McKesson Corp – ‘DEFR14A’ on 7/16/99

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Revised Definitive Proxy Solicitation Material   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: DEFR14A     Revised Definitive Proxy Materials                    46    247K 

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SCHEDULE 14A INFORMATION  

Proxy Statement Pursuant to Section 14(a) of the Securities 
Exchange Act of 1934 (Amendment No. 1)  

Filed by the Registrant [X]                                                     

Filed by a Party other than the Registrant [_]                                  

Check the appropriate box:                                                      

[_]  Preliminary Proxy Statement         [_]  CONFIDENTIAL, FOR USE OF THE      
                                            COMMISSION ONLY (AS PERMITTED BY
                             RULE 14A-6(E)(2))

[_]  Definitive Proxy Statement                                                 

[X]  Definitive Revised Materials                                               

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

McKesson HBOC, Inc. 
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)  

McKesson HBOC, Inc. 
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)  

Payment of Filing Fee (Check the appropriate box):                              

[X]  No fee required                                                            

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.   

(1) Title of each class of securities to which transaction applies:   

   -------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:      

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(3) Per unit price or other underlying value of transaction computed  
   pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:                  

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(5) Total fee paid:                                                   

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[_]  Fee paid previously with preliminary materials.                            

[_]  Check box if any part of the fee is offset as provided by Exchange         
  Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.           

(1) Amount Previously Paid:                                           

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(2) Form, Schedule or Registration Statement No.:                     

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(3) Filing Party:                                                     

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(4) Date Filed:                                                       

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Notes:                                                                          

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[McKesson Logo Appears Here]                                                    

Notice of Annual Meeting of Stockholders                                        
of McKesson HBOC, Inc.                                                          

Date: Wednesday, August 25, 1999                                                

Time: 10:00 A.M., Pacific Daylight Time                                         

Place: Palace Hotel                                                             
2 New Montgomery Street                                               
San Francisco, California 94105                                       

Purpose: .Elect four directors                                                  
. Approve the Employee Stock Purchase Plan                            
. Approve an increase in the number of authorized shares for the Stock
Purchase Plan                                                     
. Conduct other business if properly raised                           

Your Board of Directors recommends that you vote in favor of the three          
proposals outlined in this proxy statement.                                     

Stockholders of record at the close of business on July 14, 1999, may vote at   
the Annual Meeting or any adjournment or postponement thereof.                  

Your vote is important. Whether you plan to attend the meeting, or not, please  
cast your vote by telephone, through the Internet or complete, sign and return  
the enclosed proxy card in the envelope provided. If you attend the meeting and 
prefer to vote in person, you may do so even if you have previously voted by    
proxy.                                                                          

                                      By Order of the Board of Directors

                        /s/ IVAN D. MEYERSON

                    IVAN D. MEYERSON
                                  Senior Vice President, General
                         Counsel and Secretary

One Post Street                                                                 
San Francisco, CA 94104-5296                                                    
July 21, 1999                                                                   

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CONTENTS                                                                        

                                                                [Download Table]

                                                                           Page
                                                                           ----
                                                                               
General Information.......................................................   1 
Proxies and Voting at the Meeting.........................................   1 
Proxy Materials and Annual Report.........................................   2 
Attendance at the Meeting.................................................   2 
Dividend Reinvestment Plan................................................   2 
Profit-Sharing Investment Plan............................................   2 
Vote Required and Method of Counting Votes................................   2 
Security Ownership of Certain Beneficial Owners...........................   2 
Security Ownership of Directors and Executive Officers....................   3 
Election of Directors.....................................................   4 
Board Meetings and Committees.............................................   7 
Compensation of Directors.................................................   8 
Report of the Compensation Committee on Executive Compensation............  11 
Executive Compensation....................................................  13 
  Summary Compensation Table..............................................  14 
  Option/SAR Grants in the Last Fiscal Year...............................  15 
  Aggregated Option/SAR Exercises in the Last Fiscal Year and Fiscal Year-     
   End Option/ SAR Values.................................................  16 
  Long-Term Incentive Plan Awards in the Last Fiscal Year.................  17 
Stock Price Performance Graph.............................................  18 
Approval of the McKesson HBOC, Inc. Employee Stock Purchase Plan..........  19 
Proposal to Amend the McKesson HBOC, Inc. Stock Purchase Plan.............  21 
Employment Agreements, Executive Severance Policy and Termination of           
 Employment and Change in Control Arrangements............................  23 
Pension Benefits..........................................................  27 
Certain Relationships and Related Transactions............................  27 
Indebtedness of Executive Officers........................................  28 
Independent Auditors......................................................  29 
Section 16(a) Beneficial Ownership Reporting Compliance...................  29 
Solicitation of Proxies...................................................  29 
Other Matters.............................................................  29 
Advance Notice Procedures.................................................  29 
Stockholder Proposals for 2000 Annual Meeting.............................  30 
Appendix A--McKesson HBOC, Inc. 1998 Employee Stock Purchase Plan......... A-1 

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PROXY STATEMENT 

General Information                                                             

On January 12, 1999, McKesson Corporation ("McKesson"), a Delaware corporation, 
completed a merger with HBO & Company ("HBOC") upon the approval of the         
transaction by stockholders of both McKesson and HBOC (the "Merger"). Holders   
of HBOC common stock received 0.37 of a share of McKesson common stock in       
exchange for each share of HBOC common stock that they owned. McKesson then     
changed its name to McKesson HBOC, Inc. (the "Company").                        

On June 21, 1999, the Company announced, among other things, that its Board of  
Directors elected Alan Seelenfreund Chairman of the Board and, effective July   
15, 1999, elected John H. Hammergren and David L. Mahoney as Co-Presidents and  
Co-Chief Executive Officers of the Company. Heidi E. Yodowitz, Senior Vice      
President and Controller, was appointed acting Chief Financial Officer. Mark A. 
Pulido resigned from his position as Chief Executive Officer and director and   
Richard H. Hawkins resigned from his position as Executive Vice President and   
Chief Financial Officer effective July 15, 1999. Since the announcement, John   
H. Hammergren and David L. Mahoney have been elected directors of the Company.  

On the same date the Company announced that Charles W. McCall was removed as    
Chairman of the Board and dismissed as an employee of the Company and that      
Albert J. Bergonzi, formerly President and Chief Executive Officer of the       
Information Technology Business (formerly HBOC), was dismissed for cause.       

These changes are reflected in the information that follows.                    

Proxies and Voting at the Meeting                                               

The Company's Board of Directors is soliciting proxies to be voted at the       
Annual Meeting of Stockholders to be held August 25, 1999 (the "Meeting"). This 
proxy statement includes information about the issues to be voted upon at the   
Meeting.                                                                        

On July 21, 1999 the Company began mailing these proxy materials to all         
stockholders of record at the close of business on July 14, 1999. On this date, 
there were approximately 281,333,000 shares of the Company's common stock       
outstanding and entitled to vote. Each share is entitled to one vote on each    
matter properly brought before the Meeting.                                     

As required by Delaware law, a list of stockholders entitled to vote at the     
Meeting will be available at the Palace Hotel, 2 New Montgomery Street, San     
Francisco, California, on August 25, 1999, and for 10 days prior to the         
Meeting, during normal business hours, at the offices of the Company, One Post  
Street, San Francisco, California 94104.                                        

Shares can be voted only if the stockholder is present at the Meeting in person 
or by proxy. Any person giving a proxy may revoke it at any time before the     
Meeting by sending in a written revocation or a proxy bearing a later date.     
Stockholders may also revoke their proxies by attending the Meeting in person   
and casting a ballot.                                                           

Stockholders of record can give proxies by calling a toll free telephone        
number, by using the Internet, or by mailing their signed proxy cards. Specific 
instructions for stockholders of record who wish to use the telephone or        
Internet voting procedures are set forth on the enclosed proxy card.            
Participants in the Company's Profit-Sharing Investment Plan ("PSIP") can give  
proxies by calling a toll free telephone number or by mailing their signed      
proxy cards.                                                                    

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Proxy Materials and Annual Report                                               

The Company's Notice of Annual Meeting and Proxy Statement is available on the  
Company's website under the Investor Resource tab on the Internet at            
www.mckhboc.com.                                                                

The Company's 1999 Annual Report to Stockholders, which includes the Annual     
Report on Form 10-K for the fiscal year ended March 31, 1999 ("FY 1999"),       
accompanies these proxy materials.                                              

Attendance at the Meeting                                                       

If you plan to attend the Meeting, you will need to bring your admission        
ticket. You will find an admission ticket attached to the proxy card and to the 
PSIP voting instruction card. If your shares are held in the name of a bank,    
broker or other holder of record and you plan to attend the Meeting in person,  
you may obtain an admission ticket in advance by sending a written request,     
along with proof of ownership, such as a bank or brokerage account statement,   
to the Company's transfer agent, First Chicago Trust Company of New York, 525   
Washington Blvd., Suite 4690, Jersey City, New Jersey 07310. Stockholders who   
do not have admission tickets will only be admitted upon verification of        
ownership at the door.                                                          

Dividend Reinvestment Plan                                                      

For those stockholders who participate in the Company's Automatic Dividend      
Reinvestment Plan, the enclosed proxy includes all full shares of common stock  
held in the stockholder's dividend reinvestment plan account on the record date 
for the Meeting, as well as shares held of record by the stockholder.           

Profit-Sharing Investment Plan                                                  

Participants in the Company's PSIP have the right to instruct the PSIP Trustee, 
on a confidential basis, how the shares allocated to their accounts are to be   
voted and will receive a separate PSIP voting instruction card for that         
purpose.                                                                        

Vote Required and Method of Counting Votes                                      

The presence in person or by proxy of holders of a majority of the outstanding  
shares of common stock entitled to vote will constitute a quorum for the        
transaction of business at the Meeting. The director nominees who receive the   
greatest number of votes cast in person or by proxy at the Meeting will be      
elected directors of the Company. The affirmative vote of the holders of the    
majority of the shares present or represented by proxy at the Meeting is        
required for the approval of each of the other matters to be voted upon.        
Abstentions for these matters will be treated as votes cast on a particular     
matter as well as shares present and represented for purposes of establishing a 
quorum. Broker nonvotes (i.e., when a broker does not have authority to vote on 
a specific issue) will not be treated as votes cast on a particular matter but  
will be treated as shares present or represented for purposes of establishing a 
quorum.                                                                         

Security Ownership of Certain Beneficial Owners                                 

The following table sets forth, as of July 1, 1999, information regarding       
ownership of the Company's outstanding common stock, by any entity or person    
known by the Company to be the beneficial owner of more than five percent of    
the outstanding shares of common stock.                                         

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                                                                [Download Table]

                                                 Amount and Nature           
              Name and Address of                  of Beneficial   Percent of
                Beneficial Owner                     Ownership       Class   
              -------------------                ----------------- ----------
                                                                             
The Chase Manhattan Bank, N.A.,                                              
as Trustee for the McKesson HBOC, Inc.                                       
Profit-Sharing Investment Plan                                               
1 Chase Manhattan Plaza                                                      
New York, NY 10081..............................    19,141,103(1)     6.81   

The Equitable Companies Incorporated, AXA                                    
and the Mutuelles AXA as a group(2).............    33,057,493(3)     12.2   

--------                                                                        
(1) These shares are held in trust for the benefit of participants in the PSIP, 
 for which The Chase Manhattan Bank, N.A. is the Trustee. Shares that have
 been allocated to the individual accounts of participants in the PSIP are
 voted by the Trustee as instructed by PSIP participants. Shares allocated
to participants' PAYSOP accounts for which no voting instructions are   
received will not be voted. The PSIP provides that all other shares for 
   which no voting instructions are received from participants and unallocated
  shares of common stock held in the leveraged employee stock ownership plan
(the "Leveraged ESOP") established as part of the PSIP, will be voted by
the Trustee in the same proportion as shares as to which voting         
instructions are received.                                              

(2) This information is based on a Schedule 13G filed with the Securities and   
 Exchange Commission by: The Equitable Companies Incorporated, 1290 Avenue
of the Americas, New York, New York 10104; AXA, 9 Place Vendome, 75001  
  Paris France; and the Mutuelles AXA as a group as follows: AXA Conseil Vie
Assurance Mutuelle, 100-101 Terrasse Boieldieu, 92042 Paris La Defense  
 France; AXA Assurances I.A.R.D. Mutuelle and AXA Assurances Vie Mutuelle,
   21, rue de Chateaudun, 75009 Paris France; AXA Courtage Assurance Mutuelle,
26 rue Louis le Grand, 75002 Paris France.                              

(3) The above described beneficial owners report voting and dispositive power   
as of June 30, 1999, as follows: The Equitable Companies Incorporated   
 reports no voting power and no dispositive power; its subsidiary Alliance
Capital Management L.P., sole voting power with respect to 10,225,717   
shares; shared voting power with respect to 17,088,724 shares; sole     
  dispositive power with respect to 32,609,146 shares and shared dispositive
power with respect to 3,262 shares; its subsidiary Donaldson, Lufkin &  
   Jenrette, sole dispositive power with respect to (36,840) shares and shared
dispositive power with respect to 47,375 shares; and its subsidiary The 
Equitable Life Assurance Society of the United States, sole voting power
with respect to 81,537 shares, shared voting power with respect to      
  342,320 shares, sole dispositive power with respect to 423,857 shares. AXA
and the Mutuelles AXA as a group each report no voting power and no     
dispositive power.                                                      

Security Ownership of Directors and Executive Officers                          

The following table sets forth, as of July 1, 1999, information regarding       
ownership of the Company's outstanding common stock by (i) each Named Executive 
Officer, as defined on page 14, (ii) each director and (iii) all executive      
officers and directors as a group. The table also includes the number of shares 
subject to outstanding options to purchase common stock of the Company which    
are currently exercisable or become exercisable within 60 days of July 1, 1999. 

                                                                [Download Table]

                                                             Percent            
                          Shares of Common Stock               of       Stock   
   Name of Individual     Beneficially Owned(1)               Class  Units(2)(3)
   ------------------     ----------------------             ------- -----------
                                                                                
Alfred C. Eckert III....           33,040(4)(5)                 *          --   
Tully M. Friedman.......           39,555(5)(6)                 *       7,317   
Alton F. Irby III.......           81,040(5)                    *          --   
M. Christine Jacobs.....           17,400(5)                    *         159   
Gerald E. Mayo..........          110,160(5)                    *          --   
Charles W. McCall.......        2,879,677(5)(7)               1.02         --   
James V. Napier.........          120,980(5)                    *         496   
David S. Pottruck.......           27,555(5)                    *       2,997   
Mark A. Pulido..........        2,141,184(5)(7)                 *          --   
Carl E. Reichardt.......           27,555(5)(6)                 *       2,723   
Alan Seelenfreund.......        1,314,254(5)(7)                 *         500   
Jane E. Shaw............           34,069(5)(6)                 *      11,191   
Albert J. Bergonzi......          787,824(5)                    *          --   
John H. Hammergren......          481,762(5)(7)(8)              *          --   
David L. Mahoney........          901,032(5)(7)                 *          --   
All Directors and                                                               
 Executive Officers as a                                                        
 group (18 Persons).....        9,984,983(4)(5)(6)(7)(8)(9)   3.55     25,383   

* Less than 1%                                                                  
--------                                                                        
(1) Represents shares held as of July 1, 1999, directly and with sole voting    
and investment power (or with voting and investment power shared with a 
spouse) unless otherwise indicated. The number of shares of common stock
owned by each director, except for Mr. McCall, or executive officer     
represents less than 1% of the outstanding shares of such class. All    
directors and executive officers as a group own 3.55% of the outstanding
shares of common stock.                                                 

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(2) Includes restricted stock units and share units accrued under the 1997 Non- 
Employee Directors' Equity Compensation and Deferral Plan (the "1997    
Plan"), as described on page 9, and the 1994 Stock Option and Restricted
Stock Plan (the "1994 Plan"), as follows: Mr. Friedman, 6,688 units; Ms.
Jacobs, 159 units; Mr. Napier, 496 units; Mr. Pottruck, 2,997 units; Mr.
Reichardt, 2,723 units; Mr. Seelenfreund, 500 units and Dr. Shaw, 6,114 
 units, and all non-employee directors as a group, 19,583 units. Directors
have neither voting nor investment power in respect of such units.      

(3) Includes common stock units accrued under the Directors' Deferred           
 Compensation Plan, as described on page 10, as follows: Mr. Friedman, 629
  units; Dr. Shaw, 5,077 units; and those directors as a group, 5,706 units.
   Participating directors have neither voting nor investment power in respect
of such units.                                                          

(4) Includes 7,500 shares held by Mr. Eckert in an Individual Retirement        
Account. Also, includes 740 shares held by Mr. Eckert's spouse in an    
Individual Retirement Account, for which beneficial ownership is        
disclaimed.                                                             

(5) Includes shares that may be acquired by exercise of stock options within 60 
   days of July 1, 1999, as follows: Mr. Eckert, 17,400; Mr. Friedman, 23,555;
Mr. Irby, 76,600; Ms. Jacobs, 17,400; Mr. Mayo, 109,160; Mr. Napier,    
91,400; Mr. Pottruck, 22,555; Mr. Reichardt, 17,555; Mr. Seelenfreund,  
   1,171,956; Dr. Shaw, 23,555; Mr. Hammergren, 300,816; Mr. Mahoney, 744,100;
  ; Mr. Pulido, 1,690,000; Mr. McCall, 1,184,000; Mr. Bergonzi, 685,536; and
all directors and executive officers as a group, 6,892,816.             

(6) Includes shares held by family trusts as to which each of the following     
named directors and their respective spouses have shared voting and     
investment power: Mr. Reichardt, 10,000 shares; and Dr. Shaw, 10,514    
   shares; and those directors as a group, 20,514 shares. Also includes 14,000
shares held in a revocable trust established by and for the benefit of  
Mr. Friedman who is the sole trustee of such trust.                     

(7) Includes shares held under the Company's PSIP, as to which the participants 
have sole voting but no investment power, as follows: Mr. Seelenfreund, 
 18,085 shares; Mr. Hammergren, 946 shares; Mr. Mahoney, 5,932 shares: Mr.
Pulido, 1,184 shares; Mr. McCall, 13,416 shares; and all directors and  
executive officers as a group, 60,797 shares.                           

(8) Includes 40,000 shares subject to possible forfeiture under the terms of    
the Company's 1994 Plan.                                                

(9) Includes 400 shares held by a member of the group as custodian for his      
minor child.                                                            

PROPOSALS TO BE VOTED ON                                                        

1. Election of Directors                                                        

On July 12, 1999, the Board of Directors amended the Company's Restated By-Laws 
to provide for a Board of Directors consisting of fourteen members, and then    
elected John H. Hammergren and David L. Mahoney to serve as directors of the    
Company. Following the resignation of Mark A. Pulido as a director effective    
July 15, 1999, the Board amended the Restated By-Laws to provide for a Board    
consisting of thirteen members.                                                 

The Board is divided into three classes for purposes of election. One class is  
elected at each annual meeting of stockholders to serve for a three-year term.  
Directors hold office until the end of their terms and until their successors   
have been elected and qualified, or until their earlier death, resignation, or  
removal. If a nominee is unavailable for election, your proxy authorizes the    
persons named in the proxy to vote for a replacement nominee if the Board names 
one. As an alternative, the Board may reduce the number of directors to be      
elected at the meeting. The Board is not aware that any nominee named in this   
proxy statement will be unwilling or unable to serve as a director.             

The following is a brief description of the principal occupation for at least   
the past five years, age and major affiliations of each director.               

Nominees for Election for Terms that will Expire in 2002                        

The Board of Directors recommends a vote FOR all Nominees.                      

Alfred C. Eckert III                                                            
President, Greenwich Street Capital Partners, Inc.                              

Mr. Eckert, age 51, has been President of Greenwich Street Capital Partners,    
Inc., a private investment firm, since January 1994. In 1991, he co-founded the 
South Street Funds and was formerly a partner with Goldman Sachs & Co. Mr.      
Eckert is the Chairman of the Board of Day International, Inc. and a            

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director of Telex Communications, Inc., Eastgate Group Limited and IPC          
Magazines. He was a director of HBOC from 1990 until the Merger, and he became  
a director of the Company in January 1999. He is Chairman of the Compensation   
Committee of the Board.                                                         

Gerald E. Mayo                                                                  
Chairman of the Board, Retired, Midland Financial Services, Inc.                

Mr. Mayo, age 66, retired in 1997 as Chairman of the Board of Midland Financial 
Services, Inc., the holding company for the Midland Life Insurance Company. He  
was President from 1994 until early 1996. He joined the Midland Life Insurance  
Company's predecessor in 1968, was elected to its Board of Directors in 1970,   
became its President and Chief Executive Officer in 1980, and was named         
Chairman of the Board in 1986. Mr. Mayo is a director of Columbia Energy Group, 
Dominion Homes, Inc. and was a director of HBOC from 1991 until the Merger. He  
became a director of the Company in January 1999. He is a member of the Audit   
Committee of the Board.                                                         

Alan Seelenfreund                                                               
Chairman of the Board                                                           

Mr. Seelenfreund, age 62, was elected Chairman of the Board in June 1999. He    
previously served as Chairman of the Board from 1989 until January 1999. He was 
Chief Executive Officer of the Company from 1989 until 1997; Executive Vice     
President from 1986 to 1989; Chief Financial Officer from 1984 to 1989; and he  
held various other senior financial positions since joining the Company in      
1975. Mr. Seelenfreund is a director of Golden Gate National Park Association,  
Nadro, S.A. de C.V. (Mexico), World Wildlife Fund and The Nature Conservancy.   
He has served as director of the Company since 1988. He is Chairman of the      
Audit Committee of the Board.                                                   

Jane E. Shaw                                                                    
Chairman of the Board and Chief Executive Officer, AeroGen, Inc.                

Dr. Shaw, age 60, has been Chairman of the Board and Chief Executive Officer of 
AeroGen, Inc., a private company specializing in the development of pulmonary   
drug delivery systems, since January, 1998. She founded The Stable Network, a   
biopharmaceutical consulting firm in 1995. In September 1994, Dr. Shaw resigned 
as President and Chief Operating Officer of ALZA Corporation, a pharmaceutical  
research, manufacturing and marketing firm with which she had been associated   
in various technical and executive positions since 1970. She is a director of   
AeroGen, Inc., Aviron Corporation, Boise Cascade Corporation and Intel          
Corporation. Dr. Shaw has been a director of the Company since 1992. She is a   
member of the Audit Committee of the Board.                                     

Directors Whose Terms will Expire in 2000                                       

Tully M. Friedman                                                               
Chairman and Chief Executive Officer, Friedman Fleischer & Lowe, LLC            

Mr. Friedman, age 57, is Chairman and Chief Executive Officer of Friedman       
Fleischer & Lowe, LLC, a private investment firm founded in 1997. For the 13    
years prior to 1997 he was a Managing Partner of Hellman & Friedman. He is      
currently on the Advisory Board of Tevecap, S.A., and a director of The Clorox  
Company, Levi Strauss & Co. and Mattel, Inc. Mr. Friedman is a member of the    
Executive Committee and a Trustee of the American Enterprise Institute, and a   
director of the Stanford Management Company. Mr. Friedman has served as a       
director of the Company since 1992. He is a member of the Compensation          
Committee of the Board.                                                         

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Alton F. Irby III                                                               
Deputy Chairman and Chief Executive of NatWest Markets Global Corporate         
Advisory Limited                                                                

Mr. Irby, age 58, has been Chief Executive of NatWest Global Corporate Advisory 
since 1997, when the company acquired Hambro Magan Irby Holdings. He is also    
Chief Executive of Hawkpoint Partners, an affiliate of NatWest Global Corporate 
Advisory. Mr. Irby co-founded J.O. Hambro Magan Irby Holdings in 1988 following 
his retirement as a Director of Sedgwick Plc in 1987. Mr. Irby is a director of 
City Capital Counseling, Inc., Eastgate Group Ltd., Crown Communications Ltd.,  
Input Typesetting Ltd. and was a director of HBOC from 1990 until the Merger.   
He is also a Trustee of the Victoria & Albert Museum. Mr. Irby became a         
director of the Company in January 1999. He is a member of the Compensation     
Committee of the Board.                                                         

James V. Napier                                                                 
Chairman of the Board, Scientific-Atlanta, Inc.                                 

Mr. Napier, age 62, is Chairman of the Board of Scientific-Atlanta, Inc. He has 
been a private investor for more than five years and was a director of HBOC     
from 1981 until the Merger. Mr. Napier is a director of Engelhard Corporation,  
Intelligent Systems Corporation, Vulcan Materials Company, Personnel Group of   
America, Inc. and Westinghouse Air Brake Corporation. Mr. Napier became a       
director of the Company in January 1999. He is a member of the Audit Committee  
of the Board.                                                                   

Carl E. Reichardt                                                               
Chairman of the Board, Retired, Wells Fargo & Company                           

Mr. Reichardt, age 67, retired as Chairman of the Board and Chief Executive     
Officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo      
Bank, N.A., at the end of 1994, having occupied those positions since 1983. Mr. 
Reichardt joined Wells Fargo & Company in 1970, was named Executive Vice        
President in 1973 and President of Wells Fargo Bank, N.A., in 1978. He is a     
director of Columbia/HCA Healthcare Corporation, ConAgra, Inc., Ford Motor      
Company, Newhall Management Corporation, PG&E Corporation and Pacific Gas and   
Electric Company. Mr. Reichardt has served as a director of the Company since   
1996. He is a member of the Compensation Committee of the Board.                

Directors Whose Terms will Expire in 2001                                       

M. Christine Jacobs                                                             
Chairman, President and Chief Executive Officer, Theragenics Company            

Ms. Jacobs, age 48, has been Chairman of the Board of Theragenics Corporation   
since 1998 and served as Co-Chairman of its Board from 1997 to 1998. She has    
been President and Chief Executive Officer of Theragenics since 1993 and was    
President and Chief Operating Officer from 1992 until 1993. She joined          
Theragenics in 1987. Ms. Jacobs was a director of HBOC from 1998 until the      
Merger. Currently she is serving a three-year term on the Board of Councilors   
of the Carter Center in Atlanta, and is a trustee of Georgia State University   
Foundation. She is a member and former director of the Georgia Biomedical       
Partnership and she serves on the Georgia Secretary of State's Small Business   
Taskforce. Ms. Jacobs became a director of the Company in January 1999.         

Charles W. McCall                                                               
Director                                                                        

Mr. McCall, age 55, was Chairman of the Board of Directors of the Company from  
January 1999 until June 1999, when he was removed from that office. Mr. McCall  
was Chairman of the Board of HBOC from February 1998 until January 1999, and    
President, Chief Executive Officer and a director of                            

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HBOC from 1991 until the Merger. From 1977 until 1991, Mr. McCall served in     
various positions with CompuServe, Inc., most recently as President and Chief   
Executive Officer. Mr. McCall is a director of EIS International, Inc. and      
WestPoint Stevens, Inc.                                                         

David S. Pottruck                                                               
President, Co-Chief Executive Officer and Chief Operating Officer, The Charles  
Schwab Corporation                                                              

Mr. Pottruck, age 50, became the Co-Chief Executive Officer of The Charles      
Schwab Corporation in January 1998, and has been the Chief Operating Officer    
and a member of the Schwab board since 1994 and the President of that company,  
and the Chief Executive Officer of Charles Schwab & Co., Inc., since 1992. He   
is a director of the Charles Schwab Corporation, Intel Corporation, Preview     
Travel, Inc., Bay Area Sports Organizing Committee and U.S. Ski and Snowboard   
Team Foundation, and a Trustee of the University of Pennsylvania. Mr. Pottruck  
has served as director of the Company since 1997.                               

John H. Hammergren                                                              
Co-President and Co-Chief Executive Officer                                     

Mr. Hammergren, age 40, was elected Co-President and Co-Chief Executive         
Officer, effective July 15, 1999, and director, effective July 12, 1999. He was 
Executive Vice President of the Company and President and Chief Executive       
Officer of the Supply Management Business from January 1999 to July 1999; Group 
President, McKesson Health Systems Group from August 1997 to January 1999, and  
Vice President of the Company since 1996. He was President of Kendall           
Healthcare Products Company, Medical/Surgical Division from 1993 to 1996.       

David L. Mahoney                                                                
Co-President and Co-Chief Executive Officer                                     

Mr. Mahoney, age 45, was elected Co-President and Co-Chief Executive Officer    
effective July 15, 1999, and director effective July 12, 1999. He was Executive 
Vice President of the Company and President and Chief Executive Officer of the  
Pharmaceutical Services Business from January 1999 to July 1999; Group          
President, Pharmaceutical Services and International Group from August 1997 to  
January 1999; President, Pharmaceutical and Retail Services from August 1996 to 
August 1997; President, Pharmaceutical Services Group from December 1995 to     
August 1996; President of the Company's Healthcare Delivery Systems, Inc. from  
September 1994 to December 1995 and Vice President of Strategic Planning from   
1990 to 1994.                                                                   

Board Meetings and Committees                                                   

During the fiscal year ended March 31, 1999, the Board of Directors met 16      
times, 15 times prior to the Merger, and once since the Merger. No director     
attended fewer than 79% of the aggregate number of meetings of the Board and of 
all committees on which he or she served. Directors meet their responsibilities 
not only by attending Board and committee meetings, but also through            
communication with executive management on matters affecting the Company.       

Since the Merger, the Board of Directors established standing Audit and         
Compensation Committees to aid it in the discharge of its responsibilities. The 
members of each standing committee are elected by the Board each year for a     
term of one year or until his or her successor is elected. The full Board acts  
as a nominating committee. The Board will consider re-establishing certain      
committees that were disbanded at the time of the Merger.                       

The Audit Committee, which since the Merger consists of Alan Seelenfreund,      
Chairman, Gerald E. Mayo, James V. Napier and Jane E. Shaw, met three times     
prior to the Merger and once since the                                          

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Merger during the year ended March 31, 1999. The Audit Committee is responsible 
for recommending to the Board the annual selection of the Company's independent 
auditors, the scope of audit to be performed and the compensation to be paid    
for such services; reviewing the audit results and the auditor's report and     
related management letter, if any; reviewing and approving the audited          
financial statements and recommending to the Board their inclusion in the       
Company's Annual Report on Form 10-K; reviewing the engagement of the auditors  
for services of a non-audit nature; consulting with the independent auditors,   
the internal auditors and management on the adequacy of internal accounting     
controls; reviewing procedures designed to implement the corporate code of      
conduct and compliance with those procedures; directing and supervising         
investigations into matters within the scope of the Committee's duties; and     
performing other functions as may be necessary to discharge its duties, which   
has included the matters arising out of the Company's restatement of its        
financial results announced on April 28, 1999.                                  

The Compensation Committee, which since the Merger consists of Alfred C. Eckert 
III, Chairman, Tully M. Friedman, Alton F. Irby III and Carl E. Reichardt, met  
twice prior to the Merger and once since the Merger during the year ended March 
31, 1999. The Committee has responsibility for recommending to the Board a      
compensation program for managerial level employees; advising the Board         
regarding director compensation; administering the stock plans and certain      
incentive plans and reviewing the administration of other incentive plans;      
approving the selection of trustees and investment advisors and establishing    
the overall investment policies for those funds that are part of the Company's  
retirement program; reviewing and approving compensation and other terms and    
conditions of employment for corporate officers at the Senior Vice President    
level and above; recommending the factors and measures to be used to evaluate   
the Co-President and Co-Chief Executive Officers' performance for the current   
fiscal year and evaluating such performance with the other non-employee         
directors; making recommendations to the Board regarding the compensation and   
terms and conditions of employment of the Chairman of the Board and the Co-     
President and Co-Chief Executive Officers and recommending their successors in  
the event of a vacancy; and reviewing and monitoring management's succession    
plans for officers.                                                             

Since the Merger, the full Board has acted as a nominating committee. The       
Board, in evaluating candidates, seeks individuals of proven judgment and       
competence who are outstanding in their chosen fields. It also considers        
factors such as education, geographic location, anticipated participation in    
Board activities and special talents or personal attributes. Stockholders who   
wish to suggest qualified candidates to the Board should write to the Secretary 
of the Company, at One Post Street, San Francisco, California 94104, stating in 
detail the candidate's qualifications for consideration by the Board. A         
stockholder who wishes to nominate a director must comply with certain          
procedures set out in the Company's Restated By-Laws (see "Advance Notice       
Procedures").                                                                   

On June 21, 1999, the Company announced that the Board established an Ad Hoc    
Committee consisting of Alan Seelenfreund, Chairman, Tully M. Friedman, Gerald  
E. Mayo and Carl E. Reichardt to consult with, and provide counsel and guidance 
to, senior management of the Company.                                           

Compensation of Directors                                                       

Directors who are not employees of the Company or its subsidiaries receive an   
annual retainer of $27,500, a fee of $1,000 for each Board or committee meeting 
attended, and are reimbursed for all expenses incurred in attending such        
meetings. Committee chairpersons receive an additional retainer of $3,000 per   
year. Directors who are employees of the Company do not receive any             
compensation for their service as directors.                                    

Under the stockholder-approved 1997 Non-Employee Directors' Equity Compensation 
and Deferral Plan, as amended, (the "1997 Plan"), each director is required to  
defer the receipt of 50% of his or her annual retainer fee, in the form of      
Restricted Stock Units ("RSUs") or Retainer Options ("ROs"),                    

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as elected by the director. Directors may also elect to defer the remaining     
portion of their annual retainer into additional RSUs or ROs, or to receive     
that amount in cash. The number of RSUs is determined based on the fair market  
value of the Company's common stock on the last trading day of the quarter      
immediately preceding the date such amounts would otherwise be payable. RO      
shares are granted to directors in January each year at the same time annual    
stock option grants are made to employees. The number of ROs granted is         
determined using the same conversion rate that is employed each year for the    
purpose of determining the number of stock options to be granted to employees   
who have elected to receive options in lieu of some portion of their            
anticipated annual bonus awards under the Company's 1989 Management Incentive   
Plan. The conversion value is set each November for the following calendar year 
and is based on the discounted Black Scholes valuation of the Company's common  
stock. For calendar year 1999, the ROs have a cash conversion value of $14.00   
per share. ROs are granted at fair market value on the date of grant, become    
fully vested one year after the grant date and have a term of ten years.        

Directors may elect to receive the remainder of their fees (other than the      
portion of the annual retainer subject to mandatory deferral) earned in any     
calendar year prior to the termination or expiration of the 1997 Plan in cash,  
or to defer all or a portion of such fees in the form of additional RSUs or     
into an interest-bearing cash account under the terms of the Company's Deferred 
Compensation Administration Plan II ("DCAP II"). The minimum amount that may be 
deferred under DCAP II for any year is $5,000 and the minimum deferral period   
is generally five years. The interest rate on DCAP II deferrals is determined   
by the Compensation Committee each year based upon several related factors,     
including the Company's cost of funds and tax bracket, the size and years of    
deferrals, the number and ages of participants and mortality and turnover       
patterns.                                                                       

Under the 1997 Plan, and under the 1994 Plan (pursuant to which plan all non-   
employee directors' options were granted prior to calendar year 1997), non-     
employee directors are permitted to make an election whereby receipt and        
taxation of the gain upon the exercise of stock options may be deferred,        
provided the director uses the stock-for-stock method of exercise. Rather than  
receiving a certificate for the option shares acquired at the time of exercise, 
the shares are credited in the form of share units to a bookkeeping account     
maintained by the Company and distributed according to the director's election. 

Effective January 27, 1999, the Board of Directors amended the 1997 Plan to     
delete the provision providing for the annual grant of 400 RSUs to each         
Director on the date of the Annual Meeting each year. In addition, the annual   
grant provision under the 1997 Plan was also amended to (i) eliminate the       
initial grant of a nonqualified option to purchase 5,000 shares of common stock 
to each director upon election to the Board, and subsequent annual grants of    
1,500 shares on the date of the Annual Meeting each year to each director       
continuing in office, and (ii) substitute instead an annual nonqualified option 
grant to purchase 10,000 shares, automatically made to each director who is a   
director as of the date of the Board of Directors meeting in January each year. 
Any director elected to the Board later in the calendar year will receive an    
automatic grant of a reduced number of option shares, prorated based on the     
number of calendar quarters in which the director will serve as such during the 
remainder of such year. All such options are granted at fair market value on    
the effective date of grant, are immediately exercisable in full and have an    
option term of ten years.                                                       

The 1997 Plan provides that upon the occurrence of a change in control of the   
Company, all outstanding options become immediately exercisable and common      
stock to be issued in respect of RSUs will be immediately distributed, unless   
the director has made an irrevocable election to have the acceleration          
provisions respecting RSUs waived. All current directors of the Company who     
also served on the Board immediately prior to the Merger elected to waive such  
acceleration provisions.                                                        

Prior to January 1, 1994, non-employee directors could defer compensation       
received for their services as directors under the Directors' Deferred          
Compensation Plan, thereby automatically                                        

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becoming participants in the Deferred Compensation Administration Plan (the     
"DCAP"), or under the Management Deferred Compensation Plan (the "MDCP", or     
together with the DCAP, the "Prior Deferred Plans"). Although the Prior         
Deferred Plans have been superseded and replaced by DCAP II as to future        
compensation deferrals, previous deferrals under these plans will continue to   
be administered in accordance with the respective provisions of the plan under  
which the original deferrals were made. Interest on deferral balances held      
under the Prior Deferred Plans is credited each year at the same rate as that   
determined by the Compensation Committee for deferrals under DCAP II.           

In the event of a change in control of the Company (as defined in DCAP II and   
the Prior Deferred Plans), deferred amounts will be distributed immediately     
upon the effective date of the change unless the director has made an           
irrevocable election (at least twelve months in advance of the effective date   
of any such change) to receive payment of any deferral balance in accordance    
with his or her most recent valid election on file with the Company rather than 
in a single sum. All current directors of the Company who also served on the    
Board prior to the Merger had such elections on file. Any deferral election     
under DCAP II or the Prior Deferred Plans may be modified as to the length of   
the deferral period and the timing of the distribution, provided such changes   
are made at least twelve months prior to the previously scheduled date of       
commencement of payments and payments do not begin earlier than twelve months   
from the date of the modified election.                                         

The Company has entered into indemnity agreements with each of its directors    
that provides for indemnification against any judgment or costs assessed        
against them in the course of their service as directors. Such agreements do    
not permit indemnification for acts or omissions for which indemnification is   
not permitted under Delaware law.                                               

On March 25, 1998, the Company and Mr. Seelenfreund extended by mutual          
agreement the term of the consulting agreement (the "Agreement") entered into   
by them in March 1997 in connection with Mr. Seelenfreund's retirement in July  
1997 as an executive officer and employee of the Company. Pursuant to the       
Agreement, as extended, Mr. Seelenfreund was to continue to serve the Company   
as non-executive Chairman of the Board and to render such consulting and        
advisory services and perform such special assignments as may be requested by   
the Board or the Chief Executive Officer until July 31, 1999. In connection     
with the Merger, Mr. Seelenfreund resigned as Chairman of the Board (but        
continued to serve as a non-employee director of the Company) and the Agreement 
was terminated effective January 12, 1999. In consideration for his services    
under the Agreement for the period July 31, 1998 to January 12, 1999, Mr.       
Seelenfreund received a pro rata payment of his annual retainer of $250,000 and 
an additional payment of $312,000, calculated on the same basis as if he had    
continued to participate in the Company's Management Incentive Plan ("MIP") for 
FY 1999. In addition, on January 27, 1999, Mr. Seelenfreund received a stock    
option grant of 11,000 shares pursuant to his election to receive such grant in 
lieu of a portion of the additional payment provided for in the Agreement for   
FY 1999. In connection with his election as Chairman, and in consideration for  
Mr. Seelenfreund's agreement to provide significant services to the Company,    
including his guidance and support to the new senior management team, the Board 
has authorized the Company to enter into an agreement with Mr. Seelenfreund for 
a term of two years, that will provide for, among other things, an annual       
payment of $500,000 per year, a MIP target of 100%, a grant of a nonqualified   
option for 1 million shares of the Company's common stock, with a 2-year        
vesting schedule, under certain circumstances, accelerated vesting of such      
option upon early termination of the agreement and a gross-up payment to cover  
excise taxes and interest imposed on "excess parachute payments" as defined in  
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code").     

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Report of the Compensation Committee on Executive Compensation                  

The Corporation's executive compensation program is administered by the         
Compensation Committee (the "Committee") of the Board of Directors, which       
consists exclusively of non-employee directors. The Committee relies on         
independent executive compensation consultants and survey data to determine     
competitive levels of executive compensation. This report describes the         
policies and the criteria used by the Committee in establishing the principal   
components, and setting the level of compensation for executive officers during 
FY 1999.                                                                        

The Company's Philosophy of Executive Compensation                              

The overall objective of the Company's executive compensation program is to     
provide base salary and annual cash bonuses for executive officers at           
approximately the median level for executive officers at companies similar in   
size, complexity or line of business, while providing a total compensation      
target at the 75th percentile. The program is designed to enhance stockholder   
value by linking a large part of executive officers' compensation directly to   
the Company's performance.                                                      

Many factors enter into the Committee's deliberations in the design of the      
compensation plans and direct pay for executive officers of the Company. The    
factors include the Company's performance as measured against targets approved  
by the Committee; the individual performance of each executive officer; the     
overall competitive environment for executives and the level of compensation    
needed to attract and retain executive talent; compensation surveys supplied by 
and the recommendations of independent executive compensation consultants       
approved by the Committee and retained by the Company for this purpose.         

The Committee has selected a group of comparator companies, with the help of    
independent executive compensation consultants, to establish the parameters for 
meeting the base salary and total compensation targets. As a result of the      
Merger, the group of comparator companies was refined, and now represents a     
cross-section of pharmaceutical, healthcare services and other nonmanufacturing 
companies as well as information technology and software companies, based on a  
number of factors including similarities to the Company in financial attributes 
and size.                                                                       

Components of Compensation                                                      

Base Salary                                                                     

The Company's executive compensation program consists of base salary, a short-  
term incentive plan and long-term incentives (stock options, stock purchases    
and cash). Base salary is reviewed annually. Actual base salary is driven by    
individual performance, competitive practices and level of responsibility.      
Salary increases for FY 1999 reflect the Committee's determination that base    
salary levels should be increased to recognize increased responsibilities, to   
reward performance and to remain competitive.                                   

Short Term Incentives                                                           

Under the Company's short-term incentive plan (the "Management Incentive Plan"  
or "MIP"), individual target awards are set as a percentage of the executive's  
base salary and vary by level of responsibility. The target awards are designed 
to be competitive with those set for executive officers at companies in the     
Company's executive compensation comparator group. Annual MIP awards can range  
from zero to two times the executives' target awards and are determined by the  
Company's and/or individual business unit's performance as compared to pre-     
established income objectives. The actual awards to the named executives for FY 
1999 have been reduced from the maximums established by the above procedure by  
the Committee exercising "negative discretion" in accordance with regulations   
under Section 162(m) of the Code with respect to this type of plan. Final       
awards reflect the contribution the executive officer was judged to have made   
to the Company's overall results.                                               

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Prior to the Merger, HBOC had a short-term incentive plan similar in concept    
and application to the Company's MIP, with award cycles based on a calendar     
year. Individual target awards were set and varied by level of responsibility.  
The target awards were designed to be competitive with those set for executive  
officers at companies in HBOC's executive compensation comparator group. Annual 
awards ranged from zero to two times the executives' target awards with final   
award amounts driven entirely by HBOC's financial results as compared to pre-   
established targets. Awards for calendar year 1998 were based on HBOC's         
financial results for that period, and were paid in 1999. That plan was         
modified by the Committee to establish a one-time plan year, from January       
through March 1999. Messrs. McCall and Bergonzi did not receive awards for that 
3-month period because pre-established income objectives for HBOC were not met. 

Long Term Incentives                                                            

The Company's long-term incentive program has 3 components: a stock option      
component, a stock purchase component and a cash component. Under the program   
every 3 years:                                                                  

. participants are granted nonqualified options to purchase shares of the   
Company's common stock at fair market value;                            

. participants are offered the opportunity to purchase the Company's common 
stock under the Stock Purchase Plan or the 1999 Executive Stock Purchase
Plan. The purchase price is equal to the fair market value of the stock 
on the day the participant accepts the offer to purchase the shares. At 
the same time, the Company makes a five-year, full recourse, interest-  
bearing loan to the executive to purchase the stock;                    

. The Compensation Committee establishes a target award for each            
participant under the Long-Term Incentive Plan (the "LTIP"), which cash 
award is reduced if financial targets are not met.                      

The review of executive compensation conducted in mid-1998 established that the 
market for seasoned executive talent had changed dramatically and compensation  
elements had increased substantially. As a result, in July 1998, a grant of     
premium-priced stock options was made to certain executives. Premium-priced     
options are granted with an exercise price above the fair market value of the   
stock at the time of grant and are subject to strict forfeiture provisions. The 
primary purpose of these options is to strongly motivate executive officers to  
achieve outstanding returns for the Company's stockholders. Unlike fair market  
value options (under which the executive receives compensation from any         
increase in stock value after the date of grant) premium-priced options are     
designed so that an executive receives no compensation until the value of the   
stock exceeds the above-market exercise price. Thus stockholders will receive   
significant appreciation in their investment in the Company before executives   
can realize any gains on their premium priced options. The options were granted 
with exercise prices set at 33%, 66% and 100% premiums above the average fair   
market value for the 30 trading days preceding the date of grant, or $90.9332   
per share, $113.4955 per share and $136.7416 per share, respectively. The       
Merger resulted in a change in control (see "Change in Control" at page 26),    
and thus these options have vested and are no longer subject to forfeiture.     

Under the Company's LTIP, which was amended in 1997 principally to comply with  
Section 162(m) of the Code, awards to named executive officers had been granted 
for the period April 1, 1996 though March 31, 1999, which awards are reflected  
in the Summary Compensation Table.                                              

Policy Regarding Tax Deduction for Compensation Under Internal Revenue Code     
Section 162(m)                                                                  

Section 162(m) of the Code limits the Company's tax deduction to $1 million for 
compensation paid to certain executive officers named in the proxy statement    
unless the compensation is "performance-based" within the meaning of Section    
162(m). The Committee's intention is and has been to comply with the            
requirements of Section 162(m) unless the Committee concludes that such         
compliance would not be in the best interest of the Company or its              
stockholders.                                                                   

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As noted above, the Merger was deemed to be a "change in control" under many of 
the Company's executive compensation programs. As a result, under the Long-Term 
Incentive Plan, awards granted in January and July, 1997 became payable. The    
awards, when granted, were performance based and so in the normal course        
payments would have been exempt from Section 162(m). However, regulations under 
Section 162(m) specifically remove the "performance based compensation"         
protections from amounts paid on an accelerated basis, so LTIP payments which   
together with base salary exceed $1 million will not be deductible to the       
Company.                                                                        

The McKessonHBOC 1994 Stock Option and Restricted Stock Plan (the "1994 Plan")  
restricts the maximum number of stock options that can be granted to an         
individual in any year to 600,000 shares. The Committee concluded that          
complying with this restriction in FY 1999, was not in the best interest of the 
Company or its stockholders. The much larger and more complex company that      
emerged from the Merger supports incentive compensation levels for named        
executives beyond the limits imposed under the 1994 Plan. The reorganization    
into three business units has increased the responsibilities of the business    
unit heads. The Company faces a unique challenge to retain key employees from   
both McKesson and HBOC and to foster a unified vision for the future. The       
Committee concluded that it was appropriate to make grants of options beyond    
the limit imposed, and outside the structure of the 1994 Plan. These grants are 
displayed in the table entitled "Option/SAR Grants in the Last Fiscal Year" on  
page 15.                                                                        

Compensation of the Chief Executive Officer                                     

Mark A. Pulido resigned from the Company effective July 15, 1999. Mr. Pulido's  
base salary of $850,000 for FY 1999 was established by the Board in April 1998  
following a review of his performance for FY 1998. Goals were established at    
that time for FY 1999, which included specific targets for economic measures    
such as earnings per share, revenue growth, efficiency gain, strategy           
fulfillment and innovation, while qualitative measures were established for     
organization development, and communication with investors and employees. The   
Merger constituted a "change in control" under the terms of the LTIP which      
resulted in accelerated payments to Mr. Pulido of $6,000,000 during FY 1999. He 
also received a pro rata cash award of $189,000 under the LTIP for the four-    
year period ended March 31, 1999. Also during FY 1999, he was awarded options   
for 3,660,000 shares of common stock, 600,000 of which are premium-priced       
options, as described above. On March 26, 1999, the Company and Mr. Pulido      
entered into an Amended and Restated Employment Agreement (the "Agreement"), as 
more fully described under "Employment Agreements." In accordance with the      
terms of the Agreement, Mr. Pulido received a payment under the MIP for FY 1999 
in the amount of $722,500. Future payments to Mr. Pulido will be paid in        
accordance with the terms of the Agreement.                                     

                              The Compensation Committee

                                  Alfred C. Eckert III, Chairman
                     Tully M. Friedman
                     Alton F. Irby III
                     Carl E. Reichardt

Executive Compensation                                                          

Note: In the tables that follow, information is presented as to the stock       
ownership of certain executive officers. The Merger, which was accounted for as 
a pooling of interests, constituted a "change in control" under the Company's   
equity-based incentive plans (see "Change in Control" at page 26), which would  
have caused the acceleration of vesting for stock options and restricted stock. 
However, for certain tax and accounting reasons, such acceleration was          
generally postponed until the end of the pooling period, which occurred on      
April 22, 1999. This information has been reflected in footnotes, as            
appropriate.                                                                    

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The following table discloses compensation earned by the Chief Executive        
Officer and the four other most highly paid executive officers (the "Named      
Executive Officers") for the three fiscal years ended March 31, 1999:           

Summary Compensation Table

                                                        [Enlarge/Download Table]

                                     Annual Compensation             Long-Term Compensation          
                                  ------------------------- -----------------------------------------
                                                                   Awards               Payouts      
                                                            --------------------- -------------------
                                                     Other             Securities                    
                                                    Annual  Restricted Underlying           All Other
                                                    Compen-   Stock     Options/    LTIP     Compen- 
                                  Salary    Bonus   sation   Award(s)     SARs     Payouts   sation  
Name and Principal Position  Year   ($)    ($)(1)   ($)(2)    ($)(3)     (#)(4)    ($)(5)    ($)(6)  
---------------------------  ---- ------- --------- ------- ---------- ---------- --------- ---------
                                                                                                     
Charles W. McCall(7)         1999 708,333 1,365,989      --       --   2,000,000         --     4,334
Chairman of the Board                                                                                

Mark A. Pulido(7)            1999 850,000        --      --       --   3,660,000  6,189,000   525,972
President and Chief          1998 700,000 1,550,000  61,887       --     370,000    186,000   129,558
Executive Officer            1997 437,500   700,000 333,654  910,000     720,000    196,500    27,450

Albert J. Bergonzi(7)        1999 453,333   816,660      --       --   1,000,000         --        --
Executive Vice                                                                                       
President, President and                                                                             
Chief Executive Officer,                                                                             
Information Technology                                                                               
Business                                                                                             

John H. Hammergren(7)        1999 420,000   622,100  76,992       --   1,219,850  1,566,150 1,676,275
Executive Vice               1998 401,667   396,006  73,733       --     109,666     43,400    29,434
President, President and     1997 350,000   295,000 478,739       --      84,000     22,925     9,148
Chief Executive Officer,                                                                             
Supply Management                                                                                    
Business                                                                                             

David L. Mahoney(7)          1999 400,000   504,990      --       --   1,215,715  1,566,780 1,655,424
Executive Vice               1998 358,333   353,900  93,312       --     106,900     62,000    38,453
President, President and     1997 306,250   195,000      --       --      84,000     58,950    31,186
Chief Executive Officer,                                                                             
Pharmaceutical Services                                                                              
Business                                                                                             

--------                                                                        
(1) Represents the portion of the Named Executive Officers' bonus award for FY  
1999 under the MIP that was either paid in cash or deferred at the      
 executives' election under DCAP II except for Messrs. McCall and Bergonzi
whose bonus awards were paid by HBOC prior to the Merger pursuant to the
HBOC short term incentive plan.                                         

(2) Except as noted, the dollar value of perquisites and other personal         
benefits for each Named Executive Officer during FY 1999 was less than  
established reporting thresholds. Other Annual Compensation for FY 1999 
   includes for Mr. Hammergren an annual housing assistance payment of $50,000
which is equal to 1/10th of the original principal amount of the housing
 loan made to him and discussed under "Indebtedness of Executive Officers"
on page 28.                                                             

(3) No restricted stock awards were made in FY 1999 to any Named Executive      
 Officers. The number and value of the aggregate restricted stock holdings
of the named executive officers on March 31, 1999 (based on the closing 
price for the Company's common stock of $66.00) were as follows: Mr.    
Pulido, 40,000 shares and $2,640,000; Mr. McCall, 0 shares and $0; Mr.  
Bergonzi, 0 shares and $0; Mr. Hammergren, 40,000 shares and $2,640,000;
Mr. Mahoney, 0 shares and $0. Following the Merger, restrictions on the 
   shares of restricted stock previously granted to Mr. Pulido were removed in
accordance with the "change in control" provisions of the 1994 Plan. See
"Note" above. The restrictions on Mr. Hammergren's restricted stock will
lapse in January 2000.                                                  

(4) For FY 1999, includes shares granted on January 27, 1999, to the Named      
Executive Officers under the 1994 Plan pursuant to such persons'        
irrevocable election to receive a stock option grant in lieu of all or a
portion of their respective bonus awards, if any, for FY 1999 under the 
MIP; Mr. Pulido, 60,000, Mr. Hammergren, 19,850 and Mr. Mahoney         
15,715. Options granted to Messrs. McCall and Bergonzi in FY 1999 were  
cancelled upon their dismissals.                                        

(5) Includes for FY 1999 accelerated payments under the LTIP resulting from the 
Merger, which constituted a "change in control" under the terms of the  
LTIP.                                                                   

(6) For FY 1999, includes the aggregate value of (i) the Company's stock        
contributions under the PSIP, a plan designed to qualify as an employee 
   stock ownership plan under the Code, allocated to the accounts of the Named
Executive Officers as follows: Mr. Pulido, $17,018; Mr. Hammergren,     
 $15,418; Mr. Mahoney, $17,136; (ii) employer matching contributions under
   the Supplemental PSIP, an unfunded nonqualified plan established because of
 limitations on annual contributions to the PSIP contained in the Code, as
follows: Mr. Pulido, $500,765, Mr. Hammergren, $134,814, Mr. Mahoney,   
$125,288, Mr. McCall,                                                   

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$0, Mr. Bergonzi, $0, and (iii) above market interest accrued on deferred   
compensation for the following executive officers: Mr. Pulido, $8,189, Mr.  
Hammergren, $26,044 and Mr. Mahoney, $13,000. Amounts for Messrs. Hammergren
and Mahoney include for each a $1.5 million retention payment, 50% of which 
is to be repaid if he voluntarily resigns from the Company within 12 months 
following the execution of his employment agreement. In FY 1999, HBOC paid  
the annual premium in the amount of $4,334 on a $1,000,000 term life        
insurance policy for the benefit of Mr. McCall and his family.              

(7) Charles W. McCall and Albert J. Bergonzi became executive officers of the   
  Company at the time of the Merger. On June 21, 1999, the Company announced
  that Mr. McCall had been removed as Chairman of the Board and dismissed as
an employee and that Mr. Bergonzi had been dismissed as an employee for 
cause. Mr. Pulido resigned from the Company and Messrs. Hammergren and  
  Mahoney were named Co-Presidents and Co-Chief Executive Officers effective
July 15, 1999 (see "General Information" above).                        

The following table provides information on stock option grants during FY 1999  
to the Named Executive Officers:                                                

Option/SAR Grants in the Last Fiscal Year 

                                                        [Enlarge/Download Table]

                           Number of         % of Total                                      
                           Securities       Options/SARs                                     
                           Underlying        Granted to  Exercise or             Grant Date  
                            Options         Employees in Base Price  Expiration Present Value
          Name           Granted (#)(1)     Fiscal 1999    ($/Sh)       Date      ($)(#)(2)  
          ----           --------------     ------------ ----------- ---------- -------------
                                                                                             
Charles W. McCall.......     600,000(3)(4)      3.88         73.00   01/26/2009  13,603,380  
                           1,400,000(3)(4)      9.06         73.00   01/26/2009  31,741,220  

Mark A. Pulido..........     200,000(5)         1.29       90.9332   05/28/2008   4,256,180  
                             200,000(5)         1.29      113.4955   05/28/2008   3,128,060  
                             200,000(5)         1.29      136.7416   05/28/2008   2,306,360  
                              60,000(6)         0.39         73.00   01/26/2009   1,360,338  
                             600,000(3)         3.88         73.00   01/26/2009  13,603,380  
                           2,400,000(3)        15.53         73.00   01/26/2009  54,413,520  

Albert J. Bergonzi......     600,000(3)(4)      3.88         73.00   01/26/2009  13,603,380  
                             400,000(3)(4)      2.59         73.00   01/26/2009   9,068,920  

John H. Hammergren......      66,666(5)         0.43       90.9332   05/28/2008   1,418,712  
                              66,667(5)         0.43      113.4955   05/28/2008   1,042,692  
                              66,667(5)         0.43      136.7416   05/28/2008     768,791  
                              19,850(6)         0.13         73.00   01/26/2009     450,045  
                             600,000(3)         3.88         73.00   01/26/2009  13,603,380  
                             400,000(3)         2.59         73.00   01/26/2009   9,068,920  

David L. Mahoney........      66,666(5)         0.43       90.9332   05/28/2008   1,418,712  
                              66,667(5)         0.43      113.4955   05/28/2008   1,042,692  
                              66,667(5)         0.43      136.7416   05/28/2008     768,791  
                              15,715(6)         0.10         73.00   01/26/2009     356,295  
                             600,000(3)         3.88         73.00   01/26/2009  13,603,380  
                             400,000(3)         2.59         73.00   01/26/2009   9,068,920  

--------                                                                        
(1) No options were granted with stock appreciation rights ("SARs") and no      
freestanding SARs have ever been granted. Optionees may satisfy the     
   exercise price by submitting currently owned shares and/or cash. Income tax
withholding obligations may be satisfied by electing to have the Company
withhold shares otherwise issuable under the option with a fair market  
value equal to such obligations. As a result of the change in control at
  the time of the Merger, all of the options granted by the Company prior to
the Merger and reflected in this table became immediately exercisable   
except for those options granted to Mr. Hammergren who executed a waiver
   for tax reasons. See Note under the heading "Executive Compensation" above.
 In the case of the other Named Executives Officers, they could not engage
   in any transactions related to their options until after the pooling period
had elapsed.                                                            

(2) In accordance with Securities and Exchange Commission ("SEC") rules, a      
modified Black-Scholes option pricing model was chosen to estimate the  
grant date present value for the options set forth in this table. The   
assumptions used in                                                     

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calculating the reported value included: an option term of 5 years and a    
dividend yield of 1.5%; stock volatility, 31.4% and risk-free interest rate,
 4.8%. The Company does not believe that the Black-Scholes model, or any other
 model, can accurately determine the value of an option. Accordingly, there is
no assurance that the value, if any, realized by an executive, will be at or
near this value estimated by the Black-Scholes model. Future compensation   
resulting from option grants is based solely on the performance of the      
Company's stock price.                                                      

(3) The option exercise price of the indicated options was 100% of the fair     
market value on the date of grant. The options become exercisable in    
   installments of 50% on the second anniversary of the date of grant, and 25%
on each of the third and fourth anniversaries of the date of grant and  
expire ten years after the date of the grant.                           

(4) As a result of their dismissals as employees, those options granted to      
Messrs. McCall and Bergonzi in FY 1999 were cancelled. None of these    
options was exercisable prior to its cancellation.                      

(5) The indicated options are premium-priced stock options with an option term  
of ten years from the date of grant, which options vested following the 
"change in control" resulting from the Merger.                          

(6) The indicated stock options were granted to the Named Executive Officers    
 pursuant to such persons' irrevocable elections to receive a stock option
 grant under the 1994 Plan in lieu of all or a portion of their respective
 bonus awards for FY 1999 under the MIP. The number of options granted was
determined by dividing the amount of the bonus deferral by the cash     
conversion value of $14.00 per share. The conversion value is set each  
November for the following calendar year and is based on the discounted 
  Black-Scholes valuation of the Company's common stock. The option exercise
 price was 100% of the fair market value on the date of grant. The options
  become fully exercisable on the first anniversary of the date of grant and
expire ten years after the date of the grant.                           

The following table provides information on the value of each of the Named      
Executive Officers' Options at March 31, 1999:                                  

Aggregated Option/SAR Exercises in the Last Fiscal Year 
and Fiscal Year-End Option/SAR Values 

                                                        [Enlarge/Download Table]

                                                 Number of Securities      Value of Unexercised   
                                                Underlying Unexercised     In the Money Options/  
                           Shares                   Options/SARs at               SARs at         
                          Acquired     Value      March 31, 1999 (#)       March 31, 1999 ($)(2)  
                         on Exercise Realized  ------------------------- -------------------------
          Name               (#)      ($)(1)   Exercisable/Unexercisable Exercisable/Unexercisable
          ----           ----------- --------- ------------------------- -------------------------
                                                                                                  
Charles W. McCall.......   155,400   4,046,486     148,000/3,036,000(3)             0/11,094,080  
Mark A. Pulido..........         0           0     250,000/4,500,000(4)     9,431,250/28,019,984  
Albert J. Bergonzi......    44,400   2,541,660     140,896/1,544,640(3)     3,220,220/11,777,544  
John H. Hammergren......         0           0      85,666/1,407,850(4)     2,861,031/ 5,904,621  
David L. Mahoney........         0           0     368,600/1,391,215(4)    19,821,679/ 5,392,121  

--------                                                                        
(1) Fair market value of securities underlying options on the date of exercise  
minus the exercise price.                                               

(2) Calculated based upon the fair market value share price of $66.00 on March  
31, 1999, less the share price to be paid upon exercise. There is no    
  guarantee that if and when these options are exercised they will have this
  value. As of July 12, 1999 the closing price of the Company's common stock
was $32.875.                                                            

(3) The number of options indicated as exercisable and unexercisable for        
Messrs. McCall and Bergonzi was adjusted following their dismissals as  
employees of the Company. For Mr. McCall, the options exercisable and   
  unexercisable as of June 18, 1999, were 1,184,000 and 0, respectively; and
  for Mr. Bergonzi, 685,000 and 0, respectively. All options granted to them
by the Company subsequent to the Merger were cancelled. Pursuant to the 
 "change in control" provisions of the HBOC option plans under which their
options were granted prior to the Merger, the vesting of such options   
   generally accelerates so that they become immediately exercisable as of the
date of termination of employment, and remain available for exercise for
   the full terms of the original option grants. The table above reflects this
treatment.                                                              

(4) As explained in the Note above under the heading "Executive Compensation,"  
the vesting of options granted to Messrs. Pulido, Hammergren and Mahoney
   prior to January 1999 accelerated at the end of the pooling period on April
   22, 1999 (except for 172,850 options granted to Mr. Hammergren, as to which
he waived acceleration). Accordingly, as of April 22, 1999, the options 
exercisable and unexercisable were as follows: Mr. Pulido, 1,690,000 and
  3,060,000; Mr. Hammergren, 300,816 and 1,192,700; and Mr. Mahoney, 744,100
   and 1,015,715. Mr. Pulido's options will continue to vest through March 31,
2004 pursuant to the terms of his employment agreement, as more fully   
described under "Employment Agreements" begining on page 23.            

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Long-Term Incentive Plan Awards in the Last Fiscal Year 

                                                        [Enlarge/Download Table]

                                        Estimated Future Payouts Under                    Estimated Future Payouts Under 
                       Performance or   Non-Stock Price-Based Plans(1)   Performance or   Non-Stock Price-Based Plans(1) 
                        Other Period   --------------------------------   Other Period   --------------------------------
                      Until Maturation Threshold    Target    Maximum   Until Maturation Threshold    Target    Maximum  
        Name             or Payout        ($)        ($)        ($)        or Payout        ($)        ($)        ($)    
        ----          ---------------- --------------------- ---------- ---------------- --------------------- ----------
                                                                                                                         
Charles W. McCall....   Three years             0          0          0    Five years             0          0          0
Mark A. Pulido.......   Three years     1,250,000  5,000,000  5,000,000    Five years     1,250,000  5,000,000  5,000,000
Albert J. Bergonzi...   Three years     1,250,000  5,000,000  5,000,000    Five years     1,250,000  5,000,000  5,000,000
John H. Hammergren...   Three years     1,250,000  5,000,000  5,000,000    Five years     1,250,000  5,000,000  5,000,000
David L. Mahoney.....   Three years     1,250,000  5,000,000  5,000,000    Five years     1,250,000  5,000,000  5,000,000

--------                                                                        
(1) The table above represents potential payouts of cash awards, if earned,     
upon completion of the three and five-year incentive periods beginning  
January 27, 1999 and ending January 27, 2003. Twenty-five percent of the
   amounts shown in the Maximum column will be paid on the completion of three
 and five years of service. Any payment in excess of 25% of the maximum is
performance-based and will be contingent upon the Company's Total       
Shareholder Return ("TSR"), performance percentile at the end of the    
performance period as defined in the LTIP. One hundred percent of the   
 maximum amount will be paid if the average TSR for the performance period
is at or above the 75th percentile of the S&P 500 without the financial 
institutions. Lower awards will be paid for lower performance. No awards
   above the service-based 25% of maximum will be paid if TSR is less than the
50th percentile. There are no target awards as such under the LTIP. The 
amount shown in the Target column represents the amount of the maximum  
  which would have been paid based on the Company's TSR return for the five-
 year period ended March 31, 1999. In the case of Mr. Bergonzi, this award
was cancelled upon his dismissal.                                       

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Stock Price Performance Graph                                                   

The following graph compares the cumulative total stockholder return* on the    
Company's common stock beginning on November 21, 1994, when the Company         
completed the PCS Transaction,** and for the periods indicated with the         
Standard & Poor's 500 Index and the Value Line Health Care Sector Index         
(composed of 107 companies in the health care industry, including the Company). 
The stock price performance depicted in the performance graph (i) is not        
necessarily indicative of future price performance and (ii) does not reflect    
the price of the Company's common stock following its April 28, 1999            
announcement that it would restate its financial results for the fourth quarter 
and fiscal year ended March 31, 1999. The closing price for the Company's       
common stock on March 31, 1999 was $66.00; and on April 28, 1999 it was $34.50. 

[PERFORMANCE GRAPH APPEARS HERE]                                                

                                                                [Download Table]

                          11/21/94 03/31/95 03/31/96 03/31/97 03/31/98 03/31/99
                          -------- -------- -------- -------- -------- --------
                                                                               
McKessonHBOC............. $100.00  $134.69  $174.59  $222.29  $405.46  $466.01 
S&P 500 Index............ $100.00  $111.35  $147.13  $176.47  $261.38  $309.16 
Value Line HealthCare                                                          
 Index................... $100.00  $113.49  $164.37  $200.15  $316.32  $393.72 

--------                                                                        
* Assumes $100 invested in the Company's common stock and in each index on    
November 21, 1994 and that all dividends are reinvested.                  

** The Company was organized in the state of Delaware on July 7, 1994, as a     
wholly-owned subsidiary of McKesson Corporation, a Delaware corporation   
 ("Old McKesson"), for the purpose of owning and operating the businesses of
Old McKesson following the acquisition of Old McKesson's pharmaceutical   
benefits management business (the "PCS Business") by a subsidiary of Eli  
  Lilly and Company (the "PCS Transaction"). As part of the PCS Transaction on
 November 21, 1994 the Company acquired all of the assets and liabilities of
  Old McKesson, other than those related to the PCS Business, and Old McKesson
 distributed to its stockholders one share of the Company's common stock for
  each share of Old McKesson common stock outstanding as of November 19, 1994.
The Company had no material assets, operations or activities prior to     
  November 21, 1994. After that date, the Company has continued the businesses
of Old McKesson, other than the PCS Business, on an uninterrupted basis.  

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2. Approval of the McKesson HBOC, Inc. Employee Stock Purchase Plan             

The Board of Directors Recommends a Vote FOR the Plan                           

The McKesson HBOC, Inc. 1998 Employee Stock Purchase Plan (the "Employee Stock  
Purchase Plan") is being submitted for approval by the Company's stockholders   
at the 1999 Annual Meeting, to permit participation in the plan by certain      
employees of the Company and its subsidiaries who are not currently eligible to 
participate.                                                                    

The Employee Stock Purchase Plan is designed to provide employees, including    
officers, with an opportunity to purchase shares of the Company's common stock  
on favorable terms by means of an automatic payroll deduction mechanism. The    
Employee Stock Purchase Plan is intended to qualify under Section 423 of the    
Code.                                                                           

The Employee Stock Purchase Plan, which was assumed by the Company in the       
Merger, was originally adopted by the HBOC Board of Directors on November 11,   
1997, and was approved by the HBOC stockholders on May 12, 1998. Since the      
Merger, employees of HBOC and its subsidiaries have continued to participate in 
the plan, but other employees of the Company and its subsidiaries have been     
excluded from participation by the terms of the plan.                           

The Company's Board of Directors has amended the Employee Stock Purchase Plan   
to permit participation by substantially all employees of the Company. To       
reflect such increased participation, the Board of Directors has also approved  
an increase in the number of shares of common stock reserved for issuance under 
the plan from 1,100,000 to 6,100,000 (subject to adjustment for any stock       
split, stock dividend or other relevant change in the Company's                 
capitalization). These changes are subject to stockholder approval. The Board   
has also made a number of technical amendments with regard to administration of 
the Employee Stock Purchase Plan.                                               

A vote in favor of the Employee Stock Purchase Plan will permit participation   
in the plan by certain employees of the Company and its subsidiaries who are    
not currently eligible to participate, and increase the number of shares        
available for purchase under the plan. A vote not to approve the Employee Stock 
Purchase Plan will mean that only employees of HBOC and its subsidiaries will   
continue to participate in the plan, and that the number of shares reserved for 
issuance under the plan will remain at 1,100,000.                               

The following summary of the Employee Stock Purchase Plan is qualified by       
reference to the full text of the Employee Stock Purchase Plan, a copy of which 
is attached as Appendix A.                                                      

Plan Administration; Eligible Employees                                         

The Employee Stock Purchase Plan is administered by the Compensation Committee  
of the Board, which has the authority to make rules and regulations governing   
the plan. Committee members will in general be indemnified by the Company with  
respect to the plan.                                                            

Substantially all employees of the Company who work at least 20 hours per week  
and more than five (5) months in any calendar year will be eligible to          
participate in the plan. As of June 1, 1999 approximately 7,940 employees of    
HBOC and its subsidiaries were eligible to participate in the Employee Stock    
Purchase Plan, and 3,142 employees had elected to participate. If the Employee  
Stock Purchase Plan is approved by the stockholders, an additional 23,000       
employees of the Company would become eligible to participate in the plan.      

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Purchase Periods; Payroll Deductions; Purchase Price                            

The Employee Stock Purchase Plan will generally be implemented by a series of   
year-long offerings (each one a "Purchase Period") beginning on April 1st of    
each calendar year (the "Offering Date"). Certain adjustments with respect to   
the Purchase Period have been made in connection with the Merger, and if the    
Employee Stock Purchase Plan is approved by stockholders, a new Purchase Period 
will begin shortly following the date of the 1999 Annual Meeting, in order that 
newly-eligible employees may begin participating in the plan.                   

Each eligible employee may become a participant in the Employee Stock Purchase  
Plan by making an election, prior to any Offering Date, authorizing regular     
payroll deductions during the following Purchase Period, the amount of which    
may not exceed 10% of a participant's compensation for any payroll period and   
certain other limitations imposed by the Code.                                  

Payroll deductions are credited to a cash account for each participant. At the  
end of each Purchase Period, the funds in each cash account will be used to     
purchase shares of the Company's common stock, which are then held in a stock   
account. A participant has the right to vote the shares credited to his or her  
stock account, and may withdraw these shares at any time.                       

The purchase price of each share of the Company's common stock will be the      
lesser of (i) 85% of the fair market value of the Company's common stock on the 
first day of the Purchase Period, or (ii) 85% of the fair market value of the   
Company's common stock on the last day of the Purchase Period. The purchase     
price is subject to adjustment to reflect certain changes in the Company's      
capitalization.                                                                 

Effect of Termination of Employment of Participant                              

If a participant terminates employment with the Company and its subsidiaries    
during a Purchase Period, the balance of the participant's cash account will    
either be returned to the participant or held in the cash account until the end 
of the Purchase Period and applied to purchase the Company's common stock.      

Non-Transferability of Purchase Rights                                          

Rights to acquire the Company's common stock under the Employee Stock Purchase  
Plan are not transferable by any participant and may in general be exercised    
only by the participant.                                                        

Amendment; Termination of Plan                                                  

The Board may amend the Employee Stock Purchase Plan in any respect. However,   
any amendment increasing the number of shares of the Company's common stock     
reserved under the plan or changing the designated class of employees eligible  
to participate in the plan must be approved by the stockholders of the Company. 

The Employee Stock Purchase Plan will terminate when the number of shares       
available for issuance under the plan has been substantially exhausted, or at   
any earlier time by action of the Board.                                        

New Plan Benefits                                                               

Because levels of participation and the eventual purchase prices are not        
presently known, the future benefits to be received by any person under the     
Employee Stock Purchase Plan are not determinable at this time.                 

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Certain Federal Income Tax Effects                                              

The following discussion is for general information only and is based on the    
Federal income tax laws now in effect, which are subject to change, possibly    
retroactively.                                                                  

The Employee Stock Purchase Plan is intended to qualify as an "employee stock   
purchase plan" under Section 423 of the Code. As a result, a participant will   
pay no Federal income tax upon enrolling in the Employee Stock Purchase Plan or 
upon purchase of shares under the plan. A participant may recognize income      
and/or capital gain or loss upon the sale or other disposition of shares        
purchased under the plan, the amount and character of which will depend on      
whether the shares are held for at least one year after the last day of the     
Purchase Period in which the shares were purchased (the "Required Holding       
Period").                                                                       

If the participant sells or otherwise disposes of the shares before expiration  
of the Required Holding Period, the participant will recognize ordinary income  
in the year of the sale in an amount equal to the excess of (i) the fair market 
value of the shares on the purchase date over (ii) the purchase price paid by   
the participant for the shares. The Company will be entitled to a Federal       
income tax deduction in the same amount.                                        

In contrast, if the participant holds the shares until after the Required       
Holding Period expires, the participant will generally recognize ordinary       
income at the time of sale in an amount equal to the lesser of (i) 15 percent   
of the fair market value of the shares on the first day of the Purchase Period  
in which the shares were purchased, or (ii) the excess of the fair market value 
of the shares at the time the shares were sold over the purchase price of the   
shares. The Company will not in this case be entitled to any deduction for      
Federal income tax purposes.                                                    

Net capital gain (i.e., generally, capital gain in excess of capital losses)    
recognized by the participant from the sale of shares that have been held for   
more than 12 months will generally be subject to tax at a rate not to exceed    
20%. Net capital gain recognized from the sale of shares held for 12 months or  
less will be subject to tax at ordinary income rates.                           

3. Proposal to Amend the McKesson HBOC, Inc. Stock Purchase Plan                

The Board of Directors Recommends a Vote FOR the Amendment to the Stock         
Purchase Plan                                                                   

On April 26, 1999, the Board of Directors, subject to approval of the Company's 
stockholders, amended the McKesson HBOC, Inc. Stock Purchase Plan (the "SPP")   
to make available for purchase thereunder an additional 2,500,000 shares of the 
Company's common stock. The SPP was (i) originally approved by the stockholders 
of the Company's predecessor in 1973, (ii) amended with stockholder approval in 
1974 to add 400,000 additional shares to the SPP, (iii) assumed by the Company  
in November 1994 and (iv) amended and restated with stockholder approval in     
1997, among other things to add 450,000 shares to the SPP. The SPP provides for 
the grant to designated key employees of rights to purchase shares of the       
Company's common stock at a price equal to its closing price on the New York    
Stock Exchange on the date the right is exercised.                              

Administration                                                                  

The SPP is administered by the Committee consisting of not less than two        
directors of the Company appointed by the Board, each of whom is a "non-        
employee director" within the meaning of Rule 16b-3 under the Securities        
Exchange Act of 1934, as amended (the "Act"). The Committee has the right to    
interpret the SPP and make final and binding determinations in connection with  
the SPP.                                                                        

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Eligibility                                                                     

Rights may be granted under the SPP to those key employees of the Company       
designated from time to time by the Committee. No member of the Committee is    
eligible to receive benefits under the SPP.                                     

Stock Subject to the Plan                                                       

As of June 30, 1999, 10,200 shares remained available for issuance pursuant to  
future grants of rights to purchase the Company's common stock under the SPP.   
Approval of the proposed amendment to the SPP would make an additional          
2,500,000 shares available for issuance pursuant to future grants under the     
SPP.                                                                            

Terms and Conditions of the Purchase Rights; Purchase Price                     

The purchase price of the Company common stock subject to rights granted under  
the SPP will be not less than the fair market value of the Company common stock 
on the date the right is exercised, which for purposes of the SPP is the        
closing price of the Company common stock on the New York Stock Exchange        
(NYSE). Each person granted a right to purchase Company common stock under the  
SPP will have at most thirty days in which to exercise the purchase right.      
Purchases will be evidenced by a written Stock Purchase Agreement, on terms and 
conditions established by the Committee, which may provide for the payment of   
the purchase price (i) in cash, (ii) entirely by a promissory note or (iii) by  
any combination of cash and promissory note. Stock purchased by an employee     
under the SPP will be pledged to the Company as collateral for the purchase     
loan upon terms and conditions set forth in the Stock Purchase Agreement.       

Voting and Dividend Rights                                                      

Shares purchased under the SPP are entitled to voting, dividend and other       
rights of holders of shares of the Company's common stock.                      

Amendment and Termination                                                       

The Board of Directors may at any time suspend, terminate or amend the SPP as   
it may deem advisable.                                                          

Change In Control                                                               

In the event of a change in control of the Company, the shares being held as    
collateral against outstanding SPP loans will be released from all transfer and 
pledge restrictions and the remaining balances due under the promissory notes   
will become due and payable within a limited period of time following the       
change in control.                                                              

New Plan Benefits                                                               

It has not yet been determined which executives will be granted awards under    
the SPP if the proposed amendment to add 2,500,000 shares to the SPP is         
approved by stockholders. In FY 1999, the most recent year in which awards were 
made under the SPP, the following awards were made:                             

                                                                [Download Table]

                                                                   Dollar Value
                                                         Number of   on Date   
                          Name                            Shares   of Purchase 
                          ----                           --------- ------------
                                                                               
Charles W. McCall.......................................        0           -- 
Mark A. Pulido..........................................        0           -- 
Albert J. Bergonzi......................................        0           -- 
John H. Hammergren......................................        0           -- 
David L. Mahoney........................................        0           -- 
Executive Officer Group (8 persons, including those                            
 named above)...........................................   20,000  $ 1,276,350 
Non-Executive Officer Group (63 persons)................  540,000   34,458,750 

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The consideration for each purchase was an initial cash payment of the $.01 per 
share par value of the common stock plus delivery of a full recourse promissory 
note for the balance of the purchase price, bearing interest at an annual rate  
of 4.7%, and payable in full on February 5, 2004, subject to the terms of the   
SPP and a Stock Purchase Agreement entered into between the Company and the     
purchaser.                                                                      

Any stockholder may obtain a copy of the current SPP by writing to the          
Secretary of the Company, One Post Street, San Francisco, California 94104.     

Employment Agreements, Executive Severance Policy and Termination of Employment 
and Change in Control Arrangements                                              

Employment Agreements                                                           

The Company has entered into an employment agreement ("Agreement") with each of 
Messrs. Pulido, Bergonzi, Hammergren and Mahoney, but not with Mr. McCall, that 
provides for, among other things, the term of employment, compensation and      
benefits payable during the term of the Agreement as well as for specified      
payments in case of termination of employment. The term of each Agreement is    
until March 31, 2003, except for Mr. Pulido's Agreement which runs until        
March 31, 2004. In each case, the Agreement provides that the executive will    
participate in all compensation and fringe benefit programs made available to   
all executive officers.                                                         

The Company may terminate any of the executives, under the terms of their       
respective Agreements, for "Cause" (as defined in each Agreement) in which case 
the Company's obligations under the Agreements cease.                           

Mr. Bergonzi's Agreement provided for an annual base salary of at least         
$580,000, and a retention payment of $6 million, 50% of which was to have been  
repaid upon his voluntary resignation from the Company within 12 months from    
the effective time of the Merger. He had been granted an LTIP award of $10      
million payable, if earned, 50% at the end of three years, and 50% at the end   
of five years, which amounts would have been reduced accordingly had financial  
targets not been met. He was granted a nonqualified option for 1 million shares 
of the Company's common stock and he purchased 100,000 shares of the Company's  
common stock under the 1999 Executive Stock Purchase Plan. Mr. Bergonzi was     
dismissed as an employee for cause on June 18, 1999. Accordingly, the Company's 
obligations under his Agreement ceased on that date, he did not receive a       
retention payment and his awards under his Agreement have been cancelled.       

Messrs. Hammergren's and Mahoney's Agreements provide for an annual base salary 
of at least $500,000 and a retention payment of $1.5 million, 50% of which is   
to be repaid if either such executive voluntarily resigns from the Company      
within 12 months following the execution of the Agreement. Each of Messrs.      
Hammergren and Mahoney will be granted incentive compensation, if any, as       
determined by the Compensation Committee. Each has been granted an LTIP award   
of $10 million payable, if earned, 50% at the end of three years, and 50% at    
the end of five years, which amounts will reduced accordingly if financial      
targets are not met. Each was granted a nonqualified option for 1 million       
shares of the Company's common stock and each purchased 100,000 shares of the   
Company's common stock under the 1999 Executive Stock Purchase Plan (see        
"Indebtedness of Executive Officers" on page 28).                               

Mr. Pulido's Agreement provides for an annual base salary of at least $850,000  
and such additional incentive compensation, if any, as may be determined by the 
Board of Directors. For fiscal year 1999, any incentive compensation awarded to 
Mr. Pulido under the Company's MIP shall be calculated using an Individual      
Target Award of 85% of his base salary. For fiscal year 2000 and thereafter any 
incentive compensation awarded to Mr. Pulido under the Company's MIP will be    

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calculated using an Individual Target Award of 100% of his base salary for the  
applicable year. Mr. Pulido has resigned from the Company effective July 15,    
1999. As a result, in addition to his base salary and any incentive             
compensation, pursuant to his Agreement, the Company will continue Mr. Pulido's 
participation in "DCAP II" and his automobile allowance until March 31, 2004,   
the accrual and vesting of his rights and benefits under the Executive Survivor 
Benefits Plan ("ESBP") and Executive Benefit Retirement Plan ("EBRP"), and with 
respect to these two plans, calculated on the basis of his receiving (i)        
Approved Retirement commencing on the expiration of his Agreement and (ii) with 
respect to the EBRP, a benefit calculated on the basis of the greater of 60% or 
the maximum percentage of Average Final Compensation then specified in the EBRP 
without any reduction for early retirement (see "Pension Benefits"), continue   
the vesting of all awards under the Company's Stock Option and Restricted Stock 
Plans and LTIP until March 31, 2004, and provide him with lifetime coverage     
under the Company's Executive Medical Plan and financial counseling program,    
office space and secretarial support.                                           

In the event any executive is prevented from performing his duties under his    
respective Agreement due to a disability, the Company shall continue to pay the 
current salary during the period of disability, provided however that if the    
executive is continuously disabled for more than 12 months, the Company's       
obligations under the Agreement cease. In the event of death of the executive   
during the term of the Agreement, his salary will continue to be paid to his    
surviving spouse for six months following the death and thereafter the          
Company's obligations under the Agreement cease.                                

The Company may terminate Messrs. Hammergren and Mahoney other than for "Cause" 
or each such executive may terminate for "Good Reason" under the terms of their 
respective Agreements (each as defined in each Agreement), in which case the    
Company's obligations generally will continue for the remainder of the term of  
the Agreement in lieu of any benefits payable under the Executive Severance     
Policy so long as payments and benefits equal or exceed those under that        
Policy; stock options granted prior to January 1, 1999 will continue to vest    
according to their original vesting schedule and options granted after January  
1, 1999 will be cancelled. Continuing salary payments made under the Agreement  
are reduced by any compensation received from a subsequent employer. If either  
of Messrs. Hammergren or Mahoney voluntarily terminates his employment other    
than for "Good Reason" prior to the expiration of his Employment Agreement, the 
Company is under no obligation to make any additional payments or provide any   
benefits to either executive.                                                   

Mr. Bergonzi agreed not to become associated with any business competing with   
the Company or any affiliated company for a period of one-year following his    
termination of employment. Each executive agreed not to solicit employees or    
customers of the Company following his termination of employment.               

The Company anticipates entering into new employment agreements with Messrs.    
Hammergren and Mahoney reflecting their new positions and increased             
responsibilities as of July 15, 1999. The Board of Directors has authorized the 
following terms for these agreements. The term of the agreements is until March 
31, 2004, and will be automatically extended by one year on March 31, 2004, and 
thereafter, unless either party gives notice that the term will not be          
extended. Each agreement will provide for, among other things, an annual base   
salary of at least $750,000 and additional incentive compensation, if any, as   
may be determined by the Board of Directors. Any incentive compensation awarded 
to either executive under the Company's MIP shall be calculated using an        
Individual Target Award of 100% of base salary. In addition, each executive     
will be granted options to purchase 2,000,000 shares of Company common stock.   
Each agreement will provide that, in the event (i) the Company terminates the   
executive without "Cause," (ii) the executive terminates for "Good Reason"      
(each as to be defined in the agreements) or (iii) the Company elects not to    
extend the term of the agreement, the executive will be entitled to receive     
payment of his then base salary and incentive                                   

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compensation (using an Individual Target Award of 100% of base salary), for the 
remainder of the term of the agreement, but in no event for less than two       
years, continued participation in the DCAP II for the term of the agreement,    
continued accrual and vesting in his rights and benefits under the ESBP and     
EBRP, calculated on the basis of his receiving (A) Approved Retirement          
commencing on the expiration of the agreement and (B) with respect to the EBRP, 
a benefit calculated on the basis of 60% of Average Final Compensation then     
specified in the EBRP without any reduction for early retirement (see "Pension  
Benefits"); lifetime coverage under the Company's Executive Medical Plan and    
financial counseling program, with respect to LTIP awards granted January 27,   
1999, receive such awards in accordance with the terms and conditions           
applicable to Approved Retirement with the exception that the "Service-based    
Portion of the Target Award" shall be paid as if executive continued employment 
throughout the performance period; and if such termination occurs prior to      
August 1, 2000, acceleration of vesting of all unvested options granted to the  
executive prior to July 1, 1999, and 50% of the unvested options granted to the 
executive after July 1, 1999, and if such termination occurs on or after August 
1, 2000, acceleration of vesting of all unvested options. In the event such     
termination occurs within two years following a Change in Control (to be        
defined in the agreement), executive will be entitled to a gross-up payment to  
cover the excise taxes and interest imposed on "excess parachute payments" as   
defined in Section 280G of the Code.                                            

Executive Severance Policy                                                      

The Company has implemented an Executive Severance Policy (the "Policy"), which 
applies in the event an executive officer is terminated by the Company for      
reasons other than for cause at any time other than within two years following  
a change in control (as defined in the Policy) of the Company. The benefit      
payable to executive officers under the Policy is equal to 12 months' base      
salary plus one month's pay per year of service, up to a maximum of 24 months.  
Such benefits would be reduced or eliminated by any income the executive        
officer receives from subsequent employers during the severance payment period  
and discontinued in the event the executive officer is employed by a            
competitor. Executive officers who are age 55 or older and have 15 or more      
years of service with the Company at the time of such involuntary termination   
are granted "approved retirement" for purposes of the EBRP and the ESBP. The    
Policy also provides that, upon such involuntary termination, awards under the  
LTIP are prorated for all cycles then in progress. In addition, vesting of      
stock options and lapse of restrictions on restricted stock awards will cease   
as of the date of termination, and no severance benefits will be paid beyond    
age 62.                                                                         

Termination of Employment and Change in Control Arrangements                    

The Company has entered into termination agreements with 16 executive officers, 
including Messrs. Pulido, Bergonzi, Hammergren and Mahoney, but not with Mr.    
McCall. The termination agreements operate independently of the Policy,         
continue through December 31 of each year, and are automatically extended in    
one-year increments until terminated by the Committee (or by the Board of       
Directors in the case of the Chief Executive Officer). The agreements are       
automatically extended for a period of two years following any change in        
control.                                                                        

The termination agreements provide for the payment of certain severance and     
other benefits to executive officers whose employment is terminated within two  
years of a change in control of the Company. Specifically, if following a       
change in control, the executive officer is terminated by the Company for any   
reason, other than for "Cause" (as defined in the agreements), or if such       
executive officer terminates his or her employment for "Good Reason" (as that   
term is defined in the termination agreements), then the Company will pay to    
the executive officer, as severance pay in cash, an amount equal to 2.99 times  
his or her "base amount" (as that term is defined in Section 280G of the Code)  
less any amount which constitutes a "parachute payment" (as defined in          

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Section 280G). The Company will also continue the executive officer's coverage  
in the health and welfare benefit plans in which he or she was a participant as 
of the date of termination of employment, and the executive officer will        
continue to accrue benefits under the EBRP, in both such cases for the period   
of time with respect to which the executive officer would be entitled to        
payments under the Policy described above if the executive officer's            
termination of employment had been covered by such Policy. In addition, if the  
executive officer is age 55 or older and has 15 or more years of service (as    
determined under such plan on the date of executive's termination of            
employment), then such termination will automatically be deemed to be an        
"Approved Retirement" under the terms of the EBRP. The amount of severance      
benefits paid shall be no higher than the amount that is not subject to         
disallowance of deduction under Section 280G of the Code.                       

Change in Control                                                               

For purposes of the termination agreements and as used elsewhere in this proxy  
statement, a "change in control" is generally deemed to occur if: (i) any       
"person" (as defined in the Securities Exchange Act of 1934, as amended) other  
than the Company or any of its subsidiaries or a trustee or any fiduciary       
holding securities under an employee benefit plan of the Company or any of its  
subsidiaries, acquires securities representing 30% or more of the combined      
voting power of the Company's then outstanding securities; (ii) during any      
period of not more than two consecutive years, individuals who at the beginning 
of such period constitute the Board of Directors of the Company and any new     
director whose election by the Board of Directors or nomination for election by 
the Company's stockholders was approved by a vote of at least two-thirds of the 
directors then still in office who either were directors at the beginning of    
the period or whose election or nomination for election was previously so       
approved, cease for any reason to constitute a majority thereof; (iii) the      
stockholders of the Company approve a merger or consolidation of the Company    
with any other Company, other than (a) a merger or consolidation which would    
result in the voting securities of the Company outstanding immediately prior    
thereto continuing to represent, in combination with the ownership of any       
trustee or other fiduciary holding securities under an employee benefit plan of 
the Company, at least 50% of the combined voting power of the voting securities 
of the Company or such surviving entity outstanding immediately after such      
merger or consolidation, or (b) a merger or consolidation effected to implement 
a recapitalization of the Company (or similar transaction) in which no person   
acquires more than 50% of the combined voting power of the Company's then       
outstanding securities; or (iv) the stockholders approve a plan of complete     
liquidation of the Company or an agreement for the sale or disposition by the   
Company of all or substantially all of its assets.                              

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Pension Benefits                                                                

The table below illustrates the estimated combined annual benefits payable upon 
retirement at age 62 under the Company's qualified retirement plan and          
supplemental EBRP in the specified compensation and years of service            
classifications. The benefits are computed as single life annuity amounts.      

Years of Service

                                                                [Download Table]

 Five Year                                                            
  Average                                                             
Compensation     15         20          25          30          35    
------------  --------  ----------  ----------  ----------  ----------
                                                                      
$  600,000    $279,300  $  332,400  $  360,000  $  360,000  $  360,000
$  800,000     372,400     443,200     480,000     480,000     480,000
$1,000,000     465,500     554,000     600,000     600,000     600,000
$1,200,000     558,600     664,800     720,000     720,000     720,000
$1,400,000     651,700     775,600     840,000     840,000     840,000
$1,600,000     744,800     886,400     960,000     960,000     960,000
$1,800,000     837,900     997,200   1,080,000   1,080,000   1,080,000
$2,000,000     931,000   1,108,000   1,200,000   1,200,000   1,200,000

The compensation covered under the plans whose benefits are summarized in the   
above table includes the base salary and annual bonus amounts reported in the   
Summary Compensation Table plus any annual bonus amounts foregone for grants of 
bonus options.                                                                  

The estimated years of service for purposes of the EBRP at March 31, 1999 for   
each of the executive officers named in the Summary Compensation Table are as   
follows: Mr. Pulido, 2; Mr. McCall, 0; Mr. Bergonzi, 0; Mr. Hammergren, 3; Mr.  
Mahoney, 8.                                                                     

The benefit under the EBRP is a percentage of final average pay based on years  
of service or as determined by the Board of Directors. The maximum benefit is   
60% of final average pay. The total paid under the EBRP is not reduced by       
Social Security benefits but is reduced by those benefits payable on a single   
life basis under the Company's qualified retirement plan and the annuitized     
value of the Retirement Share Plan allocations of Company common stock made to  
the PSIP assuming 12% growth in the value of the stock. Mr. Pulido will receive 
benefits from the EBRP based on 60% of final pay and not reduced by any early   
retirement reduction (see "Employment Agreements").                             

Certain Relationships and Related Transactions                                  

A limited partnership established by the Pulido family ("PLP"), holds an        
interest of approximately 62% in Humco Holdings Group, Inc. ("HHG"), which is a 
supplier of certain over-the-counter sundry products and vitamins, minerals and 
supplements. A brother of Mr. Pulido is the Chairman and Chief Executive        
Officer of HHG and holds a 40% interest in PLP. The Company has purchased       
products from HHG for more than 40 years, most recently pursuant to a five-year 
contract executed in August 1998. During fiscal year 1999, aggregate purchases  
by the Company from HHG totaled approximately $5.3 million and are expected to  
be slightly higher in fiscal year 2000. Mark Pulido holds a 24.66% interest in  
PLP, his father, approximately 16%, another brother, approximately 8% and his   
sister, less than 1%.                                                           

The Company and its subsidiaries also engage in transactions in the ordinary    
course of business with unaffiliated companies of which certain of the          
Company's non-employee directors are directors and/or executive officers. The   
Company does not consider the amounts involved in such transactions to be       
material in relation to the businesses of such other Companies or the interests 
of the directors involved. The Company anticipates that similar transactions    
will occur in FY 2000.                                                          

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Indebtedness of Executive Officers                                              

Under the 1999 ESPP, full recourse unsecured loans for the purchase of Company  
common stock, such loans having a term of five years, bearing interest at the   
rate of 4.7% per annum, were made on February 5, 1999 (the "Purchase Date") to  
six executive officers, including the Named Executive Officers, other than Mr.  
McCall. Pursuant to the 1999 ESPP, Mr. Pulido purchased 150,000 shares and      
Messrs. Bergonzi, Hammergren and Mahoney purchased 100,000 shares each, all at  
a purchase price of $63.8125 per share, which was the fair market value of the  
Company's common stock on the Purchase Date. In addition, under the SPP full    
recourse loans, having a term of five years, bearing interest at the rate of    
4.7% per annum, were made on the Purchase Date to certain executive officers    
and other key executives not named in the Summary Compensation Table. Such      
loans were for the purchase of Company common stock at the fair market value on 
the Purchase Date and are secured by a pledge of the shares purchased under the 
SPP. In fiscal years 1998, 1997, and 1995 loans to certain executive officers   
named in the Summary Compensation Table and other executive officers of the     
Company were made to purchase Company common stock at the fair market value on  
the dates of purchase, bearing interest at rates ranging from 7.1% to 8% per    
annum. All shares purchased by the executive officers under the 1999 ESPP and   
the SPP are included in the Security Ownership of Directors and Executive       
Officers table on page 3.                                                       

The table below shows as to each executive officer who was indebted to the      
Company in an amount exceeding $60,000 at any time during the period April 1,   
1998 through June 30, 1999, (i) the largest aggregate amount of indebtedness    
outstanding during such period, and (ii) the amount of indebtedness outstanding 
at June 30, 1999. For each individual listed in the table below, unless         
additional loans are described later in this paragraph, the indebtedness shown  
resulted from loans previously outstanding or those made on the Purchase Date   
under the 1999 ESPP or under the SPP. The indebtedness shown for Mr. Hammergren 
also includes the balance owed on a secured housing loan in the original        
principal amount of $500,000. The indebtedness shown for Ms. Yodowitz also      
includes balances owed on secured housing loans in the original principal       
amounts of $500,000 and $150,000. These housing loans are without interest      
unless and until the individuals fail to pay any amount under the loans when    
due, and thereafter at a market rate. The indebtedness shown for Mr. Hawkins    
also includes the balance owed on a secured housing loan in the amount of       
$300,000, bearing interest at the rate of 7.1% per annum. See Footnote 2 to the 
Summary Compensation Table on page 14 for further information regarding the     
housing loan made to Mr. Hammergren.                                            

                                                                [Download Table]

                                                    Largest     Amount of  
                                                   Aggregate   Indebtedness
                                                   Amount of   at June 30, 
                                                  Indebtedness     1999    
                                                  ------------ ------------
                                                                           
Albert J. Bergonzi............................... $ 6,455,619  $ 6,455,619 
John H. Hammergren...............................   8,535,910    8,535,910 
Richard H. Hawkins...............................   8,427,768    8,427,768 
David L. Mahoney.................................   8,110,908    8,110,908 
Ivan D. Meyerson.................................   2,554,053    2,554,053 
Mark A. Pulido...................................  17,802,042   17,802,042 
Heidi E. Yodowitz................................   1,941,124    1,941,124 

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Independent Auditors                                                            

At the recommendation of the Audit Committee, the Board of Directors has        
reappointed the firm of Deloitte & Touche LLP as the principal independent      
auditors to audit the consolidated financial statements of the Company and its  
subsidiaries for the fiscal year ending March 31, 2000, such appointment to     
continue at the pleasure of the Board of Directors. Deloitte & Touche LLP has   
acted as the Company's independent auditors for several years, is knowledgeable 
about the Company's operations and accounting practices, and is well qualified  
to act in the capacity of independent auditors.                                 

Representatives of Deloitte & Touche LLP are expected to be present at the      
meeting to respond to appropriate questions and to make a statement if they     
desire to do so.                                                                

Section 16(a) Beneficial Ownership Reporting Compliance                         

Section 16(a) of the Act requires the Company's directors, its executive        
officers and persons who own more than ten percent of the Company's common      
stock to file reports regarding their ownership of the Company's common stock   
and any subsequent changes in that ownership with the SEC, the NYSE and the     
Company. Based on its review of the copies of such forms received by it, or     
written representations from certain reporting persons that no Form 5 reports   
were required to be filed for those persons, the Company believes that, during  
the last fiscal year, all such reporting requirements were satisfied.           

Solicitation of Proxies                                                         

The Company is paying the cost of preparing, printing and mailing these proxy   
materials. We will reimburse banks, brokerage firms and others for their        
reasonable expenses in forwarding proxy materials to beneficial owners and      
obtaining their instructions. The Company has engaged Georgeson Shareholder     
Communications Inc., a proxy solicitation firm, to assist in the solicitation   
of proxies. We expect Georgeson's fee to be approximately $10,000, plus out-of- 
pocket expenses. A few officers and employees of the Company may also           
participate in the solicitation without additional compensation.                

Other Matters                                                                   

In addition to voting choices specifically marked, and unless otherwise         
indicated by the stockholder, the proxy card confers discretionary authority on 
the named proxy holders to vote on any matter that properly comes before the    
Meeting which is not described in these proxy materials. At the time this proxy 
statement went to press, the Company knew of no other matters which might be    
presented for stockholder action at the Meeting.                                

Advance Notice Procedures                                                       

Under the Company's Restated By-Laws, no business may be brought before an      
annual meeting except as specified in the notice of meeting (which includes     
stockholder proposals that the Company is required to include in its proxy      
statement under Rule 14a-8 of the Act) or as otherwise brought before the       
meeting by or at the direction of the Board or by a stockholder entitled to     
vote who has delivered notice to the Company (containing certain information    
specified in the Restated By-Laws and required to be included) not less than 90 
nor more than 120 days prior to the first anniversary of the preceding year's   
annual meeting. These requirements are separate and apart from, and in addition 
to, the SEC's requirements that a stockholder must meet to have a stockholder   
proposal included in the Company's proxy statement under Rule 14a-8.            

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The Restated By-Laws also provide that nominations for Director may be made     
only by the Board or a Board committee, or a stockholder entitled to vote who   
delivered notice not less than 90 nor more than 120 days prior to the first     
anniversary of the preceding year's annual meeting.                             

A copy of the full text of the By-Law provisions discussed above may be         
obtained by writing to the Secretary of the Company at the address below.       

Stockholder Proposals for 2000 Annual Meeting                                   

Proposals intended for inclusion in next year's proxy statement should be sent  
to the Secretary of the Company at the principal executive offices of the       
Company, One Post Street, San Francisco, CA 94104, and must be received by      
March 24, 2000.                                                                 

                                      By Order of the Board of Directors

                        /s/ IVAN D. MEYERSON

                    IVAN D. MEYERSON
                                  Senior Vice President, General
                         Counsel and Secretary

July 21, 1999                                                                   

A copy of the Company's Annual Report on Form 10-K to the Securities and        
Exchange Commission for the fiscal year ended March 31, 1999, excluding certain 
exhibits thereto, may be obtained without charge, by writing to Investor        
Relations, Box K, McKesson HBOC, Inc., One Post Street, San Francisco, CA       
94104.                                                                          

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                                                                      Appendix A

McKesson HBOC, Inc. 
1998 Employee Stock Purchase Plan 

As Amended and Restated Through April 26, 1999

WHEREAS, the Board of Directors of HBO & Company, a Delaware corporation        
("HBOC"), adopted the 1998 Employee Discount Stock Purchase Plan on November    
11, 1997, subject to the approval of the stockholders of HBOC, which approval   
was obtained on May 12, 1998; and                                               

WHEREAS, McKesson Corporation, a Delaware corporation ("McKesson"), HBOC, and   
McKesson Merger Sub, Inc., a Delaware corporation ("Merger Sub"), entered into  
an Agreement and Plan of Merger (the "Merger Agreement"), dated as of October   
17, 1998, whereby Merger Sub was merged with and into HBOC, and HBOC thereby    
became a direct, wholly-owned subsidiary of McKesson (the "Merger"); and        

WHEREAS, pursuant to the Merger Agreement, upon consummation of the Merger, the 
name of the combined entity was changed to McKesson HBOC, Inc. (the "Company"); 
and                                                                             

WHEREAS, upon consummation of the Merger, the 1998 Employee Discount Stock      
Purchase Plan was renamed the McKesson HBOC, Inc. 1998 Employee Stock Purchase  
Plan; and                                                                       

WHEREAS, the Boards of Directors of each of McKesson and HBOC have adopted      
resolutions amending and restating the 1998 Employee Stock Purchase Plan in the 
form below (the "Amendment and Restatement"):                                   

1. Purpose                                                                      

The McKesson HBOC, Inc. 1998 Employee Stock Purchase Plan (the "Plan") is       
intended to encourage the employees of the Company and certain of its           
subsidiaries to acquire a proprietary interest, or to increase their existing   
proprietary interest, in the Company. The Board of Directors of the Company     
(the "Board") believes that employee ownership of the Company's stock will      
serve as an incentive, encouraging employees to continue their employment and   
to perform diligently their duties as employees. The Plan is intended to        
qualify as an "employee stock purchase plan" within the meaning of Section 423  
of the Internal Revenue Code of 1986, as amended (the "Code").                  

2. Stock Reserved for the Plan                                                  

The Company will reserve 6,100,000 (which number has been adjusted to reflect   
the 2:1 stock split effected by HBO on May 27, 1998, and the Exchange Ratio as  
defined in the Merger Agreement) shares of the Company's common stock, $.01 par 
value per share ("Stock"), for purchase by employees under the Plan. The number 
of shares of Stock reserved for the Plan may further be adjusted as provided in 
Section 16. The shares of Stock reserved for the Plan may be shares now or      
hereafter authorized but unissued, shares that have been reacquired by the      
Company, or shares of treasury stock.                                           

3. Administration                                                               

The Plan will be administered by the Compensation Committee of the Board (the   
"Committee"), consisting of members of the Board designated by the Board. The   
Board from time to time may remove members from, or add members to, the         
Committee. Vacancies on the Committee will be filled by the Board. Subject to   
the express provisions of the Plan, the Committee will have authority           

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to interpret the Plan, to prescribe rules and regulations for administering the 
Plan, and to make all other determinations necessary or advisable in            
administering the Plan. The determinations of the Committee will be final and   
binding upon all persons, unless otherwise determined by the Board. A majority  
of the members of the Committee will constitute a quorum, and the Committee may 
act by vote of a majority of its members at a meeting at which a quorum is      
present, or without a meeting by a written consent signed by all members of the 
Committee. To the extent consistent with applicable law, the Committee may      
delegate its duties hereunder to a sub-committee, whose members need not be     
members of the Board.                                                           

4. Eligibility                                                                  

(a) Eligible Employees. Except as set forth in subsections (b) and (c) below,   
all employees of the Company, and all employees of any parent corporation, as   
defined in Code Section 424(e) (a "Parent") or any subsidiary corporation as    
defined in Code Section 424(f) (a "Subsidiary") of the Company that is          
designated by the Board as a participating Parent or Subsidiary, will be        
eligible to participate in the Plan. Such employees are referred to herein as   
"Employees." No person who is not an Employee will be eligible to participate   
in the Plan.                                                                    

(b) Excluded Employees. The following Employees will not be eligible to         
participate in the Plan:                                                        

(i) any Employee whose customary employment is 20 hours or less per week or 
for not more than 5 months in any calendar year; and                        

(ii) any Employee who, immediately after a right to purchase Stock is       
granted hereunder, would own shares of Stock, or of the stock of a          
Subsidiary, possessing 5 percent or more of the total combined voting power 
or value of all classes of such stock. In determining whether an Employee   
owns 5 percent of such shares, (A) the attribution of ownership rules of    
Code Section 424(d) will apply, and (B) an Employee will be deemed to own   
the shares of stock underlying any outstanding option which he has been     
granted (whether under the Plan or any other plan or arrangement).          

(c) Participation by Certain Employees Subject to Stockholder                   
Approval. Employees of the Company or any Subsidiary who are employed neither   
by HBOC nor by any subsidiary (as defined in Code Section 424(f)) (the          
"Contingent Participants"), will not be eligible to participate in the Plan     
unless and until the stockholders of the Company approve this Amendment and     
Restatement on or prior to January 12, 2000 (the date of such approval, the     
"Stockholder Approval Date").                                                   

5. Offering Dates                                                               

(a) In General. Except as set forth in subsections (b) and (c) below, the Plan  
will be implemented by a continuous series of offerings beginning on the first  
trading day on or after April 1st of each calendar year (the "Offering Date")   
and terminating on the last trading day of the following March (the "Purchase   
Date"). A trading day will be a day on which the New York Stock Exchange (or    
any other exchange or quotation system on which the Stock may from time to time 
be listed) will be open. The period for which each such offering is effective   
is referred to herein as a "Purchase Period."                                   

(b) Special Purchase Periods. The Offering Date for the first Purchase Period   
under the Plan was March 1, 1998 and the Purchase Date for the first Purchase   
Period under the Plan was the last trading day on or before February 28, 1999.  
The Offering Date for the second Purchase Period under the Plan was the first   
trading day on or after March 1, 1999, and the Purchase Date for the second     
Purchase Period under the Plan will be the last trading day on or before March  
31, 2000.                                                                       

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(c) Application to Contingent Participants. Subject to Section 4(c) above,      
Contingent Participants may elect to participate in the Plan beginning with the 
first offering commencing on or after the Stockholder Approval Date. The        
Committee may establish a special Purchase Period following the Stockholder     
Approval Date to permit Contingent Participants to commence participation in    
the Plan prior to the next regularly scheduled Offering Date.                   

6. Election to Participate                                                      

(a) Initial Election. Each Employee who is eligible to participate in the Plan  
may become a participant (a "Participant") by making an election, prior to any  
Offering Date and in accordance with procedures established by the Committee,   
authorizing specified regular payroll deductions over the next succeeding       
Purchase Period (an "Election Form"). Each election will be expressed as a      
percentage of the Employee's Compensation (as defined below), which may not     
exceed 10 percent of the Employee's Compensation for any payroll period or be   
less than 1 percent of the Employee's Compensation for any payroll period (or   
such other maximum and minimum percentages as the Committee may determine). An  
Employee's "Compensation" is his total cash compensation from the Company and   
its affiliates. Payroll deductions for a Participant will be made regularly and 
in equal amounts during the Purchase Period by the Company, and will be         
credited to a bookkeeping account established by the Company in the name of the 
Participant (the "Cash Account"). No interest will be paid on or credited to    
Cash Accounts.                                                                  

(b) Changes in Rate of Payroll Deductions. A Participant may discontinue making 
payroll deductions in accordance with Section 6(c), but may not otherwise       
increase or decrease the amount of payroll deductions elected for a Purchase    
Period.                                                                         

(c) Discontinuance of Contributions. At any time during a Purchase Period, a    
Participant may discontinue participation in the Plan for the current Purchase  
Period by providing notice in accordance with procedures established by the     
Committee. Upon such discontinuance, at the Participant's election, the balance 
of his Cash Account will be (i) returned to the Participant as soon as          
practicable, or (ii) held in the Cash Account until the end of the Purchase     
Period and applied to purchase Stock in accordance with Section 10. A           
Participant who discontinues payroll deductions may recommence his              
participation in the Plan as of the Offering Date for any other succeeding      
Purchase Period, provided he otherwise is eligible to participate and timely    
files a new Election Form with the Committee.                                   

7. Purchase Period Limitation on Rights to Purchase Stock                       

(a) In General. Except as provided in Section 7(b) below with respect to the    
first Purchase Period under the Plan, and subject to the annual limitations in  
Section 8 below, the maximum number of shares of Stock each Participant will    
have the right to purchase under the Plan during a Purchase Period is           
determined by dividing (i) $25,000 by (ii) the Fair Market Value of one share   
of Stock on the Offering Date for such Purchase Period.                         

(b) First Purchase Period. For purposes of the first Purchase Period hereunder, 
the maximum number of shares of Stock each Participant had the right to         
purchase under the Plan was determined by dividing (i) $25,000 by (ii) the      
quotient of (A) the closing price of the common stock, par value $.005 per      
share, of HBOC as quoted on the Nasdaq National Market on February 27, 1998     
divided by (B) the Exchange Ratio (as defined in the Merger Agreement).         

(c) Insufficient Shares of Stock. If at any time the number of shares of Stock  
available for purchase under the Plan is insufficient to grant to each          
Participant the right to purchase the full number of shares to which he         
otherwise would be entitled, then each Participant will have the right to       
purchase that number of available shares of Stock that is equal to the total    
number of available shares of                                                   

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Stock multiplied by a fraction, the numerator of which is the amount of         
Compensation credited to the Participant's Cash Account for the Purchase        
Period, and the denominator of which is the total amount of Compensation        
credited to the Cash Accounts of all Participants for the Purchase Period.      

8. Annual Limitation on Rights to Purchase Stock                                

No right to purchase shares of Stock under the Plan will be granted to an       
Employee if such right, when combined with all other rights and options granted 
under all of the Code Section 423 employee stock purchase plans of the Company  
or any Parent or Subsidiary would permit the Employee to purchase shares of     
Stock with a Fair Market Value (determined at the time the right or option is   
granted) in excess of $25,000 for each calendar year in which the right or      
option is outstanding at any time, determined in accordance with Code           
Section 423(b)(8).                                                              

9. Purchase Price                                                               

(a) In General. Except as provided in Section 9(b) with respect to the purchase 
of Stock under the first offering of the Plan, the purchase price of each share 
of Stock will be the lesser of (i) 85 percent of the Fair Market Value of the   
Stock on the Offering Date, or (ii) 85 percent of the Fair Market Value of the  
Stock on the Purchase Date.                                                     

(b) Effect of Merger. The purchase price for each share of Stock purchased      
under the first Purchase Period of the Plan was the lesser of (i) 85 percent of 
the closing price of the common stock, par value $.005 per share, of HBOC as    
quoted on the Nasdaq National Market on February 27, 1998 divided by the        
Exchange Ratio (as defined in the Merger Agreement), or (ii) 85 percent of the  
Fair Market Value of the Stock on the Purchase Date.                            

(c) Fair Market Value. The Fair Market Value of the Stock, as of any date, will 
be equal to the closing price of the Stock on the New York Stock Exchange       
("NYSE"), for such date as reported in The Wall Street Journal. If no           
transaction is reported for a particular date, Fair Market Value will be the    
closing price on the closest preceding date for which any transaction is        
reported. If the Stock is not traded on the NYSE, Fair Market Value will be     
determined using the method established by the Committee.                       

10. Purchase of Stock                                                           

(a) Funds in Cash Account Used to Purchase Whole Shares of Stock. Subject to    
the share limitations set forth in Sections 7 and 8 above, as of each Purchase  
Date, the Committee will purchase from the Company using the funds in each Cash 
Account on such date, on behalf of each Participant having funds in his Cash    
Account, the number of whole shares of Stock determined by dividing the amount  
in such Cash Account on such date by the purchase price determined under        
Section 9.                                                                      

(b) No Fractional Shares. No fractional shares will be issued under the Plan.   
To the extent that, following the purchase of shares of Stock on any Purchase   
Date, there remains in any Cash Account payroll deduction amounts insufficient  
to purchase at least one full share of Stock, such amounts will be retained in  
the Participant's Cash Account and applied to the next subsequent Purchase      
Period, subject to withdrawal by the Participant as provided in Section 6(c)    
hereof.                                                                         

(c) Return of Excess Contributions. Any additional amounts remaining in a       
Participant's Cash Account following the purchase of shares of Stock on any     
Purchase Date that are equal to or in excess of the amount required under       
Section 10(a) to purchase at least one full share of Stock will be returned to  
the Participant as soon as reasonably practicable following the Purchase Date.  

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11. Stock Accounts                                                              

(a) Establishment of Accounts. As soon as reasonably practicable after each     
Purchase Date, the Company will deliver to a custodian selected by the          
Committee (the "Custodian") a certificate or certificates representing the      
total number of shares purchased by all Participants in the Purchase Period.    
The Custodian will maintain a separate "Stock Account" for each Participant,    
which will be credited with the number of shares of Stock purchased by the      
Participant under the Plan.                                                     

(b) Withdrawals from Stock Accounts. A Participant may at any time withdraw any 
shares of Stock credited to his Stock Account. As soon as practicable after     
such request by a Participant, the Custodian will cause a certificate           
representing such Shares to be delivered to the Participant.                    

(c) Rights as Shareholders. A Participant will have all of the rights of a      
stockholder of the Company with respect to all of the shares of Stock credited  
to his Stock Account, including the right to vote and receive dividends on such 
Shares.                                                                         

12. Termination of Employment                                                   

(a) Termination Other Than Due to Death, Disability or Retirement. If a         
Participant terminates employment with the Company or any Parent or Subsidiary  
during a Purchase Period for any reason other than death, disability, or        
Retirement, then the Participant's participation in the Plan will immediately   
terminate and the balance of the Participant's Cash Account will be returned to 
the Participant. For purposes of the Plan, a Participant who is on an approved  
leave of absence will not be considered to have terminated employment until the 
91st day of such leave of absence or such longer period as the Participant's    
right to re-employment is guaranteed by law or contract.                        

(b) Termination Due to Death. If a Participant terminates employment with the   
Company or any Parent or Subsidiary during a Purchase Period due to death,      
then, at the election of the Participant's beneficiary, the balance of the      
Participant's Cash Account will be (i) delivered to the beneficiary or (ii)     
held in the Cash Account until the end of the Purchase Period and applied to    
purchase Stock in accordance with Section 1.                                    

(c) Termination Due to Disability or Retirement. If a Participant terminates    
employment with the Company or any Parent or Subsidiary due to Retirement or    
disability no more than 3 months before the Purchase Date for a Purchase        
Period, then, at the Participant's election, the balance of the Participant's   
Cash Account will be (i) returned to the Participant, or (ii) held in the Cash  
Account until the end of the Purchase Period and applied to purchase Stock in   
accordance with Section 10. If a Participant terminates employment due to       
Retirement or disability more than 3 months before the Purchase Date for a      
Purchase Period, then the Participant's participation in the Plan will          
immediately terminate and the balance of the Participant's Cash Account will be 
returned to the Participant.                                                    

(d) Definition of Retirement. For purposes of the Plan, Retirement will mean    
the attainment by a Participant of age plus whole years of service with the     
Company or any Parent or Subsidiary totaling 65 or more.                        

13. Designation of Beneficiary                                                  

In accordance with procedures established by the Committee, a Participant may   
designate one or more beneficiaries to receive benefits in the event of the     
Participant's death. If a Participant fails to properly designate a             
beneficiary, the Participant's estate will be considered the Participant's      
beneficiary for purposes of the Plan.                                           

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14. Compliance with Securities Law                                              

All shares of Stock issued under the Plan will be subject to such restrictions  
as the Committee may deem advisable under any applicable federal or state       
securities laws, and the Committee may cause a legend or legends making         
reference to such restrictions to be placed on the certificates representing    
such shares.                                                                    

15. Rights Not Transferable                                                     

Neither payroll deductions credited to a Participant's account nor any rights   
under the Plan may be assigned, transferred, pledged or otherwise disposed of   
in any way by the Participant (other than by will or the laws of descent and    
distribution or as provided in Section 13 hereof). Rights under the Plan are    
exercisable during the lifetime of the Participant only by the Participant.     

16. Adjustment in Case of Changes Affecting the Company's Stock                 

(a) In General. In the event of a subdivision or consolidation of outstanding   
shares of Stock, the payment of a stock dividend thereon, stock split, reverse  
stock split, or in the event of any "corporate transaction" as defined in       
Treasury Regulations Section 1.425 1(a)(1)(ii) (now relating to Code Section    
424), the number of shares reserved or authorized to be reserved under the      
Plan, the number and price of such shares subject to purchase pursuant to       
rights outstanding hereunder, the maximum number of shares each Participant may 
purchase during each Purchase Period (pursuant to Section 7) or during each     
calendar year (pursuant to Section 8), and the number of shares credited to     
Participants' Stock Accounts, will be adjusted in such manner as may be deemed  
necessary or equitable by the Board to give proper effect to such event,        
subject to the limitations of Code Section 424.                                 

(b) Effect of Merger. Following consummation of the Merger, outstanding         
purchase rights of HBOC employees under the Plan remained in effect and were    
assumed by the Company, with appropriate changes to reflect the issuance of     
shares of Stock.                                                                

17. Foreign Employees                                                           

To the extent permitted under Section 423 of the Code, the Committee may        
provide for such special terms for Participants who are foreign nationals, or   
who are employed by the Company or a Parent or Subsidiary outside of the United 
States of America, as the Committee may consider necessary or appropriate to    
accommodate differences in local law, tax policy or custom. Moreover, the       
Committee may approve such supplements to or amendments, restatements, or       
alternative versions of, this Plan as it may consider necessary or appropriate  
for such purposes without thereby affecting the terms of this Plan as in effect 
for any other purpose; provided, however, that no such supplements, amendments, 
restatements or alternative versions will include any provisions that are       
inconsistent with the terms of this Plan, as then in effect, unless this Plan   
could have been amended to eliminate such inconsistency without further         
approval by the shareholders of the Company, or which would cause the Plan to   
fail to meet the requirements of Section 423 of the Code.                       

18. Amendment of the Plan                                                       

The Board may amend the Plan in any respect; provided, however, that, any       
amendment (i) increasing the number of shares of Stock reserved under the Plan  
(other than as provided in Section 16), or (ii) changing the designated class   
of employees eligible to participate in the Plan as provided in Section 4, must 
be approved, within 12 months of the adoption of such an amendment, by the      
holders of a majority of the voting power of the outstanding shares of Stock.   

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19. Termination of the Plan                                                     

The Plan and all rights of Employees hereunder will terminate:                  

(i)as of the Purchase Date on which Participants purchase a number of shares of 
Stock that substantially exhausts the number of shares available for issuance   
under the Plan, to such an extent that the Committee determines that no         
subsequent offerings are practicable; or                                        

(ii)at any time upon action of the Board; provided, however, that if the Plan   
is terminated during any Purchase Period, any amounts in a Participant's Cash   
Account will be returned to the Participant.                                    

20. Effective Date                                                              

This Amendment and Restatement will become effective as of April 26, 1999;      
provided, that the increase of shares of Common Stock reserved for issuance     
under the plan under Section 2 and the participation of Contingent Participants 
in the Plan shall become effective only upon stockholder approval of this       
Amendment and Restatement on or prior to January 12, 2000. Participation in the 
Plan by Employees who are employed by HBOC or by any subsidiary (as defined in  
Code Section 424(f)) designated as eligible to participate will continue in     
full force and effect and will not be affected by any failure to obtain such    
stockholder approval.                                                           

21. Government and Other Regulations                                            

(a) In General. The Plan, and the grant and exercise of the rights to purchase  
shares of Stock hereunder, and the Company's obligation to sell and deliver     
shares of Stock, will be subject to all applicable federal, state and foreign   
laws, rules and regulations, and to such approvals by any regulatory or         
government agency as may, in the opinion of counsel for the Company, be         
required.                                                                       

(b) Withholding Obligations. Each Participant will, no later than the date as   
of which the value of any purchase right granted under the Plan first becomes   
includible in the gross income of the Participant for federal income tax        
purposes, pay to the Company, or make arrangements satisfactory to the Company, 
regarding payment of any federal, state, or local taxes of any kind required by 
law to be withheld with respect to such purchase right. The obligations of the  
Company under the Plan will be conditional on the making of such payments or    
arrangements and the Company will, to the extent permitted by law, have the     
right to deduct any such taxes from any payment of any kind otherwise due to    
the Participant.                                                                

22. Indemnification of Committee                                                

In addition to such other rights of indemnification as they have as directors   
or as members of the Committee, the members of the Committee will be            
indemnified by the Company against reasonable expenses (including, without      
limitation, attorneys' fees) actually and necessarily incurred in connection    
with the defense of any action, suit or proceeding, or in connection with any   
appeal, to which they or any of them may be a party by reason of any action     
taken or failure to act under or in connection with the Plan or any right       
granted hereunder, and against all amounts paid by them in settlement thereof   
(provided such settlement is approved to the extent required by and in the      
manner provided by the Bylaws of the Company relating to indemnification of     
directors) or paid by them in satisfaction of a judgment in any such action,    
suit or proceeding, except in relation to matters as to which it will be        
adjudged in such action, suit or proceeding that such Committee member did not  
act in good faith and in a manner he reasonably believed to be in or not        
opposed to the best interests of the Company.                                   

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[RECYCLE LOGO APPEARS HERE] 
Printed on Recycled Paper 

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P R O X Y 

McKESSON HBOC, INC. 

Proxy for Annual Meeting  
10:00 A.M., August 25, 1998 
Solicited on Behalf of the Board of Directors of the Corporation  

The undersigned, whose signature appears on the reverse side, hereby constitutes
and appoints Alan Seelenfreund and Ivan D. Mayerson, and each of them, with full
power of substitution, proxies to vote all stock of McKesson HBOC, Inc. which   
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be 
held at the Palace Hotel, 2 New Montgomery Street, San Francisco, California, on
August 25, 1999, and any adjournments thereof, as specified upon the matters    
indicated on the reverse side, and in their discretion upon any other matter    
that may properly come before said meeting.                                     

Election of Directors                                       

Nominees for three-year terms expiring in 2002              
(01) Alfred C. Eckert III                                   
(02) Gerald E. Mayo                                         
(03) Alan Seelenfreund                                      
(04) Jane E. Shaw.                                          

Your shares will not be voted unless you (1) vote by telephone, (2) vote via    
the Internet, as described on the reverse side, or (3) sign and return this     
card.                                                                           

                                                                   -------------
                                                                   SEE REVERSE
                                                                    SIDE
                                                                   -------------

--------------------------------------------------------------------------------
FOLD AND DETACH HERE  

ANNUAL MEETING OF STOCKHOLDERS  
OF  
McKESSON HBOC, INC. 

Wednesday, August 25, 1999  
Palace Hotel  
2 New Montgomery Street 
San Francisco, CA 94105 

----------------------------------------------------  

Please present this ADMISSION TICKET at the Annual  
Meeting of Stockholders as verification of your   
McKesson HBOC, Inc. share ownership.  

----------------------------------------------------  

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[X]  Please mark your votes as in this example.                                 
  This proxy, when properly executed, will be voted as directed, but if no
direction is given, this proxy will be voted FOR each of the following          
proposals.                                                                      
--------------------------------------------------------------------------------
   The Board of Directors Recommends a Vote FOR Each of the Following Proposals:
--------------------------------------------------------------------------------
FOR     WITHHELD                          
1.   Election of   [_]       [_]                                                
Directors                                                             
(See reverse)                                                         

For, except vote withheld from the following nominee(s):                        

____________________________                                                    

                                                    FOR      AGAINST   ABSTAIN
2.   Approve the Employee Stock Purchase Plan        [_]        [_]       [_]   
3.   Approve an Increase in Number of Authorized                                
  Shares for the Stock Purchase Plan              [_]        [_]       [_]

PLEASE CAST YOUR VOTE BY TELEPHONE OR VIA THE INTERNET AS INSTRUCTED BELOW OR   
COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY
ENVELOPE.                                                                       

                                                        YES     NO
Please indicate if you plan to attend the Annual Meeting:      [_]     [_]      

Please sign exactly as name appears hereon. Joint owners should each sign. When 
signing as attorney, executor, administrator, trustee or guardian, please give  
full title as such.                                                             

_______________________________________                                         

_______________________________________                                         
SIGNATURE(S)                DATE                                            

--------------------------------------------------------------------------------
FOLD AND DETACH HERE - IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL 

McKesson HBOC, Inc. encourages you to take advantage of a new and convenient way
by which you can vote your shares - by either telephone or the Internet.        

- By Telephone. Stockholders calling from the United States, Canada, Puerto Rico
and the U.S. Virgin Islands may dial toll-free 1-877-779-8683 (1-877-PRX-VOTE). 
If you call from other locations, you may dial 201-324-0377, and you will bear  
the normal cost of international telephone access charges to use the telephone  
voting service. Listen to the recorded instructions, use the control number     
printed in the box in the upper right corner of this proxy card to access the   
system, and use your telephone key pad to vote.                                 

-Over the Internet. Access the World Wide Web site "http://www.eproxyvote.      
com/mck" and follow the instructions posted on the web                          
site.                                                                           

Your my telephone or over the Internet authorizes the proxies named on the      
front of this proxy card to vote your shares in the same manner as if you       
marked, signed, dated and returned the proxy card. If you choose to vote your   
shares by either of these electronic means, there is no need for you to mail    
back your proxy card.                                                           

Your vote is important. Thank you for voting. 

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PSIP VOTING CARD  
DIRECTIONS TO TRUSTEE, McKESSON HBOC, INC. PROFIT-SHARING INVESTMENT PLAN 

To: The Chase Manhattan Bank, N.A.                                              

I direct you as Trustee of the McKesson HBOC, Inc. Profit-Sharing Investment    
Plan to vote (in person or by proxy) as I have specified on the reverse side    
hereof all shares of McKesson HBOC, Inc. common stock allocated to my accounts  
under the plan at the Annual Meeting of Stockholders of McKesson HBOC, Inc. on  
August 25, 1999. You may vote according to your discretion (or that of your     
proxy holder) on any other matter which may properly come before the meeting.   

Election of Directors                                       

Nominees for three-year terms expiring in 2002    
Alfred C. Eckert III                    
Gerald E. Mayo                          
Alan Seelenfreund                       
Jane E. Shaw                            

Your shares will not be voted unless you (1) vote by telephone as described on  
the reverse side, or (2) sign and return this card.                             

                                                                     -----------
                                                                     SEE REVERSE
                                                                    SIDE
                                                                     -----------

ANNUAL MEETING OF STOCKHOLDERS  
OF  
McKESSON HBOC, INC. 

Wednesday, August 25, 1999  
Palace Hotel  
2 New Montgomery Street   
San Francisco, CA 94105   

----------------------------------------------------------------------  
Please present this ADMISSION TICKET at the Annual  
Meeting of Stockholders as verification of your participation in
the McKesson HBOC, Inc. Profit-Sharing Investment Plan. 
----------------------------------------------------------------------  

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The Board of Directors recommends a Vote FOR ALL Proposals  

Please mark your votes as indicated [X]                                         

                                                          With-  For all
                                                   For   hold   Except
1. Election of Directors                                [_]   [_]     [_]       
Alfred C. Eckert III                                                      
Gerald E. Mayo                                                            
Alan Seelenfreund                                                         
Jane E. Shaw                                                              

If you do not wish your shares voted "FOR" a particular nominee, mark the "For  
All Except" box and strike a line through the nominee(s) name. Your shares will 
be voted for the remaining nominee(s).                                          

                                                       FOR   AGAINST   ABSTAIN
2. Approve the Employee Stock Purchase Plan.           [_]     [_]       [_]  

3. Approve an Increase in Number of Authorized Shares  [_]     [_]       [_]  
for the Stock Purchase Plan.                                            

 PLEASE CAST YOUR VOTE BY TELEPHONE AS INSTRUCTED BELOW OR COMPLETE DATE
SIGN AND MAIL THIS VOTING INSTRUCTION CARD PROMPTLY IN THE ENCLOSED BUSINESS
REPLY ENVELOPE.                                                             
                                                              YES       NO
PLEASE INDICATE IF YOU PLAN TO ATTEND THE ANNUAL MEETING:        [_]       [_]  

This voting instruction card, when properly executed, will be voted as    
directed, but if no direction is given, it will be voted FOR proposals 1, 2,
and 3.                                                                      

Signature ___________________________________ Dated: __________________ 1999    

--------------------------------------------------------------------------------
FOLD AND DETACH HERE-IF YOU ARE RETURNING YOUR VOTING CARD BY MAIL  

--------------------------------------------------------------------  
IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW  
--------------------------------------------------------------------  
VOTE BY TELEPHONE 

QUICK - EASY  

PSIP participants may instruct the Plan Trustee how to vote the shares allocated
to their account by telephone 24 hours a day, 7 days a week. If you wish to do  
so, dial 1-800-840-1208 on a touch-tone telephone.                              

You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form. 

--------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL proposals:   
Press 1.  
--------------------------------------------------------------------------------

When asked, please confirm your vote by pressing 1. 

--------------------------------------------------------------------------------
OPTION #2. If you choose to vote on each proposal separately, press 0. You will 
hear these instructions:  
--------------------------------------------------------------------------------

Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL      
                 nominees, press 9. To withhold FOR AN INDIVIDUAL nominee, press
0 and listen to the instructions.             

    Proposals 2 and 3: to vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.

When asked, please confirm your vote by pressing 1. 

--------------------------------------------------------------------------------
PLEASE DO NOT RETURN YOUR VOTING INSTRUCTION CARD IF YOU HAVE VOTED BY PHONE. 
--------------------------------------------------------------------------------

                                                          ======================
Call Toll Free Anytime From a Touch Tone Telephone        (PIN # to appear here)

1-800-840-1208                                    

There is NO CHARGE to you for this call.                                
                                                          ======================

DEFR14A
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McKesson HBOC, Inc. 
One Post Street, San Francisco CA 94104-5296
July 21, 1999                                                                   

Dear McKesson HBOC, Inc. Profit-Sharing Investment Plan Participant:            

As a participant in the McKesson HBOC, Inc. Profit-Sharing Investment Plan      
("PSIP"), you are a stockholder in the Company. At the Annual Stockholders      
Meeting, you have the right to instruct the Plan Trustee, on a confidential     
basis, how the shares of McKesson HBOC common stock in your account are to be   
voted on matters that come before the meeting.                                  

The enclosed Proxy Statement describes three proposals to be voted on at this   
year's meeting. The Board of Directors recommends that you vote FOR all         
proposals. This year participants in the PSIP can vote their shares by          
telephone. The toll-free number and procedures for voting by telephone are      
included on the enclosed PSIP voting card. Alternatively, you may cast your     
vote by completing, signing and returning the PSIP voting card in the business  
reply envelope provided. If you sign and return the card without marking your   
choices, your shares will be voted in accordance with the Board of Directors'   
recommendations as indicated above. This card or your telephone voting          
instructions also give the Trustee authority to vote on your behalf on any      
other matters that may properly come before the meeting. Please do not return   
your PSIP voting card if you vote by telephone.                                 

If the Trustee receives no voting instructions for shares credited to           
participants' PAYSOP accounts, no vote will be cast on those shares. The PSIP   
provides that all other shares for which the Trustee receives no voting         
instructions from participants, as well as all unallocated shares of common     
stock, will be voted by the Trustee in the same proportion as shares for which  
voting instructions are received.                                               

Participants who own shares of McKesson HBOC common stock by means other than   
through the PSIP will receive a separate proxy card and instructions for voting 
those shares.                                                                   

To ensure that your shares are represented and voted at the meeting according   
to your wishes, your telephone voting instructions or signed PSIP voting card   
must be received by the Trustee by August 20, 1999. The Company's Annual Report 
for the fiscal year ended March 31, 1999 accompanies this Proxy Statement.      

We urge you to exercise your voting rights as a stockholder. Your vote does     
make a difference.                                                              

Sincerely,

/s/ John H. Hammergren                     /s/ David L. Mahoney                 
John H. Hammergren                         David L. Mahoney                     
Co-President and                           Co-President and                     
Co-Chief Executive Officer                 Co-Chief Executive Officer           

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DEFR14A’ Filing		Date		First		Last			Other Filings
		3/31/04		19		27			10-K,  11-K,  4
		2/5/04		26					SC 13G
		3/31/03		26					10-K,  11-K,  5
		1/27/03		20
		8/1/00		28
		3/31/00		32		35			10-K,  11-K
		3/24/00		33
		1/12/00		35		40
		8/25/99		2		44			DEF 14A
		8/20/99		46
		7/31/99		13
		7/21/99		2		46
Filed on:		7/16/99							10-K405/A,  SC 13G
		7/15/99		4		27
		7/14/99		2		4			10-K405,  DEF 14A
		7/12/99		7		19			SC 13G/A
		7/1/99		5		28
		6/30/99		6		31			10-Q,  NT 10-K,  NT 11-K
		6/21/99		4		18
		6/18/99		19		26
		6/1/99		22
		4/28/99		11		21
		4/26/99		24		40
		4/22/99		16		19
		3/31/99		5		46			10-K/A,  10-K405,  10-K405/A,  NT 10-K,  NT 11-K,  POS AM
		3/26/99		16
		3/1/99		35
		2/28/99		35
		2/5/99		31					S-8
		1/27/99		12		28			8-K
		1/12/99		4		13			424B3,  8-K,  S-8
		1/1/99		27
		10/17/98		34					8-K,  8-K/A
		8/25/98		42					424B3
		7/31/98		13
		5/27/98		34					424B3
		5/12/98		22		34
		4/1/98		31					424B3,  S-4
		3/25/98		13
		3/1/98		35
		2/27/98		36		37
		11/11/97		22		34
		4/1/96		15
		11/21/94		21
		11/19/94		21
		7/7/94		21
		1/1/94		12
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