Exhibit 10.7

McKESSON CORPORATION
DEFERRED COMPENSATION ADMINISTRATION PLAN II (“DCAP II”)

(Amended and Restated as of October 28, 2004)

 

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TABLE OF CONTENTS

             
A.
  PURPOSE     1  
 
           
B.
  ERISA PLAN     1  
 
           
C.
  PARTICIPATION     1  
 
           
D.
  AMOUNTS OF DEFERRAL     2  
 
           
E.
  PAYMENT OF DEFERRED COMPENSATION     3  
 
           
F.
  SOURCE OF PAYMENT     7  
 
           
G.
  MISCELLANEOUS     7  
 
           
H.
  ADMINISTRATION OF THE PLAN     8  
 
           
I.
  AMENDMENT OR TERMINATION OF THE PLAN     8  
 
           
J.
  CLAIMS AND APPEALS     8  
 
           
K.
  DEFINITIONS     10  
 
           
L.
  SUCCESSORS     11  
 
           
M.
  EXECUTION     11  
 
            APPENDIX A DEFERRAL OF RESTRICTED STOCK PROCEEDS     A-1  

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McKESSON CORPORATION
DEFERRED COMPENSATION ADMINISTRATION PLAN II

(Amended and Restated as of October 28, 2004)

A. PURPOSE

     This Plan was established to enhance the Company’s ability to attract and
retain executive personnel and members of the Board who are not otherwise
employees of the Company. The Plan replaced and superseded the Directors’
Deferred Compensation Plan, the Management Deferred Compensation Plan, the
Deferred Compensation Administration Plan, and the PCS, Inc. Optional Deferred
Compensation Administration Plan. This Plan was originally approved by the Board
and became effective on January 27, 1993. Since its original effective date, 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 set forth below.

B. ERISA PLAN

     This Plan is an unfunded deferred compensation program intended primarily
for a select group of management or highly compensated employees of the Company
and members of the Board who are not employees of 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. The Administrator may, at his or her
discretion, and at any time, and from time to time, select Company executives
who may elect to participate in this Plan (“Eligible Executives”). Selection of
Eligible Executives may be evidenced by the terms of the executive’s employment
contract with the Company, or by inclusion among the persons or classes of
persons specified by the Administrator.

          The Administrator may, at his or her discretion, and at any time, and
from time to time, designate additional Eligible Executives and/or provide that
executives previously designated are no longer Eligible Executives. If the
Administrator determines that an executive is no longer an Eligible Executive,
he or she shall remain a Participant in the Plan until all amounts credited to
his or her Account prior to such determination are paid out under the terms of
the Plan (or until death, if earlier).

          b. Eligible Directors. Each individual who is a member of the Board of
McKesson and who is not a Company employee 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 compensation 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

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time and in the form specified by the Administrator. On electing to defer
compensation under this Plan, the Participant shall be deemed to accept all of
the terms and conditions of this Plan. All elections to defer amounts under this
Plan shall be made pursuant to an election executed and filed with the
Administrator before the amounts so deferred are earned.

     3. Notification of Participants. The Administrator shall annually notify
each Eligible Executive and each Eligible Director that he or she may
participate in the Plan for the next Year. Such notice shall also set forth the
Declared Rate for the next Year.

     4. Relation to Other Plans.

          a. Participation in 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.
Deferrals under this Plan may result in a reduction of benefits payable under
the Social Security Act, the Retirement Plan and the PSIP.

          b. Automatic Deferral. Prior to January 1, 2000 and subject to the
last sentence of Section D.2 below, an Eligible Executive who makes an election
to defer compensation under this Plan shall have an additional amount
automatically deferred from his or her remaining compensation. The amount of
such additional deferral shall be an amount equal to (x) the amount deferred by
the Eligible Executive into the Plan, multiplied by (y) the percentage rate of
the Eligible Executive’s deferrals into the PSIP, as in effect at the beginning
of each Year.

          Effective as of January 1, 2000, an Eligible Executive’s base salary
deferrals and annual bonus award deferrals (but not DCAP housing deferrals,
sign-on and retention bonus deferrals and Long-Term Incentive Plan award
deferrals) shall be credited, in a separate Account under the Plan with an
amount calculated to be the Matching Employer Contribution percentage that would
have been credited to the Eligible Executive’s PSIP account if six percent (6%)
of such deferrals under DCAP II had been made under the PSIP. For these
purposes, Matching Employer Contribution shall have the meaning defined in the
PSIP. (Prior to January 1, 2000, the additional deferrals were credited to the
Eligible Executive’s account in the McKesson Corporation Supplemental PSIP and
governed by the terms of that plan.)

D. AMOUNTS OF DEFERRAL

     1. Minimum Deferral. The minimum amount that an Eligible Executive may
defer under this Plan for any Year is $5,000 of base salary, or $5,000 of any
annual bonus award(s) and $5,000 of any Long-Term Incentive Plan award. The
minimum amount of compensation that an Eligible Director may defer for any Year
is $5,000.

     2. Maximum Deferral for Eligible Executives. The maximum amount of
compensation which an Eligible Executive may defer under this Plan for any Year
is (i) 75% (80% prior to January 1, 2000) of the amount of such Eligible
Executive’s base salary for such Year, and (ii) 90% (100% prior to January 1,
2002) of any annual bonus award and/or any Long-Term Incentive Plan award
determined and payable to him or her in such Year. Additionally,

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effective January 1, 2000, the Executive Vice President of Human Resources may
change the maximum amount (expressed as a percentage limit) of base salary that
Eligible Executives as a group may defer under the Plan for any Year.
Notwithstanding these limits, deferrals may be reduced by the Company to leave
sufficient remaining compensation legally required for taxes and other
authorized deductions, including, but not limited to, those for Company benefit
programs.

     3. Maximum Deferral for Eligible Directors. The maximum amount of
compensation which an Eligible Director may defer under this Plan for any Year
is the amount of any annual retainer (other than the portion of the annual
retainer subject to Mandatory Deferral under and as defined in the 1997
Non-Employee Directors’ Equity Compensation and Deferral Plan) and other fees
from McKesson earned by him or her in any such Year.

E. PAYMENT OF DEFERRED COMPENSATION

     1. Book Account and Interest Credit. Compensation deferred by a Participant
under the Plan shall be credited to a separate bookkeeping account for such
Participant (the “Account”). (Sub-Accounts may be established for each Year for
which the Participant elects to defer compensation.) Interest shall be credited
to each Account (including Sub-Accounts established thereunder) for each Year at
a rate equal to a rate declared by the Compensation Committee acting in its sole
discretion after taking into account, among other things, the following factors:
McKesson’s cost of funds, corporate tax brackets, expected amount and duration
of deferrals, number and age of eligible Participants, expected time and manner
of payment of deferred amounts, and expected performance of available fixed-rate
insurance contracts covering the lives of Participants (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 at the
twelfth root of 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
compensation, 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 five years after the end of
the Year for which compensation is deferred. Notwithstanding the foregoing, the
five-year minimum deferral period shall not apply to payments made as a result
of death, Disability, Retirement, pre-retirement termination, a Change in
Control 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 reaches age 72 or, in the case of an Eligible Director, the
January after McKesson’s annual meeting of stockholders next following the

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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 five-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 of any election to defer compensation under the Plan of the
time and form 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 forms 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 sum; provided, however, that

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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 was 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 was 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
any entity as his or her Beneficiary. Designation shall be in writing and shall
become effective only when filed with the Administrator. Such filing must occur
before the Participant’s death. A Participant may change the Beneficiary, 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 the
Participant’s financial affairs.

     9. Other Withdrawals. 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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          With respect to deferrals made prior to January 1, 1994, deferred
funds shall be distributed upon a Change in Control, if the Participant has so
elected.

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 the payment of benefits 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. Other than 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 or to any person whatsoever. These
benefits shall be exempt from the claims of creditors or other claimants and
from all orders, decrees, levies, garnishments or executions to the fullest
extent allowed by law.

          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 not already provided
under the Plan, including without limitation, with respect to form and time of
payment.

     3. Applicable Law and 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

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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 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 of the Plan 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. All elections to defer compensation 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

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days after the date the request is received, unless the circumstances require an
extension of time. 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 to 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

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access to, and copies of, all documents, records, and other information relevant
to the claim for 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.

          f. 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” means 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. “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.

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

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

     8. “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.

     9. “Eligible Director” shall mean a member of the Board described by
Section C.1.b.

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

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

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

     13. “Participant” shall be any Company executive or member of the Board 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.

     14. “Plan” shall mean the McKesson Corporation Deferred Compensation
Administration Plan II (“DCAP II”).

     15. “PSIP” shall mean the McKesson Corporation Profit-Sharing Investment
Plan.

     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 PSIP equals 65, (b) attaining eligibility for a Retirement Allowance
under the terms of the 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 this Plan, Retirement for an
Eligible Director shall mean cessation of service as a member of the Board on or
after the completion of at least two successive terms as a member of the Board.

     17. “Retirement Plan” shall mean the McKesson Corporation Retirement Plan.

     18. “Year” is the calendar year.

L. SUCCESSORS

     This Plan shall be binding on the Company and any successors or 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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APPENDIX A

DEFERRAL OF RESTRICTED STOCK PROCEEDS

Any other provision of the Plan to the contrary notwithstanding, the following
provisions shall apply to the cash paid to the Company by Eli Lilly and Company
(“Lilly”) upon the tender of certain shares of restricted stock (the
“Transaction Proceeds”), which had been granted to executives under the
Company’s 1988 Restricted Stock Plan, at the completion of the transaction
involving the acquisition of PCS Health Systems, Inc. (“PCS”) by Lilly (the
“Transaction”).

     1. Former executives of the Company may be selected to participate in the
Plan, and, if so selected, shall be deemed Eligible Executives.

     2. The Transaction Proceeds shall be automatically deferred into the Plan
on behalf of those Eligible Executives who hold outstanding Restricted Stock
Grants under the Company’s 1988 Restricted Stock Plan. Such Eligible Executives
shall be deemed to have elected the deferral of the Transaction Proceeds.

     3. The five-year minimum deferral period required by Section E.2 of the
Plan shall not apply to the deferral of the Transaction Proceeds.

     4. Transaction Proceeds shall not be deferred on behalf of Eligible
Executives who are also employees of PCS.

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