EXHIBIT 10.6
MCKESSON CORPORATION
1994 STOCK OPTION AND RESTRICTED STOCK PLAN
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(As amended through March 26, 1997)
1. Establishment, Purpose and Definitions.
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(a) There is hereby adopted the McKesson Corporation 1994 Stock Option
and Restricted Stock Plan (the "Plan"). The Plan shall be the successor to the
McKesson Corporation 1988 Restricted Stock Plan and the McKesson Corporation
1978 Stock Option Plan (collectively, the "Predecessor Plans") with respect to
those awards under the Predecessor Plans which will be equitably adjusted to
become awards under the Plan ("Adjusted Awards"), all in connection with the
restructuring of McKesson Corporation, a Delaware corporation ("Old McKesson"),
that will result in the sale of Old McKesson's PCS business to Eli Lilly and
Company (the "Transaction"). In connection with the Transaction, SP Ventures,
Inc. shall be renamed McKesson Corporation (both of such entities being referred
to herein as the "Company", in each case as the context so requires) and the
Plan shall be renamed the McKesson Corporation 1994 Stock Option and Restricted
Stock Plan.
(b) The purpose of this Plan is to provide a means whereby key
executives of the Company and its affiliates and members of the Board of
Directors of the Company (the "Board") who are not employed as regular salaried
officers or employees of the Company or any affiliate of the Company
("Nonemployee Directors") may be given an opportunity to purchase shares of the
common stock ($0.01 par value) of the Company (the "Stock") pursuant to options
which may or may not qualify as "incentive stock options" under Section 422 of
the Internal Revenue Code, as amended (the "Code"), and by providing
participants (other than Nonemployee Directors) with grants of restricted shares
of Stock ("Restricted Stock") in accordance with the terms and conditions set
forth herein.
2. Stock Subject to the Plan.
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(a) The aggregate number of shares of Stock available for the grant of
awards hereunder shall equal the sum of (a) the number of shares of Stock
issuable in connection with Adjusted Awards, plus (b) 4,150,000 (all such shares
shall be subject to equitable adjustment as provided herein). With respect to
the shares of Stock referred to in clause (b) above (the "Future Award Shares")
no more than 350,000 shares may be awarded as Restricted Stock (subject to
equitable adjustment as provided herein). All Future Award Shares granted to
Nonemployee Directors shall be granted pursuant to the formula provisions set
forth in Section 5(e) herein. The maximum number of Future Award Shares that may
be granted to any individual during any plan year in the form of Restricted
Stock shall not exceed 20,000 and the maximum number of Future Award Shares that
may be granted to any individual in the form of options during any plan year
shall not exceed
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300,000; in each case, such maximum number shall be subject to equitable
adjustment as provided herein. All awards of Future Award Shares shall be
contingent on the approval of the Plan by the stockholders of the Company at its
first annual meeting of stockholders next following consummation of the
Transaction.
As the Committee (as hereinafter defined) may determine from time to
time, the Stock may consist either in whole or in part of shares of authorized
but unissued Stock, or shares of authorized and issued Stock reacquired by the
Company and held in its treasury. If an option covered by Future Award Shares is
surrendered for cash or for any other reason (except surrender for shares of
Stock) ceases to be exercisable in whole or in part, the shares which were
subject to such option but as to which the option had not been exercised shall
continue to be available for grants of stock options under the Plan. If any
shares of Stock underlying Restricted Stock grants which are covered by Future
Award Shares shall be reacquired by the Company pursuant to the termination
provisions described herein or in the instruments evidencing the making of such
Restricted Stock grants, such shares shall again be available for grant of
Restricted Stock awards under the Plan (to the extent permitted under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Prior to the granting of awards, the Company shall be under no obligation to
reserve or retain in its treasury any particular number of shares of Stock at
any time, and no particular shares of Stock, whether issued or held as treasury
Stock, shall be identified as being available for future awards under the Plan.
(b) In the case of options which are intended to qualify as "incentive
stock options" under Section 422 of the Code, the aggregate fair market value
(determined as of the time the option is granted) of the Stock with respect to
which incentive stock options are exercisable for the first time by any eligible
key executive during any calendar year (under this Plan and any other plans of
the Company) shall not exceed $100,000.
(c) In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, stock, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to preserve (but not increase) the rights of
participants under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of (i)
the number and kind of shares which may thereafter be issued in connection with
Future Award Shares (with respect to both Restricted Stock and option awards),
(ii) the number and kind of shares issued in respect of outstanding Adjusted
Awards, (iii) the number and kind of shares issued in respect of outstanding
awards of Future Award Shares, and (iv) the exercise price relating to any
options.
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3. Eligibility.
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Persons who shall be eligible to have granted to them awards provided
for by the Plan shall be (i) such key executives of the Company and its
affiliates as the Committee, in its sole discretion, shall designate from time
to time and (ii) Nonemployee Directors.
4. Administration of the Plan.
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(a) The Plan shall be administered by a committee (the "Committee")
consisting of not less than two directors of the Company to be appointed by the
Board, each of whom is an "outside director" within the meaning of Section
162(m) of the Code and a "non-employee director" within the meaning of Rule 16b-
3 under the Exchange Act.
(b) The Committee may from time to time determine which key executives
of the Company and its affiliates shall be granted awards under the Plan, the
terms thereof, and the number of shares covered by an option or the number of
shares of Restricted Stock to be granted.
(c) The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and the instruments evidencing
awards granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. All decisions,
determinations, and interpretations of the Committee shall be final and binding
on all participants and other interested parties.
5. Stock Options and Stock Appreciation Rights.
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(a) The Option Price.
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The exercise price of each option shall not be less than the fair
market value of the Stock covered by such option on the date the option is
granted, except that the option price associated with Adjusted Awards shall be
such price as results from the equitable adjustment of such awards. Such fair
market value shall, if the Stock is not listed or admitted to trading on a stock
exchange, be the mean between the lowest reported bid price and highest reported
asked price of the Stock on the date the option is granted in the over-the-
counter market, as reported by any publication of general circulation selected
by the Company which regularly reports the market price of the Stock in such
market, or, if the Stock is then listed or admitted to trading on any stock
exchange, the composite closing price on such day as reported in the Wall Street
Journal; provided, however, that if the Committee determines that as a result of
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the Transaction fair market value may be more accurately determined based on the
average closing price of the Stock over a three-
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consecutive-day period immediately prior to the grant, then such average will
constitute fair market value. Such price shall be subject to adjustment as
provided in paragraph 2(c) hereof.
(b) Terms and Conditions of Options.
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(i) Each option granted pursuant to the Plan shall be evidenced by
a written grant agreement (the "Agreement") executed by the Company and the
person to whom such option is granted which shall provide such terms and
conditions as the Committee may determine, in its sole discretion.
(ii) Unless otherwise provided in the Agreement, the term of each
option shall be for no more than ten years and three months; provided however
that the term of each option intended to qualify as an "incentive stock option"
shall be for no more than ten years.
(iii) The Agreement may contain such other terms, provisions, and
conditions as may be determined by the Committee (not inconsistent with this
Plan) including, without limitation, provisions relating to stock appreciation
rights ("SARs") with respect to options granted hereunder. Unless otherwise
provided in the Agreement, the Committee may, in its sole discretion, extend the
post-termination exercise period with respect to an option (but not beyond the
original term of such option). If an option, or any part thereof, is intended
to qualify as an "incentive stock option", the Agreement shall contain those
terms and conditions necessary to so qualify said option or such part thereof.
(iv) The Committee shall have the authority to accelerate the
exercisability of any outstanding option (except for options granted to
Nonemployee Directors) at such time and under such circumstances as it, in its
sole discretion, deems appropriate.
(v) Adjusted Awards shall remain subject to the same terms and
conditions to which they were subject prior to any equitable adjustment made in
respect of the Transaction.
(c) Stock Appreciation Rights.
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The Committee may, under such terms and conditions as it deems
appropriate, authorize the surrender by an optionee who is not a Nonemployee
Director of all or part of an unexercised option and authorize a payment in
consideration thereof of an amount equal to the difference obtained by
subtracting the option price of the shares then subject to exercise under such
option from the fair market value of the Stock represented by such shares on the
date of surrender, provided that the Committee determines that such
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settlement is consistent with the purpose of the Plan. Such payment may be made
in shares of Stock valued at their fair market value on the date of surrender of
such option or in cash, or partly in shares and partly in cash. Acceptance of
such surrender and the manner of payment shall be in the discretion of the
Committee. If an option is surrendered for cash, the shares covered by the
surrendered option will thereafter be available for grant under the Plan to the
extent permitted under Rule 16b-3 of the Exchange Act.
(d) Use of Proceeds.
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Proceeds realized from the sale of Stock pursuant to options granted
under the Plan shall constitute general funds of the Company.
(e) Granting of Options to Nonemployee Directors.
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Each Nonemployee Director (i) commencing his or her term on the Board
at the Company's first annual meeting of stockholders following consummation of
the Transaction or (ii) who is elected to the Board for the first time by the
stockholders of the Company at any special or annual meeting of stockholders
(other than those Nonemployee Directors who were nonemployee directors of Old
McKesson), will automatically receive, on such date, an option to purchase 5,000
shares of Stock (subject to adjustment as provided in Paragraph 2(c) above),
which option shall be immediately exercisable in full but shall expire to the
extent of 1,000 shares per year on each anniversary of the grant date unless and
until such Nonemployee Director retires from the Board, in which case the option
period shall end three years after the retirement date or until the option term
expires, whichever shall first occur, and the option shall be exercisable to the
extent of the entire unexercised portion of the option (or any lesser amount)
remaining at the date of retirement. On the date of each subsequent annual
meeting of stockholders (and, in the case of those Nonemployee Directors who
were previously nonemployee directors of Old McKesson, on the date of the
Company's first annual meeting of stockholders following consummation of the
Transaction and on the date of each subsequent annual meeting of stockholders)
each continuing Nonemployee Director will automatically receive, on such date,
an option to purchase 1,500 shares of Stock (subject to adjustment as provided
in Paragraph 2(c) above), which option shall be immediately exercisable in full.
Nonemployee Directors shall not dispose of shares of Stock received upon
exercise of any such option prior to six months from the date of grant of such
option.
Subject to the aforementioned expiration provisions, the term of each
option shall be five years. All such options shall be designated as stock
options which do not qualify under Section 422 of the Code. Subject to the
foregoing, all provisions of this Plan not inconsistent with the foregoing shall
apply to options granted to Nonemployee Directors, except that with respect to
an option granted to a Nonemployee Director, (a) any requirement for employment
with the Company or a subsidiary shall be deemed to be a
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requirement for service as a director, (b) any requirement of continuous
employment shall be deemed to be a requirement of continuous service as a
director, and (c) any reference to termination of employment shall be deemed to
mean termination of service as a director.
6. Restricted Stock Awards.
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(a) Terms and Conditions.
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Each Restricted Stock grant made pursuant to the Plan shall be
evidenced by an Agreement executed by the Company and the person to whom such
Restricted Stock is granted (the "Grantee"). Each Restricted Stock grant made
under the Plan shall, unless otherwise provided in the Agreement, contain the
following terms, conditions and restrictions and such additional terms,
conditions and restrictions as may be determined by the Committee. Adjusted
Awards shall maintain the same terms and conditions to which they were subject
prior to any equitable adjustment made in respect of the Transaction.
(b) Restrictions.
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Until the restrictions imposed on any Restricted Stock grant shall
lapse, shares of Stock granted to a participant pursuant to a Restricted Stock
grant:
(i) shall not be sold, assigned, transferred, pledged,
hypothecated, or otherwise disposed of, and
(ii) shall, if the Grantee's continuous employment with the
Company shall terminate for any reason, unless otherwise provided in the
Agreement, be returned to the Company forthwith, and all the rights of the
Grantee to such shares shall immediately terminate; provided that if the
Committee, in its sole discretion, shall within ninety (90) days of such
termination of employment, notify the participant in writing of its decision not
to terminate the Grantee's rights in such shares, then the Grantee shall
continue to be the owner of such shares subject to such continuing restrictions
as the Committee may prescribe in such notice. If the Grantee's interests in the
shares granted pursuant to a Restricted Stock grant shall be terminated, such
Grantee shall forthwith deliver or cause to be delivered to the Secretary of the
Company the certificate(s), if any, previously delivered to the Grantee for such
shares, accompanied by such endorsement(s) and/or instrument(s) of transfer as
may be required by the Secretary of the Company.
(c) Lapse of Restrictions.
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Except as otherwise provided in the Plan or the Agreement, the
restrictions imposed on any Restricted Stock grant shall commence with the date
of the grant and continue during a period set by the Committee. Notwithstanding
the foregoing, the
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Committee may accelerate the lapsing of restrictions on a Restricted Stock grant
under such terms and conditions as it may deem appropriate.
(d) Restrictive Legend; Certificates May be Held in Custody.
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Each certificate evidencing shares granted pursuant to a Restricted
Stock grant may bear an appropriate legend referring to the terms, conditions
and restrictions described in the Plan and in the instrument evidencing the
Restricted Stock grant. Any attempt to dispose of such shares in contravention
of such terms, conditions and restrictions shall be invalid. The Committee may
enact rules which provide that the certificates evidencing such shares may be
held in custody by a bank or other institution, or that the Company may itself
hold such shares in custody, until restriction thereon shall have lapsed.
(e) Restrictions upon Making of Restricted Stock Grants.
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The registration or qualification under any federal or state law of any
shares to be granted pursuant to Restricted Stock grants or the resale or other
disposition of any such shares by or on behalf of the Grantees receiving such
shares may be necessary or desirable as a condition of or in connection with
such Restricted Stock grants, and, in any such event, if the Committee in its
sole discretion so determines, delivery of the certificates for such shares
shall not be made until such registration or qualification shall have been
completed.
(f) Special Provisions Regarding Awards.
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Notwithstanding anything to the contrary contained herein, unless
otherwise provided in the Agreement governing a Restricted Stock grant,
Restricted Stock awards granted pursuant to this Section 6 to Executive Officers
(as such term is defined in Rule 3b-7 promulgated under the Exchange Act) shall
be based on the attainment by the Company (or a subsidiary or division of the
Company if applicable) of performance goals pre-established by the Committee,
during a performance period pre-established by the Committee, based on one or
more of the following criteria: (i) the attainment of a specified percentage
return on total capital employed by the Company (or a subsidiary or division of
the Company); (ii) the attainment of a specified percentage return on total
stockholder equity of the Company; (iii) the attainment of a specified
percentage increase in earnings per share of Stock from continuing operations;
(iv) the attainment of a specified percentage increase in net income of the
Company; (v) the attainment of a specified percentage increase in profit before
taxation of the Company (or a subsidiary or division of the Company); and (vi)
the attainment of a specified percentage increase in revenues of the Company (or
a subsidiary or division of the Company). In addition, such performance goals
may be based upon the attainment of specified levels of Company performance
under one or more of the measures described above relative to the performance of
other corporations.
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Each such performance criteria shall be evaluated in accordance with
generally accepted accounting principles. Such shares of Restricted Stock shall
be released from restrictions only after the attainment of such performance
measures have been certified by the Committee.
7. Change in Control.
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Upon a Change in Control (as hereinafter defined), then notwithstanding
anything herein to the contrary, all options granted under the Plan that are
outstanding at the time of such Change in Control shall become immediately
exercisable in full and all restrictions with respect to shares of Restricted
Stock shall lapse and such shares shall become fully vested and exercisable.
A "Change in Control" of the Company shall be deemed to have occurred
if any of the events set forth in any one of the following paragraphs shall
occur:
(i) any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act), excluding the Company or any of its affiliates, a trustee
or any fiduciary holding securities under an employee benefit plan of the
Company or any of its affiliates, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation owned, directly or
indirectly, by stockholders of the Company in substantially the same proportions
as their ownership of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities; or
(ii) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in clause (i),
(iii) or (iv) of this paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were directors 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
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
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 the Company, at
least 50% of the combined voting power of the voting securities
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of the Company or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company'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 the 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 the Company immediately prior to such transaction or series of
transactions.
8. Amendment and Termination of the Plan.
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The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that an amendment which requires
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stockholder approval in order for the Plan to continue to comply with Section
162(m) of the Code or any other law, regulation or stock exchange requirement
shall not be effective unless approved by the requisite vote of stockholders. No
suspension, termination, modification or amendment of the Plan may adversely
affect any award previously granted without the written consent of the Grantee.
9. Assignability.
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Each option award granted pursuant to this Plan shall, during the
participant's lifetime, be exercisable only by him. No award nor any right
thereunder shall be transferable by the participant by operation of law or
otherwise other than by will, the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined in the Code or the Employee
Retirement Income Security Act of 1974, as amended.
10. Payment Upon Exercise.
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Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in cash; provided that the Committee, in its sole
discretion, may permit an option holder to pay the option price, in whole or in
part, by tendering to the Company shares of Stock owned by the option holder,
and having a fair market value equal to the option price. The fair market value
of such Stock shall be determined by the Committee as it deems appropriate, or
as may be required in order to comply with any applicable law
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or regulation.
11. Effective Date and Duration of the Plan.
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The Plan shall become effective upon its adoption by the Board and
the approval thereof by Old McKesson as the sole stockholder of the Company;
provided, however, that the effectiveness of the Plan shall be contingent upon
the occurrence of the Transaction and all awards of Future Award Shares shall be
contingent on the approval of the Plan by the stockholders of the Company at its
first annual meeting of stockholders. Unless sooner terminated, the Plan shall
remain in effect until terminated by action of the Board, provided, however,
that the duration of the Plan shall in no event exceed ten years from the date
of the adoption of the Plan by the Board. Termination of the Plan shall not
affect any awards previously granted pursuant thereto, which shall remain in
effect until their restrictions shall have lapsed (with respect to Restricted
Stock grants) or until exercised (with respect to option grants) all in
accordance with their terms.
12. Agreement by Participant Regarding Withholding Taxes.
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If the Committee shall so require, as a condition of exercise of an
option or SAR or upon the lapsing of restrictions imposed on Restricted Stock
(each a "Tax Event"), each participant shall agree that no later than the date
of the Tax Event, the participant will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state or local
taxes of any kind required by law to be withheld upon the Tax Event.
Alternatively, the Committee may provide, in its sole discretion, that a
participant may elect, to the extent permitted or required by law, to have the
Company deduct federal, state and local taxes of any kind required by law to be
withheld upon the Tax Event from any payment of any kind due to the participant,
including withholding of Shares.
13. Rights as a Shareholder.
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A participant granted an award hereunder or a transferee of an
award shall have no rights as a stockholder with respect to any shares covered
by the award until the date of the issuance of a stock certificate to him for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distribution of
other rights for which the record date is prior to the date such stock
certificate is issued, except as otherwise provided in the Plan.
14. No Rights to Employment.
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Nothing in the Plan or in any award granted or Agreement entered
into pursuant hereto shall confer upon any participant the right to continue in
the employ of, or in an independent contractor relationship with, the Company or
any subsidiary or to be
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entitled to any remuneration or benefits not set forth in the Plan or such
Agreement or to interfere with or limit in any way the right of the Company or
any such subsidiary to terminate such participant's employment. Awards granted
under the Plan shall not be affected by any change in duties or position of a
participant as long as such participant continues to be employed by, or in a
consultant relationship with, the Company or any subsidiary.
15. Interpretation.
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The Plan is designed and intended to comply with Rule 16b-3
promulgated under the Exchange Act and Section 162(m) of the Code and all
provisions hereof shall be construed in a manner to so comply.