McKesson 2006 Annual Report Download - page 16

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McKESSON CORPORATION
The following are descriptions of equity plans that have been approved by the Company’s stockholders. The plans are administered by the
Compensation Committee of the Board of Directors, except for the portion of the 2005 Stock Plan related to Non-Employee Directors which is
administered by the Committee on Directors and Corporate Governance.
2005 Stock Plan (the “2005 Stock Plan”): The 2005 Stock Plan was adopted by the Board of Directors on May 25, 2005 and approved by
the Company’s stockholders on July 27, 2005. The 2005 Stock Plan provides for the grant of up to 13 million shares, in the form of
nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance
shares and other share-based awards. For any one share of common stock issued in connection with a stock-settled stock appreciation right,
restricted stock award, restricted stock unit award, performance share or other share-based award, two shares shall be deducted from the shares
available for future grants. Shares of common stock not issued or delivered as a result of the net exercise of a stock appreciation right or option,
shares used to pay the withholding taxes related to a stock award, or shares repurchased on the open market with proceeds from the exercise of
options shall not be returned to the reserve of shares available for issuance under the 2005 Stock Plan.
Options are granted at not less than fair market value and have a term of seven years. Options generally become exercisable in four equal
annual installments beginning one year after the grant date, or after four years from the date of grant. The award or vesting of restricted stock,
restricted stock units (“RSUs”) or performance shares may be conditioned upon the attainment of one or more performance objectives. Vesting
of such awards is generally a three year cliff.
Non-employee directors receive an annual grant of up to 5,000 RSUs, currently set at 2,500 RSUs, which vest immediately, however
payment of any shares is delayed until the director is no longer performing services for the Company. The 2005 Stock Plan replaced the 1997
Non-Employee Directors Equity Compensation and Deferral Plan.
1973 Stock Purchase Plan (the “SPP”): The SPP was adopted by the stockholders of the Company’s predecessor in 1973. The Company’s
stockholders approved an additional 2.5 million shares to be issued under the SPP in 1999, which remain available for issuance. Rights to
purchase shares are granted under the SPP to key employees of the Company as determined by the Compensation Committee of the Board. The
purchase price, to be paid in cash or using promissory notes of the Company’s common stock, subject to rights granted under the SPP, is the
fair market value of such stock on the date the right is exercised.
2000 Employee Stock Purchase Plan (the “ESPP”): The ESPP is intended to qualify as an “employee stock purchase plan” within the
meaning of Section 423 of the Internal Revenue Code. In March 2002, the Board amended the ESPP to allow for participation in the plan by
employees of certain of the Company’s international and other subsidiaries. As to those employees, the ESPP does not so qualify. Currently,
11.1 million shares have been authorized for issuance under the ESPP.
The ESPP is implemented through a continuous series of three month purchase periods (“Purchase Periods”) during which contributions can
be made toward the purchase of common stock under the plan.
Each eligible employee may elect to authorize regular payroll deductions during the next succeeding Purchase Period, the amount of which
may not exceed 15% of a participant’s compensation. At the end of each Purchase Period, the funds withheld by each participant will be used
to purchase shares of the Company’s common stock. The purchase price of each share of the Company’s common stock is based on 85% of the
fair market value of each share on the last day of the applicable Purchase Period. In general, the maximum number of shares of common stock
that may be purchased by a participant for each Purchase Period is determined by dividing $12,500 by the fair market value of one share of
common stock on the offering date.
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