MCKESSON HBOC INC
AMENDED AND RESTATED EMPLOYMENT AGMT - HAMMERGREN
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>AMENDED AND RESTATED EMPLOYMENT AGMT - HAMMERGREN
<TEXT>

<PAGE>

                                                                    Exhibit 10.2


                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT


          This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"),
effective as of June 21, 1999 (the "Effective Date"), by and between McKesson
HBOC, Inc. (the "Company"), a Delaware corporation with its principal office at
One Post Street, San Francisco, California, and John H. Hammergren
("Executive").

                                   RECITALS
                                   --------

A.   WHEREAS, Executive and the Company have previously entered into
that certain employment agreement dated as of March 31, 1999 (the "Old
Employment Agreement").

B.   WHEREAS, Executive and the Company have previously entered into an
agreement providing for the payment of severance benefits to Executive in
connection with his termination following a Change in Control (as defined in
Paragraph 9(c) below) of the Company, dated January 31, 1996 (the "Termination
Agreement").

C.   WHEREAS, a Change in Control of the Company occurred under the Termination
Agreement on January 12, 1999 (the "1999 Change in Control")

D.   WHEREAS, Executive and the Company desire to amend and restate in its
entirety the Old Employment Agreement and to incorporate into this Agreement the
terms of such amendment and restatement the terms of the Termination Agreement
as it applies with regard to any Change in Control.

E.   WHEREAS, the Company, in its business, develops and uses certain
Confidential Information (as defined in Paragraph 7(c) below).  Such
Confidential Information will necessarily be communicated to or acquired by
Executive by virtue of his employment with the Company, and the Company has
spent time, effort and money to develop such Confidential Information and to
promote and increase its goodwill; and

F.   WHEREAS, the Company desires to retain the services of, and employ,
Executive on its own behalf and on behalf of its affiliated companies for the
period provided in this Agreement and, in so doing, to protect its Confidential
Information
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and goodwill, and Executive is willing to accept employment by the Company on a
full-time basis for such period, upon the terms and conditions hereinafter set
forth.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereto agree as follows:

1.   Employment.  Subject to the terms and conditions of this Agreement, the
     ----------
     Company agrees to employ Executive, and Executive agrees to accept
     employment from, and remain in the employ of, the Company for the period
     stated in Paragraph 3 hereof.

2.   Position and Responsibilities.  During the period of his employment
     -----------------------------
     hereunder, Executive agrees to serve the Company, and the Company shall
     employ Executive, as Co-President and Co-Chief Executive Officer of the
     Company and in such other senior corporate executive capacities consistent
     with such position as may be specified from time to time by the Board of
     Directors of the Company (the "Board"). During the period of his employment
     hereunder, Executive shall report directly to the Board.

3.   Term and Duties.
     ---------------

     (a)  Term of Employment.  The period of Executive's employment under this
          ------------------
          Agreement shall be deemed to have commenced on the date of this
          Agreement and shall continue until March 31, 2004 (the "Term"). Prior
          to the expiration of the Term, the Company shall offer to extend the
          Term of the Agreement effective as of the expiration of the Term on
          terms and conditions that are identical to the terms and conditions
          contained herein except that such extended agreement shall not
          obligate the Company to pay a Sign-On Bonus (as defined below) or
          Retention Bonus (as defined below) and the extended agreement shall
          not be subject to further extension. If Executive rejects such
          extension and the Agreement expires, the expiration of the Term shall
          be treated as a voluntary resignation entitling Executive to the
          amounts and benefits, if any, set forth in Paragraph 9(a) as of the
          end of the Term. If (i) the Company fails to offer to extend the term
          of the Agreement or (ii) the terms and conditions of the extension are
          not identical (except as set forth above) to the terms and conditions
          set forth herein and Executive rejects such extension, the expiration
          of the Term shall be treated as a termination other than for Cause (as
          defined

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          in Paragraph 8 below) entitling Executive to the amounts and benefits
          set forth in Paragraph 9(b) or (c), as the case may be, as of the end
          of the Term.

     (b)  Duties.  During the period of his employment hereunder and except for
          ------
          illness, reasonable vacation periods, and reasonable leaves of
          absence, Executive shall devote substantially all of his business
          time, attention, skill and efforts to the business and affairs of the
          Company and its affiliated companies, as such business and affairs now
          exist and as they may be hereafter changed or added to, under and
          pursuant to the general direction of the Board; provided, however,
                                                          --------  -------
          that, (i) with the approval of the Board (which will not be
          unreasonably withheld or delayed), Executive may serve, or continue to
          serve, on the boards of directors of, hold any other offices or
          positions in, for profit companies or organizations, which, in the
          Board's judgment, will not present any conflict of interest with the
          Company or any of its subsidiaries or affiliates or divisions, or
          materially affect the performance of Executive's duties pursuant to
          this Agreement and (ii) Executive may devote a portion of his time to
          the management of his personal affairs or involvement in charitable
          activities, which activities shall not materially affect the
          performance of Executive's duties pursuant to this Agreement. The
          services which are to be employed by Executive hereunder are to be
          rendered in the State of California, or in such other place or places
          in the United States or elsewhere as may be determined from time to
          time by the Board, but are to be rendered primarily at the Company's
          principal place of business at One Post Street in San Francisco,
          California. Unless and until otherwise mutually agreed to between the
          Company and Executive, Executive shall be at liberty to maintain his
          residence in the San Francisco Bay Area, State of California.

4.   Compensation and Reimbursement of Expenses; Other Benefits.
     ----------------------------------------------------------

     (a)  Compensation.  During the period of his employment hereunder,
          ------------
          Executive shall be paid a salary, in monthly or semi-monthly
          installments (in accordance with the Company's normal payroll
          practices for senior executive officers), at the rate of Seven Hundred
          Fifty Thousand Dollars ($750,000.00) per year, or such higher salary
          as may be from time to time approved by the Board (or any duly
          authorized

                                       3
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          Committee thereof) (any such higher salary so approved to be
          thereafter the minimum salary payable to Executive during the
          remainder of the Term hereof), plus such additional incentive
          compensation, if any, as may be awarded to him yearly by the Board (or
          any duly authorized Committee thereof). For purposes of the MIP (as
          defined in subparagraph (c) below), for each of the Company's fiscal
          years ending during the Term of this Agreement, Executive's Individual
          Target Award shall be 100% of his base salary for the applicable Year
          (as defined in the MIP). Executive shall also receive an automobile
          allowance from the Company of One Thousand Dollars ($1,000.00) per
          month during the Term of this Agreement.

     (b)  Reimbursement of Expenses.  The Company shall pay or reimburse
          -------------------------
          Executive, in accordance with its normal policies and practices, for
          all reasonable travel and other expenses incurred by Executive in
          performing his obligations hereunder. The Company further agrees to
          furnish Executive with such assistance and accommodations as shall be
          suitable to the character of Executive's position with the Company and
          adequate for the performance of his duties hereunder.

     (c)  Other Benefits.  During the period of his employment hereunder,
          --------------
          Executive shall be entitled to receive all other benefits of
          employment available to any other Co-President and Co-Chief Executive
          Officer of the Company and generally available to other members of the
          Company's management and those benefits for which key executives are
          or shall become eligible, when and as he becomes eligible therefor,
          including without limitation, group health and life insurance
          benefits, short and long-term disability plans, deferred compensation
          plans, and participation in the Company's Profit-Sharing Investment
          Plan, Employee Stock Purchase Plan, Executive Medical Plan, 1989
          Management Incentive Plan ("MIP"), Long Term Incentive Plan, 1984
          Executive Benefit Retirement Plan ("EBRP"), 1988 Executive Survivor
          Benefits Plan ("ESBP"), Stock Purchase Plan and 1994 Restricted Stock
          and Stock Option Plan (or any other similar plan or arrangement), and
          the Company agrees that none of such benefits shall be altered in any
          manner or in such a way as to reduce any then existing entitlement of
          Executive thereunder or any entitlement provided for hereunder. To the
          extent specific provisions of this Agreement that relate to other
          plans or arrangements of the Company are more favor-

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          able than the terms and conditions set forth in such other plan or
          arrangement of the Company, the provisions of this Agreement shall
          control. Additionally, to the extent any other plan or arrangement of
          the Company contains provisions regarding noncompetition, unauthorized
          use of confidential information, or nonsolicitation, such provisions
          shall not be deemed to have been violated by Executive except to the
          extent his activities would also constitute a violation of similar
          provisions contained herein.

5.   Initial Incentive Grants.  Executive has received or will receive the
     ------------------------
     following initial incentive awards specified below:

     (a)  Sign-On/Retention Bonus.  Executive has received a special, one-time
          -----------------------
          sign-on bonus in the amount of Seven Hundred and Fifty Thousand
          Dollars ($750,000.00) (the "Sign-On Bonus"). Executive has also
          received a special one-time retention bonus in the amount of Seven
          Hundred and Fifty Thousand Dollars ($750,000.00) (the "Retention
          Bonus") to be retained by Executive if and only if he remains employed
          by the Company on March 31, 2000, or his employment terminates earlier
          as a result of his death, disability, a termination by the Company
          other than for Cause or a termination by Executive for Good Reason (as
          defined in Paragraph 8(c)). Executive acknowledges and agrees that, in
          the event he voluntarily leaves the Company's employment (other than
          for Good Reason) or if he is terminated by the Company for Cause prior
          to March 31, 2000, he shall promptly (and in no event later than
          thirty (30) days following cessation of employment) return the
          Retention Bonus (i.e., $750,000.00) to the Company.
                           ----

     (b)  Stock Options.  Executive has received a non-qualified stock option to
          -------------
          purchase One Million (1,000,000) shares of the Company's common stock,
          which option will vest at the rate of fifty percent (50%) at January
          29, 2001, seventy-five percent (75%) at January 29, 2002, and one
          hundred percent (100%) at January 29, 2003. Such option shall continue
          to be subject to the terms and conditions of the plan or arrangement
          pursuant to which it was issued in all respects; except that (i) to
          the extent vested, such option will remain exercisable until its
          expiration date unless Executive is terminated by the Company for
          Cause; (ii) provisions regarding noncompetition, use of confidential

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          information, and nonsolicitation shall not be deemed to have been
          violated except to the extent such activities would also constitute a
          violation of similar provisions contained herein and (iii) the
          provisions regarding acceleration of vesting and exercisability set
          forth in the termination sections of this Agreement shall be
          applicable.

     (c)  LTIP Cash Award.  The Company has granted to Executive a Long-Term
          ---------------
          Incentive Plan award of Ten Million dollars ($10,000,000), payable, if
          earned, fifty percent (50%) at March 31, 2002, and fifty percent (50%)
          at March 31, 2004 (the "LTIP Award"). Executive acknowledges that
          payments of the award are contingent and based upon the Company's
          total shareholder return ("TSR"). Full awards will be paid if, at the
          end of each measurement period, the TSR is at or above the 75/th/
          percentile of the S&P 500 (excluding therefrom financial
          institutions). Partial awards will be paid as follows: 75% if TSR is
          between the 60/th/ and 75/th/ percentile; 50% if TSR is between the
          50/th/ and 60/th/ percentile; and 25% if TSR is below the 50/th/
          percentile.

     (d)  Executive was granted on August 16, 1999 (the "Grant Date"), a non-
          qualified stock option to purchase Two Million (2,000,000) shares of
          the Company's common stock, at a per share exercise price of $29.8125
          which option will vest at the rate of fifty percent (50%) on the
          second anniversary of the Grant Date, seventy-five percent (75%) on
          the third anniversary of the Grant Date and one hundred percent (100%)
          on the fourth anniversary of the Grant Date. Such option shall
          otherwise be subject to the terms and conditions of the Company's
          Stock Option and Restricted Stock Plan and the terms and conditions
          set forth in the form of agreement evidencing the stock option
          referenced in subparagraph (b) above, as adjusted by the provisions of
          subparagraph, b(i), (b)(ii) and (b)(iii), provided that with regard to
                                                    --------
          (b)(i), the period shall be the lesser of three years or the
          expiration date.

     (e)  Housing Loan.  Executive and the Company acknowledge and agree that
          ------------
          the terms and conditions of the housing loan between Executive and the
          Company remain in full force and effect.

                                       6
<PAGE>

6.   Benefits Payable Upon Disability or Death.
     -----------------------------------------

     (a)  Disability Benefits.  If, during the term of Executive's employment
          -------------------
          hereunder, Executive shall be prevented from properly performing
          services hereunder by reason of his illness or other physical or
          mental incapacity, the Company shall continue to pay Executive his
          then current salary hereunder during the period of such disability;
          or, if less, for a period of (12) calendar months, at which time the
          Company's obligations hereunder (other than as provided herein) shall
          cease and terminate. Following the expiration of such 12-month period,
          Executive shall be eligible to receive his benefits pursuant to the
          EBRP calculated at the maximum level of 60% of Average Final
          Compensation (as defined in the EBRP) without regard to any reduction
          for early retirement.

     (b)  Death Benefits.  In the event of the death of Executive during the
          --------------
          term of his employment hereunder, (i) Executive's salary payable
          hereunder shall continue to be paid to Executive's surviving spouse,
          or if there is no spouse surviving, then to Executive's designee or
          representative (as the case may be) through the six-month period
          following the end of the calendar month in which Executive's death
          occurs and (ii) the benefits payable under the EBRP calculated at the
          maximum level of 60% of Average Final Compensation (as defined in the
          EBRP) shall be payable without regard to any reduction for early
          retirement. Thereafter, all of the Company's obligations hereunder
          (other than as provided herein) shall cease and terminate.

     (c)  Other Plans.  Except as specifically provided herein, the provisions
          -----------
          of this Paragraph 6 shall not affect (i) any rights of Executive's
          heirs, administrators, executors, legatees, beneficiaries or assigns
          under the Company's Profit-Sharing Investment Plan, EBRP, Long Term
          Incentive Plan, ESBP, Restricted Stock and Stock Option Plan (or any
          similar plan or arrangement), any stock purchase plan or any other
          employee benefit plan of the Company, and any such rights shall be
          governed by the terms of the respective plans, or (ii) any rights that
          exist with respect to indemnification or directors and officers
          insurance or any other rights hereunder which are intended to continue
          after a termination of employment.

                                       7
<PAGE>

7.   Obligations of Executive During and After Employment.
     ----------------------------------------------------

     (a)  Noncompetition.  Executive agrees that during the Term of his
          --------------
          employment hereunder, he will engage in no other business activities,
          directly or indirectly, which are or may be competitive with or which
          might place him in a competing position to that of the Company, or any
          affiliated company, without the prior written consent of the Board.
          Without any inference as to any other activity, the foregoing shall
          not limit ownership by Executive of (i) less than one percent (1%) of
          the common stock or public debt of any publicly traded entity; (ii)
          less than five percent (5%) in any investment pool, hedge fund,
          private equity fund or other similar vehicle in which Executive has no
          control over the investments that are made by such investment pool,
          hedge fund, private equity fund or other similar vehicle; or (iii) the
          amount of stock or other interests Executive holds as of the Effective
          Date of this Agreement in the entities listed on Schedule 7(a) hereof,
          provided that Executive is not actively engaged in the management of
          such entities.

     (b)  Unauthorized Use of Confidential Information.  Executive acknowledges
          --------------------------------------------
          and agrees that (i) during the course of his employment Executive will
          have produced and/or have access to Confidential Information, of the
          Company and its affiliated companies, and (ii) the unauthorized use or
          sale of any of such confidential or proprietary information at any
          time would harm the Company and would constitute unfair competition
          with the Company. Executive promises and agrees not to engage in any
          unfair competition with the Company by reason of Executive's use of
          Confidential Information either during or after the Term of his
          employment hereunder. Therefore, during and subsequent to his
          employment by the Company and its affiliated companies, Executive
          agrees to hold in confidence and not, directly or indirectly,
          disclose, use, copy or make lists of any such information, except (x)
          pursuant to his duties hereunder during his employment by the Company,
          (y) to the extent expressly authorized by the Company in writing or as
          required by law or (z) to comply with a legal process, provided
          Executive promptly notifies the Company in order that the Company, at
          its expense, may seek a protective order and Executive cooperates with
          the Company in seeking such order. All records, files, drawings,
          documents, equipment, and the like, or copies thereof,

                                       8
<PAGE>

          relating to the Company's business, or the business of any of its
          affiliated companies, which Executive shall prepare, use, or come into
          contact with, shall be and remain the sole property of the Company,
          and shall not be removed (except to allow Executive to perform his
          responsibilities hereunder while traveling for business purposes or
          otherwise working away from his office) from the Company's or the
          affiliated company's premises without its prior written consent, and
          shall be promptly returned to the Company upon termination of
          employment with the Company and its affiliated companies. This
          Paragraph 7(b) shall survive the termination or expiration of the term
          of Executive's employment hereunder.

     (c)  Confidential Information Defined.  For purposes of this Agreement,
          --------------------------------
          "Confidential Information" means all information (whether reduced to
          written, electronic, magnetic or other tangible form) acquired in any
          way by Executive during the course of his employment with the Company
          or any of its affiliated companies concerning the products, projects,
          activities, business or affairs of the Company and its affiliated
          companies or the Company's or any of its affiliated companies'
          customers, including, without limitation, (i) all information
          concerning trade secrets of the Company and its affiliated companies,
          including computer programs, system documentation, special hardware,
          product hardware, related software development, manuals, formulae,
          processes, methods, machines, compositions, ideas, improvements or
          inventions of the Company and its affiliated companies, (ii) all sales
          and financial information concerning the Company and its affiliated
          companies, (iii) all customer and supplier lists of the Company and
          its affiliated companies, (iv) all information concerning products or
          projects under development of the Company and its affiliated companies
          or marketing plans for any of those products or projects, and (v) all
          information in any way concerning the products, projects, activities,
          business or affairs of customers of the Company and its affiliated
          companies which was furnished to him by the Company or any of its
          agents or customers; provided, however, that Confidential Information
          does not include information which (A) becomes available to the public
          or the industry in which the Company operates other than as a result
          of a disclosure by Executive (other than in the normal course of
          Executive's duties hereunder), (B) was available to him on a non-
          confidential basis outside of his employment with the Company, or

                                       9
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          (C) becomes available to him on a non-confidential basis from a source
          that Executive believes in good faith is not under an obligation of
          confidentiality to the Company.

     (d)  Nonsolicitation.  Executive recognizes and acknowledges that it is
          ---------------
          essential for the proper protection of the business of the Company and
          its affiliated companies that Executive be restrained for a reasonable
          period following the termination of Executive's employment with the
          Company and its affiliated companies from: (i) soliciting or inducing
          any employee of the Company or any of its affiliated companies to
          leave the employ of the Company or any of its affiliated companies;
          (ii) hiring or attempting to hire any employee of the Company or any
          of its affiliated companies; or (iii) directly and personally
          soliciting the trade of or trading with the customers of the Company
          or any of its affiliated companies for any competitive business
          purpose. Accordingly, Executive agrees that during the Term of his
          employment hereunder, and for the Restricted Period thereafter
          following the termination of Executive's employment with the Company
          and its affiliated companies for any reason, Executive shall not, (x)
          directly or indirectly, hire, solicit, aid in or encourage the hiring
          and/or solicitation of, contract with, aid in or encourage the
          contracting with, or induce or encourage to leave the employment of
          the Company or any of its affiliated companies, any employee of the
          Company or any of its affiliated companies; or (y) directly and
          personally solicit, or use Confidential Information to aid in the
          solicitation of, contract with, or service any person or entity which
          is, or was, within two (2) years prior to the termination of
          Executive's employment with the Company and its affiliated companies,
          a customer or client of the Company or any of its affiliated companies
          for the purpose of offering or selling a product or service
          competitive with any of those offered by the Company or any of its
          affiliated companies. Notwithstanding the foregoing, nothing in this
          Paragraph 7(d) shall prohibit Executive from providing references on
          an unsolicited basis with respect to employees of the Company. For
          purposes of this Paragraph 7(d), the "Restricted Period" shall be
          deemed to be equal to the longer of (i) two (2) years following the
          termination of Executive's employment for any reason, or (ii) the
          period during which Executive is receiving salary continuation
          payments hereunder. This Paragraph 7(d) shall survive the termination
          or expiration of this Agreement.

                                       10
<PAGE>

     (e)  Remedy for Breach.  Executive agrees that in the event of a breach or
          -----------------
          threatened breach of any of the covenants contained in this Paragraph
          7, the Company shall have the right and remedy to have such covenants
          specifically enforced by any court having jurisdiction, it being
          acknowledged and agreed that any material breach of any of the
          covenants will cause irreparable injury to the Company and that money
          damages will not provide an adequate remedy to the Company.

8.   Termination.
     -----------

     (a)  For Cause.  Notwithstanding anything herein to the contrary, the
          ---------
          Company may, without liability, terminate Executive's employment
          hereunder for Cause (as defined below) at any time within ninety (90)
          days of the date the Chairman of the Board, or of any Committee
          thereof, first has knowledge of the event justifying such termination
          by delivery of a Notice of Termination (as defined in subparagraph (d)
          below) from the Board (or any duly authorized Committee thereof)
          specifying such Cause, and thereafter, the Company's obligations
          hereunder shall cease and terminate.

          i)   Definition of Cause.  Except as provided in Paragraph 9(c) below,
               -------------------
               as used herein, the term "Cause" shall mean (i) Executive's
               willful engaging in misconduct with regard to the Company or any
               of its affiliated companies which is demonstrably and materially
               injurious to the Company and its affiliated companies taken as a
               whole, (ii) Executive's willful dishonesty of a material nature
               involving the Company's or any of its affiliated companies'
               assets, or (iii) a material failure by Executive to comply with
               any of the provisions of this Agreement. No act, or failure to
               act, on Executive's part shall be considered "willful" unless
               done, or omitted to be done, by Executive not in good faith and
               without reasonable belief that Executive's action or omission was
               in the best interest of the Company or its subsidiaries.
               Notwithstanding the foregoing, Executive shall not be deemed to
               have been terminated for Cause pursuant to this Paragraph 8(a)
               unless and until there shall have been delivered to Executive a
               copy of a resolution

                                       11
<PAGE>

               duly adopted by the affirmative vote of not less than three
               quarters of the entire membership of the Board at a meeting of
               the Board called and held for the purpose of making a
               determination of whether Cause for termination exists (after
               reasonable notice to Executive and an opportunity for Executive
               to be heard before the Board), finding that in the good faith
               opinion of the Board, Executive was guilty of misconduct as set
               forth above in this subparagraph 8(a)(i) and specifying the
               particulars thereof in detail. In addition, if the conduct
               alleged to have constituted Cause is curable (as determined by
               the Board), the Notice of Termination shall not be delivered
               until after the Board (or any duly authorized Committee thereof)
               shall have given Executive written notice specifying the conduct
               alleged to have constituted such Cause and Executive has failed
               to cure such conduct, within fifteen (15) days following receipt
               of such notice.

          ii)  Arbitration Required to Confirm Cause.  In the event of a
               -------------------------------------
               termination for Cause pursuant to this Paragraph 8(a) or pursuant
               to subparagraph 9(c)(iv), the Company shall continue to pay
               Executive's then current compensation as specified in this
               Agreement until the issuance of an arbitration award affirming
               the Company's action. Such arbitration shall be held in
               accordance with the provisions of Paragraph 11(c) below. In the
               event the award upholds the action of the Company, Executive
               shall promptly repay to the Company any sums received pursuant to
               Paragraph 9 below, following termination of employment.

     (b)  Other than for Cause; Performance, Reorganization; Any Reason or
          ----------------------------------------------------------------
          Reasons. Notwithstanding anything herein to the contrary, the Company
          -------
          may also terminate Executive's employment (without regard to any
          general or specific policies of the Company relating to the employment
          or termination of its employees) (i) should Executive fail to perform
          his duties hereunder in a manner satisfactory to the Board, provided
          that Executive shall first be given written notice of such
          unsatisfactory performance and a period of ninety (90) days to improve
          such performance to a level deemed acceptable to the Board, (ii)
          should Executive's position be eliminated as a result of a
          reorgani-

                                       12
<PAGE>

          zation or restructuring of the Company or any of its affiliated
          companies or (iii) for any other reason or reasons.

     (c)  Termination by Executive.  Executive may terminate his employment
          ------------------------
          hereunder with or without Good Reason by delivery of a Notice of
          Termination to the Company, provided that any such Notice of
          Termination for Good Reason shall be given within ninety (90) days
          after the occurrence of the event giving rise to Good Reason, which
          notice shall specify the act, or failure to act, alleged to give rise
          to Good Reason hereunder and shall otherwise comply with the
          provisions of subparagraph (d) below. If Executive gives the Company
          such Notice of Termination, the Company shall have fifteen (15) days
          after receipt of such notice to remedy the facts and circumstances
          that allegedly gave rise to Good Reason. In the event Executive does
          not provide a Notice of Termination to the Company of termination for
          Good Reason, such termination shall be deemed a voluntary resignation
          by Executive.

          i)  Definition of Good Reason.  As used herein, the term "Good Reason"
              -------------------------
              shall mean any of the following acts or failures to act, if taken
              without the express written consent of Executive, (A) any material
              change by the Company in Executive's functions, duties or
              responsibilities as Co-President and Co-Chief Executive Officer,
              which change would cause Executive's position with the Company to
              become of less dignity, responsibility, importance, or scope as
              compared to the position and attributes that applied to Executive
              as of the Effective Date, or an adverse change in Executive's
              title, position or his obligation and right to report directly to
              the Board; (B) any reduction in Executive's base salary, other
              than a reduction effected proportionately as part of an
              across-the-board reduction affecting all executive employees of
              the Company; (C) any material failure by the Company to comply
              with any of the provisions of the Agreement; (D) the Company's
              requiring Executive to be based at any office or location more
              than 25 miles from the office at which Executive is based as of
              the Effective Date, except for travel reasonably required in the
              performance of Executive's responsibilities; or (E) any failure by
              the Company to obtain the express assumption of the Agreement by
              any

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<PAGE>

               successor or assign of the Company. Executive's right to
               terminate employment for Good Reason pursuant to this Paragraph 8
               shall not be affected by Executive's incapacity due to physical
               or mental illness.

     (d)  Notice of Termination.  Any termination of Executive's employment by
          ---------------------
          the Company or by Executive hereunder shall be communicated by a
          Notice of Termination to the other party hereto. For purposes of this
          Agreement, a "Notice of Termination" shall mean a written notice which
          shall indicate the specific termination provisions in this Agreement
          relied upon and which sets forth (i) in reasonable detail the facts
          and circumstances claimed to provide a basis for termination of
          Executive's employment under the provision so indicated and (ii) the
          date of Executive's termination of employment, which shall be no
          earlier than fifteen (15) days after such Notice is received by the
          other party. Any purported termination of Executive's employment by
          the Company which is not effected pursuant to a Notice of Termination
          satisfying the requirements of this Agreement shall not be effective.
          In the case of a termination for Cause, the Notice of Termination
          shall also satisfy the requirements set forth in Paragraph 8(a).

9.   Obligations of the Company on Termination of Employment.
     -------------------------------------------------------

     (a)  For Cause; Voluntary Resignation.  If (i) the Company terminates
          --------------------------------
          Executive's employment for Cause hereunder or (ii) Executive
          terminates his employment with the Company other than for Good Reason,
          then, except as otherwise specifically set forth herein, all of the
          Company's obligations hereunder shall immediately cease and terminate.
          Executive shall thereupon have no further right or entitlement to
          additional salary, incentive compensation payments or awards, or any
          perquisites from the Company whatsoever, and Executive's rights, if
          any, under the Company's employee and executive benefit plans shall be
          determined solely in accordance with the express terms of the
          respective plans. Notwithstanding the foregoing, Executive shall be
          entitled to receive any accrued base salary, accrued but unused
          vacation and unreimbursed expenses, and if such termination is by
          Executive other than for Good Reason on or after March 31, 2004,
          Executive shall be entitled to receive the benefits under Paragraphs
          9(b)(i)(C), 9(b)(i)(E)(x) and (E)(y) and 9(b)(i)(H).

                                       14
<PAGE>

     (b)  Termination Other than for Cause; Termination for Good Reason.
          -------------------------------------------------------------

          i)   If the Company terminates Executive's employment pursuant to
               Paragraph 8(b) above or Executive terminates his employment with
               the Company for Good Reason in both cases prior to a Change in
               Control of the Company or at any time other than within the two
               (2) years immediately following a Change in Control, then in lieu
               of any benefits payable pursuant to the Company's Executive
               Severance Policy (so long as the compensation and benefits
               payable hereunder equal or exceed those payable under said
               Policy) and in complete satisfaction and discharge of all of its
               obligations to Executive hereunder (other than obligations that
               arise under Paragraphs 10 or 11 hereof), the Company shall, while
               Executive is not in breach of the provisions of Paragraph 7
               hereof; provided any such suspended payments and/or benefits
               shall resume once any such breach has been cured, (A) continue
               Executive's then base salary, without increase, for the remainder
               of the Term of this Agreement but in no event for a period of
               less than two years following such termination of employment
               (such greater of the remainder of the Term or two (2) years shall
               be referred to as the "Severance Period"), (B) continue
               Executive's incentive award compensation under the terms of the
               Company's MIP for each fiscal year ending with or within the
               Severance Period, such MIP awards to be equal, in each case, to
               100% of Executive's Individual Target Award existing at the time
               of his termination of employment, (C) provide Executive with
               lifetime (x) coverage under the Company's Executive Medical Plan
               and financial counseling program and (y) office space and
               secretarial support services as may be suitable and adequate for
               Executive's needs, (D) continue Executive's participation in the
               Deferred Compensation Administration Plan II, and Executive's
               automobile allowance for the Severance Period, (E) subject to the
               express special forfeiture and repayment provisions of the
               respective plans (or the terms and conditions applicable
               thereto), continue the accrual and vesting of Executive's rights,
               benefits and existing awards for the Severance Period for
               purposes of the EBRP and ESBP (with

                                       15
<PAGE>

               Executive's benefits, for purposes of those two plans only,
               calculated on the basis of Executive receiving (x) Approved
               Retirement (as defined in the EBRP) commencing on the expiration
               of this Agreement and, (y) with respect to the EBRP, a benefit
               calculated at the maximum level of 60% of Average Final
               Compensation (as defined in the EBRP) then specified in the EBRP
               without any reduction for early retirement), (F) subject to both
               (x) the express special forfeiture and repayment provisions of
               the applicable plans or arrangements (or the terms and conditions
               applicable thereto) and (y) the provisions of subparagraph
               (b)(ii) below, accelerate the vesting of all Executive's awards
               granted prior to such termination of employment pursuant to the
               Company's Stock Option and Restricted Stock Plan (or any similar
               plan or arrangement); provided, that Executive shall in no event
                                     --------  ----
               be entitled to or receive additional grants or awards subsequent
               to the date of his termination of employment, (G) continue
               Executive's participation in the Company's Long Term Incentive
               Plan for the remainder of the Term of this Agreement (but not
               thereafter) (pro-rating performance periods as of the date
               Executive ceased rendering services to the Company), provided,
                                                                    --------
               that Executive shall not participate in any way whatsoever in any
               ----
               performance period commencing subsequent to the date of
               termination, and provided, further, that with respect to the LTIP
                                --------  -------
               Award, such award shall be paid 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 had continued employment throughout the
               performance period applicable to such award (H) deem Executive's
               termination to have occurred as if the sum of his age and years
               of service to the Company is at least 65 for purposes of both the
               Deferred Compensation Administration Plan II and the Stock Option
               and Restricted Stock Plan (or any similar plan or arrangement,
               and (I) terminate Executive's participation in the Company's tax-
               qualified profit-sharing plans and stock purchase plans, pursuant
               to the terms of the respective plans, as of the date of
               Executive's termination of employment. During the Severance
               Period, Executive shall have no obligation to seek other
               employment

                                       16
<PAGE>

               and the Company shall not (x) have the right of offset as a
               result of any compensation Executive may receive from a
               subsequent employer or, (y) while Executive is not in breach of
               the provisions of Paragraph 7, reduce its payments pursuant to
               this Paragraph 9(b)(i).

          ii)  For purposes of subparagraph (b)(i) above, (A) if Executive's
               termination occurs prior to August 1, 2000, (x) 100% of the stock
               options granted to Executive prior to July 1, 1999, shall vest in
               full, and (y) 50% of the then unvested stock options granted to
               Executive subsequent to July 1, 1999, shall vest in full, and
               (B), if Executive's termination occurs on or after August 1,
               2000, all unvested stock options granted to Executive shall vest
               in full.

     (c)  Termination in Connection with a Change in Control.  Notwithstanding
          --------------------------------------------------
          the provisions of Paragraph 9(a) and (b) hereof, in the event of an
          occurrence of a Change in Control (which shall include the 1999 Change
          in Control), the following provisions shall apply in the event of
          Executive's termination of employment (i) within two (2) years
          following such Change in Control or (ii) within the six (6) month
          period immediately preceding such Change in Control if such
          termination of employment occurs at the direction of the person or
          entity that is involved in, or otherwise in connection with, such
          Change in Control:

          i)   If the Company terminates Executive's employment pursuant to
               Paragraph 8(b) above or otherwise without Cause (as defined in
               subparagraph 9(c)(iv) below) or Executive terminates his
               employment with the Company for Good Reason, then the Company
               shall in lieu of the benefits payable under subparagraphs (A) and
               (B) of Paragraph 9(b) above immediately pay to Executive in a
               cash lump sum an amount equal to the greater of: (x) 2.99
                                                    ----------
               multiplied by Executive's "base amount" determined pursuant to
               section 280G of the Internal Revenue Code of 1986, as amended
               (the "Code") and (y) the sum of the amounts described in clauses
               (A) and (B) in Paragraph 9(b) above and shall take all actions
               described in clauses (C) through (I) in Paragraph 9(b) hereof.

                                       17
<PAGE>

          ii)  For Cause; Voluntary Resignation.  If the Company terminates
               --------------------------------
               Executive's employment for Cause (as defined in subparagraph
               9(c)(iv)) or Executive terminates his employment with the Company
               other than for Good Reason, then the rights and obligations of
               the Company and Executive shall be governed by Paragraph 9(a)
               hereof.

          iii) Change in Control.  For purposes of this Agreement, a "Change in
               -----------------
               Control" of the Company shall be deemed to have occurred if any
               of the events set forth in any one of the following subparagraphs
               shall occur: (A) any Person (as defined in section 3(a)(9) of the
               Securities Exchange Act of 1934, as amended (the "Exchange Act"),
               and as such term is modified in sections 13(d) and 14(d) of the
               Exchange Act), excluding the Company or any of its subsidiaries,
               a trustee or any fiduciary holding securities under an employee
               benefit plan of the Company or any of its subsidiaries, an
               underwriter temporarily holding securities pursuant to an
               offering of such securities, or a corporation owned, directly or
               indirectly, by stockholders of the Company in substantially the
               same proportions as their ownership of the Company, is or becomes
               the "beneficial owner" (as defined in Rule 13(d)(3) under the
               Exchange Act), directly or indirectly, of securities of the
               Company representing 30% or more of the combined voting power of
               the Company's then outstanding securities; (B) during any period
               of not more than two consecutive years, individuals who at the
               beginning of such period constitute the Board and any new
               director (other than a director designated by a Person who has
               entered into an agreement with the Company to effect a
               transaction described in clause (A), (C) or (D) of this
               subparagraph) whose election by the Board or nomination for
               election by the Company's stockholders was approved by a vote of
               at least two-thirds (2/3) of the directors then still in office
               who either were directors at the beginning of the period or whose
               election or nomination for election was previously so approved,
               cease for any reason to constitute a majority thereof; (C) the
               stockholders of the Company approve a merger or consolidation of
               the Company with any other corporation, other than (x) a

                                       18
<PAGE>

               merger or consolidation which would result in the voting
               securities of the Company outstanding immediately prior thereto
               continuing to represent (either by remaining outstanding or by
               being converted into voting securities of the surviving entity),
               in combination with the ownership of any trustee or other
               fiduciary holding securities under an employee benefit plan of
               the 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
               (y) 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 (D) the
               stockholders of the Company 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 the
               Company's assets.

               Notwithstanding the foregoing, no Change in Control shall be
               deemed to have occurred if there is consummated any transaction
               or series of integrated transactions immediately following which,
               in the judgment of the Compensation Committee of the Board, the
               holders of the Company's common stock immediately prior to such
               transaction or series of transactions continue to have the same
               proportionate ownership in an entity which owns all or
               substantially all of the assets of the Company immediately prior
               to such transaction or series of transactions.

          iv)  Notwithstanding anything to the contrary contained in
               subparagraph 8(a)(i), for purposes of this Paragraph 9(c),
               termination by the Company of Executive's employment for "Cause"
               shall mean termination upon Executive's willful engaging in
               misconduct which is demonstrably and materially injurious to the
               Company and its subsidiaries taken as a whole. No act, or failure
               to act, on Executive's part shall be considered "willful" unless
               done, or omitted to be done, by Executive not in good faith and
               without reasonable belief that Executive's action or omission was
               in the best interest of the Company or its subsid-

                                       19
<PAGE>

               iaries. Notwithstanding the foregoing, Executive shall not be
               deemed to have been terminated for Cause pursuant to this
               subparagraph 9(c)(iv) unless and until there shall have been
               delivered to Executive a copy of a resolution duly adopted by the
               affirmative vote of not less than three quarters of the entire
               membership of the Board at a meeting of the Board called and held
               for the purpose of making a determination of whether Cause for
               termination exists (after reasonable notice to Executive and an
               opportunity for Executive to be heard before the Board), finding
               that in the good faith opinion of the Board, Executive was guilty
               of misconduct as set forth above in this subparagraph 9(c)(iv)
               and specifying the particulars thereof in detail. In addition, if
               the conduct alleged to have constituted Cause is curable (as
               determined by the Board), the Notice of Termination shall not be
               delivered until after the Board (or any duly authorized Committee
               thereof) shall have given Executive written notice specifying the
               conduct alleged to have constituted such Cause and Executive has
               failed to cure such conduct, within fifteen (15) days following
               receipt of such notice.

          v)   Remedy by Company.  If, within two years following a Change in
               -----------------
               Control, Executive terminates employment for Good Reason in
               accordance with the provisions of Paragraph 9(c), Executive shall
               make a good faith reasonable determination immediately after the
               fifteen-day period whether the facts and circumstances that
               allegedly gave rise to Good Reason have been remedied and shall
               communicate such determination in writing to the Company (the
               "Executive Determination"). If Executive determines that adequate
               remedy has not occurred, then the initial Notice of Termination
               shall remain in effect. The Company shall not be bound by any
               Executive Determination that applies to any termination other
               than a termination for Good Reason that occurs within two years
               following a Change in Control. Notwithstanding any dispute
               concerning whether Good Reason exists for termination of
               employment or whether adequate remedy has occurred, the Company
               shall immediately pay to Executive, as specified in subparagraph
               9(c)(i), any amounts otherwise due under this

                                       20
<PAGE>

               Agreement. Executive may be required to repay such amounts to the
               Company if any such dispute is finally determined adversely to
               Executive.

10.  Excise Tax Payment.
     ------------------

     (a)  If, as a result of Executive's employment with the Company or
          termination thereof, the benefits received by Executive (the "Total
          Payments") are subject to the excise tax provision set forth in
          section 4999 of the Code (the "Excise Tax"), the Company shall pay to
          Executive an additional amount (the "Gross-Up Payment") such that the
          net amount retained by Executive, after deduction of any Excise Tax on
          the benefits received hereunder and any Federal, state and local
          income and employment taxes and Excise Tax upon the Gross-Up Payment,
          shall be equal to the Total Payments.

     (b)  For purposes of determining whether any of the Total Payments will be
          subject to the Excise Tax and the amount of such Excise Tax, (i) all
          of the Total Payments shall be treated as "parachute payments" (within
          the meaning of section 280G(b)(2) of the Code) unless, in the opinion
          of tax counsel ("Tax Counsel") reasonably acceptable to Executive and
          selected by the accounting firm which was, immediately prior to the
          Change in Control, the Company's independent auditor (the "Auditor"),
          such payments or benefits (in whole or in part) do not constitute
          parachute payments, including by reason of section 280G(b)(4)(A) of
          the Code, (ii) all "excess parachute payments" within the meaning of
          section 280G(b)(l) of the Code shall be treated as subject to the
          Excise Tax unless, in the opinion of Tax Counsel, such excess
          parachute payments (in whole or in part) represent "reasonable
          compensation" for services actually rendered (within the meaning of
          section 280G(b)(4)(B) of the Code) in excess of the Base Amount (as
          defined in section 280G(b)(3) of the Code) allocable to such
          reasonable compensation, or are otherwise not subject to the Excise
          Tax, and (iii) the value of any noncash benefits or any deferred
          payment or benefit shall be determined by the Auditor in accordance
          with the principles of sections 280G(d)(3) and (4) of the Code. For
          purposes of determining the amount of the Gross-Up Payment, Executive
          shall be deemed to pay federal income tax at the highest marginal rate
          of federal income taxation in the calendar year in which the

                                       21
<PAGE>

          Gross-Up Payment is to be made and state and local income taxes at the
          highest marginal rate of taxation in the state and locality of
          Executive's residence on the date of termination (or if there is no
          date of termination, then the date on which the Gross-Up Payment is
          calculated for purposes of this Paragraph 10(b)), net of the maximum
          reduction in federal income taxes which could be obtained from
          deduction of such state and local taxes.

     (c)  In the event that the Excise Tax is finally determined to be less than
          the amount taken into account hereunder in calculating the Gross-Up
          Payment, Executive shall repay to the Company, within five (5)
          business days following the time that the amount of such reduction in
          the Excise Tax is finally determined, the portion of the Gross-Up
          Payment attributable to such reduction (plus that portion of the
          Gross-Up Payment attributable to the Excise Tax and federal, state and
          local income and employment taxes imposed on the Gross-Up Payment
          being repaid by Executive, to the extent that such repayment results
          in a reduction in the Excise Tax and a dollar-for-dollar reduction in
          Executive's taxable income and wages for purposes of federal, state
          and local income and employment taxes, plus interest on the amount of
          such repayment at 120% of the rate provided in section 1274(b)(2)(B)
          of the Code. In the event that the Excise Tax is determined to exceed
          the amount taken into account hereunder in calculating the Gross-Up
          Payment (including by reason of any payment the existence or amount of
          which cannot be determined at the time of the Gross-Up Payment), the
          Company shall make an additional Gross-Up Payment in respect of such
          excess plus any interest, penalties or additions payable by Executive
          with respect to such excess) within five (5) business days following
          the time that the amount of such excess is finally determined.
          Executive and the Company shall each reasonably cooperate with the
          other in connection with any administrative or judicial proceedings
          concerning the existence or amount of liability for Excise Tax with
          respect to the Total Payments.

     (d)  Notwithstanding anything else herein, this Paragraph 10 shall survive
          any termination of employment, any payments hereunder or any
          termination of obligations hereunder; provided, however, that this
          Paragraph 10 shall not survive any termination of employment for Cause
          that occurs prior to a Change in Control, or any payments or

                                       22
<PAGE>

          termination of obligations in connection with such termination for
          Cause.

11.  General Provisions.
     ------------------

     (a)  Executive's rights and obligations hereunder shall not be transferable
          by assignment or otherwise; provided, however, that this Agreement
          shall inure to the benefit of and be enforceable by Executive's
          personal and legal representatives, executors, administrator,
          successors, heirs, distributees, devisees and legatees. If Executive
          should die while any amounts are still payable to Executive hereunder,
          all such amounts, unless otherwise provided herein, shall be paid in
          accordance with the terms of this Agreement to Executive's devisee,
          legatee or other designee or, if there be no such designee, to
          Executive's estate. Nothing in this Agreement shall prevent the
          consolidation of the Company with, or its merger into, any other
          corporation, or the sale by the Company of all or substantially all of
          its properties or assets; and this Agreement shall inure to the
          benefit of, be binding upon and be enforceable by, any successor
          surviving or resulting corporation, or other entity to which such
          assets shall be transferred. Unless otherwise agreed to by Executive,
          the Company shall require any successor or assign (whether direct or
          indirect, by purchase, merger, consolidation or otherwise) to all or
          substantially all of the business and/or assets of the Company, by
          agreement in form and substance satisfactory to Executive (such
          agreement not to be unreasonably withheld or delayed), to assume and
          agree to perform this Agreement in the same manner and to the same
          extent that the Company would be required to perform it if no such
          succession or assignment had taken place. This Agreement shall not
          otherwise be assigned by the Company. As used in this Agreement,
          "Company" shall mean the Company as hereinbefore defined and any
          successor or assign to its business and/or assets as aforesaid which
          executes and delivers the agreement provided for in this paragraph or
          which otherwise becomes bound by all the terms and provisions of this
          Agreement by operation of law. This Agreement shall not be terminated
          by the voluntary or involuntary dissolution of the Company.

     (b)  This Agreement and the rights of Executive with respect to the
          benefits of employment referred to in Paragraph 4(c) constitute the
          entire

                                       23
<PAGE>

          agreement between the parties hereto in respect of the employment of
          Executive by the Company. This Agreement supersedes and replaces in
          its entirety all prior oral and written agreements, understandings,
          commitments, and practices between the parties, including, but not
          limited to, the Old Employment Agreement and the Termination
          Agreement.

     (c)  Any dispute, controversy or claim arising under or in connection with
          this Agreement, or the breach hereof, other than any dispute,
          controversy claim or breach arising under Paragraph 7 of this
          Agreement, shall be settled exclusively by arbitration in accordance
          with the Rules of the American Arbitration Association then in effect.
          Judgment upon the award rendered by the arbitrator may be entered in
          any court of competent jurisdiction. Any arbitration held pursuant to
          this paragraph in connection with any termination of Executive's
          employment shall take place in San Francisco, California at the
          earliest possible date. If any proceeding is necessary to enforce or
          interpret the terms of this Agreement, or to recover damages for
          breach thereof, the prevailing party shall be entitled to reasonable
          attorneys fees and necessary costs and disbursements, not to exceed in
          the aggregate one percent (1%) of the net worth of the other party, in
          addition to any other relief to which he or it may be entitled.

     (d)  The provisions of this Agreement shall be regarded as divisible, and
          if any of said provisions or any part hereof are declared invalid or
          unenforceable by a court of competent jurisdiction, the validity and
          enforceability of the remainder of such provisions or parts hereof and
          the applicability hereof shall not be affected thereby.

     (e)  This Agreement may not be amended or modified except by a written
          instrument executed by the Company and Executive.

     (f)  This Agreement and the rights and obligations hereunder shall be
          governed by and construed in accordance with the laws of the State of
          California without regard to its principles of conflict of laws.

     (g)  For purposes of this Agreement, notices and all other communications
          provided for in this Agreement shall be in writing and shall be deemed
          to have been duly given when delivered by messenger or in

                                       24
<PAGE>

          person, or when mailed by United States registered mail, return
          receipt requested, postage prepaid, as follows:

          If to the Company: McKesson HBOC, Inc.
                             One Post Street
                             San Francisco, CA 94104
                             Attention: Office of the General Counsel

          If to Executive:   John H. Hammergren
                             c/o McKesson HBOC, Inc.
                             One Post Street
                             San Francisco, CA 94104

          or such other address as either party may have furnished to the other
          in writing in accordance herewith, except that notices of change of
          address shall be effective only upon receipt.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                          McKESSON HBOC, INC.
                                          A Delaware Corporation


                                          By /s/ William A. Armstrong
                                             -----------------------------------
                                             Senior Vice President

ATTEST:

/s/ Ivan D. Meyerson                      /s/ John H. Hammergren
-------------------------------------     --------------------------------------
 Senior Vice President and Secretary         Executive


By the Authority of the
Board of Directors
of McKesson HBOC, Inc.
on July 12, 1999.

                                       25
</TEXT>
</DOCUMENT>
