Document:

exv10w7

 

Exhibit 10.7

McKESSON CORPORATION

DEFERRED COMPENSATION ADMINISTRATION PLAN II (“DCAP II”)

(Amended and Restated as of October 28, 2004)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	A.

	 	PURPOSE
	 	 	1	 
	 
	 	 	 	 	 	 
	B.

	 	ERISA PLAN
	 	 	1	 
	 
	 	 	 	 	 	 
	C.

	 	PARTICIPATION
	 	 	1	 
	 
	 	 	 	 	 	 
	D.

	 	AMOUNTS OF DEFERRAL
	 	 	2	 
	 
	 	 	 	 	 	 
	E.

	 	PAYMENT OF DEFERRED COMPENSATION
	 	 	3	 
	 
	 	 	 	 	 	 
	F.

	 	SOURCE OF PAYMENT
	 	 	7	 
	 
	 	 	 	 	 	 
	G.

	 	MISCELLANEOUS
	 	 	7	 
	 
	 	 	 	 	 	 
	H.

	 	ADMINISTRATION OF THE PLAN
	 	 	8	 
	 
	 	 	 	 	 	 
	I.

	 	AMENDMENT OR TERMINATION OF THE PLAN
	 	 	8	 
	 
	 	 	 	 	 	 
	J.

	 	CLAIMS AND APPEALS
	 	 	8	 
	 
	 	 	 	 	 	 
	K.

	 	DEFINITIONS
	 	 	10	 
	 
	 	 	 	 	 	 
	L.

	 	SUCCESSORS
	 	 	11	 
	 
	 	 	 	 	 	 
	M.

	 	EXECUTION
	 	 	11	 
	 
	 	 	 	 	 	 
	APPENDIX A DEFERRAL OF RESTRICTED STOCK PROCEEDS	 	 	A-1	 

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McKESSON CORPORATION

DEFERRED COMPENSATION ADMINISTRATION PLAN II

(Amended and Restated as of October 28, 2004)

A. PURPOSE

     This Plan was established to enhance the Company’s ability to attract and retain executive
personnel and members of the Board who are not otherwise employees of the Company. The Plan
replaced and superseded the Directors’ Deferred Compensation Plan, the Management Deferred
Compensation Plan, the Deferred Compensation Administration Plan, and the PCS, Inc. Optional
Deferred Compensation Administration Plan. This Plan was originally approved by the Board and
became effective on January 27, 1993. Since its original effective date, the Plan has been amended
and restated on various occasions. This amendment and restatement has been approved by the Board
as of October 28, 2004 and shall be effective as of such date except as otherwise set forth below.

B. ERISA PLAN

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

C. PARTICIPATION

     1. Eligibility to Participate.

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

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

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

     2. Election to Participate. An Eligible Executive or an Eligible Director may become
a Participant in the Plan by electing to defer compensation in accordance with the terms of this
Plan. An election to defer shall be in writing, shall be irrevocable and shall be made at the

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time and in the form specified by the Administrator. On electing to defer compensation under
this Plan, the Participant shall be deemed to accept all of the terms and conditions of this Plan.
All elections to defer amounts under this Plan shall be made pursuant to an election executed and
filed with the Administrator before the amounts so deferred are earned.

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

     4. Relation to Other Plans.

          a. Participation in Other Plans. An Eligible Executive or an Eligible Director may
participate in this Plan and may also participate in any other benefit plan of the Company in
effect from time to time for which he or she is eligible, unless the other plan may otherwise
exclude participation on the basis of eligibility for, or participation in, this Plan. No amounts
may be deferred under this Plan which have been deferred under any other plan of the Company.
Deferrals under this Plan may result in a reduction of benefits payable under the Social Security
Act, the Retirement Plan and the PSIP.

          b. Automatic Deferral. Prior to January 1, 2000 and subject to the last sentence of
Section D.2 below, an Eligible Executive who makes an election to defer compensation under this
Plan shall have an additional amount automatically deferred from his or her remaining compensation.
The amount of such additional deferral shall be an amount equal to (x) the amount deferred by the
Eligible Executive into the Plan, multiplied by (y) the percentage rate of the Eligible Executive’s
deferrals into the PSIP, as in effect at the beginning of each Year.

          Effective as of January 1, 2000, an Eligible Executive’s base salary deferrals and annual
bonus award deferrals (but not DCAP housing deferrals, sign-on and retention bonus deferrals and
Long-Term Incentive Plan award deferrals) shall be credited, in a separate Account under the Plan
with an amount calculated to be the Matching Employer Contribution percentage that would have been
credited to the Eligible Executive’s PSIP account if six percent (6%) of such deferrals under DCAP
II had been made under the PSIP. For these purposes, Matching Employer Contribution shall have the
meaning defined in the PSIP. (Prior to January 1, 2000, the additional deferrals were credited to
the Eligible Executive’s account in the McKesson Corporation Supplemental PSIP and governed by the
terms of that plan.)

D. AMOUNTS OF DEFERRAL

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

     2. Maximum Deferral for Eligible Executives. The maximum amount of compensation which
an Eligible Executive may defer under this Plan for any Year is (i) 75% (80% prior to January 1,
2000) of the amount of such Eligible Executive’s base salary for such Year, and (ii) 90% (100%
prior to January 1, 2002) of any annual bonus award and/or any Long-Term Incentive Plan award
determined and payable to him or her in such Year. Additionally,

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effective January 1, 2000, the Executive Vice President of Human Resources may change the
maximum amount (expressed as a percentage limit) of base salary that Eligible Executives as a group
may defer under the Plan for any Year. Notwithstanding these limits, deferrals may be reduced by
the Company to leave sufficient remaining compensation legally required for taxes and other
authorized deductions, including, but not limited to, those for Company benefit programs.

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

E. PAYMENT OF DEFERRED COMPENSATION

     1. Book Account and Interest Credit. Compensation deferred by a Participant under the
Plan shall be credited to a separate bookkeeping account for such Participant (the “Account”).
(Sub-Accounts may be established for each Year for which the Participant elects to defer
compensation.) Interest shall be credited to each Account (including Sub-Accounts established
thereunder) for each Year at a rate equal to a rate declared by the Compensation Committee acting
in its sole discretion after taking into account, among other things, the following factors:
McKesson’s cost of funds, corporate tax brackets, expected amount and duration of deferrals, number
and age of eligible Participants, expected time and manner of payment of deferred amounts, and
expected performance of available fixed-rate insurance contracts covering the lives of Participants
(the “Declared Rate”). Notwithstanding the foregoing, if a Change in Control (as defined in
Section E.10 below) occurs, the Declared Rate for the balance of the calendar year in which the
Change in Control occurs and for the two calendar years immediately following the year in which the
Change in Control occurs shall not be less than the Declared Rate as in effect on the day before
the Change in Control occurs. Interest on each Account balance shall be compounded daily on each
business day within the Year to yield the Declared Rate for the Year. (Prior to January 1, 2000,
each Account balance was compounded monthly at the twelfth root of the annual Declared Rate.) In
the case of installment payments as provided in Section E.3 below, interest shall be credited on
all amounts remaining in a Participant’s Account until all amounts are paid out.

     2. Length of Deferral. An Eligible Executive or Eligible Director shall elect in
writing, and file with the Administrator, at the same time as such Eligible Executive or Eligible
Director makes any election to defer compensation, the period of deferral with respect to such
election, subject to the minimum required period of deferral and the maximum permissible period of
deferral. The minimum required period of deferral is five years after the end of the Year for
which compensation is deferred. Notwithstanding the foregoing, the five-year minimum deferral
period shall not apply to payments made as a result of death, Disability, Retirement,
pre-retirement termination, a Change in Control or hardship. Payment must commence no later than
the end of the maximum period of deferral, which is the January following the year in which the
Eligible Executive reaches age 72 or, in the case of an Eligible Director, the January after
McKesson’s annual meeting of stockholders next following the

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Eligible Director’s 72nd birthday. Once such an election has been made, the Eligible
Executive or Eligible Director may alter the period of deferral, provided that:

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

          b. such alteration does not provide for the receipt of such amounts earlier than one year from
the date of the alteration, subject to the five-year minimum deferral rule stated above.

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

          a. Form.

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

               ii. Payment of amounts credited to the Participant’s Account in any specified number of
approximately equal annual installments (not in excess of ten).

          b. Time.

               i. The lump sum or first installment to be paid in January of the year designated by the
Participant.

               ii. The lump sum or first installment to be paid in January after the designated interval
following the earlier of the Participant’s Retirement or of the determination of Disability.

     4. Payments on Termination. If a Participant terminates service with the Company for
any reason other than Retirement, Disability or death, then, notwithstanding the election made by
the Participant pursuant to Sections E.2 and E.3 above, the entire undistributed amount credited to
his or her Account shall be paid in the form of a lump sum in the January of the calendar year
following the calendar year of termination of service.

     5. Payments on Death.

          a. On and after January 1, 2003, each Participant shall make an election at the time of any
election to defer compensation under the Plan of the time and form in which any amount remaining in
the Participant’s Account at the time of the Participant’s death shall be paid to his or her
Beneficiary. Such election shall be made in writing and filed with the Administrator. Benefits
shall be paid in one of the forms specified in Section E.3. The Participant may modify such
election at any time up until the date of the Participant’s death in a writing filed with the
Administrator. In addition, within one year following the death of the Participant the Beneficiary
may elect to receive payment in a lump sum; provided, however, that

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such election shall not take effect until 12 months after the date it is made, and payment
otherwise scheduled to be made in that 12-month period shall be made on schedule. The foregoing
notwithstanding, the Administrator may, at his or her discretion, distribute all benefits to a
Beneficiary in a single payment as soon as reasonably practicable after the death of the
Participant if the value of the Participant’s Account is less than $5,000 on the date of death of
the Participant.

          b. Prior to January 1, 2003, if a Participant died after payments from his or her Account had
begun, the remainder of the amounts credited to the Participant’s Account was paid to his or her
Beneficiary at the same time and in the same manner as they would have been paid to the Participant
had the Participant survived. If a Participant died before payments from his or her Account had
begun, the amount credited to his or her Account was paid to his or her Beneficiary at the time and
in the manner elected by the Participant.

     6. Designation of Beneficiary. A Participant may designate any person(s) or any
entity as his or her Beneficiary. Designation shall be in writing and shall become effective only
when filed with the Administrator. Such filing must occur before the Participant’s death. A
Participant may change the Beneficiary, from time to time, by filing a new written designation with
the Administrator. Effective January 1, 2003, if the Participant fails to effectively designate a
Beneficiary in accordance with the Administrator’s procedures or the person designated by the
Participant is not living at the time the distribution is to be made, then the Participant’s
Beneficiary shall be the Participant’s surviving spouse, if any, or, if there is no surviving
spouse, the Participant’s surviving children, if any, in equal shares, or if there are no surviving
children, the Participant’s estate.

     7. Payments on Disability. If the Administrator determines that a Participant has
become Disabled, the entire undistributed amount credited to his or her Account shall be paid in
the form and at the time elected by the Participant, or, if no election has been made, in a lump
sum as soon as practicable after such determination is made.

     8. Payments on Hardship. The Administrator may, in his or her sole discretion, direct
payment to a Participant of all or of any portion of the Participant’s Account balance,
notwithstanding an election under Section E.3 above, at any time that he or she determines that
such Participant has suffered an event of undue hardship which causes an emergency condition in the
Participant’s financial affairs.

     9. Other Withdrawals. Effective June 1, 2000 and subject to approval by the
Administrator, a Participant may elect to receive a withdrawal of all or part of the Participant’s
Account under the Plan at any time not otherwise expressly authorized pursuant to the terms of the
Plan; provided, however, that ten percent (10%) of the amount of the withdrawal requested shall be
permanently forfeited to the Company and the Participant shall have no further right to that
amount. The terms of such withdrawal shall be governed by the provisions of the Participant’s
election form in effect at the time of such election to the extent not otherwise specified in the
Participant’s election made pursuant to this Section E.9.

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     10. Change in Control. For purposes of this Plan, a Change in Control shall be deemed
to have occurred if any of the events set forth in any of the following paragraphs shall occur:

          a. any “person” (as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and as such term is modified in sections 13(d) and 14(d) of the
Exchange Act), excluding McKesson or any of its subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of McKesson or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a corporation owned,
directly or indirectly, by stockholders of McKesson in substantially the same proportions as their
ownership of McKesson, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of McKesson representing 30% or more of the
combined voting power of McKesson’s then outstanding securities; or

          b. during any period of not more than two consecutive years, individuals who at the beginning
of such period constitute the Board and any new members of the Board (other than a member
designated by a “person” who has entered into an agreement with McKesson to effect a transaction
described in Sections E.10.a, c and d) whose election by the Board or nomination for election by
McKesson’s stockholders was approved by a vote of at least two-thirds (2/3) of the members of the
Board then still in office who either were members of the Board at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or

          c. consummation of a merger or consolidation of McKesson with any other corporation, which has
been approved by the shareholders of McKesson, other than (I) a merger or consolidation which would
result in the voting securities of McKesson outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of McKesson, at least 50% of the combined voting power of
the voting securities of McKesson or such surviving entity outstanding immediately after such
merger or consolidation, or (II) a merger or consolidation effected to implement a recapitalization
of McKesson (or similar transaction) in which no person acquires more than 50% of the combined
voting power of McKesson’s then outstanding securities; or

          d. the shareholders of McKesson approve a plan of complete liquidation of McKesson or an
agreement for the sale or disposition by McKesson of all or substantially all of McKesson’s assets.

          Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if there
is consummated any transaction or series of integrated transactions immediately following which the
holders of McKesson’s common stock immediately prior to such transaction or series of transactions
continue to have the same proportionate ownership in an entity which owns all or substantially all
of the assets of McKesson immediately prior to such transaction or series of transactions.

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          With respect to deferrals made prior to January 1, 1994, deferred funds shall be distributed
upon a Change in Control, if the Participant has so elected.

F. SOURCE OF PAYMENT

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

G. MISCELLANEOUS

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

     2. No Assignment.

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

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

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

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amounts deferred under this Plan prior to 2005 to be subject to the deferred compensation
provisions of section 885 of the American Jobs Creation Act of 2004, if such legislation is enacted
into law, such provision shall be null, void and without effect retroactive to October 28, 2004.

H. ADMINISTRATION OF THE PLAN

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

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

I. AMENDMENT OR TERMINATION OF THE PLAN

     The Compensation Committee may at any time amend this Plan. Such action shall be prospective
only and shall not adversely affect the rights of any Participant or Beneficiary to any benefit
previously earned under this Plan. The Board may at any time terminate this Plan; thereupon,
compensation previously deferred plus interest credited thereon shall promptly be paid in single
lump sums to the respective Participants or Beneficiaries entitled thereto. The foregoing
notwithstanding, no amendment adopted following the occurrence of a Change in Control shall be
effective if it (a) would reduce the Declared Rate for the balance of the calendar year in which
the Change in Control occurs or for the two calendar years immediately following the year in which
the Change in Control occurs to a rate lower than the Declared Rate as in effect on the day before
the Change in Control occurred or (b) modify the provisions of (a) above.

J. CLAIMS AND APPEALS

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

     2. Formal Benefits Claim – Review by Executive Vice President, Human Resources. A
Participant or Beneficiary may make a written request for review of any matter concerning his or
her benefits under this Plan. The claim must be addressed to the Executive Vice President, Human
Resources, McKesson Corporation, One Post Street, San Francisco, California 94104. The Executive
Vice President, Human Resources or his or her delegate (“Executive Vice President”) shall decide
the action to be taken with respect to any such request and may require additional information if
necessary to process the request. The Executive Vice President shall review the request and shall
issue his or her decision, in writing, no later than 90

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days after the date the request is received, unless the circumstances require an extension of
time. If such an extension is required, written notice of the extension shall be furnished to the
person making the request within the initial 90-day period, and the notice shall state the
circumstances requiring the extension and the date by which the Executive Vice President expects to
reach a decision on the request. In no event shall the extension exceed a period of 90 days from
the end of the initial period.

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

     4. Appeal to Executive Vice President.

               a. A person whose request has been denied in whole or in part (or such person’s authorized
representative) may file an appeal of the decision in writing with the Executive Vice President
within 60 days of receipt of the notification of denial. The appeal must be addressed to:
Executive Vice President, Human Resources, McKesson Corporation, One Post Street, San Francisco,
California 94104. The Executive Vice President, for good cause shown, may extend the period during
which the appeal may be filed for another 60 days. The appellant and/or his or her authorized
representative shall be permitted to submit written comments, documents, records and other
information relating to the claim for benefits. Upon request and free of charge, the applicant
should be provided reasonable access to and copies of, all documents, records or other information
relevant to the appellant’s claim.

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

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

               d. If the decision on the appeal denies the claim in whole or in part written notice shall be
furnished to the appellant. Such notice shall state the reason(s) for the denial, including
references to specific Plan provisions upon which the denial was based. The notice shall state
that the appellant is entitled to receive, upon request and free of charge, reasonable

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access to, and copies of, all documents, records, and other information relevant to the claim
for benefits. The notice shall describe any voluntary appeal procedures offered by the Plan and
the appellant’s right to obtain the information about such procedures. The notice shall also
include a statement of the appellant’s right to bring an action under Section 502(a) of ERISA.

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

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

K. DEFINITIONS

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

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

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

     3. “Beneficiary” shall mean the person or entity described by Section E.6.

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

     5. “Company” shall mean McKesson and any member of its controlled group as defined by Section
414(b) and Section 414(c) of the Internal Revenue Code of 1986, as amended.

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

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

     8. “Disabled” or “Disability” shall mean a physical or mental condition which the Social
Security Administration has determined renders the Participant eligible to receive Social Security
benefits on account of disability.

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

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

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

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

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

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

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

     16. “Retirement” shall mean termination of employment after (a) the date on which the
Participant’s number of points under the Retirement Share Plan portion of the PSIP equals 65, (b)
attaining eligibility for a Retirement Allowance under the terms of the Retirement Plan or (c)
receiving an Approved Retirement under the terms of the McKesson Corporation Executive Benefit
Retirement Plan. Notwithstanding the foregoing, for purposes of this Plan, Retirement for an
Eligible Director shall mean cessation of service as a member of the Board on or after the
completion of at least two successive terms as a member of the Board.

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

     18. “Year” is the calendar year.

L. SUCCESSORS

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

M. EXECUTION

     To record the amendment and restatement of the Plan by the Board of Directors of McKesson
Corporation at a meeting held on October 28, 2004.

McKESSON CORPORATION

	 	 	 
	By
	 	 
	

	 	 
	

	 	Paul E. Kirincic
	

	 	Executive Vice President, Human Resources

11

 

APPENDIX A

DEFERRAL OF RESTRICTED STOCK PROCEEDS

Any other provision of the Plan to the contrary notwithstanding, the following provisions shall
apply to the cash paid to the Company by Eli Lilly and Company (“Lilly”) upon the tender of certain
shares of restricted stock (the “Transaction Proceeds”), which had been granted to executives under
the Company’s 1988 Restricted Stock Plan, at the completion of the transaction involving the
acquisition of PCS Health Systems, Inc. (“PCS”) by Lilly (the “Transaction”).

     1. Former executives of the Company may be selected to participate in the Plan, and, if so
selected, shall be deemed Eligible Executives.

     2. The Transaction Proceeds shall be automatically deferred into the Plan on behalf of those
Eligible Executives who hold outstanding Restricted Stock Grants under the Company’s 1988
Restricted Stock Plan. Such Eligible Executives shall be deemed to have elected the deferral of
the Transaction Proceeds.

     3. The five-year minimum deferral period required by Section E.2 of the Plan shall not apply
to the deferral of the Transaction Proceeds.

     4. Transaction Proceeds shall not be deferred on behalf of Eligible Executives who are also
employees of PCS.

iexv10w8

 

Exhibit 10.8

McKESSON CORPORATION

OPTION GAIN DEFERRAL PLAN (“OGDP”)

(Amended and Restated as of October 28, 2004)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	A.

	 	PURPOSE
	 	 	1	 
	 
	 	 	 	 	 	 
	B.

	 	ERISA PLAN
	 	 	1	 
	 
	 	 	 	 	 	 
	C.

	 	PARTICIPATION
	 	 	1	 
	 
	 	 	 	 	 	 
	D.

	 	AMOUNTS OF DEFERRAL
	 	 	2	 
	 
	 	 	 	 	 	 
	E.

	 	PAYMENT OF DEFERRED COMPENSATION
	 	 	2	 
	 
	 	 	 	 	 	 
	F.

	 	SOURCE OF PAYMENT
	 	 	6	 
	 
	 	 	 	 	 	 
	G.

	 	MISCELLANEOUS
	 	 	6	 
	 
	 	 	 	 	 	 
	H.

	 	ADMINISTRATION OF THE PLAN
	 	 	7	 
	 
	 	 	 	 	 	 
	I.

	 	AMENDMENT OR TERMINATION OF THE PLAN
	 	 	7	 
	 
	 	 	 	 	 	 
	J.

	 	CLAIMS AND APPEALS
	 	 	7	 
	 
	 	 	 	 	 	 
	K.

	 	DEFINITIONS
	 	 	9	 
	 
	 	 	 	 	 	 
	M.

	 	SUCCESSORS
	 	 	10	 
	 
	 	 	 	 	 	 
	N.

	 	EXECUTION
	 	 	10	 
	 
	 	 	 	 	 	 

 

 

McKESSON CORPORATION

OPTION GAIN DEFERRAL PLAN

(Amended and Restated as of October 28, 2004)

A. PURPOSE

     This Plan was established to allow those Company executives and members of the Board who are
not employed by the Company who hold exercisable stock options granted under the McKesson
Corporation 1978 Stock Option Plan (the “1978 Plan”) to defer the cash portion of the gain (the
“Cash Gain”) such individual realizes from his or her exercisable stock options in connection with
the restructuring of McKesson resulting in the sale of PCS Health Systems, Inc. to Eli Lilly and
Company (the “Transaction”). The Plan was originally effective on January 27, 1994, the date the
Plan was initially approved by the Board. The Plan has been amended and restated on various
occasions. This amendment and restatement has been approved by the Board as of October 28, 2004
and shall be effective as of such date except as otherwise indicated below.

B. ERISA PLAN

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

C. PARTICIPATION

     1. Eligibility to Participate.

          a. Eligible Executives. Company executives who (i) are actively employed, and (ii)
hold exercisable stock options granted under the 1978 Plan as of the date the Transaction closes
may elect to participate in this Plan (“Eligible Executives”).

          b. Eligible Directors. Each member of the Board of McKesson who (i) is not a Company
employee and (ii) holds exercisable stock options granted under the 1978 Plan as of the date the
Transaction closes may participate in this Plan (“Eligible Directors”).

     2. Election to Participate. An Eligible Executive or an Eligible Director may become
a Participant in the Plan by electing to defer the Cash Gain in accordance with the terms of this
Plan. An election to defer shall be in writing, shall be irrevocable and shall be made at the time
and in the form specified by the Administrator. On electing to defer amounts under this Plan, the
Participant shall be deemed to accept all of the terms and conditions of this Plan. All elections
to defer under this Plan shall be made pursuant to an election executed and filed with the
Administrator before the amounts so deferred are earned. Other than to avoid the expiration of an
option in accordance with its terms, a Participant shall not exercise any option with respect to
which he or she has made a deferral election.

1

 

     3. Relation to Other Plans. An Eligible Executive or an Eligible Director may
participate in this Plan and may also participate in any other benefit plan of the Company in
effect from time to time for which he or she is eligible, unless the other plan may otherwise
exclude participation on the basis of eligibility for, or participation in, this Plan. No amounts
may be deferred under this Plan which have been deferred under any other plan of the Company.

D. AMOUNTS OF DEFERRAL

     1. Minimum Deferral. The minimum amount that an Eligible Executive or Eligible
Director may defer under this Plan is $5,000 of the Cash Gain realized upon the completion of the
Transaction.

     2. Maximum Deferral. The maximum amount of compensation which an Eligible Executive
or an Eligible Director may defer under this Plan for any Year is one hundred percent (100%) of the
Cash Gain realized upon the completion of the Transaction. Notwithstanding these limits, deferrals
may be reduced by the Company to leave sufficient remaining amounts legally required for taxes and
other authorized deductions. In addition, the amount of deferrals allowed to any Participant may
be subject to a limit determined by the Administrator.

E. PAYMENT OF DEFERRED COMPENSATION

     1. Book Account and Interest Credit. Any Cash Gain deferred by a Participant under
the Plan shall be credited to a separate bookkeeping account for such Participant (the “Account”).
From the initial effective date of the Plan (January 27, 1994) through the end of Year 1994,
interest was credited to each Account at an annual rate of 7.5%. Thereafter, the interest rate is
set each year to the Moody’s Corporate Bond Yield Average for December of the preceding year (the
“Declared Rate”). Notwithstanding the foregoing, if a Change in Control (as defined in Section
E.10 below) occurs, the Declared Rate for the balance of the calendar year in which the Change in
Control occurs and for the two calendar years immediately following the year in which the Change in
Control occurs shall not be less than the Declared Rate as in effect on the day before the Change
in Control occurs. Interest on each Account balance shall be compounded daily on each business day
within the Year to yield the Declared Rate for the Year. (Prior to January 1, 2000, each Account
balance was compounded monthly based on the annual Declared Rate.) In the case of installment
payments as provided in Section E.3 below, interest shall be credited on all amounts remaining in a
Participant’s Account until all amounts are paid out.

     2. Length of Deferral. An Eligible Executive or Eligible Director shall elect in
writing, and file with the Administrator, at the same time as such Eligible Executive or Eligible
Director makes any election to defer any portion of the Cash Gain, the period of deferral with
respect to such election, subject to the minimum required period of deferral and the maximum
permissible period of deferral. The minimum required period of deferral is two years from the date
the compensation is deferred. Notwithstanding the foregoing, the two-year minimum deferral period
shall not apply to payments made as a result of death, Disability, Retirement, pre-Retirement
termination or hardship. Payment must commence no later than the end of the maximum period of
deferral, which is the January following the year in which the Eligible Executive attains age 72
or, in the case of an Eligible Director, the January after the Company’s

2

 

annual meeting of stock holders next following the Eligible Director’s 72nd birthday. Once
such an election has been made, the Eligible Executive or Eligible Director may alter the period of
deferral, provided that:

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

          b. such alteration does not provide for the receipt of such amounts earlier than one year from
the date of the alteration, subject to the two-year minimum deferral rule stated above.

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

          a. Form.

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

               ii. Payment of amounts credited to the Participant’s Account in any specified number of
approximately equal annual installments (not in excess of ten).

          b. Time.

               i. The lump sum or first installment to be paid in January of the year designated by the
Participant.

               ii. The lump sum or first installment to be paid in January after the designated interval
following the earlier of the Participant’s Retirement or of the determination of Disability.

     4. Payments on Termination. If a Participant terminates service with the Company for
any reason other than Retirement, Disability or death, then, notwithstanding the election made by
the Participant pursuant to Sections E.2 and E.3 above, the entire undistributed amount credited to
his or her Account shall be paid in the form of a lump sum in the January of the calendar year
following the calendar year of termination of service.

     5. Payments on Death.

          a. On and after January 1, 2003, each Participant shall make an election at the time and
manner in which any amount remaining in the Participant’s Account at the time of the Participant’s
death shall be paid to his or her Beneficiary. Such election shall be made in writing and filed
with the Administrator. Benefits shall be paid in one of the methods specified in Section E.3.
The Participant may modify such election at any time up until the date of the Participant’s death
in a writing filed with the Administrator. In addition, within one year following the death of the
Participant the Beneficiary may elect to receive payment in a lump

3

 

sum; provided, however, that such election shall not take effect until 12 months after the
date it is made, and payment otherwise scheduled to be made in that 12-month period shall be made
on schedule. The foregoing notwithstanding, the Administrator may, at his or her discretion,
distribute all benefits to a Beneficiary in a single payment as soon as reasonably practicable
after the death of the Participant if the value of the Participant’s Account is less than $5,000 on
the date of death of the Participant.

          b. Prior to January 1, 2003, if a Participant died after payments from his or her Account had
begun, the remainder of the amounts credited to the Participant’s Account were paid to his or her
Beneficiary at the same time and in the same manner as they would have been paid to the Participant
had the Participant survived. If a Participant died before payments from his or her Account had
begun, the amount credited to his or her Account were paid to his or her Beneficiary at the time
and in the manner elected by the Participant.

     6. Designation of Beneficiary. A Participant may designate any person(s) or entity as
his or her Beneficiary. Such designation shall be in writing and shall be effective only when
filed with the Administrator. Such filing must occur before the Participant’s death. A
Participant may change the Beneficiary designation from time to time by filing a new written
designation with the Administrator. Effective January 1, 2003, if the Participant fails to
effectively designate a Beneficiary in accordance with the Administrator’s procedures or the person
designated by the Participant is not living at the time the distribution is to be made, then the
Participant’s Beneficiary shall be the Participant’s surviving spouse, if any, or, if there is no
surviving spouse, the Participant’s surviving children, if any, in equal shares, or if there are no
surviving children, the Participant’s estate.

     7. Payments on Disability. If the Administrator determines that a Participant has
become Disabled, the entire undistributed amount credited to his or her Account shall be paid in
the form and at the time elected by the Participant, or, if no election has been made, in a lump
sum as soon as practicable after such determination is made.

     8. Payments on Hardship. The Administrator may, in his or her sole discretion, direct
payment to a Participant of all or of any portion of the Participant’s Account balance,
notwithstanding an election under Section E.3. above, at any time that he or she determines that
such Participant has suffered an event of undue hardship which causes an emergency condition in his
or her financial affairs.

     9. Other Payments. Effective June 1, 2000 and subject to approval by the
Administrator, a Participant may elect to receive a withdrawal of all or part of the Participant’s
Account under the Plan at any time not otherwise expressly authorized pursuant to the terms of the
Plan; provided, however, that ten percent (10%) of the amount of the withdrawal requested shall be
permanently forfeited to the Company and the Participant shall have no further right to that
amount. The terms of such withdrawal shall be governed by the provisions of the Participant’s
election form in effect at the time of such election to the extent not otherwise specified in the
Participant’s election made pursuant to this Section E.9.

4

 

     10. Change in Control. For purposes of this Plan, a Change in Control shall be deemed
to have occurred if any of the events set forth in any of the following paragraphs shall occur:

          a. any “person” (as defined in section 3(a)(9) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and as such term is modified in sections 13(d) and 14(d) of the
Exchange Act), excluding McKesson or any of its subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of McKesson or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a corporation owned,
directly or indirectly, by stockholders of McKesson in substantially the same proportions as their
ownership of McKesson, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of McKesson representing 30% or more of the
combined voting power of McKesson’s then outstanding securities; or

          b. during any period of not more than two consecutive years, individuals who at the beginning
of such period constitute the Board and any new members of the Board (other than a member
designated by a “person” who has entered into an agreement with McKesson to effect a transaction
described in Sections E.10.a, c and d) whose election by the Board or nomination for election by
McKesson’s stockholders was approved by a vote of at least two-thirds (2/3) of the members of the
Board then still in office who either were members of the Board at the beginning of the period or
whose election or nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or

          c. consummation of a merger or consolidation of McKesson with any other corporation, which has
been approved by the shareholders of McKesson, other than (I) a merger or consolidation which would
result in the voting securities of McKesson outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of McKesson, at least 50% of the combined voting power of
the voting securities of McKesson or such surviving entity outstanding immediately after such
merger or consolidation, or (II) a merger or consolidation effected to implement a recapitalization
of McKesson (or similar transaction) in which no person acquires more than 50% of the combined
voting power of McKesson’s then outstanding securities; or

          d. the shareholders of McKesson approve a plan of complete liquidation of McKesson or an
agreement for the sale or disposition by McKesson of all or substantially all of McKesson’s assets.

     Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if there
is consummated any transaction or series of integrated transactions immediately following which the
holders of McKesson’s common stock immediately prior to such transaction or series of transactions
continue to have the same proportionate ownership in an entity which owns all or substantially all
of the assets of McKesson immediately prior to such transaction or series of transactions.

5

 

F. SOURCE OF PAYMENT

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

G. MISCELLANEOUS

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

     2. No Assignment.

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

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

     3. Applicable Law; Severability. The Plan hereby created shall be construed,
administered and governed in all respects in accordance with ERISA and the laws of the State of
California to the extent that the latter are not preempted by ERISA. If any provision of this
instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereunder shall continue to be effective. If any provision this amendment and
restatement is deemed to be a “material modification” of this Plan which would cause amounts
deferred under this Plan prior to 2005 to be subject to the deferred compensation provisions of
section 885 of the American Jobs Creation Act of 2004, if such legislation is

6

 

enacted into law, such provision shall be null, void and without effect retroactive to October
28, 2004.

H. ADMINISTRATION OF THE PLAN

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

     2. Elections and Notices. All elections and notices made under this Plan shall be in
writing and filed with the Administrator at the time and in the manner specified by him or her.
Except as may be specifically otherwise stated in any Plan election form, all elections to defer
under this Plan shall be irrevocable.

I. AMENDMENT OR TERMINATION OF THE PLAN

     The Compensation Committee may at any time amend this Plan. Such action shall be prospective
only and shall not adversely affect the rights of any Participant or Beneficiary to any benefit
previously earned under this Plan. The Board may at any time terminate this Plan; thereupon
compensation previously deferred plus interest credited thereon shall promptly be paid in single
lump sums to the respective Participants or Beneficiaries entitled thereto. The foregoing
notwithstanding, no amendment adopted following the occurrence of a Change in Control shall be
effective if it (a) would reduce the Declared Rate for the balance of the calendar year in which
the Change in Control occurs or for the two calendar years immediately following the year in which
the Change in Control occurs to a rate lower than the Declared Rate as in effect on the day before
the Change in Control occurred or (b) modify the provisions of (a) above.

J. CLAIMS AND APPEALS

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

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

7

 

If such an extension is required, written notice of the extension shall be furnished to the
person making the request within the initial 90-day period, and the notice shall state the
circumstances requiring the extension and the date by which the Executive Vice President expects to
reach a decision on the request. In no event shall the extension exceed a period of 90 days from
the end of the initial period.

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

     4. Appeal to Executive Vice President.

          a. A person whose request has been denied in whole or in part (or such person’s authorized
representative) may file an appeal of the decision in writing with the Executive Vice President
within 60 days of receipt of the notification of denial. The appeal must be addressed to:
Executive Vice President, Human Resources, McKesson Corporation, One Post Street, San Francisco,
California 94104. The Executive Vice President, for good cause shown, may extend the period during
which the appeal may be filed for another 60 days. The appellant and/or his or her authorized
representative shall be permitted to submit written comments, documents, records and other
information relating to the claim for benefits. Upon request and free of charge, the applicant
should be provided reasonable access to and copies of, all documents, records or other information
relevant to the appellant’s claim.

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

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

          d. If the decision on the appeal denies the claim in whole or in part written notice shall be
furnished to the appellant. Such notice shall state the reason(s) for the denial, including
references to specific Plan provisions upon which the denial was based. The notice shall state
that the appellant is entitled to receive, upon request and free of charge, reasonable access to,
and copies of, all documents, records, and other information relevant to the claim for

8

 

benefits. The notice shall describe any voluntary appeal procedures offered by the Plan and
the appellant’s right to obtain the information about such procedures. The notice shall also
include a statement of the appellant’s right to bring an action under Section 502(a) of ERISA.

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

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

K. DEFINITIONS

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

     1. “Account” shall mean the Account specified in Section E.1.

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

     3. “Beneficiary” shall mean the person or entity described by Section E.6.

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

     5. “Cash Gain” shall mean the cash gain specified in Section A.

     6. “Company” shall mean McKesson and any member of its controlled group as defined by Section
414(b) and Section 414(c) of the Internal Revenue Code of 1986, as amended.

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

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

     9. “Disabled” or “Disability” shall mean a physical or mental condition which the Social
Security Administration has determined renders the Participant eligible to receive Social Security
benefits on account of disability.

     10. “Eligible Director” shall mean a director described by Section C.1.b.

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

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

9

 

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

     14. “Participant” shall be any Eligible Executive or Eligible Director for whom amounts are
credited to an Account under this Plan. Upon the Participant’s death, the Participant’s
Beneficiary shall be a Participant until all amounts are paid out of the Participant’s Account.

     15. “Plan” shall mean the McKesson Corporation 1994 Option Gain Deferral Plan (“OGDP”).

     16. “Retirement” shall mean termination of employment after (a) the date on which the
Participant’s number of points under the Retirement Share Plan portion of the McKesson Corporation
Profit-Sharing Investment Plan equals 65, (b) attaining eligibility for a Retirement Allowance
under the terms of the McKesson Corporation Retirement Plan or (c) receiving an Approved Retirement
under the terms of the McKesson Corporation Executive Benefit Retirement Plan. Notwithstanding the
foregoing, for purposes of the Plan, Retirement for an Eligible Director shall mean cessation of
service as a member of the Board on or after completion of at least two successive terms as a
member of the Board.

     17. “Transaction” shall mean the restructuring of the Company that resulted in the sale of PCS
Health Systems, Inc. to Eli Lilly and Company, as described in Section A.

     18. “Year” is the calendar year.

L. SUCCESSORS

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

M. EXECUTION

     To record the amendment and restatement of the Plan by the Board of Directors of McKesson
Corporation at a meeting held on October 28, 2004.

McKESSON CORPORATION

	 	 	 
	By:
	 	 
	

	 	 
	

	 	Paul E. Kirincic
	

	 	Executive Vice President, Human Resources

10

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