Exhibit 10.5
MCKESSON CORPORATION
1997 NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION
AND DEFERRAL PLAN
(As Amended Through July 31, 2001)
1. Purpose of the Plan. The purpose of the McKesson Corporation 1997
Non-Employee Directors' Equity Compensation and Deferral Plan (the "Plan") is to
attract and retain qualified individuals not employed by McKesson Corporation
(the "Company") or its subsidiaries to serve on the Board of Directors of the
Company and to further align the interests of such non-employee directors with
those of the stockholders of the Company.
2. Definitions.
(a) "Annual Meeting" shall mean the annual meeting of the stockholders
of the Company.
(b) "Annual Retainer" shall mean any retainer fee paid to a non-employee
director for service on the Board during a Director Year.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change in Control" of the Company shall mean the occurrence of any
of the following events:
(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 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 stockholders 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 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 stockholders 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 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.
(e) Effective July 26, 2000 "Committee" shall mean the Committee on
Directors and Corporate Governance of the Board of Directors.
(f) "Committee Chairman Retainer" shall mean any fee paid to a
non-employee director for service as the chairman of any committee of the Board.
(g) "Common Stock" shall mean shares of Common Stock, par value $0.01
per share, of the Company.
(h) "DCAP II" shall mean the McKesson Corporation Deferred Compensation
Administration Plan II, as amended from time to time.
(i) "Director Year" shall mean a calendar year.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) "Fair Market Value" of a share of Common Stock as of a particular
date shall mean, if the Common Stock is not listed or admitted to trading on a
stock exchange, the average between the lowest reported bid price and highest
reported asked price of the Common Stock on
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such date in the over-the-counter market, or, if the Common Stock is then listed
or admitted to trading on any stock exchange, the composite closing price on
such date as reported in The Wall Street Journal.
(l) "Fees" shall mean the sum, for any Director Year, of the Annual
Retainer, Meeting Fees and Committee Chairman Retainer.
(m) "Meeting Fees" shall mean any fees paid to a non-employee director
for attending a meeting of the Board or a committee of the Board, including any
fees paid to a non-employee director for extraordinary or special Board and/or
committee meetings.
(n) "Participant" shall mean a non-employee director of the Company
participating in the Plan.
(o) "Restricted Stock Unit" shall mean a right to receive, in accordance
with the conditions set forth herein, a share of the Common Stock or,
alternatively, a cash payment equal to the Fair Market Value of a share of
Common Stock.
(p) "Retainer Option" shall mean a stock option granted pursuant to the
Plan in lieu of all or a portion of a Participant's Annual Retainer, as provided
in Sections 6(c) and 6(d)(iv).
3. Effective Date, Duration of Plan. This Plan shall become effective as
of January 1, 1997, subject to the approval of the Plan by the stockholders of
the Company; provided, that if the Plan is so approved, any election made
hereunder prior to such approval shall be deemed effective as of the date such
election was made. The Plan will terminate on December 31, 2006 or such earlier
date as determined by the Board; provided that no such termination shall affect
rights earned or accrued under the Plan prior to the date of termination.
4. Participation. Subject to the prior approval of the Committee, each
member of the Board who is not an employee of the Company or any of its
subsidiaries shall be eligible to participate in the Plan.
5. Common Stock Subject to the Plan.
(a) Subject to Section 5(b) below, the maximum aggregate number of
shares authorized to be issued under the Plan shall be 1,286,000. All Restricted
Stock Units issued hereunder, whether or not distributed in the form of Common
Stock, shall count against such maximum. If any options granted hereunder cease
to be exercisable in whole or in part, any shares subject thereto but with
respect to which such option had not been exercised, shall not count against
such maximum. As the Committee shall determine from time to time, the Common
Stock may consist of either shares of authorized but unissued Common Stock, or
shares of authorized and issued Common Stock reacquired by the Company and held
in its treasury.
(b) 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,
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reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or share exchange or other similar corporate transaction
or event affects the Common Stock such that an adjustment is determined by the
Committee to be appropriate to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan, then the
Committee may, in its sole discretion and in such manner as it may deem
equitable, adjust any or all of (i) the number of shares of Common Stock subject
to the Plan, (ii) the number of shares of Common Stock subject to outstanding
awards under the Plan, and (iii) the grant or exercise price with respect to any
option.
6. Restricted Stock Units; Deferrals.
(a) Transition Grant. As soon as practicable following January 1, 1997,
each Participant shall receive an initial grant (the "Transition Grant") of a
number of Restricted Stock Units in consideration for the termination of such
Participant's accrued benefits and rights under the Company's Director's
Retirement Program (the "Prior Plan"); provided that the Transition Grant shall
be subject to the receipt by the Company of a written release from the
Participant, in the form approved by the Committee, consenting to such
termination. The number of Restricted Stock Units granted to a Participant in
respect of the Transition Grant shall equal the Accrued Benefit (as defined
below), divided by the Fair Market Value of a share of Common Stock as of
December 31, 1996. A Participant's Accrued Benefit shall equal his or her
accrued benefit under the Prior Plan, as of December 31, 1996.
(b) Annual Grant. On the date of each Annual Meeting prior to the
termination or expiration of the Plan, beginning with the 1997 Annual Meeting,
each Participant shall receive a grant of 400 Restricted Stock Units. Effective
January 27, 1999, the annual grants of 400 Restricted Stock Units shall be
discontinued.
(c) Mandatory Deferral. On each date that any portion of the Annual
Retainer would otherwise be payable to a Participant prior to the termination or
expiration of the Plan, each such Participant shall be required to defer the
receipt of an amount equal to 50% of such portion of Annual Retainer, which
amount shall be deferred in the form of Restricted Stock Units or Retainer
Options, as elected by the Participant prior to the end of the calendar year
preceding the year in which the Annual Retainer is payable. In the event that a
participant fails to make such an election with respect to any calendar year in
which he or she receives payment of an Annual Retainer, the Participant shall be
deemed to have elected to receive the Annual Retainer in the form of Restricted
Stock Units. The number of Restricted Stock Units granted to a Participant in
respect of such deferral shall equal the Annual Retainer so deferred, divided by
the Fair Market Value of a share of Common Stock as of the last trading day of
the calendar quarter immediately preceding the date such Annual Retainer would
otherwise be payable. To the extent applicable, Restricted Stock Units granted
pursuant to this paragraph shall be subject to the same terms and conditions
described in Section 6(d)(ii) below. The number of Retainer Option shares
granted to a Participant in respect of such deferral shall be determined using
the same conversion rate as employed in that year for the purpose of determining
the number of stock option shares to be granted to employees in lieu of awards
under the Company's Management Incentive Plan.
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(d) Optional Deferral. All Fees (other than the portion of Annual
Retainer subject to Mandatory Deferral described above) earned by a Participant
in each Director Year prior to the termination or expiration of the Plan shall
be subject to the following payment and deferral options. Each Participant may
elect by written notice to the Company, in accordance with the procedures
established by the Company, to participate in such payment and deferral options.
(i) Cash Alternative. Unless a valid election is made in accordance
with the procedures established by the Company, each Participant shall
receive payment of all Fees (other than the portion of Annual Retainer
subject to Mandatory Deferral described above) in the form of cash.
(ii) Restricted Stock Unit Alternative. Subject to executing a valid
election with the Company (the "RSU Election"), each Participant may
elect to defer all or any portion of his or her Fees (other than the
portion of Annual Retainer subject to Mandatory Deferral described
above) in the form of Restricted Stock Units. The number of Restricted
Stock Units granted shall equal the amount of Fees so deferred, divided
by the Fair Market Value of the Common Stock as of the last trading day
of the calendar quarter immediately preceding the date such Fees would
otherwise be payable. The RSU Election (A) shall be in the form of a
document executed by the Participant and filed with the Secretary of the
Company, (B) shall be made before the first day of the calendar year in
which the applicable Fees are earned and shall become irrevocable on the
last day prior to the beginning of such calendar year, and (C) shall
continue until the Participant ceases to serve as a director of the
Company or until he or she terminates or modifies such election by
written notice to the Company in accordance with the procedures
established by the Company, any such termination or modification to be
effective as of the end of the calendar year in which such notice is
given with respect to Fees otherwise payable in subsequent calendar
years. Any person who becomes a Participant during any Director Year may
execute an RSU Election prior to commencing service on the Board with
respect to Fees to be earned for the remainder of such year and for
future Director Years in accordance with the procedures established by
the Company.
Each Restricted Stock Unit shall entitle the holder to, upon
distribution thereof (A) receive a cash payment equal to the Fair Market
Value of one share of Common Stock, or (B) have issued in his or her
name one share of Common Stock. In either case, each such Restricted
Stock Unit shall terminate upon distribution.
The Company shall credit each Participant holding Restricted Stock
Units with a number of additional Restricted Stock Units equal to any
dividends and other distributions paid by the Company on an equivalent
number of shares of Common Stock, as of the date such dividends or
distributions are payable. Such additional Restricted Stock Units shall
thereafter be treated as any other Restricted Stock Units issued under
the Plan. Restricted Stock Units may not be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of until such time as share
certificates for Common Stock are issued.
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Each Participant issued Restricted Stock Units shall execute a valid
distribution election in accordance with the procedures established by
the Committee (the "Distribution Election"). The Distribution Election
shall indicate (A) whether distribution shall be made in the form of
Common Stock or cash, (B) whether the distribution shall be made in a
single allotment or in substantially equal annual installments over a
period not to exceed ten (10) years and (C) with respect to Distribution
Elections filed on or after October 28, 1998, the date on which the
distribution shall commence in accordance with the next paragraph. The
Distribution Election (D) shall be in the form of a document executed by
the participant and filed with the Secretary of the Company, (E) shall
be made no later than twelve (12) months prior to the distribution date
and (F) shall become irrevocable twelve (12) months prior to the
distribution date.
With respect to a Distribution Election completed on or after
October 28, 1998, the Participant shall elect whether distributions
shall commence as soon as practicable after (i) the first business day
of January of the calendar year following the Participant's cessation
from service as a director of the Company; or (ii) the first business
day of January of any calendar year, provided that such calendar year is
not later than the calendar year following the calendar year in which
the Participant attains age 72. All other distributions shall commence
as soon as practicable after the first business day of the January
following the Participant's cessation from service as a director of the
Company. If no valid Distribution Election is made, the Restricted Stock
Units shall be distributed in a lump sum as soon as practicable after
the first business day of January of the calendar year following the
Participant's cessation from service as a director of the Company, in
the form of cash. Participants who receive Restricted Stock Units shall
have no rights as stockholders with respect to such Restricted Stock
Units until share certificates for Common Stock are issued.
Notwithstanding any provision to the contrary, any fractional shares of
Common Stock issuable hereunder shall be paid in cash.
Upon the occurrence of a Change in Control, Common Stock to be
issued in respect of all Restricted Stock Units shall be immediately
distributed.
(iii) DCAP II Alternative. Subject to executing an election in
accordance with the procedures established by the Company and the terms
of DCAP II, each Participant may elect to defer all or any portion of
his or her Fees (other than the portion of Annual Retainer subject to
Mandatory Deferral described above) under DCAP II.
(iv) Retainer Option Alternative. Subject to executing an election
in accordance with the procedures established by the Company, each
Participant may elect to receive the portion of Annual Retainer not
subject to Mandatory Deferral, as described in Section 6(c) above, in
the form of Retainer Options. The number of Retainer Option shares
granted to a Participant with respect to such deferral shall be
determined in the manner described in Section 6(c) above.
7. Stock Options.
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(a) Discretionary Grants. The Committee may, in its sole discretion,
grant options to purchase Common Stock to Participants, pursuant to such terms
and conditions that it may deem advisable, so long as not inconsistent with
Section 7(d) below or any other terms of this Plan.
(b) Formula Grants. Each Participant then serving as a non-employee
director of the Company shall automatically receive, on the date of each January
meeting of the Board, an option to purchase 10,000 shares of Common Stock
(subject to adjustment as provided in Section 5(b) above); provided, however,
that a Participant who is elected to the Board after the January meeting of the
Board shall be granted, as of the date of election, a prorated number of options
with respect to the initial year of participation in the Plan, based on the
number of full calendar quarters remaining in the calendar year in which the
Participant is elected to the Board. The options granted pursuant to this
Section 7(b) shall be immediately exercisable in full and have an option term of
ten years.
(c) Retainer Option Grants. At the same time that the Company makes
stock option grants annually to eligible employees, each Participant who has
made an election to receive a Retainer Option pursuant to Section 6(c) or
6(d)(iv) with respect to all or any portion of the Annual Retainer to be paid in
such year shall be granted an option to purchase that number of shares of Common
Stock determined pursuant to Section 6(c) and/or Section 6(d)(iv), as
applicable. The terms of such Retainer Options shall be as prescribed by the
Committee, so long as such terms are not inconsistent with Section 7(d) below or
any other terms of this Plan.
(d) Terms and Conditions of Options. Except as provided in Section 7(b)
above, the following terms and conditions shall apply to all options granted to
Participants under the Plan.
(i) The exercise price of each option shall not be less than the
Fair Market Value of the Common Stock covered by the option on the date
the option is granted.
(ii) 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,
so long as not inconsistent with the terms of this Plan.
(iii) The term of each option shall be for no more than ten years.
(iv) The Agreement may contain such other terms, provisions, and
conditions as may be determined by the Committee (not inconsistent with
this Plan). Unless otherwise provided in the Agreement and excluding
options granted under paragraph (b) above, 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).
(v) Payment of the purchase price upon exercise of any option shall
be made in cash; provided that the Committee, in its sole discretion,
may permit an option holder to pay the option price by such other method
that it may deem appropriate, including,
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without limitation, by tendering to the Company shares of Common Stock
owned by the option holder, and having a Fair Market Value equal to the
option price. Such stock surrender method may permit an election by the
option holder to have the unrealized gain with respect to the option
denominated in stock units (based on the fair market value of a share of
Common Stock on the date of exercise) and paid in shares of Common Stock
at the time specified by the Participant at the time of making the stock
surrender option gain deferral election. During the deferral period each
such stock unit shall be credited with additional stock units equal to
any dividends or other distributions paid by the Company on an
equivalent number of shares of Common Stock, as of the date such
dividends or distributions are payable. Stock units may not be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of
until such time as share certificates for Common Stock are issued.
(vi) All such options shall be designated as stock options which do
not qualify under Section 422 of the Internal Revenue Code of 1986, as
amended.
(vii) Unless otherwise provided in an Agreement, options granted
under the Plan will become immediately and fully vested and exercisable
upon the occurrence of a Change in Control.
8. Administration. The Plan shall be administered by the Committee. The
Committee shall have full power to interpret the Plan and formulate additional
details and regulations for carrying out the Plan. Any decision or
interpretation adopted by the Committee shall be final and conclusive.
9. No Right to Serve. Nothing in the Plan shall confer upon any
Participant the right to remain in service as a member of the Board.
10. Amendment and Termination. The Board at any time may amend or
terminate the Plan; provided that any such amendment or termination does not
adversely affect the rights of any Participant.
11. Governing Law. The validity, construction and effect of the Plan and
any such actions taken under or relating to the Plan shall be determined in
accordance with the laws of the State of California.
12. Notices. All notices under this Plan shall be sent in writing to the
Secretary of the Company. All correspondence to the Participants shall be sent
in writing to the Participant at the address which is their recorded address as
listed on the most recent election form or as specified in the Company's
records.
13. Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. Nothing contained
hereunder shall give any Participant any rights that are greater than those of
an unsecured general creditor of the Company.
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