<PAGE> 1
Exhibit 99.1
JAMES E. LYONS (Cal. Bar No. 112582)
TIMOTHY A. MILLER (Cal. Bar. No. 154744)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Embarcadero Center, Suite 3800
San Francisco, California 94111
Telephone: (415) 984-6400
Facsimile: (415) 984-2698
JONATHAN J. LERNER (Admitted Pro Hac Vice)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
4 Times Square
New York, New York 10036
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
Attorneys for Plaintiff and Counterclaim Plaintiff
MCKESSON HBOC, INC.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
McKESSON HBOC, INC., Case No. ________________
Plaintiff and
Counterclaim Plaintiff, COMPLAINT AND COMPULSORY
COUNTERCLAIM OF MCKESSON
HBOC, INC.
vs.
DEFENDANT CLASS ACTION
NEW YORK STATE COMMON RETIREMENT FUND, INC.,
individually and as a representative of a defendant
class consisting of all persons who exchanged more
than 20,000 shares of HBO & Company common stock for
shares of McKesson HBOC, Inc. common stock on or after
January 12, 1999 (as defined herein),
Defendants and
Counterclaim Defendants.
-------------------------------------
IN RE McKESSON HBOC, INC. MASTER File No. C- 99-20743-RMW
SECURITIES LITIGATION
Class Action
-------------------------------------
This Document Relates to: All Actions
-------------------------------------
DEMAND FOR JURY TRIAL
<PAGE> 2
Plaintiff McKesson HBOC, Inc. ("McKesson HBOC"), by its attorneys, Skadden,
Arps, Slate, Meagher & Flom LLP, for its complaint and compulsory counterclaim
against defendant the New York State Common Retirement Fund ("NYSCRF"),
individually and as a representative of a defendant class consisting of all
persons who exchanged more than 20,000 shares of HBO & Company ("HBOC") common
stock for shares of McKesson HBOC common stock on or after January 12, 1999 (as
defined below), alleges as follows:
NATURE OF THE ACTION
1. This is an action against defendant NYSCRF, individually and as
representative of a class consisting of all persons who exchanged more than
20,000 HBOC common shares for common shares of McKesson HBOC on or after January
12, 1999, as further defined below (the "HBOC Shareholders"). NYSCRF is also the
lead plaintiff in the consolidated securities class action against McKesson HBOC
and other defendants currently pending in the Northern District of California
(Case No. 99-20743-RMW; hereinafter, the "Securities Litigation"). The claims
asserted in this action are also compulsory counterclaims in that action. 1.
2. McKesson HBOC is seeking to recover for itself, which will indirectly
benefit its shareholders, the unjust enrichment derived by NYSCRF and the other
HBOC Shareholders at the direct expense of McKesson HBOC. On January 12, 1999,
pursuant to a merger agreement between McKesson Corporation ("McKesson"), which
changed its name to McKesson HBOC after the Merger, McKesson Merger Sub, Inc.
("Merger Sub") and HBOC, NYSCRF, along with the other HBOC shareholders,
exchanged artificially inflated shares of HBOC for shares of McKesson (the
"Merger"). The HBOC shares were inflated because HBOC had not disclosed
accounting improprieties in its pre-Merger financial statements. Had HBOC
disclosed those improprieties prior to the Merger, the market would have
discounted the shares to correct the inflation in HBOC's share price. As a
result, McKesson HBOC would not have agreed to the exchange ratio set forth in
the merger agreement. Instead, because HBOC's pre-Merger accounting
improprieties were not disclosed until after the Merger, McKesson HBOC was
harmed by paying more for the shares of HBOC than it otherwise would have.
Conversely,
-1-
<PAGE> 3
NYSCRF and the other HBOC Shareholders who exchanged inflated HBOC shares for
valuable McKesson shares were unjustly enriched, at the direct expense of
McKesson HBOC, by virtue of their receipt of a disproportionately large number
of shares of McKesson HBOC.
FORMAL JUDICIAL ADMISSIONS OF NYSCRF
3. NYSCRF has admitted that it and the other HBOC Shareholders were
unjustly enriched at the direct expense of McKesson HBOC.
4. In the Second Amended and Consolidated Class Action Complaint in the
Securities Litigation ("Second Amended Complaint"), NYSCRF stated: "The purpose
and result of this scheme [to inflate HBOC's financial results and conceal
HBOC's true financial condition and operating results] was to enable HBOC to
publish the false financial statements . . . to allow HBOC to acquire companies
at artificially low prices by using inflated HBOC stock as currency and to
accomplish the Merger with McKesson." (Second Amended Complaint Paragraph 122;
emphasis added; internal citations omitted.)
5. NYSCRF has further admitted that McKesson HBOC was a "stable, prosperous
company" harmed by the artificial inflation of HBOC stock, to the benefit of
NYSCRF and the other HBOC Shareholders. In the words of NYSCRF: "The defendants
named in this count were also motivated by the desire to enable HBOC to use
stock as currency to make acquisitions of other companies during the Class
Period. . . . By making these acquisitions and building HBOC's revenues and
product lines, defendants were able to position HBOC so that it could merge with
a stable, prosperous company like McKesson." (Second Amended Complaint Paragraph
160; emphasis added.)
6. In its original Amended and Consolidated Class Action Complaint in the
Securities Litigation ("ACCAC"), NYSCRF admitted that it and the other HBOC
Shareholders unjustly benefitted from the Merger: "The merger with McKesson thus
enabled each of the Individual Defendants named in this Claim to divest all of
their holdings in HBOC stock at an artificially inflated price." (ACCAC
Paragraph 206; emphasis added.) NYSCRF further admitted that this benefit was
derived directly at the expense of McKesson HBOC: "They agreed to a merger at an
exchange ratio that was materially unfair to McKesson shareholders in that the
assumed
-2-
<PAGE> 4
value of HBOC stock was materially overstated." (ACCAC Paragraph 224(c);
emphasis added.)
THE MERGER
7. On October 17, 1998, McKesson and HBOC entered into a merger agreement.
The transaction was approved by the shareholders of both companies and was
consummated on January 12, 1999. Relying on the financial statements and other
disclosures made by HBOC and McKesson to each other, the transaction was
structured as a "reverse triangular merger" in which Merger Sub (a subsidiary of
McKesson formed for the merger transaction), merged with and into HBOC, with
HBOC as the surviving corporation. Upon consummation of the Merger, HBOC became
a wholly-owned subsidiary of McKesson. McKesson was subsequently renamed
McKesson HBOC. McKesson HBOC is not a successor to HBOC.
8. The Merger was completed on January 12, 1999. In the Merger, NYSCRF and
other HBOC shareholders received 0.37 shares of McKesson common stock for each
of their shares of HBOC common stock (the "Exchange Ratio"). As a result, the
shares of McKesson common stock issued to HBOC shareholders constituted about
64% of all the issued and outstanding shares of McKesson HBOC.
THE RESTATEMENT
9. In April 1999, McKesson HBOC discovered improper accounting practices at
HBOC. On July 16, 1999, McKesson HBOC filed with the Securities and Exchange
Commission its Annual Report on Form 10-K/A for the fiscal year ended March 31,
1999 (the "Form 10-K/A"), which contained McKesson HBOC's consolidated financial
statements. The Form 10-K/A announced that, as a result of the findings of an
investigation by the Audit Committee of McKesson HBOC's Board of Directors,
McKesson HBOC's consolidated financial statements reflect amounts for HBOC
(pre-Merger) that are restated from those previously reported by HBOC
(pre-Merger) in HBOC's fiscal 1999 quarterly results and annual results for
fiscal 1998 and 1997. At no time has NYSCRF alleged that McKesson's pre-Merger
financial statements were inaccurate or misleading in any way.
-3-
<PAGE> 5
THE UNJUST ENRICHMENT
10. McKesson HBOC was harmed by HBOC's misstated financial statements.
Because HBOC's financial statements prior to the Merger reflected improperly
recorded revenue, the price of the HBOC shares exchanged by NYSCRF and the other
HBOC Shareholders was artificially inflated. Had McKesson HBOC known about the
accounting errors at HBOC, it would not have acquired HBOC on the terms
contained in the Merger. Because of the accounting errors at HBOC, McKesson HBOC
paid more than it should have for HBOC's shares.
11. NYSCRF and the other HBOC Shareholders benefitted from the harm
suffered by McKesson HBOC. For example, NYSCRF, which owned in excess of three
million artificially inflated HBOC shares prior to the Merger, exchanged those
artificially inflated HBOC shares for McKesson shares (which became shares of
McKesson HBOC). In that transaction, McKesson HBOC did not receive the
appropriately valued consideration for which it bargained. Had HBOC's true
financial condition been disclosed prior to the Merger, the Exchange Ratio
governing the exchange of HBOC shares for McKesson HBOC shares would have been
altered to reduce the amount of shares of McKesson HBOC common stock received by
NYSCRF and the other HBOC Shareholders.
12. As a result of HBOC's misstatements, and the incorrect Exchange Ratio
which was based upon those misstatements, NYSCRF and the other HBOC Shareholders
received more shares of McKesson HBOC common stock than those to which they were
entitled. NYSCRF and the other HBOC Shareholders received that unjust benefit at
the direct expense of McKesson HBOC, which received less value for the shares it
issued than that to which it was entitled or was led to believe it was getting
in the Merger.
13. As a result, NYSCRF and the other HBOC Shareholders have thus been
unjustly enriched at the expense of McKesson HBOC. Justice requires that
McKesson HBOC be allowed to recover that benefit. Accordingly, McKesson HBOC
seeks damages and an order from the Court compelling NYSCRF and the other HBOC
Shareholders to disgorge the amount of their unjust enrichment to McKesson HBOC.
-4-
<PAGE> 6
THE PARTIES
14. Plaintiff McKesson HBOC is a Delaware corporation which was renamed in
(but otherwise structurally unchanged by) a merger between its wholly-owned
subsidiary, Merger Sub, and HBOC, which became effective on January 12, 1999.
McKesson HBOC has executive offices in San Francisco, California.
15. Defendant NYSCRF is a public pension system established by Article 9 of
the New York Retirement and Social Security Law. NYSCRF holds and invests the
assets of the New York State and Local Employees' Retirement System and the New
York State and Local Police and Fire Retirement System. H. Carl McCall, the
Comptroller of the State of New York, is the sole trustee of NYSCRF and he has
sole investment and fiduciary responsibility for managing its assets. NYSCRF and
McCall are citizens of the State of New York. On January 12, 1999, NYSCRF
exchanged nearly 3.1 million shares of HBOC for shares of McKesson HBOC.
16. By Order dated December 22, 1999, the Court appointed NYSCRF as Lead
Plaintiff in the Securities Litigation. In the Securities Litigation, NYSCRF
asserts claims under Fed. R. Civ. P. 23(a) and 23(b)(3) on behalf of a class
that includes all persons who acquired McKesson common stock in exchange for
shares of HBOC in the Merger. Among those excluded from the class alleged by
NYSCRF in the Securities Litigation is any person who was an officer or director
of HBOC from January 20, 1997, through January 12, 1999. On November 14, 2000,
NYSCRF filed the Second Amended Complaint.
JURISDICTION AND VENUE
17. The Court has jurisdiction over the claims asserted in this action
pursuant to 28 U.S.C. section 1332, in that the matter in controversy is between
citizens of different states and that the matter in controversy exceeds the sum
or value of $75,000 for each member of the Defendant Class defined below. In
addition, the claims asserted in this action are also compulsory counterclaims
in the Securities Litigation. The Court therefore also has supplemental
jurisdiction over McKesson HBOC's claims against NYSCRF and the defendant class
pursuant to 28 U.S.C. section 1367, in that the claims arise out of the
transactions and occurrences that are the subject matter of claims enumerated in
the Second Amended Complaint
-5-
<PAGE> 7
in the Securities Litigation and form a part of the same case or controversy
under Article III of the United States Constitution. This Court also has
jurisdiction over McKesson HBOC's request for declaratory relief pursuant to 28
U.S.C. section 2201.
18. Venue is proper in this District pursuant to 28 U.S.C. sections 1391(a)
and (b) and Rule 13(a) of the Federal Rules of Civil Procedure in that a
substantial part of the events giving rise to the claims asserted herein
occurred in this District. In addition, McKesson HBOC maintains its principal
office in this District.
INTRADISTRICT ASSIGNMENT
19. This action should be assigned to the San Jose Division as required by
Pretrial Order No. 1 (filed February 2, 2000) issued by this Court in the
Securities Litigation, because this action relates to the subject matter of the
Securities Litigation.
FACTUAL BACKGROUND
A. MCKESSON AND HBOC: BEFORE THE MERGER
20. Prior to the merger of its subsidiary with and into HBOC, McKesson was
a Delaware corporation headquartered in San Francisco, California. McKesson was
one of the country's largest distributors of ethical and proprietary drugs,
medical-surgical supplies and health and beauty products. After its subsidiary
merged with HBOC, with HBOC the surviving corporation, McKesson was renamed
McKesson HBOC.
21. Prior to merging with McKesson's subsidiary, HBOC was a Delaware
corporation headquartered in Atlanta, Georgia. HBOC was one of the country's
largest providers of integrated patient care, clinical, financial, managed care
and strategic management software solutions for the healthcare industry.
B. THE MERGER AGREEMENT
22. In the Fall of 1998, McKesson and HBOC representatives explored the
possibility of a business combination between McKesson and HBOC.
23. Pursuant to an Agreement and Plan of Merger between McKesson and HBOC
dated October 17, 1998 ("the Merger Agreement"), McKesson, its subsidiary Merger
Sub and HBOC agreed to a merger transaction in which Merger Sub would be merged
with and into
-6-
<PAGE> 8
HBOC, with HBOC as the surviving corporation, subject to shareholder approval of
both McKesson and HBOC shareholders and other conditions contained in the Merger
Agreement. As part of the transaction, McKesson would be renamed McKesson HBOC.
24. The transaction was approved by the shareholders of both companies
holding a majority of the outstanding shares on January 12, 1999, and the Merger
was completed on that date. Pursuant to the Merger Agreement, each outstanding
share of HBOC common stock was converted into a right to receive 0.37 shares of
newly issued McKesson common stock. Simultaneously, all shares of HBOC common
stock were automatically canceled and ceased to exist. Under the terms of the
Merger Agreement, the HBOC shareholders received 0.37 shares of McKesson common
stock for each of their shares of HBOC common stock, and were compensated for
any fractional interests with cash. In the aggregate, McKesson issued 177
million shares of its common stock for all the outstanding HBOC common stock. In
addition, options to purchase HBOC common stock ("HBOC options") were exchanged
for options to purchase McKesson common stock ("McKesson HBOC options") pursuant
to the same exchange ratio (the "Options Exchange").
25. Since the Merger, HBOC has been a wholly-owned subsidiary of McKesson
HBOC. HBOC's existing business is referred to as McKesson HBOC's Healthcare
Information Technology Business ("ITB").
C. THE RESTATEMENT
26. After the Merger, during an audit conducted by Deloitte & Touche,
McKesson HBOC's outside auditors, McKesson HBOC discovered that certain software
sales revenue had been improperly recorded by HBOC. On April 28, 1999, McKesson
HBOC announced that during the course of its year-end financial audit process,
it had determined that certain software sales transactions amounting to $26.2
million at ITB (the former HBOC business) in the quarter ended March 31, 1999,
were improperly recorded because they were subject to contingencies and had been
reversed. McKesson HBOC further announced that the audit process was ongoing and
that there was a possibility that additional contingent sales would be
identified.
-7-
<PAGE> 9
27. On May 25, 1999, McKesson HBOC announced that it had discovered certain
additional improper revenue recognition matters relating to software sales at
ITB and would have to restate revenue and income for prior quarters of fiscal
year 1999. McKesson HBOC also announced that its internal audit was ongoing and
the financials of prior years may also have to be restated.
28. On July 14, 1999, McKesson HBOC announced that it had completed its
internal year-end audit and, as predicted in its earlier announcements, revised
downward its revenues by $245.8 million for the fiscal year ended March 31,
1999, by $48.8 million for the fiscal year ended March 31, 1998, and by $33.2
million for the fiscal year ended March 31, 1997. McKesson HBOC further stated
that the downward revisions resulted from the company's year-end internal and
external audit process and a special review of certain accounting practices at
its ITB unit (formerly HBOC) and were exclusively in the revenues and operating
profits of that business. No adjustments were made to the financial results of
any other McKesson HBOC business.
29. On July 16, 1999, McKesson HBOC filed its Form 10-K/A with the SEC that
reflected amounts for HBOC (pre-Merger) that were restated from those previously
reported by HBOC (pre-Merger) in HBOC's fiscal 1999 quarterly results and annual
results for fiscal 1998 and 1997. The Form 10-K/A disclosed that several types
of improper accounting practices had been discovered at HBOC, including improper
application of American Institute of Certified Public Accountants Statement of
Position ("SOP") 97-2 and 91-1, improper recognition of contingent revenues,
improper backdating of contracts and certain improper adjustments to income
statements.
D. DAMAGE TO MCKESSON HBOC
30. Because HBOC's financial statements prior to the Merger were misstated,
the market price of the shares of HBOC exchanged in the Merger by the HBOC
Shareholders were artificially inflated. As a result, McKesson HBOC issued more
shares to HBOC shareholders, including NYSCRF, than they were entitled to
receive to acquire the outstanding shares of HBOC. Had HBOC's true financial
condition been disclosed prior to the Merger, less
-8-
<PAGE> 10
McKesson HBOC stock would have been issued to NYSCRF and the other HBOC
shareholders, and NYSCRF and the other HBOC shareholders would have obtained
shares representing a smaller percentage of the total outstanding shares of
McKesson HBOC than those the HBOC shareholders actually obtained in the Merger.
As a result, McKesson HBOC was damaged in an amount equal to its overpayment to
NYSCRF and other HBOC shareholders. McKesson HBOC was damaged in the same manner
by the Options Exchange.
31. In addition, pursuant to the Merger Agreement, McKesson HBOC paid cash
to NYSCRF and other HBOC shareholders who would otherwise be entitled to
fractional shares of McKesson HBOC in the Merger transaction. Those payments of
cash also unjustly benefitted NYSCRF and other HBOC shareholders at the expense
of McKesson HBOC, to the extent those payments exceeded the amount to which they
would have been entitled had HBOC's true financial condition been disclosed
prior to the Merger.
32. Accordingly, NYSCRF and the HBOC Shareholders have thus been unjustly
enriched at the expense of McKesson HBOC. McKesson HBOC, therefore, seeks
damages from NYSCRF and the other HBOC Shareholders, an order from the Court
compelling NYSCRF and the other HBOC Shareholders to disgorge the amount of
their unjust enrichment to McKesson HBOC, and a declaratory judgment that NYSCRF
and HBOC Shareholders who are members of the defendant class are liable for the
amount by which they were unjustly enriched.
CLASS ACTION ALLEGATIONS
33. McKesson HBOC commences this action against NYSCRF, pursuant to Federal
Rule of Civil Procedure 23, individually and on behalf of a defendant class
consisting of all persons who exchanged more than 20,000 shares of HBOC common
stock for shares of McKesson HBOC common stock on or after January 12, 1999 (the
"Defendant Class"). Excluded from the Defendant Class are any person who, as of
January 11, 2001, served as an officer, director or employee of McKesson HBOC
(or its subsidiaries or affiliates) and the members of the immediate family of
each such person.
34. Because members of the Defendant Class are so numerous, joinder of all
members is impracticable. The Defendant Class consists of many hundreds of
persons and
-9-
<PAGE> 11
entities geographically dispersed throughout the United States and elsewhere.
35. Common questions of law and fact exist as to all members of the
Defendant Class and predominate over any questions affecting solely individual
members of the Defendant Class. Questions of law and fact common to the
Defendant Class include, but are not limited to:
(i) Whether HBOC misstated its financial results prior to the January 12,
1999 Merger between McKesson, Merger Sub and HBOC;
(ii) Whether the Exchange Ratio employed in the Merger was unjustly favorable
to HBOC shareholders assuming that HBOC had not misstated its financial
results prior to the Merger; and
(iii) Whether members of the Defendant Class were unjustly enriched at the
expense of McKesson HBOC by receiving more shares of McKesson HBOC and
more of McKesson HBOC's cash than they would have received absent the
misstatements of HBOC's financial results.
36. NYSCRF's defenses are typical of the defenses of the members of the
Defendant Class in that NYSCRF exchanged HBOC shares for McKesson HBOC shares on
or after January 12, 1999. NYSCRF's rights and liabilities are thus coextensive
with those of the absent members of the Defendant Class who also exchanged HBOC
shares on that date. This Court has appointed NYSCRF as Lead Plaintiff in the
Securities Litigation in which, among other things, NYSCRF purports to represent
all persons who acquired McKesson common stock in exchange for HBOC common stock
in the Merger. NYSCRF will fairly and adequately represent the interests of the
Defendant Class. NYSCRF has asserted that it is represented in the Securities
Litigation by counsel competent and experienced in class and securities
litigation (Second Amended Complaint paragraph 37), and it is expected that
NYSCRF will retain competent and experienced counsel in defense of this action.
37. The maintenance of separate actions by or against individual members of
the Defendant Class would create a risk of inconsistent or varying adjudications
with respect to individual members of the Defendant Class, which would establish
incompatible standards of
-10-
<PAGE> 12
conduct between McKesson HBOC and the Defendant Class. The numerous, widely
dispersed, absent members of the Defendant Class are subject to suit, and may
bring suit, in a variety of forums throughout the nation. Such duplicative
litigation creates the risk of anomalous verdicts, establishing inconsistent or
incompatible standards of conduct between McKesson HBOC and the Defendant Class.
Such confusion would undermine the rights of the parties to this suit, as well
as the financial markets in general.
38. NYSCRF has acted or refused to act on grounds and in a manner generally
applicable to the Defendant Class, thereby making judgment appropriate with
respect to the Defendant Class as a whole. Only through a judgment binding upon
all members of the Defendant Class, encompassing relevant state and federal law,
can McKesson HBOC be afforded appropriate relief.
39. A class action against the Defendant Class is superior to other
available methods for the fair and efficient adjudication of this controversy.
McKesson HBOC knows of no difficulty that will be encountered in the management
of this litigation that would preclude its maintenance as a class action.
40. Record owners and other members of the Defendant Class may be
identified from records maintained by the transfer agents of McKesson HBOC and
HBOC, and other public records. Notice may be provided to Defendant Class
members via first class mail using techniques and a form of notice similar to
those customarily used in class actions.
FIRST CLAIM FOR RELIEF
UNJUST ENRICHMENT
41. McKesson HBOC repeats and realleges the allegations of paragraphs 1-40
as if fully set forth herein.
42. NYSCRF and the Defendant Class benefitted unjustly from the Merger by
receiving more McKesson HBOC shares and options, and more of McKesson HBOC's
cash, than they would have received for their HBOC shares and options had the
Exchange Ratio reflected the true nature of HBOC's financial condition prior to
the Merger.
43. The unjust benefit to NYSCRF and the Defendant Class came directly at
-11-
<PAGE> 13
the expense of McKesson HBOC. McKesson HBOC, as a result of HBOC's misstatements
before the Merger, issued more shares and options of McKesson HBOC to NYSCRF and
the Defendant Class, and paid them more cash, than that to which NYSCRF and the
Defendant Class were entitled. McKesson HBOC was not fairly or adequately
compensated for the McKesson HBOC shares, options and cash it transferred to
NYSCRF and the Defendant Class in the Merger.
44. It is unconscionable and unjust for NYSCRF and the Defendant Class to
retain a benefit that has come at the expense, and to the detriment, of McKesson
HBOC. Accordingly, NYSCRF and the Defendant Class should be required to disgorge
the amount of their unjust enrichment to McKesson HBOC.
SECOND CLAIM FOR RELIEF
MONEY HAD AND RECEIVED
45. Plaintiff repeats and realleges the allegations of paragraphs 1-40, and
42-44 as if fully set forth herein.
46. NYSCRF and the Defendant Class received more McKesson HBOC shares and
options, and more of McKesson HBOC's cash, than they would have received for
their HBOC shares and options had the Exchange Ratio reflected the true nature
of HBOC's financial condition prior to the Merger. McKesson HBOC was not
adequately compensated for the McKesson HBOC shares, options and cash it
transferred to NYSCRF and the Defendant Class in the Merger.
47. McKesson HBOC has a right to the excess benefit received by NYSCRF and
the Defendant Class. It is unconscionable and unjust for NYSCRF and the
Defendant Class to retain a benefit that has come at the expense, and to the
detriment, of McKesson HBOC. Accordingly, NYSCRF and the Defendant Class should
be required to pay damages to McKesson HBOC equal to the amount of excess
benefit NYSCRF and the Defendant Class received from McKesson HBOC in the
Merger.
-12-
<PAGE> 14
THIRD CLAIM FOR RELIEF
MONEY PAID BY MISTAKE
48. Plaintiff repeats and realleges the allegations of paragraphs 1-40,
42-44 and 46-47 as if fully set forth herein.
49. NYSCRF and the Defendant Class received more McKesson HBOC shares and
options, and more of McKesson HBOC's cash, than they would have received for
their HBOC shares and options had the Exchange Ratio reflected the true nature
of HBOC's financial condition prior to the Merger. Because of the mistake of
fact regarding HBOC's financial condition prior to the Merger, McKesson HBOC was
not adequately compensated for the McKesson HBOC shares, options and cash it
transferred to NYSCRF and the Defendant Class in the Merger.
50. McKesson HBOC has a right to the excess benefit received by NYSCRF and
the Defendant Class. It is unconscionable and unjust for NYSCRF and the
Defendant Class to retain a benefit that has come at the expense, and to the
detriment, of McKesson HBOC. Accordingly, NYSCRF and the Defendant Class should
be required to pay damages to McKesson HBOC equal to the amount of excess
benefit NYSCRF and the Defendant Class received from McKesson HBOC in the
Merger.
FOURTH CLAIM FOR RELIEF
DECLARATORY JUDGMENT
51. McKesson HBOC repeats and realleges the allegations of paragraphs 1-40,
42-44, 46-47 and 49-50 as if fully set forth herein.
52. An actual controversy has arisen and now exists between McKesson HBOC
and NYSCRF concerning their respective rights and duties in that McKesson HBOC
contends that NYSCRF and the Defendant Class were unjustly enriched at the
expense of McKesson HBOC by receiving more McKesson HBOC common stock shares and
options, and more of McKesson HBOC's cash, than they would have received had
HBOC's true financial condition been disclosed prior to the Merger.
53. A judicial declaration is necessary and appropriate at this time under
-13-
<PAGE> 15
the circumstances pursuant to 28 U.S.C.section 2201 and Rule 57, Fed. R. Civ. P.
54. McKesson HBOC, therefore, seeks a declaration that the HBOC shares and
options exchanged by NYSCRF and the Defendant Class were artificially inflated,
that the Exchange Ratio was improperly calculated, and that NYSCRF and the
Defendant Class will be unjustly enriched at the expense of McKesson HBOC and
its shareholders if they are allowed to retain the McKesson HBOC shares, options
and cash in excess of the amount that NYSCRF and the Defendant Class would have
been entitled to receive had HBOC's true financial condition been disclosed
prior to the Merger.
WHEREFORE, Plaintiff McKesson HBOC respectfully prays for judgment as
follows:
A. Declaring this action to be a proper defendant class action
maintainable pursuant to Rule 23 of the Federal Rules of Civil Procedure and
declaring NYSCRF to be a proper class representative;
B. Declaring that the HBOC shares and options exchanged by NYSCRF
and the Defendant Class were artificially inflated, that the Exchange Ratio was
improperly calculated, and that NYSCRF and the Defendant Class will be unjustly
enriched at the expense of McKesson HBOC and its shareholders if they are
allowed to retain the McKesson HBOC shares, options and cash in excess of the
amount that NYSCRF and the Defendant Class would have been entitled to receive
had HBOC's true financial condition been disclosed prior to the Merger;
C. Ordering NYSCRF and the Defendant Class to disgorge the amount
of their unjust enrichment to McKesson HBOC;
D. Awarding McKesson HBOC compensatory damages as permitted by law;
E. Awarding McKesson HBOC its costs and disbursements, including
attorneys' fees, incurred in this action; and
-14-
<PAGE> 16
F. Granting McKesson HBOC such other and further relief as the
Court shall deem just and proper.
DATED: January 10, 2001
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
By: /s/ JAMES E. LYONS
--------------------------------------------------
James E. Lyons
Attorneys for Plaintiff and Counterclaim Plaintiff
McKESSON HBOC, INC.
-15-
<PAGE> 17
JURY TRIAL DEMANDED
McKesson HBOC demands a trial by jury of all issues so triable.
DATED: January 10, 2001
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
By: /s/ JAMES E. LYONS
--------------------------------------------------
James E. Lyons
Attorneys for Plaintiff and Counterclaim Plaintiff
McKESSON HBOC, INC.
-16-
