Employment Agreement - McKesson HBOC Inc. and Graham O. King


                             EMPLOYMENT AGREEMENT
                             --------------------

THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated 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 Graham O. King ("Executive").

                                   RECITALS
                                   --------

A.   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

B.   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 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 President, Information Technology Business ("ITB") of
     the Company or in such other senior corporate executive capacity or
     capacities as may be mutually agreed upon from time to time between
     Executive and the Chief Executive Officer or either of the Co-Chief
     Executive Officers, as the case may be, of the Company (either, hereinafter
     referred to as the "Chief Executive Officer").

3.   Term and Duties.

     (a)  Term of Employment. The term of this Agreement shall be deemed to have
          ------------------ 
          commenced on the date of this Agreement and shall continue until the
          earlier of (i) March 31, 2004, or (ii) the date that Executive shall
          have been granted "Approved Retirement status under the Company's 1984
          Executive Benefit Retirement Plan ("EBRP").

     (b)  Duties. During the period of his employment hereunder and except for
          ------
          illness, reasonable vacation periods, and reasonable leaves of
          absence, Executive shall


 
          devote his best efforts and all 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 of Directors of the Company (the
          "Board"); provided, however, that, with the approval of the Chief
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          Executive Officer, Executive may serve, or continue to serve, on the
          boards of directors of, hold any other offices or positions in,
          companies or organizations which, in such officer'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.

     (c)  Place of Performance.  So long as Executive shall be President, ITB,
          --------------------                                                
          he shall provide his services primarily at the headquarters of the
          ITB, presently located in the Atlanta, Georgia metropolitan area.
          Notwithstanding the foregoing, Executive shall be under no obligation
          throughout the term of this Agreement to relocate his permanent
          residences, presently located in Hinsdale, Illinois and Jupiter,
          Florida.

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 Five Hundred Eighty Thousand
          Dollars ($580,000.00) per year, or such higher salary as may be from
          time to time approved by the Board (or any duly authorized 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 75% 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
          connection with the performance of his obligations hereunder. The
          Company further agrees to furnish Executive with such living and
          entertainment 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. Executive shall be entitled to receive all other
          --------------
          benefits of employment generally available to other members of the
          Company's executive management and those benefits for which key
          executives are or shall become eligible, when and as he becomes
          eligible therefor, including without limitation, 

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          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"),
          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.

     (d)  EBRP and ESBP. With respect to Executive's participation in the EBRP
          ------------- 
          and ESBP, Executive shall be subject to the terms and conditions of
          such plan, provided, however, that, in the event Executive's
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          performance regarding the rebuilding of ITB and the development of a
          successor is satisfactory to the Chief Executive Officer (the
          "Accomplishment of ITB Rebuilding and Development"), management shall
          recommend to the Board that Executive be granted "Approved Retirement"
          status pursuant to the EBRP and the ESBP; provided, further, that, if
                                                    --------  -------
          Executive accrues five years of actual service credit pursuant to the
          EBRP and the ESBP (regardless of having earlier been granted "Approved
          Retirement" status, Executive shall be granted additional service
          credit thereunder for prior service with US Servis and HBO & Company.
          Executive and the Chief Executive Officer will work together in the
          future to establish objective criteria by which Executive may be
          judged to have achieved the Accomplishment of ITB Rebuilding and
          Development. In the event Executive (a) resigns as President of ITB
          following the grant of Approved Retirement status and (b) otherwise
          remains employed by the Company in a mutually agreed upon position,
          for purposes of the EBRP and the ESBP only, the EBRP and ESBP benefits
          payable to Executive upon termination of employment shall be
          calculated based upon the Executive's compensation at the time of
          Executive's resignation as President, ITB.

5.   Initial Incentive Grants.  Executive shall receive the following initial
     ------------------------                                                
     incentive awards specified in subparagraphs (a) and (b) below:

     (a)  Retention Bonus. The Company shall pay Executive a special, one-time
          ---------------
          bonus of Two Million Five Hundred Thousand Dollars ($2,500,000.00),
          payable in two installments of $1,250,000.00 each on (i) as soon as
          practicable following execution of this Agreement, and (ii) the
          anniversary of the Effective Date, provided Executive is employed on
          such dates or his employment terminates earlier as a result of his
          death, disability, a termination by the Company other than for Cause
          (as defined in Paragraph 8(a)) or a termination by Executive for Good
          Reason (as defined in Paragraph 8(d)(iv)). This bonus is not to be
          construed as a salary type payment but rather a retention payment.

     (b)  Stock Options. Executive will be granted on or about August 16, 1999,
          ------------- 
          a non-qualified stock option to purchase One Million (1,000,000)
          shares of the Company's common stock, at a per share exercise price
          equal to the fair market value of a share of the Company's common
          stock on the date of grant (the "Grant 

                                       3

 
          Date"), 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. Notwithstanding
          the foregoing, the option granted pursuant to this Section 5(b) shall
          vest if and at such time as Executive is granted "Approved Retirement"
          status under the EBRP, as is contemplated in Section 4(d). If
          Executive's employment is terminated by either party for any reason
          other than for Cause, such option shall be exercisable, to the extent
          it is vested on the date of termination or becomes vested thereafter
          pursuant to Section 8(d)(iii)(D), for a period of thirty-six (36)
          months following the later of termination of Executive's employment or
          the vesting of such option. Such option will otherwise be subject to
          the terms and conditions of the Company's Stock Option and Restricted
          Stock Plan (or any other similar plan or arrangement).

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

     (a)  Disability Benefits. If, during the term of this Agreement, 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 shall cease and terminate.

     (b)  Death Benefits. In the event of the death of Executive during the term
          -------------- 
          of this Agreement, 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. Thereafter, all of the
          Company's obligations hereunder shall cease and terminate.

     (c)  Other Plans. The provisions of this Section 6 shall not affect any
          ----------- 
          rights of Executive's heirs, administrators, executors, legatees,
          beneficiaries or assigns under the Company's Profit-Sharing Investment
          Plan, EBRP, ESBP, Restricted Stock and Stock Option Plan (or any other
          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.

7.   Obligations of Executive During and After Employment.
     ----------------------------------------------------
 
     (a)  Noncompetition. Executive agrees that during the term of his
          --------------
          employment hereunder, and for the "Restricted Period" (as hereinafter
          defined) thereafter following the termination of Executive's
          employment with the Company for any reason, he will not, within the
          United States, participate, engage or have any interest in, directly
          or indirectly, any person, firm, corporation, or business (whether as
          an employee, officer, director, agent, creditor, or consultant or in
          any capacity which calls for the rendering of personal services,
          advice, acts of

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          management, operation or control) which carries on any business or
          activity competitive with the Company or any affiliated company
          (including, without limitation, any products or services sold,
          investigated, developed or otherwise pursued by the Company or any
          affiliated company at any time or from time to time) without the prior
          written consent of the Chief Executive Officer. For purposes of this
          Paragraph 7, the "Restricted Period" shall be deemed to be the longer
          of (i) one (1) year (two (2) years when the term is used in Paragraph
          7(d)) following termination of Executive's employment for any reason
          or (ii) the period during which Executive is receiving salary
          continuation payments hereunder. This Paragraph 7(a) shall survive the
          termination or expiration of this Agreement.

     (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 (as
          defined in subparagraph (c) hereof), 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 either during or after the term of this Agreement.
          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 to the extent expressly authorized by the
          Company in writing or as required by law. All records, files,
          drawings, documents, equipment, and the like, or copies thereof,
          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 this
          Agreement.

     (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 company's
          customers, including, without limitation, (i) all information
          concerning trade secrets of the Company and its affiliated companies,
          including computer programs,

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          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 by the Company or any of 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 or any of 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 other than as a result of a disclosure by Executive, (B)
          was available to him on a non-confidential basis outside of his
          employment with the Company, or (C) becomes available to him on a non-
          confidential basis from a source other than the Company or any of its
          agents, creditors, suppliers, lessors, lessees or customers.

     (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) 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, directly or indirectly, (x) 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; and (y) solicit, aid in or encourage the
          solicitation of, contract with, aid in or encourage the contracting
          with, service, or contact any person or entity which is, or was,
          within three 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 of any of its affiliated companies. This
          Paragraph 7(d) shall survive the termination or expiration of this
          Agreement.

     (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 

                                       6

 
          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.

     (f)  Blue-Penciling. Executive acknowledges and agrees that the
          --------------
          noncompetition and nonsolicitation provisions contained herein are
          reasonable and valid in geographic, temporal and subject matter scope
          and in all other respects, and do not impose limitations greater than
          are necessary to protect the goodwill, Confidential Information and
          other business interests of the Company. Nevertheless, if any court
          determines that any of said noncompetition and other restrictive
          covenants and agreements, or any part thereof, is unenforceable
          because of the duration or geographic scope of such provision, such
          court shall have the power to reduce the duration or scope of such
          provision, as the case may be, and, in its reduced form, such
          provision shall then be enforceable to the maximum extent permitted by
          applicable law.

8.  Termination.

     (a)  For Cause. Notwithstanding anything herein to the contrary, the
          ---------
          Company may, without liability, terminate Executive's employment
          hereunder for Cause at any time upon written notice from the Board (or
          any duly authorized Committee thereof) specifying such Cause, and
          thereafter, the Company's obligations hereunder (other than the
          obligation to pay any accrued salary or benefits) shall cease and
          terminate; provided, however, that such written notice 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, if curable, within fifteen (15) days
          following receipt of such notice. As used herein, the term "Cause"
          shall mean (i) Executive's willful misconduct, habitual neglect,
          dishonesty or other intentional actions (or failures to act) which are
          materially and demonstrably injurious to the Company, or (ii) a
          material breach by Executive of one or more terms of this Agreement.

     (b)  Arbitration Required to Confirm Cause. In the event of a termination
          -------------------------------------   
          for Cause pursuant to subparagraph (a) above, 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 9(d) below. In the event the award
          upholds the action of the Company, Executive shall promptly repay to
          the Company any sums received pursuant to this subparagraph 8(b),
          following termination of employment.

     (c)  Other than for Cause; Performance, Reorganization. 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 Chief Executive Officer,

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          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 Chief Executive
          Officer, (ii) should Executive's position be eliminated as a result of
          a reorganization or restructuring of the Company or any of its
          affiliated companies or (iii) for any other reason or reasons.

     (d)  Obligations of the Company on Termination of Employment.

          i)     If the Company terminates Executive's employment pursuant to
                 subparagraph 8(a) above and the Company's action is affirmed as
                 specified in subparagraph 8(b) above or Executive terminates
                 his employment with the Company other than for Good Reason (as
                 defined in subparagraph (d)(iii)), then all of the Company's
                 obligations hereunder (other than the obligation to pay any
                 accrued salary or benefits) 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, termination by Executive without
                 Good Reason shall not affect Executive rights with regard to
                 vested options.

          ii)    In the event that Executive shall terminate his employment for
                 any reason after Executive shall have been granted "Approved
                 Retirement" status under the EBRP, as is contemplated in
                 Section 4(d), Executive shall be eligible for the continuation
                 of health benefits as are described in Section 8(d)(iii)(C).
                 This provision will survive the termination of this Agreement.

          iii)   If the Company terminates Executive's employment pursuant to
                 subparagraph 8(c) above or Executive terminates his employment
                 with the Company for Good Reason prior to the expiration of
                 this Agreement, 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,
                 the Company shall, provided Executive is not in breach of the
                 provisions of Paragraph 7 hereof, and except as provided in
                 Paragraph 9(c) below, (A) continue Executive's then base
                 salary, without increase, for the remainder of the term of this
                 Agreement, provided, however, that the Company's obligation to
                 make such salary payments shall be reduced by any compensation
                 received by Executive from a subsequent employer during such
                 term, (B) consider Executive for a bonus under the terms of the
                 Company's MIP for the fiscal year in which termination occurs
                 (but not for any subsequent year) provided that any such bonus,
                 if earned, shall be pro-rated to reflect the portion of the
                 year for which Executive was 

                                       8

 
                 actively employed, (C) continue Executive's automobile
                 allowance, financial planning allowance, and Executive Medical
                 Plan benefits until the expiration date of this Agreement,
                 provided, however, that Executive may thereafter elect to
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                 continue his Executive Medical Plan benefits (or, at his
                 choice, any lesser medical coverage offered by the Company at
                 the time of termination) by paying the Company's actual cost
                 for said benefit, (D) 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 remainder of the term of this Agreement for purposes of the
                 EBRP, ESBP and the Stock Option and Restricted Stock Plan (or
                 any other similar plan or arrangement), provided, however, that
                                                         --------  ------- 
                 (unless the Board, or any duly authorized Committee, in its
                 sole discretion, determines otherwise) Executive shall in no
                 event receive or be entitled either to additional grants or
                 awards subsequent to the date of termination, or "Approved
                 Retirement" status, under the foregoing plans, and (E)
                 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.

          iv)    For purposes of this Agreement, "Good Reason" shall mean any of
                 the following actions, if taken without the express written
                 consent of Executive, (A) any material change by the Company in
                 Executive's functions, duties, or responsibilities as
                 President, Information Technology Business, which changes 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; (B) any reduction in Executive's base salary,
                 other than a reduction effect as part of an across-the-board
                 reduction affecting all executives of the Company; (C) any
                 material failure by the Company to comply with any of the
                 provisions of the Agreement; (D) the requirement made by the
                 Company that Executive change his manner of performing his
                 responsibilities so as to require a change in his residence;
                 (E) a removal of the principal place of business of the ITB to
                 a place more than 1,000 miles from Chicago, Illinois; (F) a
                 Change of Control; or (G) any failure by the Company to obtain
                 the express assumption of the Agreement by any successor or
                 assign of the Company.

          v)     a "Change of Control shall have been deemed to have occurred if
                 at any time during the term of the Agreement: (A) the Company
                 sells. or otherwise disposes of substantially all of the assets
                 of the ITB or a majority of the equity ownership or voting
                 control of any corporation or other entity holding
                 substantially all of the assets of the ITB in a single
                 transaction or series of related transactions, or (B)(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

                                       9

 
                 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.
                 Notwithstanding the foregoing, no Change of Control shall be
                 deemed to have occurred for purposes of subsection (B) of this
                 paragraph, (i) as a result of the consummation of any
                 transaction occurring prior to the date of the Agreement, or
                 (ii) if there is consummated any transaction or series of
                 integrated transactions immediately following which, in the
                 judgement 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.

9.   General Provisions.

     (a)  Executive's rights and obligations hereunder shall not be transferable
          by assignment or otherwise. 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. This Agreement shall not be terminated by
          the voluntary or involuntary dissolution of the Company.

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     (b)  This Agreement (together with the Termination Agreement of even date
          herewith and the Indemnification Agreement dated August 25, 1999) and
          the rights of Executive with respect to the benefits of employment
          referred to in Paragraph 4(c) constitute the entire agreement between
          the parties hereto in respect of the employment of Executive by the
          Company. This Agreement supersedes and replaces all prior oral and
          written agreements, understandings, commitments, and practices between
          the parties with regard to such employment. To the extent that the
          terms of Section 13(b) of the Termination Agreement are inconsistent
          with the provisions of this subsection (b), this subsection (b) shall
          control.

     (c)  In the event Executive's employment with the Company shall terminate
          under circumstances otherwise providing Executive with a right to
          benefits under both Section 5 of the Termination Agreement and
          Paragraph 8(d)(iii) of this Agreement, Executive shall be entitled to
          receive the greater of the benefits provided therein or herein,
                      ------- 
          calculated individually, without duplication. The obligation of the
          Employee to remain in the employ of the Company as set forth in
          Section 2 of the Termination Agreement shall relate only to potential
          benefits to be derived under the Termination Agreement and in no case
          shall be deemed to effect or limit any rights or obligations that
          Employee shall have under this Agreement or any other agreement
          between the Company and Employee (which rights and obligations shall
          be governed solely by the provisions of such agreements) other than
          the Termination Agreement.

     (d)  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.

     (e)  Executive expressly acknowledges and agrees that, in the event the
          benefits provided hereunder are subject to the excise tax provision
          set forth in Section 4999 of the Internal Revenue Code of 1986, as
          amended, (i) Executive shall be responsible for and (ii) Executive
          shall not be entitled to any additional payment from the Company for
          any Federal, state, and local income and employment taxes, interest or
          penalties that may arise in connection with such benefits.

     (f)  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

                                       11

 
          competent jurisdiction, the validity and enforceability of the
          remainder of such provisions or parts hereof and the applicability
          hereof shall not be affected thereby.

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

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

     (i)  The Company shall indemnify and hold harmless Executive from all legal
          fees and expenses of counsel arising out of or incurred in connection
          with any claims, by or on behalf of, or against, SMS under that
          certain Employment Agreement dated January 10, 1991 between SMS and
          Executive, that certain Separation Agreement dated as of November 30,
          1993 or otherwise, arising as a result of Executive's employment with
          the Company or actions taken by Executive in connection therewith.
          Expenses incurred by Executive in connection with any claim for
          indemnification shall be paid by the Company in advance upon the
          written request of Executive. Executive shall reimburse the Company
          for such expenses in the event and only to the extent that it shall be
          ultimately determined that Executive is not entitled under applicable
          state law to be indemnified for such expenses.

     (j)  This Agreement and all rights of Executive hereunder shall inure to
          the benefit of and be enforceable by Executive's personal or legal
          representatives, executors, administrators, successors, heirs,
          distributees, devisees and legatees.

     (k)  The waiver by either party hereto of any right hereunder or of any
          failure to perform or breach by the other party hereto shall not be
          deemed a waiver of any other right hereunder or of any other failure
          or breach by the other party hereto, whether of the same or a similar
          nature or otherwise. No waiver shall be deemed to have occurred unless
          set forth in a writing executed by or on behalf of the waiving party.
          No such written waiver shall be deemed a continuing waiver unless
          specifically stated therein, and each such waiver shall operate only
          as to the specific term or condition waived and shall not constitute a
          waiver of such term or condition for the future or as to any act other
          than that specifically waived.

                            (signature page follows)

                                       12

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

                                        McKESSON HBOC, INC.
                                        A Delaware Corporation


                                        By /s/ Ivan D. Meyerson
                                          --------------------------
                                               Senior Vice President

ATTEST:



/s/ Kristina Veaco     
-----------------------
    Assistant Secretary

                                          /s/ Graham O. King
                                          ------------------
                                              Executive


By the Authority of the
Compensation Committee
of the Board of Directors
of McKesson HBOC, Inc.
on July 6, 1999.