Exhibit 10.8

McKESSON CORPORATION
OPTION GAIN DEFERRAL PLAN (“OGDP”)

(Amended and Restated as of October 28, 2004)

 

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TABLE OF CONTENTS

                      Page  
A.
  PURPOSE     1  
 
           
B.
  ERISA PLAN     1  
 
           
C.
  PARTICIPATION     1  
 
           
D.
  AMOUNTS OF DEFERRAL     2  
 
           
E.
  PAYMENT OF DEFERRED COMPENSATION     2  
 
           
F.
  SOURCE OF PAYMENT     6  
 
           
G.
  MISCELLANEOUS     6  
 
           
H.
  ADMINISTRATION OF THE PLAN     7  
 
           
I.
  AMENDMENT OR TERMINATION OF THE PLAN     7  
 
           
J.
  CLAIMS AND APPEALS     7  
 
           
K.
  DEFINITIONS     9  
 
           
M.
  SUCCESSORS     10  
 
           
N.
  EXECUTION     10  
 
           

 

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McKESSON CORPORATION
OPTION GAIN DEFERRAL PLAN

(Amended and Restated as of October 28, 2004)

A. PURPOSE

     This Plan was established to allow those Company executives and members of
the Board who are not employed by the Company who hold exercisable stock options
granted under the McKesson Corporation 1978 Stock Option Plan (the “1978 Plan”)
to defer the cash portion of the gain (the “Cash Gain”) such individual realizes
from his or her exercisable stock options in connection with the restructuring
of McKesson resulting in the sale of PCS Health Systems, Inc. to Eli Lilly and
Company (the “Transaction”). The Plan was originally effective on January 27,
1994, the date the Plan was initially approved by the Board. The Plan has been
amended and restated on various occasions. This amendment and restatement has
been approved by the Board as of October 28, 2004 and shall be effective as of
such date except as otherwise indicated below.

B. ERISA PLAN

     This Plan is an unfunded deferred compensation program for a select group
of management and highly compensated employees of the Company and members of the
Board who are not employed by the Company. The Plan, therefore, is covered by
Title I of ERISA except that it is exempt from Parts 2, 3 and 4 of Title I of
ERISA.

C. PARTICIPATION

     1. Eligibility to Participate.

          a. Eligible Executives. Company executives who (i) are actively
employed, and (ii) hold exercisable stock options granted under the 1978 Plan as
of the date the Transaction closes may elect to participate in this Plan
(“Eligible Executives”).

          b. Eligible Directors. Each member of the Board of McKesson who (i) is
not a Company employee and (ii) holds exercisable stock options granted under
the 1978 Plan as of the date the Transaction closes may participate in this Plan
(“Eligible Directors”).

     2. Election to Participate. An Eligible Executive or an Eligible Director
may become a Participant in the Plan by electing to defer the Cash Gain in
accordance with the terms of this Plan. An election to defer shall be in
writing, shall be irrevocable and shall be made at the time and in the form
specified by the Administrator. On electing to defer amounts under this Plan,
the Participant shall be deemed to accept all of the terms and conditions of
this Plan. All elections to defer under this Plan shall be made pursuant to an
election executed and filed with the Administrator before the amounts so
deferred are earned. Other than to avoid the expiration of an option in
accordance with its terms, a Participant shall not exercise any option with
respect to which he or she has made a deferral election.

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     3. Relation to Other Plans. An Eligible Executive or an Eligible Director
may participate in this Plan and may also participate in any other benefit plan
of the Company in effect from time to time for which he or she is eligible,
unless the other plan may otherwise exclude participation on the basis of
eligibility for, or participation in, this Plan. No amounts may be deferred
under this Plan which have been deferred under any other plan of the Company.

D. AMOUNTS OF DEFERRAL

     1. Minimum Deferral. The minimum amount that an Eligible Executive or
Eligible Director may defer under this Plan is $5,000 of the Cash Gain realized
upon the completion of the Transaction.

     2. Maximum Deferral. The maximum amount of compensation which an Eligible
Executive or an Eligible Director may defer under this Plan for any Year is one
hundred percent (100%) of the Cash Gain realized upon the completion of the
Transaction. Notwithstanding these limits, deferrals may be reduced by the
Company to leave sufficient remaining amounts legally required for taxes and
other authorized deductions. In addition, the amount of deferrals allowed to any
Participant may be subject to a limit determined by the Administrator.

E. PAYMENT OF DEFERRED COMPENSATION

     1. Book Account and Interest Credit. Any Cash Gain deferred by a
Participant under the Plan shall be credited to a separate bookkeeping account
for such Participant (the “Account”). From the initial effective date of the
Plan (January 27, 1994) through the end of Year 1994, interest was credited to
each Account at an annual rate of 7.5%. Thereafter, the interest rate is set
each year to the Moody’s Corporate Bond Yield Average for December of the
preceding year (the “Declared Rate”). Notwithstanding the foregoing, if a Change
in Control (as defined in Section E.10 below) occurs, the Declared Rate for the
balance of the calendar year in which the Change in Control occurs and for the
two calendar years immediately following the year in which the Change in Control
occurs shall not be less than the Declared Rate as in effect on the day before
the Change in Control occurs. Interest on each Account balance shall be
compounded daily on each business day within the Year to yield the Declared Rate
for the Year. (Prior to January 1, 2000, each Account balance was compounded
monthly based on the annual Declared Rate.) In the case of installment payments
as provided in Section E.3 below, interest shall be credited on all amounts
remaining in a Participant’s Account until all amounts are paid out.

     2. Length of Deferral. An Eligible Executive or Eligible Director shall
elect in writing, and file with the Administrator, at the same time as such
Eligible Executive or Eligible Director makes any election to defer any portion
of the Cash Gain, the period of deferral with respect to such election, subject
to the minimum required period of deferral and the maximum permissible period of
deferral. The minimum required period of deferral is two years from the date the
compensation is deferred. Notwithstanding the foregoing, the two-year minimum
deferral period shall not apply to payments made as a result of death,
Disability, Retirement, pre-Retirement termination or hardship. Payment must
commence no later than the end of the maximum period of deferral, which is the
January following the year in which the Eligible Executive attains age 72 or, in
the case of an Eligible Director, the January after the Company’s

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annual meeting of stock holders next following the Eligible Director’s 72nd
birthday. Once such an election has been made, the Eligible Executive or
Eligible Director may alter the period of deferral, provided that:

          a. such alteration is made at least one year prior to the earliest
date the Participant could have received distribution of the amounts credited to
his or her Account under the earlier election, and

          b. such alteration does not provide for the receipt of such amounts
earlier than one year from the date of the alteration, subject to the two-year
minimum deferral rule stated above.

     3. Election of Form and Time of Payment. A Participant shall elect in
writing, and file with the Administrator, at the same time as any election to
defer compensation, a form and time of payment of benefits under this Plan from
the following:

          a. Form.

               i. Payment of the amount credited to the Participant’s Account in
a single sum.

               ii. Payment of amounts credited to the Participant’s Account in
any specified number of approximately equal annual installments (not in excess
of ten).

          b. Time.

               i. The lump sum or first installment to be paid in January of the
year designated by the Participant.

               ii. The lump sum or first installment to be paid in January after
the designated interval following the earlier of the Participant’s Retirement or
of the determination of Disability.

     4. Payments on Termination. If a Participant terminates service with the
Company for any reason other than Retirement, Disability or death, then,
notwithstanding the election made by the Participant pursuant to Sections E.2
and E.3 above, the entire undistributed amount credited to his or her Account
shall be paid in the form of a lump sum in the January of the calendar year
following the calendar year of termination of service.

     5. Payments on Death.

          a. On and after January 1, 2003, each Participant shall make an
election at the time and manner in which any amount remaining in the
Participant’s Account at the time of the Participant’s death shall be paid to
his or her Beneficiary. Such election shall be made in writing and filed with
the Administrator. Benefits shall be paid in one of the methods specified in
Section E.3. The Participant may modify such election at any time up until the
date of the Participant’s death in a writing filed with the Administrator. In
addition, within one year following the death of the Participant the Beneficiary
may elect to receive payment in a lump

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sum; provided, however, that such election shall not take effect until 12 months
after the date it is made, and payment otherwise scheduled to be made in that
12-month period shall be made on schedule. The foregoing notwithstanding, the
Administrator may, at his or her discretion, distribute all benefits to a
Beneficiary in a single payment as soon as reasonably practicable after the
death of the Participant if the value of the Participant’s Account is less than
$5,000 on the date of death of the Participant.

          b. Prior to January 1, 2003, if a Participant died after payments from
his or her Account had begun, the remainder of the amounts credited to the
Participant’s Account were paid to his or her Beneficiary at the same time and
in the same manner as they would have been paid to the Participant had the
Participant survived. If a Participant died before payments from his or her
Account had begun, the amount credited to his or her Account were paid to his or
her Beneficiary at the time and in the manner elected by the Participant.

     6. Designation of Beneficiary. A Participant may designate any person(s) or
entity as his or her Beneficiary. Such designation shall be in writing and shall
be effective only when filed with the Administrator. Such filing must occur
before the Participant’s death. A Participant may change the Beneficiary
designation from time to time by filing a new written designation with the
Administrator. Effective January 1, 2003, if the Participant fails to
effectively designate a Beneficiary in accordance with the Administrator’s
procedures or the person designated by the Participant is not living at the time
the distribution is to be made, then the Participant’s Beneficiary shall be the
Participant’s surviving spouse, if any, or, if there is no surviving spouse, the
Participant’s surviving children, if any, in equal shares, or if there are no
surviving children, the Participant’s estate.

     7. Payments on Disability. If the Administrator determines that a
Participant has become Disabled, the entire undistributed amount credited to his
or her Account shall be paid in the form and at the time elected by the
Participant, or, if no election has been made, in a lump sum as soon as
practicable after such determination is made.

     8. Payments on Hardship. The Administrator may, in his or her sole
discretion, direct payment to a Participant of all or of any portion of the
Participant’s Account balance, notwithstanding an election under Section E.3.
above, at any time that he or she determines that such Participant has suffered
an event of undue hardship which causes an emergency condition in his or her
financial affairs.

     9. Other Payments. Effective June 1, 2000 and subject to approval by the
Administrator, a Participant may elect to receive a withdrawal of all or part of
the Participant’s Account under the Plan at any time not otherwise expressly
authorized pursuant to the terms of the Plan; provided, however, that ten
percent (10%) of the amount of the withdrawal requested shall be permanently
forfeited to the Company and the Participant shall have no further right to that
amount. The terms of such withdrawal shall be governed by the provisions of the
Participant’s election form in effect at the time of such election to the extent
not otherwise specified in the Participant’s election made pursuant to this
Section E.9.

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     10. Change in Control. For purposes of this Plan, a Change in Control shall
be deemed to have occurred if any of the events set forth in any of the
following paragraphs shall occur:

          a. any “person” (as defined in section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and as such term is
modified in sections 13(d) and 14(d) of the Exchange Act), excluding McKesson or
any of its subsidiaries, a trustee or any fiduciary holding securities under an
employee benefit plan of McKesson or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a
corporation owned, directly or indirectly, by stockholders of McKesson in
substantially the same proportions as their ownership of McKesson, is or becomes
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of McKesson representing 30% or more of
the combined voting power of McKesson’s then outstanding securities; or

          b. during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board and any new
members of the Board (other than a member designated by a “person” who has
entered into an agreement with McKesson to effect a transaction described in
Sections E.10.a, c and d) whose election by the Board or nomination for election
by McKesson’s stockholders was approved by a vote of at least two-thirds (2/3)
of the members of the Board then still in office who either were members of the
Board 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

          c. consummation of a merger or consolidation of McKesson with any
other corporation, which has been approved by the shareholders of McKesson,
other than (I) a merger or consolidation which would result in the voting
securities of McKesson 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
McKesson, at least 50% of the combined voting power of the voting securities of
McKesson or such surviving entity outstanding immediately after such merger or
consolidation, or (II) a merger or consolidation effected to implement a
recapitalization of McKesson (or similar transaction) in which no person
acquires more than 50% of the combined voting power of McKesson’s then
outstanding securities; or

          d. the shareholders of McKesson approve a plan of complete liquidation
of McKesson or an agreement for the sale or disposition by McKesson of all or
substantially all of McKesson’s assets.

     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 McKesson’s 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 McKesson immediately prior to such transaction or series of
transactions.

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F. SOURCE OF PAYMENT

     Amounts paid under this Plan shall be paid from the general funds of the
Company, and each Participant and his or her Beneficiaries shall be no more than
unsecured general creditors of the Company with no special or prior right to any
assets of the Company for payment of any obligations hereunder. Nothing
contained in this Plan shall be deemed to create a trust of any kind for the
benefit of any Participant or Beneficiary, or create any fiduciary relationship
between the Company and any Participant or Beneficiary with respect to any
assets of the Company.

G. MISCELLANEOUS

     1. Withholding. Each Participant and Beneficiary shall make appropriate
arrangements with the Company for the satisfaction of any federal, state or
local income tax withholding requirements and Social Security or other
employment tax requirements applicable to deferrals under this Plan or the
payment of amounts deferred under this Plan. If no other arrangements are made,
the Company may provide, at its discretion, for such withholding and tax
payments as may be required.

     2. No Assignment.

          a. Except as provided in Section G.2.b below, the benefits provided
under this Plan may not be alienated, assigned, transferred, pledged or
hypothecated by any person, at any time. These benefits shall be exempt from the
claims of creditors or other claimants and from all orders, decrees, levies,
garnishments or executions.

          b. If a court of competent jurisdiction determines pursuant to a
judgment, order or approval of a marital settlement agreement that all or any
portion of the benefits payable hereunder to a Participant constitute community
property of the Participant and his or her spouse or former spouse (hereafter,
the “Alternate Payee”) or property which is otherwise subject to division by the
Participant and the Alternate Payee, a division of such property shall not
constitute a violation of Section G.2.a, and any portion of such property may be
paid or set aside for payment to the Alternate Payee. The preceding sentence of
this Section G.2.b, however, shall not create any additional rights and
privileges for the Alternate Payee (or the Participant) not already provided
under the Plan; in this regard, the Administrator shall have the right to refuse
to recognize any judgment, order or approval of a martial settlement agreement
that provides for any additional rights and privileges already not already
provided under the Plan, including without limitation with respect to form and
time of payment.

     3. Applicable Law; Severability. The Plan hereby created shall be
construed, administered and governed in all respects in accordance with ERISA
and the laws of the State of California to the extent that the latter are not
preempted by ERISA. If any provision of this instrument shall be held by a court
of competent jurisdiction to be invalid or unenforceable, the remaining
provisions hereunder shall continue to be effective. If any provision this
amendment and restatement is deemed to be a “material modification” of this Plan
which would cause amounts deferred under this Plan prior to 2005 to be subject
to the deferred compensation provisions of section 885 of the American Jobs
Creation Act of 2004, if such legislation is

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enacted into law, such provision shall be null, void and without effect
retroactive to October 28, 2004.

H. ADMINISTRATION OF THE PLAN

     1. In General. The Administrator shall be the Executive Vice President,
Human Resources of McKesson. If the Executive Vice President, Human Resources is
a Participant, any discretionary action taken as Administrator which directly
affects him or her as a Participant shall be specifically approved by the
Compensation Committee. The Administrator shall have the authority and
responsibility to interpret this Plan and shall adopt such rules and regulations
for carrying out this Plan as it may deem necessary or appropriate. Decisions of
the Administrator shall be final and binding on all parties who have or claim
any interest in this Plan.

     2. Elections and Notices. All elections and notices made under this Plan
shall be in writing and filed with the Administrator at the time and in the
manner specified by him or her. Except as may be specifically otherwise stated
in any Plan election form, all elections to defer under this Plan shall be
irrevocable.

I. AMENDMENT OR TERMINATION OF THE PLAN

     The Compensation Committee may at any time amend this Plan. Such action
shall be prospective only and shall not adversely affect the rights of any
Participant or Beneficiary to any benefit previously earned under this Plan. The
Board may at any time terminate this Plan; thereupon compensation previously
deferred plus interest credited thereon shall promptly be paid in single lump
sums to the respective Participants or Beneficiaries entitled thereto. The
foregoing notwithstanding, no amendment adopted following the occurrence of a
Change in Control shall be effective if it (a) would reduce the Declared Rate
for the balance of the calendar year in which the Change in Control occurs or
for the two calendar years immediately following the year in which the Change in
Control occurs to a rate lower than the Declared Rate as in effect on the day
before the Change in Control occurred or (b) modify the provisions of (a) above.

J. CLAIMS AND APPEALS

     1. Informal Resolution of Questions. Any Participant or Beneficiary who has
questions or concerns about his or her benefits under the Plan is encouraged to
communicate with the Human Resources Department of McKesson. If this discussion
does not give the Participant or Beneficiary satisfactory results, a formal
claim for benefits may be made in accordance with the procedures of this
Section J.

     2. Formal Benefits Claim – Review by Executive Vice President, Human
Resources. A Participant or Beneficiary may make a written request for review of
any matter concerning his or her benefits under this Plan. The claim must be
addressed to the Executive Vice President, Human Resources, McKesson
Corporation, One Post Street, San Francisco, California 94104. The Executive
Vice President, Human Resources or his or her delegate (“Executive Vice
President”) shall decide the action to be taken with respect to any such request
and may require additional information if necessary to process the request. The
Executive Vice President shall review the request and shall issue his or her
decision, in writing, no later than 90 days after the date the request is
received, unless the circumstances require an extension of time.

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If such an extension is required, written notice of the extension shall be
furnished to the person making the request within the initial 90-day period, and
the notice shall state the circumstances requiring the extension and the date by
which the Executive Vice President expects to reach a decision on the request.
In no event shall the extension exceed a period of 90 days from the end of the
initial period.

     3. Notice of Denied Request. If the Executive Vice President denies a
request in whole or in part, he or she shall provide the person making the
request with written notice of the denial within the period specified in
Section J.2. The notice shall set forth the specific reason for the denial,
reference the specific Plan provisions upon which the denial is based, a
description of any additional material or information necessary to perfect the
request, an explanation of why such information is required, and an explanation
of the Plan’s appeal procedures and the time limits applicable to such
procedures, including a statement of the claimant’s right to bring a civil
action under Section 502(a) of ERISA following an adverse benefit determination
on review.

     4. Appeal to Executive Vice President.

          a. A person whose request has been denied in whole or in part (or such
person’s authorized representative) may file an appeal of the decision in
writing with the Executive Vice President within 60 days of receipt of the
notification of denial. The appeal must be addressed to: Executive Vice
President, Human Resources, McKesson Corporation, One Post Street, San
Francisco, California 94104. The Executive Vice President, for good cause shown,
may extend the period during which the appeal may be filed for another 60 days.
The appellant and/or his or her authorized representative shall be permitted to
submit written comments, documents, records and other information relating to
the claim for benefits. Upon request and free of charge, the applicant should be
provided reasonable access to and copies of, all documents, records or other
information relevant to the appellant’s claim.

          b. The Executive Vice President’s review shall take into account all
comments, documents, records and other information submitted by the appellant
relating to the claim, without regard to whether such information was submitted
or considered in the initial benefit determination. The Executive Vice President
shall not be restricted in his or her review to those provisions of the Plan
cited in the original denial of the claim.

          c. The Executive Vice President shall issue a written decision within
a reasonable period of time but not later than 60 days after receipt of the
appeal, unless special circumstances require an extension of time for
processing, in which case the written decision shall be issued as soon as
possible, but not later than 120 days after receipt of an appeal. If such an
extension is required, written notice shall be furnished to the appellant within
the initial 60-day period. This notice shall state the circumstances requiring
the extension and the date by which the Executive Vice President expects to
reach a decision on the appeal.

          d. If the decision on the appeal denies the claim in whole or in part
written notice shall be furnished to the appellant. Such notice shall state the
reason(s) for the denial, including references to specific Plan provisions upon
which the denial was based. The notice shall state that the appellant is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records, and other information relevant to the claim
for

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benefits. The notice shall describe any voluntary appeal procedures offered by
the Plan and the appellant’s right to obtain the information about such
procedures. The notice shall also include a statement of the appellant’s right
to bring an action under Section 502(a) of ERISA.

          e. The decision of the Executive Vice President on the appeal shall be
final, conclusive and binding upon all persons and shall be given the maximum
possible deference allowed by law.

     5. Exhaustion of Remedies. No legal or equitable action for benefits under
the Plan shall be brought unless and until the claimant has submitted a written
claim for benefits in accordance with Section J.2, has been notified that the
claim is denied in accordance with Section J.3, has filed a written request for
a review of the claim in accordance with Section J.4, and has been notified in
writing that the Executive Vice President has affirmed the denial of the claim
in accordance with Section J.4.

K. DEFINITIONS

     For purposes of this Plan, the following terms shall have the meanings
indicated:

     1. “Account” shall mean the Account specified in Section E.1.

     2. “Administrator” shall mean the person specified in Section H.

     3. “Beneficiary” shall mean the person or entity described by Section E.6.

     4. “Board” shall mean the Board of Directors of McKesson.

     5. “Cash Gain” shall mean the cash gain specified in Section A.

     6. “Company” shall mean McKesson and any member of its controlled group as
defined by Section 414(b) and Section 414(c) of the Internal Revenue Code of
1986, as amended.

     7. “Compensation Committee” shall mean the Compensation Committee of the
Board.

     8. “Declared Rate” shall have the meaning described in Section E.1.

     9. “Disabled” or “Disability” shall mean a physical or mental condition
which the Social Security Administration has determined renders the Participant
eligible to receive Social Security benefits on account of disability.

     10. “Eligible Director” shall mean a director described by Section C.1.b.

     11. “Eligible Executive” shall mean an employee of the Company selected as
being eligible to participate in this Plan under Section C.1.a.

     12. “ERISA” shall mean the Employee Retirement Income Security Act of 1974,
as amended.

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     13. “McKesson” shall mean McKesson Corporation, a Delaware corporation.

     14. “Participant” shall be any Eligible Executive or Eligible Director for
whom amounts are credited to an Account under this Plan. Upon the Participant’s
death, the Participant’s Beneficiary shall be a Participant until all amounts
are paid out of the Participant’s Account.

     15. “Plan” shall mean the McKesson Corporation 1994 Option Gain Deferral
Plan (“OGDP”).

     16. “Retirement” shall mean termination of employment after (a) the date on
which the Participant’s number of points under the Retirement Share Plan portion
of the McKesson Corporation Profit-Sharing Investment Plan equals 65,
(b) attaining eligibility for a Retirement Allowance under the terms of the
McKesson Corporation Retirement Plan or (c) receiving an Approved Retirement
under the terms of the McKesson Corporation Executive Benefit Retirement Plan.
Notwithstanding the foregoing, for purposes of the Plan, Retirement for an
Eligible Director shall mean cessation of service as a member of the Board on or
after completion of at least two successive terms as a member of the Board.

     17. “Transaction” shall mean the restructuring of the Company that resulted
in the sale of PCS Health Systems, Inc. to Eli Lilly and Company, as described
in Section A.

     18. “Year” is the calendar year.

L. SUCCESSORS

     This Plan shall be binding on the Company and any successors and assigns
thereto.

M. EXECUTION

     To record the amendment and restatement of the Plan by the Board of
Directors of McKesson Corporation at a meeting held on October 28, 2004.

McKESSON CORPORATION

     
By:
   

   

  Paul E. Kirincic

  Executive Vice President, Human Resources

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