McKesson 2010 Annual Report Download - page 114

McKESSON CORPORATION
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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 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 permits the granting of up to 42.5 million
shares in the form of stock options, restricted stock (“RS”), RSUs, performance-based restricted stock units
(“PeRSUs”) and other share-based awards. For any one share of common stock issued in connection with a RS,
RSU, PeRSU 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 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.
Stock options are granted at no less than fair market value and those options granted under the 2005 Stock Plan
generally have a contractual term of seven years. Prior to 2005, stock options typically had a contractual term of ten
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 vesting of RS or RSUs is determined by the Compensation
Committee at the time of grant. RS and RSUs generally vest over four years. Vesting of PeRSUs ranges from one
to three-year periods following the end of the performance period and may follow the graded or cliff method of
vesting.
Non-employee directors may be granted an award on the date of each annual meeting of the stockholders for up
to 5,000 RSUs, as determined by the Board. Such non-employee director award is fully vested on the date of the
grant.
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
certain other subsidiaries. As to those employees, the ESPP does not qualify under Section 423 of the Internal
Revenue Code. Currently, 16 million shares have been approved by stockholders 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 calendar year is determined by dividing $25,000 by the fair
market value of one share of common stock on the offering date.
The following are descriptions of equity plans that have not been submitted for approval by the Company’s
stockholders:
On July 27, 2005, the Company’s stockholders approved the 2005 Stock Plan which had the effect of
terminating the 1999 Stock Option and Restricted Stock Plan, the 1998 Canadian Stock Incentive Plan and certain
1999 one-time stock option plan awards, which plans had not been submitted for approval by the Company’s
stockholders, and the 1997 Non-Employee Directors’ Equity Compensation and Deferral Plan, which had previously
been approved by the Company’s stockholders. Prior grants under these plans include stock options, RS and RSUs.
Stock options under the terminated plans generally have a ten-year life and vest over four years. RS contains certain
restrictions on transferability and may not be transferred until such restrictions lapse. Each of these plans has
outstanding equity grants, which are subject to the terms and conditions of their respective plans, but no new grants
will be made under these terminated plans.