital; return on equity; return on net assets; return on total assets;
return on investment; return on capital; return on committed capital; return on invested capital;
return on sales; net or gross sales; market share; economic value added; cost of capital; change in
assets; expense reduction levels; debt reduction; productivity; stock price; customer satisfaction;
employee satisfaction; and total shareholder return.

2. Adjustment of Performance Goals 

     Performance Goals may be determined on an absolute basis or relative to internal goals or
relative to levels attained in prior years or related to other companies or indices or as ratios
expressing relationships between two or more Performance Goals. In addition, Performance Goals may
be based upon the attainment of specified levels of Company performance under one or more of the
measures described above relative to the performance of other corporations. The Committee shall
specify the manner of adjustment of any Performance Goal to the extent necessary to prevent
dilution or enlargement of any award as a result of extraordinary events or circumstances, as
determined by the Committee, or to exclude the effects of extraordinary, unusual, or non-recurring
items; changes in applicable laws, regulations, or accounting principles; currency fluctuations;
discontinued operations; non-cash items, such as amortization, depreciation, or reserves; asset
impairment; or any recapitalization, restructuring, reorganization, merger, acquisition,
divestiture, consolidation, spin-off, split-up, combination, liquidation, dissolution, sale of
assets, or other similar corporate transaction.

3. Performance Goals related to More than One Segment of the Company 

     Awards may be based on performance against objectives for more than one segment of the
Company. For example, awards for corporate management may be based on overall corporate performance
against objectives, but awards for a unit’s management may be based on a combination of corporate,
unit and sub-unit performance against objectives.

4. Individual Performance

     Subject to the limitations set forth in Article H below, individual performance of each
Participant may be measured and used in determining awards under the Plan.

G. AWARD DETERMINATION 

1. Award Determined by Committee

     After any Plan Year for which an Individual Target Award is established for a Participant
under the Plan, the Committee shall review and approve, modify or disapprove the amount, if any, to
be paid to the Participant for the Plan Year. The amount paid shall be the Individual Target Award
adjusted to reflect both the results against the Participant’s Performance Goals and the
Participant’s individual performance. All awards are subject to adjustment at the sole discretion
of the Committee.

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2. Financial and Non-Financial Performance 

     Individual Target Award amounts will be modified based on the achievement of financial and
non-financial objectives by the Company and relevant units and/or sub-units. Performance results
against objectives shall be reviewed and approved by the Committee in accordance with paragraph F.2
above, as applicable.

3. Individual Performance

     Any Individual Target Award, adjusted to reflect financial performance, may be further
adjusted with the review and approval of the Committee to give full weight to the Participant’s
individual performance during the Plan Year.

4. Overall Effect

     The combination of any financial performance adjustment and individual performance adjustment
may increase the amount paid under the Plan to a Participant for any Plan Year to as much as three
times the Individual Target Award, and may reduce any amount payable to zero, subject to Article H.

H. PROCEDURES APPLICABLE TO COVERED EMPLOYEES 

     Awards under the Plan to Participants who are Covered Employees shall be subject to
preestablished Performance Goals as set forth in this Article H. Notwithstanding the provisions of
paragraph G.3 above, the Committee shall not have discretion to modify the terms of awards to such
Participants except as specifically set forth in this Article H.

     At the beginning of a Plan Year, the Committee shall establish Individual Target Awards for
such of the Participants who may be Covered Employees, payment of which shall be conditioned upon
satisfaction of specific Performance Goals for the Plan Year established by the Committee in
writing in advance of the Plan Year, or within such period as may be permitted by regulations
issued under Section 162(m). The Performance Goals established by the Committee shall be based on
one or more of the criteria set forth in paragraph F.1 above. The extent, if any, to which an award
will be payable will be based upon the degree of achievement of the Performance Goals in accordance
with a pre-established objective formula or standard as determined by the Committee. The
application of the objective formula or standard to the Individual Target Award will determine
whether the Covered Employee’s award for the Plan Year is greater than, equal to or less than the
Participant’s Individual Target Award. To the extent that the minimum Performance Goals are
satisfied or surpassed, and upon written certification by the Committee that the Performance Goals
have been satisfied to a particular extent, payment of the award shall be made as soon as
reasonably practicable after the Payment Date in accordance with the objective formula or standard
applied to the Individual Target Award unless the Committee determines, in its sole discretion, to
reduce or eliminate the payment to be made.

     Notwithstanding any other provision of the Plan, the maximum award payable to any Participant
who is a Covered Employee for any Plan Year shall not exceed $6,000,000.

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I. PAYMENT OF AWARDS 

     An award under the Plan shall be paid in a single sum to the Participant as soon as reasonably
practicable after Payment Date, unless the Participant elects to defer his or her award pursuant to
the terms and conditions of the Company’s Deferred Compensation Administration Plan III (“DCAP
III”) and in compliance with Section 409A of the Code. To the extent that an award is not deferred
under DCAP III, such award shall be paid no later than the later of two and one-half months
following the end of the Company’s fiscal year or the end of calendar year in which the Payment
Date occurs.

J. EMPLOYMENT ON PAYMENT DATE 

     No award shall be made to any Participant who is not an active employee of the Company on the
Payment Date; provided, however, that the Committee, in its sole and absolute discretion, may make
pro-rata awards to Participants in circumstances that the Committee deems appropriate including,
but not limited to, a Participant’s death, disability, retirement or other termination of
employment prior to the Payment Date. Any such pro-rated awards shall be determined by the
Committee in accordance with Article G above after taking into account the portion of the Plan Year
completed. Notwithstanding the foregoing, any pro-rata award that the Committee in its sole and
absolute discretion, may make to a Covered Employee upon a circumstance that is not death,
disability or a Change in Control, shall be based on the attainment of the pre-established
Performance Goals designated for the applicable performance period under Article H above.

K. CHANGE IN CONTROL 

     In the event of a Change in Control, the Company or any successor or surviving corporation
shall pay to each Participant an award for the Plan Year in which the Change in Control occurs and
for any previous Plan Year for which awards have been earned but not yet paid; provided, however,
any awards for any previous Plan Year paid to a Covered Employee shall be based on the attainment
of the pre-established Performance Goals designated for the applicable performance period under
Article H above. Each such award shall be equal to the greatest of the following: (i) the
Participant’s Individual Target Award for the applicable Plan Year; (ii) the Participant’s
Individual Target Award for the applicable Plan Year adjusted based on the actual performance
outcome for that Plan Year, provided, that the Committee may not invoke its discretionary authority
to reduce the amount of such an award; or (iii) the average of awards earned and paid to (or
deferred by) the Participant in the three (or such fewer number of years that the Participant has
been eligible for such an award) completed Plan Years immediately preceding the applicable Plan
Year. Such awards shall be paid by the Company or any successor or surviving corporation at such
time as the awards otherwise would be payable under the Plan; provided, however, that if a
Participant is terminated without Cause or terminates for Good Reason within twelve months after a
Change in Control, then such Participant shall be paid his or her awards determined under this
Article K, within thirty days of such termination. Notwithstanding the foregoing, any award
determined pursuant to this Article K shall be reduced by any corresponding award payable under a
Participant’s individual written employment agreement, if any.

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L. FORFEITURE 

     Any other provision of the Plan to the contrary notwithstanding, if the Committee determines
that a Participant has engaged in any of the actions described below, then upon written notice from
the Company to the Participant (i) the Participant shall not be eligible for any award for the year
in which such notice is given or for the preceding year, if such award has not been paid as of the
date of the notice, (ii) any payment of an award received by the Participant within twelve months
prior to the date that the Company discovered that the Participant engaged in any action described
below shall immediately be repaid to the Company by the Participant in cash (including amounts
withheld pursuant to Article M) and (iii) any award deferred pursuant to Article I within twelve
months prior to the date that the Company discovered that the Participant engaged in any action
described below shall be forfeited immediately and shall not be distributed to the Participant
under any circumstances.

     The consequences described above shall apply if the Participant, either before or after
termination of employment with the Company:

     1. Discloses to others, or takes or uses for his or her own purpose or the purpose of others,
any trade secrets, confidential information, knowledge, data or know-how or any other proprietary
information or intellectual property belonging to the Company and obtained by the Participant
during the term of his or her employment, whether or not they are the Participant’s work product.
Examples of such confidential information or trade secrets include, without limitation, 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
Participant knows or has reason to know that the Company intends or expects secrecy to be
maintained; or

     2. Fails to promptly return all documents and other tangible items belonging to the Company in
the Participant’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 termination of employment, whether pursuant to retirement or otherwise; or

     3. Fails to provide the Company with at least thirty (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 termination of the
Participant’s employment with the Company; or

     4. Fails to inform any new employer, before accepting employment, of the terms of this section
and of the Participant’s continuing obligation to maintain the confidentiality of the trade secrets
and other confidential information belonging to the Company and obtained by the Participant during
the term of his or her employment with the Company; or

6

 

     5. 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 Participant or any third party; or

     6. 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; or

     7. Directly or indirectly engages in, becomes employed by, or renders services, advice or
assistance to any business in competition with the Company, at any time during the twelve months
following termination of employment with the Company.

     The Committee shall determine in its sole discretion whether the Participant has engaged in
any of the acts set forth in subsections 1 through 7 above, and its determination shall be
conclusive and binding on all interested persons.

     Any provision of this Article L which is determined by a court of competent jurisdiction to be
invalid or unenforceable should 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 Article
L.

M. WITHHOLDING TAXES 

     Whenever the payment of an award is made, such payment shall be net of an amount sufficient to
satisfy federal, state and local income and employment tax withholding requirements and authorized
deductions.

N. EMPLOYMENT RIGHTS 

     Neither the Plan nor designation as a Plan Participant shall be deemed to give any individual
a right to remain employed by the Company. The Company reserves the right to terminate the
employment of any employee at any time, with or without cause or for no cause, subject only to a
written employment contract (if any).

O. NONASSIGNMENT; PARTICIPANTS ARE GENERAL CREDITORS 

     The interest of any Participant under the Plan shall not be assignable either by voluntary or
involuntary assignment or by operation of law (except by designation of a beneficiary or
beneficiaries to the extent allowed under DCAP II with respect to amounts deferred under Article I)
and any attempted assignment shall be null, void and of no effect.

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

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P. AMENDMENT OR TERMINATION 

     The Board of Directors may terminate or suspend the Plan at any time. The Committee may amend
the Plan at any time; provided that (i) to extent required under Section 162(m), the Plan will not
be amended without prior approval of the Company’s stockholders, and (ii) no amendment shall
retroactively and adversely affect the payment of any award previously made. Notwithstanding the
foregoing, no amendment adopted following the occurrence of a Change in Control shall be effective
if it (a) would reduce a Participant’s Individual Target Award for the Plan Year in which the
Change in Control occurs, (b) would reduce an award payable to a Participant based on the
achievement of Performance Goals in the Plan Year before the Plan Year in which the Change in
Control occurs, or (c) modify the provisions of this paragraph.

Q. SUCCESSORS AND ASSIGNS 

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

R. INTERPRETATION AND SEVERABILITY,

     The Plan is intended to comply with Section 162(m), and all provisions contained herein shall
be construed and interpreted in a manner to so comply. In case any one or more of the provisions
contained in the Plan shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other provision of
the Plan, but the Plan shall be construed as if such invalid, illegal or unenforceable provisions
had never been contained herein.

S. DEFINITIONS 

     “Cause” shall mean 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.

     “Change in Control” 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
Internal Revenue Code of 1986, as amended, the regulations thereunder, and any other published
interpretive authority, as issued or amended from time to time.

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

     “Committee” shall mean the Compensation Committee of the Board of Directors of McKesson
Corporation; provided, however, that the Committee shall consist solely of two or more “outside
directors”, in conformance with Section 162(m) of the Code.

     “Company” shall mean McKesson Corporation, a Delaware corporation, including its subsidiaries
and affiliates.

8

 

     “Covered Employee” shall mean an eligible Participant designated by the Committee who is, or
is expected to be, a “covered employee” within the meaning of Section 162(m) for the Plan Year in
which an award is payable hereunder.

     “Good Reason” shall mean any of the following actions, if taken without the express written
consent of the Participant:

     a. any material change by the Company in the functions, duties, or responsibilities of the
Participant, which change would cause such Participant’s position with the Company to become of
less dignity, responsibility, importance, or scope from the position and attributes that applied to
the Participant immediately prior to the Change in Control;

     b. any reduction in the Participant’s base salary;

     c. any material failure by the Company to comply with any of the provisions of any employment
agreement between the Company and the Participant;

     d. the requirement by the Company that the Participant 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 and commensurate with the amount of travel required of the
Participant prior to the Change in Control; or

     e. any failure by the Company to obtain the express assumption of this Plan by any successor
or assign of the Company.

     “Individual Target Award” shall mean the target award established for each Participant under
Article E, which shall be a percentage of the Participant’s base salary or a fixed dollar amount,
as determined by the Committee.

     “Officer Group” shall mean the Covered Employees and any other officer of the Company
designated as part of the Officer Group by the Committee.

     “Participants” shall mean those employees specifically designated as Participants for a Plan
Year under Article D.

     “Payment Date” shall mean the date following the conclusion of a Plan Year on which the
Committee certifies that applicable Performance Goals have been satisfied and authorizes payment of
corresponding awards.

     “Performance Goals” shall have the meaning set forth in Article F hereof. “Plan” shall mean
the McKesson Corporation 2005 Management Incentive Plan. “Plan Year” shall mean the fiscal year of
the Company.

     “Section 162(m)” shall mean Section 162(m) of the Code and regulations promulgated thereunder,
as may be amended from time to time.

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T. EXECUTION 

     This amended and restated 2005 Management Incentive Plan was adopted 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	 	 

10

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