McKesson 2005 Annual Report Download - page 16

McKESSON CORPORATION
Item 11. Executive Compensation
Information with respect to this item is incorporated by reference from the Proxy Statement.
Information about security ownership of certain beneficial owners and management is incorporated by reference from the Proxy Statement.
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 Directors’ Plan (defined below) which is administered by the Committee on
Directors and Corporate Governance.
1994 Stock Option and Restricted Stock Plan (the “1994 Plan”): The 1994 Plan was adopted by the Board of Directors in 1994 and
provided for the grant of approximately 41.2 million shares, which includes awards granted under predecessor plans, in the form of
nonqualified stock options, incentive stock options with or without tandem stock appreciation rights (“SARs”), restricted stock, or restricted
stock units (“RSUs”). Options granted under the 1994 Plan were generally subject to the same terms and conditions as those granted under the
1999 Plan, discussed below, except that under the 1994 Plan only executive officers of the Company were eligible to receive option grants. The
1994 Plan expired in October 2004 and thus we no longer grant any awards under this plan.
1997 Non-Employee Directors’ Equity Compensation and Deferral Plan (the “Directors’ Plan”): The Directors’ Plan was adopted in 1997
and provides for the grant of approximately 1.3 million shares in the form of nonqualified stock options or restricted stock units to non-
employee directors of the Company. Shares subject to option grants, which cease to be exercisable, shall not be counted against the number of
shares available under the Directors’ Plan. RSUs (described below), whether or not distributed in the form of restricted stock, will be counted
against the number of shares available.
Under the Director’s Plan, each director receives an annual stock option grant of 7,500 shares. In addition, each director is required to defer
50% of his or her annual retainer into either RSUs payable in cash or stock at the Director’s election, or nonqualified stock options, and may
also elect to defer the remaining 50% of the annual retainer into RSUs or Retainer Options or the Company’s Deferred Compensation
Administration Plan (DCAP II), or may elect to receive cash. Meeting fees and Committee Chair annual retainers may be deferred into RSUs
or DCAP II or may be paid in cash. Options are granted at fair market value and have a term of ten years. If the Company’s stockholders
approve the new 2005 Stock Incentive Plan at the Annual Meeting on July 27, 2005, as described in the Company’s Proxy Statement, this Plan
will be replaced by the 2005 Stock Incentive 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 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 was implemented through a continuous series of 24-month offerings beginning on the first trading day on or after each May 1
and November 1 (the “Offering Dates”) and ending on the last trading day of the month which is 24 months later (the “Offering Periods”) and
six-month periods beginning on each May 1 and November 1 and ending on the following October 31 and April 30, during which contributions
could be made toward the purchase of common stock under the plan (“Purchase Periods”). Effective April 1, 2005, the ESPP has been
amended to eliminate the 24-month lookback feature, and following a one-time four-month Purchase Period, effective August 1, 2005,
Purchase Periods will occur every three months.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters