Exhibit 10.2
McKESSON CORPORATION
SEVERANCE POLICY FOR
EXECUTIVE EMPLOYEES
(Amended and Restated as of May 31, 1996)
SECTION 1. ADOPTION AND PURPOSE OF POLICY.
The McKesson Corporation Severance Policy for Executive
Employees (the "Policy") was adopted effective September 29, 1993
by McKesson Corporation, a Delaware corporation (the "Company"), to
provide a program of severance payments to certain employees of the
Company and its designated subsidiaries. The Policy is an employee
welfare benefit plan within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") and Section 2510.3-1 of the regulations issued
thereunder. The plan administrator of the Policy for purposes of
ERISA is the Company.
SECTION 2. DEFINITIONS.
Whenever used and capitalized in the text of the Policy, the
following terms shall have the meaning set forth below:
(a) "Cause" means:
(i) The continuing willful failure of the
Participant to perform the Participant's prescribed
duties to the Company (other than any such failure
resulting from the Participant's incapacity due to
physical or mental illness) after written notice thereof
(specifying the particulars thereof in reasonable detail)
and a reasonable opportunity to be heard and cure such
failure are given to the Participant by the Board of
Directors or a committee thereof; or
(ii) The willful commission by the Participant of a
wrongful act that caused or was reasonably likely to
cause substantial damage to the Company, or an act of
gross negligence, fraud, unfair competition, dishonesty
or misrepresentation in the performance of the
Participant's duties on behalf of the Company; or
(iii) The conviction of the Participant for
commission of a felony.
(b) "Change of Control" shall have the meaning set forth in
the Company's standard form of termination agreement for executive
employees.
(c) "Earnings" means a Participant's monthly base salary.
(d) "Participant" means a Principal Officer whose employment
is terminated under circumstances that render him or her eligible
for the benefits described in Section 3 of the Policy.
(e) "Principal Officers" means those persons who have been
designated as executive officers of the Company for purposes of
Section 16 of the Securities Exchange Act of 1934 by resolution
adopted by its Board of Directors.
(f) "Year of Service" shall have the meaning set forth in
Section (1) of Article II of the McKesson Corporation Retirement
Plan.
SECTION 3. SEVERANCE BENEFITS.
(a) Basic Severance Benefits. In the event that the Company
terminates the employment of a Principal Officer for any reason
other than Cause at any time other than within two years following
a Change of Control, that Principal Officer shall be entitled to a
severance payment equal to the lesser of (A) 12 months' Earnings
plus one additional month for each Year of Service or (B) 24
months' Earnings.
In no event shall the number of months Earnings a
Participant is entitled to receive hereunder exceed the number of
months remaining between the Participant's termination date and the
date he or she will attain age 62 (rounded to the next higher whole
month).
(b) Mitigation of Damages. The amount of a Participant's
benefits calculated under (a) above shall be reduced by the amount
of compensation, if any, the Participant receives from any
subsequent employer(s) for work performed during a period of time
following his or her termination of employment equal to the number
of months of Earnings the Participant is entitled to receive.
(c) Effect on Other Plans. Nothing in this Policy shall
alter or impair any rights a Participant may have upon termination
of employment under any other plan or program of the Company,
except as follows:
(i) If a Participant is at least age 55 with 15 or
more Years of Service at the time of his or her
termination under this Section 3, he or she will
automatically be granted "Approved Retirement" for
purposes of the 1984 Executive Benefit Retirement Plan
and the 1988 Executive Survivor Benefits Plan.
(ii) A Participant who is terminated pursuant to
this Section 3 shall receive pro rata Long-Term Incentive
Plan awards for all cycles in progress as of his or her
termination date. Such payments shall be based on actual
Company performance for the relevant award cycle, and
awards shall be paid at such time and in such manner as
are paid to other participants under such Plan.
(d) No Duplication of Benefits. In no event shall a
Participant be entitled to any benefits under this Policy if his or
her employment with the Company terminates under circumstances that
entitle the Participant to receive severance benefits following a
Change of Control of the Company.
SECTION 4. FORM OF BENEFIT.
The benefit described in Section 3(a) shall be paid in a lump
sum or in monthly installments over a period commencing on the date
of the Participant's termination of employment not to exceed the
number of months determined under said Section.
SECTION 5. EFFECT OF DEATH OF EMPLOYEE.
Should a Participant die after employment terminates but while
participating in the Policy and prior to the payment of the entire
benefit due hereunder, the balance of the benefit payable under the
Policy shall be paid in a lump sum to the Participant's surviving
spouse, or, if none, to his or her surviving children or, if none,
to his or her estate.
SECTION 6. AMENDMENT AND TERMINATION.
The Company reserves the right to amend or terminate the
Policy at any time and to increase or decrease the amount of any
benefit provided under the Policy by action of the Compensation
Committee of its Board of Directors; provided, however, that no
such action shall have the effect of decreasing the benefit of a
Participant whose employment with the Company terminated prior to
the date of the Compensation Committee's action.
SECTION 7. ADMINISTRATION AND FIDUCIARIES.
(a) Plan Sponsor and Administrator. The Company is the "plan
sponsor" and the "administrator" of the Policy, within the meaning
of ERISA.
(b) Administrative Responsibilities. The Company shall be
the named fiduciary with the power and sole discretion to determine
who is eligible for benefits under the Policy, to interpret the
Policy and to prescribe such forms, make such rules, regulations
and computations and prescribe such guidelines as it may determine
are necessary or appropriate for the operation and administration
of the Policy and to change the terms of or rescind such rules,
regulations or guidelines. Such determinations of eligibility,
rules, regulations, interpretations, computations and guidelines
shall be conclusive and binding upon all persons. In administering
the Policy, the Company shall at all times discharge its duties
with respect to the Policy in accordance with the standards set
forth in section 404(a)(1) of ERISA.
(c) Allocation and Delegation of Responsibilities. The
Compensation Committee may allocate any of the Company's
responsibilities for the operation and administration of the Policy
among the Company's officers, employees and agents. It may also
delegate any of the Company's responsibilities under the Policy by
designating, in writing, another person to carry out such
responsibilities.
(d) No Individual Liability. It is declared to be the
express purpose and intent of the Company that no individual
liability shall attach to or be incurred by any member of the Board
of Directors of the Company, or by any officer, employee
representative or agent of the Company, under, or by reason of the
operation of, the Policy.
SECTION 8. CLAIMS AND REVIEW PROCEDURES.
The Compensation Committee of the Company's Board of Directors
shall establish a procedure pursuant to which a Participant may
file a claim for benefits under the Policy, and at the request of
a Participant it shall also provide a full and fair review of any
denied claim for benefits under the Policy. A claim for benefits
and a request for the review of a denied benefit shall be made in
writing and addressed to the Compensation Committee at the
Company's headquarters. The Compensation Committee's response
shall be in writing and shall be given in a manner and time
consistent with the regulations under ERISA Section 503. The
Compensation Committee shall establish such rules and procedures,
consistent with the Policy and with ERISA, as it may deem necessary
or appropriate in carrying out its responsibilities under this
Section 8.
SECTION 9. GENERAL PROVISIONS.
(a) Basis of Payments to and from Policy. All benefits under
the Policy shall be paid by the Company. The Policy shall be
unfunded and benefits hereunder shall be paid only from the general
assets of the Company. Nothing contained in the Policy shall be
deemed to create a trust of any kind for the benefit of any
employee, or create any fiduciary relationship between the Company
and any employee with respect to any assets of the Company. The
Company is under no obligation to fund the benefits provided herein
prior to payment, although it may do so if it chooses. Any assets
which the Company chooses to use for advance funding shall not
cause the Policy to be a funded plan within the meaning of ERISA.
(b) No Employment Rights. Nothing in the Policy shall be
deemed to give any individual the right to remain in the employ of
the Company or a subsidiary or to limit in any way the right of the
Company or a subsidiary to discharge, demote, reclassify, transfer,
relocate an individual or terminate an individual's employment at
any time and for any reason, which right is hereby reserved.
(c) Non-alienation of Benefits. No benefit payable under the
Policy shall be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void.
(d) Legal Construction. The Policy shall be governed and
interpreted in accordance with ERISA.
SECTION 10. EXECUTION.
This Amended and Restated Severance Policy shall be effective
as of the 31st day of May, 1996.
McKESSON CORPORATION
By /s/William A. Armstrong
----------------------------
William A. Armstrong,
Vice President, Human Resources
and Administration