McKESSON CORPORATION

STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO
OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS AND PERFORMANCE SHARES GRANTED
TO
EMPLOYEES PURSUANT TO THE 2005 STOCK PLAN

(Effective July 27, 2005)

  I.   INTRODUCTION

The following terms and conditions shall apply to each Award granted under the
Plan to an Employee eligible to participate in the Plan. This Statement of Terms
and Conditions is intended to meet the requirements of Code Section 409A and any
rules promulgated thereunder and is subject to the terms of the Plan and of any
Award made pursuant to the Plan. In the event of any inconsistency between this
Statement of Terms and Conditions and the Plan, the Plan shall govern.
Capitalized term not otherwise defined in this Statement of Terms and Conditions
shall have the meaning set forth in the Plan.

  II.   OPTIONS

1. Option Notice and Agreement. An Option granted under the Plan shall be
evidenced by an Option Agreement setting forth the terms and conditions of the
Option, including whether the Option is an Incentive Stock Option or a
Nonstatutory Stock Option and the number Shares subject to the Option. Each
Option Agreement shall incorporate by reference and be subject to this Statement
of Terms and Conditions and the terms and conditions of the Plan.

2. Exercise Price. The per Share Exercise Price of an Option, as specified in
the Option Agreement, shall be equal to or greater than the per Share Fair
Market Value of the Shares underlying the Option on the Grant Date.

3. Option Period. An Option shall be exercisable only during the applicable
Option Period, and during such Option Period the exercisability of the Option
shall be subject to the vesting provisions of Section II.4 as modified by the
rules set forth in Sections II.5 and V. The Option Period shall be not more than
seven years from the Grant Date.

4. Vesting of Right to Exercise Options.

(A) Except as provided in Section V, an Option shall be exercisable during the
Option Period in accordance with the following vesting schedule: (i) 25% of the
Shares subject to the Option shall vest on the first anniversary of the Grant
Date; (ii) an additional 25% of the Shares shall vest on the second anniversary
of the Grant Date; (iii) an additional 25% of the Shares shall vest on the third
anniversary of the Grant Date; and (iv) the remaining 25% of the Shares subject
to the Option shall vest on the fourth anniversary of the Grant Date.
Notwithstanding the foregoing, the Administrator may specify a different vesting
schedule at the time the Option is granted and as specified in the Option
Agreement.

(B) Any vested portion of an Option not exercised hereunder shall accumulate and
be exercisable at any time on or before the Termination Date, subject to the
rules set forth in Section V. No Option may be exercised for less than 5% of the
total number of Shares then available for exercise under such Option. In no
event shall the Corporation be required to issue fractional shares.

5. Limits on Option Period and Acceleration of Vesting. The Option Period may
end before the Termination Date, and in the circumstances described in
Sections II.5(B), (D), (E) and (F), the vesting schedule of an Option may be
accelerated, (subject to the provisions of Section V), as follows:

(A) If a Participant ceases to be a bona fide employee of the Corporation or of
its affiliates during the Option Period for reasons other than for Cause (as
defined herein), Long-Term Disability, Normal or Early Retirement or death, the
Option Period shall end ninety days after the date of the Participant’s
termination of employment or on the Termination Date, whichever occurs first and
in all cases the Option shall be exercisable only to the extent that it was
exercisable under the provisions of the foregoing Section II.4 at the time of
such termination of employment. If a Participant is absent from work with the
Corporation or an affiliate because of his or her Short-Term Disability or
because the Participant is on an approved leave of absence, the Participant
shall not be deemed during the period of any such absence, by virtue of such
absence alone, to have terminated employment with the Corporation or an
affiliate except as the Administrator may otherwise expressly determine.
Notwithstanding the foregoing, if the Participant is on a voluntarily leave of
absence for the purpose of serving the government of the country of which the
Participant is a citizen or in which the Participant’s principal place of
employment is located and such leave exceeds twelve months in duration, then the
Participant shall be deemed to have terminated employment with the Corporation
or an affiliate for purposes of this Section II.5(A).

(B) If a Participant ceases to be a bona fide employee of the Corporation or of
its affiliates (for reasons other than for Cause, Long-Term Disability, Normal
or Early Retirement or death) during the Option Period, the Administrator may,
in its sole and absolute discretion (and subject to conditions deemed
appropriate in the circumstances) approve the continuation of the vesting
schedule of the Participant’s Option. The Option Period for any Option that
continues to vest pursuant to this subsection (B) shall end ninety days after
the last Option installment vests, or on the Termination Date, whichever occurs
first.

(C) If the Participant’s employment is terminated for Cause during the Option
Period, the Option Period shall end on the date of such termination of
employment and the Option shall thereupon not be exercisable to any extent
whatsoever.

(D) If a Participant ceases to be a bona fide employee of the Corporation or of
its affiliates due to his or her Long-Term Disability during the Option Period,
the vesting schedule of the Participant’s Option shall be accelerated, the
Option shall become fully exercisable and the Option Period shall end three
years after the date of the Participant’s termination of employment or on the
Termination Date, whichever occurs first.

(E)

1

If the Participant’s employment is terminated:

(i) by reason of Normal Retirement, the vesting schedule of the Participant’s
Option shall be accelerated and the Option shall become fully exercisable as of
the date of Normal Retirement; or

(ii) by reason of Early Retirement, the Option shall be exercisable only to the
extent that it was exercisable under the provisions of the foregoing
Section II.4 at the time of such Early Retirement; provided, however, that the
Administrator may, in its sole discretion (and subject to conditions deemed
appropriate in the circumstances), either (A) accelerate the vesting schedule of
the Participant’s Option effective as of the date of the Participant’s Early
Retirement or (B) approve the continuation of the vesting schedule of the
Participant’s Option.

(iii) With respect to an Option held by a Participant at Normal or Early
Retirement, the Option Period for that portion of the Option designated as a
Nonstatutory Stock Option shall end three years after the date of retirement or
on the Termination Date, whichever occurs first; provided, however, that in the
case of an Option held by a Participant at Early Retirement as to which the
Administrator exercises its discretionary authority to approve the continuation
of the vesting schedule, the Option Period shall end on the earlier of the
Termination Date or three years after the last Option installment vests.

(F) If a Participant should die while in the employ of the Corporation or an
affiliate and during the Option Period, the vesting schedule of the
Participant’s Option shall be accelerated and the Option shall become fully
exercisable, the Option Period shall end three years after the date of death or
on the Termination Date, whichever occurs first, and the Participant’s
Beneficiary may exercise the entire unexercised portion of the then exercisable
Shares covered by such Option (or any lesser amount) remaining on the date of
death.

(G) If a Participant who ceases to be a bona fide employee of the Corporation or
an affiliate is subsequently rehired prior to the expiration of his or her
Option, then the Option shall continue to remain outstanding until such time as
the Participant subsequently terminates employment. Upon the Participant’s
subsequent termination of employment, the post-termination exercise period
calculated pursuant to the terms and conditions of this Section II.5 shall be
reduced by the number days between the date of the Participant’s initial
termination of employment and his or her re-hire date; provided, however, that
if the rehired Participant continues to be employed by the Corporation or an
affiliate for at least one year from his or her rehire date, then the post
termination exercise period for the Option shall be determined in accordance
with Sections II.5(A) through (F) and shall not be adjusted as described above.

6. Method of Exercise. A Participant may exercise an Option with respect to all
or any part of the exercisable Shares as follows:

(A) By giving the Corporation, or its authorized representative designated for
this purpose, written notice of such exercise specifying the number of Shares as
to which the Option is so exercised. Such notice shall be accompanied by an
amount equal to the Exercise Price of such Shares, in the form of any one or
combination of the following: cash or a certified check, bank draft, postal or
express money order payable to the order of the Corporation in lawful money of
the United States. The Participant may pay the Exercise Price, in whole or in
part, by tendering to the Corporation or its authorized representative Shares
which have been owned by the Participant for at least six months prior to said
tender, and having a fair market value, as determined by the Corporation, equal
to the Exercise Price, or in lieu of the delivery of actual Shares in such
tender, the Corporation may accept an attestation by the Participant, in a form
prescribed by the Corporation or its authorized representative, that the
Participant owns sufficient Shares, which have been owned by the Participant for
at least six months prior to said tender, of record or in an account in street
name to satisfy the Exercise Price, and such attestation will be deemed a tender
of Shares for purposes of this method of exercise. In the event a Participant
tenders Shares to pay the Exercise Price, tender of Shares acquired through
exercise of an Incentive Stock Option may result in unfavorable income tax
consequences unless such Shares are held for at least two years from the Grant
Date of the Incentive Stock Option and one year from the date of exercise of the
Incentive Stock Option. The Corporation or its authorized representative may
accept payment of the Exercise Price in the form of a Participant’s personal
check. Payment may also be made by delivery (including by FAX transmission) to
the Corporation or its authorized representative of an executed irrevocable
option exercise form together with irrevocable instructions to an approved
registered investment broker to sell Shares in an amount sufficient to pay the
Exercise Price plus any applicable withholding taxes and to transfer the
proceeds of such sale to the Corporation.

(B) If required by the Corporation, by giving satisfactory assurance in writing,
signed by the Participant, the Participant shall give his or her assurance that
the Shares subject to the Option are being purchased for investment and not with
a view to the distribution thereof; provided that such assurance shall be deemed
inapplicable to (1) any sale of the Shares by such Participant made in
accordance with the terms of a registration statement covering such sale, which
has heretofore been (or may hereafter be) filed and become effective under the
Securities Act of 1933, as amended (the “Securities Act”) and with respect to
which no stop order suspending the effectiveness thereof has been issued, and
(2) any other sale of the Shares with respect to which, in the opinion of
counsel for the Corporation, such assurance is not required to be given in order
to comply with the provisions of the Securities Act.

(C) As soon as practicable after receipt of the notice and the assurance
described in Sections II.6(A) and (B), the Corporation shall, without transfer
or issue tax (except for withholding tax arrangements contemplated in
Section VII.6) and without other incidental expense to the Participant, cause an
appropriate book entry to be entered in the records of the Corporation’s
transfer agent recording the Participant’s unrestricted interest in the
purchased Shares; provided, however, that the time of such delivery may be
postponed by the Corporation for such period as may be required for it with
reasonable diligence to comply with applicable registration requirements under
the Securities Act, the Exchange Act, any applicable listing requirements of any
national securities exchange and requirements under any other law or regulation
applicable to the issuance or transfer of the Shares.

7. Limitations on Transfer. An Option shall, during a Participant’s lifetime, be
exercisable only by the Participant. No Option or any right granted thereunder
shall be transferable by the Participant by operation of law or otherwise, other
than by will or the laws of descent and distribution. Notwithstanding the
foregoing, (i) a Participant may designate a beneficiary to succeed, after the
Participant’s death, to all of the Participant’s Options outstanding on the date
of death; (ii) a Nonstatutory Stock Option may be transferable pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act; and (iii) any Participant, who is a
senior executive officer recommended by the Chief Executive Officer and approved
by the Administrator may voluntarily transfer any Nonstatutory Stock Option to a
Family Member as a gift or through a transfer to an entity in which more than
50% of the voting interests are owned by Family Members (or the Participant) in
exchange for an interest in that entity. In the event of any attempt by a
Participant to alienate, assign, pledge, hypothecate, or otherwise dispose of an
Option or of any right thereunder, except as provided herein, or in the event of
the levy of any attachment, execution, or similar process upon the rights or
interest hereby conferred, the Corporation at its election may terminate the
affected Option by notice to the Participant and the Option shall thereupon
become null and void.

8. No Shareholder Rights. Neither a Participant nor any person entitled to
exercise a Participant’s rights in the event of the Participant’s death shall
have any of the rights of a shareholder with respect to the Shares subject to an
Option except to the extent that a book entry has been entered in the records of
the Corporation’s transfer agent with respect to such Shares upon the exercise
of an Option.

  III.   RESTRICTED STOCK

1. Restricted Stock Agreement. A Restricted Stock Award granted under the Plan
shall be evidenced by an Restricted Stock Agreement to be executed by the
Participant and the Corporation setting forth the terms and conditions of the
Restricted Stock Award. Each Restricted Stock Agreement shall incorporate by
reference and be subject to this Statement of Terms and Conditions and the terms
and conditions of the Plan.

2. Rights with Respect to Shares of Restricted Stock. Upon written acceptance of
a grant of Restricted Stock Award by a Participant, including the restrictions
and other terms and conditions described in the Plan, the Restricted Stock
Agreement and herein, the Corporation shall cause an appropriate book entry to
entered in the records of the Corporation’s transfer agent recording the
Participant’s interest in the Restricted Stock. From and after the Grant Date,
the Participant shall have absolute ownership of such shares of Restricted
Stock, including the right to vote and to receive dividends thereon, subject to
the terms, conditions and restrictions described in the Plan, the Restricted
Stock Agreement and this Statement of Terms and Conditions.

3. Special Restrictions. Each Restricted Stock Award made under the Plan shall
contain the following terms, conditions and restrictions and such additional
terms, conditions and restrictions as may be determined by the Administrator;
provided, however, that no Restricted Stock grant shall be subject to additional
terms, conditions and restrictions which are more favorable to a Participant
than the terms, conditions and restrictions set forth elsewhere in the Plan, the
Restricted Stock Agreement or this Statement of Terms and Conditions.

(A) Restrictions. Until the restrictions imposed on any Restricted Stock grant
shall lapse, shares of Restricted Stock granted to a Participant: (i) shall not
be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of,
other than pursuant to a qualified domestic relations order as defined in the
Code or Title I of the Employee Retirement Income Security Act and (ii) shall,
if the Participant’s continuous employment with the Corporation or any of its
affiliates shall terminate for any reason (except as otherwise provided in the
Plan or in Section III.3(B)) be returned to the Corporation forthwith, and all
the rights of the Participant to such shares shall immediately terminate. If a
Participant is absent from work with the Corporation or an affiliate because of
his or her Short-Term Disability or because the Participant is on an approved
leave of absence, the Participant shall not be deemed during the period of any
such absence, by virtue of such absence alone, to have terminated employment
with the Corporation or an affiliate except as the Administrator may otherwise
expressly determine. Notwithstanding the foregoing, if the Participant is on a
voluntarily leave of absence for the purpose of serving the government of the
country of which the Participant is a citizen or in which the Participant’s
principal place of employment is located and such leave exceeds twelve months in
duration, then the Participant shall be deemed to have terminated employment
with the Corporation or an affiliate for purposes of this Section III.3(A).

(B) Termination of Employment by Reason of Death, Long-Term Disability or Normal
Retirement. Notwithstanding any provision contained herein or in the Plan or the
Restricted Stock Agreement to the contrary, if a Participant who has been in the
continuous employment of the Corporation or any of its affiliates since the
Grant Date of a Restricted Stock Award ceases to be a bona fide employee of the
Corporation or an affiliate as a result of death, Long-Term Disability, or
Normal Retirement, then the restrictions imposed on any Restricted Stock Award
shall lapse as to all shares of stock granted to such Participant pursuant to
such Restricted Stock Award on the date of such termination.

(C) Termination of Employment by Reason of Early Retirement. Notwithstanding any
provision contained herein or in the Plan or the Restricted Stock Agreement to
the contrary, if a Participant who has been in the continuous employment of the
Corporation or any of its affiliates since the Grant Date of a Restricted Stock
Award ceases to be a bona fide employee of the Corporation of an affiliate by
reason of Early Retirement, the Administrator may, in its sole discretion (and
subject to conditions deemed appropriate in the circumstances), accelerate the
vesting schedule of the Participant’s Restricted Stock Award effective as of the
date of the Participant’s Early Retirement.

4. Dividends. Cash dividends paid with respect to the Restricted Stock during
the Restriction Period shall be paid directly to the Participant during the
Restriction Period. Stock dividends paid with respect to Restricted Stock during
the Restriction Period shall be treated as Restricted Stock which shall be
subject to the same restrictions as the original award for the duration of the
Restricted Period.

5. Election to Recognize Gross Income in the Year of Grant. If any Participant
validly elects within thirty days of the Grant Date, to include in gross income
for federal income tax purposes an amount equal to the fair market value of the
shares of Restricted Stock granted on the Grant Date, such Participant shall pay
to the Corporation, or make arrangements satisfactory to the Administrator to
pay to the Corporation in the year of such grant, any federal, state or local
taxes required to be withheld with respect to such shares in accordance with
Section VII.6.

6. Restrictive Legend. Each book entry in the records of the Corporation’s
transfer agent evidencing shares of stock granted pursuant to a Restricted Stock
grant may bear an appropriate legend referring to the terms, conditions and
restrictions described in the Plan, the Restricted Stock Agreement and this
Statement of Terms and Conditions.

7. Expiration of Restricted Period. If and when the Restriction Period
applicable to the Restricted Stock expires without a prior forfeiture, an
appropriate book entry recording the Participant’s interest in the unrestricted
Shares shall be entered on the records of the Corporation’s transfer agent.

  IV.   RESTRICTED STOCK UNITS AND PERFORMANCE SHARES

1. Award Agreement.

(A) A Restricted Stock Unit Award granted under the Plan shall be evidenced by a
Restricted Stock Unit Agreement to be executed by the Participant and the
Corporation setting forth the terms and conditions of the Restricted Stock Unit
Award. Each Restricted Stock Unit Agreement shall incorporate by reference and
be subject to this Statement of Terms and Conditions and the terms and
conditions of the Plan.

(B) Performance Shares granted under the Plan shall be evidenced by a
Performance Share Agreement to be executed by the Participant and the
Corporation setting forth the terms and conditions of the Performance Shares.
Each Performance Share Agreement shall incorporate by reference and be subject
to this Statement of Terms and Conditions and the terms and conditions of the
Plan.

2. Special Restrictions. Restricted Stock Unit Awards and Performance Shares
granted under the Plan shall contain the following terms, conditions and
restrictions and such additional terms, conditions and restrictions as may be
determined by the Administrator; provided, however, that no such Award shall be
subject to additional terms, conditions and restrictions which are more
favorable to a Participant than the terms, conditions and restrictions set forth
elsewhere in the Plan, the Restricted Stock Unit Agreement or Performance Share
Agreement or this Statement of Terms and Conditions.

(A) Restrictions. If a Participant ceases to be a bona fide employee of the
Corporation or an affiliates (except as otherwise provided in the Plan or in
Section III.3(B)) prior to the lapse of the restrictions imposed on the Award,
the unvested Restricted Stock Units or Performance Shares shall be returned to
the Corporation, and all the rights of the Participant to such Share Equivalents
shall immediately terminate. If a Participant is absent from work with the
Corporation or an affiliate because of his or her Short-Term Disability or
because the Participant is on an approved leave of absence, the Participant
shall not be deemed during the period of any such absence, by virtue of such
absence alone, to have terminated employment with the Corporation or an
affiliate except as the Administrator may otherwise expressly determine.
Notwithstanding the foregoing, if the Participant is on a voluntarily leave of
absence for the purpose of serving the government of the country of which the
Participant is a citizen or in which the Participant’s principal place of
employment is located and such leave exceeds twelve months in duration, then the
Participant shall be deemed to have terminated employment with the Corporation
or an affiliate for purposes of this Section IV.2(A).

(B) Termination of Employment by Reason of Death, Long-Term Disability or Normal
Retirement. Notwithstanding any provision contained herein or in the Plan, the
Restricted Stock Unit Agreement or Performance Share Agreement to the contrary,
if a Participant who has been in the continuous employment of the Corporation or
any of its affiliates since the Grant Date shall, while in such employment, be
terminated as a result of death, Long-Term Disability, or Normal or Early
Retirement, then the restrictions imposed on any Restricted Stock Unit Award or
Performance Shares shall lapse as to all Share Equivalents granted to such
Participant pursuant to such Award on the date of such termination.

(C) Termination of Employment by Reason of Early Retirement. Notwithstanding any
provision contained herein or in the Plan or the Restricted Stock Unit Agreement
or Performance Share Agreement to the contrary, if a Participant who has been in
continuous employment of the Corporation or any of its affiliates since the
Grant Date of a Restricted Stock Unit Award or Performance Share Award ceases to
be a bona fide employee of the Corporation of an affiliate by reason of Early
Retirement, the Administrator may, in its sole discretion (and subject to
conditions deemed appropriate in the circumstances), accelerate the vesting
schedule of the Participant’s Restricted Stock Units or Performance Shares
effective as of the date of the Participant’s Early Retirement.

3. Dividend Equivalents. Dividend equivalents shall be credited in respect of
Restricted Stock Units and Performance Shares. Cash dividends shall be credited
on behalf of the Participant to a deferred cash account (in a manner designed to
comply with Code Section 409A). Stock dividends shall be converted into
additional Restricted Stock Units or Performance Shares, which will be subject
to all of the terms and conditions of the underlying Restricted Stock Unit Award
or Performance Shares, including the same vesting restrictions as the underlying
award.

4. Assignability. A Participant shall not be permitted to sell, transfer,
pledge, assign or encumber such Restricted Stock Units or Performance Shares,
other than pursuant to a qualified domestic relations order as defined in the
Code or Title I of the Employee Retirement Income Security Act.

5. No Shareholder Rights. Neither a Participant nor any person entitled to
exercise a Participant’s rights in the event of the Participant’s death shall
have any of the rights of a shareholder with respect to the Share Equivalents
subject to a Restricted Stock Unit Award or Performance Shares except to the
extent that a book entry has been entered in the records of the Corporation’s
transfer agent with respect to such Shares upon the payment of any vested
Restricted Stock Unit Award of Performance Shares.

6. Time of Payment of Restricted Stock Units and Performance Shares. Upon the
lapse of the restriction imposed on Restricted Stock Unit Awards or Performance
Shares, all Restricted Stock Units and Performance Shares that were not
forfeited pursuant to Sections IV.2(A) or V shall be paid to the Participant as
soon as reasonably practicable after the restrictions lapse. Payment shall be
made in Shares in the form of a an appropriate book entry entered in the records
of the Corporation’s transfer agent recording the Participant’s unrestricted
interest in the number of Shares equal to the number of vested Share Equivalents
subject to the Restricted Stock Unit Award or Performance Shares. The foregoing
notwithstanding, the Participant may elect to defer payment of the Restricted
Stock Units in the manner described in Section IV.6.

7. Deferral Election. Each Participant, pursuant to rules established by the
Administrator, may be entitled to elect to defer all or a percentage of any
payment in respect of a Restricted Stock Unit Award that he or she may be
entitled to receive as determined pursuant to Section IV.5. This election shall
be made by giving notice in a manner and within the time prescribed by the
Administrator and in compliance with Code Section 409A. Each Participant must
indicate the percentage (expressed in whole percentages) he or she chooses to
defer of any payment he or she may be entitled to receive. If no notice is
given, the Participant shall be deemed to have made no deferral election. Each
deferral election filed with the Corporation shall become irrevocable in
accordance with the terms and conditions of the Corporation’s Deferred
Compensation Administration Plan II (DCAP II) (or any successor plan) and in
compliance with Code Section 409A.

  V.   SPECIAL FORFEITURE AND REPAYMENT RULES

Any other provision of this Statement of Terms and Conditions to the contrary
notwithstanding, if the Administrator determines that a Participant has engaged
in any of the actions described in 3 below, the consequences set forth in 1 and
2 below shall result:

1. Any outstanding Options shall immediately and automatically terminate, be
forfeited and shall cease to be exercisable, without limitation. In addition,
any shares of Restricted Stock, Restricted Stock Units or Performance Shares as
to which the restrictions have not lapsed shall immediately and automatically be
forfeited and such shares or share equivalents shall be returned to the
Corporation and all of the rights of the Participant to such shares or share
equivalents shall immediately terminate.

2. If the restrictions imposed on any shares of Restricted Stock, Restricted
Stock Units or Performance Shares lapsed within six months prior to the date the
Corporation discovered that the Participant engaged in any action described in 3
below, the Participant, upon written notice from the Corporation, shall
immediately pay to the Corporation the economic value realized or obtained with
respect to such shares of Restricted Stock, the Restricted Stock Units or the
Performance Shares, measured at the date such shares or share equivalents
vested.

3. The consequences described in 1 and 2 above shall apply if the Participant,
either before or after termination of employment with the Corporation or any of
its affiliates:

(A) 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 Corporation or any of its 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, without limitation, 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 Corporation or
any of its affiliates intends or expects secrecy to be maintained;

(B) fails to promptly return all documents and other tangible items belonging to
the Corporation or any of its 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 for any reason;

(C) fails to provide the Corporation 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
Corporation or any of its 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 Corporation or any of
its affiliates at the time of the termination of the Participant’s employment
with the Corporation or any of its affiliates;

(D) fails to inform any new employer, before accepting employment, of the terms
of this section and of the Participant’s continuing obligation to maintain the
confidentiality of the trade secrets and other confidential information
belonging to the Corporation or any of its affiliates and obtained by the
Participant during the term of his employment with the Corporation or any of its
affiliates;

(E) induces or attempts to induce, directly or indirectly, any of the customers
of the Corporation or any of its affiliates, employees, representatives or
consultants to terminate, discontinue or cease working with or for the
Corporation or any of its affiliates, or to breach any contract with the
Corporation or any of its affiliates, in order to work with or for, or enter
into a contract with, the Participant or any third party; or

(F) engages in conduct which is not in good faith and which disrupts, damages,
impairs or interferes with the business, reputation or employees of the
Corporation or any of its affiliates.

The Administrator shall determine in its sole discretion whether the Participant
has engaged in any of the acts set forth in (A) through (F) above, and its
determination shall be conclusive and binding on all interested persons.

Any provision of this Section V which is determined by a court of competent
jurisdiction to be invalid or unenforceable shall 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 Section
V.

      VI.

2

CHANGE IN CONTROL

1. In the event of a Change in Control, all Options that are outstanding at the
time of such Change in Control shall become 100 percent vested and immediately
exercisable, all restrictions with respect to outstanding shares of Restricted
Stock shall lapse and such Shares shall become 100 percent vested and all
outstanding Restricted Stock Unit Awards, Performance Shares and Other
Share-Based Awards shall become 100 percent vested and immediately payable

2. For purposes of this Statement of Terms and Conditions, a “Change in Control”
of the Corporation shall be deemed to have occurred if any of the events set
forth in any one of the following paragraphs shall occur:

(i) Any “person” (as such term is used in sections 13(d) and 14(d) of the
Exchange Act), excluding the Corporation or any of its affiliates, a trustee or
any fiduciary holding securities under an employee benefit plan of the
Corporation 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 Corporation in substantially the
same proportions as their ownership of the Corporation, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 30% or more of the
combined voting power of the Corporation’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 Corporation 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 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;
or

(iii) The shareholders 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 Corporation
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 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 shareholders of the Corporation 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 the Corporation’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 the 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 Corporation immediately prior to such transaction or series of
transactions.

  VII.   MISCELLANEOUS

1. No Effect on Terms of Employment. Subject to the terms of any employment
contract entered into by the Corporation and a Participant to the contrary, the
Corporation (or its affiliate which employs him) shall have the right to
terminate or change the terms of employment of a Participant at any time and for
any reason whatsoever.

2. Grants to Participants in Foreign Countries. In making grants to Participants
in foreign countries, the Administrator has the full discretion to deviate from
this Statement of Terms and Conditions in order to adjust grants under the Plan
to prevailing local conditions, including custom and legal and tax requirements.

3. Information Notification. Any information required to be given under the
terms of a Agreement shall be addressed to the Corporation in care of its
Secretary at McKesson Plaza, One Post Street, San Francisco, California 94104,
and any notice to be given to a Participant shall be addressed to him at the
address indicated beneath his or her name on the Agreement or such other address
as either party may designate in writing to the other. Any such notice shall be
deemed to have been duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, registered or certified and deposited (postage
or registration or certification fee prepaid) in a post office or branch post
office regularly maintained by the United States.

4. Administrator Decisions Conclusive. All decisions of the Administrator
administering the Plan upon any questions arising under the Plan, under this
Statement of Terms and Conditions, or under an Agreement, shall be conclusive.

5. No Effect on Other Benefit Plans. Nothing herein contained shall affect a
Participant’s right to participate in and receive benefits from and in
accordance with the then current provisions of any pensions, insurance or other
employment welfare plan or program offered by the Corporation.

6. Withholding. Each Participant shall agree to make appropriate arrangements
with the Corporation and his or her employer for satisfaction of any applicable
federal, state or local income tax withholding requirements or payroll tax
requirements. With respect to the exercise of an Option, such arrangements may
include an election by A Participant to have the Corporation retain some portion
of the Stock acquired pursuant to exercise of the Option to satisfy such
withholding requirements. The election must be made prior to the date on which
the amount to be withheld is determined.

If a qualifying election is made, then upon exercise of an Option, in whole or
in part, the Corporation will retain the number of Shares having a value equal
to the amount necessary to satisfy any withholding requirements. Calculation of
the number of Shares to be withheld shall be made based on the closing price of
the Stock on the New York Stock Exchange on the date that the amount of tax to
be withheld is determined. In no event, however, shall the Corporation be
required to issue fractional shares of Stock.

The Administrator shall be authorized to establish such rules, forms and
procedures as it deems necessary to implement the foregoing.

With respect the vesting of an Award other than an Option, if the Participant
does not make an arrangement with Corporation and his or her employer for
satisfaction of the applicable income and withholding requirements or social
security requirements in advance of the vesting date, the Corporation shall
retain the number of Shares (that otherwise would have been payable to the
Participant) having a value equal to the amount necessary to satisfy any
withholding requirements. Calculation of the number of such Shares shall be as
described above.

7. Successors. This Statement of Terms and Conditions and the Award Agreements
shall be binding upon and inure to the benefit of any successor or successors of
the Corporation. “Participant” as used herein shall include the Participant’s
Beneficiary.

8. California Law. The interpretation, performance, and enforcement of this
Statement of Terms and Conditions and all Award Agreements shall be governed by
the laws of the State of California.

  VIII.   DEFINITIONS

When capitalized in this Statement of Terms and Conditions, the following terms
shall have the meaning set forth below:

1. “Beneficiary” means a person designated as such by a Participant or a
Beneficiary. If a Beneficiary has not been designated or if no designated
Beneficiary survives the Participant, distribution will be made to the
Participant’s surviving spouse, or if none, to the Participant’s children in
equal shares, or if none, to the residuary beneficiary under the terms of the
Participant’s or Beneficiary’s last will and testament or, in the absence of a
last will and testament, to the Participant’s or Beneficiary’s estate as
Beneficiary.

2. “Cause” means termination of the Participant’s employment with the
Corporation or an affiliate upon the Participant’s negligent or willful
engagement in misconduct which, in the sole determination of the Chief Executive
Officer (or his designee), is injurious to the Corporation, its employees, or
its customers.

3. “Early Retirement” means a termination of employment which occurs prior to
Normal Retirement but on or after the date on which the Participant’s age
(expressed in terms of years and completed months) plus service with the
Corporation equals 65.

4. “Family Member” means any person identified as an “immediate family” member
in Rule 16(a)-1(e) of the Exchange Act, as such Rule may be amended from time to
time. Notwithstanding the foregoing, the Administrator may designate any other
person(s) or entity(ies) as a “family member.”

5. “Grant Date” means the date the Administrator grants the Award.

6. “Long-Term Disability” means 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.

7. “Normal Retirement” means retirement at age 65 (62, in the case of a
participant in the McKesson Corporation 1984 Executive Benefit Retirement Plan)
with at least ten years of Service with the Corporation.

8. “Option Period” means the period commencing on the Grant Date of an Option
and, except at otherwise provided in Section II.5, ending on the Termination
Date.

9. “Service” means “Service” as defined in the Corporation’s Profit-Sharing
Investment Plan.

10. “Short-Term Disability” means short-term disability as defined in the
Corporation’s short-term disability plan.

11. “Termination Date” means the date that an Option expires as set forth in the
Option Agreement.

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