Business Context and Reporting Period
This Form 8-K is a current report filed by McKesson Corporation on April 25, 2006. The filing discloses the entry into a material definitive agreement regarding the compensation package for Laureen E. Seeger, Executive Vice President, General Counsel, and Secretary.
Key Financial Metrics
The filing does not report consolidated revenue, profit, cash flow, margins, debt, or liquidity metrics for the company. It focuses exclusively on executive compensation details:
- Annual Base Salary: $425,000
- Target Management Incentive Plan (MIP) Award (FY 2007): $318,750
- Long Term Incentive Plan Target Award (FY 2006-2008): $250,000
- Stock Option Grant: 50,000 shares at $49 per share
Material Changes
The filing details a new compensation arrangement approved by the Compensation Committee. Key changes include:
- Establishment of a new base salary and target bonus structure for Ms. Seeger.
- Grant of nonqualified stock options with a vesting schedule of 50% after two years, 25% after three years, and 25% after four years.
- Designation of Ms. Seeger as a participant in the Executive Medical Plan and Executive Survivor Benefit Plan.
Guidance, Risks, and Contingencies
The filing outlines specific contingencies related to executive severance and performance metrics:
- Performance Metrics: Actual MIP and Long Term Incentive awards depend on company performance. FY 2007 MIP measures are not yet established. The Long Term Incentive Plan is based on cumulative earnings per share over three years.
- Severance Policy: In the event of termination without "cause" outside of a Change in Control (CIC) window, benefits equal 12 months' base salary plus one month per year of service (max 24 months), capped at 2.99 times the sum of base salary and target bonus.
- Change in Control: If terminated without "cause" or for "good reason" within two years of a CIC, the severance payment equals 2.99 times the executive officer's base amount.
- Indemnification: The company entered a standard agreement to indemnify Ms. Seeger for expenses and judgments arising from her service.
Investor Verification Checklist
- Verify the vesting schedule and grant price ($49) of the 50,000 stock options granted to Ms. Seeger.
- Confirm the specific performance measures for the FY 2007 Management Incentive Plan once established.
- Review the definition of "base amount" used in the Change in Control severance calculation to understand the potential liability cap.
- Check subsequent filings for the actual payout of the Long Term Incentive Plan based on the three-year cumulative EPS target.