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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
McKesson Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1997
The Annual Meeting of Stockholders of McKesson Corporation, a Delaware
corporation (hereinafter called "McKesson" or the "Corporation"), will be held
at 10:00 A.M. on Wednesday, July 30, 1997 in the Colonial Room, mezzanine
level, at The Westin St. Francis Hotel, 335 Powell Street, San Francisco,
California, to consider and take action upon the following matters:
1.election of three directors for terms expiring at the annual meeting in 2000;
2. a proposal to approve the 1997 Non-Employee Directors' Equity Compensation
and Deferral Plan;
3.a proposal to amend and restate the Corporation's 1973 Stock Purchase Plan;
4.a proposal to amend the Corporation's 1981 Long-Term Incentive Plan;
and such other business as may properly come before the meeting or any
adjournment thereof.
Holders of record of the Corporation's Common Stock at the close of business on
June 2, 1997 are entitled to receive notice of and to vote at the meeting.
You are cordially invited to attend the meeting in person. However, whether you
plan to attend or not, we urge you to mark, sign, date and return the
accompanying proxy in the enclosed business reply envelope. Returning your
proxy does not deprive you of your right to attend the meeting and to vote your
shares in person.
By Order of the Board of Directors
LOGO
Nancy A. Miller
Vice President and Corporate Secretary
June 18, 1997
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CONTENTS
<TABLE>
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PAGE
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<S> <C>
General Information....................................................... 1
Voting Securities and Record Date......................................... 2
Security Ownership of Certain Beneficial Owners........................... 3
Security Ownership of Directors and Executive Officers.................... 3
Election of Directors (Proxy Item No. 1).................................. 4
Section 16(a) Beneficial Ownership Reporting Compliance................... 7
Board of Directors and Committees of the Board............................ 7
Compensation of Directors................................................. 9
Report of the Compensation Committee on Executive Compensation............ 10
Stock Price Performance Graphs............................................ 14
Executive Officer Compensation............................................ 16
Summary Compensation Table.............................................. 16
Option Grants in the Last Fiscal Year................................... 17
Aggregated Option/SAR Exercises in the Last Fiscal Year................. 18
Long-Term Incentive Plan Awards in the Last Fiscal Year................. 18
Employment Agreements................................................... 18
Executive Severance Policy and Termination of Employment and Change in
Control Arrangements................................................... 20
Pension Benefits........................................................ 21
Certain Transactions...................................................... 21
Indebtedness of Executive Officers........................................ 22
Approval of 1997 Non-Employee Directors' Equity Compensation and Deferral
Plan (Proxy Item No. 2).................................................. 23
Amendment and Restatement of the 1973 Stock Purchase Plan (Proxy Item No.
3)....................................................................... 25
Amendment of the 1981 Long-Term Incentive Plan (Proxy Item No. 4)......... 27
Independent Certified Public Accountants.................................. 28
Additional Information.................................................... 29
Stockholder Proposals for the 1998 Annual Meeting......................... 29
Exhibit A--McKesson Corporation 1997 Non-Employee Directors' Equity
Compensation
and Deferral Plan........................................................ A-1
Exhibit B--McKesson Corporation Stock Purchase Plan (As Amended and
Restated through
March 26, 1997).......................................................... B-1
Exhibit C--McKesson Corporation 1981 Long-Term Incentive Plan (As Amended
through
January 29, 1997)........................................................ C-1
</TABLE>
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LOGO
June 18, 1997
PROXY STATEMENT
The Corporation was organized in the state of Delaware on July 7, 1994 as a
wholly-owned subsidiary of McKesson Corporation, a Delaware corporation ("Old
McKesson"), for the purpose of owning and operating the businesses of Old
McKesson following the acquisition of Old McKesson's pharmaceutical benefits
management business (the "PCS Business") by a subsidiary of Eli Lilly and
Company (the "PCS Transaction").
As part of the PCS Transaction, on November 21, 1994 (the "Closing Date") the
Corporation acquired all of the assets and liabilities of Old McKesson, other
than those related to the PCS Business, and Old McKesson distributed to its
stockholders one share of the Corporation's Common Stock for each share of Old
McKesson Common Stock outstanding as of November 19, 1994.
THE CORPORATION HAD NO MATERIAL ASSETS, OPERATIONS OR ACTIVITIES PRIOR TO
NOVEMBER 21, 1994. AFTER THAT DATE, THE CORPORATION HAS CONTINUED THE
BUSINESSES OF OLD MCKESSON, OTHER THAN THE PCS BUSINESS, ON AN UNINTERRUPTED
BASIS. FOR THE PURPOSE OF COMPLETENESS, THIS PROXY STATEMENT INCLUDES, FOR
PERIODS PRIOR TO THE CLOSING DATE, INFORMATION WITH RESPECT TO OLD MCKESSON;
AND REFERENCES TO THE "CORPORATION" WITH RESPECT TO SUCH PERIODS SHALL REFER TO
THE BUSINESS, OPERATIONS, CAPITALIZATION AND ACTIVITIES OF OLD MCKESSON, EXCEPT
WHERE OTHERWISE INDICATED.
GENERAL INFORMATION
This Proxy Statement is being mailed on or about June 18, 1997 to stockholders
of McKesson in connection with the solicitation of proxies by the Board of
Directors of the Corporation for use at the Annual Meeting of Stockholders to
be held on July 30, 1997, and at any and all adjournments of that meeting,
pursuant to the accompanying Notice of Meeting. Shares represented by a
properly executed proxy will be voted as indicated on the proxy. Stockholders
may revoke the authority granted by their proxies at any time before the
exercise of the powers conferred thereby by notice in writing delivered to the
Secretary of the Corporation; by submitting a subsequently dated proxy; or by
attending the meeting, withdrawing the proxy, and voting in person.
It is proposed that at the meeting action will be taken on the matters set
forth in the accompanying Notice of Meeting and described in this Proxy
Statement. The Board of Directors knows of no other matters that properly may
be presented for action at the meeting. If any other matters do properly come
before the meeting, the persons named on the enclosed proxy will have
discretionary authority to vote thereon in accordance with their best judgment.
Under the Corporation's Restated By-Laws, for business to be properly brought
before an annual meeting by a stockholder, the Secretary of the Corporation
must have received written notice thereof not less than 60 days nor more than
90 days prior to the meeting (except, if fewer than 70 days' notice or prior
public disclosure of the meeting date is given or made to stockholders, not
later than the close of business on the 10th day following the day of mailing
notice of the meeting or public disclosure thereof). The notice must contain
certain information about the proposed business and the stockholder who
proposes to bring the business
1
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before the annual meeting, including (a) a brief description of the proposed
business and the reasons for conducting such business at the annual meeting,
(b) the stockholder's name and record address, (c) the class and number of
shares beneficially owned by the stockholder, and (d) any material interest of
the stockholder in the business so proposed. Notwithstanding anything in the
Restated By-Laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the foregoing procedures.
The cost of soliciting proxies will be borne by the Corporation. In addition to
solicitations by mail, officers and regular employees of the Corporation may
solicit proxies personally or by telephone, telegraph or other means without
additional compensation. Arrangements will also be made with banks, brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of stock held of record by such persons, and
the Corporation will, upon request, reimburse them for their reasonable
expenses in so doing. Georgeson & Company, Inc., New York, N.Y., has been
retained by the Corporation to assist in the solicitation of proxies for an
anticipated fee of approximately $6,000 plus out-of-pocket costs and expenses.
VOTING SECURITIES AND RECORD DATE
At the close of business on June 2, 1997, there were 45,896,833 shares of
Common Stock of the Corporation, par value $0.01 per share (the "Common
Stock"), outstanding and entitled to vote at the meeting. Each share of Common
Stock outstanding on such date entitles the stockholder of record thereof to
one vote on each matter to be voted upon at the meeting. The presence in person
or by proxy of holders of a majority of the outstanding shares of Common Stock
entitled to vote will constitute a quorum for the transaction of business at
the meeting. Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum. Provided a quorum is present,
directors will be elected by a plurality of the votes cast by the holders of
the Corporation's Common Stock voting in person or by proxy at the meeting. The
proposals to (i) approve the 1997 Non-Employee Directors' Equity Compensation
and Deferral Plan (the "1997 Directors' Plan"), (ii) amend and restate the 1973
Stock Purchase Plan (the "SPP") and (iii) amend the 1981 Long-Term Incentive
Plan (the "LTIP") will each require the affirmative vote of the holders of a
majority of the Corporation's Common Stock present in person or by proxy and
entitled to vote at the meeting. Thus, abstentions will have the same practical
effect as a negative vote on each of the three proposals, but will have no
effect on the vote for election of directors. Broker non-votes, if any, will
not be included in vote totals and will have no effect on the outcome of the
vote.
If a stockholder participates in the Corporation's Automatic Dividend
Reinvestment Plan, the enclosed proxy includes all full shares of Common Stock
held in the stockholder's dividend reinvestment plan account on the record date
for the annual meeting, as well as shares held of record by the stockholder.
Participants in the Corporation's Profit-Sharing Investment Plan (the "PSIP")
have the right to instruct the Plan Trustee, on a confidential basis, how the
shares allocated to their accounts are to be voted and will receive a separate
voting instruction card for that purpose.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below lists as of June 2, 1997, unless otherwise indicated,
information as to the only persons believed by the Corporation to be beneficial
owners of more than five percent of the Corporation's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ------------------------------ ----------------- ----------
<S> <C> <C> <C>
Common The Chase Manhattan 10,126,057(1) 22.06
Bank, N.A., as Trustee for the
McKesson Corporation Profit-
Sharing Investment Plan
1 Chase Manhattan Plaza
New York, NY 10081
Common Wellington Management 2,179,500(2) 5.20(2)
Company, LLP
75 State Street
Boston, MA 02109
</TABLE>
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(1) These shares are held in trust for the benefit of participants in the PSIP
for which The Chase Manhattan Bank, N.A. is the Trustee. Shares that have
been allocated to the individual accounts of participants in the PSIP are
voted by the Trustee as instructed by PSIP participants. Shares allocated
to participants' PAYSOP accounts for which no voting instructions are
received will not be voted. The PSIP provides that all other shares for
which no voting instructions are received from participants and unallocated
shares of Common Stock held in the leveraged employee stock ownership plan
(the "Leveraged ESOP") established as part of the PSIP, will be voted by
the Trustee in the same proportion as shares as to which voting
instructions are received.
(2) This information is based on a schedule 13G filed with the Securities and
Exchange Commission reporting that as of December 31, 1996, Wellington
Management Company, LLP ("WMC") in its capacity as a registered investment
adviser, had shared voting power as to 586,000 shares and shared
dispositive power as to 2,179,500 shares. These shares are owned of record
by clients of WMC, no one of which has an interest that relates to more
than 5% of the class.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below shows the number of shares of the Corporation's Common Stock
beneficially owned as of June 2, 1997, by each current director, each executive
officer named in the Summary Compensation Table on page 16, and by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK STOCK
NAME BENEFICIALLY OWNED (1) UNITS (2)(3)
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<S> <C> <C>
Mary G.F. Bitterman.......... 5,500(4)(5) 322
Tully M. Friedman............ 12,000(5)(6) 1,367
John M. Pietruski............ 11,000(5) 2,085
David S. Pottruck............ 500 --
Mark A. Pulido............... 160,186(5)(7)(9) --
Carl E. Reichardt............ 5,000(5)(8) 321
Alan Seelenfreund............ 515,388(5)(7)(9) --
Jane E. Shaw................. 9,181(5)(8) 3,461
Robert H. Waterman, Jr,...... 9,000(5)(8) 1,843
John H. Hammergren........... 40,110(5)(7)(9) --
Richard H. Hawkins........... 105,966(5)(9) --
David L. Mahoney............. 159,544(5)(9) --
All Directors and Executive
Officers as a group (22
persons)..................... 1,744,043(4)(5)(6)(7)(8)(9)(10) 9,399
</TABLE>
3
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(1) Represents shares held as of June 2, 1997 directly and with sole voting and
investment power (or with voting and investment power shared with a spouse)
unless otherwise indicated. The number of shares of Common Stock owned by
each director or executive officer represents less than 1% of the
outstanding shares of such class. All directors and executive officers as a
group own 3.8% of the outstanding shares of Common Stock.
(2) Includes restricted stock units accrued under the 1997 Directors' Plan, as
described beginning on page 9, as follows: Dr. Bitterman, 322 units; Mr.
Friedman, 1,058 units; Mr. Pietruski, 2,085 units; Mr. Reichardt, 321
units; Dr. Shaw, 966 units and Mr. Waterman, 1,843 units; and all non-
employee Directors as a group, 6,595 units. Directors have neither voting
nor investment powers in respect of such units.
(3) Includes common stock units accrued under the Directors' Deferred
Compensation Plan, as described on page 10, as follows: Mr. Friedman, 309
units; Dr. Shaw, 2,495 units; and those directors as a group, 2,804 units.
Participating directors have neither voting nor investment powers in
respect of such units.
(4) Includes 1,000 shares held by Dr. Bitterman's husband through an Individual
Retirement Account, for which beneficial ownership is disclaimed.
(5) Includes shares that may be acquired by exercise of stock options within 60
days after June 2, 1997 as follows: Dr. Bitterman, 4,500; Mr. Friedman,
5,000; Mr. Pietruski, 5,000; Mr. Pulido, 50,000; Mr. Reichardt, 0; Mr.
Seelenfreund, 420,812; Dr. Shaw, 5,000; Mr. Waterman, 5,000; Mr.
Hammergren, 10,000; Mr. Hawkins, 83,291; Mr. Mahoney, 142,375; and all
directors and executive officers as a group, 1,229,999.
(6) Includes 6,000 shares held in a revocable trust established by and for the
benefit of Mr. Friedman who is the sole Trustee of such trust.
(7) Includes shares subject to possible forfeiture under the terms of the
Corporation's 1994 Stock Option and Restricted Stock Plan and the 1988
Restricted Stock Plan of Old McKesson as follows: Mr. Pulido, 20,000
shares; Mr. Seelenfreund, 22,586 shares; Mr. Hammergren, 20,000 shares; and
all directors and executive officers as a group, 86,587 shares.
(8) Includes shares held by family trusts as to which each of the following
named directors and their respective spouses have shared voting and
investment power: Mr. Reichardt, 5,000 shares; Dr. Shaw, 4,000 shares; Mr.
Waterman, 3,000 shares; and those directors as a group, 12,000 shares.
(9) Includes shares held under the PSIP as to which the participant has sole
voting but no investment power, as follows: Mr. Seelenfreund,8,796; Mr.
Pulido, 186; Mr. Hammergren, 110; Mr. Hawkins, 2,675; Mr. Mahoney, 1,669;
and all directors and executive officers as a group, 36,459.
(10) Includes 2,200 shares held by members of the group as custodians for their
minor children.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
The Board of Directors is divided into three classes. At each annual meeting of
stockholders, one class of directors, on a rotating basis, is elected to hold
office for a three-year term.
The Board of Directors elects directors to fill vacancies on the Board, as they
occur, as well as newly created directorships. A director elected to fill a
vacancy is elected to the same class as the director he or she succeeds, and a
director elected to fill a newly created directorship holds office until the
next election by the stockholders of the class to which such director is
elected.
Since the last annual meeting, one person, David S. Pottruck, has been elected
a director of the Corporation to fill a vacancy created by reason of an
increase in the authorized number of directors from eight to nine for a term
expiring at the annual meeting in 1999.
The Board of Directors has designated Messrs. Tully M. Friedman, John M.
Pietruski and Carl E. Reichardt as nominees for election as directors at the
1997 Annual Meeting for a three-year term expiring in 2000. Each nominee has
consented to being named in the proxy statement and to serve if elected. All of
the nominees are currently serving as directors and, were previously elected by
the stockholders.
It is the intention of the persons named in the enclosed form of proxy, unless
authorization to do so is withheld, to vote for the election of the three
nominees named below. If prior to the annual meeting any nominee should become
unavailable for election, an event that is not now anticipated by the Board,
the proxies will be voted for the election as directors of such other person or
persons as shall be determined by the persons named in the enclosed form of
proxy in accordance with their judgment, or the number of authorized directors
may be reduced.
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Biographical information follows for each person nominated and each person
whose term of office as a director will continue after the Annual Meeting.
Directors' ages are as of June 2, 1997.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE ANNUAL MEETING IN
2000
TULLY M. FRIEDMAN
Chairman and Chief Executive Officer, Tully M. Friedman & Company, LLC
Mr. Friedman, age 55, is Chairman and Chief Executive Officer of Tully M.
Friedman & Company, LLC, a private investment firm he founded in 1997. For the
13 years prior to 1997 he was a Managing Partner of Hellman & Friedman. He is
currently on the Advisory Board of Tevecap, S.A., the Board of Directors of APL
Limited, Levi Strauss & Co., and Mattel, Inc. Mr. Friedman is a member of the
Executive Committee and a Trustee of the American Enterprise Institute, and a
Director of the Stanford Management Company. Mr. Friedman previously served as
a director of Old McKesson since 1992, and was elected to serve as a director
of the Corporation on November 9, 1994. He is Chairman of the Finance Committee
and a member of the Committee on Directors and Corporate Governance and the
Compensation and Executive Committees of the Board.
JOHN M. PIETRUSKI
Chairman, Texas Biotechnology Corporation; Chairman and Chief Executive
Officer, Retired, Sterling Drug Inc.
Mr. Pietruski, age 64, is Chairman of the Board of Texas Biotechnology
Corporation, a publicly held pharmaceutical research and development company.
In September 1988, Mr. Pietruski retired as Chairman and Chief Executive
Officer of Sterling Drug Inc. with which company he had been associated in
various executive positions since 1977. He is a director of General Public
Utilities Corporation, Hershey Foods Corporation and Lincoln National
Corporation and is a Regent of Concordia College. Mr. Pietruski previously
served as a director of Old McKesson since 1990 and was elected to serve as a
director of the Corporation on November 9, 1994. He is Chairman of the
Compensation Committee and a member of the Committee on Directors and Corporate
Governance and the Executive Committee of the Board.
CARL E. REICHARDT
Chairman of the Board, Retired, Wells Fargo & Company
Mr. Reichardt, age 65, retired as Chairman of the Board and Chief Executive
Officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo
Bank, N.A., at the end of 1994, having occupied those positions since 1983. Mr.
Reichardt joined Wells Fargo & Company in 1970, was named Executive Vice
President in 1973 and President of Wells Fargo Bank, N.A., in 1978. He is a
director of Columbia/HCA Healthcare Corporation, ConAgra, Inc., Ford Motor
Company, Newhall Management Corporation, Pacific Gas and Electric Company,
SunAmerica Inc., Wells Fargo & Company and Wells Fargo Bank, N.A. Mr. Reichardt
was elected a director of the Corporation on February 1, 1996. He is a member
of the Audit, Compensation and Finance Committees of the Board.
5
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
MARY G.F. BITTERMAN
President and Chief Executive Officer, KQED, Inc.
Dr. Bitterman, age 53, has been President and Chief Executive Officer of KQED,
Inc. (public broadcasting) since November 1993. For the five years prior to
joining KQED she was a private consultant on development, communications and
international affairs. Previously, Dr. Bitterman served as Executive Director
of the Hawaii Public Broadcasting Authority (1974-1980), Director of the Voice
of America (1980-1981), Director of the Hawaii State Department of Commerce and
Consumer Affairs (1981-1983) and Director of the East-West Center's Institute
of Culture and Communication (1984-1988). She is a Director of Bancorp Hawaii,
the Bank of Hawaii, and Bancorp Investment Group; a trustee of the
International Center for Communications, San Diego State University; a member
of the Board of Governors of Pacific Forum/CSIS, and a member of the Board of
Directors of the Association of American Public Television Stations, the World
Affairs Council and the Bay Area Council. Dr. Bitterman was elected a director
of the Corporation on April 26, 1995. She is a member of the Audit and Finance
Committees of the Board.
MARK A. PULIDO
President and Chief Executive Officer
Mr. Pulido, age 44, became Chief Executive Officer of the Corporation on April
1, 1997. He has served as President and Chief Operating Officer since joining
the Corporation in May 1996. Prior to joining McKesson, he was associated with
Sandoz International Ltd., an international pharmaceutical company. Most
recently he was President and Chief Executive Officer of Sandoz Pharmaceuticals
Corporation (January-April 1996), and also served as Chief Operating Officer of
that company (1994-1995). During the previous five years, Mr. Pulido was
associated with Red Line Healthcare Corporation, a Sandoz affiliate and the
nation's largest provider of medical supplies and reimbursement services to the
long-term care industry, where he held the positions of Chairman of the Board
(December 1994-January 1996), Chairman, President and Chief Executive Officer
(March 1992-November 1994) and President and Chief Executive Officer (January
1992-March 1992). He is a director of Imation Corporation. Mr. Pulido was
elected a director of the Corporation on May 20, 1996.
ROBERT H. WATERMAN, JR.
Chairman, The Waterman Group, Inc.
Mr. Waterman, age 60, is the founder and Chairman of The Waterman Group, Inc.,
a management research and publishing firm established in 1986. For the 21 years
prior to 1986, he was a Senior Director at McKinsey & Company, Inc., an
international management consulting firm. Mr. Waterman has authored several
books and essays on business management. He is a director of AES Corporation, a
trustee of the World Wildlife Fund and an advisor to the President of the
National Academy of Sciences. Mr. Waterman previously served as a director of
Old McKesson since 1990 and was elected to serve as a director of the
Corporation on November 9, 1994. He is Chairman of the Committee on Directors
and Corporate Governance and a member of the Audit and Executive Committees of
the Board.
6
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
DAVID S. POTTRUCK
President and Chief Operating Officer, The Charles Schwab Corporation
Mr. Pottruck, age 48, became the Chief Operating Officer and a director of The
Charles Schwab Corporation in March 1994 and has been the President of that
company and Chief Executive Officer of Charles Schwab & Co., Inc. since July
1992. He also served as Executive Vice President of The Charles Schwab
Corporation from March 1987 to July 1992. Mr. Pottruck was elected a director
of the Corporation effective May 30, 1997.
ALAN SEELENFREUND
Chairman of the Board
Mr. Seelenfreund, age 60, has been Chairman of the Board of Directors of the
Corporation and Old McKesson since November 1989. He was Chief Executive
Officer of the Corporation and Old McKesson from November 1989 through March
1997. Previously he served Old McKesson as Executive Vice President from
November 1986 to November 1989; Chief Financial Officer from April 1984 to
April 1990; and held various other senior financial positions since joining Old
McKesson in 1975. Mr. Seelenfreund is a director of Pacific Gas and Electric
Company. He previously served as a director of Old McKesson since 1988 and was
elected to serve as a director of the Corporation on November 9, 1994. He is a
member of the Finance Committee and Chairman of the Executive Committee of the
Board.
JANE E. SHAW
Founder, The Stable Network; Former President and Chief Operating Officer, ALZA
Corporation
Dr. Shaw, age 58, founded The Stable Network, a biopharmaceutical consulting
firm, in 1995. In September 1994, Dr. Shaw resigned as President and Chief
Operating Officer of ALZA Corporation, a pharmaceutical research, manufacturing
and marketing firm with which she had been associated in various technical and
executive positions since 1970. She is a director of Aviron Corporation, Boise
Cascade Corporation and Intel Corporation. Dr. Shaw previously served as a
director of Old McKesson since 1992 and was elected to serve as a director of
the Corporation on November 9, 1994. She is Chairman of the Audit Committee and
a member of the Committee on Directors and Corporate Governance and the
Compensation and Executive Committees of the Board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's
Directors, its executive officers and persons who own more than ten percent of
the Corporation's Common Stock to file reports of ownership of the
Corporation's Common Stock and any subsequent changes in that ownership with
the Securities and Exchange Commission, the New York Stock Exchange and the
Corporation. Based on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5 reports
were required to be filed for those persons, the Corporation believes that,
during the last fiscal year, all such filing requirements were satisfied.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has the responsibility for establishing broad corporate
policies and for the overall performance of the Corporation, although it is not
involved in day-to-day operating management. Members of the Board are kept
informed of the Corporation's business by various reports and documents sent to
them on a regular basis, as well as by operating and financial reports made at
Board meetings by the Chief Executive Officer and other executive officers.
7
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Attendance at Meetings
The Board of Directors held eleven meetings during the year ended March 31,
1997. Attendance at Board and Committee meetings combined averaged 92.03%. Each
director attended more than 75% of the combined total meetings of the Board and
Committees of the Board on which the director served at any time during the
year.
Certain Committees of the Board
To assist in the discharge of its responsibilities, the Board has designated
several standing committees including an Audit Committee, a Compensation
Committee and a Committee on Directors and Corporate Governance. The members of
each standing committee are elected by the Board of Directors at its
organizational meeting following the annual stockholders' meeting, each for a
term of one year or until his or her successor is elected.
The Audit Committee, composed of four directors who are neither officers nor
employees of the Corporation, held five meetings during the year ended March
31, 1997. The Audit Committee recommends to the Board the retention or
discharge of the Corporation's independent auditors; reviews the engagement of
the independent auditors including the scope, extent and procedures of the
audit and fees to be paid therefor; reviews, in consultation with the
independent auditors, the audit results and their auditor's report and related
management letter, if any; reviews the independence of the independent auditors
and, in this connection, reviews the engagement of the independent auditors for
services of a non-audit nature; reviews and approves the audited financial
statements and recommends to the Board their inclusion in the Corporation's
annual report on Form 10-K to the Securities and Exchange Commission and in the
annual report to stockholders; consults with the independent auditors, the
internal auditors and management (together or separately) on the adequacy of
internal accounting controls and reviews the results thereof; reviews, on a
continuing basis, the procedures designed to implement the corporate code of
conduct and compliance therewith; directs and supervises investigations into
matters within the scope of the Committee's duties; and performs such other
functions as may be necessary in the efficient discharge of its duties.
The Compensation Committee, composed of four directors who are neither officers
nor employees of the Corporation, held six meetings during the year ended March
31, 1997. The Compensation Committee administers the Corporation's 1989
Management Incentive Plan, the 1981 Long-Term Incentive Plan, the Deferred
Compensation Administration Plan II, the Deferred Compensation Administration
Plan and the Management Deferred Compensation Plan and all stock option,
restricted stock or stock purchase plans; reviews the administration of all
other incentive plans within the Corporation; approves the selection of
trustees and investment advisers and managers and establishes the overall
investment policies with respect to the funds incident to the Corporation's
retirement program; reviews and makes recommendations to the Board with respect
to salary and other terms and conditions of employment and changes therein of
the Chief Executive Officer and approves salaries and other terms and
conditions of employment and changes therein of the other executive officers
and key management employees of the Corporation above specified salary grades;
and examines and makes recommendations to the Board regarding the Corporation's
overall compensation program for managerial level employees.
The Committee on Directors and Corporate Governance, established in 1996 and
composed of four directors who are neither officers nor employees of the
Corporation, held two meetings during the year ended March 31, 1997. The
Committee reviews and makes recommendations to the Board, as appropriate,
concerning the size and composition of the Board; the guidelines and criteria
for election of members to the Board; retirement from the Board; director
compensation and benefits; the structure, functions and membership of Board
committees, administers the 1997 Directors' Plan and oversees matters of
corporate governance. The Committee also recommends to the Board the slate of
nominees for election by the stockholders at the annual meeting and recommends
and nominates candidates to fill Board vacancies that occur. The Committee will
consider nominees recommended by stockholders. Stockholders wishing to
recommend Board nominees should write to the Vice President and Corporate
Secretary, McKesson Corporation, One Post Street, San Francisco, CA 94104,
stating in detail the qualifications of the proposed nominee for consideration
by the Committee.
8
<PAGE>
The Restated By-Laws of the Corporation provide that a stockholder may nominate
a person for election as a director at a meeting of stockholders only if
written notice thereof has been received by the Secretary of the Corporation
not less than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 70 days' notice or prior public
disclosure of the meeting date is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. The notice must
contain certain information about the proposed nominee, including such person's
name, age, business and residence addresses, principal occupation or
employment, the class and number of shares of the Corporation beneficially
owned by the person and any other information relating to the person that would
be required to be included in a proxy statement soliciting proxies for election
of directors, and certain information about the nominating stockholder. The
Corporation may also require any proposed nominee to furnish other information
reasonably required by the Corporation to determine the proposed nominee's
eligibility to serve as a director.
COMPENSATION OF DIRECTORS
Directors who are employees of the Corporation receive no additional
remuneration for their services as directors.
In October 1996, the Board of Directors, upon the recommendation of the
Committee on Directors and Corporate Governance, reevaluated the compensation
and benefits provided to non-employee directors; modified the amount of fees
and the payment method thereof in several respects; terminated benefits to new
directors, and froze the accrual of future benefits to existing non-employee
directors, under the Retirement Program for Non-Employee Directors (the
"Retirement Program"); and, subject to approval by the Corporation's
stockholders, adopted the 1997 Directors' Plan to replace the Retirement
Program and in lieu of participation by non-employee directors in the
Corporation's 1994 Stock Option and Restricted Stock Plan (the "1994 Plan"), as
described in Proxy Item No. 2 beginning of page 23. These changes were the
result of a review of competitive compensation practices for board members at
other comparable companies and are designed to further align the interests of
non-employee directors with those of the Corporation's stockholders by
providing that a portion of directors' compensation will be linked directly to
increases in stockholder value.
Under the new compensation arrangements, effective as of January 1, 1997, the
annual retainer payable to non-employee directors was increased from $24,000 to
$27,500; the meeting fees for standing committees of the board were increased
from $850 to $1,000 and the $150 differential payable to committee chairmen was
eliminated; and, an annual retainer of $3,000 payable to non-employee chairmen
of standing board committees was implemented. The $1,000 fee for each Board
meeting attended remains unchanged.
The 1997 Directors' Plan provides that, effective January 1, 1997, non-employee
directors will receive 50% of their annual retainer in the form of Restricted
Stock Units ("RSUs") instead of cash. The number of RSUs is determined based on
the fair market value of the Corporation's Common Stock on the last trading day
of the quarter immediately preceding the date such amounts would otherwise be
payable. In addition, current non-employee directors who had an accrued benefit
under the Retirement Program as of December 31, 1996 (an "Accrued Benefit"),
agreed in writing to the termination of their right to receive the Accrued
Benefit, and received a one-time transition grant on January 1, 1997 of RSUs
equal in number to the present value of the director's Accrued Benefit divided
by the fair market value of the Corporation's Common Stock on that date (see
New Plan Benefits section under Proxy Item No. 2 on page 25). On the date of
each Annual Meeting prior to the termination or expiration of the 1997
Directors' Plan, beginning with the 1997 Annual Meeting, each non-employee
director will receive a grant of 400 RSUs. Non-employee directors holding RSUs
will be credited with a number of additional RSUs equal to any dividends and
other distributions paid by the Corporation on the Common Stock.
Non-employee directors may elect to receive all fees (other than the portion of
the annual retainer subject to mandatory deferral in the form of RSUs) earned
in any calendar year prior to the termination or expiration of
9
<PAGE>
the 1997 Director's Plan in cash (the "Cash Alternative"), or to defer all or a
portion of such fees in the form of additional RSUs (the "RSU Alternative") or
under the terms of the Corporation's Deferred Compensation Administration Plan
II (the "DCAP II Alternative"). The minimum amount that may be deferred under
DCAP II for any year is $5,000 and the minimum deferral period is generally
five years, except in cases of death, disability, retirement, pre-retirement
termination or a change in control of the Corporation, where the minimum
deferral period does not apply. The interest rate on DCAP II deferrals is
determined by the Compensation Committee each year based upon several related
factors, including, the Corporation's cost of money and tax bracket, the size
and years of deferrals, the number and ages of participants and mortality and
turnover patterns. For calendar year 1997, four directors have elected the Cash
Alternative under the 1997 Directors' Plan, one has elected the RSU Alternative
and one has elected the DCAP II Alternative.
Prior to January 1, 1994, non-employee directors could defer compensation
received for their services as directors under the Directors Deferred
Compensation Plan, thereby automatically becoming participants in the Deferred
Compensation Administration Plan (the "DCAP"), or under the Management Deferred
Compensation Plan (the "MDCP", or together with the DCAP, the "Prior Deferred
Plans"). Although the Prior Deferred Plans have been superseded and replaced by
DCAP II as to future compensation deferrals, previous deferrals under these
plans will continue to be administered in accordance with the respective
provisions of the plan under which the original deferrals were made. Interest
on deferral balances held under the Prior Deferred Plans is credited each year
at the same rate as that determined by the Compensation Committee for deferrals
under DCAP II.
In the event of a change in control of the Corporation (as defined in DCAP II
and the Prior Deferred Plans), deferred amounts will be distributed immediately
upon the effective date of the change unless the director has made an
irrevocable election (at least twelve months in advance of the effective date
of any such change) to receive payment of any deferral balance in accordance
with his or her most recent valid election on file with the Corporation rather
than in a single sum. Any deferral election under DCAP II or the Prior Deferred
Plans may be modified as to the length of the deferral period and the timing of
the distribution provided such changes are made at least twelve months prior to
the previously scheduled date of commencement of payments and payments do not
begin earlier than twelve months from the date of the modified election.
The 1994 Plan provides for the automatic grant to each non-employee director on
the date of election to the Board for the first time at any annual or special
meeting of the Corporation's stockholders of a nonqualified option to purchase
5,000 shares of Common Stock. These options are immediately exercisable in full
but expire in five equal annual installments. On the date of each subsequent
annual meeting, each nonemployee director continuing in office is automatically
granted an option for an additional 1,500 shares which is immediately
exercisable in full. All options are granted at fair market value on the
effective date of grant, and, subject to the above-mentioned expiration
provisions applicable to the initial grant, have a term of five years. In the
event that the 1997 Directors' Plan is approved by the Corporation's
stockholders, all future stock option grants to non-employee directors will be
awarded under that plan in lieu of the 1994 Plan.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee (the "Committee") of the Board of Directors. The
Committee is composed entirely of independent, nonemployee directors. The
Committee is responsible for administering the Corporation's stock option and
restricted stock plan, reviewing and making recommendations to the full Board
with respect to the salary, incentive compensation and other terms and
conditions of employment of the Chief Executive Officer and approving salaries,
incentive compensation and other terms and conditions of employment of
executive officers, including those named in the Summary Compensation Table on
page 16 (the "named executive officers") and other officers and key employees
of the Corporation in and above specified salary grade levels.
This report describes the policies and the criteria used by the Committee in
establishing the principal components, and setting the levels, of executive
compensation during FY 1997.
10
<PAGE>
In its deliberations concerning compensation of executive officers, the
Committee considers the following factors: (1) the Corporation's performance
measured against previously set objectives and against prior year's
achievement; (2) the individual performance of each executive officer; (3) a
number of comparative compensation surveys, which are supplied by professional
compensation consultants approved by the Committee and retained by the
Corporation for this purpose, and other material concerning compensation levels
and stock grants at other companies, such as compensation information disclosed
in the proxy statements of other companies; (4) the overall competitive
environment for executives and the level of compensation needed to attract and
retain executive talent; and (5) the recommendations of professional
compensation consultants. Companies used in comparative analyses for executive
compensation purposes are selected with the assistance of these professional
compensation consultants. Such companies represent a broad cross-section of
non-manufacturing service companies and are selected based on a number of
factors including similarity to the Corporation in financial attributes, size
and complexity. The companies used in comparative analyses for executive
compensation purposes include some of the companies in the Value Line Health
Care Sector Index (the "Health Care Index") used in the Performance Graph, as
well as other companies in the distribution and wholesale/retail business. The
Committee relies on a broad array of companies in various industries for
comparative analysis of executive compensation because it believes that the
Corporation's competitors for executive talent are more varied than the
companies in the Health Care Index chosen for comparing stockholder return in
the Performance Graphs.
The Corporation's compensation program is designed to enhance stockholder value
by linking a large part of executive officers' compensation directly to
performance. The objective is to provide base salary and annual cash bonuses
for executive officers at approximately the median level for executive officers
of companies in the comparison group, while providing an opportunity to achieve
total compensation (including base salary, annual bonus and long-term
incentives) at the 60th percentile.
Components of Compensation
The Corporation's compensation package consists of base salary, a short-term
incentive plan, and long-term incentives (stock and cash). Base pay is reviewed
annually. Actual base salary is based on individual performance, competitive
pay practices and level of responsibility. Competitive pay practices are
determined through job evaluation and market comparisons. The FY 1997 salaries
of executive officers were determined primarily on the basis of each executive
officer's responsibilities and performance, the Corporation's performance, and
competitive salary level market data. Increases in FY 1997 salaries reflected
the Committee's determination that compensation levels should be increased to
reward performance and to remain competitive.
The Management Incentive Plan (the "MIP") rewards participants for reaching
annual profit targets related to required rates of return. Individual
executives' target award values vary by level of responsibility, are set as a
percentage of base salary and are competitive with those paid to executive
officers at companies in the comparison group. The annual incentive award an
executive officer is eligible to receive can range from zero to three times
their target award. Actual awards to the named executive officers for FY 1997
depended on the degree to which the business unit (corporate or division)
achieved its target income objectives and the extent to which the executive
officer was judged to have contributed to the overall results.
During FY 1997, the Corporation redesigned and implemented a new long-term
incentive program for senior executives in order to focus even greater
attention on sustained creation of shareholder value. The components of the new
program consist of a triennial grant of fair market value stock options, an
offer to purchase stock with a full recourse loan from the Corporation and a
cash long-term incentive award based on achievement of specified targets
measured by Total Stockholder Return ("TSR") relative to the S&P 400 Index.
Target values, varying according to the executive's level of responsibility,
are set at a percentage of base salary and are competitive with those paid at
companies in the comparison group.
Under the redesigned program, nonqualified options to purchase shares of Common
Stock are granted at 100% fair market value every three years. The size of the
grants is determined by the Committee after reviewing a
11
<PAGE>
survey of select competitive companies' long-term compensation practices and
utilizing the Black Scholes model for calculating the value of the
Corporation's stock options.
To further encourage stock ownership by senior executives, an offer to purchase
Common Stock of the Corporation is made every three years under the SPP. The
purchase price is equal to the fair market value of the stock on the day the
executive accepts the offer to purchase the shares. At the same time, the
Corporation makes a five-year, full recourse, interest bearing loan to the
executive to purchase the stock.
The Committee also adopted changes to the cash LTIP and established new terms
and conditions which will govern the awards for periods beginning after January
1, 1997, as more fully described in Proxy Item No. 4 beginning on page 27.
No new award cycles will commence under the previous LTIP program since it has
been discontinued. However, awards under existing cycles will continue to be
paid, if earned, through the final four-year award period April 1, 1996 to
March 31, 2000. The two measures of financial performance under that LTIP are
compound growth in annual earnings per share ("EPS") and average return on
stockholder equity ("ROE"). These measures are to be weighted equally in
calculating awards for each incentive period. The LTIP awards to the named
executive officers for the four-year period ended March 31, 1997, shown in the
Summary Compensation Table on page 16, reflected the Corporation's achievement
of 131% of the LTIP targets.
All of the changes outlined above in the Corporation's long-term incentive
program for senior executives were designed to better align incentive pay with
the achievement of enhanced shareholder value.
Policy Regarding Tax Deduction for Compensation Under Internal Revenue Code
Section 162(m)
Section 162(m) of the Internal Revenue Code (the "Code") limits the tax
deduction to $1 million for compensation paid to certain executive officers of
the Corporation named in the proxy statement, unless compensation is
performance-based. It has been determined that the limitations did not impact
the Corporation in FY 1997. The Committee's present intention is to comply with
the requirements of Section 162(m) unless the Committee concludes that required
changes would not be in the best interest of the Corporation or its
stockholders.
The Compensation Committee believes that the total compensation paid to the
named executive officers in FY 1997 reflects the achievement of the
Corporation's goals, attainment of business strategy, and performance
consistent with the interests of its stockholders.
Compensation of the Chairman and Chief Executive Officer
At the end of FY 1997, the Committee reviewed the performance of the Chairman
and Chief Executive Officer and made recommendations to the Board concerning
his compensation using the same criteria as those discussed at the beginning of
this report for determining salaries and incentive compensation levels for the
other named executive officers.
Inasmuch as the Chairman and Chief Executive Officer plans to retire as an
executive officer and employee of the Corporation on July 31, 1997, no
adjustment was made in his base salary for his performance in FY 1997. His MIP
award for FY 1997 represented 62% of his annual compensation and reflected the
Corporation's operating results. He also received a cash award of $301,300
under the LTIP for the four-year period ended FY 1997, which represented 131%
achievement of the Corporation's long-term financial objectives for this
period.
During FY 1997, the Corporation continued implementation of its long-range
plan. The Corporation reinvested cash into assets and expertise to expand its
reach in health care supply management. The Corporation sold its majority
interest in Armor All Products Corporation, as well as its Millbrook
Distribution Services Inc. unit, both of which businesses were not part of the
core health care business. The Corporation acquired the assets of FoxMeyer Drug
Company, the fourth largest company in the pharmaceutical distribution
industry, and is
12
<PAGE>
successfully integrating it into the Corporation's core health care business.
Effective integration of that business resulted in a significant increase in
the Corporation's market share in the institutional, chain and independent
pharmaceutical distribution business. That acquisition was then followed by the
purchase of General Medical Inc., with sales in calendar year 1996 of $1.7
billion. This acquisition was completed to further strengthen the Corporation's
position in the institutional market. These major transactions continued the
Corporation's strategy of increasing its focus on its core health care
business. The Corporation's continued success in implementing its strategic
goals was recognized in the investment community. During FY 1997, the
Corporation's TSR was 27.3% compared to the TSR of 19.9% for the S&P 500 Index,
14.9% for the S&P 400 Midcap Index and 22.7% for the Value Line HealthCare
Sector Index.
In view of his planned retirement as an executive officer and employee of the
Corporation on July 31, 1997, the Chairman and CEO did not participate in the
redesigned long-term incentive program. In lieu thereof, he was granted an
option to purchase 100,000 shares of Common Stock at fair market value.
It is the Committee's view that the total compensation package for the Chairman
and Chief Executive Officer for FY 1997 was based on an appropriate balance of
the Corporation's performance, his own performance and competitive practice.
The Compensation Committee
John M. Pietruski, Chairman
Tully M. Friedman
Carl E. Reichardt
Jane E. Shaw
13
<PAGE>
STOCK PRICE PERFORMANCE GRAPHS
The following graphs compare the cumulative total stockholder return on the
Corporation's Common Stock for the periods indicated with the Standard & Poor's
500 Stock Index and the Value Line Health Care Sector Index (comprised of
seventy-four companies in the health care industry, including the Corporation).
The stock price performance depicted in the performance graphs is not
necessarily indicative of future price performance.
FIVE YEAR CUMULATIVE TOTAL RETURN*
LOGO
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
-----------------------------------------------------------------------
McKesson $100.00 $143.04 $196.22 $481.53 $624.17 $794.68
------------------------------------------------------------------------------------------
S&P 500 Index $100.00 $115.41 $117.41 $135.72 $179.34 $214.88
------------------------------------------------------------------------------------------
S&P 400 Index $100.00 $116.17 $119.75 $130.07 $166.68 $191.49
------------------------------------------------------------------------------------------
Value Line Health $100.00 $ 83.81 $ 81.27 $111.99 $160.47 $196.91
Care Sector
</TABLE>
* Assumes $100 invested in McKesson Common Stock and in each index
on March 31, 1992, and that all dividends are reinvested. Prior
to the PCS Transaction, Old McKesson was included in the S&P 500
Index. Since November 21, 1994, the date New McKesson commenced
operations, the Corporation has been included in the S&P 400
Midcap Index.
14
<PAGE>
CUMULATIVE TOTAL RETURN SINCE NOVEMBER 21, 1994*
LOGO
<TABLE>
<S> <C> <C> <C> <C>
11/21/94 3/31/95 3/31/96 3/31/97
-----------------------------------------------------------
McKesson $100.00 $134.69 $174.59 $222.29
------------------------------------------------------------------------------
S&P 500 Index $100.00 $111.35 $147.15 $176.49
------------------------------------------------------------------------------
S&P 400 Index $100.00 $109.37 $140.16 $161.01
------------------------------------------------------------------------------
Value Line Health $100.00 $112.85 $161.70 $198.42
Care Sector
</TABLE>
* Assumes $100 invested in McKesson Common Stock and in each index
on November 21, 1994, on which date New McKesson commenced
operations, and that all dividends are reinvested. Prior to the
PCS Transaction, Old McKesson was included in the S&P 500 Index.
Since November 21, 1994, the Corporation has been included in the
S&P 400 Midcap Index.
15
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the compensation for services in all capacities
to the Corporation and its subsidiaries (including compensation for services
rendered previously to Old McKesson and its subsidiaries) for the three fiscal
years ended March 31, 1995, 1996 and 1997, of the Chief Executive Officer and
each of the other four most highly compensated executive officers of the
Corporation in FY 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------- --------------------------------
AWARDS PAYOUTS
----------------------- --------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR SALARY ($) BONUS ($) ($)(1) ($)(2) (#) ($) ($)(3)
------------------ ---- ---------- ---------- ------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alan Seelenfreund(4) 1997 $655,000 $1,050,000 -- -- 100,000 $301,300 $147,701
Chairman and Chief 1996 655,000 500,000 -- -- 55,000 250,000 132,164
Executive Officer 1995 625,000 1,100,000 -- -- 55,000 180,000 140,991
Mark A. Pulido(4) 1997 437,500 700,000 333,654(5) 910,000(2) 360,000 196,500 27,450
President and Chief
Operating Officer
John H. Hammergren(4) 1997 350,000 295,000 478,739(5) -- 42,000 22,925 9,148
Vice President and 1996 58,333 277,000 980,000 40,000 -- 428
President, McKesson
Health Systems
Richard H. Hawkins(4) 1997 256,250 275,000 -- -- 42,000 41,134 37,774
Vice President and Chief 1996 208,333 125,000 -- -- 10,000 39,250 22,023
Financial Officer 1995 165,000 175,000 -- -- 10,000 31,400 29,882
David L. Mahoney 1997 306,250 195,000 -- -- 42,000 58,950 31,186
Vice President and 1996 265,000 125,000 -- -- 15,000 52,500 29,312
President, Pharmaceuti- 1995 250,000 337,500 -- -- 15,000 42,000 45,258
cal
and Retail Services
</TABLE>
- --------
(1) Except as noted in the footnotes below, the dollar value of perquisites and
other personal benefits for each named executive officer during FY 1997 was
less than established reporting thresholds.
(2) Mr. Pulido received a restricted stock award of 20,000 shares valued at
$45.50 per share upon joining the Corporation on May 15, 1996. Restrictions
on 50% of these shares lapse four years after the date of the award and, on
the remaining 50%, five years after the date of the award if he is still
employed by the Corporation at the end of the respective restriction
periods. The number and value of the aggregate restricted stock holdings of
the named executive officers on March 31, 1997 (based on the closing market
value stock price of $64.00) were as follows: Mr. Seelenfreund, 0 and $0;
Mr. Pulido, 20,000 and $1,280,000; Mr. Hammergren, 20,000 and $1,280,000;
Mr. Hawkins, 0 and $0; and Mr. Mahoney, 0 and $0. The restrictions imposed
on the restricted stock award made to Mr. Hammergren lapse four years after
the date of the award if he is still employed by the Corporation at the end
of the restriction period. The number and value of the aggregate Restricted
Incentive Stock ("RIS") holdings of the named executive officers on March
31, 1997 (based upon the closing market value stock price of $64.00) were
as follows: Mr. Seelenfreund, 22,586 and $1,445,504; and each of the other
named executive officers, 0 and $0. Under the provisions of Old McKesson's
1988 Restricted Stock Plan, RIS Grants were awarded to certain designated
key executives with respect to nonqualified options granted under Old
McKesson's 1978 Stock Option Plan in order to encourage such persons to
hold shares of stock following exercise of nonqualified options. RIS grants
were awarded on the basis of one share of Common Stock for every ten option
shares. The restrictions imposed on RIS grant shares lapse on the third
anniversary of the option exercise date provided the related option shares
have not been sold or otherwise disposed of prior to such third
anniversary. If they have been so disposed of, then all rights to the RIS
grant shares immediately terminate. Dividends are paid on the restricted
stock and RIS grant shares at the same rate and at the same time as on the
Common Stock.
16
<PAGE>
(3) For FY 1997, includes the aggregate value of (i) the Corporation's stock
contributions under the PSIP, a plan designed to qualify as an employee
stock ownership plan under the Internal Revenue Code, allocated to the
accounts of the named executive officers, as follows: Mr. Seelenfreund,
$14,420; Mr. Pulido, $11,925; Mr. Hammergren, $7,063; Mr. Hawkins, $17,638;
and Mr. Mahoney, $15,283; (ii) employer matching contributions under the
Supplemental PSIP, an unfunded, nonqualified plan established because of
limitations on annual contributions to the PSIP contained in the Code, as
follows: Mr. Seelenfreund, $48,447; Mr. Pulido, $15,525; Mr. Hammergren,
$0; Mr. Hawkins, $9,869 and Mr. Mahoney, $13,005; and (iii) above-market
interest accrued on deferred compensation for the following executive
officers: Mr. Seelenfreund, $84,834; Mr. Pulido, $0; Mr. Hammergren,
$2,086; Mr. Hawkins, $10,267; and Mr. Mahoney, $2,898.
(4) From April 1, 1997, Mr. Seelenfreund has served as Chairman of the Board of
Directors of the Corporation and Mr. Pulido, who joined the Corporation in
May 1996, has served as Chief Executive Officer and President. Mr.
Hammergren became an executive officer when he joined the Corporation in
January 1996; and Mr. Hawkins was named Chief Financial Officer in
September 1996.
(5) Other annual compensation for FY 1997 includes: (i) for Mr. Pulido,
$204,732 representing reimbursement for temporary housing and relocation
expenses, and $98,274 to mitigate potential additional taxes payable by Mr.
Pulido for relocation expenses; and (ii) for Mr. Hammergren, $171,447
representing reimbursement for housing relocation expenses, $83,577 to
mitigate potential additional taxes payable by Mr. Hammergren for
relocation expenses, $154,500 to compensate Mr. Hammergren for benefits
lost as a result of leaving his former employer to join the Corporation and
an annual housing assistance payment of $50,000, which amount is equal to
1/10th of the original principal amount of the housing loan made to Mr.
Hammergren and discussed under "Indebtedness of Executive Officers" on page
22.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) GRANT DATE VALUE
------------------------------------------------- ----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE VALUE(3)
---- ------------- ------------ ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Alan Seelenfreund....... 100,000 5.83 $55.75 1/29/07 $1,150,445
Mark A. Pulido.......... 200,000 11.65 45.50 5/15/06 2,231,185
160,000 9.32 55.75 1/29/07 2,600,184
John H. Hammergren...... 42,000 2.45 55.75 1/29/07 682,548
Richard H. Hawkins...... 42,000 2.45 55.75 1/29/07 682,548
David L. Mahoney........ 42,000 2.45 55.75 1/29/07 682,548
</TABLE>
- --------
(1) The options granted to Mr. Seelenfreund become exercisable in two equal
annual installments on the first and second anniversaries of the grant
date; Mr. Pulido's grant of 200,000 shares at the time he joined the
Corporation becomes exercisable in installments of 25% per year on each of
the first through fourth anniversaries of the grant date; all other grants
become exercisable in installments of 50% on the third anniversary, and 25%
on each of the fourth and fifth anniversaries of the grant date. No options
were granted with SARs and no freestanding SARs have ever been granted.
Upon the occurrence of a change in control of the Corporation (as defined
in the 1994 Plan) all options granted by the Corporation become immediately
exercisable.
(2) All options were granted at 100% fair market value. Optionees may satisfy
the exercise price by submitting currently owned shares and/or cash. Income
tax withholding obligations may be satisfied by electing to have the
Corporation withhold shares otherwise issuable under the option with a fair
market value equal to such obligations.
(3) In accordance with Securities and Exchange Commission rules, a Black-
Scholes option pricing model was chosen to estimate the grant date present
value for the options set forth in this table. The assumptions used in
calculating the reported value included: an option term of five years;
stock volatility, 25.6%; risk-free interest rate, 6.2%; and dividend yield
of 1.5%. The Corporation does not believe that the Black-Scholes model, or
any other model can accurately determine the value of an option.
Accordingly, there is no assurance that the value, if any, realized by an
executive, will be at or near the value estimated by the Black-Scholes
model. Future compensation resulting from option grants is based solely on
the performance of the Corporation's stock price.
17
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN THE MONEY OPTIONS/
ACQUIRED VALUE MARCH 31, 1997 (#) SARS AT MARCH 31, 1997(2)
ON EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan Seelenfreund....... 100,000 $5,386,163 420,812 202,717 $20,097,599 $3,807,658
Mark A. Pulido.......... 0 0 0 360,000 0 5,020,000
John H. Hammergren...... 0 0 10,000 72,000 140,000 766,500
Richard H. Hawkins...... 0 0 83,291 58,745 4,122,143 797,416
David L. Mahoney........ 0 0 142,375 86,225 6,722,940 1,927,232
</TABLE>
- --------
(1) Fair market value of securities underlying options or SARs on the date of
exercise minus the exercise price.
(2) Calculated based upon the fair market value share price of $64.00 on March
31, 1997, less the share price to be paid upon exercise. There is no
guarantee that if and when these options are exercised they will have this
value.
LONG-TERM INCENTIVE PLAN AWARDS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR NON-STOCK PRICE-BASED PLANS(1)
OTHER PERIOD --------------------------------
UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME OR PAYOUT ($) ($) ($)
---- ---------------- --------------------- ----------
<S> <C> <C> <C> <C>
Alan Seelenfreund........ Four years $ 87,770 $ 262,000 $ 393,000
Mark A. Pulido........... Four years 50,250 150,000 225,000
John H. Hammergren....... Four years 23,450 70,000 105,000
Richard H. Hawkins....... Four years 15,410 46,000 69,000
David L. Mahoney......... Four years 18,760 56,000 84,000
</TABLE>
- --------
(1) The table above represents potential payouts of cash awards, if earned,
upon completion of the four-year incentive period ending March 31, 2000.
These awards are currently tied to after-tax growth in annual earnings per
share (EPS) and return on average stockholder equity (ROE). These two
measures of financial performance currently in use are weighted equally.
Target amounts will be earned for the EPS objective if 100% of the EPS
growth target is achieved; threshold amounts are earned at 50% of target,
and maximum amounts at 130% of target. Additionally, target amounts will be
earned for the ROE objective if 100% of the ROE growth target is achieved;
threshold amounts are earned at 84% of target, and maximum amounts at 116%
of target. Awards, if earned, will be paid in cash at the end of the
performance cycle.
EMPLOYMENT AGREEMENTS
Effective March 28, 1997, in anticipation of Mr. Seelenfreund's planned
retirement, the Corporation and Mr. Seelenfreund entered into an agreement (the
"Agreement") pursuant to which Mr. Seelenfreund will retire as an executive
officer and employee of the Corporation on July 31, 1997, but continue to serve
the Corporation in the capacity of non-executive Chairman of the Board until
July 31, 1998, unless the term of the Agreement is extended by mutual agreement
of the parties thereto. During the term of the Agreement, Mr. Seelenfreund will
render consulting and advisory services and perform such special assignments as
may be requested from time to time by the Board of Directors or the Chief
Executive Officer of the Corporation. In consideration for such services, Mr.
Seelenfreund will be paid an annual retainer of $250,000 and will be considered
for an additional payment at the end of FY 1998 which will be calculated on the
same basis as if he had continued to participate in the Corporation's MIP, with
a target bonus of sixty (60) percent of his annual retainer. He will also be
reimbursed for reasonable and documented travel and other expenses incurred in
performing services for the Corporation and will be furnished with office
space, secretarial support, an automobile and driver and membership in various
luncheon clubs. So long as he is receiving payments pursuant to this Agreement,
Mr. Seelenfreund will not receive a retainer or fees for his service as a non-
employee director of the Corporation. (See "Pension Benefits" on page 21 for a
description of the benefits Mr. Seelenfreund will receive when he retires on
July 31, 1997.)
18
<PAGE>
Effective January 30, 1996, the Corporation entered into a three-year
employment agreement with Mr. Hammergren covering the terms and conditions of
his employment as Vice President of the Corporation and President of McKesson
Health Systems. The agreement provides for an annual base salary of at least
$350,000, plus such incentive compensation, if any, as may be voted to Mr.
Hammergren yearly by the Compensation Committee of the Board; a one-time
employment bonus of $225,000; a monthly car allowance of $1,000; initial grants
of 40,000 stock options and 20,000 shares of restricted stock under the
Corporation's 1994 Plan; cash target awards under the Corporation's LTIP of
$17,500 for FY 1997, $35,000 for FY 1998, $52,500 for FY 1999 and $70,000 for
FY 2000, subject to achievement by the Corporation of the financial targets
specified for each performance period; an annual housing assistance payment by
the Corporation of $50,000, which amount is equal to 1/10th of the original
principal amount of the housing loan made to Mr. Hammergren and discussed under
"Indebtedness of Executive Officers" on page 22; and, other benefits of
employment generally available to other members of senior management when and
as he becomes eligible therefor. If Mr. Hammergren should become disabled
during the term of the agreement, the Corporation will continue to pay his then
current salary for a period of up to twelve (12) months. In the event of death,
his salary will continue to be paid to his surviving spouse or designee (as the
case may be) through the six-month period following the end of the calendar
month in which death occurs. If the Corporation terminates Mr. Hammergren's
employment during the term of his agreement other than for cause, he will be
entitled to receive (i) continued payment of his then base salary for the
remainder of the term of the agreement (reduced by any compensation received
from a subsequent employer during the term); (ii) be considered for a prorata
bonus award under the Corporation's MIP for the year in which termination
occurs; (iii) continued coverage under the Executive Medical Plan until the
earlier of expiration of the agreement or the effective date of coverage under
a subsequent employer's plan; and (iv) continued accrual and vesting of rights,
benefits and existing awards for the remainder of the term of the agreement for
purposes of the Executive Benefit Retirement Plan, Executive Survivor Benefits
Plan and the 1994 Stock Option and Restricted Stock Plan.
Effective May 20, 1996, the Corporation entered into a three-year employment
agreement with Mr. Pulido covering the terms and conditions of his employment
as President and Chief Operating Officer of the Corporation. The agreement
provides for an annual base salary of at least $500,000 per annum, plus such
incentive compensation, if any, as may be voted to him yearly by the Board; a
monthly car allowance of $1,000; initial grants of 200,000 stock options and
20,000 shares of restricted stock under the Corporation's 1994 Plan; a cash
target award of 30% of base salary under the Corporation's LTIP for the
incentive period ended March 31, 1997, subject to achievement by the
Corporation of the financial targets specified for such performance period; a
target award of 60% of base salary under the Corporation's MIP; and, other
benefits of employment generally available to other members of senior
management when and as he becomes eligible therefor. If Mr. Pulido should
become disabled during the term of the agreement, the Corporation will continue
to pay his then current salary for a period of up to twelve (12) months. In the
event of death, his salary will continue to be paid to his surviving spouse or
designee (as the case may be) through the six-month period following the end of
the calendar month in which death occurs. If the Corporation terminates Mr.
Pulido's employment during the term of his agreement other than for cause, he
will be entitled to (i) receive continued payment of his then base salary for
the remainder of the term of the agreement (reduced by any compensation
received from a subsequent employer during the term); (ii) be considered for a
bonus award under the Corporation's MIP for the year in which termination
occurs; (iii) receive a continued monthly automobile allowance and coverage
under the Executive Medical Plan until the earlier of expiration of the
agreement or the effective date of coverage under a subsequent employer's plan;
(iv) continued accrual and vesting of rights, benefits and existing awards for
the remainder of the term of the agreement for purposes of the Executive
Benefit Retirement Plan, Executive Survivor Benefits Plan and the 1994 Plan and
(v) awards under the LTIP for all performance periods then in effect for the
remainder of the term of the agreement.
19
<PAGE>
EXECUTIVE SEVERANCE POLICY AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Corporation has implemented an Executive Severance Policy (the "Policy"),
which applies in the event an executive officer is terminated by the
Corporation for reasons other than for cause at any time other than within two
years following a change in control (as defined in the Policy) of the
Corporation. The benefit payable to executive officers under the Policy is
equal to 12 months' base salary plus one month's pay per year of service, up to
a maximum of 24 months. Such benefits would be reduced or eliminated by any
income the executive officer receives from subsequent employers during the
severance payment period and discontinued in the event the executive officer is
employed by a competitor. Executive officers who are age 55 or older and have
15 or more years of service with the Corporation at the time of such
involuntary termination are granted "approved retirement" for purposes of the
Corporation's 1984 Executive Benefit Retirement Plan (the "EBRP") and the 1988
Executive Survivor Benefits Plan. The Policy also provides that, upon such
involuntary termination, awards under the LTIP are pro-rated for all cycles
then in progress. In addition, vesting of stock options and lapse of
restrictions on restricted stock awards will cease as of the date of
termination, and no severance benefits will be paid beyond age 62.
The Corporation has entered into termination agreements with 13 executive
officers, including Messrs. Pulido, Hammergren, Hawkins and Mahoney. Pursuant
to the Agreement with Mr. Seelenfreund described above, his termination
agreement will be of no further force or effect after July 31, 1997. The
agreements operate independently of the Policy, continue through December 31 of
each year, and are automatically extended in one-year increments until
terminated by the Compensation Committee (or by the Board of Directors in the
case of Mr. Pulido's agreement). The agreements are automatically extended for
a period of two years following any change in control.
The agreements provide for the payment of certain severance and other benefits
to executive officers whose employment is terminated within two years of a
change in control of the Corporation. Specifically, if following a change in
control, the executive officer is terminated by the Corporation for any reason,
other than for "Cause" (as defined in the agreements), or if such executive
officer terminates his or her employment for "Good Reason" (as that term is
defined in the agreements), then the Corporation will pay to the executive
officer, as severance pay in cash, an amount equal to 2.99 times his or her
"base amount" (as that term is defined in Section 280G of the Code) less any
amount which constitutes a "parachute payment" (as defined in Section 280G).
The Corporation will also continue the executive officer's coverage in the
health and welfare benefit plans in which he or she was a participant as of the
date of termination of employment, and the executive officer will continue to
accrue benefits under the EBRP, in both such cases for the period of time with
respect to which the executive officer would be entitled to payments under the
Policy described above if the executive officer's termination of employment had
been covered by such Policy. In addition, if the executive officer is age 55 or
older and has 15 or more years of service (as determined under such plan on the
date of executive's termination of employment), then such termination will
automatically be deemed to be an "approved retirement" under the terms of the
EBRP. The amount of severance benefits paid shall be no higher than the amount
that is not subject to disallowance of deduction under Section 280G of the
Internal Revenue Code.
For purposes of the termination agreements and as used elsewhere in this proxy
statement, a "change in control" is generally deemed to occur if: (i) any
"person" (as defined in the Securities Exchange Act of 1934, as amended) other
than the Corporation or any of its subsidiaries or a trustee or any fiduciary
holding securities under an employee benefit plan of the Corporation or any of
its subsidiaries, acquires securities representing 30% or more of the combined
voting power of the Corporation's then outstanding securities; (ii) during any
period of not more than two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the Corporation and any new
director whose election by the Board of Directors or nomination for election by
the Corporation'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;
(iii) the stockholders of the Corporation approve a merger or consolidation of
the Corporation with any other corporation, other than (a) a merger or
consolidation which would result in the voting securities of the
20
<PAGE>
Corporation outstanding immediately prior thereto continuing to represent, in
combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, at least 50% of
the combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or consolidation, or
(b) a merger or consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no person acquires more than 50%
of the combined voting power of the Corporation's then outstanding securities;
or (iv) the stockholders approve a plan of complete liquidation of the
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all of its assets.
PENSION BENEFITS
The table below illustrates the estimated combined annual benefits payable upon
retirement at age 62 under the Corporation's qualified retirement plans and the
supplemental EBRP in the specified compensation and years-of-service
classifications. The benefits are computed as single life annuity amounts.
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------
FIVE YEAR
AVERAGE
COMPENSATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 93,100 $110,800 $120,000 $120,000 $120,000
$ 400,000 186,200 221,600 240,000 240,000 240,000
$ 600,000 279,300 332,400 360,000 360,000 360,000
$ 800,000 372,400 443,200 480,000 480,000 480,000
$1,000,000 465,500 554,000 600,000 600,000 600,000
$1,200,000 558,600 664,800 720,000 720,000 720,000
$1,400,000 651,700 775,600 840,000 840,000 840,000
</TABLE>
The compensation covered under the plans whose benefits are summarized in the
above table includes the base salary and annual bonus amounts reported in the
Summary Compensation Table.
The estimated years of service for purposes of the EBRP at March 31, 1997 for
each of the executive officers named in the Summary Compensation Table are as
follows: Mr. Seelenfreund, 22; Mr. Pulido, 0; Mr. Hammergren, 1; Mr. Hawkins,
13; and Mr. Mahoney, 6.
The benefit under the EBRP is a percentage of final average pay based on years
of service or is determined by the Board of Directors. The maximum benefit is
60% of final average pay. The total paid under the EBRP is not reduced by
Social Security benefits but is reduced by those benefits payable on a single
life basis under the Corporation's qualified retirement plan and the annuitized
value of the Retirement Share Plan allocations of Common Stock made to the PSIP
assuming 12% growth in the value of the stock. In connection with his planned
retirement on July 31, 1997 as an employee of the Corporation, and as provided
in the EBRP, Mr. Seelenfreund has elected to receive a lump sum payment of his
retirement benefit in lieu of a life annuity. The lump sum value of such
benefit is estimated to be approximately $10.4 million.
CERTAIN TRANSACTIONS
The Corporation and its subsidiaries also have transactions in the ordinary
course of business with unaffiliated corporations of which certain of the
Corporation's non-employee directors are directors and/or executive officers.
The Corporation does not consider the amounts involved in such transactions to
be material in relation to the businesses of such other corporations or the
interests of the directors involved. The Corporation anticipates that similar
transactions will occur in FY 1997.
21
<PAGE>
INDEBTEDNESS OF EXECUTIVE OFFICERS
Under the SPP, which plan was assumed by the Corporation from Old McKesson upon
consummation of the PCS Transaction, loans bearing interest at the rate of from
6.1% to 8% per annum have been made to key employees of the Corporation and its
business units for the purchase of shares of the Corporation's Common Stock at
100% of the fair market value on the date of purchase. On January 29, 1997,
full recourse, interest bearing loans, having a term of five years, were made
to each of the executive officers named in the Summary Compensation Table,
other than to Mr. Seelenfreund, and to six other executive officers to purchase
an aggregate of 130,000 shares of the Corporation's Common Stock at a price of
$55.75 per share under the SPP. Interest at 6.1% per annum is payable prior to
maturity to the extent of dividends or other distributions paid in cash on the
shares purchased, with the balance due at the maturity of the loan. The loans
are secured by a pledge of the shares of Common Stock acquired under the SPP.
The table below shows as to each director or executive officer who was indebted
to the Corporation in an amount exceeding $60,000 at any time during the period
April 1, 1996 through May 15, 1997, (i) the largest aggregate amount of
indebtedness outstanding during such period, and (ii) the amount of
indebtedness outstanding at May 15, 1997. All indebtedness shown in the case of
Messrs. Dalby, Hawkins, Mahoney, Meyerson, Norris and Pulido resulted from
loans previously outstanding or those made on January 29, 1997 under the SPP.
The indebtedness shown for Messrs. Armstrong, Hammergren, Majeske and Villani
also includes balances owed on secured loans in the original principal amounts
of $95,000, $500,000, $500,000 and $100,000, respectively, given to assist
those named executives with housing relocation from other areas upon joining
the Corporation (see footnote (5) to the Summary Compensation Table on page 16
for further information regarding the housing loan made to Mr. Hammergren.)
Such housing loans are without interest so long as the individuals remain in
the employ of the Corporation or are under an employment contract and
thereafter at a market rate. Mr. Majeske's loan provides for an annual housing
assistance payment by the Corporation of $50,000, which amount is equal to
1/10th of the original principal amount of his loan. Under the provisions of
Mr. Villani's loan, the Corporation agreed to reduce the $100,000 principal
amount of the loan each June 30 (the "Anniversary Date") beginning June 30,
1993, by $20,000 so long as he remains a full-time active employee of the
Corporation on the Anniversary Date of the loan.
<TABLE>
<CAPTION>
LARGEST AMOUNT OF
AGGREGATE INDEBTEDNESS
AMOUNT OF AT
INDEBTEDNESS MAY 15, 1997
------------ ------------
<S> <C> <C>
William A. Armstrong........................... $ 660,097 $ 660,097
Michael T. Dalby............................... 623,553 623,553
John H. Hammergren............................. 1,065,097 1,065,097
Richard H. Hawkins............................. 667,161 667,161
David L. Mahoney............................... 652,115 646,840
Mark T. Majeske................................ 1,065,097 1,065,097
Ivan D. Meyerson............................... 565,097 565,097
Charles A. Norris.............................. 566,180 565,097
Mark A. Pulido................................. 4,322,138 4,295,224
Carmine J. Villani............................. 605,097 585,097
</TABLE>
22
<PAGE>
PROPOSAL TO APPROVE THE 1997 NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION AND
DEFERRAL PLAN (PROXY ITEM NO. 2)
General
The Board of Directors of the Corporation adopted the McKesson Corporation 1997
Non-Employee Directors' Equity Compensation and Deferral Plan (the "1997
Directors' Plan") on January 29, 1997, subject to stockholder approval. The
1997 Directors' Plan is intended to replace the McKesson Corporation Retirement
Program for Non-Employee Directors (the "Retirement Program") and is in lieu of
participation by non-employee directors in the McKesson Corporation 1994 Stock
Option and Restricted Stock Plan (the "1994 Plan").
The Board of Directors believes that the 1997 Plan will be of substantial value
in enabling the Corporation to attract and retain qualified individuals not
employed by the Corporation or its subsidiaries to serve on the Board of
Directors and to further align the interests of such non-employee directors
with those of the stockholders of the Corporation.
Participation in the 1997 Plan is limited to members of the Board of Directors
who are not employees of the Corporation or any of its subsidiaries. The
effective date of the 1997 Plan will be January 1, 1997, subject to the
approval of the Plan by the stockholders of the Corporation.
The summary of the 1997 Plan which follows is qualified in its entirety by
reference to provisions of the 1997 Plan, the full text of which is included as
Exhibit A to this Proxy Statement.
Description of the Plan
The 1997 Plan authorizes 250,000 shares of Common Stock to be issued pursuant
to its provisions. Awards of stock options and Restricted Stock Units under the
1997 Plan will be subject to an appropriate adjustment in the event of an
action which may otherwise cause dilution or enlargement of the rights of the
non-employee directors.
Plan Administration. The 1997 Plan is administered by the Committee on
Directors and Corporate Governance of the Board of Directors of the Corporation
(the "Committee"). The Committee has the full power to construe and interpret
the 1997 Plan and to establish, amend or rescind rules and regulations for its
administration.
Restricted Stock Units. On the date of each annual meeting, each non-employee
director shall receive a grant of 400 Restricted Stock Units ("RSUs"). Each
calendar year, each non-employee director shall also receive 50 percent of the
annual retainer fee (and, at the election of the director, up to 100 percent of
the annual retainer fee, meeting fees and committee chairman retainer) in RSUs
instead of cash. The number of RSUs granted to a participant in respect of such
grant shall equal the applicable amount of the annual retainer, meeting fees
and committee chair retainer, 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 amounts would otherwise be payable. For purposes of the
1997 Directors' Plan, the term "fair market value" means the composite closing
price of the Common Stock on the applicable date as reported in The Wall Street
Journal.
Non-employee directors who accrued rights under the Retirement Program shall
also receive a one-time transitional grant of RSUs if the director agrees in
writing to the termination of the director's right to receive accrued benefits
under the Retirement Program. The number of transition RSUs granted to a non-
employee director shall equal the participant's accrued benefit under the
Retirement Program as of December 31, 1996, divided by the fair market value of
a share of Common Stock as of December 31, 1996.
Non-employee directors holding RSUs will be credited with a number of
additional RSUs equal to any dividends and other distributions paid by the
Corporation on an equivalent number of shares of Common Stock, as of the date
such dividends or distributions are paid. Such additional RSUs shall be treated
as any other RSUs issued under the 1997 Directors' Plan.
23
<PAGE>
Each non-employee director issued RSUs may elect to have his or her award
distributed in a single allotment or in substantially equal annual installments
over a period not to exceed ten (10) years. Each participant awarded RSUs will
receive, at the participant's election, one share of Common Stock for each RSU
awarded or a cash payment equal to the fair market value of one share of Common
Stock for each RSU awarded. All such distributions shall commence as soon as
practicable after the first business day of January of the calendar year
following the year in which the participant ceases to be a director.
Stock Options. Each non-employee director who is elected to the Corporation's
Board for the first time on or after January 1, 1997, shall receive, on the
date of the annual meeting of stockholders next following or concurrent with
such election, an option to purchase 5,000 shares of Common Stock. This option
is immediately exercisable in full but generally will expire in five equal
annual installments on each anniversary of the date of grant. On the date of
each annual meeting, each non-employee director who continues to serve as such
and who was first elected to the Board prior to January 1, 1997, will receive
an option to purchase 1,500 shares of Common Stock. Such option is immediately
exercisable in full and has a term of five years. The Committee may, in its
sole discretion, grant additional options to purchase Common Stock to
participants.
All options granted to non-employee directors under the 1997 Directors' Plan
are nonqualified options. The per share price to be paid by the non-employee
director at the time an option is exercised shall be the fair market value of
the Common Stock covered by the option on the date of grant. Payment of the
exercise price shall be made in cash unless the Committee, in its sole
discretion, permits the option holder to pay the option price by such other
method that the Committee may deem appropriate.
Amendment and Termination. The Board of Directors may at any time amend or
terminate the 1997 Plan, but such action shall not adversely affect the rights
of any participant. Unless sooner terminated, the 1997 Plan shall remain in
effect until December 31, 2006.
Change in Control. The 1997 Plan provides that, upon the occurrence of a change
in control of the Corporation (as defined in the 1997 Plan), outstanding
options shall become immediately exercisable and Common Stock to be issued in
respect of all RSUs shall be immediately distributed.
Federal Tax Consequences
Neither the optionee nor the Corporation will incur any federal tax
consequences as a result of the grant of a nonqualified stock option. Upon
exercise, the optionee must generally recognize ordinary income equal to the
difference between the option price and the fair market value of the shares on
the date of exercise; the Corporation generally is entitled to a deduction for
the same amount for federal income tax purposes. Generally, any profit or loss
on the subsequent disposition of such shares will be short-term or long-term
capital gain or loss, depending upon the holding period for the shares.
Recipients of RSUs will not recognize any income for federal income tax
purposes until they receive payment. The Corporation will not be entitled to
any deduction at the time RSUs are granted or credited to the accounts of
recipients, but upon receipt of benefits by the recipient, the Corporation will
be entitled to a deduction and the recipient will be subject to ordinary income
taxes on the amount received.
New Plan Benefits
If the 1997 Plan is approved by the stockholders of the Corporation, the non-
employee directors will receive an aggregate of 2,800 RSUs on July 30, 1997,
representing the annual grant of 400 RSUs (based on the assumption that all
three of the non-employee directors who are candidates for election are elected
at the annual meeting and the other four non-employee directors continue in
office); an aggregate of up to 4,147 RSUs during the current fiscal year,
representing annual retainer fees, meeting fees and committee chairman retainer
fees expected to be paid during the current fiscal year, based on the amount of
such fees currently in effect, and assuming deferral of all such fees into
RSUs; an aggregate of 6,042 RSUs, representing the one-time
24
<PAGE>
transitional grant of RSUs to non-employee directors who relinquished their
vested rights in the Retirement Program; and an aggregate of approximately 176
RSUs representing dividends during the current fiscal year with respect to the
RSUs described above, and calculated on the assumption that the Corporation
continues to pay dividends during the current fiscal year at the same annual
dividend rate in effect for the fiscal year ended March 31, 1997.
Such RSUs have an aggregate value of $982,438, based on the closing market
price of the Corporation's Common Stock on the New York Stock Exchange
composite tape on June 2, 1997 of $74.625 per share.
If all three of the non-employee directors who are candidates for election are
elected, and the other four non-employee directors continue in office, options
for an aggregate of 14,000 shares of Common Stock will be granted on July 30,
1997.
Vote Required
Approval of the 1997 Directors' Plan will require the affirmative vote of the
holders of a majority of the Corporation's Common Stock present in person or by
proxy and entitled to vote at the meeting. If the 1997 Directors' Plan is not
approved, all RSUs accrued to date thereunder will be cancelled, the Retirement
Program will be reinstated, the entire annual retainer fee will be paid in cash
(or deferred at the director's election under the provisions of DCAP II) and
the non-employee directors will continue to participate in the 1994 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1997 DIRECTORS'
PLAN.
PROPOSAL TO AMEND THE 1973 STOCK PURCHASE PLAN (PROXY ITEM NO. 3)
On January 29, 1997 and March 26, 1997, respectively, the Board of Directors,
subject to approval of the Corporation's stockholders, amended and restated the
McKesson Corporation 1973 Stock Purchase Plan (the "SPP"). The SPP was
originally approved by the stockholders of Old McKesson in 1973, amended with
stockholder approval in 1974 to add 400,000 additional shares to the SPP, and
was assumed by the Corporation at the time of the PCS Transaction in November
1994. The SPP provides for the grant of rights to designated key employees to
purchase shares of Common Stock at a price equal to the closing price on the
New York Stock Exchange on the date the right is exercised.
The SPP amendments being submitted for stockholder approval at the 1997 Annual
Meeting (the "SPP Amendments") were prepared primarily to make available for
purchase under the SPP an additional 450,000 shares of Common Stock and to make
other changes appropriate to facilitate the administration of grants of rights
under the SPP.
Set forth below is a summary of certain important features of the SPP
Amendments, which summary is qualified in its entirety by reference to the full
text of the SPP, as amended and restated, which is included as Exhibit B to
this Proxy Statement. The SPP Amendments are shown in italics in the Plan
document.
Administration
The SPP is administered by a committee (the "Committee") consisting of not less
than two directors of the Corporation appointed by the Board, each of whom is a
"non-employee director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934. No member of the Committee is eligible to receive
benefits under the SPP.
Stock Subject to the Plan
Of the 450,000 additional shares of Common Stock authorized for issuance under
the SPP on January 29, 1997, and the 55,100 shares remaining available under
the SPP as of that date, 365,100 shares remained available for the future grant
of rights under the SPP at June 2, 1997.
25
<PAGE>
Right Terms and Conditions
The term of each right shall continue to be for a period not in excess of
thirty days as the Committee may determine. Purchases will be evidenced by a
written Stock Purchase Agreement which may provide for the payment of the
purchase price (i) in cash; (ii) entirely by a promissory note payable on such
repayment schedule as the Committee may determine; or (iii) by any combination
of cash and promissory note. The Stock Purchase Agreement may contain such
other terms, provisions, and conditions as determined by the Committee. Stock
purchased by an employee under the SPP will be pledged to the Corporation as
collateral for the purchase loan upon terms and conditions set forth in the
Stock Purchase Agreement.
Amendment and Termination
The Board of Directors may at any time suspend or terminate the SPP. The Board
of Directors may amend the SPP from time to time in such respects as it may
deem advisable. (Previously, the SPP provided that the Board could not amend
the SPP to increase the maximum number of shares subject to the SPP. The SPP
Amendments delete this limitation.)
Change in Control
In the event of the occurrence of a change in control of the Corporation, the
shares being held as collateral against outstanding SPP loans will be released
from all transfer and pledge restrictions and the remaining balances due under
the promissory notes will become due and payable within a limited period of
time following the change in control.
New Benefits
On January 29, 1997, pursuant to the terms of the SPP, the Corporation sold
Common Stock to certain senior executives in the following amounts:
<TABLE>
<CAPTION>
DOLLAR
NUMBER VALUE ON
OF DATE OF
NAME SHARES PURCHASE
---- ------ ----------
<S> <C> <C>
Mark A. Pulido........................................ 40,000 $2,230,000
John H. Hammergren.................................... 10,000 557,500
Richard H.Hawkins..................................... 10,000 557,500
David L. Mahoney...................................... 10,000 557,500
Executive Officer Group (6 persons, excluding those
named above)......................................... 60,000 3,345,000
Non-Executive Officer Group (1 person)................ 10,000 557,500
</TABLE>
Each sale was for an initial payment of $.01 per share plus delivery of a full
recourse promissory note bearing interest at an annual rate of 6.1% and payable
in full on January 29, 2002, subject to the terms of the Plan and a stock
purchase agreement entered into between the Corporation and the purchaser. No
opportunity to purchase Common Stock under the Plan was offered to Mr.
Seelenfreund, in view of his planned retirement as an executive officer and an
employee of the Corporation on July 31, 1997.
Vote Required
Approval of the SPP Amendments will require the affirmative vote of the holders
of a majority of shares of the Corporation's Common Stock, present in person or
by proxy and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
SPP AMENDMENTS.
26
<PAGE>
PROPOSAL TO AMEND THE 1981 LONG-TERM INCENTIVE PLAN (PROXY ITEM NO. 4)
On January 29, 1997, the Board of Directors, subject to approval of the
Corporation's stockholders, amended and restated the McKesson Corporation 1981
Long-Term Incentive Plan (the "LTIP"). The LTIP was originally approved by the
stockholders of Old McKesson in 1981, and was assumed by the Corporation at the
time of the PCS Transaction in November 1994. The purpose of the LTIP is to
advance and promote the interests of the stockholders of the Corporation by
attracting and retaining employees who strive for excellence, and to motivate
those employees to set and achieve above-average financial objectives by
providing competitive compensation for those who contribute most to the
operating progress and earning power of the Corporation, its subsidiaries and
affiliates.
The LTIP amendments (the "LTIP Amendments") were prepared primarily to permit
awards under the LTIP to qualify for exemption under Section 162(m) of the
Internal Revenue Code of 1986 (the "Code") if the Committee that administers
the LTIP determines that such exemption is appropriate and to make other
changes necessary to facilitate the administration of awards under the LTIP.
Set forth below is a summary of certain important features of the LTIP
Amendments, which summary is qualified in its entirety by reference to the full
text of the LTIP, as amended and restated, which is included as Exhibit C to
this Proxy Statement. The LTIP Amendments are shown in italics in the Plan
document.
Administration
The LTIP will be administered by a committee (the "Committee") consisting of
not less than two directors of the Corporation to be appointed by the Board,
each of whom is an "outside director" within the meaning of Section 162(m). No
member of the Committee will be eligible to receive benefits under the Plan.
The Committee has the sole authority, in its absolute discretion: to adopt,
amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of the LTIP; to construe and interpret the LTIP
and the rules and regulations; and to make all other determinations deemed
necessary or advisable for the administration of the LTIP. The Committee's
decisions, determinations and interpretations shall be final and binding on all
participants and other interested parties.
Calculation of Awards
The Committee will set the maximum award for each participant at the beginning
of each performance period. The Committee may (but is not required to)
designate for each incentive period the measures of financial performance and
the performance objectives applicable to awards made with respect to such
periods. Such measures include, but are not limited to, earnings per share,
total shareholder return ("TSR") and return on capital employed. New target
awards and performance periods will be set every three years based upon the
Corporation's TSR for the ensuing five-year period. The maximum amount
potentially payable to an individual for a performance period shall not exceed
125% of the participant's rate of basic compensation at the beginning of the
performance period, multiplied by the number of years in the performance
period. For the purpose of calculating the maximum amount for performance
periods beginning after 1997, the 125% factor shall be increased by adjusting
it by the compound rate of TSR for the Corporation, as determined by the
Committee, for the period elapsed since the beginning of the last performance
period. (Prior to amendment, the LTIP provided that successive four-year award
periods ended annually; amounts paid could not exceed 125% of the participant's
highest rate of basic compensation for the first year of the incentive period
and awards were paid every year based on overlapping four-year performance
periods.)
Amendment and Termination
The Board of Directors may amend or revise the LTIP. The Board of Directors, by
the affirmative vote of a majority of the directors in office, may terminate
the Plan at any time; provided, however, that such termination shall not affect
any incentive award granted before the termination.
27
<PAGE>
New Benefits
Inasmuch as awards granted under the LTIP will be granted in the sole
discretion of the Committee and as the performance goal criteria may vary from
year to year and from participant to participant, benefits under the LTIP are
not determinable. On January 29, 1997, the Committee adopted terms and
conditions governing the awards under the LTIP, as amended, and approved the
following maximum LTIP awards for the five-year period from January 1, 1997
through March 31, 2002:
<TABLE>
<CAPTION>
MAXIMUM
DOLLAR
VALUE OF
NAME AWARD
---- ----------
<S> <C>
Mark A. Pulido............................................... $3,000,000
John H. Hammergren........................................... 750,000
Richard H.Hawkins............................................ 750,000
David L. Mahoney............................................. 750,000
Executive Group (6 persons excluding those named above)...... 4,500,000
Non-Executive Officer Group (1 person)....................... 750,000
</TABLE>
Twenty-five percent of the amounts shown will be paid on the completion of five
years of service. Any payment in excess of 25% of the maximum is performance-
based and will be contingent upon the Corporation's TSR performance percentile
at the end of the five-year performance period. One hundred percent of the
maximum amount will be paid if the average TSR for the five-year period is at
or above the 75th percentile of the S&P 400 Index. Lower awards will be paid
for lower performance. No award above the service based 25% maximum will be
paid if TSR is less than the 50th percentile. New maximum awards and
performance periods will be set every three years based upon the Corporation's
TSR for the ensuing five-year period. In view of his planned retirement as an
executive officer and an employee of the Corporation on July 31, 1997, Mr.
Seelenfreund did not receive an LTIP award in January 1997.
Change in Control
In the event of the occurrence of a change in control prior to a participant's
termination of employment with the Corporation, the maximum value of each
target award as set at the beginning of each performance period that is not
complete on the effective date of such change will be paid in full.
Vote Required
Approval of the LTIP Amendments will require the affirmative vote of the
holders of a majority of shares of the Corporation's Common Stock, present in
person or by proxy and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
LTIP AMENDMENTS.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
At the recommendation of the Audit Committee, the Board of Directors has
reappointed the firm of Deloitte & Touche LLP as the principal independent
auditors to audit the consolidated financial statements of the Corporation and
its subsidiaries for the fiscal year ending March 31, 1998, such appointment to
continue at the pleasure of the Board of Directors. Deloitte & Touche has acted
as the Corporation's independent auditors for several years, is knowledgeable
about the Corporation's operations and accounting practices, and is well
qualified to act in the capacity of auditor.
Representatives of Deloitte & Touche are expected to be present at the meeting
to respond to appropriate questions and to make a statement if they desire to
do so.
28
<PAGE>
ADDITIONAL INFORMATION
The Corporation's Annual Report for the fiscal year ended March 31, 1997,
including the audited financial statements, accompanies this Proxy Statement.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
A stockholder who intends to submit a proposal for inclusion pursuant to Rule
14a-8 under the Securities Exchange Act of 1934 in the proxy statement for the
1998 Annual Meeting, must send the proposal so as to be received by the Vice
President and Corporate Secretary at the principal executive offices of the
Corporation, One Post Street, San Francisco, CA 94104, no later than February
19, 1998.
By Order of the Board of Directors
LOGO
Nancy A. Miller
Vice President and Corporate Secretary
June 18, 1997
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED MARCH 31, 1997, EXCLUDING CERTAIN
EXHIBITS THERETO, MAY BE OBTAINED WITHOUT CHARGE, BY WRITING TO INVESTOR
RELATIONS, BOX K, MCKESSON CORPORATION, ONE POST STREET, SAN FRANCISCO, CA
94104.
29
<PAGE>
EXHIBIT A
MCKESSON CORPORATION
1997 NON-EMPLOYEE DIRECTORS' EQUITY COMPENSATION AND DEFERRAL PLAN
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. Once approved, the Plan shall replace the
Company's Directors' Retirement Program and shall be in lieu of participation
by Non-Employee Directors in the Company's 1994 Stock Option and Restricted
Stock Plan.
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 (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
(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.
A-1
<PAGE>
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) "Committee" shall mean the Committee on Directors and Corporate Governance.
(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 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.
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.
A-2
<PAGE>
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 250,000. 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, 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.
(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 fifty
percent (50%) of such portion of Annual Retainer, which amount shall be
deferred in the form of Restricted Stock Units. The number of Restricted Stock
Units granted to a Participant in respect of such deferral shall equal fifty
percent (50%) of the portion of 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.
A-3
<PAGE>
(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.
Each Participant issued Restricted Stock Units shall execute a valid
distribution election in accordance with the procedures established by the
Company (the "Distribution Election"). The Distribution Election shall
indicate (A) whether the distribution shall be made in the form of Common
Stock or cash and (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. The Distribution Election (C) shall be in the
form of a document executed by the Participant and filed with the Secretary
of the Company, (D) shall be made no later than 12 months prior to the
Participant's cessation from service as a director of the Company, and (E)
shall become irrevocable 12 months prior to the Participant's cessation
from service as a director of the Company.
All distributions shall commence 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. If no valid
Distribution Election is made, the Restricted Stock Units shall be
distributed in a lump sum as soon as
A-4
<PAGE>
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.
7. STOCK OPTIONS.
(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(c) below or any other
terms of this Plan.
(B) FORMULA GRANTS.
Each Participant who is elected to the Board for the first time will
automatically receive, on the date of the annual meeting of stockholders next
following such election (or, if such election occurs at an annual meeting, on
such date), an option to purchase 5,000 shares of Common Stock (subject to
adjustment as provided in Section 5(b) above), which option shall be
immediately exercisable in full but shall expire to the extent of 1,000 shares
per year on each anniversary of the grant date unless and until such
Participant retires from the Board, in which case the option period shall end
three years after the retirement date or until the option term expires,
whichever shall first occur, and the option shall be exercisable to the extent
of the entire unexercised portion of the option (or any lesser amount)
remaining at the date of retirement. On the date of each Annual Meeting,
beginning with the 1997 Annual Meeting, each Participant continuing to serve as
a Non-Employee Director (but not entitled to receive an option grant pursuant
to the first sentence of this paragraph) will automatically receive, on such
date, an option to purchase 1,500 shares of Common Stock (subject to adjustment
as provided in Section 5(b) above), which option shall be immediately
exercisable in full. Subject to the aforementioned expiration provisions
applicable to the initial grant of 5,000 shares, the term of each option shall
be five years.
(C) 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.
A-5
<PAGE>
(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, 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.
(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 record 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.
A-6
<PAGE>
EXHIBIT B
MCKESSON CORPORATION
STOCK PURCHASE PLAN
(As Amended and Restated Through March 26, 1997)
(Proposed amendments are shown in italics)
1. ESTABLISHMENT.
There is hereby adopted the McKesson Corporation Stock Purchase Plan
(hereinafter called the "Plan"), subject to approval by holders of at least a
majority of the outstanding shares of voting stock of the Corporation.
2. STOCK SUBJECT TO THE PLAN.
Rights may be granted under the Plan from time to time to key employees of the
Corporation and its Subsidiaries to purchase from the Corporation an aggregate
of not more than 1,250,000 shares of Common Stock ($.01 par value) of the
Corporation.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee (the "Committee") consisting of
not less than two directors of the Company to be appointed by the Board, each
of whom is a "non-employee director" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934. No member of the Committee shall be
eligible to receive benefits under the Plan. The Committee may from time to
time determine which eligible employees shall be granted rights under the
Plan, and the number of shares for which a right shall be granted to an
employee. The Committee shall have the sole authority, in its absolute
discretion, to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and regulations, and to make all other
determinations deemed necessary or advisable for the administration of the
Plan. All decisions, determinations and interpretations of the Committee shall
be final and binding on all grantees and purchasers of stock under the Plan
and on other interested parties.
4. ELIGIBILITY.
Persons eligible for rights under the Plan are those key employees of the
Corporation or its Subsidiaries designated from time to time by the Committee.
Members of the Board of Directors of the Corporation who are not employed as
regular salaried officers or employees of the Corporation or of any Subsidiary
of the Corporation may not participate in the Plan.
5. EXERCISE PRICE.
The exercise price of the stock covered by each right shall not be less than
the fair market value of such stock on the date the right is exercised, which
shall be the closing sale price on such day on the New York Stock Exchange.
6. RIGHT TERMS AND CONDITIONS; EXTENSION OF CREDIT BY THE CORPORATION.
The term of each right shall be for such period not in excess of thirty days
as the Committee may determine. Purchases shall be evidenced by a written
Stock Purchase Agreement which may provide for the payment of the purchase
price (i) by a payment in cash or (ii) entirely by a promissory note payable
on such repayment schedule as the Committee may determine or (iii) by any
combination of (i) and (ii). The Stock Purchase Agreement may contain such
other terms, provisions, and conditions as are determined by the Committee.
Stock purchased by an employee under the Plan shall be pledged to the
Corporation as collateral for the purchase loan terms and conditions set forth
in the Stock Purchase Agreement.
B-1
<PAGE>
7. VOTING, DIVIDEND RIGHTS, ETC.
Shares purchased by employees under the Plan shall be fully paid and non-
assessable and be entitled to voting, dividend and other rights.
8. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
The Board of Directors may at any time suspend or terminate this Plan, and may
amend it from time to time in such respects as it may deem advisable.
B-2
<PAGE>
EXHIBIT C
MCKESSON CORPORATION
1981 LONG-TERM INCENTIVE PLAN
(As Amended Through January 29, 1997)
(Proposed amendments are shown in italics)
1. NAME AND PURPOSE.
The name of this plan is the McKesson Corporation Long-Term Incentive Plan
(the "Plan"). Its purpose is to advance and promote the interests of the
stockholders of McKesson Corporation, a Delaware Corporation (the "Company")
by attracting and retaining employees who strive for excellence, and to
motivate those employees to set and achieve above-average financial objectives
by providing competitive compensation for those who contribute most to the
operating progress and earning power of the Company, its subsidiaries and
affiliates.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a committee (the "Committee") consisting of
not less than two directors of the Company to be appointed by the Board, each
of whom is an "outside director" within the meaning of Section 162(m) of the
Internal Revenue code of 1986, as amended. No member of the Committee shall be
eligible to receive benefits under the Plan. The Committee shall have the sole
authority, in its absolute discretion, to adopt, amend, and rescind such rules
and regulations as, in its opinion, may be advisable in the administration of
the Plan, to construe and interpret the Plan, the rules and regulations, and
to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations
of the Committee shall be final and binding on all participants and other
interested parties.
3. ELIGIBILITY.
Participation in the Plan shall be limited to those full-time, salaried key
officers and other employees of the Company, its subsidiaries and affiliates
who are selected from time to time by the Committee. Participants in the Plan
are also eligible to participate in any incentive plan of the Company.
4. CALCULATION OF AWARDS.
The Plan is designed to reward participants with benefits which reflect the
financial performance of the Company over performance periods of a duration
designated by the Committee at the beginning of such period. The Committee may
(but is not required to) designate for each incentive period the measures of
financial performance and the performance objectives (including, but not
limited to, earnings per share, total shareholder return or return on capital
employed) applicable to awards made with respect to such periods. The
foregoing notwithstanding, the maximum amount potentially payable to an
individual for a performance period shall not exceed 125% of the participant's
rate of basic compensation at the beginning of the performance period,
multiplied by the number of years in the performance period. For the purpose
of calculating the maximum amount for performance periods beginning after
1997, the 125% factor shall be increased by adjusting it by the compound rate
of total shareholder return for the Company, as determined by the Committee,
for the period elapsed since the beginning of the last performance period.
5. PAYMENT OF AWARDS.
All awards to participants pursuant to the Plan shall be paid in cash,
provided, however, that, at the participant's election, receipt of all or part
of an award may be deferred under the terms of the Company's Deferred
Compensation Administration Plan II in the manner prescribed by regulations
established by the Committee.
C-1
<PAGE>
A Participant shall have no right to receive payment of any award under the
Plan unless he or she has satisfied regulations prescribed by the Committee at
the time of making the award and the Committee has determined that the
performance objectives applicable to such award, if any, have been achieved.
Any other provision of the Plan to the contrary notwithstanding, if the
Committee determines that a Participant has engaged in any of the actions
described in (c) below, the consequences set forth in (a) and (b) below shall
result:
(a) Any outstanding award granted on or after October 27, 1993, shall be
forfeited immediately and automatically and shall not be payable to the
participant under any circumstances.
(b) If the participant received payment of an award granted on or after October
27, 1993, within six months prior to the date that the Company discovered that
the participant engaged in any action described in (c) below, the participant,
upon written notice from the Company, shall immediately repay to the Company in
cash the amount of such award (including any amounts withheld pursuant to
Paragraph 7).
(c) The consequences described in (a) and (b) shall apply if the participant,
either before or after termination of employment with the Company or one of its
subsidiaries or affiliates:
(i) discloses to others, or takes or uses for his own purpose or the
purpose of others, any trade secrets, confidential information, knowledge,
data or know-how belonging to the Company or any of its subsidiaries or
affiliates and obtained by the participant during the term of his
employment, whether or not they are the participant's work product.
Examples of such confidential information or trade secrets include (but are
not limited to) customer lists, supplier lists, pricing and cost data,
computer programs, delivery routes, advertising plans, wage and salary
data, financial information, research and development plans, processes,
equipment, product information and all other types and categories of
information as to which the participant knows or has reason to know that
the Company or its subsidiaries or affiliates intends or expects secrecy to
be maintained;
(ii) fails to promptly return all documents and other tangible items
belonging to the Company or any of its subsidiaries or affiliates in the
participant's possession or control, including all complete or partial
copies, recordings, abstracts, notes or reproductions of any kind made from
or about such documents or information contained therein, upon termination
of employment, whether pursuant to retirement or otherwise;
(iii) fails to provide the Company with at least thirty (30) days' written
notice prior to directly or indirectly engaging in, becoming employed by,
or rendering services, advice or assistance to any business in competition
with the Company or any of its subsidiaries or affiliates. As used herein,
"business in competition" means any person, organization or enterprise
which is engaged in or is about to become engaged in any line of business
engaged in by the Company or any of its subsidiaries or affiliates at the
time of the termination of the participant's employment with the Company or
any of its subsidiaries or affiliates;
(iv) fails to inform any new employer, before accepting employment, of the
terms of this paragraph 5 and of the participant's continuing obligation to
maintain the confidentiality of the trade secrets and other confidential
information belonging to the Company or any of its subsidiaries or
affiliates and obtained by the participant during the term of his
employment with the Company or any of its subsidiaries or affiliates;
(v) induces or attempts to induce, directly or indirectly, any of the
customers of the Company or its subsidiaries or affiliates, employees,
representatives or consultants to terminate, discontinue or cease working
with or for the Company, or any of its subsidiaries or affiliates, or to
breach any contract with the Company or any of its subsidiaries or
affiliates, in order to work with or for, or enter into a contract with,
the participant or any third party; or
C-2
<PAGE>
(vi) engages in conduct which is not in good faith and which disrupts,
damages, impairs or interferes with the business, reputation or employees
of the Company or any of its subsidiaries or affiliates.
The Committee shall determine in its sole discretion whether the participant
has engaged in any of the acts set forth in (i) through (vi) above, and its
determination shall be conclusive and binding on all interested persons.
Any provision of this paragraph 5 which is determined by a court of competent
jurisdiction to be invalid or unenforceable should be construed or limited in a
manner that is valid and enforceable and that comes closest to the business
objectives intended by such invalid or unenforceable provision, without
invalidating or rendering unenforceable the remaining provisions of this
paragraph 5.
6. TRANSFERABILITY.
Awards made pursuant to the Plan are not transferable or assignable by the
participant other than by will or the laws of descent and distribution, and
payment thereunder during the participant's lifetime shall be made only to the
participant or to the guardian or legal representative of the participant.
Payments which are due to a deceased participant pursuant to the Plan shall be
paid to the person or persons to whom such right to payment shall have been
transferred by will or the laws of descent and distribution.
7. WITHHOLDING TAXES.
Whenever the payment of an award is made, such payment shall be net of an
amount sufficient to satisfy federal, state and local withholding tax
requirements and authorized deductions.
8. FUNDING.
No provision of the Plan, or regulations adopted hereunder, shall require the
Company, for the purpose of satisfying any obligations under the Plan, to
purchase assets or segregate or place any assets in a trust or other entity to
which contributions are made.
9. AMENDMENT.
The Plan may be amended or revised by the Board of Directors of the Company.
10. TERMINATION.
The Plan may be terminated at any time by resolution of the Board of Directors
of the Company by the affirmative vote of a majority of the directors in
office; provided, however, that such termination shall not affect any incentive
award which shall have been granted prior to such termination.
C-3
<PAGE>
MCKESSON CORPORATION
P
PROXY FOR ANNUAL MEETING
10:00 A.M., JULY 30, 1997
R SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION
The undersigned, whose signature appears on the reverse side, hereby
O constitutes and appoints Alan Seelenfreund, Ivan D. Meyerson and Nancy
A. Miller, and each of them, with full power of substitution, proxies
to vote all stock of McKesson Corporation which the undersigned is
X entitled to vote at the Annual Meeting of Stockholders to be held in
the Colonial Room at The Westin St. Francis Hotel, 335 Powell Street,
San Francisco, California, on July 30, 1997, and any adjournments
Y thereof, as specified upon the matters indicated on the reverse side,
and in their discretion upon any other matter that may properly come
before said meeting.
Election of Directors
Nominees for three-year terms expiring in 2000
Tully M. Friedman
John M. Pietruski
Carl E. Reichardt
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXY COMMITTEE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-------------
|SEE REVERSE|
| SIDE |
-------------
<PAGE>
Please mark your
X votes as in this |4896
example. -----
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BELOW. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR EACH OF THE FOLLOWING PROPOSALS.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING PROPOSALS:
- --------------------------------------------------------------------------------
1. Election of Directors FOR WITHHELD
(see reverse) [_] [_]
For, except vote withheld from
the following nominee(s):
______________________________
2. Approval of 1997 Non-Employee FOR AGAINST ABSTAIN
Directors' Equity Compensation [_] [_] [_]
and Deferral Plan
3. Approval of Amendment and [_] [_] [_]
Restatement of 1973 Stock
Purchase Plan
4. Approval of Amendments to 1981 [_] [_] [_]
Long-Term Incentive Plan
Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
______________________________________
______________________________________
SIGNATURE(S) DATE
<PAGE>
PSIP VOTING CARD
DIRECTIONS TO TRUSTEE, MCKESSON CORPORATION PROFIT-SHARING INVESTMENT PLAN
To: The Chase Manhattan Bank, N.A.
I direct you as Trustee of the McKesson Corporation Profit-Sharing Investment
Plan to vote (in person or by proxy) as I have specified on the reverse side
hereof all shares of McKesson Corporation Common Stock allocated to my accounts
under the plan at the Annual Meeting of Stockholders of McKesson Corporation on
July 30, 1997. You may vote according to your discretion (or that of your proxy
holder) on any other matter which may properly come before the meeting.
Election of Directors
Nominees for three-year terms expiring in 2000
Tully M. Friedman
John M. Pietruski
Carl E. Reichardt
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
-------------
|SEE REVERSE|
| SIDE |
-------------
FOLD AND DETACH HERE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 4.
WITH- FOR ALL
FOR HOLD EXCEPT
[ ] [ ] [ ]
1. Election of Directors
TULLY M. FRIEDMAN
JOHN M. PIETRUSKI
CARL E. REICHARDT
If you do not wish your shares voted "FOR" a particular nominee, mark the
"For All Except" box and strike a line through the nominee(s) name. Your
shares will be voted for the remaining nominee(s).
FOR AGAINST ABSTAIN
2. Approval of 1997 Non- [ ] [ ] [ ]
Employee Directors' Equity
Compensation and Deferral
Plan
3. Approval of Amendment and [ ] [ ] [ ]
Restatement of 1973 Stock
Purchase Plan
4. Approval of Amendments to [ ] [ ] [ ]
1981 Long-Term Incentive
Plan
THIS VOTING CARD WHEN PROPERLY EXECUTED WILL BE VOTED
IN THE MANNER DIRECTED ABOVE. IF NO DIRECTION IS GIVEN,
IT WILL BE VOTED FOR THE PROPOSALS.
Signature(s) ________________________________ Dated: _________________, 1997
PLEASE SIGN THIS PROXY PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE
FOLD AND DETACH HERE
<PAGE>
LOGO
June 18, 1997
Dear McKesson Profit-Sharing Investment Plan Participant:
As a participant in the McKesson Corporation Profit-Sharing Investment Plan
("PSIP"), you are a stockholder in the Corporation. At the Annual Stockholders
Meeting, you have the right to instruct the Plan Trustee, on a confidential
basis, how the shares of McKesson Common Stock in your account are to be voted
on matters that come before the meeting. Your PSIP account includes the shares
held for the Company Matching Contributions, PAYSOP, ESOP, Retirement Share
Plan, PSIP Plus and Quarterly Contributions.
The enclosed Proxy Statement describes four proposals to be voted on at this
year's meeting. The Board of Directors recommends that you vote FOR proposals 1
through 4. PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PSIP VOTING CARD IN
THE ENVELOPE PROVIDED. If you sign and return this card without marking your
choices, your shares will be voted in accordance with the Board of Directors'
recommendations as indicated above. This card also gives the Trustee authority
to vote on your behalf on any other matters that may properly come before the
meeting.
If the Trustee receives no voting instructions for shares credited to
participants' PAYSOP accounts, no vote will be cast on those shares. The PSIP
provides that all other shares for which the Trustee receives no voting
instructions from participants, as well as all unallocated shares of Common
Stock, will be voted by the Trustee in the same proportion as shares for which
voting instructions are received.
Participants who own shares of McKesson Common Stock by means other than
through the PSIP will receive a separate proxy card for the voting of those
shares.
To ensure that your shares are represented and voted at the meeting according
to your wishes, your signed PSIP voting card must be received by the Trustee by
July 27, 1997. The Corporation's Annual Report for the fiscal year ended March
31, 1997, including the audited financial statements, accompanies this Proxy
Statement.
We urge you to exercise your voting rights as a stockholder. Your vote does
make a difference.
Sincerely,
LOGO
/s/ ALAN SEELENFREUND
Alan Seelenfreund
Chairman of the Board
