Document:

exv10w3

 

Exhibit
10.3  

Exhibit B to Employment Agreement

NON-QUALIFIED STOCK OPTION AGREEMENT

PIER 1 IMPORTS, INC.

[Employment
Agreement Option 2]

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is made effective and
entered into as of February ___, 2007, by and between PIER 1 IMPORTS, INC., a Delaware corporation
(the “Company”), and ALEXANDER W. SMITH (the “Optionee”). All terms defined in the
Employment Agreement (defined below) are used herein with same meanings as are ascribed to them
therein.

     WHEREAS, this Option (defined below) is being granted pursuant to the terms of that certain
Employment Agreement (the “Employment Agreement”) dated February 19, 2007, by and between
the Company and Optionee, and is the stock option defined therein as “Option 2”;

     WHEREAS, this Option is granted as an inducement grant, not under any stock incentive plan
adopted by the Company:

     NOW, THEREFORE, the parties hereto agree as follows:

     1. Grant of Option. The Company hereby grants to the Optionee an Option (this
“Option”), subject to the execution of this Option Agreement, on the Date of Grant (as
defined below) to purchase from the Company upon the terms and conditions hereinafter set forth
2,000,000 shares (the “Option Shares”) of the Company’s Common Stock, par value $1.00 per
share (the “Common Stock”).

     2. Date of Grant. This Option is granted to Optionee on February ___, 2007 (the
“Date of Grant”).

     3. Exercise Price. The exercise price is $___for each of the Option Shares (the
“Exercise Price”).

     4. Expiration Date: The expiration date of this Option is February ___, 2017 (the
“Expiration Date”).

               (i) Term of Option; Exercisability. Unless sooner terminated as hereinafter provided,
this Option shall become vested and exercisable up to 1,000,000 Option Shares on the date of filing
of the Company’s Annual Report on Form 10-K (“Form 10-K”) with the Securities and Exchange
Commission (the “SEC”) for the fiscal year ending February 28, 2009 (such date, the
“2nd Vesting Date”), based upon achieving a percentage of the fiscal 2009 EBITDA
target (the “2009 EBITDA Target”) as follows:

100% of the 2009 EBITDA Target – 1,000,000 shares;

98% of the 2009 EBITDA Target – 900,000 shares;

96%
of the 2009 EBITDA Target – 800,000 shares;

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Exhibit B to Employment Agreement

94% of the 2009 EBITDA Target – 700,000 shares;

92% of the 2009 EBITDA Target – 600,000 shares; and

90% of the 2009 EBITDA Target – 500,000 shares.

     Unless sooner terminated as hereinafter provided, this Option shall become vested and
exercisable up to 1,000,000 Option Shares on the date of filing of the Company’s Form 10-K with the
SEC for the fiscal year ending February 27, 2010 (such date, the “3rd Vesting
Date”), based upon achieving a percentage of the fiscal 2010 EBITDA target (the “2010
EBITDA Target”) as follows:

100% of the 2010 EBITDA Target – 1,000,000 shares;

98% of the 2010 EBITDA Target – 900,000 shares;

96% of the 2010 EBITDA Target — 800,000 shares;

94% of the 2010 EBITDA Target – 700,000 shares;

92% of the 2010 EBITDA Target – 600,000 shares; and

90% of the 2010 EBITDA Target – 500,000 shares.

     If, on the 3rd Vesting Date, the Company’s aggregate consolidated EBITDA for the
Company’s fiscal years 2009 and 2010 equals or exceeds the sum of the 2009 EBITDA Target plus the
2010 EBITDA Target, then any Option Shares that did not vest on the 2nd Vesting Date may
be earned and shall become vested and exercisable on the 3rd Vesting Date.

     Notwithstanding any other provision of this Agreement to the contrary, in the event that
Optionee is employed by the Company as of the end of any the fiscal years 2009 and 2010, Optionee
shall be entitled to the vesting of this Option for that fiscal year, as set forth above,
regardless of whether Optionee’s employment terminates prior to the formal determination of vesting
(i.e., based on EBITDA calculations) for such fiscal year, as set forth above.

     5. Exercise of Option. Notice of the exercise of this Option or any portion thereof
shall be given to the Company, or any other employee of the Company or an affiliate who is
designated by the Company to accept such notices on its behalf, specifying the number of shares for
which it is exercised; provided, that no partial exercise of this Option may be for fewer than 100
shares unless the remaining shares purchasable are fewer than 100 shares. Payment of the Exercise
Price shall be made in full at the time this Option is exercised. Payment shall be made (i) by
certified or cashier’s check, (ii) by delivery and assignment to the Company of Common Stock owned
by the Optionee that has a Fair Market Value (as defined in the Company’s 2006 Stock Incentive
Plan) on the first business day preceding the date this Option is exercised equal to the aggregate
purchase price of the Option Shares, (iii) by irrevocably authorizing a third party to sell Option
Shares and remit to the Company a sufficient portion of the sale proceeds to pay
the purchase price, or (iv) by a combination of (i), (ii) or (iii). The Company will, as soon
as reasonably practicable, notify the Optionee of the amount of the minimum withholding tax, if

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Exhibit B to Employment Agreement

any, that must be collected by the Company under federal, state and local law due to the exercise
of this Option. The Optionee shall, prior to receiving the Option Shares purchased under this
Option, satisfy the amount of the withholding tax specified in the Company’s notice by (i)
certified or cashier’s check, (ii) delivery and assignment to the Company of shares of Common Stock
previously owned by the Optionee having a Fair Market Value of such amount, (iii) notice to the
Company of the Optionee’s election to require the Company to withhold whole Option Shares otherwise
deliverable to the Optionee from the exercise of this Option, which Option Shares have a Fair
Market Value of such amount, or (iv) a combination of (i), (ii) or (iii). Certificates for any
shares of Common Stock delivered in satisfaction of all or a portion of the Exercise Price and the
withholding tax shall be appropriately endorsed for transfer and assignment to the Company. For
purposes of determining the amount, if any, of the Exercise Price satisfied by delivery of shares
of Common Stock or the amount of the tax withholding satisfied by delivery of shares of Common
Stock or withholding of Option Shares from the exercise of this Option, such shares shall be valued
at Fair Market Value on the first business day preceding the date of exercise.

     6. Termination of Option. In the event of the termination of the Optionee’s employment
under the Employment Agreement, this Option shall terminate in accordance with the following
provisions:

          (a) If Optionee’s employment is terminated by the Company for Cause or by Optionee without
Good Reason, this Option, to the extent not vested, shall terminate and shall not thereafter be
exercisable as to any portion thereof that has not vested.

          (b) If Optionee’s employment is terminated by the Company without Cause or by Optionee for
Good Reason, then any portion of the Option Shares which has not vested as of the termination date
shall vest according to the following schedule:

	 	(i)	 	If the termination date is on or anywhere in between the Date
of Grant and February 18, 2009, then 1,000,000 of the Option Shares shall
become vested and shall be fully exercisable by Optionee as of the termination
date; and
	 
	 	(ii)	 	If the termination date is on or after February 19, 2009, then
all of the Option Shares shall become vested and shall be fully exercisable by
Optionee as of the termination date.

          (c) If Optionee’s employment is terminated by the Company by reason of Disability or
Incapacity, this Option or any portion hereof which has not vested on or before the end of the last
day of such thirteen (13) week period following the date on which such Disability or Incapacity is
determined to have begun shall terminate and shall not thereafter be exercisable.

     7. Not an Incentive Stock Option. No portion of this Option is intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and shall be so construed.

     8. Inducement Grant. This Option is granted as an inducement grant, not under any
stock option or other equity incentive plan adopted by the Company.

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Exhibit B to Employment Agreement

     9. Subdivision or Consolidation of Shares; Stock Dividends; and Recapitalizations.
Whenever, prior to the Expiration Date, the Company shall effect a subdivision or consolidation of
shares of Common Stock or the payment of a stock dividend on Common Stock without receipt of
consideration by the Company, the number of shares of Common Stock covered by this Option (i) in
the event of an increase in the number of outstanding shares, shall be proportionately increased,
and the purchase price per share shall be proportionately reduced, and (ii) in the event of a
reduction in the number of outstanding shares, shall be proportionately reduced, and the purchase
price per share shall be proportionately increased. Any fractional share resulting from such
adjustment shall be rounded up to the next whole share. If the Company recapitalizes, reclassifies
its capital stock, or otherwise changes its capital structure (a “recapitalization”), the number
and class of shares of Common Stock covered by this Option shall be adjusted so that this Option
shall thereafter cover the number and class of shares of stock and securities to which Optionee
would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, Optionee had been the holder of record of the number of shares of Common Stock
then covered by this Option.

     10. Registration of Shares. The Company shall use reasonable commercial efforts to
register the Option Shares to be issued upon the exercise of this Option under the Securities Act
of 1933 on a Registration Statement on Form S-8, or such other form as the Company may deem
appropriate, as soon as reasonably practicable following the date of this Agreement.

     11. Non-Assignability of Option. This Option shall not be transferable by the Optionee
otherwise than by will or the laws of descent and distribution. During the Optionee’s lifetime,
this Option shall be exercisable only by the Optionee or by his guardian or legal representative.
This Option shall not be subject to execution, attachment or similar process.

     12. Compliance with Laws. The obligation of the Company to sell and issue Option
Shares pursuant to this Option is subject to such compliance as the Company deems necessary or
advisable with federal and state laws, rules and regulations applying to the authorization,
issuance, sale or listing of securities.

     13. No Rights as Stockholder. The Optionee shall have no rights as a stockholder of
the Company, including any voting rights or any claim to dividends with respect to any Option
Shares until such Option Shares are issued to the Optionee by the Company pursuant to an exercise
of the Option.

     14. Notices. Any notice to be provided hereunder shall be in writing and addressed to
the Company at the Company’s principal executive offices or to the Optionee at their address shown
on the Company’s records, or such other address provided to the Company by the Optionee in
accordance herewith. Notice shall be given by hand delivery, overnight courier service, facsimile
transmission (promptly confirmed in writing), or certified mail (postage prepaid, return receipt
requested). Notices given by hand delivery, overnight courier or facsimile transmission shall be
deemed given upon delivery and notices given by mail shall be deemed
given on the earlier of three days after deposit in the U.S. mail or on the first date
delivery is refused.

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Exhibit B to Employment Agreement

     15. Resolution of Disputes. Any dispute or disagreement which may arise under, or as
a result of, or in any way relate to, the interpretation, construction or application of this
Agreement shall be determined in accordance with the Employment Agreement.

     16. Entire Agreement. This Agreement, together with the documents incorporated herein
by reference, represents the entire agreement between the parties with respect to the subject
matter hereof and this Agreement may not be modified by any oral or written agreement unless same
is in writing, signed by both parties and has been approved by the Committee.

     17. Governing Law. This Option Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to the principles of conflict
of laws.

     18. Successors and Assigns. This Option shall be binding upon and shall inure to the
benefit of the Company and its successors and assigns.

     19. Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

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Exhibit 10.31

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

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

RECITALS

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

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

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

     D. The Company desires to retain the services of, and employ, Executive on its own behalf and
on behalf of its affiliated companies for the period provided in this Agreement and, in so doing,
to protect its Confidential Information and goodwill, and Executive is willing to accept employment
by the Company on a full-time basis for such period, upon the terms and conditions hereinafter set
forth.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein
contained, the parties hereto agree as follows:

          1. Employment. Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive, and Executive agrees to accept employment from, and remain in the
employ of, the Company for the period stated in Paragraph 3 hereof.

          2. Position and Responsibilities. During the period of her employment hereunder,
Executive agrees to serve the Company, and the Company shall employ Executive, as Executive Vice
President and President, McKesson Provider Technologies, or in such other senior corporate
executive capacity or capacities as may be specified from time to time by the Chief Executive
Officer of the Company (the “Chief Executive Officer”).

          3. Terms and Duties.

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

 

 

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

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

          4. Compensation and Reimbursement of Expenses.

               (a) Compensation. During the period of her employment hereunder, Executive shall be
paid a salary, in monthly or semi-monthly installments (in accordance with the Company’s normal
payroll practices for senior executive officers), at the rate of Six Hundred Thirty-Four Thousand,
Seven Hundred and Seventy-Six Dollars ($634,776) per year, or such higher salary as may be from
time to time approved by the Board (or any duly authorized Committee thereof) (any such higher
salary so approved to be thereafter the minimum salary payable to Executive during the remainder of
the term hereof), plus such additional incentive compensation, if any, as may be awarded to her
yearly by the Board (or any duly authorized Committee thereof). For purposes of the MIP (as defined
in paragraph 5 below), for each of the Company’s fiscal years ending during the term of this
Agreement, Executive’s Individual Target Award shall be 85% of her base salary for the applicable
Year (as defined in the MIP). Executive shall also receive a Mortgage Allowance of Two Thousand Six
Hundred Forty-Six Dollars and Four Cents ($2,646.04) per month through February 2013, or
termination of employment, if earlier, provided that her current residence remains her principal
residence.

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

          5. Other Benefits. During the period of her employment hereunder, Executive shall be
entitled to receive all other benefits of employment generally available to other members of the
Company’s senior management and those benefits for which key executives are or shall become
eligible, when and as she becomes eligible therefore,

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including without limitation, group health and life insurance benefits, short and long-term
disability plans, deferred compensation plans, and participation in the Company’s Profit-Sharing
Investment Plan, Employee Stock Purchase Plan, Executive Medical Plan, Management Incentive Plan
(“MIP”), Executive Benefit Retirement Plan (“EBRP”), Executive Survivor Benefits Plan (“ESBP”),
Long-Term Incentive Plan (“LTIP”). Stock Purchase Plan and 1994 Stock Option and Restricted Stock
Plan, the 2005 Stock Plan, (or any other similar plan or arrangement).

          6. Benefits Payable Upon Disability or Death.

               (a) Disability Benefits. If, during the term of this Agreement, Executive shall be
prevented from properly performing services hereunder by reason of her illness or other physical or
mental incapacity, the Company shall continue to pay Executive her then current salary hereunder
during the period of such disability or, if less, for a period of (12) calendar months, at which
time the Company’s obligations hereunder shall cease and terminate.

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

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

          7. Obligations of Executive During and After Employment.

               (a) Noncompetition. Executive agrees that during the term of her employment hereunder,
that she will work exclusively for and devote her substantial working energies solely to the
benefit of the Company. Executive further agrees that for a period of two (2) years following the
termination of her employment for whatever reason, that Executive will not perform, in any state of
the United States of America, any like or similar services that Executive performed during the
course of her employment with Company, for any competitor of Company. Executive agrees that, at the
time of execution of this Agreement, (1) the Company is currently conducting or planning to solicit
and conduct business in each of the states of the United States of America, and (2) that she has
direct or indirect supervisory responsibilities for such conduct or plans in each such state.

               (b)  Trade Secret and Confidential Information. Executive acknowledges and agrees
that, during the course of her employment, Executive will have produced and/or

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have access to trade secrets and Confidential Information (as defined below), of the Company and
that the unauthorized use or disclosure of any of such trade secrets and Confidential Information
would harm the Company.

               (i) Trade Secrets. Executive promises and agrees to take all reasonable steps to
maintain and protect the trade secrets of the Company and its affiliates during and after
Executive’s employment with the Company. Executive further agrees not to use or disclose any trade
secret of the Company and its affiliates after the termination of her employment.

               (ii) Confidential Information. Executive promises and agrees to take all reasonable
steps to maintain and protect the Confidential Information (as defined below) of the Company during
and for a period of three years after Executive’s employment with the Company. Executive further
agrees not to use or disclose any Confidential Information of the Company for a three year period
after the termination of her employment with the Company. Therefore subject to these restrictions,
Executive agrees to hold in confidence and not, directly or indirectly, disclose, use, copy or make
lists of any such information, except to the extent expressly authorized by the Company in writing
or as required by law. All records, files, drawings, documents, equipment, and the like, or copies
thereof, relating to the Company’s business which Executive shall prepare, use, or come into
contact with, shall be and remain the sole property of the Company, and shall not be removed
(except to allow Executive to perform her responsibilities hereunder while traveling for business
purposes or otherwise working away from her office) from the Company’s premises without its prior
written consent, and shall be promptly returned to the Company upon termination of employment with
the Company. This Paragraph 7 (b) shall survive the termination or expiration of this Agreement.

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

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her employment with the Company, or (C) becomes available to her on a non-confidential basis from a
source other than the Company or any of its agents, creditors, suppliers, lessors, lessees or
customers.

               (c) Non-solicitation of Employees. Executive agrees that for a period of two years
following the termination of Executive’s employment for any reason, that Executive will not
solicit, recruit or hire any employee of Company with whom Executive had business contact or about
whom Executive had access to Confidential Information regarding the employee’s pay, performance,
duties or customer contacts.

               (d) Non-solicitation of Customers. Executive recognizes and acknowledges that it is
essential for the proper protection of the business of the Company that Executive be restrained for
a reasonable period following the termination of Executive’s employment with the Company from
soliciting customers of the Company. Executive agrees for a period of two years following the
termination of Executive’s employment for whatever reason, that Executive will not solicit for any
competitive purpose the customers of Company, such customers shall be limited to those customers
with whom Executive had material personal, business contact within the last three years of
Executive’s employment with Company.

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

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

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

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Company’s obligations to pay Executive her Base Salary, bonus or any other compensation and
benefits, including severance pay, may be terminated immediately.

               (h) Right to Resign. The parties expressly acknowledge that Executive may terminate
her employment at any time for any reason upon giving written notice of termination to the Company,
and that such resignation shall not constitue a breach of this Agreement.

          8. Termination.

               (a) For Cause. Notwithstanding anything herein to the contrary, the Company may,
without liability, terminate Executive’s employment hereunder for Cause (as defined below) at any
time upon written notice from the Board (or any duly authorized Committee thereof) specifying such
Cause, and thereafter, the Company’s obligations hereunder shall cease and terminate; provided,
however, that such written notice shall not be delivered until after the Board (or any duly
authorized Committee thereof) shall have given Executive written notice specifying the conduct
alleged to have constituted such Cause and Executive has failed to cure such conduct, if curable,
within fifteen (15) days following receipt of such notice. As used herein, the term “Cause” shall
mean ...(i) Executive’s willful misconduct, habitual neglect or dishonesty with respect to matters
involving the Company or its subsidiaries which is materially and demonstrably injurious to the
Company, or (ii) a material breach by Executive of one or more terms of this Agreement.

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

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

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

                    (i) If the Company terminates Executive’s employment pursuant to subparagraph 8(a) above and
the Company’s action is affirmed as specified in subparagraph 8(b) above or Executive terminates
her employment with the Company other than for Good Reason (as defined in subparagraph (d)(iii)
below), then all of the

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Company’s obligations hereunder shall immediately cease and terminate. Executive shall thereupon
have no further right or entitlement to additional salary, incentive compensation payments or
awards, or any perquisites from the Company whatsoever, and Executive’s rights, if any, under the
Company’s employee and executive benefit plans shall be determined solely in accordance with the
express terms of the respective plans.

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

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                    (iii) For purposes of this Agreement, “Good Reason” shall mean any of the following actions,
if taken without the express written consent of Executive: (A) any material change by the Company
in Executive’s functions, duties or responsibilities as Executive Vice President and President,
McKesson Provider Technologies, which change would cause Executive’s position with the Company to
become of less dignity, responsibility, importance, or scope as compared to the position and
attributes that applied to Executive as of the Effective Date; (B) any reduction in Executive’s
base salary, other than a proportional reduction effected as part of an across-the-board reduction
affecting all executive employees of the Company; (C) any material failure by the Company to comply
with any of the provisions of the Agreement; (D) the Company’s requiring Executive to be based at
any office or location more than 25 miles from the office at which Executive is based as of the
Effective Date, except for travel reasonably required in the performance of Executive’s
responsibilities and consistent with practices as of the Effective Date; or (E) in the event of a
Change in Control, any change in the level of officer within the Company to whom Executive reports,
as this reporting relationship existed immediately prior to a Change in Control.

          9. Termination in Connection with a Change in Control. Notwithstanding the
provisions of Paragraph 8(d), in the event of an occurrence of a Change in Control, the following
provisions shall apply in the event of Executive’s termination of employment (i) within two (2)
years following such Change in Control, or (ii) within the six (6) month period immediately
preceding such Change in Control if such termination of employment occurs at the direction of the
person or entity that is involved in, or otherwise in connection with, such Change in Control:

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

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

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          10. Excise Tax Payment.

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

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

               (c) In the event that the Excise Tax is finally determined to be less than the amount taken
into account hereunder in calculating the Gross-Up Payment, Executive shall repay to the Company,
within five (5) business days following the time that the amount of such reduction in the Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus
that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by Executive, to the
extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in Executive’s taxable income and wages for purposes of federal, state and local income
and employment taxes, plus interest on the amount of such repayment at

9

 

120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess plus any interest, penalties or additions payable by Executive with respect to such
excess) within five (5) business days following the time that the amount of such excess is finally
determined. Executive and the Company shall each reasonably cooperate with the other in connection
with any administrative or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Total Payments.

               (d) Notwithstanding anything else herein, this Paragraph 10 shall survive any termination of
employment, any payments hereunder or any termination of obligations hereunder; provided, however,
that this Paragraph 10 shall not survive any termination of employment for Cause that occurs prior
to a Change in Control or any payments or termination of obligations in connection with such
termination for Cause.

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

          12. General Provisions.

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

               (b) This Agreement and Executive’s “Indemnification Agreement” (as defined below) constitutes
the entire agreement between the parties hereto in respect of the

10

 

matters addressed herein regarding the employment of Executive by the Company. This Agreement and
Executive’s Indemnification Agreement supersedes and replaces all prior oral and written
agreements, understandings, commitments, and practices between the parties pertaining to
Executive’s employment by the Company, including, but not limited to, the Prior Employment
Agreement. “For purposes of this Agreement, “Indemnification Agreement” means the Company’s
standard form of indemnification agreement for executives, as amended, restated and revised from
time to time.

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

               (d) Executive and the Company agree that any dispute, controversy or claim between them, other
than any dispute, controversy claim or breach arising under Paragraph 7 of this Agreement, shall be
settled exclusively by final and binding arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (the “AAA Rules”). A
neutral and impartial arbitrator shall be chosen by mutual agreement of the parties or, if the
parties are unable to agree upon an arbitrator within a reasonable period of time, then a neutral
and impartial arbitrator shall be appointed in accordance with the arbitrator nomination and
selection procedure set forth in the AAA Rules. The arbitrator shall apply the same substantive
law, with the same statutes of limitations and remedies, that would apply if the claims were
brought in court. The arbitrator also shall prepare a written decision containing the essential
findings and conclusions upon which the decision is based. Either party may bring an action in
court to compel arbitration under this Agreement or to enforce an arbitration award. Otherwise,
neither party shall initiate or prosecute any lawsuit in any way related to any claim subject to
this agreement to arbitrate. Any arbitration held pursuant to this Paragraph shall take place in
San Francisco, California. Each party shall pay its own costs and attorneys’ fees, unless a party
prevails on a statutory claim and the statute provides that the prevailing party is entitled to
payment of its or her attorneys’ fees. In that case, the arbitrator may award reasonable attorneys’
fees and costs to the prevailing party as provided by law. The Company agrees to pay any
administrative costs and fees of the AAA, as well as the costs and fees of the arbitrator. THE
PARTIES UNDERSTAND AND AGREE THAT THIS AGREEMENT CONSTITUTES A WAIVER OF THEIR RIGHT TO A TRIAL BY
JURY OF ANY CLAIMS OR CONTROVERSIES COVERED BY THIS AGREEMENT.

               (e) Executive expressly acknowledges and agrees that, except as expressly set forth in
paragraph 10 of this Agreement, in the event the benefits provided hereunder are subject to the
excise tax provision set forth in Section 4999 of the Internal Revenue Code of 1986, as amended,
(i) Executive shall be responsible for, and (ii) Executive shall not be entitled to any additional
payment from the Company for any Federal, state, and local income and employment taxes, interest or
penalties that may arise in connection with such benefits.

11

 

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

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

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

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

	 	 	 	 	 
	ATTEST: 	 	 
	 	 	McKesson Corporation

A Delaware Corporation

 
	/s/ Laureen E. Seeger 	 	By:  	/s/ Paul E. Kirincic
 
	Laureen E. Seeger 	 	 	Paul E. Kirincic 
	Executive Vice President and Secretary 	 	 	Executive Vice President,

Human Resources 
	 
	By the Authority of the Compensation
Committee of the McKesson Corporation 	 	 
	 	 	                                                 /s/ Pamela J. Pure
 
	 	 	Pamela J. Pure 
	 	 	Executive Vice President and President,

McKesson Provider Technologies 
	 

12

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