Exhibit 10.2
McKESSON CORPORATION
MANAGEMENT DEFERRED COMPENSATION PLAN
Amended as of May 29, 1998
A. PURPOSE
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This Plan is established to further enhance the Company's
ability to attract and retain executive personnel and Directors.
B. ERISA PLAN
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This Plan is an unfunded deferred compensation program for
a select group of management employees and Directors 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
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1. Eligibility to Participate
a. Eligible Executives. The Compensation Committee
may, at its 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
specified by the Compensation Committee.
The Compensation Committee may, at its 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 Compensation Committee
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 Director 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 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. All
elections to defer compensation for any Year shall be executed
and filed with the Administrator no later than (i) November 30 of
the immediately preceding Year for Eligible Executives whose
salaries are paid monthly and (ii) December 15 of the immediately
preceding Year for all other Eligible Executives and Eligible
Directors.
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. An Eligible Executive or a
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 Company's
Retirement Plan and the Company's Profit-Sharing Investment Plan.
D. AMOUNTS OF DEFERRAL
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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 any annual bonuses and/or 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) fifty percent (50%) of the
amount of such Eligible Executive's base salary for such Year,
and (ii) the entire amount of any annual bonus award and/or any
Long-Term Incentive Plan Award determined and payable to him or
her in such Year.
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 and
other fees from the Company earned by him or her in any such
Year.
4. No New Deferrals After January 1, 1994.
Notwithstanding paragraphs 1, 2 and 3 of this Section D., no new
deferrals under this Plan shall be made after January 1, 1994.
E. PAYMENT OF DEFERRED COMPENSATION
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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: the Company'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"). Each Account balance shall be compounded
monthly at the twelfth root of the annual Declared Rate of
interest provided for under this Plan. 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, which is five years after the end of the Year
for which compensation is deferred, except as otherwise provided
in this Section E. 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 the Company's
annual meeting of stockholders 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 five-year minimum deferral rule stated
above.
3. Election of Methods of Payment. A Participant shall
elect in writing, and file with the Administrator, at the same
time as any election to defer compensation, a method of payment
of benefits under this Plan from the following methods:
a. Payment of amounts credited to the Participant's
Account in any specified number of approximately equal annual
installments (not in excess of 10), the first installment to be
paid in the Year designated by the Participant.
b. Payment of the amounts credited to the
Participant's Account in any specified number of approximately
equal annual installments (not in excess of ten), the first
installment to be paid at a designated interval following the
earlier of Participant's Retirement or one continuous year of
disability.
c. Payment of the amount credited to the
Participant's Account in a single sum.
4. Date Payments Begin. Single sum payments to be made
following Retirement shall be made as soon as practicable
following such Retirement. In the case of a Participant's death,
single sum or installment payments may begin as soon as
practicable after such death. All other payments shall begin
(or, in the case of payments to be made in a single sum, shall be
made) in January following the deferral period under Section E.2,
but, in any event, must begin no later than the January following
the year in which the Eligible Executive reaches age 72, or, in
the case of an Eligible Director, the January after the Company's
annual meeting of stockholders next following the Eligible
Director's 72nd birthday.
5. Payments on Termination. If for any reason other than
Retirement or Death, an Eligible Executive terminates employment
with the Company or an Eligible Director ceases to be a Director,
the entire undistributed amount of his or her deferred
compensation will be paid in the form of a lump sum as soon as
practicable after such termination or cessation.
6. Payments on Death.
a. Death After Payments Have Begun. If a Participant
dies after payments from his or her Account have begun, the
remainder of the amounts credited to the Participant's Account
shall be paid to his or her Beneficiary at the same time and in
the same manner as they would have been paid had the Participant
survived.
b. Death Before Payments Have Begun. If a
Participant dies before payments from his or her Account have
begun, the amount credited to his or her Account shall be paid to
his or her Beneficiary at the time and in the manner elected by
the Participant. Such election shall be made in writing and
filed with the Administrator at the time of any election to defer
compensation. Benefits shall be paid in one of the methods
specified in paragraphs a. and c. of Section E.3. and at the time
specified in Section E.4. The Administrator, at his or her
discretion, may distribute all benefits to a Beneficiary in a
single payment if the present value of the benefits payable to a
Participant or Beneficiary is less than $5,000.
7. Payments on Hardship. The Compensation Committee may
in its sole discretion direct payment to a Participant of all or
of any portion of any amounts deferred, notwithstanding an
election under Section E.3 above at any time that it determines
that such Participant has suffered an event of undue hardship
which causes an emergency condition in his or her financial
affairs.
8. Effect of Change in Control on Minimum Deferral Period.
The five-year minimum deferral period described in Section E.2.
shall not apply in the event of a Change in Control of Company or
its operating subsidiary, McKesson Corporation, a Maryland
corporation (each of which is referred to herein as
"Corporation");
For purposes of this Plan, a Change in Control of a
Corporation shall be deemed to have occurred if any of the events
set forth in any one 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 the Company or any of its subsidiaries,
a trustee or any fiduciary holding securities under an employee
benefit plan of the Company 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 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
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 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 a., c., or d. 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
c. the shareholders of the Company approve a merger
or consolidation of the Company with any other corporation, other
than (I) a merger or consolidation which would result in
thevoting 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 of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or
(II) 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
d. 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 Company'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 the Company
immediately prior to such transaction or series of transactions.
With respect to deferrals made prior to January 1,
1994, deferred funds will be
distributed upon a Change in Control, if the Participant has so
elected.
9. 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. If the Participant is
married, any Beneficiary designation which does not designate the
Participant's spouse to receive at least one-half of the
Participant's Account shall only become effective when approved
in writing by the Participant's spouse.
F. SOURCE OF PAYMENT
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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
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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. 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.
3. Insurance Examinations. As a condition of
participation in this Plan, each Eligible Executive shall, if
requested by the Company, undergo such examination and provide
such information as may be required by the Company with respect
to an insurance contract on the Participant's life, and shall
authorize the Company to purchase life insurance on his or her
life.
4. 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.
H. ADMINISTRATION OF THE PLAN
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1. In General. The Plan Administrator shall be the Vice
President, Human Resources of the Company. If the 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 Compensation Committee 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 Compensation
Committee 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 under this Plan shall be
irrevocable.
I. AMENDMENT OR TERMINATION OF THE PLAN
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The Board 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, on
termination, in single lump sums to the respective Participants
or Beneficiaries entitled thereto.
J. EFFECTIVENESS
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This Plan is effective as of November 1, 1989, the date on
which this Plan was approved by the Board; provided, however,
that deferrals of compensation under this Plan shall not commence
unless and until the Company has received a favorable no-action
letter regarding this Plan from the Securities and Exchange
Commission.
K. DEFINITIONS
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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.9.
4. "Board" shall mean the Board of Directors of McKesson
Corporation, a Delaware corporation.
5. "Company" shall mean McKesson Corporation, a Delaware
corporation and any subsidiary in which it owns at
least 50% of the issued and outstanding stock (and any
subsidiary 50% of the issued and outstanding stock of
which is owned by such a subsidiary).
6. "Compensation Committee" shall mean the Compensation
Committee of the Board.
7. "Declared Rate" shall have the meaning described in
Section E.1.
8. "Eligible Director" shall mean a Director described by
Section C.1.b.
9. "Eligible Executive" shall mean an employee of the
Company selected as being eligible to participate in
this Plan under Section C.
10. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
11. "Participant" shall be any Company executive or member
of the Board for whom amounts are credited to an
Account under this Plan. Upon his or her death, his or
her Beneficiary shall be a Participant until all
amounts are paid out of his or her Account.
12. "Plan" shall mean the McKesson Corporation Management
Deferred Compensation Plan.
13. "Retirement" shall mean termination of a Participant's
employment after his or her age plus years of service
with the Company reaches 65.
14. "Year" is the calendar year.
Executed as of May 29, 1998, in the City and County of San
Francisco, State of
California.
McKESSON CORPORATION
By:
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William A. Armstrong
Vice President, Human Resources and Administration